20-F

As filed with the Securities and Exchange Commission on March 30, 2005

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number 001-04226

KERZNER INTERNATIONAL LIMITED

(Exact name of Registrant as specified in its charter)

Commonwealth of The Bahamas

(Jurisdiction of incorporation or organization)

Executive Offices
Coral Towers
Paradise Island, The Bahamas
(242) 363-6018

(Address and telephone number of principal executive offices)

Securities registered or to be registered pursuant of Section 12(b) of the Act:

Title of each class on which registered	Name of each exchange
Ordinary Shares, $.001 par value per share	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.  None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.  None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.  Ordinary Shares, net of treasury shares:  35,899,849

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý  No o

Indicate by check mark which financial statement Item the Registrant has elected to follow.

Item 17 o  Item 18 ý

KERZNER INTERNATIONAL LIMITED

FORM 20-F
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

Presentation of Financial and Other Information		3
Forward-Looking Statements		4
Item 1.	Identity of Directors, Senior Management and Advisers	5
Item 2.	Offer Statistics and Expected Timetable	5
Item 3.	Key Information	5
Item 4.	Information on the Company	14
Item 5.	Operating and Financial Review and Prospects	42
Item 6.	Directors, Senior Management and Employees	65
Item 7.	Major Shareholders and Related Party Transactions	70
Item 8.	Financial Information	75
Item 9.	The Offer and Listing	76
Item 10.	Additional Information	77
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	83
Item 12.	Description of Securities Other than Equity Securities	84
Item 13.	Defaults, Dividend Arrearages and Delinquencies	85
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	85
Item 15.	Controls and Procedures	85
Item 16A.	Audit Committee Financial Expert	85
Item 16B.	Code of Ethics	85
Item 16C.	Principal Accountant Fees and Services	86
Item 16D.	Exemptions from the Listing Standards for Audit Committees	86
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	86
Item 17.	Financial Statements	87
Item 18.	Financial Statements	87
Item 19.	Exhibits	88

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this Annual Report, “Kerzner” or “the Company” refers to Kerzner International Limited, and the terms “we,” “us,” “our” and similar terms refer to Kerzner and any or all of its subsidiaries and joint ventures as the context requires.

Our fiscal year is the calendar year.

The financial statements contained in this Annual Report have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  Financial information in this Annual Report, including the financial statements, has been presented in U.S. dollars, unless otherwise specified.

“Our properties” refers to both our owned and/or managed resorts, or properties under development, as the context requires.

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FORWARD-LOOKING STATEMENTS

This Annual Report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, business strategies, operating efficiencies or synergies, plans for future expansion and other business development activities as well as other capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition, markets for Kerzner’s issued and outstanding ordinary shares (“Ordinary Shares”) and other matters.  Statements in this Annual Report that are not historical facts are “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”).  Forward-looking statements, including, without limitation, those relating to our future business prospects, revenues and income, wherever they occur in this Annual Report, are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by forward-looking statements.  You should consider forward-looking statements, therefore, in light of various important factors, including those set forth in this Annual Report.  These risks and uncertainties include, but are not limited to, those relating to development and construction activities, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), availability of financing, global economic conditions, foreign currency fluctuations, pending litigation, the impact of actual or threatened terrorist activity or war on the economy in general and the travel and leisure industries in particular, acts of God, including hurricanes, earthquakes, tsunamis and other natural disasters (which may result in uninsured losses), changes in tax laws or the administration of such laws and changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions) and the risk factors discussed under the heading “Risk Factors” in this Annual Report and our other filings with the SEC.

Words such as “estimate,” “project,” “plan,” “intend,” “expect,” “believe” and similar expressions are intended to identify forward-looking statements.  You will find these forward-looking statements at various places throughout this Annual Report.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made.  We do not undertake any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

In compiling the information in this Annual Report, we have also used industry data and projections obtained from industry surveys, market research, publicly available information and industry publications.  Industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions.  We have not independently verified this data or determined the reasonableness of such assumptions.  We have indicated where information has come from internal sources.  Such information reflects our management’s best estimates based upon information obtained from our customers and from trade and business organizations and other contacts within the businesses in which we operate.

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PART I

Item 1.Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.Offer Statistics and Expected Timetable

Not applicable.

Item 3.Key Information

(A)Selected Financial Data

The following table sets forth certain historical consolidated financial information of the Company for each of the five years ended December 31, 2004.  The historical financial information as of December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004, as set forth below, has been derived from our audited consolidated financial statements, prepared in accordance with U.S. GAAP, included in this Annual Report.  The information set forth below is not necessarily indicative of future results and should be read in conjunction with “Item 5.  Operating and Financial Review and Prospects” and the consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report.  Amounts are reported in U.S. dollars and have been prepared in accordance with U.S. GAAP.  We have not paid dividends for the five years ended December 31, 2004.

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(In thousands of U.S. dollars, except share data)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:

	For the Year Ended December 31,
	2004(a)		2003(b)		2002(c)			2001(d)			2000(e)
Gross revenues	$	644,119	$	582,092	$	564,472		$	614,209		$	920,143
Net revenues	621,085		558,513		542,262			573,436			868,364
Income (loss) from operations	50,347		63,206		64,619			66,960			(90,695		)
Relinquishment fees - equity in earnings of TCA	35,909		33,960		30,041			24,263			19,508
Income (loss) from continuing operations	68,132		70,267		47,664			37,269			(115,447		)
Net income (loss)	68,132		71,572		39,603			32,661			(115,447		)
Basic earnings (loss) per share:
Income (loss) from continuing operations	$	2.09	$	2.46	$	1.71		$	1.39		$	(3.74	)
Income (loss) from discontinued operations	—		0.04		(0.29		)	(0.18		)	—
Net income (loss) per share	$	2.09	$	2.50	$	1.42		$	1.21		$	(3.74	)
Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	2.01	$	2.39	$	1.67		$	1.34		$	(3.74	)
Income (loss) from discontinued operations	—		0.05		(0.28		)	(0.17		)	—
Net income (loss) per share	$	2.01	$	2.44	$	1.39		$	1.17		$	(3.74	)

CONSOLIDATED BALANCE SHEET DATA:

	For the Year Ended December 31,
	2004(a)		2003		2002		2001		2000
Total assets	$	2,087,275	$	1,455,928	$	1,395,039	$	1,337,740	$	1,438,776
Long-term debt, net of current maturities	754,129		417,220		497,756		518,231		668,908
Shareholders’ equity	1,116,278		839,590		729,021		674,662		637,081
Number of shares outstanding, net of treasury shares	35,900		30,284		28,125		27,318		26,786

(a)We consolidated Palmilla JV, LLC effective January 1, 2004 in accordance with Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), which increased revenues, cost and expenses, assets and liabilities.  During 2004, we recognized an impairment of the Atlantic City land of $7.3 million, $4.6 million of expenses related to Hurricane Frances and operating losses from Palmilla JV, LLC, which reflect $3.3 million of pre-opening expenses.

(b)In 2003, we recognized $2.8 million of insurance recovery and a $2.5 million gain on damaged assets related to Hurricane Michelle.  The operations of our online gaming subsidiary, Kerzner Interactive Limited, were discontinued during the first quarter of 2003.  In connection with the discontinuance of Kerzner Interactive Limited, we recognized $4.5 million of income related to an option agreement with Station Casinos, Inc., which was terminated during the first quarter of 2003.  This amount was partially offset by expenses and write-offs related to the termination of Kerzner Interactive Limited’s operations. 

(c)In 2002, we recognized a loss on the early extinguishment of debt of $20.5 million related to the redemption and repurchase of our 9% Senior Subordinated Notes and our 85/8% Senior Subordinated Notes and a $14.5 million gain on settlement of territorial and other disputes in connection with a settlement with a major shareholder.

(d)In 2001, we recognized the results of operations of Resorts Atlantic City from January 1, 2001 to April 24, 2001.

(e)In 2000, we recognized a $229.2 million write-down of the carrying value of Resorts Atlantic City and a related option to purchase certain real estate from us at its net realizable value, a $76.4 million gain on real estate related sales at the Ocean Club Estates and $7.6 million of pre-opening expenses related to the expansion of the One&Only Ocean Club and the Ocean Club Golf Course. 

We have reclassified “Relinquishment Fees – equity in earnings of TCA” from operating income to a separate line item after income from operations but before other income (expense) for each of the four years ended December 31, 2003.  For the years ended December 31, 2003, 2002 and 2001, we have reclassified insurance

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recovery of $2.8 million, $1.1 million and $2.0 million, respectively, from revenues to a line item credit within cost and expenses (there was no such recovery during 2000).

(B)Capitalization and Indebtedness

Not applicable.

(C)Reasons for the Offer and Use of Proceeds

Not applicable.

(D)Risk Factors

The resort and casino industries are highly competitive and increases in competition could adversely affect our financial performance.

Our properties compete with other resorts, hotels and casinos, including land-based casinos, riverboat, dockside and cruise ship casinos and other forms of gaming, as well as other forms of entertainment.  If other properties operate more successfully, if existing properties are enhanced or expanded or if additional hotels or casinos are established in and around the markets in which we conduct business, we may lose market share.  In particular, the expansion, upgrade or construction of competing resort or casino properties in or near any market from which we attract or expect to attract a significant number of customers could have a significant adverse effect on our business, financial condition or results of operations.

A number of our competitors are larger and have greater financial and other resources than we do.  In addition, a number of jurisdictions have legalized gaming and other jurisdictions are considering the legalization and/or expansion of gaming.  This could open markets in which we currently compete to new entrants and could create new markets that may compete as tourist destinations.  Our gaming operations compete, and will in the future compete, with all forms of existing legalized gaming and with new forms of gaming that may be legalized in the future.  Our competitive position could be materially adversely affected by competing companies, new entrants, new markets and new forms of gaming, and our revenues could decline, harming our financial condition.

A further discussion of competition at our operations by geographic location is included in “Item 4.  Information on the Company, (B) Business Overview—Competition.”

New projects and expansion and renovation efforts are inherently subject to significant development and construction risks.

We regularly evaluate potential development opportunities and engage in expansion, development, upgrade and renovation projects at properties that we develop or operate.  Each of these projects, including the Phase III expansion on Paradise Island (“Phase III”) discussed in “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island,” the development of Atlantis, The Palm, Dubai (“Atlantis, The Palm”) discussed in “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm,” the four proposed development projects in the United Kingdom, the proposed development project in Morocco and the completion of our projects in the Maldives and South Africa will be subject to the many risks associated with expanding or renovating an existing enterprise or developing new projects, including unanticipated design, construction, regulatory, environmental and operating problems, and the significant risks commonly associated with implementing an expansion strategy in new markets.  In particular, any such projects are subject to the risks associated with the following:

•the availability of financing and the terms and covenants in our Fifth Amended and Restated Credit Facility (the “Amended Credit Facility”) and other debt;

•shortages in materials;

•insufficient public infrastructure improvements or maintenance;

•shortages of skilled labor or work stoppages;

•unforeseen construction, scheduling, engineering, environmental or geological problems;

•weather interference, natural disasters, floods, fires or other casualty losses;

•the failure to obtain required licenses, permits or approvals;

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•difficulties and uncertainties associated with the regulatory environment in non-U.S. jurisdictions;

•regulatory or private litigation arising out of projects; and

•unanticipated cost increases and budget overruns.

For example, our projects are subject to regulation at the national, state and local levels in their respective jurisdictions, which could adversely affect the progress of our projects.  In order to proceed with projects, we may need to, among other things, notify authorities of our proposals or submit environmental statements.  We could be sanctioned for any failure to follow any of these procedures, including fines or even temporary closure of our work sites.  We cannot guarantee that we will be successful in obtaining required permits and approvals.  Delays and compliance costs associated with our projects as a result of regulatory obstacles could have a material adverse effect on our business, financial condition or results of operations.

The anticipated costs and construction periods for projects are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with architects and contractors.  The cost of any project may vary from initial expectations, and we, or the owners of the property, may have a limited amount of capital resources to fund cost overruns on any project.  If cost overruns cannot be financed on a timely basis, the completion of one or more projects may be delayed until adequate funding is available.  The completion dates of development projects could also differ significantly from expectations for construction-related or other reasons.  We cannot ensure that any project will be completed, if at all, on time or within established budgets.  Significant delays or cost overruns on projects could have a material adverse effect on our business, financial condition or results of operations.

Litigation may also impede or delay our ability to complete construction or expansion projects.  We have on occasion been named as a defendant in lawsuits brought to delay, alter or enjoin projects in which we have been involved.  If litigation is successfully brought against us as a result of our expansion or renovation projects around the world, it could have a material adverse effect on our business, financial condition or results of operations.

In addition, although we design our projects for existing facilities to minimize disruption of business operations, expansion and renovation projects require, from time to time, portions of the existing operations to be closed or disrupted.  Any extended disruptions in our operations could have a material adverse effect on our business, financial condition or results of operations.

If we are unable to finance our expansion, development and renovation projects as well as other capital expenditures through cash on hand, cash flows or borrowings, our expansion, development and renovation efforts could be jeopardized.

If we are unable to finance existing or future projects with cash on hand, cash flows from operations or borrowings, we will have to adopt one or more alternatives, such as reducing or delaying planned expansion, development and renovation projects and other capital expenditures, selling assets, restructuring indebtedness, obtaining equity financing or joint venture partners or modifying our Amended Credit Facility.  These sources of funds may not be sufficient to finance existing or future projects, and other financing may not be available on acceptable terms, in a timely manner or at all.  In addition, our Amended Credit Facility and the indenture governing our 87/8% senior subordinated notes due 2011 (the “87/8% Senior Subordinated Notes”) contain certain restrictions on our ability to incur additional indebtedness, and our future indebtedness will likely contain similar restrictions.  If we are unable to secure additional financing, we could be forced to limit or cancel expansion, development or renovation projects, which may materially adversely affect our business, financial condition or results of operations.

Severe weather conditions or natural disasters could adversely affect our business, financial condition or results of operations, or further increase our insurance premiums and deductibles or make insurance unavailable at commercially reasonable rates.

The Bahamas, Mexico, the Maldives, Morocco and Mauritius are subject to tropical weather and natural disasters, which, if severe, could adversely affect our operations and tourism.  Similarly, inclement weather can adversely affect the relinquishment fees that we earn from the Mohegan Sun Casino (“Mohegan Sun”), as the principal access to this property is by road.  In September 1999, Hurricane Floyd, a hurricane rated by the United States National Weather Service as a category five, its highest rating, passed within 60 miles of Paradise Island.  Our Paradise Island properties suffered approximately $45.0 million of property damage.  In November 2001, Hurricane Michelle impacted our Paradise Island properties.  Although the storm caused minimal disruption to our operations,

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our properties (other than Harborside at Atlantis, which was closed from August 2002 through December 2002 due to water damage resulting primarily from Hurricane Michelle—see “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island”) suffered approximately $28.3 million in damage.  Our losses for Hurricane Floyd and Hurricane Michelle were predominately covered by insurance.

In September 2004, Hurricane Frances passed just to the north of Paradise Island.  Costs associated with Hurricane Frances were $4.6 million, which consisted of $3.4 million of clean up and repair costs and complimentary goods and services to guests and a $1.2 million loss on damaged assets.

In December 2004, the tsunami caused by an earthquake off the coast of Indonesia in southern Asia resulted in flooding damage at our two properties in the Maldives.  We estimate that the One&Only Kanuhura and the One&Only Reethi Rah sustained aggregate property damages of approximately $24.0 million.  In addition, the One&Only Kanuhura sustained approximately $7.0 million in business interruption losses.  We expect the owners of the One&Only Kanuhura and the One&Only Reethi Rah to submit claims to their respective insurers, and that a significant portion of their damages will be covered.  In 2004, equity earnings from the One&Only Kanuhura were $0.4 million and we received $1.2 million in management fees.  In 2005, we expect both equity earnings and management fees from the One&Only Kanuhura to be adversely affected by the tsunami.

Hurricanes and other natural disasters, in addition to causing property damage, lead to decreased revenues until business returns to normal operations and business interruption expenses, such as increased marketing expenses.  We cannot assure you that our business and, consequently, our financial condition or results of operations, will not be adversely affected by severe weather conditions or other natural disasters in the future, which could cause significant damage and suspension of services provided to our patrons, further increases in our insurance premiums and per occurrence deductibles or cancellations of, or decreases in, our coverage and harm to our business.

We are subject to extensive governmental gaming regulations, that may harm our business.

Our operation of gaming facilities is subject to extensive governmental regulations.  Regulatory authorities typically require various registrations, licenses, findings of suitability and approvals to be held by operators of gaming facilities.  The regulatory authorities in these jurisdictions generally have broad discretion in the granting, renewal, suspension and revocation of licenses and require that such registrations, licenses, findings and approvals be renewed or updated periodically.  The Company and its key personnel are currently qualified to do business in all of the jurisdictions in which we operate gaming facilities.  We cannot assure you that any new or permanent licenses, permits or approvals that may be required by us, our key employees and our partners, if applicable, in the future will be granted or that our existing licenses, permits and approvals will be renewed or will not be suspended or revoked in the future.  The failure to receive or renew licenses and/or the suspension or revocation of licenses could materially adversely affect our business, financial condition or results of operations.

Our gaming operations are subject to significant taxation and fees that, if increased, could harm our profitability.

Our gaming operations are subject to significant taxation and fees.  We pay substantial taxes and fees with respect to our gaming operations in The Bahamas and Connecticut and will likely incur significant taxes and fees in other jurisdictions, including the United Kingdom and Morocco, in which we expect to conduct gaming operations in the future.  Any material increase in existing taxes and fees, the adoption of new taxes or fees or the loss or reduction of any existing or future tax incentives could have a material adverse effect on our profitability.

Our business is seasonal, which could increase our exposure to disruptions caused by weather and other factors.

Historically, our revenues and operating profits in The Bahamas and Mexico have been higher during the first quarter, the prime tourist season, than in successive quarters.  Higher revenues and earnings are typically realized from the Mauritius properties during the fourth quarter of the year and from Mohegan Sun during the second and third quarters of the year.  If any of these properties were unable to accommodate guests during such periods for any reason, including disruptions caused by weather, our revenues and profits could be adversely affected.

Work stoppages and other labor disputes could harm our financial condition and results of operations.

In The Bahamas, a union represents approximately 3,600 of our approximately 5,800 local employees.  We participate in an employer association whose existing contract with the union will expire on January 7, 2008.  Labor

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relations in The Bahamas have been unstable at times over the last few years and there have been occasional work stoppages.  As the country’s largest private employer, we are sometimes the target of labor disputes.  Any protracted labor disputes or work stoppages affecting any of the properties that we own or operate could reduce our revenues.  In addition, many of the public sector industries in The Bahamas, such as electricity, telecommunication and airport facilities, are unionized.  The Bahamian government’s labor relations with these unions have been unstable at times and there have been work stoppages on occasion that have been disruptive to our business.

Lack of sufficient air service could adversely affect our revenues and profits.

Most patrons of our properties arrive by air.  Although we consider the current level of air service to our properties in The Bahamas, Mauritius, Mexico, Dubai and the Maldives to be adequate, any interruption or reduction of air service to any such locations could restrict the growth of our businesses, negatively affect our competitive position and adversely affect our revenues and profits.  As we continue to expand or develop additional properties, such future growth may require additional air service to meet demand.

We are subject to environmental, health and safety laws and regulations, and our noncompliance or a significant regulatory change could adversely affect our business, financial condition or results of operations.

Our operations are regulated under a number of federal, provincial, state and local laws and regulations that govern, among other things, the handling of waste materials, some of which are classified as hazardous materials, and the discharge of hazardous materials into the environment.  Our operations are subject to stringent regulations relating to protection of the environment and waste handling.  In addition to liability for our own noncompliance, these laws and regulations may expose us to liability for the noncompliance of other parties, without regard to whether we were negligent.  Sanctions for noncompliance with applicable environmental laws and regulations may include administrative, civil and criminal penalties, revocation of permits and corrective action orders.  Furthermore, we may be liable for costs for environmental cleanup at currently or previously owned or operated properties or off-site locations.  Our failure to comply with existing laws or regulations, the adoption of new laws or regulations with additional or more rigorous compliance standards or the more vigorous enforcement of environmental laws or regulations could significantly harm our business by increasing our expenses and limiting our future opportunities.

We do not own, manage or control Mohegan Sun and the revenues that we derive from Mohegan Sun are therefore outside of our control and are subordinated to certain existing and future obligations of Mohegan Sun.

In 2004, we earned approximately $36.8 million from Trading Cove Associates (“TCA”), which is party to a relinquishment agreement with the Mohegan Tribal Gaming Authority (“MTGA”).  Pursuant to the agreement, in exchange for relinquishing its right to manage Mohegan Sun, TCA is entitled to receive 5% of Mohegan Sun’s gross revenues through December 2014.  As a result, decisions that affect Mohegan Sun’s business or operations, and therefore the revenues that TCA earns under the agreement, are outside of our control.  Revenues on which TCA’s fees are based exclude any revenues generated by any future expansion of Mohegan Sun.  The senior and junior relinquishment fees from the MTGA to TCA rank behind all of the MTGA’s obligations to pay certain minimum priority distributions to the Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) and all of the MTGA’s existing and future senior secured indebtedness.  The junior fees also rank behind all unsecured indebtedness.  Should the MTGA not be able to meet these obligations, it would not be able to pay TCA its relinquishment fees, which could have a material adverse effect on our financial position and results of operations.

A small number of our shareholders control a significant percentage of our Ordinary Shares and are able to control decisions affecting our company.

As of February 28, 2005, Caledonia Investments PLC (“Caledonia”), Cement Merchants SA (“CMS”), Baron Capital Group, Inc. (“Baron”), FMR Corp. (“FMR”), and Istithmar PJSC (“Istithmar”) had the right to vote approximately 11.2%, 7.6%, 16.2%, 11.9%, and 12.4%, respectively, of our Ordinary Shares.  As of February 28, 2005, the Kerzner Family Trust and its subsidiary, World Leisure Group (“WLG”), both of which are controlled by Mr. S. Kerzner, had the right to vote approximately 12.5% of our Ordinary Shares.  See “Item 7.  Major Shareholders and Related Party Transactions, (A) Major Shareholders” for more information as to how the foregoing ownership percentages were determined.  If any combination of our major shareholders act together, they may be able to effectively control the outcome of substantially all matters requiring shareholder approval, including the election of our directors, thereby controlling our management, policies and business operations.  For example, our major shareholders could combine to use this voting power to block our ability to obtain certain types of

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financing for development plans, renovations or expansions, which could materially adversely affect our ability to develop our business and pursue our strategies.

We significantly rely on technology.

The resort and casino industries continue to demand the use of sophisticated technology, including technology utilized for property management, casino-related technology, procurement, reservation systems and guest amenities.  In 2005, we expect to introduce a real-time web-accessible reservation system.  We expect the technologies utilized at our properties to require refinements.  There can be no assurance that, as certain technologies become outdated or as advanced technologies are introduced, we will be able to replace or introduce such technologies as quickly as our competition, within our established budgets or that we will be able to integrate such technologies into our existing systems.  Further, there can be no assurance that we will achieve any benefits from any new technology.

Joint ventures decrease our ability to manage risk.

We have from time to time invested, and expect to continue to invest, in joint ventures.  Joint venturers typically have shared control over the joint venture assets.  As a result, joint venture investments involve risks, such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial resources to meet its obligations, have economic or business interests that are inconsistent with our business interests or take action contrary to our instructions or requests or contrary to our policies or objectives.  Any of such actions may subject the properties owned by the joint venture to additional risk.  In general, we seek to maintain sufficient control of any joint venture, however, we may be unable to take action without the approval of our joint venture partners.  If a joint venture partner becomes bankrupt, we could become liable for such partner’s share of joint venture liabilities.  If we are unable to maintain sufficient control of any joint venture, our business, financial condition or results of operations could be materially adversely affected.

We may have disputes with the owners and joint venture partners of the properties that we manage.

Our obligations under our management agreements to manage each property and enforce certain required standards may, in some instances, be subject to interpretation and may give rise to disagreements.  While we will seek to resolve any disagreements in a manner that develops and maintains positive relationships with current and potential owners and joint venture partners, our failure to resolve any such disagreements could result in litigation or could interrupt the services or operating quality of the affected property, which could materially adversely affect our business, financial condition and results of operations.

You may have difficulty enforcing judgments against us or our directors or management that reside outside the United States.

Kerzner is an international business company incorporated under the laws of the Commonwealth of The Bahamas.  Certain of our directors and executive officers reside outside the United States.  In addition, a substantial portion of the assets of our directors and officers and of our assets are located outside the United States.  As a result, it may be difficult or impossible to:

•effect service of process within the United States upon us or these persons; or

•enforce, against us or these persons, court judgments obtained in U.S. courts, including judgments relating to U.S. federal securities laws.

It is unlikely that Bahamian courts would entertain original actions against Bahamian companies, their directors or officers predicated solely upon U.S. federal securities laws.  Furthermore, judgments based upon any civil liability provisions of the U.S. federal securities laws are not directly enforceable in The Bahamas.  Rather, a lawsuit must be brought in The Bahamas on any such judgment.  Subject to consideration of private international law, in general, a judgment obtained after due trial by a court of competent jurisdiction, which is final and conclusive as to the issues in connection, is actionable in Bahamian courts and is impeachable only upon the grounds of fraud, public policy and natural justice.

We may have difficulty enforcing gaming debts in certain foreign jurisdictions or in certain jurisdictions within the United States, which could negatively affect our operating results.

Gaming debts may not be legally enforced in certain foreign jurisdictions or in certain jurisdictions within the United States.  A substantial portion of the customers at Atlantis, Paradise Island reside in the United States.  As a

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result, we may be unable to collect gaming debts from our patrons who reside in such jurisdictions, which could negatively affect our operating results.

Reassessments of and changes to our business plans could hinder our development and result in charges or fees that could harm our financial condition or results of operations.

We are regularly reviewing our business plans in light of a variety of factors, including the availability of financing, regulatory and political considerations, competition and other business and strategic concerns.  As a result of such assessments, our management may choose to change such plans, which could result in failure to expand and could also cause us to incur fees or charges.  We cannot assure you that we will carry forward and complete any proposed business plans.

Energy price increases may adversely affect our cost of operations and our revenues.

Resorts use significant amounts of electricity, natural gas and other forms of energy.  Although we have not experienced shortages of energy, substantial increases in the cost of electricity or natural gas may negatively affect our operating results.  The extent of any impact is subject to the magnitude and duration of the energy price increases and could be material.  In addition, energy price increases in locations that constitute a significant source of customers for our properties could result in a decline in disposable income of potential customers and a decrease in visitation and spending at our properties, which could negatively impact revenues.

Additional increases in our insurance premiums and deductibles may increase our costs and impair our ability to obtain or maintain insurance on our properties.

Due to changes in the insurance market arising prior to the September 11th terrorist attacks and the effects of such attacks, it has become more difficult and/or more expensive to obtain insurance.  We may encounter difficulty in obtaining or renewing property or casualty insurance on certain of our properties which are subject to the potential negative impact of hurricanes.  In addition, such insurance may be more limited and may not cover catastrophic risks or terrorist acts at current levels or at all.  The tsunami in December 2004 in southeast Asia will result in increases in local insurance rates.  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.  In addition to the “all risk” coverage described below, we have insured Atlantis, Paradise Island for up to $300.0 million per occurrence (and in an annual aggregate amount) from damages directly resulting from certain terrorist acts to cover property damage and related business interruption losses.  If any such event were to affect all or part of one or more of our properties, it is possible that we would suffer a substantial loss beyond what is covered by our insurance policies.

The amount of our “all risk” property and business interruption insurance with regard to our Paradise Island business (inclusive of a per occurrence deductible) in the 2004 policy year commencing June 1, 2004, was $300.0 million, as compared to $175.0 million in the 2003 policy year and $150.0 million in the 2002 policy year.  (“Policy Years” are defined as June 1 of that year through May 31 of the following year.)  “All risk” insurance includes coverage for the windstorm related effects of hurricanes among other casualty losses.

In 2002, with regard to our Paradise Island property insurance, our “all risk” premium increased from approximately $4.6 million in the 2001 Policy Year to a total of approximately $14.1 million in the 2002 Policy Year, and Kerzner’s deductibles also increased from $4.0 million per occurrence in the 2001 Policy Year to $15.0 million per occurrence in the 2002 Policy Year with an annual aggregate deductible of $30.0 million.  For the 2003 Policy Year, our premium for Paradise Island property insurance decreased to $13.5 million with the deductibles remaining the same as in the 2002 Policy Year.  For the 2004 Policy Year, our premium for Paradise Island property insurance increased to $14.1 million with the deductibles remaining the same as in the 2003 Policy Year.  In light of the significant hurricane activity in the Caribbean, our insurance premium and deductibles may significantly increase.

Acts of terrorism and war could adversely affect the travel market and reduce our operating revenues.

The terrorist attacks of September 11^th had a significant impact on the travel and tourism industries in which we operate.  The considerable reduction in both business and leisure air travel following that date significantly reduced visitation to all our properties, including our Paradise Island properties, during the fourth quarter of 2001, resulting in a significant decline in our operating results during this period.  On March 19, 2003, the U.S. and coalition forces commenced a war with Iraq.  Although the official combat in the war with Iraq ceased in May 2003, the U.S. and coalition forces still maintain a presence in Iraq and terrorist activities in the country have continued.  These events,

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the potential for future terrorist attacks (in the United States and in foreign locations), the national and international responses to terrorist attacks and other acts of war or hostility have created many economic and political uncertainties, which could adversely affect our business and results of operations.  Future acts of terror, anti-terrorist efforts, war or other armed conflicts involving the United States or other countries may reduce our guests’ willingness to travel, which could have a material adverse effect on the U.S. and global economies and on our business, financial condition or results of operations.

Additional risks may be associated with Atlantis, The Palm.

In September 2003, we entered into agreements to form a joint venture with Nakheel LLC, an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  In June 2004, we entered into an agreement with Istithmar, an entity indirectly wholly owned by the Royal Family of Dubai, which has assumed all obligations and rights of its affiliate, Nakheel LLC.  Dubai is one of seven autonomous Sheikhdoms that form the federation of the United Arab Emirates.  The United Arab Emirates is located along the Persian Gulf, and bordered on the south and west by Saudi Arabia, on the west by Qatar and on the north and east by Oman.  These states and others in the region, more specifically Bahrain and Kuwait, through an organization formed to strengthen relations among the six states, the Gulf Cooperation Council, maintain peaceful relations and cooperate on trade, regional defense and economic issues.  His Highness Sheikh Zayed bin Sultan Al Nahyan served as President of the United Arab Emirates from 1971 until his death on November 2, 2004.  On November 3, 2004, His Highness Sheikh Khalifa bin Zayed Al Nahyan was named President of the United Arab Emirates.  His Highness Sheikh Maktoum bin Rashid Al Maktoum has ruled in Dubai since 1990.  Although the Sheikh-led government appears to be stable and not subject to any significant local challenges, the September 11th terrorist attacks on the United States and the war and ongoing efforts in Iraq have both increased scrutiny and heightened tensions throughout the Middle East, including the United Arab Emirates.  Al-Qaeda and other terrorist organizations, in their hostile campaign against supporters of the West, present a threat to stability in the Middle East.  The United Arab Emirates maintains friendly relations with the United States.  For example, it allowed U.S. troops to be stationed there in preparation for the invasion of Iraq in 2003 and it has pledged humanitarian assistance in the Iraqi reconstruction efforts and encouraged the United States to maintain security even after the handover of power to the Iraqis on July 1, 2004.  This support for the United States may increase the likelihood of attacks on the state by terrorist organizations.  As publicly reported on May 5, 2004, Pakistani intelligence uncovered a plot by a small group of terrorists to hijack and possibly bomb a plane bound for the United Arab Emirates.  The firm relationship between Saudi Arabia and the United States has in recent years led to a number of significant terrorist activities in Saudi Arabia and similar events could occur in the United Arab Emirates.

The U.S. Department of State is concerned that terrorists may be planning to carry out attacks against Westerners and oil workers in the Gulf.  Perceptions of the safety of the region could affect Atlantis, The Palm, as the viability of this undertaking is dependent on the continued growth of tourism in the region, primarily from Western Europe and Asia.  Future acts of terrorism, anti-terrorist efforts, war or political and civil unrest in the region could have a material adverse effect on global economies, the economies of the Gulf States and in particular on the development of Atlantis, The Palm.  Dubai is generally viewed as the most progressive, open and pro-Western emirate.  In addition, it is currently the only emirate that permits the sale of land to foreigners.  With its relatively high profile, Dubai could represent a potentially attractive target to terrorist organizations.

Atlantis, The Palm will be located at the apex of the crescent, which forms the external border of The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai, and is expected to be connected to the rest of The Palm, Jumeirah by a roadway tunnel and proposed monorail.  As with any reclamation project, there are inherent subsidence and liquefaction risks.  The Company and Nakheel have been monitoring the construction site for subsidence, which to date has been isolated and not in excess of three millimeters.  However, the Company has not monitored or had any opportunity to monitor other sites on The Palm, Jumeirah for subsidence.  In the event of unforeseeable subsidence on the site or on other sites on The Palm, Jumeirah, we would expect at a minimum for there to be a material reduction in hotel bookings for Atlantis, The Palm and in day visitors to the water attractions, which in turn could have a material adverse impact on the operations and financial condition of Atlantis, The Palm.  In the event of an earthquake, there is the risk of liquefaction.  While there has not been recent significant seismic activity in the immediate vicinity of Dubai, earthquakes have recently occurred in Iran, Egypt, Syria and southern Asia, off the coast of Indonesia.  In addition, severe storms accompanied by high winds can develop over the Gulf.  These storms could lead to surges and high wave heights that could erode or top the breakwater that has been erected on the Gulf-side of the site, thereby leading to flooding.  Aside from the property damage that could occur from such floods, any such flooding could also damage the roads on the crescent or the proposed monorail, as well

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as flood the tunnel, which would limit or curtail arrivals and departures to Atlantis, The Palm.  Any of these structural, climatic or geological events would likely have a material adverse impact on the site and operations of Atlantis, The Palm, including the extensive marine environment and animals that will be a key attraction of the resort.  Nakheel and other developers have also announced other reclamation projects in Dubai of a similar scale to The Palm, Jumeirah.  Should any of these reclamation projects suffer from any of these events, Atlantis, The Palm and, as a result, the Company could be materially adversely affected.

Additional risks may be associated with our proposed destination resort casino in Morocco.

In July 2004, we announced that Kerzner and two local Moroccan companies, Société Maroc Emirates Arabs Unis de Développement (“SOMED”) and Caisse de Dépôt et de Gestion (“CDG”), had entered into an agreement with the Government of the Kingdom of Morocco for the ownership, development and management of a destination resort casino.  This agreement is subject to the fulfillment of certain conditions.  Morocco is located in Northern Africa and is bordered by Algeria, the North Atlantic Ocean and the Mediterranean Sea.  The Head of State of Morocco is His Majesty King Mohammed IV and the Prime Minister of Morocco is Mr. Driss Jettou.  Although Morocco is largely stable, with limited security risks, the May 2003 suicide bomb attacks in Casablanca have raised concerns about terrorist activity in the region.  The implication of several Moroccans in the March 2004 Madrid train bombing has further heightened concerns about terrorism.  There are several loose-knit terrorist groups in Morocco that have connections to Al-Qaeda.  Morocco has been an ally of the United States, although it did express opposition to the war in Iraq.  Its historic support for the United States may increase the likelihood of attacks on the state by terrorist organizations.  Establishments which are readily identifiable with Western interests are potential targets for future attacks.  Such targets may include establishments where activities occur that may offend religious sensitivities, such as casinos or places where alcoholic beverages are sold or consumed.  At present, there are five casinos located in Morocco, however, our proposed resort would be the largest casino in Morocco and therefore, a potentially more high-profile target.  Future acts of terrorism, anti-terrorist efforts, war or political and civil unrest in the region could have a material adverse effect on global economies, the economy of Morocco and in particular, on the development and success of our destination resort casino in Morocco.

Our success depends on certain key employees.

Our success depends upon the continued services of certain key employees, in particular our senior management.  Our senior management is responsible for the implementation and development of our various projects, the development and maintenance of our relationships with current and potential hotel and resort owners and joint venture partners and the marketing and related activities necessary to attract patrons to our properties.  Although we believe that we could replace our key employees within a reasonable amount of time should the need arise, the loss of key personnel could have a material adverse effect on our business.

Deterioration in general economic and market conditions could adversely affect our business.

Our business is affected by general economic and market conditions, particularly in the United States and Europe.  A large portion of our business at Atlantis, Paradise Island is generated by group convention sales and individual tour and travel.  A recession or economic slowdown could cause a reduction in group sales bookings or the willingness or ability of tourists to book vacations at our properties, which could materially adversely affect our operating results.

Item 4.Information on the Company

(A)History and Development of the Company

Kerzner was incorporated in The Bahamas in 1993 under the name “Sun International Hotels Limited,” and is an international business company under the International Business Companies Act, 2000 of the Commonwealth of The Bahamas.  The Company is registered under number 46,600B at the Companies Registry of The Bahamas.  Our executive offices are located at Executive Offices, Coral Towers, Paradise Island, The Bahamas, and the telephone number is 242-363-6018.  Our agent for service of process in the United States is Corporation Services Company, 1013 Centre Road, Wilmington, Delaware 19805.  On March 1, 1996, we listed our Ordinary Shares for trading on The New York Stock Exchange (“NYSE”).  On July 1, 2002, we changed our corporate name from Sun International Hotels Limited to Kerzner International Limited and our stock, which was trading on the NYSE under the symbol “SIH,” was listed under the new ticker symbol “KZL.” The name change was implemented in accordance with agreements related to the restructuring of Sun International Investments Limited (“SIIL”), which

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was formerly our majority shareholder.  See “Item 7.  Major Shareholder and Related Party Transactions.”  There was no change in our management or worldwide operations as a result of the name change.

The Company was established in order to acquire the Paradise Island Resort and Casino and related operations from Resorts International, Inc.  The acquisition was completed in May 1994.

In June 1994, we established Sun Cove Limited, which is now known as Kerzner Investments Connecticut, Inc. (“Kerzner Connecticut”).  Kerzner Connecticut owns a 50% interest in, and is a managing partner of, TCA, a Connecticut general partnership.  In September 1995, TCA entered into a Gaming Facility and Construction Agreement with the MTGA, an instrumentality of the Mohegan Tribe, pursuant to which TCA assisted the Mohegan Tribe with the design, development and financing of Mohegan Sun, a resort and entertainment complex situated in the town of Uncasville, Connecticut.  In addition, in August 1995, TCA entered into a gaming management agreement (the “Management Agreement”) with the Mohegan Tribe pursuant to which TCA provided certain management, marketing and administrative services to the Mohegan Tribe upon the opening of Mohegan Sun in October 1996.  In February 1998, TCA and the Mohegan Tribe entered into an agreement (the “Relinquishment Agreement”) pursuant to which the Management Agreement was terminated effective January 1, 2000 and the Mohegan Tribe assumed full management responsibility for Mohegan Sun.  Pursuant to the Relinquishment Agreement, TCA receives payments of 5% of the gross revenues of Mohegan Sun for the 15-year period that commenced January 1, 2000.  In addition to the Relinquishment Agreement, in February 1998, the Mohegan Tribe appointed TCA to develop its $1.0 billion expansion of Mohegan Sun, which was completed in June 2002.  See below “(B) Business Overview—The Properties—Gaming—Mohegan Sun” for a further description of the Relinquishment Agreement and the $1.0 billion expansion.

In December 1996, we acquired Sun International North America, Inc. (formerly Griffin Gaming & Entertainment, Inc.), which is now known as Kerzner International North America, Inc. (“KINA”).  KINA is a holding company, which, through an indirect wholly owned subsidiary, formerly owned and operated a 644-room casino hotel property in Atlantic City, New Jersey (“Resorts Atlantic City”).

In April 2001, we completed the sale of Resorts Atlantic City to an affiliate of Colony Capital LLC (“Colony”) for a purchase price of approximately $144.0 million, including accrued interest (the “Resorts Atlantic City Sale”).  The proceeds received from Colony consisted of approximately $123.5 million in cash, net of costs incurred subsequent to closing, and an unsecured $17.5 million note which was paid in full in March 2002.  The net cash proceeds received from this transaction were used to reduce the amount of borrowings outstanding under our then-existing amended and restated revolving credit facility.  In 2000, we recognized a $229.2 million write-down of the carrying value of Resorts Atlantic City and a related option to purchase certain real estate to its net realizable value.

Pursuant to the terms of the Resorts Atlantic City Sale, we granted Colony a two-year option (the “Atlantic City Option”) to acquire certain undeveloped real estate adjacent to Resorts Atlantic City that we owned for a purchase price of $40.0 million in the form of a promissory note.  In February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we sold the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary (the “Purchaser”) of Colony RIH Holdings, Inc. for a purchase price of $40.0 million.  The sale was completed on March 18, 2004.  See “Item 4.  Information on the Company, (B) Business Overview—Atlantic City Option” below for more information on this sale.

In 1999, we formed a joint venture with Starwood Vacation Ownership, Inc. (“SVO”) (formerly Vistana, Inc.), a subsidiary of Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”), to develop Harborside at Atlantis, a timeshare project on Paradise Island.  We and SVO each hold a 50% interest in Harborside at Atlantis.  As part of the joint venture, we contributed land and cash and SVO contributed cash.

In January 2000, we received a proposal from SIIL, at that time the majority shareholder of Kerzner, to acquire in a merger transaction all of our Ordinary Shares not already owned by SIIL or its shareholders for $24 per share in cash.  To consider the proposal, we formed a committee of independent members of the Board of Directors (the “Special Committee”), which retained its own financial and legal advisers.  The proposed transaction was subject to various conditions, including approval by the Special Committee.  On June 16, 2000, we announced that SIIL was not able to negotiate a mutually satisfactory transaction with the Special Committee and that SIIL advised us that its proposal had been withdrawn.

In order to allow our shareholders to sell at least a portion of their Ordinary Shares at the price formerly proposed by SIIL, our Board of Directors approved a self-tender offer for up to 5,000,000 Ordinary Shares at a $24

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per share cash price.  In August 2000, we announced the completion of the self-tender, pursuant to which we purchased 5,000,000 Ordinary Shares at $24 per share.

In August 2000, we established Kerzner Interactive Limited, our Internet gaming subsidiary.  In September 2001, we received a license to operate in the Isle of Man and commenced live gaming operations in January 2002.  The Company discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003.  See below “(B) Business Overview—Internet Gaming” for more information.

On July 3, 2001, we announced the restructuring of our former majority shareholder, SIIL.  In connection with this restructuring, among other things, the shareholders agreement governing SIIL was terminated and SIIL was dissolved.  In November 2002, we reached a further settlement with Sun International Limited (formerly known as Kersaf Investments Limited, and referenced herein as “Kersaf”) related to the restructuring agreement and certain other matters.  See “Item 7.  Major Shareholders and Related Party Transactions.”

Effective August 2001, we acquired a 25% interest in the Kanuhura Sun Resort & Spa Limited (“One&Only Kanuhura”) for approximately $3.8 million.  As of December 31, 2004, we had provided debt financing to the One&Only Kanuhura of $2.4 million, excluding accrued interest and we also have a contingent guarantee obligation to provide up to approximately $10.7 million.  The One&Only Kanuhura is a 100-room luxury resort located on Lhaviyani Atoll in the Maldives, which is located approximately 600 miles southwest of the southern tip of India.  Our management contract with the One&Only Kanuhura expires in 2026.  Our agreement with Sun Resorts Limited (see below) also included the sale of 20% of our debt and equity interests in the One&Only Kanuhura to Sun Resorts Limited and the transfer to One&Only Management (as defined below) of the One&Only Kanuhura management agreement.  Effective January 1, 2005, our ownership interest in the One&Only Kanuhura further decreased to 18.75% and SRL’s interest increased to 6.25%, as SRL purchased an additional 1.25% interest from us.

In June 2002, we entered into management and development agreements for the One&Only Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives that we expect will open in the second quarter of 2005.  This new five-star resort will occupy the site where a small resort had previously been located.  The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2020.  As part of this development, we have committed to provide certain financing arrangements to the current owner of the resort.  See “Item 5.  Operating and Financial Review and Prospects, (C) Liquidity and Capital Resources” below for more information.

On September 12, 2002, we purchased a 50% ownership interest in the 115-room Palmilla Resort (“One&Only Palmilla”), a deluxe five-star property located near Cabo San Lucas in Baja, Mexico for approximately $40.8 million, including transaction costs.  In connection with the purchase, we entered into long-term management and development agreements related to the property that will expire in 2022.  The acquisition was funded through a combination of cash on hand and drawings under our then-existing amended and restated revolving credit facility.  The One&Only Palmilla re-opened in January 2004 following a refurbishment that expanded the room count to 172 rooms, all of which are oceanfront, and added a Charlie Trotter restaurant, a 12-unit spa with open air villas, a meeting space, a pool and a poolside restaurant.  In addition, in February 2004, the One&Only Palmilla had a grand re-opening event.  The expansion was financed by the One&Only Palmilla through local project financing that was supported by a $46.5 million guarantee from Kerzner, and by approximately $14.5 million in completion loans from Kerzner.  The total cost of the One&Only Palmilla renovation was approximately $102.0 million.  On December 17, 2004, the One&Only Palmilla entered into two promissory notes pursuant to which it borrowed $110.0 million.  The proceeds were used to, among other things, repay all of the One&Only Palmilla’s existing loans, including the completion loans provided by Kerzner, and fund the One&Only Palmilla’s working capital requirements.  In connection with the repayment of the One&Only Palmilla’s existing loans, Kerzner’s $46.5 million guarantee was extinguished.  The new indenture governing the promissory notes provides recourse to Kerzner in the event certain representations and warranties are violated.

In December 2002, we began to operate and market certain of our managed and/or owned luxury resort hotels under the “One&Only” brand in connection with our corporate name change.  We are now marketing six of our properties under our One&Only brand.

We currently have a 20.4% ownership interest in Sun Resorts Limited (“SRL”), a publicly traded company on the Mauritian Stock Exchange, which owns the One&Only Le Saint Géran, the One&Only Le Touessrok, Sugar Beach Resort, La Pirogue Hotel and Le Coco Beach Hotel, which are all located in Mauritius.  In December 2002, we entered into an agreement with SRL to form One&Only (Indian Ocean) Management Limited (“One&Only

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Management”), a new management company, for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives, and, as consideration, securing an extension to our management agreements in Mauritius from 2008 until 2023.  Pursuant to an agreement among us, SRL and One&Only Management, SRL’s ownership interest in One&Only Management will increase incrementally, subject to certain conditions, from 2005 through 2009, for no additional consideration, at which time it will own 50% of One&Only Management.  Effective January 1, 2005, SRL’s ownership interest increased from 20% to 25%, and our ownership interest correspondingly decreased from 80% to 75%.  One&Only Management serves as a joint venture growth vehicle for expansion in the islands of the Indian Ocean.  In connection with this transaction, we subcontracted to One&Only Management all of our Mauritius management agreements and assigned to it the One&Only Kanuhura management agreement, and SRL purchased 20% of our debt and equity interests in the One&Only Kanuhura.  Effective January 1, 2005, our ownership interest in the One&Only Kanuhura further decreased to 18.75% and SRL’s interest increased to 6.25%, as SRL purchased an additional 1.25% interest from us.  Pursuant to an additional subcontract arrangement with One&Only Management, we provide comprehensive management services to the five Mauritius resorts and the One&Only Kanuhura and receive a management fee.  We expect to transfer the management agreement for the One&Only Reethi Rah to One&Only Management, and if such transfer occurs, SRL will be obligated to acquire 25% of the subordinated debt interest in the One&Only Reethi Rah (and this percentage will increase to 50% as SRL’s interest in One&Only Management increases).

In April 2003, we agreed to acquire from London Clubs International (“LCI”) for $2.1 million a property located in the town center of Northampton, England.  On March 30, 2004, we announced that the Gaming Board of Great Britain had granted us a Certificate of Consent, which has enabled us to transfer a gaming license held by LCI into our name and proceed with our plans for a casino in Northampton.  We expect to develop and operate the new casino facility on an approximate 30,000 square foot site, which is expected to cost approximately £10.0 million (approximately $18.7 million in U.S. dollars as of March 25, 2005).  The development of this facility has been approved by the local planning authorities.  We have commenced construction on this project and expect the casino facility to open in 2006.  See “(B) Business Overview—Gaming—United Kingdom” for more information.

In May 2003, we entered into a “Heads of Agreement” with the Bahamian Government with respect to the Phase III expansion on Paradise Island.  In May 2004 and December 2004, we entered into supplements to the Heads of Agreement, pursuant to which we modified certain components involved in the Phase III expansion, which now includes a new luxury all-suite hotel, an expansion of our convention facilities, expanded water attractions and an addition to Harborside at Atlantis.  See “(B) The Properties—Atlantis, Paradise Island” for more information.

On September 22, 2003, we announced that we had agreed to form a joint venture with Nakheel LLC, an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  On June 23, 2004, we announced that we had entered into an agreement with Istithmar, an entity indirectly wholly owned by the Royal Family of Dubai, which has assumed all obligations and rights of its affiliate, Nakheel LLC, pursuant to which we formed Kerzner Istithmar Limited (“Kerzner Istithmar”) and increased the scope of Atlantis, The Palm.  Based on our current budget, the development costs of the expanded project are expected to be approximately $1.1 billion and will include an approximately 2,000-room resort and extensive water park situated on 1.25 miles of beachfront property.  Atlantis, The Palm will be located on The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai, United Arab Emirates.  We and Istithmar have each agreed to invest $100.0 million in the form of Class A common stock in Kerzner Istithmar, and Istithmar has agreed to underwrite $200.0 million of Kerzner Istithmar’s limited voting Class B common stock.  In addition, each of Istithmar and Kerzner will provide, on a joint and several basis, additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.  The balance of the financing is expected to be obtained through a $700.0 million syndicated term loan facility that is limited recourse to Kerzner.  As part of the transactions, Kerzner has entered into a development services agreement and a long-term management agreement with a subsidiary of Kerzner Istithmar.  See below “(B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm” for more information.

In October 2003, we entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited on Paradise Island for approximately $38.5 million.  The approximate 39-acre site is adjacent to the proposed site of the new 600-room luxury all-suite hotel that is part of the Phase III expansion.  In the short term, it is expected that the existing hotel on the property will be used to house construction workers during the construction of the planned all-suite hotel.  During the year ended December 31, 2003, we paid $20.0 million in connection with the acquisition. The balance of $18.5 million, which included a $3.5 million stamp tax, was paid in 2004.  In addition, Kerzner obtained an option to purchase certain adjacent land lots for an option price of $5.0 million.  In September 2004, we

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exercised our option and purchased the adjacent land lots at a price of $5.0 million, plus $0.5 million in related stamp taxes.

In November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop a new luxury hotel, subject to various conditions, at the highest end of the market in Cape Town, South Africa.  We intend to form a joint venture in which we will own a minority interest to develop and operate a new 163-room One&Only luxury hotel on the waterfront.

On March 10, 2004, we announced that we had entered into a joint venture, BLB Investors, L.L.C. (“BLB”), with an affiliate of Starwood Capital Group, L.L.C. (“Starwood Capital”) and an affiliate of Waterford Group, L.L.C. (“Waterford”) for the purpose of acquiring an interest in Wembley plc (“Wembley”), which owns gaming and track operations in the United States and race tracks in the United Kingdom.  BLB acquired and retains a 22.2% stake in Wembley.  See “Recent Developments” and “(B) Business Overview—Gaming—United Kingdom” for more information.

On July 13, 2004, we announced our appointment as the preferred developer and operator with respect to the development and management of gaming, hotel and entertainment facilities for two sites in two key markets in the United Kingdom.  The sites for the projects are the Scottish Exhibition + Conference Centre in Glasgow and Sportcity in East Manchester.  We are negotiating binding agreements for both of these projects.  In addition, on July 13, 2004, we announced that we had entered into a binding agreement with affiliates of Anschutz Entertainment Group for the development and operation of a casino and hotel resort facility at the Millennium Dome in London.  Our development and management of our sites in the United Kingdom is subject to a number of contingencies.  First, the United Kingdom needs to pass gambling reform legislation.  Second, a special government committee that is expected to be established upon the passage of such legislation then must select eight localities that will be entitled to have a “Resort” or “Regional Casino,” as such criteria are defined by the Department of Culture, Media and Sport and the Parliamentary Joint Committee, which reviewed the draft Gambling Bill.  Our sites must be in the selected localities and must further compete for and be awarded a regional casino license by the local authorities.  See “(B) Business Overview—Gaming—United Kingdom” below for more information on these projects.

On July 22, 2004, we announced that Kerzner and two local Moroccan companies, SOMED and CDG, had entered into an agreement with the Government of the Kingdom of Morocco that contemplates the creation of a joint venture that will own a destination resort casino in Morocco that we will develop and manage.  In addition, Kerzner, SOMED and CDG entered into an Agreement in Principle with respect to the ownership, development and management of this resort.  The cost of the project is estimated at $230.0 million.  We will initially own 50% of the joint venture, requiring Kerzner to commit up to approximately $47.0 million.  See “(B) Business Overview—Destination Resorts—Morocco” below for more information on this project.

Capital Structure

Bahamian Depositary Receipts

Pursuant to the Heads of Agreement, we completed an equity offering in July 2004 in The Bahamas of approximately 4.3 million Bahamian Depositary Receipts (“BDRs”), which are the equivalent of approximately 0.4 million Ordinary Shares.  The BDRs are listed and trade on The Bahamas International Securities Exchange.  Net proceeds received from the offering were $19.1 million.

Strategic Investment by Istithmar PJSC

On July 16, 2004, we announced a strategic investment in our Ordinary Shares by Istithmar, our partner in the development of Atlantis, The Palm.  This transaction closed on August 10, 2004.  As part of this arrangement, Istithmar purchased 4.5 million of our Ordinary Shares for an aggregate price of $225.0 million.  As of February 28, 2005, Istithmar held approximately 12.4% of our Ordinary Shares.

Istithmar purchased 3.0 million newly issued Ordinary Shares directly from Kerzner, resulting in net proceeds of $153.4 million ($51.25 per share).  We intend to use proceeds from the issuance to fund capital expenditures and investments and for general corporate purposes.  Of the remaining 1.5 million Ordinary Shares, Istithmar purchased 1.3 million shares from Caledonia and 0.2 million shares from CMS at a price of $47.50 per share, the market price at the time the purchase agreements were executed.  Therefore, Istithmar paid an average per share price of $50 for its aggregate acquisition of 4.5 million Ordinary Shares.  Following receipt of the necessary regulatory approval on December 8, 2004, Mr. Hamed Kazim, a representative of Istithmar, took a seat on our Board of Directors.

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Amended Credit Facility

On July 7, 2004, Kerzner, KINA and Kerzner International Bahamas Limited (“KIB”), as co-borrowers, entered into the Amended Credit Facility with a syndicate of banks (the “Lenders”).  Under the Amended Credit Facility, the maximum amount of borrowings that may be outstanding is $500.0 million, subject to certain conditions.  On February 15, 2005, we amended the Amended Credit Facility to make certain changes to reflect our current business plans.

Loans under the Amended Credit Facility bear interest at (i) the higher of (a) a base rate or (b) the Federal Funds Rate plus one-half of one percent, in either case plus an additional 0.125% to 2.00% based on a debt to EBITDA ratio during the period, as defined (the “Leverage Ratio”), (ii) the London Interbank Offered Rate (“LIBOR”) rate plus 1.125% to 3.00% based on the Leverage Ratio or (iii) the Federal Funds Rate plus 1.125% to 3.00% based on the Leverage Ratio.  For loans based on the Alternate Base Rate (as defined therein), interest is payable monthly.  For loans based on the LIBOR rate, interest is payable on the last day of each applicable interest period.  Loans under the Amended Credit Facility may be prepaid and re-borrowed at any time and are due in full in July 2009.  Commitment fees are calculated at per annum rates ranging from 0.25% to 0.60% based on the Leverage Ratio, applied to the undrawn amount of the Amended Credit Facility and are payable quarterly.

The Amended Credit Facility contains affirmative and restrictive covenants with which Kerzner must comply, which, among other things: (a) require periodic financial reporting, (b) require meeting certain financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the incurrence of indebtedness and (e) limit asset expenditures and dispositions outside the ordinary course of business.  As of December 31, 2004, we believe that we were in compliance with all such covenants.

As of December 31, 2004, we had no borrowings outstanding under the Amended Credit Facility.  Our availability as of December 31, 2004 was $494.0 million after giving effect to the $6.0 million in outstanding letters of credit.  All amounts outstanding are unconditionally guaranteed by all significant subsidiaries that are a party to the Amended Credit Facility.

Issuance of 2.375% Convertible Senior Subordinated Notes

In April 2004, Kerzner issued $230.0 million principal amount of 2.375% convertible senior subordinated notes due 2024 (the “2.375% Convertible Senior Subordinated Notes”) which, after related issuance costs, resulted in net proceeds of approximately $223.7 million.  In connection with the issuance of the 2.375% Convertible Senior Subordinated Notes, we filed a shelf registration statement, pursuant to which holders of such notes may engage in resales.  All of the proceeds received from the issuance of the 2.375% Convertible Senior Subordinated Notes will be used to fund future capital expenditures and for general corporate purposes.

The 2.375% Convertible Senior Subordinated Notes may be converted into cash and Ordinary Shares at an initial conversion rate of 17.1703 shares per $1,000 principal amount in accordance with the terms of the indenture.  This conversion rate is equal to a conversion price of approximately $58.24 per Ordinary Share.  Upon conversion, all of the principal amount of the converted notes must be paid in cash.

The 2.375% Convertible Senior Subordinated Notes, which are unsecured obligations, are not guaranteed by any of Kerzner’s subsidiaries and therefore are effectively subordinated to the subsidiary guarantees of the 87/8% Senior Subordinated Notes.  Interest on the 2.375% Convertible Senior Subordinated Notes is payable semi-annually and commenced on October 15, 2004.  We believe that we were in compliance with all covenants contained in the indenture governing the 2.375% Convertible Senior Subordinated Notes as of December 31, 2004.  All of our outstanding 2.375% Convertible Senior Subordinated Notes are subordinated to the borrowings under our Amended Credit Facility.

Issuances of 87/8% Senior Subordinated Notes

In August 2001, Kerzner along with KINA (together, the “Companies”) issued $200.0 million principal amount of 87/8% Senior Subordinated Notes which, after costs, resulted in net proceeds of approximately $194.0 million.  The proceeds received from the issuance of the 87/8% Senior Subordinated Notes were advanced to one of our wholly owned subsidiaries to repay amounts outstanding under our then-existing amended and restated revolving credit facility.

In May 2002, the Companies issued an additional $200.0 million principal amount of 87/8% Senior Subordinated Notes, which after costs, resulted in net proceeds of approximately $201.5 million.  The proceeds were used to repay

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the Company’s then-outstanding 9% senior subordinated notes (the “9% Senior Subordinated Notes”) pursuant to the Tender Offer, Consent Solicitation and Redemption described below.

The 87/8% Senior Subordinated Notes, which are unsecured obligations, are unconditionally guaranteed by substantially all of the wholly owned subsidiaries of Kerzner and KINA.  Interest on the 87/8% Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002.  The indenture governing the 87/8% Senior Subordinated Notes contains various restrictive covenants, including limitations on the ability of the Companies and the guarantors to, among other things:  (a) incur additional indebtedness, (b) incur certain liens, (c) engage in certain transactions with affiliates and (d) pay dividends and make certain other payments.  We believe that we were in compliance with all such covenants as of December 31, 2004.  All of our outstanding 87/8% Senior Subordinated Notes are subordinated to the borrowings under our Amended Credit Facility.

Derivative Financial Instruments

In August and December 2001, we entered into fixed-to-variable rate interest rate swap agreements (the “Swap Agreements”) designated as fair value hedges on $200.0 million principal amount of our 87/8% Senior Subordinated Notes.  In each of September 2003 and July 2004, we canceled $25.0 million of our $200.0 million Swap Agreements, resulting in $150.0 million of fair value hedges on our 87/8% Senior Subordinated Notes as of December 31, 2004.  The Swap Agreements have rates of 6-month LIBOR plus 291 to 302 basis points.

In December 2004, the One&Only Palmilla entered into an interest rate cap agreement in connection with its issuance of two promissory notes for an aggregate principal amount of $110.0 million.  The purpose of the interest rate cap agreement is to cap the LIBOR component of the interest on the promissory notes at 5%.  The interest rate cap agreement is designated as a cash flow hedge and is used to hedge the variable cash flows associated with the promissory notes.

Tender Offer, Consent Solicitation and Redemption of 9% Senior Subordinated Notes

On May 8, 2002, we commenced a cash tender offer to purchase any and all of our outstanding 9% Senior Subordinated Notes.  In conjunction with the tender offer, we solicited consents to proposed amendments to the indenture governing the 9% Senior Subordinated Notes.  The tender offer expired on June 5, 2002.  At the expiration, a total of $177.5 million of the outstanding $200.0 million aggregate principal amount of the notes were tendered and accepted for purchase in the tender offer.  On June 21, 2002, we redeemed, in accordance with the terms of the indenture governing the notes, all of the 9% Senior Subordinated Notes that remained outstanding at the time, at the applicable redemption price of $1,045 per $1,000 of principal amount thereof, plus interest accrued to the redemption date.  We used the net proceeds from the issuance of $200.0 million of our 87/8% Senior Subordinated Notes on May 20, 2002 to retire our outstanding 9% Senior Subordinated Notes pursuant to the tender offer and redemption.

Shelf Registration

In May 2002, Kerzner and KINA filed a universal shelf registration statement on Form F-3 (the “Universal Shelf”) with the SEC relating to the sale of up to $500.0 million in securities.  The Universal Shelf allows us flexibility as to the type of security we could choose to sell in the future, including various types of debt securities, Ordinary Shares, preference shares and warrants, and replaces the 1997 Shelf Registration.  We may also utilize the Universal Shelf to register secondary sales of Ordinary Shares by selling shareholders.  In connection with a settlement agreement with Kersaf, a major shareholder of Kerzner, on December 18, 2002, an indirect subsidiary of Kersaf sold 2.3 million Ordinary Shares of Kerzner (the “Kersaf Offering”) in a registered public offering, using securities registered under the Universal Shelf.  Securities registered under the Universal Shelf may be offered from time to time directly by us or through underwriters at amounts, prices, interest rates and other terms to be determined at the time of the offering.

In November 2003, pursuant to Rule 12h-3 of the Exchange Act, KINA suspended its obligation to file periodic reports under the Exchange Act.  Accordingly, KINA is no longer able to issue or co-issue any securities registered pursuant to the Universal Shelf.

Redemption of 85/8% Senior Subordinated Notes

On November 27, 2002, we called for the redemption of the entire outstanding principal amount of our 85/8% senior subordinated notes due 2007 (the “85/8% Senior Subordinated Notes”) pursuant to the terms of the indenture governing these notes.  We purchased $25.8 million of the 85/8% Senior Subordinated Notes through transactions on

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the open market.  On December 27, 2002, we redeemed the remaining $74.2 million aggregate principal amount outstanding at the redemption price of 104.313%, or $1,043.13 for each $1,000.00 of principal amount outstanding, plus accrued interest.

Kersaf Offering

On December 18, 2002, Royale Resorts International Limited, an indirect subsidiary of Kersaf, completed the Kersaf Offering.  We received approximately $32.1 million of the proceeds from the sale of 2.3 million Ordinary Shares pursuant to the terms of the settlement agreement entered into by Kerzner, Kersaf and certain of its affiliates and certain other parties.  See “Item 7.  Major Shareholders and Related Party Transactions, (B) Related Party Transactions—Global Settlement” for more information.

Recent Developments

Sentosa Island, Singapore

On January 20, 2005, we announced that we and CapitaLand, one of the largest listed property companies in Asia, intended to submit a joint concept proposal to the Singapore Government for the development of an integrated entertainment resort complex on Sentosa Island in Singapore.  The joint proposal was submitted on February 28, 2005 and was in response to the Singapore Tourism Board’s invitation to interested parties to submit concept proposals for the first integrated resort with gaming in Singapore.

Wembley

On February 8, 2005, Wembley and BLB announced that they had entered into a conditional sale agreement providing for the purchase by BLB of a holding company that owns Wembley’s operations in Rhode Island and Colorado, consisting primarily of the Lincoln Park facility in Rhode Island.  The purchase price is expected to be approximately $455.0 million.  Additionally, in connection with the transaction, Wembley is expected to repurchase BLB’s existing shareholding in Wembley for approximately $116.0 million.  In addition, BLB anticipates making certain infrastructure improvements at Lincoln Park.  BLB has received binding commitments from institutional lenders to provide up to $495.0 million in financing to cover the cash costs of the acquisition and the infrastructure improvements.  Substantially all of the operating profits of Wembley’s U.S. operations are based on video lottery terminals (“VLTs”) in operation at Lincoln Park.  Among other things, BLB’s purchase offer is conditioned on an increase in the number of authorized VLTs at Lincoln Park to approximately 4,750, the execution of a long-term revenue-sharing arrangement for the Lincoln Park facility with the State of Rhode Island (any such agreement would require the approval of the Rhode Island Senate, the Rhode Island House of Representatives and the Governor) and a tax parity arrangement with the State of Rhode Island to ensure that the tax rate imposed on Lincoln Park’s gaming operations will not exceed the tax rate imposed on any other gaming operations within the State.  The conditional sale agreement may be terminated by either party if the transaction has not been completed by May 30, 2005.

(B)Business Overview

We are the developer, owner and operator of Atlantis, Paradise Island, a 2,317-room island destination resort in The Bahamas, and a leading developer and operator of gaming entertainment properties and luxury resort hotels worldwide.  Atlantis, Paradise Island, our flagship property, is a premier destination resort property that we believe has strong brand recognition.  We have entered into a joint venture agreement to develop and manage a second Atlantis resort, Atlantis, The Palm, in the United Arab Emirates.

Our gaming business is focused on owning, developing and/or managing casino properties in attractive markets where we can capitalize on our development and operating expertise.  We developed and receive income from Mohegan Sun in Uncasville, Connecticut, which is owned and operated by the MTGA.

Our luxury resort hotel business consists of a collection of managed and/or owned/partially owned premier properties that primarily operate in the five-star, deluxe-end of the resort market in The Bahamas, Mauritius, Dubai, the Maldives and Mexico under the One&Only brand.  We are developing additional One&Only Resorts properties in Cape Town, South Africa and the Maldives.

Each of our segments operates in various geographic areas.  For a table of net revenues, contribution to net income and total assets by segment, see Note 24—Segment Information in the accompanying notes to the consolidated financial statements.

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The Properties

Destination Resorts

Atlantis, Paradise Island

Our flagship property is Atlantis, Paradise Island, a 2,317-room ocean-themed resort and casino located on Paradise Island, The Bahamas.  Since acquiring the property in 1994, we have invested approximately $1.0 billion to create a unique destination resort that caters to multiple segments of the resort and casino gaming markets.  The property features a 100,000 square foot entertainment complex that includes the largest casino in the Caribbean market, an 88,000 square foot convention facility and 30,000 square feet of retail space.  Atlantis, Paradise Island celebrates the wonders of the sea and is inspired by the myth of the lost continent of Atlantis.  The ocean-themed environment of Atlantis, Paradise Island includes:

•three interconnected hotel towers, the Beach, Coral and Royal Towers, built around a seven-acre lagoon;

•a 34-acre marine environment, which features the world’s largest open air marine habitat, showcasing over 200 species of marine life, waterfalls, lagoons and adventure walks;

•“The Dig,” an area through which visitors can walk surrounded by sharks, numerous species of tropical fish, sea turtles, stingrays and other marine life;

•several waterslides, including the Mayan Temple slide, which propels guests through an acrylic tube in a shark-infested tank;

•the largest casino in the Caribbean market;

•the 63-slip, full-service Marina at Atlantis, which enjoys some of the highest docking rates in the Caribbean market and can accommodate yachts up to 200 feet in length; and

•Harborside at Atlantis, a timeshare project located adjacent to Atlantis, Paradise Island, developed through a joint venture with an affiliate of Starwood.

We acquired the property in May 1994 for $125.0 million and redeveloped the property into an ocean-themed destination resort through an initial $140.0 million capital expenditure program.  In 1995, the property achieved an average occupancy and average daily room rate of 85% and $122, respectively, a substantial increase from the 62% and $95, respectively, achieved in 1993 under previous management.  Seeking to capitalize on the early success of Atlantis, Paradise Island, we began construction of an approximate $640.0 million expansion of the property in 1997.  This major expansion was completed in December 1998 and effectively doubled the size of Atlantis, Paradise Island.  The 1998 expansion included a 1,200-room hotel, a 100,000 square foot entertainment complex that included a casino containing approximately 900 slot machines and 80 table games, a marina and an expansion of the ocean-themed environment.  During 1999, we completed several additional development projects at Atlantis, Paradise Island, including the addition of 30,000 square feet of retail and restaurant space, the conversion of a previously existing 30,000 square foot casino space into a convention center and the construction of a sports center, including an 18-hole Tom Fazio-designed putting course and a tennis center.

During the second half of 2000, we completed an extensive capital expenditure program of approximately $20.0 million at Atlantis, Paradise Island’s Beach Tower.  This program included the renovation of all of the Beach Tower’s 425 rooms and improvements to certain public spaces.  During 2001, we completed a major capital expenditure program of approximately $20.0 million to complete renovations at the Ocean Wing of Atlantis, Paradise Island’s Coral Towers.  This included the renovation of approximately 400 rooms, including improvements to certain public spaces.

To add to our product mix at Atlantis, Paradise Island, we developed Harborside at Atlantis, a timeshare project adjacent to Atlantis, Paradise Island, through a joint venture with SVO.  As part of the joint venture agreement, we contributed land and cash and SVO contributed cash.  Subsequently, both partners have loaned funds to finance construction costs.  The first phase of the project was completed in February 2001 and consists of 82 two-bedroom units.  We began selling the units in May 2000 and had sold approximately 98% of the units through December 31, 2004. In August 2002, Harborside at Atlantis was closed to repair water damage primarily resulting from 2001’s Hurricane Michelle.  During the fourth quarter of 2002, these repairs were completed and the resort re-opened in December 2002.  During the temporary closure, Harborside at Atlantis’ guests were moved to Atlantis, Paradise Island.  Our share of construction remediation costs from Harborside at Atlantis was $6.9 million and $1.8 million in

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2002 and 2003, respectively.  For 2003 and 2004, we recognized a total of $5.7 million of insurance recoveries related to Hurricane Michelle.

In order to capitalize on the demand for rooms and to leverage our investment in The Bahamas, in May 2003, we entered into a Heads of Agreement with the Government of the Commonwealth of The Bahamas, which set forth an expansion plan for Atlantis, Paradise Island and the One&Only Ocean Club.  In May 2004 and December 2004, we entered into supplements to the Heads of Agreement, pursuant to which we modified certain components involved in Phase III.  Phase III, as modified, consists of the following components:

•a 600-room luxury all-suite hotel;

•the right to develop an approximately 500-unit condo-hotel;

•three luxury villas at the One&Only Ocean Club (the “Ocean Club Villas”);

•four new company-operated restaurants and additional food and beverage and retail space, comprising approximately 65,000 square feet on a four-acre site adjacent to the Marina at Atlantis, the Marina Village at Atlantis (the “Marina Village”);

•an expansion of the convention facilities at Atlantis, Paradise Island by approximately 100,000 square feet;

•a significant expansion to the existing water-based attractions of Atlantis, Paradise Island;

•the construction and initial equipping of a fire and ambulance station on land owned by us, to be operated and maintained by the Bahamian Government under a long-term lease (the “Fire and Ambulance Station”);

•the right to develop, upon environmental approval, a new 18-hole golf course on Athol Island, which lies just east of Paradise Island, in partnership with an agency to be nominated by the Bahamian Government (the “Athol Golf Course”);

•expansion of the existing water production and treatment plant and any other private infrastructure upgrades or expansions necessary to accommodate the other elements of the Phase III expansion (the “Utilities and Infrastructure Expansion”); and

•an expansion of Harborside at Atlantis by the addition of 316 timeshare units along the harbor, the next phase of such expansion (the second phase) will add 116 two- and three-bedroom timeshare units.

Construction of certain elements of the Phase III expansion commenced in August 2003, including the Marina Village, the Fire and Ambulance Station, the next phase of the Harborside at Atlantis timeshare expansions and the completed Ocean Club Villas.  We anticipate the Marina Village will open as early as the third quarter of 2005.  In addition, we expect the second phase of Harborside at Atlantis to be complete by the third quarter of 2005.  We began sales of the second phase in the third quarter of 2004, and as of December 31, 2004, we had sold 13.0% of the second phase units.  During the year ended December 31, 2004, we funded $1.5 million to Harborside at Atlantis for the construction of the second phase.  The Phase III expansion also includes a third phase of timeshare development, consisting of approximately 200 additional units.  We plan to develop this third phase in collaboration with Starwood and expect to commence its development once Harborside at Atlantis has sold 75% of the second phase.

We anticipate that development of the 600-room luxury all-suite hotel will commence during the third quarter of 2005.  Pursuant to the Heads of Agreement, we have committed to substantially complete the all-suite hotel by December 2006.

We expect to commence pre-sales of the approximately 500-unit condo-hotel in the second quarter of 2005.  We expect to commence construction of the condo-hotel in the second half of 2005 with completion scheduled for 2007, as contemplated by the Heads of Agreement.  We expect to develop this project through a 50-50 joint venture with Turnberry Associates, one of the premier real estate development and property management companies in the United States.  The development cost associated with this project is expected to be approximately $250.0 million.  We anticipate that this project will primarily be funded on a non-recourse basis to Kerzner based on pre-sales.

It is anticipated that the Phase III expansion investment in The Bahamas will exceed $1.0 billion.  Exclusive of the Harborside at Atlantis timeshare projects, the condo-hotel, the Athol Golf Course and Ocean Club Residences & Marina, our recently announced ultra-luxury condominium project, we expect our investment to be approximately $650.0 million.  If we do not proceed with the condo-hotel and the Athol Golf Course, casino tax concessions and a

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joint marketing contribution from the Bahamian Government will be reduced beginning in 2009 in accordance with a schedule contained in the Heads of Agreement.

A complete description of the Heads of Agreement can be found in “Item 4.  Information on the Company, (B) Business Overview—Certain Matters Affecting Our Bahamian Operations—Heads of Agreement.”

Through certain Bahamian subsidiaries (the “Bahamian Operations”), we now own approximately 553 acres (including the Club Méditerranée property we purchased) on Paradise Island (or almost 67% of Paradise Island), including approximately 134 acres of undeveloped land.  The Phase III expansion will use approximately 68 acres of currently undeveloped land (excluding the next phase of Harborside at Atlantis, the Athol Golf Course and Ocean Club Residences & Marina).

We also own and operate the One&Only Ocean Club, a high-end luxury resort hotel, as well as the Ocean Club Golf Course.  Through our Bahamian Operations, we also operate roads and other land improvements on Paradise Island and a water and sewage system which serves, at stated charges, substantially all facilities on Paradise Island, including non-affiliated customers.

We recently announced the development of Ocean Club Residences & Marina, an 88-unit ultra-luxury condominium project at Ocean Club Estates.  We expect to form a joint venture with a Bahamian partner for this project.  We expect Ocean Club Residences & Marina to cater to the highest end of the luxury residential market.  We commenced pre-sales in the first quarter of 2005, and anticipate breaking ground on this project in the second quarter of 2005.  We expect that this project will be primarily funded based on pre-sales.  We expect Ocean Club Residences & Marina to have construction costs of approximately $130.0 million.  In addition, we plan to contribute approximately 9 acres to the project.

Paradise Island is easily accessible by air from the eastern United States and London and has an extensive infrastructure.  The majority of patrons at our resorts on Paradise Island arrive through Nassau International Airport located on New Providence Island.  This airport is serviced by several major carriers that offer jet service from most major cities on the east coast of the United States and other international destinations.  Ground transportation is facilitated by two bridges linking Paradise Island and New Providence Island.

Atlantis, The Palm

In September 2003, we announced that we had agreed to form a joint venture with Nakheel LLC, an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  On June 23, 2004, we announced that we had entered into an agreement with Istithmar, an entity indirectly wholly owned by the Royal Family of Dubai, that has assumed all obligations and rights of its affiliate, Nakheel LLC, pursuant to which we formed Kerzner Istithmar and increased the scope of Atlantis, The Palm.  Based on our current budget, the development costs of the expanded project are expected to be approximately $1.1 billion and will include an approximately 1,200-room five-star hotel, an approximately 800-room four-star hotel and an extensive water theme park situated on 1.25 miles of beachfront property.  Atlantis, The Palm will be located on The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai, United Arab Emirates.  We and Istithmar have each agreed to invest $100.0 million in the form of Class A common stock in Kerzner Istithmar, and Istithmar has agreed to underwrite $200.0 million of Kerzner Istithmar’s limited voting Class B common stock.  Each of Istithmar and Kerzner will provide, on a joint and several basis, additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.  In addition to the joint and several sponsor support, Istithmar has agreed to provide a $100.0 million guarantee to cover any post-completion debt service obligations over $55.0 million.  Further, Istithmar has agreed to provide an additional guarantee for cost overruns over $55.0 million.  The balance of the financing is expected to be obtained through a $700.0 million syndicated term loan facility that is limited recourse to Kerzner.  The closing of the term loan facility is expected to occur in the second quarter of 2005.

We commenced construction on Atlantis, The Palm in the first quarter of 2005 and anticipate that the project will be completed in 2008.  As part of this transaction, we have entered into a long-term management agreement with the joint venture that entitles us to receive a base management fee based on the gross revenues generated by Atlantis, The Palm, and an incentive management fee based on operating income.  We have also entered into a development agreement with the joint venture that entitles us to receive $20.0 million and reimbursement of certain expenses over the development period.  This project is subject to various closing conditions, including obtaining financing and all requisite governmental consents.  In August 2004, Istithmar purchased 4.5 million of our Ordinary Shares for an aggregate purchase price of $225.0 million.  See “Item 4.  Information on the Company, (A) History and Development of the Company—Reorganization of Capital Structure” for more information.

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Morocco

On July 22, 2004, we announced that Kerzner and two local Moroccan companies, SOMED and CDG, had entered into an agreement with the Government of the Kingdom of Morocco (for this section, the “Government”) that contemplates the creation of a joint venture that will own a destination resort casino in Morocco that we will develop and manage.  In addition, Kerzner, SOMED and CDG entered into an Agreement in Principle with respect to the ownership, development and management of this resort.  The agreement with the Government and the Agreement in Principle are both subject to obtaining third-party financing and the satisfactory negotiation of definitive documents with our prospective Moroccan partners.

The greenfield site is located near El Jadida, which lies approximately 50 miles southwest of Casablanca.  This site includes three miles of beachfront along Morocco’s Atlantic coast.  Approximately an hour’s drive from Casablanca, Morocco’s largest city with a population of approximately 3.5 million, the site provides for easy access to-and-from Casablanca International Airport, which currently receives daily flights from 22 European cities.  Access to the area is supported by a rail network as well.

The cost of the project is estimated at $230.0 million and is expected to consist of a 600-room hotel, an 18-hole golf course, convention space, restaurants and a casino.  As part of its agreement with the Government, the joint venture has negotiated exclusive rights to conduct gaming operations within a territory that includes the cities of Casablanca and Rabat, an area with a combined population of nearly four million.  This agreement provides for a 15-year period of exclusivity, which commences once construction of the project is complete.

We will initially own 50% of the joint venture, requiring Kerzner to commit up to approximately $47.0 million.  SOMED and CDG will provide the majority of the remaining equity requirement.  While we will have the ability to reduce our initial equity interest in the project after the commencement of operations, we have undertaken to hold at least a 34% equity interest in the project.  The balance of the required financing is expected to be raised by a consortium of Moroccan banks.  We expect to commence construction of the project in the fourth quarter of 2005 and to complete the project during the fourth quarter of 2007.

SOMED is an investor with interests in various industries, including the hospitality industry.  SOMED is 50% owned by Abu Dhabi Development Fund and 30% owned by the Government, with the remaining interests being institutionally owned.  CDG is the governmental entity that invests Morocco’s pension funds and is one of the country’s leading institutional investors.

We expect the joint venture agreement to be executed in the second quarter of 2005.  We also expect to enter into long-term management and development agreements with the joint venture and obtain non-recourse financing to Kerzner for the project in the second quarter of 2005.  The development of this project is subject to obtaining financing as well as certain other conditions, including the receipt of all applicable regulatory, municipal, regional and other approvals.

Gaming

Mohegan Sun

Our gaming business is focused on owning, developing or managing casino properties in attractive markets where we believe we can capitalize on our development and operating expertise.  We own a 50% interest in, and are a managing partner of, TCA, a Connecticut general partnership that developed and initially managed Mohegan Sun, a casino and entertainment complex in Uncasville, Connecticut.  TCA managed Mohegan Sun from its opening in October 1996 to December 31, 1999 pursuant to a Management Agreement from which TCA earned management fees based on a percentage of Mohegan Sun’s earnings after depreciation and interest.

In 1998, the MTGA appointed TCA to develop the $1.0 billion “Project Sunburst” expansion of Mohegan Sun pursuant to a development services agreement (the “TCA Development Agreement”) for a development fee of $14.0 million.  In turn, TCA subcontracted with an affiliate of the Company pursuant to a subcontract development services agreement, which was later assigned to the Company.  In consideration for the services provided under the subcontract, TCA paid a fee to the Company.  The expansion project was completed in June 2002.

In addition, TCA and the Mohegan Tribe entered into the Relinquishment Agreement whereby it was agreed that effective January 1, 2000, TCA would turn over management of Mohegan Sun to the Mohegan Tribe.  Pursuant to the Relinquishment Agreement, the Management Agreement was terminated and TCA receives payments of 5% of the gross revenues of Mohegan Sun for the 15-year period that commenced January 1, 2000.  The relinquishment

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fees pursuant to the Relinquishment Agreement (“Relinquishment Fees”) are divided into senior and junior relinquishment payments, which equal 5.0% of revenues.  Revenues are generally defined as gross gaming revenues (other than Class II gaming revenue, i.e. bingo) and all other facility revenues, including hotel revenues, food and beverage sales, parking, ticket revenues and other fees or receipts from the convention/events center generated by Mohegan Sun.  Revenues will exclude any revenues generated by any other future expansion of Mohegan Sun.  TCA’s right to receive the Relinquishment Fees is junior to certain payments by the MTGA to the Mohegan Tribe and holders of its indebtedness.  The senior and junior Relinquishment Fees from the MTGA to TCA rank behind all of the MTGA’s obligations to pay certain minimum priority distributions to the Mohegan Tribe and all of the MTGA’s existing and future senior secured indebtedness.  The junior fees also rank behind all unsecured indebtedness.

For seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the Relinquishment Fees it receives each year (after the return of certain expenses and capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.

We are one of two managing partners of TCA.  All decisions of the managing partners require the concurrence of us and the other managing partner, Waterford Gaming, L.L.C.  In the event of a deadlock, there are mutual buy-out provisions.  TCA’s partnership agreement will terminate on December 31, 2040, or earlier in certain circumstances, in accordance with its terms.

Mohegan Sun incorporates its historical Native American theme through unique architectural features and the use of natural design elements such as timber, stone and water.  Mohegan Sun is located on 240 acres and currently features the 179,500 square foot Casino of the Earth and the 119,000 square foot Casino of the Sky, which combined have approximately 6,250 slot machines, 290 table games and various other amenities, and a 34-story, 1,200-room luxury hotel.

Mohegan Sun is located approximately one mile from the interchange of Interstate 395 and Connecticut Route 2A in Uncasville, Connecticut and is within 150 miles of approximately 22 million adults.  Mohegan Sun spent $40.0 million for infrastructure improvements providing direct highway access to the property from Boston, Providence and New York.

We oversaw the $1.0 billion “Project Sunburst” expansion of Mohegan Sun through TCA, which was completed in June 2002.  This expansion included the Casino of the Sky, a 10,000-seat arena, a 350-seat cabaret and specialty retail areas and restaurants that opened in September 2001.  The expansion also included a 100,000 square foot convention center and a 34-story, 1,200-room luxury hotel that opened with 734 rooms in April 2002.  Mohegan Sun opened the remaining rooms in phases through June 2002 and also added an additional 2,700 parking spaces in June 2002.

We believe the northeast gaming market has been strong and that Mohegan Sun’s unique design and superior location have helped it to become a popular and profitable casino.  Since opening, gross revenues at the property have grown to $1.4 billion for the twelve months ended September 30, 2004, a 6.8% increase over the twelve month period ended September 30, 2003.

Trading Cove New York

Through a wholly owned subsidiary, we own a 50% interest in, and are a managing member of, Trading Cove New York, LLC (“TCNY”).  In March 2001, TCNY entered into a development services agreement (the “TCNY Development Agreement”) with the Stockbridge-Munsee Band of Mohican Indians (the “Stockbridge-Munsee Tribe”) for the development of a casino project (the “Catskills Project”) in the Catskills region of the State of New York (for purposes of this section, the “State”).  The TCNY Development Agreement was amended and restated in February 2002 and subsequently amended in October and December 2004.

Pursuant to the TCNY Development Agreement, as amended, TCNY would provide preliminary funding, certain financing and exclusive development services to the Stockbridge-Munsee Tribe in conjunction with the Catskills Project.  If the Catskills Project is approved and ultimately developed, TCNY will earn a development fee in an amount equal to 5% of gross revenues as compensation for these services (subject to certain priorities), as defined in the TCNY Development Agreement, beginning with the opening of the Catskills Project and continuing for a period of 20 years.  TCNY has secured land and/or options on approximately 400 acres of property in the Town of Thompson, County of Sullivan (the “County”), of which approximately 333 acres are currently designated for the Catskills Project.

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The Stockbridge-Munsee Tribe does not currently have reservation land in the State, but is federally recognized and operates a casino on its reservation in Wisconsin.  In February 2002, the Tribe filed a Land to Trust Application with the U.S. Department of Interior, Bureau of Indian Affairs (the “BIA”), for the Catskills Project site properties.  Should the BIA approve the Land to Trust Application and the Stockbridge-Munsee Tribe obtain other required approvals, the land could be taken into trust by the Federal Government on behalf of the Stockbridge-Munsee Tribe for the purpose of conducting Class III Gaming.  The Land to Trust Application and accompanying Environmental Impact Statement (“EIS”) are pending.

In October 2001, the State enacted legislation (Chapter 383 of the Laws of 2001) (the “State Gaming Law”) authorizing up to three Class III Native American casinos in the counties of Sullivan and Ulster and three Native American casinos in western New York pursuant to Tribal State Gaming Compacts to be entered into by the State and applicable Native American tribes as well as video lottery terminals at State racetracks.  In January 2002, a lawsuit was filed in the Supreme Court of the State of New York (the “Supreme Court”) (Index No. 719-02) by various plaintiffs against New York Governor George Pataki, the State of New York and various other defendants alleging that the State Gaming Law violated the New York State Constitution.  Motions to dismiss the litigation were filed in April 2002.  In July 2003, the Supreme Court issued a ruling upholding the validity of the State Gaming Law, which decision as it pertains to the legality of conducting slot machine gaming at State approved Native American casinos was subsequently upheld by the Appellate Division of the New York Supreme Court.  The decision was appealed to the New York Court of Appeals.  Arguments were heard on March 21, 2005 and the appeal is pending.

In January 2002, the Stockbridge-Munsee Tribe entered into an agreement with the County pursuant to which the Stockbridge-Munsee Tribe will make certain payments to the County to mitigate any potential impacts the Catskills Project may have on the County and other local government subdivisions within the County.  The payments will not commence until after the opening of the Catskills Project.  In addition, the Stockbridge-Munsee Tribe has entered into sewer and water agreements with local agencies to service the Catskills Project site.

The Stockbridge-Munsee Tribe has land claim litigation pending in the U.S. District Court for the Northern District of New York (the “Court”) against the State, the counties of Madison and Oneida and several municipalities to recover lands within the state that it alleges were wrongfully taken from the tribe.  In December 2004, the Stockbridge-Munsee Tribe and the State entered into the “Agreement of Settlement and Compromise to Resolve the Stockbridge-Munsee Land Claims in the State of New York” (the “NY Settlement Agreement”).  The NY Settlement Agreement provides, inter alia, that in consideration for settling its land claim litigation, the Stockbridge-Munsee Tribe will receive, among other things, a transfer of the Catskills Project site into trust and a gaming compact (the “Compact”) with the State authorizing the Stockbridge-Munsee Tribe to engage in Class III gaming on the Catskills Project site for a period of 14 years (and renewable for an additional seven years under certain conditions).  Under the Compact, the Stockbridge-Munsee Tribe will, in exchange for certain exclusivity rights related to the operation of slot machines in a geographically determined area encompassing a number of southern counties within the State, pay the State 20% of the net drop from the slot machines during the first four years of operation and 25% thereafter.

The NY Settlement Agreement is subject to numerous conditions, including the enactment of State legislation approving the settlement and increasing the number of Native American casinos authorized for Sullivan and Ulster counties under the State gaming law from three to five, enactment of Federal legislation approving the settlement and directing that the Catskills Project site be taken into trust and execution of the Compact.  In February 2005, State legislation was introduced to approve the NY Settlement Agreement.  We can make no representation as to whether any of the required approvals will be obtained by the Stockbridge-Munsee Tribe or whether the Catskills Project will be completed.

We are one of two managing members of TCNY.  All decisions of the managing members require the concurrence of us and Waterford Development New York, LLC, the other managing member.  In the event of deadlock, there are mutual buy-out provisions.

The Company’s investment in TCNY is reflected within investments in associated companies in the accompanying consolidated balance sheets.  As of December 31, 2004, we had invested $6.0 million in TCNY.  If the project proceeds, we will be required to provide developer assistance of up to $15.0 million, of which $7.0 million is reimbursable, and up to $100.0 million in subordinated debt or completion guarantees.

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United Kingdom

Development of Resort Casinos in London, East Manchester and Glasgow

On July 13, 2004, we announced our appointment as the preferred developer and operator with respect to the development and management of gaming, hotel and entertainment facilities for two sites in two key markets in the United Kingdom.  The sites for the projects are the Scottish Exhibition + Conference Centre (“SECC”) in Glasgow and Sportcity in East Manchester.  We are negotiating binding agreements for both of these projects.  These developments are part of major regional regeneration projects supported by the respective council for each city.  Each of these projects was the subject of a competitive bidding process.

In addition, on July 13, 2004, we also announced that we had entered into a binding agreement with affiliates of Anschutz Entertainment Group for the development and operation of a casino and hotel resort facility at the Millennium Dome in London (the “Dome”).

Our development and management of our sites in the United Kingdom is subject to a number of contingencies.  First, the United Kingdom needs to pass gambling reform legislation.  Second, a special government committee that is expected to be established upon the passage of such legislation then must select eight localities that will be entitled to have a “Resort” or “Regional Casino,” as such criteria are defined by the Department of Culture, Media and Sport and the Parliamentary Joint Committee, which reviewed the draft Gambling Bill.  Our sites must be in the selected localities and must further compete for and be awarded a regional casino license by the local authorities.

The three developments are subject to certain conditions, including the receipt of applicable regulatory, municipal, regional and other approvals, and a maximum effective tax on gaming revenue of not more than 25%.  If these projects do not proceed, we will be required to write-off certain costs that have been incurred (as of December 31, 2004, we had approximately $10.4 million on our balance sheet with respect to these projects).  As noted above, the SECC and Sportcity developments are also subject to the negotiation and execution of binding agreements.  If all of the necessary conditions with respect to any of these projects are satisfied, we expect the project to be completed within two years from the date of issuance of a license.  In connection with each project, we will be responsible for the financing, development and operation of a casino and hotel.

Scottish Exhibition + Conference Centre, Glasgow

In October 2003, SEC Limited announced a master plan outlining the future of the SECC in the form of a major development.  This project, named “QD2” because it marks the second redevelopment of Queen’s Dock in Glasgow (the first being the construction of the SECC in 1985), plans to transform the SECC’s 64-acre site into a complete exhibition, conference and entertainment complex.  The SECC is currently the largest integrated conference and exhibition center in the United Kingdom.

The QD2 project is planned to involve over $1.0 billion of new investment.  SEC Limited has appointed us as preferred developer and operator to build, operate and own the destination resort casino as part of the overall redevelopment of Queen’s Dock.  The proposed resort casino and hotel complex is expected to cost approximately $300.0 million.

Sportcity, East Manchester

A consortium led by us and Manchester-based Ask Developments (and including several other partners) has been selected by the Manchester City Council to develop an approximately $500.0 million project incorporating casino, hotel, family entertainment, sports and residential components at Sportcity, East Manchester.  Already the home of the Manchester City Football Club and other sports facilities built for the last Commonwealth Games, Sportcity would gain significant additions, including a casino, hotel, 4,000-seat multi-purpose arena and ice rink, together with other indoor sporting facilities, as well as a residential development.  We estimate the casino and hotel to be an approximately $350.0 million project.

Millennium Dome, London

In June 2004, the Office of the Deputy Prime Minister announced the successful completion of all commercial contracts and planning negotiations among the national regeneration agency, English Partnerships, Peninsula Meridian Delta Ltd., Anschutz Entertainment Group and the Greenwich Council.  These arrangements are expected to lead to the regeneration of the Greenwich Peninsula, which will include extensive new commercial facilities as well as homes, schools, nursery and health provision, transportation infrastructure and the development of a world-class entertainment and sports arena within the Dome.

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Anschutz Entertainment Group expects to develop a 20,000-seat entertainment and sports arena within the Dome, known as the “Dome Arena.” The Dome Arena will also operate as a fully flexible exhibition space.  In addition to the Dome Arena, the Dome project will include entertainment, leisure and retail facilities.  We previously announced in September 2003 an agreement to participate in a development of this type.  On July 13, 2004, we identified the project as the Dome.  Pursuant to our agreement with Anschutz Entertainment Group, we plan to develop and operate an approximately $350.0 million resort casino and hotel.

Wembley

On March 10, 2004, we announced that we had entered into a joint venture, BLB, with an affiliate of Starwood Capital and an affiliate of Waterford for the purpose of acquiring an interest in Wembley, which owns gaming and track operations in the United States and race tracks in the United Kingdom.  Wembley’s U.S. operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack with approximately 2,500 VLTs.  Wembley has recently announced that it expects to increase the number of VLTs up to its statutorily permitted number of 3,002.  BLB is owned 37.5% by each of us and Starwood Capital, with Waterford owning the balance of 25%.  As of December 31, 2004, we had invested $47.4 million in BLB.

On April 20, 2004, after a series of offers and counteroffers by MGM Mirage and BLB, BLB submitted a cash tender offer to acquire all of the outstanding shares of Wembley at 860 pence per share.  This tender offer received the recommendation of the Wembley board of directors.  On July 5, 2004, BLB announced that its offer to acquire all of Wembley’s outstanding shares had lapsed due to failure of the condition that it receive valid acceptances from at least 90% of Wembley’s outstanding shares.  BLB retains a 22.2% stake in Wembley.

On February 8, 2005, Wembley and BLB announced that they had entered into a conditional sale agreement providing for the purchase by BLB of a holding company that owns Wembley’s operations in Rhode Island and Colorado, consisting primarily of the Lincoln Park facility in Rhode Island.  The purchase price is expected to be approximately $455.0 million.  Additionally, in connection with the transaction, Wembley is expected to repurchase BLB’s existing shareholding in Wembley for approximately $116.0 million.  In addition, BLB anticipates making certain infrastructure improvements at Lincoln Park.  BLB has received binding commitments from institutional lenders to provide up to $495.0 million in financing to cover the cash costs of the acquisition and the infrastructure improvements.  Substantially all of the operating profits of Wembley’s U.S. operations are based on VLTs in operation at Lincoln Park.  Among other things, BLB’s purchase offer is conditioned on an increase in the number of authorized VLTs at Lincoln Park to approximately 4,750, the execution of a long-term revenue-sharing arrangement for the Lincoln Park facility with the State of Rhode Island (any such agreement would require the approval of the Rhode Island Senate, the Rhode Island House of Representatives and the Governor) and a tax parity arrangement with the State of Rhode Island to ensure that the tax rate imposed on Lincoln Park’s gaming operations will not exceed the tax rate imposed on any other gaming operations within the State.  The conditional sale agreement may be terminated by either party if the transaction has not been completed by May 30, 2005.

U.K. Gaming License

In April 2003, we agreed to acquire from LCI for $2.1 million a property located in the city of Northampton, England.  The city of Northampton is approximately 70 miles north of London and approximately 1.3 million people live within 25 miles of the city.  On March 30, 2004, we announced that the Gaming Board of Great Britain had granted us a Certificate of Consent, which has enabled us to transfer a gaming license held by LCI into our name and proceed with our plans for a casino in Northampton.  In February 2005, the Northampton project was approved by the local planning authorities.  We expect to develop and operate the new casino facility on an approximate 30,000 square foot site, which is expected to cost approximately £10.0 million (approximately $18.7 million in U.S. dollars as of March 25, 2005).  We have commenced construction on this project and expect the casino facility to open in 2006.

One&Only Resorts

Our One&Only Resorts business consists of a collection of managed and/or owned/partially owned premier luxury resort properties that primarily operate in the five-star, deluxe-end of the market.  In December 2002, we introduced our One&Only brand for certain of our luxury resort properties.  We are now marketing six of our properties under our One&Only brand.  We expect that our new managed property under development on North Male Atoll in the Maldives, the One&Only Reethi Rah, a 130-room luxury resort, will open in the second quarter of 2005.  In addition, we have agreed to acquire a minority interest in a joint venture that expects to develop and manage a new One&Only property in Cape Town, South Africa.  We do not currently plan on using the brand for

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Sugar Beach Resort, La Pirogue Hotel or Le Coco Beach Hotel.  We value outstanding design, unusual locations and genuine hospitality at our resorts and do not believe in applying simple “formulas.” We believe that all of our One&Only properties, most of which have been constructed or renovated within the last five years, offer guests a singularly distinctive experience.

Located on what we believe to be some of the leading beach locations in the world, these resorts are architecturally unique and have been developed to blend into their natural environment.  Our One&Only Resort business currently consists of five properties in Mauritius (two of which, Le Saint Géran and Le Touessrok, are One&Only Resort properties), the One&Only Royal Mirage in Dubai, the One&Only Kanuhura in the Maldives, the One&Only Ocean Club on Paradise Island, The Bahamas and the One&Only Palmilla near Cabo San Lucas, Mexico.  We expect to leverage our existing management expertise and business infrastructure and continue to improve the results of the One&Only Palmilla and to open the One&Only Reethi Rah, while sustaining the levels of earnings at the other properties.

As of December 31, 2004, we were managing approximately 2,000 rooms.  As part of our strategy, we often take ownership positions in the properties that we operate.  As of December 31, 2004, the properties we operated were as follows:

Property	Location	Percentage Ownership		Number of Rooms, Suites and Villas
One&Only Ocean Club	The Bahamas	100.0	%	108
One&Only Palmilla(1)	Mexico	50.0	%	172
One&Only Le Saint Géran(2)	Mauritius	20.4	%	163
One&Only Le Touessrok(2)	Mauritius	20.4	%	200
One&Only Kanuhura	Maldives	20.0	%	100
One&Only Royal Mirage	Dubai	—		466
Sugar Beach Resort(2)	Mauritius	20.4	%	238
La Pirogue Hotel (2)	Mauritius	20.4	%	248
Le Coco Beach Hotel(2)	Mauritius	20.4	%	333

(1)As of January 1, 2004, pursuant to our adoption of FIN 46R, issued by the Financial Accounting Standards Board, we determined that Palmilla JV, LLC, a previously unconsolidated 50% owned equity method investment, must be consolidated as the operating agreement contains a provision which gives Kerzner’s 50% joint venture partner the right to cause us to acquire its 50% interest.  This resulted in an increase in revenues and expenses in 2004, however, it had no impact on consolidated net income or earnings per share.

(2)Interest owned through Sun Resorts Limited.

The following properties are currently under development and will be marketed under the One&Only brand:

Property	Location	Percentage Ownership	Number of Rooms
Cape Town	South Africa	(1)	163
Reethi Rah	Maldives	—	130

(1)Minority ownership interest to be determined.

The Bahamas

We own and operate the One&Only Ocean Club, a high-end luxury resort hotel with 108 rooms, suites and villas located on Paradise Island, The Bahamas.  In October 2000, we completed an addition to the One&Only Ocean Club that comprised 50 rooms, including 10 deluxe suites, a gourmet beachfront restaurant, Dune, operated by Jean-Georges Vongerichten and significant enhancements to the existing pool and garden areas.  The One&Only Ocean Club also features the Ocean Club Golf Course, a 7,159-yard championship golf course designed by Tom Weiskopf and a clubhouse with 121 luxury oceanfront home sites situated around the golf course.  The Ocean Club Golf Course is included in the destination resorts segment within Atlantis, Paradise Island.  The One&Only Ocean Club was named to Condé Nast Traveler’s 2005 Gold List and it received Condé Nast Traveler magazine’s 2004 Readers’ Choice Award for the best Atlantic Resort.  During May 2003, the One&Only Ocean Club was also named best luxury resort in the Atlantic/Caribbean region by Departures, the luxury lifestyle magazine published

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exclusively for American Express Platinum and Centurion card members.  The property achieved an average occupancy of 79% and an average daily room rate of $762 during 2004, compared to 79% and $722 in 2003.

As part of the Phase III expansion discussed above, we developed three high-end luxury rental villas adjacent to the One&Only Ocean Club, as well as a high-end boardroom meeting facility and a children’s pool.  These facilities were completed in 2004.

As of December 31, 2004, we had closed on 112 of the 121 home sites available at Ocean Club Estates, a residential development adjacent to the Ocean Club Golf Course, and received approximately $118.4 million in gross proceeds from such sales.  Of the nine remaining properties, three are being used by the Company and we have received deposits for three of the six additional remaining properties.

Mexico

In September 2002, we purchased a 50% ownership interest in the One&Only Palmilla, a deluxe five-star property located near Cabo San Lucas in Baja, Mexico for approximately $40.8 million, including transaction costs.  The One&Only Palmilla is located on what we believe is an outstanding site with the most extensive beach coverage of any of the leading hotels in Cabo San Lucas.  The One&Only Palmilla also features a 27-hole Jack Nicklaus-designed championship golf course.  In connection with the purchase, we entered into long-term management and development agreements related to the property that will expire in 2022.  The acquisition was funded through a combination of cash on hand and drawings under our then-existing amended and restated revolving credit facility.  The One&Only Palmilla re-opened in January 2004 following a refurbishment that expanded the room count to 172 rooms and significantly upgraded the amenities and public areas offered by the resort.  The expansion was financed by the One&Only Palmilla through local project financing that was supported by a $46.5 million guarantee from Kerzner, and by approximately $14.5 million in completion loans from Kerzner.  The total cost of the One&Only Palmilla renovation was approximately $102.0 million.  On December 17, 2004, the One&Only Palmilla entered into two promissory notes pursuant to which it borrowed $110.0 million.  The proceeds were used to, among other things, repay all of the One&Only Palmilla’s existing loans, including the completion loans provided by Kerzner, and fund the One&Only Palmilla’s working capital requirements.  In connection with the repayment of the One&Only Palmilla’s existing loans, Kerzner’s $46.5 million guarantee was extinguished.  The indenture governing the promissory notes provides recourse to Kerzner in the event certain representations and warranties are violated.  The One&Only Palmilla was named to Condé Nast Traveler’s 2005 Gold List.  The One&Only Palmilla was rated as one of the “Top 25 International Golf Resorts” in 2002 by Condé Nast Traveler magazine and it received Condé Nast Traveler magazine’s 2004 Readers’ Choice Award for the best Latin American Resort.

Indian Ocean

In Mauritius, we manage and own interests in five beach resorts:

•the 163-room One&Only Le Saint Géran (renovated in 2000);

•the 200-room One&Only Le Touessrok (renovated in 2002);

•the 238-room Sugar Beach Resort;

•the 248-room La Pirogue Hotel (renovated in 2003); and

•the 333-room Le Coco Beach Hotel.

The Mauritius properties cater primarily to luxury and middle-market tourists from Europe and southern Africa. The One&Only Le Saint Géran and the One&Only Le Touessrok offer deluxe five-star accommodations and we believe that such properties are among the finest beach resorts in the world.  The One&Only Le Saint Géran and the One&Only Le Touessrok have been rated among the world’s finest leisure hotels by Condé Nast Traveler magazine. The One&Only Le Saint Géran, which is classical in style, also was voted “Hotel of the Year 2002” by Tatler magazine in the United Kingdom.  In December 2002, we completed a major redevelopment of the One&Only Le Touessrok.  The resort includes new restaurants, a new spa, a new championship golf course (which opened in November 2003) and other amenities to enhance its position in the luxury resort market.

Mauritius’ tourist industry is mainly comprised of visitors from Great Britain, Germany, France, Italy and South Africa.  Scheduled air service to-and-from Mauritius is provided through scheduled flights on numerous airlines, including Air France, British Airways, Cathay Pacific, Singapore Airlines, Air India, Air Mauritius, Condor and South African Airlines.

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In the Maldives, located 600 miles southwest of the southern tip of India, we manage and own an interest in the One&Only Kanuhura, a 100-room luxury resort located on Lhaviyani Atoll.  In August 2001, we acquired 25% of the equity of the One&Only Kanuhura for approximately $3.8 million.  Effective January 1, 2003, we sold 20% of this equity interest to SRL.  As of December 31, 2004, we had provided debt financing to the One&Only Kanuhura of $2.4 million, excluding accrued interest and we also have a contingent guarantee obligation to provide up to approximately $10.7 million.  See “Item 5. Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for more information.  The One&Only Kanuhura was selected as “Hideaway of the Year 2001” by readers of Hideaway magazine.  See Note 16—Related Party Transactions to the consolidated financial statements.

We have also entered into management and development agreements for the One&Only Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives that we expect to open in the second quarter of 2005.  The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2020.  This new five-star resort will occupy the site where a small resort was previously located.  As part of this development, we have committed to provide certain financing arrangements to the current owner of the resort.  See “Item 5. Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for more information on the financing arrangements.

We manage these resorts under long-term management agreements and receive management fees based upon a percentage of the revenues and gross operating profits of these properties.  In December 2002, we entered into an agreement with SRL to form One&Only Management for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives, and, as consideration, securing an extension to our management agreements in Mauritius from 2008 until 2023.  In connection with this transaction, we subcontracted to One&Only Management all of our Mauritius management agreements and assigned to it the One&Only Kanuhura management agreement, and SRL purchased 20% of our debt and equity interests in the One&Only Kanuhura.  Effective January 1, 2005, our ownership interest in the One&Only Kanuhura further decreased to 18.75% and SRL’s interest increased to 6.25%, as SRL purchased an additional 1.25% interest from us.  Pursuant to an additional subcontract arrangement with One&Only Management, we provide comprehensive management services to the five Mauritius resorts and the One&Only Kanuhura and receive a management fee.  Pursuant to an agreement among us, SRL and One&Only Management, SRL’s ownership interest in One&Only Management will increase incrementally, subject to certain conditions, from 2005 through 2009, for no additional consideration, at which time it will own 50% of One&Only Management.  Effective January 1, 2005, SRL’s ownership interest increased from 20% to 25%, and our ownership interest correspondingly decreased from 80% to 75%.  Subject to certain conditions, SRL has a right of first refusal to participate equally with us in any new hotels developed by us in specified Indian Ocean territories.  If SRL elects to participate in the equity or other funding of any such project, then the management agreement for that property will be held by One&Only Management.  SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (effective January 1, 2005 the participation of SRL increased to 25%) with us in connection with the One&Only Reethi Rah.  We expect to transfer the management agreement for the One&Only Reethi Rah to One&Only Management and expect SRL to be obligated to provide 25% of the total subordinated debt financing, with its commitment increasing to 50% of such financing as SRL’s ownership interest in One&Only Management increases to 50%.  It is likely we will provide bridge financing to SRL to enable it to meet its financing commitment.

Middle East

In the Middle East, we manage the One&Only Royal Mirage in Dubai, a luxury 466-room hotel, the first phase of which opened in August 1999.  Under the terms of the management agreement, which expires in 2019, we receive management fees based on a percentage of the revenues and gross operating profits of the property.  We assisted in the expansion of the One&Only Royal Mirage, which opened at the end of 2002.  The expansion of the property featured 225 new luxury rooms, including a new 50-room ultra high-end boutique hotel.

Cuba

In the first quarter of 2005, we mutually agreed with the owner that we would terminate our involvement with the proposed One&Only project in Havana, Cuba.

South Africa

In November 2003, we announced that we had entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited (“V&A Waterfront”) to develop and manage a new luxury hotel at the highest end of the market in Cape Town, South Africa.  We intend to form a joint venture with a local entity with limited financial resources in

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which we will own a minority interest to develop and operate a new 163-room One&Only luxury hotel, which we refer to as the One&Only Cape Town, to be located in The Victoria & Albert Waterfront, which is part of Cape Town’s waterfront and harbor.  In addition to an equity investment, we expect to provide financing assistance in the form of loans and/or guarantees.  We expect the joint venture to enter into a long-term land lease agreement with the V&A Waterfront for which we will provide a guarantee, which will permit the development, in conjunction with our local partner, to proceed.  Architectural design work for the new hotel has commenced and construction is expected to start in 2005 and be completed by the end of 2006.  To date we have funded $5.8 million, and if the project proceeds, we expect our investment in this project to total approximately $11.3 million.  In the first quarter of 2005, litigation was commenced against the V&A Waterfront, alleging certain zoning violations and that the V&A Waterfront had exceeded its authority with regard to the overall waterfront development.  This litigation was heard on March 8, 2005 in the High Court of South Africa (Cape Provincial Division) and we expect a ruling to be issued in the second quarter of 2005.  However, if the court delays its ruling or rules in favor of the V&A Waterfront and that judgment is appealed by the plaintiffs, this litigation could significantly delay this project.  If the court finds in favor of the plaintiffs, such a ruling could significantly delay or even terminate this development.  If the One&Only Cape Town does not proceed, we will be required to recognize a write-off of the amount funded.

In October 2003, we funded $1.7 million for the purchase of land for the potential development of an additional One&Only property in South Africa.

Internet Gaming

We previously owned and operated Kerzner Interactive Limited, an online Internet gaming site.  During 2002, several countries made it increasingly difficult for their citizens to gamble on-line.  Further, as a licensed operator in the Isle of Man, we imposed numerous restrictions and controls on how we operated this business, which made it difficult for us to compete against companies operating in a less rigorous manner.  As a result, we concluded that this business would not be economically viable in the short to medium term.  We therefore discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003.

In February 2002, we agreed to sell 50% of Kerzner Interactive Limited to Station Casinos, Inc. (“Station”), who paid us a non-refundable deposit of $4.5 million in July 2002.  Subsequently, this agreement was restructured and Station received an option through early January 2003 to purchase 50% of the operation in consideration for the $4.5 million previously received.  During the first quarter of 2003, the Company and Station mutually agreed to terminate this transaction.

Atlantic City Option

In February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we agreed to sell the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary of Colony RIH Holdings, Inc. (the “Purchaser”) for a sale price of $40.0 million.  The sale was completed on March 18, 2004.  The sale price was paid in the form of a promissory note which matures on March 16, 2009 (the “NJ Note”).  The NJ Note began accruing interest on September 30, 2004 at a rate of 4%, which rate increases at various intervals from the closing date of the transaction.  All principal and interest due under the NJ Note is due on March 16, 2009, which date may be accelerated by us in certain circumstances.  The NJ Note is secured by a first mortgage on the property sold and is guaranteed by Colony RIH Holdings, Inc. (the direct parent company of the Purchaser) initially in an amount limited to $20.0 million, which will generally increase in increments of $5.0 million annually.  The NJ Note will also be guaranteed by Resorts International Hotel and Casino, Inc.  This guarantee will go into effect when that company’s outstanding public indebtedness, which is due on March 9, 2009, has been paid.

Florida

Our indirect wholly owned subsidiary, Kerzner International Resorts, Inc., a Florida corporation, together with its subsidiaries based in Florida, provides general and administrative support services, marketing services, travel reservations and wholesale tour services for our Atlantis, Paradise Island and certain One&Only operations.  To a much lesser extent, they also provide travel reservation services for Harborside and other unaffiliated resort properties in The Bahamas.

France

Through an indirect wholly owned subsidiary, we own a tour operator company in France, Solea Vacances SA.  Solea Vacances SA primarily services patrons in France, and, among other things, offers reservations services for

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travel to the five resorts in Mauritius, the One&Only Royal Mirage Hotel in Dubai and the One&Only Kanuhura in the Maldives.

South Africa

Through our wholly owned subsidiaries, we own a tour operator company in South Africa, World Leisure Holidays (Pty.) Limited (“WLH”).  WLH handles reservations from the European and Asian markets for our One&Only properties primarily in Mauritius, the Maldives and Dubai.

Seasonality and Weather

Our business has historically been seasonal, with the largest number of patrons visiting The Bahamas during late December and the first three months of the calendar year.  Accordingly, our revenues and operating profits have historically been higher during the first quarter than in successive quarters.  In addition, The Bahamas, Mauritius, the Maldives and Mexico are subject to tropical weather and storms, which, if severe, can interrupt the normal operations and affect tourism.  Similarly, inclement weather can adversely affect the revenues that we derive from Mohegan Sun as the principal access to this property is by road.  Higher revenues and earnings are typically realized from the Connecticut operations during the second and third quarters of the year.

In September 1999, Paradise Island was affected by Hurricane Floyd, a hurricane rated by the United States National Weather Service as a category five, its highest rating.  The Paradise Island properties suffered approximately $45.0 million of property damage, for which remedial work was completed by year end 1999, and we received a number of customer cancellations.  At Atlantis, Paradise Island, 230 rooms were taken out of service for three months and the One&Only Ocean Club was closed for approximately three and one half months.  We were fully insured for property loss and business interruption.  Hurricane Floyd was the first significant hurricane to negatively impact Paradise Island in over thirty years.

In November 2001, Hurricane Michelle moved through The Bahamas.  Although the storm caused minimal disruption to our operations, our properties (other than Harborside at Atlantis, Paradise Island, which was closed from August 2002 through December 2002 due to water damage resulting primarily from Hurricane Michelle, see “Item 4.  Information on the Company, (B) Business Overview”) suffered approximately $28.3 million in damage that was substantially covered by our insurance policies.  See “Item 3.  Key Information, (D) Risk Factors—Severe weather conditions or natural disasters could adversely affect our business, financial condition or results of operations, or further increase our insurance premiums and deductibles or make insurance unavailable at commercially reasonable rates.”

In September 2004, Hurricane Frances passed just to the north of Paradise Island.  Costs associated with Hurricane Frances were $4.6 million, which primarily consisted of $3.4 million of clean up and repair costs and complimentary goods and services to guests and a $1.2 million loss on damaged assets.  While we have an “all risk” insurance policy that covers these types of losses, we were not reimbursed for these costs as the total amount of loss was less than the deductible under our policy when aggregated with the related business interruption losses.

In December 2004, the tsunami caused by an earthquake off the coast of Indonesia in southern Asia resulted in flooding damage at our two properties in the Maldives.  See “Item 3.  Key Information, (D) Risk Factors—Severe weather conditions or natural disasters could adversely affect our business, financial condition or results of operations, or further increase our insurance premiums and deductibles or make insurance unavailable at commercially reasonable rates.”

As a result of a more difficult insurance market, the fact that we have a concentration of assets in one location and that our properties are subject to the impact of hurricanes, we have experienced substantial increases in our insurance premiums and deductibles.  See “Item 3.  Key Information, (D) Risk Factors—Additional increases in our insurance premiums and deductibles may increase our costs and impair our ability to obtain or maintain insurance on our properties.”

Insurance Arrangements

In May 2003, we formed Aberdeen Insurance (Bermuda) Ltd. (“Aberdeen”), a wholly owned captive insurance company located in Bermuda.  Aberdeen has been registered by the Bermuda Monetary Authority under The Insurance Act of 1978 as a Class 1 Insurer, and is utilized by the Company as a vehicle through which the Company places its “all risk” property and business interruption insurance policy, including windstorm, for Atlantis, Paradise Island and the One&Only Ocean Club.  Harborside at Atlantis is covered under a Starwood insurance policy. 

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Although Aberdeen provides the Company with access to the reinsurance market at reduced administrative costs, all risk in excess of the Company’s $15.0 million per occurrence/$30.0 million annual aggregate deductible (which is in turn in excess of an underlying operating company deductible of $50,000 for each and every loss) will continue to be 100% reinsured through the reinsurance market, thereby leaving Aberdeen with zero retained risk.

We believe our current insurance coverage represents optimum market availability at commercially available pricing.

Competition

General

The resort and casino industries are highly competitive.  Our destination casino resorts compete with other resorts, hotels and casinos, including land-based casinos, riverboat, dockside and cruise ship on-board casinos and other forms of gaming as well as with other forms of entertainment.  Our luxury resort hotels compete with other resorts and hotels in markets in which we conduct business.  We believe the ability to compete effectively in these industries is based on a number of factors, including the scope, quality, location and accessibility of facilities, the effectiveness of marketing efforts, customer service, the relative convenience and costs of available transportation, service and the quality and price of rooms, food and beverages, convention facilities and entertainment.

Paradise Island

Our Paradise Island operations primarily compete with warm weather resort destinations, including Walt Disney World and other Orlando area attractions, as well as cruise ships and other hotels and resorts on Paradise Island, New Providence Island, Grand Bahama Island and the neighboring Caribbean islands.  We estimate that there are approximately 7,800 hotel rooms on Paradise Island and New Providence Island combined, of which approximately 3,400 are located on Paradise Island, including 2,425 in hotels owned and operated by us.  The Wyndham Nassau Resort, our primary competitor in The Bahamas, is an 850-room resort and casino.  The One&Only Ocean Club also competes with a Four Seasons property which opened on Great Exuma Island in The Bahamas in November 2003.

We also compete with Our Lucaya, located on Grand Bahama Island, approximately 40 minutes by air from Paradise Island.  Our Lucaya consists of a 749-room Westin Hotel, a 511-room Sheraton Hotel and a 30,000 square foot casino with 19,000 square feet of gaming space.

Mohegan Sun

The Connecticut market is the fourth largest gaming market in the United States, with approximately 22 million adults within 150 miles of Mohegan Sun.  Mohegan Sun and Foxwoods Resort and Casino at present are the only two casinos in the Connecticut market.  Foxwoods now has approximately 6,400 slot machines and, for the twelve months ended September 30, 2004, reported gross revenues of approximately $1.37 billion.  On February 1, 2005, Foxwoods Resort and Casino announced a $700.0 million development project, which consists of a new hotel tower, expanded convention facilities, new restaurants and retail stores, as well as an expanded casino that can accommodate 1,500 additional slot machines.  The Oneida Nation operates a casino near Syracuse, New York and other Native American tribes in the states of New York, Rhode Island, Massachusetts and Connecticut are seeking approvals to establish gaming operations which would further increase competition, particularly for day-trip patrons.  Mohegan Sun also competes with Atlantic City and several small Native American gaming facilities throughout the northeastern United States.

In Connecticut, under the tribal-state compacts between the State of Connecticut (for purposes of this section, the “State”) and the Mohegan Tribe and Foxwoods Resort and Casino, Mohegan Sun is subject to a 25% gaming fee on slot revenues payable to the State so long as the State does not issue any further licenses for gaming operations with slot machines or other commercial casino games (other than to a Native American tribe on Native American land).  In June 2002, the BIA issued a determination approving the federal recognition of the Eastern Pequot Tribe.  The State and a number of Connecticut municipalities have filed an appeal of the BIA determination to the Department of the Interior, Board of Indian Appeals (“IBIA”), which appeal is pending.  The ultimate decision of the IBIA may be appealed to the Federal courts.  In addition, on January 29, 2004, the BIA issued a determination (subject to appeal before the IBIA) that a second group in Kent, Connecticut, the Schaghticoke Tribal Nation, met the requirements for federal recognition as an Indian Tribe.  The State appealed that decision to the IBIA, which appeal is pending.  In June, 2004, the BIA denied the petitions for federal recognition as Indian tribes of three other Indian groups in the Connecticut gaming market:  the Golden Hill Paugusett of Trumbull, two bands of Nipmuc Indians of Massachusetts that border Connecticut  the Hassanamisco Band of Sutton and the Chaubunagungamaug

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Band of Dudley/Webster.  The two Nipmuc bands have appealed the BIA’s decision to the IBIA, which appeals are pending.  The Sutton group has indicated an interest in gaming in Connecticut as have the Paugusett group, the Historic Eastern Pequot and the Schaghticoke.  Each of these groups has expressed interest in obtaining trust lands for the purpose of conducting gaming in Connecticut.

Indian Ocean

In the Indian Ocean market, we primarily compete with other resorts on the islands in which we operate as well as other locations offering vacations to tourists from Europe, southern Africa and parts of Asia.  SRL owns five major hotels in Mauritius.  In the luxury end of the Mauritian hotels market, SRL owns two of the seven luxury hotels and offers a total of 363 of the approximately 1,000 luxury rooms in Mauritius.  Competition in the middle-market has increased following the introduction of 550 new mid-market rooms at the end of 2004.  These additional rooms will compete with Sugar Beach Resort, La Pirogue Hotel and Le Coco Beach Hotel.

Maldives

The One&Only Kanuhura, a five-star resort, competes with other resorts in the Maldives as well as other locations offering vacations to tourists from Europe, southern Africa and parts of Asia.  The One&Only Kanuhura primarily competes with the five other five-star resorts in the Maldives.  In this high-end market, the One&Only Kanuhura offers about 17% of the 577 available rooms.  The One&Only Reethi Rah will also compete in this high-end market.

Dubai

In Dubai, we primarily compete with other resorts and hotels on the Jumeirah Beach “golden mile.”  We manage the One&Only Royal Mirage in Dubai, a luxury 466-room hotel with distinctive Arabian architecture.  The One&Only Royal Mirage focuses on the high-end travel market.  Certain of our competitors on Jumeirah Beach include the 620-room Jumeirah Beach Hotel, which focuses on the family and group incentive markets and the 500-room Royal Meridien, which focuses on the middle-spending leisure holiday market.  The Madinat Jumeirah, a recently opened, 867-room five-star hotel, is also a competitor in the market.

The Jumeirah Beach coastline is rapidly being developed.  Residential development on The Palm, Jumeirah is underway and the main access bridge to the island is close to completion.  The Dubai Marina, located in the vicinity of Jumeirah Beach, is a waterfront development that includes apartments in high-rise towers and luxury villas.

There are two other man-made islands in Dubai: The Palm, Jebel Ali and The Palm, Deira, both of which are designed to attract resort and residential development.  These islands will be located adjacent to the Dubai coastline and will be connected to the mainland by bridges.  It is expected that these islands will substantially increase Dubai’s tourism industry.

In addition to hotel rooms and residential projects, Dubai is also focused on increasing its number of attractions.  Dubailand, a four-phase major theme park attraction, is currently under development and is within close proximity to Dubai International Airport.  Dubailand will feature six themed zones that will include various entertainment, leisure, sports, retail and other attractions.  The first phase of this government-sponsored project is expected to be completed in 2007.  Dubailand is expected to compete with Atlantis, The Palm as one of the premier visitation sites in Dubai.

Mexico

In Mexico, we entered the luxury end of the market with our ownership interest in and management of the One&Only Palmilla, a deluxe five-star resort located near Cabo San Lucas in Baja, Mexico.  The upscale four- and five-star resorts in Los Cabos, the tourism corridor between San Jose Del Cabo and Cabo San Lucas, account for approximately 2,500 rooms out of the total inventory of approximately 8,500 rooms.  The market is mainly composed of incentive group travelers, golfers, family and high-end vacationers.  Three resorts cater to the five-star market, the One&Only Palmilla, Las Ventanas al Paraíso and Esperanza.  Of these, only the One&Only Palmilla offers its own golf course, which we believe gives us a competitive advantage.  The One&Only Palmilla re-opened in January 2004 following a refurbishment that expanded the room count to 172 rooms and significantly upgraded the amenities and public areas offered by the resort.  Currently, Las Ventanas al Paraíso, with 61 rooms, leads the market with an average occupancy in the 85% range and average daily room rates in excess of $800.

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Outside of Los Cabos, domestic competition comes from the Four Seasons Punta Mita Resort in the Puerto Vallarta area of Mexico, which offers a similar resort and golf experience.  Internationally, the Los Cabos resort area competes with Hawaii, California and Arizona.

Sales and Marketing

Our marketing goal is to drive demand direct from the consumer through high profile public relations, publications and special events promotions and advertising.  To support our operations in The Bahamas, we maintain an inventory of rooms for distribution through our tour operator, PIV, Inc. (“PIV”), an indirect wholly owned subsidiary.  For the year ended December 31, 2004, PIV generated tour operations revenues of approximately $26.6 million as compared to $28.9 million in 2003.  Similarly, our operations in Mauritius, the Maldives and Dubai are supported primarily through our own European marketing offices.  In addition, we channel distribution for all of our operations through primary wholesalers in the travel agent community with a favorable commission structure.

We spent approximately $24.4 million in 2004 on sales and marketing for our operations in The Bahamas.  Pursuant to the Heads of Agreement described below under “Certain Matters Affecting Our Bahamian Operations—Heads of Agreement,” we receive $4.0 million per year from the Bahamian Government toward the direct costs related to certain marketing events, public relations activities and the production and placement of advertisement in media through December 2007.

Certain Matters Affecting Our Bahamian Operations

Airline Arrangements

The majority of patrons at our resorts on Paradise Island arrive through Nassau International Airport located on New Providence Island.  This airport is serviced by several major carriers that offer jet service from most major cities on the east coast of the United States and other international destinations.  There are approximately 70 flight arrivals each day at Nassau International Airport, depending on the time of year.  Ground transportation is facilitated by two bridges linking Paradise Island and New Providence Island.

Union Contract Arrangements

In The Bahamas, as of December 31, 2004, approximately 3,600 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.  Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area.  The association and the union are parties to a contract that expires on January 7, 2008.  Labor relations in The Bahamas have been unstable at times with occasional work slowdowns occurring, not only at Atlantis, but also at publicly run entities such as the Bahamian Electric Corporation and Bahamas Telephone Company.  As the country’s largest private employer, we are sometimes the target of labor disputes.  See “Item 3.  Key Information, (D) Risk Factors—Work stoppages and other labor disputes could harm our financial condition and results of operations.”

Casino License

Paradise Enterprises Limited (“PEL”), a subsidiary that is part of our Bahamian operations, is currently licensed to operate the Atlantis Casino under the Bahamian Gaming Act (the “Gaming Act”).  In accordance with Bahamian casino licensing requirements, PEL is obligated to have its casino license renewed annually by the Gaming Board.  In addition, other than an existing contingent obligation to grant two casino licenses, the Bahamian Government has agreed that it will grant no new casino licenses with respect to gaming operations on Paradise Island or New Providence Island until the earlier of December 31, 2027 or 20 years after the substantial completion of the Phase III expansion.  See “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island.”

Basic License Fee

Currently, the Gaming Act provides for taxes on casino revenues consisting of an annual basic license fee of $200,000.

Taxes and Fees

The following table summarizes for the periods shown the taxes and fees paid or accrued by our Bahamian operations under the Gaming Act and certain agreements with the Bahamian Government, as described below under “Heads of Agreement” (in thousands of U.S. dollars):

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	Year Ended December 31,
	2004		2003		2002
Casino license fees and win taxes	$	9,644	$	11,295	$	12,040
Basic license fees	200		200		200
Total	$	9,844	$	11,495	$	12,240

Heads of Agreement

We have an agreement with the Bahamian Government, which is titled Heads of Agreement.  This agreement provides us with certain tax incentives in exchange for the Company investing in the expansion of Atlantis, Paradise Island.  The most significant of these incentives are the casino fee and tax incentives.

We restated our agreement with the Bahamian Government on May 26, 2003, in anticipation of the Phase III expansion on Paradise Island.  Such agreement was supplemented in both May and December 2004.  The restated Heads of Agreement, as supplemented, maintains the current basic casino tax and fee structure which calls for an annual license fee of $100,000 per thousand square feet of casino space, a minimum annual casino tax of $4.3 million on all gaming win up to $20.0 million, a 12.5% win tax on gaming win between $20.0 million and $120.0 million and a 10% win tax on gaming win in excess of $120.0 million.  Against this, the Company is entitled to a credit of $5.0 million in relation to the annual license fee and a 45% credit against all win tax on gaming win between $20.0 million and $120.0 million.  With the commencement of construction of Phase III described in “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island,” the basic tax and fee structure was amended so that all gaming win in excess of $20.0 million is subject to a win tax of 10%, and is effective for a period of 20 years after the earlier of the date of the substantial completion of the Phase III expansion and December 31, 2007 (such date, the “Relevant Date”).  In addition, the $5.0 million credit against the annual license fee shall remain, and the credit against win tax shall become 50% against all win tax on gaming win over $20.0 million.  These credits shall apply from the commencement of construction of Phase III and shall expire at the end of 2024.

In order to secure the tax incentives described in the preceding paragraph, we agreed to commence construction on certain aspects of Phase III by December 31, 2003 and, pursuant to the December 2004 supplement, we agreed to commence construction on certain other aspects of Phase III by December 31, 2005.  We notified the Bahamian Government on August 11, 2003 that we had commenced construction on aspects of Phase III and were therefore entitled to the accrual of the tax incentives described above.  If we do not proceed with the condo-hotel and the Athol Golf Course, casino tax concessions and the joint marketing contribution from the Government will be reduced beginning in 2009 in accordance with a schedule contained in the Heads of Agreement.

The Company has agreed to create a minimum of 3,000 new permanent jobs for Bahamians assuming completion of all elements of the Phase III expansion.  The Bahamian Government has also agreed to extend the expiration of the Company’s casino license to the date that is 20 years after the Relevant Date.  In addition, other than an existing contingent obligation to grant two casino licenses, the Bahamian Government has agreed that it will grant no new casino licenses with respect to gaming operations on Paradise Island or New Providence Island until 20 years after the Relevant Date.  Finally, the Company has also provided certain undertakings that include skills training and community development programs.

The Heads of Agreement also provides for an extension of the Company’s joint marketing agreement with the Bahamian Government pursuant to which the Bahamian Government will match the Company’s contribution, up to $4.0 million annually, toward the direct costs related to staging certain marketing events, public relations activities and the production and placement of advertisements in all media to promote the destination and the Company’s Paradise Island properties, including the Phase III expansion.  This joint marketing agreement will expire on December 31, 2010.

This summary is qualified in its entirety by reference to the particular provisions of the Heads of Agreement, which can be found as follows:  (i) Exhibit 99(2) to our Form 6-K filed on May 28, 2003, (ii) Exhibit 99(1) to our Form 6-K filed on May 5, 2004 and (iii) Exhibit 99(2) to our Form 6-K filed on December 9, 2004.

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The Commonwealth of The Bahamas

The Commonwealth of The Bahamas had a population of approximately 300,000 in 2004.  The Bahamas includes approximately 700 islands, 29 of which are inhabited, and extends from east of the Florida coast to just north of Cuba and Hispañola.  Over 60% of the population lives on New Providence Island, where Nassau, the capital of The Bahamas, is located.  The Bahamas first obtained internal self-government in 1964 and became an independent nation within the British Commonwealth in 1973.  The first elections under universal adult suffrage were held in November 1962.  The former government was first elected in 1992 and re-elected in March 1997, having succeeded a government that was in power for over 20 years.  On May 2, 2002, general elections were held and a new government elected, including a new Prime Minister and Deputy Prime Minister.  The official language is English.

The currency of The Bahamas has been tied to the U.S. dollar since 1970 with an official exchange rate of U.S. $1.00 equal to 1.00 Bahamian dollar.

The Ministry of Tourism has historically spent over $60.0 million annually to promote The Bahamas.

Certain Matters Affecting Our Connecticut Operations

Regulation

The Mohegan Tribe is a federally recognized Native American tribe whose federal authority’s recognition became effective May 15, 1994.  In May 1994, the Mohegan Tribe and the State of Connecticut entered into a gaming compact to authorize and regulate Class III gaming operations (slot machines and table games).  Under this tribal-state compact, Mohegan Sun is subject to a 25% gaming fee on slot revenues payable to the State of Connecticut so long as the State does not issue any further licenses for gaming operations with slot machines or other commercial casino games (other than to a Native American tribe on Native American land).

Each of the partners of TCA must be licensed by relevant tribal and state authorities.  Each of the partners of TCA has received a gaming registration from the Commissioner of Revenue Services of the State of Connecticut that is renewed annually.

Priority Payments

For seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the Relinquishment Fees it receives each year (after the return of certain expenses and capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.

Waiver of Sovereign Immunity

Pursuant to the Relinquishment Agreement, the Mohegan Tribe has waived sovereign immunity for the purpose of permitting, compelling or enforcing arbitration and has agreed to be sued by TCA in any court of competent jurisdiction for the purpose of compelling arbitration or enforcing any arbitration or judicial award arising out of TCA’s agreement with the Mohegan Tribe.  The parties have agreed that all disputes and claims arising out of TCA’s agreement with the Mohegan Tribe or the Mohegan Tribe’s gaming ordinance will be submitted to binding arbitration, which shall be the sole remedy of the parties, and that punitive damages may not be awarded to either party by any arbitrator.  The Mohegan Tribe’s waiver of sovereign immunity is limited to enforcement of monetary damages from undistributed or future net revenues of Mohegan Sun (or, under certain conditions, net revenues of other gaming operations of the Mohegan Tribe).  Funds earned and paid to the Mohegan Tribe as the Mohegan Tribe’s share of net revenues prior to any judgment or award are not subject to the waiver and would not be available for levy pursuant to any judgment or award.

New Jersey Gaming Regulation

As a result of the Resorts Atlantic City Sale, effective April 25, 2001, we no longer operate a casino in Atlantic City.  However, as the lessor of real estate in Atlantic City to Colony, KINA was required to maintain a casino service industry license.  As a result of the exercise by Colony of its option to purchase the real estate which we owned, KINA was qualified by the New Jersey Casino Control Commission as a financial source of Colony due to its financing of the transaction with Colony, and KINA is required to maintain its casino service industry license.  The sale was completed on March 18, 2004.  See “Item 4.  Information on the Company, (B) Business Overview—Atlantic City Option.”

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U.K. Gaming Regulation

Our development and management of our sites in the United Kingdom is subject to a number of contingencies.  First, the United Kingdom needs to pass gambling reform legislation.  Second, a special government committee that is expected to be established upon the passage of such legislation then must select eight localities that will be entitled to have a “Resort” or “Regional Casino,” as such criteria are defined by the Department of Culture, Media and Sport and the Parliamentary Joint Committee, which reviewed the draft Gambling Bill.  Our sites must be in the selected localities and must further compete for and be awarded a regional casino license by the local authorities.

Environmental Matters

We are subject to federal, state and local laws and regulations that:

•govern activities or operations that may have adverse environmental effects, such as discharges to air and water as well as handling and disposal practices for solid and hazardous wastes, and

•impose liability for the costs of cleaning up, and certain damages resulting from, past spills, disposals or other releases of hazardous substances.

From time to time, our operations have resulted or may result in noncompliance with applicable environmental laws.  However, past noncompliance has not had, and we believe that future noncompliance, if any, would not have, a material adverse effect on our financial conditions or results of operations.

The Mohegan Sun site was formerly occupied by United Nuclear Corporation (“UNC”), a naval products manufacturer of, among other things, nuclear reactor fuel components.  UNC’s facility was officially decommissioned on June 8, 1994, when the Nuclear Regulatory Commission confirmed that all licensable quantities of special nuclear material had been removed from the Mohegan Sun site and that any residual special nuclear material contamination was remediated in accordance with the Nuclear Regulatory Commission-approved decommissioning plan.

From 1991 through 1993, UNC commissioned an environmental consultant to perform a series of environmental assessments on the Mohegan Sun site, including extensive soil investigations and groundwater monitoring.  The environmental assessments detected, among other things, volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater.  Extensive remediation of contaminated soils and additional investigations were then completed.  Although the Mohegan Sun site currently meets applicable remediation requirements, no assurance can be given that the various environmental assessments with respect to the Mohegan Sun site revealed all existing environmental conditions, that any prior owners or tenants of the Mohegan Sun site did not create any material environmental condition not known to the MTGA, that future laws, ordinances or regulations will not impose any material environmental liability or that a material environmental condition does not otherwise exist on Mohegan Sun.  Future remediation may be necessary if excavation and construction exposes contaminated soil, which has otherwise been deemed isolated and not subject to cleanup requirements.  Such remediation could adversely impact the financial condition and results of operations of Mohegan Sun and therefore our financial condition and results of operations.

In addition, the Environmental Protection Agency has named a predecessor to KINA as a potentially responsible party, or a PRP, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, for the cleanup of contamination resulting from past disposals of hazardous waste at the Bay Drum site in Florida, to which the predecessor, among others, sent waste in the past.  CERCLA requires PRPs to pay for cleanup of sites at which there has been a release or threatened release of hazardous substances.  Courts have interpreted CERCLA to impose strict, joint and several liability upon all persons liable for cleanup costs.  As a practical matter, however, at sites where there are multiple PRPs, the costs of cleanup typically are allocated among the parties according to a volumetric or other standard.  Because we have only limited information at this time regarding this site and the wastes sent to it by the predecessor, we are unable to determine the extent of our potential liability, if any, at this site.

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(C)Organizational Structure

Set forth below is a table listing our significant subsidiaries:

Name of Company	Country of Incorporation
Kerzner International Bahamas Limited(1)	The Bahamas
Kerzner International North America, Inc.(2)	United States
Kerzner Investments Palmilla, Inc.(3)	The Bahamas
One&Only Management(4)	British Virgin Islands
Kerzner International Management Limited(5)	British Virgin Islands

(1)Owner of substantially all of the Bahamian subsidiaries.  Directly or indirectly wholly owns ten subsidiaries, all of which are organized in the Commonwealth of The Bahamas.

(2)Owner of all of the U.S. subsidiaries.  Directly or indirectly wholly owns 19 subsidiaries, 16 of which are organized in the United States and three of which are organized in Mexico and relate to the management and development of the One&Only Palmilla.

(3)Owner of the 50% interest in the One&Only Palmilla.

(4)Operator of the five Mauritius management agreements and the One&Only Kanuhura management agreement.  Through the year ended December 31, 2004, Kerzner held an 80% ownership interest in One&Only Management, which decreased to 75% effective January 1, 2005.

(5)Owner of the management agreement for the One&Only Royal Mirage in Dubai.  Also receives marketing and administrative fees from One&Only Management related to the Mauritius and the One&Only Kanuhura management agreements.

See Exhibit 8, filed herewith, for a list of our significant subsidiaries.

(D)Property, Plant and Equipment

Our headquarters and registered office are located at Executive Offices, Coral Towers, Paradise Island, The Bahamas.

We own or lease properties in The Bahamas, the United States and the United Kingdom.  Set forth below is a table listing our principal properties as of December 31, 2004:

Name and Location	Owned or Leased	Principal Use	Size	Capacity
Atlantis Paradise Island, The Bahamas(1)	Owned	Hotel/Casino	123 acres	2,317 Rooms
One&Only Ocean Club Paradise Island, The Bahamas(1)	Owned	Hotel	35 acres	108 Rooms
Ocean Club Golf Course and Clubhouse Paradise Island, The Bahamas	Owned	Golf Course	209 acres	N/A
Roads and Utility Sites Paradise Island, The Bahamas(1)	Owned	Infrastructure	52 acres	N/A
Phase III Expansion Paradise Island, The Bahamas	Owned	Current Development	68 acres	N/A
Undeveloped Land Paradise Island, The Bahamas(1)	Owned	Future Development	66 acres	N/A

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Name and Location	Owned or Leased	Principal Use	Size	Capacity
Undeveloped Land Atlantic City, New Jersey	Owned	(2)	23 acres	N/A
Land Holding Northampton, UK	Owned	Current Development	1.32 acres	N/A
Kerzner International North America, Inc. Plantation, Florida	Leased	Administrative and Marketing Office	65,000 square feet	425 Employees

(1)Please see “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island,” which describes in detail our plans to construct, expand upon and improve these properties.

(2)We sold an additional 13 acres of undeveloped land to Colony in March 2004.  See “Item 4.  Information on the Company, (B) Business Overview—Atlantic City Option,” for more information on the property that we sold to Colony.  All other land that we own in Atlantic City is available for sale.

In addition to the properties listed above, we lease several small administrative offices in various locations throughout the United States that we use for marketing purposes.  We lease two small administrative offices in Buckinghamshire, United Kingdom, as well as two offices in Paris, France, one of which Solea Vacances SA, our wholly owned European tour operator subsidiary, uses as a travel agency, while the other is a marketing office.  We also lease an office outside of Frankfurt, Germany, which we use as a marketing office.

The majority of the property we own serves as collateral for our Amended Credit Facility.

Item 5.Operating and Financial Review and Prospects

(A)Overview

Business of Kerzner International

We develop and operate premier resort casinos and other properties throughout the world and manage our business in three segments: Destination Resorts, Gaming and One&Only Resorts. Our Destination Resorts segment is currently our largest and most important segment from both a gross revenue and net income perspective.

The Destination Resorts segment is comprised of our larger destination resorts, including our flagship property, Atlantis, Paradise Island, our wholly owned tour operator, PIV, and both marketing and development fee income and equity in earnings (losses) from our jointly owned timeshare, Harborside at Atlantis.  During 2004, Atlantis, Paradise Island generated approximately 81% of our net revenues.  Net revenues from Atlantis, Paradise Island primarily consist of room, food and beverage, gaming, other hotel and tour operations revenues.

During 2005, we expect to have several projects in the development phase in our Destination Resorts segment, namely, the Phase III expansion, Atlantis, The Palm and a destination resort casino in Morocco.  The Phase III expansion on Paradise Island will allow us to capitalize on the demand for the property and leverage our investment in The Bahamas.  In the third quarter of 2005, we expect to open the Marina Village, which will provide additional food and beverage and rental revenue from third-party retail operators and will contribute to the overall guest experience.  We expect to commence pre-sales of an approximately 500-unit condo-hotel, which we expect to be a 50-50 joint venture with Turnberry Associates, one of the premier real estate development and property management companies in the United States, in the second quarter of 2005.  We commenced pre-sales of luxury condo units at the Ocean Club Residences & Marina, which will be a 50-50 joint venture with a Bahamian partner, in the first quarter of 2005.  We expect to commence construction of the approximately 500-unit condo-hotel and Ocean Club Residences & Marina in the second half of 2005 with completion scheduled for 2007.  This timing is dependent on sufficient pre-sales to arrange non-recourse financing.  See “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts — Atlantis, Paradise Island” for further discussion of the Phase III expansion.

During 2004, we completed a significant portion of the planning for a 2,000-room resort at Atlantis, The Palm, and we expect to commence construction in 2005.  During the construction period, with completion scheduled in 2008, we will receive a $20.0 million development fee, and upon commencement of operations, we expect to receive

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management fees and equity earnings from our ownership interest.  In Morocco, planning for a 600-room destination resort casino is underway and construction is expected to commence in 2005.  We expect to receive development and management fees and equity earnings from our 50% ownership interest in this project.

Our Gaming segment is comprised of our interests in properties that are primarily casinos, such as our indirect interest in Mohegan Sun in Uncasville, Connecticut. We receive fees pursuant to a Relinquishment Agreement with the Mohegan Tribe through our investment in TCA.  The Gaming segment also includes equity in losses from our 50% investments in TCNY, our indirect investment in Wembley through our 37.5% ownership interest in BLB and costs associated with the development of casino and resort facilities in the United Kingdom, such as the Dome, SECC, Sportcity and Northampton.

Our development and management of our sites in the United Kingdom is subject to a number of contingencies.  First, the United Kingdom needs to pass gambling reform legislation.  Second, a special government committee that is expected to be established upon the passage of such legislation then must select eight localities that will be entitled to have a “Resort” or “Regional Casino,” as such criteria are defined by the Department of Culture, Media and Sport and the Parliamentary Joint Committee, which reviewed the draft Gambling Bill.  Our sites must be in the selected localities and must further compete for and be awarded a regional casino license by the local authorities.  See “Item 4. Information on the Company, (A) History and Development of the Company—Recent Developments” for further discussion of Wembley and “Item 4. Information of the Company, (B) Business Overview—Gaming—United Kingdom.”

Our One&Only Resorts segment is comprised of our ownership and/or management interests in a portfolio of smaller (when compared to our destination resorts) luxury resorts and hotels. We currently operate nine resort properties in Mauritius, the Maldives, Dubai, Mexico and The Bahamas, six of which are operated under the One&Only brand. We have also entered into agreements to develop, manage and own a minority interest in the One&Only Cape Town on the Victoria & Alfred Waterfront in Cape Town, South Africa and we expect to open the One&Only Reethi Rah in the Maldives in the second quarter of 2005. The earnings contribution from our One&Only Resorts segment includes earnings before interest and taxes from the One&Only Ocean Club, earnings before interest and taxes, net of minority interest, from the One&Only Palmilla and management and development fees and equity in earnings (losses) of unconsolidated investments, and also reflects direct expenses associated with these properties. In order to acquire management agreements, we often participate in the equity of managed properties, usually in a supplementary role, or we may provide project financing or guarantees in order to complete the development of a new property.  In connection with the Phase III expansion, in June 2004, we opened three new luxury villas at the One&Only Ocean Club.

We believe that the results of operations in the Destination Resorts and the One&Only Resorts segments are best explained by three key industry specific performance measures: occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”).  Occupancy is the total percentage of rooms occupied and is computed by dividing the number of room nights occupied by the total number of room nights available.  ADR is the average amount of room revenue per occupied room. RevPAR represents room revenue divided by the total number of room nights available.  These measures are influenced by a variety of factors, including national, regional and local economic conditions, changes in travel patterns and the degree of competition with other destination resorts, luxury hotels and product offerings within the travel and leisure industry.  The demand for accommodations may also be affected by seasonal factors.  For example, at Atlantis, Paradise Island and the One&Only Ocean Club there are lower occupancy levels in September, following Labor Day, through mid-December, resulting in lower revenue, net income and cash flows from operations during these periods.  Similarly, the One&Only Palmilla experiences reduced occupancy levels in July and August.

Our operations are exposed to various risks, the most significant of which are increased competition, development and construction risks, ability to obtain financing, severe weather conditions and future security alerts or terrorist attacks.  The resort and casino industries are highly competitive, and the expansion, upgrade or construction of competing resort or casino properties in or near any market from which we attract or expect to attract a significant number of customers could have a significant adverse effect on our business, financial condition or results of operations.  As we are heavily involved in new projects and expansion efforts throughout the world, there are inherent risks associated with development and construction, such as unanticipated design, construction, regulatory and operating problems.  In addition, if we are unable to finance our expansion and development projects, as well as other capital expenditures, through cash flow and borrowings, our expansion and development efforts could be jeopardized.  As discussed in “Operating and Financial Review and Prospects—Liquidity and Capital

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Resources,” we expect to have the resources necessary to finance our current expansion and development plans.  However, if in the future we are unable to secure additional financing, we could be forced to limit or cancel expansion or development plans, which may adversely affect our business, financial condition or results of operations.  The Bahamas, Mexico, the Maldives and Mauritius are subject to tropical weather and storms, which, if severe, could adversely affect our operations and tourism.  During the past seven years, Paradise Island has been affected by three major hurricanes which have caused property damage, business interruption and lost revenues.  In December 2004, the Maldives were affected by the tsunami caused by an earthquake off the coast of Indonesia in southern Asia, which resulted in flooding at the One&Only Kanuhura and the One&Only Reethi Rah.  We cannot predict if future severe weather conditions will cause significant damage and suspension of services provided to our patrons, further increases to our insurance premiums and per occurrence deductibles or cancellations of our insurance coverage.  Acts of terrorism and war could adversely affect the travel market and reduce our operating revenues.  The terrorist attacks on September 11^th adversely affected operations in 2001.  In addition, there is heightened concern about terrorist activity in Dubai and Morocco.  Future acts of terror, anti-terrorist efforts, war or other armed conflicts involving the United States or other countries may again reduce our guests’ willingness to travel.

The Company evaluates the performance of its segments based primarily on their contribution to net income, which is their respective revenues generated after direct operating costs, and depreciation and amortization attributable to each segment.  Corporate expenses, interest income and expense, income taxes and other income and expenses are not allocated to the segments but are separately evaluated.  The following tables are an analysis of net revenues and contribution to net income by segment:

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Net Revenues

	For The Year Ended December 31,
	2004			2003			2002
Destination Resorts:
Atlantis, Paradise Island(1)
Rooms	$	174,093		$	167,989		$	166,410
Casino	130,879			138,592			129,916
Food and beverage	127,633			118,414			118,802
Other resort	65,040			61,860			60,916
	497,645			486,855			476,044
Less: promotional allowances	(23,034		)	(23,579		)	(22,210		)
	474,611			463,276			453,834
Tour operations	26,564			28,875			29,026
Harborside at Atlantis fees	2,826			1,847			1,579
	504,001			493,998			484,439
Atlantis, The Palm fees	380			—			—
	504,381			493,998			484,439
Gaming:
Connecticut(2)	935			1,755			1,326
One&Only Resorts:
Ocean Club	37,731			34,186			31,200
Palmilla(3)	37,875			1,481			128
Other resorts(4)	15,753			10,094			8,689
Tour operations	20,551			11,915			12,037
	111,910			57,676			52,054
Other(5)	3,859			5,084			4,443
Net revenues	$	621,085		$	558,513		$	542,262

(1)Consists of revenue from Atlantis, Paradise Island, the Ocean Club Golf Course, the Company’s wholly owned tour operator, PIV, and marketing and development fee income from our interest in Harborside at Atlantis.

(2)Consists of development and other fees related to Mohegan Sun.  Relinquishment fees — equity in earnings of TCA related to our Gaming segment are included as a separate component outside of income from operations in the accompanying consolidated statements of operations.

(3)Consists of revenue from the One&Only Palmilla in connection with the consolidation of Palmilla JV, LLC for the year ended December 31, 2004 in accordance with FIN 46R.  Revenues for the years ended December 31, 2003 and 2002 represent management and development fees related to the One&Only Palmilla.

(4)Includes management, marketing and development fees from the One&Only Resorts properties located in Mauritius, Dubai and the Maldives.

(5)Includes revenue not directly attributable to Destination Resorts, Gaming or One&Only Resorts.

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Contribution to Net Income

	For The Year Ended December 31,
	2004			2003			2002
Destination Resorts:
Atlantis, Paradise Island	$	86,951		$	83,523		$	76,909
Tour operations	5,885			5,089			4,239
Harborside at Atlantis(1)	9,477			5,176			(3,634		)
	102,313			93,788			77,514
Atlantis, The Palm	346			—			—
	102,659			93,788			77,514
Gaming:
Connecticut(2)	36,843			35,715			31,367
United Kingdom	(2,182		)	(329		)	—
Other(3)	(4,357		)	(1,086		)	(931		)
	30,304			34,300			30,436
One&Only Resorts:
Ocean Club	3,644			4,720			3,999
Palmilla(4)	(1,831		)	(3,013		)	(17		)
Other resorts(5)	14,236			8,498			8,689
Direct expenses(5)	(15,919		)	(12,187		)	(8,061		)
Other(6)	4,737			2,242			1,079
	4,867			260			5,689
General corporate	(34,489		)	(32,842		)	(25,188		)
Impairment of Atlantic City land	(7,303		)	—			—
Restructuring reversal	—			—			1,000
Interest income	4,722			3,394			3,419
Interest expense, net of capitalization	(36,814		)	(29,264		)	(39,104		)
Gain on settlement of territorial and other disputes	—			1,479			14,459
Early extinguishment of debt, net of income tax effect	(1,655		)	—			(20,525		)
Other, net	1,358			(686		)	60
Provision for income taxes	(424		)	(162		)	(96		)
Palmilla minority interest(7)	4,907			—			—
Income (loss) from discounted operations, net of income tax	—			1,305			(8,061		)
Net income	$	68,132		$	71,572		$	39,603

(1)Consists of equity in earnings, marketing, development and other fees related to Harborside at Atlantis.

(2)Consists of relinquishment fees – equity in earnings of TCA and development and other fees related to Mohegan Sun.

(3)Consists of equity in losses of BLB and TCNY and direct expenses for the Gaming segment.

(4)Consists of earnings before interest and taxes, net of minority interest related to the One&Only Palmilla for the year ended December 31, 2004.  Results for the years ended December 31, 2003 and 2002 include management, development and other fees and the Company’s share of net loss from the One&Only Palmilla prior to the Company’s adoption of FIN 46R.

(5)Consists of management, marketing, development and other fees, net of minority interest and direct expenses related to the One&Only Resorts businesses located in Mauritius, Dubai and the Maldives.

(6)Consists of equity in earnings of SRL and the One&Only Kanuhura.

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(7)Consists of minority interest related to the portion of the One&Only Palmilla’s loss on early extinguishment of debt interest expense and taxes, which is not allocated to the One&Only Resorts segment.

During 2004, 2003 and 2002, after direct operating expenses and depreciation and amortization attributable to each segment, each of our businesses contributed the following to income (dollars in millions).  For a reconciliation of the segment contribution to U.S. GAAP net income, see the table above.

	2004			2003			2002
	$		%	$		%	$		%
Destination Resorts	$	102.7	75%	$	93.8	73%	$	77.5	68%
Gaming	$	30.3	22%	$	34.3	27%	$	30.4	27%
One&Only Resorts	$	4.9	3%	$	0.3	—	$	5.7	5%

For the purposes of the table above, income, as defined, does not include corporate expenses, interest income and expense, income taxes and other income and expenses. The amounts presented below with respect to each of our segments also do not include any of these items.

(B)Operating Results

Consolidated Results

2004 vs. 2003.  During 2004, our goal was to expand the business while continuing to grow the overall contribution to net income from our operations.  Income and diluted earnings per share from continuing operations in 2004 were $68.1 million and $2.01, respectively, which included a $7.3 million impairment of Atlantic City land, as compared to $70.3 million and $2.39, respectively, in 2003. (See “Other Factors Affecting Earnings and Earnings Per Share” for a comparison and explanation of certain items affecting 2004 and 2003 results.)  Despite a severe hurricane season in 2004, Atlantis, Paradise Island achieved record gross revenue of $527.0 million, its third consecutive year of growth and its highest ever contribution to income of $102.3 million as compared to $93.8 million in 2003. Equity earnings and fees earned from Mohegan Sun of $36.8 million represented the fourth consecutive year of growth and a 3.2% increase over 2003, as Mohegan Sun continues to increase its share of the growing Connecticut slots market.

2003 vs. 2002.  Even though the overall travel industry was struggling during 2002 and 2003, we continued to improve our profitability.  In 2003, Atlantis, Paradise Island achieved gross revenue of $517.6 million and contribution to income of $93.8 million as compared to $77.5 million in 2002. Equity earnings and fees earned from Mohegan Sun of $35.7 million represented the third consecutive year of growth and a 13.9% increase over 2002. These strong results allowed us to strengthen our balance sheet by reducing interest bearing debt by $72.3 million, resulting in a reduction of interest expense of $9.8 million in 2003. During the year, these factors contributed to income and diluted earnings per share from continuing operations in 2003 of $70.3 million and $2.39, respectively, as compared to $47.7 million and $1.67, respectively, in 2002. (See “Other Factors Affecting Earnings and Earnings Per Share” for a comparison and explanation of certain items affecting 2003 and 2002 results.)

Destination Resorts

Atlantis, Paradise Island

2004 vs. 2003.  During 2004, strong business trends and continued margin improvement led Atlantis, Paradise Island to achieve its strongest results ever. The property contributed $102.3 million to income, as compared to $93.8 million in 2003. This increase was primarily the result of the strong performance of the Atlantis hotel despite the lost business and $4.6 million of costs from Hurricane Frances, which passed just to the north of Paradise Island.  Marginal increases in occupancy and ADR generated $6.1 million of additional room revenue, of which $4.8 million went to gross profit.  Strong food and beverage results were realized by price increases and improved margins (1.4 percentage points over 2003), which led to a $4.9 million improvement in gross profit over 2003.  In the Atlantis Casino, lower hold percentage at the tables compared to an unusually high hold percentage in 2003, led to a decrease over last year’s strong results.  It should be kept in mind that the 2003 overall performance of Atlantis, Paradise Island produced record results at that time, so these improvements do not reflect weak results in a prior period.

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Atlantis, Paradise Island offers a variety of amenities resulting in a diverse stream of revenue. This limits our dependence on any particular operation and helps maximize revenue per occupied room night. Gross revenues for Atlantis, Paradise Island of $527.0 million in 2004 exceeded 2003 by $9.5 million (1.8%). These revenues were composed of 33.0% from rooms, 24.8% from gaming, 24.2% from food and beverage and 18.0% from other sources.

Room revenues and gross profit from rooms were $174.1 million and $146.2 million, respectively, in 2004 compared to $168.0 million and $141.5 million, respectively, in 2003.  The $6.1 million and $4.8 million increase in room revenues and gross profit over 2003, respectively, was due to a 3.0% increase in RevPAR from $201 to $207 and improved margins from containment of costs.  Group revenues sustained a $3.2 million (8.3%) increase in 2004 as compared to 2003, as group room nights occupied increased by 3.1% in 2004.  The ADR at Atlantis, Paradise Island in 2004 and 2003 was $257 and $251, respectively, and occupancy was 81% and 80% for 2004 and 2003, respectively.

Gross profit from gaming was $71.4 million in 2004 as compared to $75.3 million in 2003. The $3.9 million (5.2%) decrease in gross profit from gaming resulted primarily from a decrease in table game revenues of 11.4% as compared to 2003, partially offset by a 6.0% reduction in casino expenses.  The decrease in table game revenues resulted from a lower table hold percentage (which represents the ratio of table game win to dollar amount of chips purchased) and lower table drop (the dollar amounts of chips purchased).  During 2004, there was a 0.5% decrease in the table game drop from $521.7 million to $519.0 million and a decrease in the table hold percentage (from 16.3% to 14.5%) as compared to the unusually high hold percentage in 2003, resulting in table game win of $75.2 million in 2004 compared to $84.9 million in 2003.  The challenging hurricane season and the fact that the former Sheraton Grand, which is located just next to Atlantis, Paradise Island, was closed for a significant part of the year were among the factors that led to the lower table drop percentages.  Slot coin in was $662.0 million in 2004 as compared to $593.8 million in 2003.  Slot win in 2004 was $54.1 million, as compared to $53.5 million in 2003.  The 11.5% increase in slot coin in was the result of changes to the casino floor that included the majority of the floor being converted to ticket-in-ticket-out machines and the installation of more updated, popular games.

Food and beverage revenue was $127.6 million and $118.4 million in 2004 and 2003, respectively, representing a 7.8% increase over 2003.  Going into 2004, we slightly increased food and beverage prices, as we had not increased these prices in several years.  As a result, food and beverage spent per occupied room night increased from $178 in 2003 to $189 in 2004 due to increases in beverage prices and in meal plan rates.  Also contributing to the increase in food and beverage revenue was a $4.4 million increase in banquet revenue which corresponds with the increase in group room revenue.  Food and beverage gross profit was $44.1 million and $39.2 million in 2004 and 2003, respectively.  Contributing to the improved gross profit was a 2.8% decrease in costs resulting from strategic sourcing of purchases and improved efficiencies in warehousing and requisitioning.

Selling, general and administrative expenses decreased slightly from $84.5 million in 2003 to $84.3 million in 2004. Depreciation and amortization for Atlantis, Paradise Island was $48.2 million in 2004 and $51.0 million in 2003. The $2.8 million decrease is primarily attributable to assets still in service during 2004 that had been fully depreciated as they met their estimated useful lives.

Harborside at Atlantis, our 50% owned timeshare joint venture on Paradise Island, recognized $6.7 million in equity earnings (including our share of the insurance recovery discussed below) and $2.8 million in marketing and development fees in 2004. Harborside at Atlantis was closed from August through December of 2002 to repair water damage primarily resulting from Hurricane Michelle in 2001. During the year ended December 31, 2004, we recognized $4.0 million of our share of an insurance recovery realized by Harborside at Atlantis related to the final settlement of the remediation claim, which was recorded net of remediation costs incurred.  During the year ended December 31, 2003, we recognized $3.3 million and $1.8 million of equity earnings and marketing fees, respectively.  Included within equity earnings for the year ended December 31, 2003 was $0.3 million of expense related to the remediation, attributable to $1.8 million of remediation costs, offset by insurance recovery of $1.5 million.

Hurricane Frances, as well as the effects of the subsequent major hurricanes and tropical storms that impacted the State of Florida, negatively impacted business in the week preceding Labor Day and in the weeks thereafter.  Costs associated with Hurricane Frances were $4.6 million, consisting of $3.4 million clean up and repair costs and complimentary goods and services and a $1.2 million loss on damaged assets.

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2003 vs. 2002.  During 2003, despite the war in Iraq and terrorist threats in the United States, Atlantis, Paradise Island had its strongest year to date. The property contributed $93.8 million to income, as compared to $77.5 million in 2002. This increase was primarily the result of the strong performance of the Atlantis Casino and was achieved despite a $6.0 million increase in the cost of our “all risk” insurance in 2003. In 2002, we recorded a $6.9 million charge to our equity earnings related to our share of remediation work at Harborside at Atlantis.

Gross revenues for Atlantis, Paradise Island of $517.6 million in 2003 exceeded 2002 by $10.9 million (2.2%). These revenues were composed of 32.3% from rooms, 26.6% from gaming, 22.8% from food and beverage and 18.3% from other sources.

Room revenues in 2003 were $168.0 million as compared to $166.4 million in 2002. Gross profit from rooms of $141.5 million increased over 2002 by $2.0 million, or 1.5%, due primarily to an increase in RevPAR and a slight reduction in expenses. Atlantis, Paradise Island achieved RevPAR of $201 in 2003, which was a 1.0% increase over 2002. The ADR at Atlantis, Paradise Island in 2003 and 2002 was $251 and $245, respectively, and occupancy was 80% and 81%, respectively.

Gross profit from gaming was $75.3 million in 2003 as compared to $66.2 million in 2002. The $9.1 million increase in gross profit from gaming over 2002 resulted from a more favorable table hold percentage and increases in both table game drop and slot coin in. During 2003, there was a 6.4% increase in the table game drop from $490.2 million to $521.7 million and an increase in the table hold percentage (from 15.6% to 16.3%) as compared to 2002, resulting in table game win of $84.9 million in 2003 compared to $76.5 million in 2002. In addition, slot win slightly increased in 2003 to $53.5 million, as compared to $53.3 million in 2002.

Food and beverage gross profit was $39.2 million in 2003 as compared to $40.3 million in 2002. Food and beverage gross profit was down slightly (2.5%) as the $2.04 increase in food and beverage revenue per occupied room did not completely offset the slight decrease in occupancy in 2003.

Selling, general and administrative expenses were $84.5 million in 2003 as compared to $80.8 million in 2002. Contributing to this increase was a $6.0 million increase in the cost of our “all risk” insurance premiums, along with various increases in other insurance policies, as 2002 included five months of favorable pre-September 11 rates (our policy year runs from June 1 to May 31). Additionally, in 2003 there were increases of $1.8 million in information technology and human resources costs, $1.3 million in our provision for legal settlements and various other costs, none of which are individually significant. Sales and marketing costs decreased in 2003 by $2.1 million, as part of our strategy during 2002 was to expand marketing efforts following September 11^th rather than reducing room rates. We also reduced our provision for doubtful receivables by $1.8 million, specifically, the allowance for doubtful accounts related to gaming decreased by $1.2 million, or from 36% to 29%, due to the implementation of a more stringent policy relating to the granting of reductions to casino patron’s past due balances. In 2003, we increased our efforts to collect outstanding aged gaming receivables through more aggressive collection efforts, including the increased use of collection attorneys in jurisdictions where appropriate. In addition, we experienced a $1.7 million reduction related to property taxes. Also in 2002, we incurred $1.2 million of lease termination costs related to the relocation of one of our offices from Fort Lauderdale, Florida to Plantation, Florida. Depreciation and amortization for Atlantis, Paradise Island was $51.0 million in 2003 and $50.7 million in 2002.

Harborside at Atlantis performed well during 2003, resulting in the recognition of $3.3 million in equity earnings and $1.8 million in marketing fees. Harborside at Atlantis was closed from August through December 2002 to repair water damage primarily resulting from Hurricane Michelle in 2001.  During 2003 and 2002, our share of remediation costs were $1.8 million and $6.9 million, respectively, which excluded any insurance recovery.  During the fourth quarter of 2003, our portion of insurance recovery related to the remediation costs was $1.5 million.  During 2002, we recorded equity losses of $5.2 million resulting from the $6.9 million remediation charge offset by $1.7 million in equity earnings from Harborside at Atlantis’ operations. In 2002, we recognized $1.6 million in marketing fees.

Atlantis, The Palm

In September 2003, we announced that we had agreed to form a joint venture with Nakheel LLC, an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  On June 23, 2004, we announced that we had entered into an agreement with Istithmar, an entity indirectly wholly owned by the Royal Family of Dubai, that has assumed all obligations and rights of its affiliate, Nakheel LLC, pursuant to which we formed Kerzner Istithmar and increased the scope of Atlantis, The Palm.  We have agreed to invest $100.0 million in the form of Class A common stock in Kerzner Istithmar.  In addition, each of Istithmar and Kerzner will provide, on a joint and several basis,

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additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.  In addition to the joint and several sponsor support, Istithmar has agreed to provide a $100.0 million guarantee to cover any post completion debt service obligations over $55.0 million.  Further, Istithmar has agreed to provide an additional guarantee for cost overruns over $55.0 million.  As of December 31, 2004, we had invested approximately $21.8 million in Kerzner Istithmar in connection with the development of Atlantis, The Palm.

As part of this transaction, we have also entered into a development agreement with Kerzner Istithmar that entitles us to receive $20.0 million and reimbursement of certain expenses over the development period of Atlantis, The Palm.  Based on our current budget, the development costs of the project are estimated at $1.1 billion.  Kerzner currently has a 50% voting interest in Kerzner Istithmar, and as such, we expect to recognize $10.0 million in development fees over the development period.  During the year ended December 31, 2004, we recognized $0.4 million of development fees related to Atlantis, The Palm. In addition, we have entered into a long-term management agreement with a subsidiary of Kerzner Istithmar that entitles us to receive a base management fee based on the gross revenues generated by Atlantis, The Palm, and an incentive management fee based on operating income.  As of December 31, 2004, Kerzner Istithmar had incurred $41.8 million of development and design related costs for Atlantis, The Palm.

Gaming

Mohegan Sun

2004 vs. 2003.  We recognized $36.8 million in 2004 as compared to $35.7 million in 2003 from TCA.  Mohegan Sun continued to increase its share of the growing Connecticut slots market resulting in a 51% slot market share and a 6.0% increase in gross revenues, which were approximately $1.4 billion during calendar year 2004 as compared to approximately $1.3 billion during calendar year 2003.

2003 vs. 2002.  We recognized $35.7 million in 2003 as compared to $31.4 million in 2002 from TCA.  Mohegan Sun continued to increase its share of the growing Connecticut slots market resulting in an increase in gross revenues, which were $1.3 billion during calendar year 2003 as compared to $1.2 billion during calendar year 2002. In addition, during 2002, TCA incurred costs of approximately $1.8 million related to the grand opening of the Mohegan Sun “Project Sunburst” expansion, which reduced TCA’s income and our share of such income during this period.

United Kingdom

During 2004, we made significant progress in securing agreements for several development opportunities in the United Kingdom.  In 2004, we were appointed as the preferred developer and operator with respect to the development and management of gaming, hotel and entertainment facilities for two sites in two key markets in the United Kingdom.  The sites for the projects are the SECC in Glasgow and Sportcity in East Manchester.  The SECC and Sportcity developments are subject to the negotiation and execution of binding agreements.  We also have entered into a binding agreement for the development and operation of a casino and hotel resort facility at the Dome in London.  Our development and management of our sites in the United Kingdom is subject to a number of contingencies.  First, the United Kingdom needs to pass gambling reform legislation.  Second, a special government committee that is expected to be established upon the passage of such legislation then must select eight localities that will be entitled to have a “Resort” or “Regional Casino,” as such criteria are defined by the Department of Culture, Media and Sport and the Parliamentary Joint Committee, which reviewed the draft Gambling Bill.  Our sites must be in the selected localities and must further compete for and be awarded a regional casino license by the local authorities.  (See “Item 4. Information on the Company, (B) Business OverviewThe PropertiesGamingUnited Kingdom” for further discussion).

During 2004, the Gaming Board of Great Britain granted us a Certificate of Consent, which has enabled us to transfer a gaming license held by LCI into our name and proceed with our plans for a casino in Northampton.  We are currently in the planning and development phase of the new casino facility and have commenced construction on this project. In December 2004, we submitted plans to the planning counsel and received approval in February 2005. We expect the casino facility to be completed in 2006. As of December 31, 2004, we had incurred $1.1 million of construction in progress costs related to the planning and development of the casino facility in Northampton.  The total cost of the project (excluding the original purchase price of $2.1 million) is expected to be approximately £10.0 million (approximately $18.7 million U.S. dollars as of March 24, 2005).

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During the year ended December 31, 2004, we recognized $2.2 million in expenses related to gaming projects (other than Northampton) in the United Kingdom as compared to $0.3 million in 2003.  The expenses primarily related to overhead expenses and legal and professional fees incurred in connection with the pursuit of development opportunities.

BLB Investors, L.L.C.

On March 10, 2004, Kerzner announced that it had entered into a joint venture, BLB, with an affiliate of Starwood and an affiliate of Waterford for the purpose of acquiring an interest in Wembley, which owns gaming and track operations in the United States and race tracks in the United Kingdom.  Wembley’s U.S. operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack with video lottery terminals.  BLB is owned 37.5% by each of Kerzner and Starwood, with Waterford owning the balance of 25%.

In a series of private transactions, BLB acquired a 22.2% interest in Wembley at 800 pence per share.  On April 20, 2004, BLB announced a cash tender offer at 860 pence share for all of Wembley’s outstanding shares.  On July 5, 2004, BLB announced that its offer to acquire all of Wembley’s outstanding shares had lapsed due to the failure of the condition that it receive valid acceptances from at least 90% of Wembley’s outstanding shares.  BLB remains a 22.2% shareholder of Wembley.

For the year ended December 31, 2004, we recorded $3.0 million in equity losses from our investment in BLB, which included our $3.0 million share of a loss related to transaction costs incurred in connection with BLB’s intended cash tender offer to acquire all of Wembley’s outstanding shares and our $1.0 million share of a hedge loss, offset by $1.0 million of our share of dividend income received by BLB from Wembley.

See “Item 4.  Information on the Company, (A) History and Development of the CompanyRecent Developments” for further information on this project.

TCNY

We recognized $0.9 million, $1.1 million and $1.0 million in equity losses related to our 50% investment in TCNY during the years ended December 31, 2004, 2003 and 2002, respectively.  TCNY has a development agreement with the Stockbridge-Munsee Tribe for the development of a casino project in the Catskills.  The Catskills Project is contingent upon the receipt of numerous federal, state and local approvals and we make no representation as to whether any of the required approvals will be obtained or whether the Catskills Project will be completed.

One&Only Resorts

During 2004, we continued to build the management team and sales and marketing structure for our One&Only Resorts business, which has enabled One&Only Resorts to improve upon 2003’s results with increases in management fees and equity earnings at our resorts in Mauritius, the Maldives and Dubai.  The One&Only Ocean Club also sustained increased revenue, RevPAR and ADR during 2004.

In 2005, our focus will be to improve the results of the One&Only Palmilla and to commence operations at the One&Only Reethi Rah, while sustaining the 2004 levels of earnings at the other properties.  We expect to selectively pursue opportunities, particularly assets that allow us to leverage our management team and brand without requiring substantial capital commitments.  We also are in the planning phase of an additional One&Only property in Cape Town, South Africa.

2004 vs. 2003.  The One&Only Resorts segment contributed $4.9 million to income in 2004 compared to $0.3 million in 2003.  Contributing to this improvement were stronger results from SRL (a $2.8 million increase in equity earnings and management fees) and Dubai (a $2.1 million increase in management fees).  In addition, net revenues from tour operators increased by $8.6 million from $11.9 million in 2003 to $20.6 million in 2004, primarily due to a more favorable travel market in 2004 as compared to 2003 and to exchange rate movements related to the Euro and Sterling.

The One&Only Ocean Club contributed $3.6 million to income in 2004 as compared to $4.7 million in 2003, a 23% decrease primarily from $0.8 million of clean up and repair costs and complimentary goods and services provided due to Hurricane Frances.  As a result of Hurricane Frances, the property was closed for eleven days before reopening on a fully operational basis.  Revenues were $37.7 million and $34.2 million in 2004 and 2003, respectively.  This 10.2% increase in revenues is partially attributed to the fact that the One&Only Ocean Club opened three new luxury villas in June 2004.  The increase in revenues was offset by a $3.5 million increase in

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operating expenses as compared to 2003, which resulted from a $1.4 million increase in depreciation and amortization due to the new villas, along with increased room expense and selling, general and administrative expenses.  Occupancy remained flat in 2004 as compared to 2003 at 79%.  ADR and RevPAR were up during 2004 compared to 2003, $762 versus $722, respectively, and $600 versus $568, respectively.  Eleven days have been excluded from the number of available room nights used in the calculation of occupancy and RevPAR for the year ended December 31, 2004 in connection with the temporary closure of the One&Only Ocean Club due to Hurricane Frances.

In February 2004, One&Only held the grand re-opening of the One&Only Palmilla.  After almost a year, the One&Only Palmilla’s occupancy levels have increased and we look forward to the benefits of a full winter season.  During 2004, the One&Only Palmilla contributed a loss before interest and taxes, net of minority interest of $1.8 million, which includes $1.4 million of our share of re-opening expenses.  During 2003, the One&Only Palmilla contributed an equity loss of $4.8 million, management, development and accounting fees of $1.8 million. The equity loss was primarily due to our share of pre-opening expenses of $4.8 million as the resort was closed for the majority of 2003 during its redevelopment. For the year ended December 31, 2004, occupancy and RevPAR at the One&Only Palmilla were 61% and $304, respectively.  The One&Only Palmilla has recently received positive attention as it won the Condé Nast Traveler magazine’s 2004 Readers’ Choice Award for the best Latin American Resort and was also named to Condé Nast Traveler’s 2005 Gold List.

In Mauritius, we earned management fees, net of minority interest, and equity earnings of $6.7 million and $4.3 million in 2004, compared to $5.9 million and $2.3 million, respectively, in 2003 with respect to our five properties. From the One&Only Kanuhura we earned management fees, net of minority interest, and equity earnings (losses) of $0.9 million and $0.4 million in 2004 and $0.6 million and ($0.1) million in 2003, respectively. In 2004, we earned management fees from the One&Only Royal Mirage of $3.4 million, compared to $1.3 million in 2003, as business at the One&Only Royal Mirage recovered following the war in Iraq in 2003.  Additionally, we earned $1.3 million and $0.4 million in development fees in 2004 and 2003, respectively, related to the development of the One&Only Reethi Rah located in the Maldives.

In December 2004, the tsunami caused by an earthquake off the coast of Indonesia in southern Asia resulted in flooding damage at our two properties in the Maldives.  We estimate that the One&Only Kanuhura and the One&Only Reethi Rah sustained aggregate property damages of approximately $24.0 million.  In addition, the One&Only Kanuhura sustained approximately $7.0 million in business interruption losses.  We expect the owners of the One&Only Kanuhura and the One&Only Reethi Rah to submit claims to their respective insurers, and that a significant portion of their damages will be covered.  In 2004, equity earnings from the One&Only Kanuhura were $0.4 million and we received $1.2 million in management fees.  In 2005, we expect both equity earnings and management fees from the One&Only Kanuhura to be adversely affected by the tsunami.  The One&Only Kanuhura sustained flooding damage and we plan to close the resort mid-year to repair the damaged villas.

2003 vs. 2002.  The One&Only Resorts segment contributed $0.3 million to income in 2003 compared to $5.7 million in 2002, due primarily to our $4.8 million share of the equity losses of the One&Only Palmilla related to pre-opening expenses as the resort was closed for the majority of 2003 during its redevelopment. In addition, the marketing brand launch of One&Only to the European market resulted in increased advertising costs over 2002 of $3.0 million.

The One&Only Ocean Club contributed $4.7 million to income in 2003 compared to $4.0 million in 2002, which resulted primarily from a $1.4 million, or 9.9%, increase in gross profit from rooms offset by an $0.9 million increase in selling, general and administrative expenses.  Occupancy and ADR were up during 2003 compared to 2002, 79% versus 68% and $722 versus $695, respectively. Depreciation and amortization for the One&Only Ocean Club was $3.7 million in 2003 compared to $4.0 million in 2002.

In Mauritius, we earned management fees and equity earnings, net of minority interest in 2003, of $5.9 million and $2.3 million, compared to $5.6 million and $1.7 million in 2003 and 2002, respectively, with respect to our five properties. During 2002, the One&Only Le Touessrok went through a major renovation for which we earned $1.5 million in development fees. From the One&Only Kanuhura we earned management fees, net of minority interest and equity losses, of $0.6 million and $0.1 million in 2003, and $0.4 million and $0.7 million in 2002, respectively. In 2003, we earned management fees from the One&Only Royal Mirage of $1.3 million, compared to $1.2 million in 2002. Additionally, we earned $0.4 million in development fees in 2003 related to the One&Only Reethi Rah and we earned $1.3 million in development fees for the redevelopment of the One&Only Palmilla.

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Corporate Expense

2004 vs. 2003.  Corporate expenses increased by $1.7 million in 2004 compared with 2003 (from $32.8 million to $34.5 million) due primarily to an increase of $1.8 million incurred in 2004 related to the expensing of restricted shares granted during the year and an increase in payroll and related costs of $1.4 million. These increases were offset by a $2.3 million reduction in costs related to new business development projects, which in 2003, included a $1.5 million charitable contribution to a new hotel school in South Africa.

2003 vs. 2002.  Corporate expenses increased by $7.6 million in 2003 compared with 2002 (from $25.2 million to $32.8 million) due primarily to an incremental increase of $3.0 million incurred for new business development projects related to all of our three segments, which included a $1.5 million charitable contribution made to a South African hotel school in 2003, increased payroll and related costs of $1.9 million, increased legal, audit and other professional fees of $1.9 million and an increase of $0.6 million in insurance premiums for directors and officers policies.

Interest Income

2004 vs. 2003.  Interest income in 2004 and 2003 was $4.7 million and $3.4 million, respectively. The $1.3 million increase in 2004 is primarily attributable to $2.9 million of interest income earned on the proceeds received from the issuance of the 2.375% Convertible Senior Subordinated Notes in April 2004 and the issuance of 3.0 million Ordinary Shares to Istithmar in August 2004 (See “Liquidity and Capital Resources” for further discussion) offset by $1.2 million of interest income earned in 2003 on $15.0 million principal amount of debt securities of LCI that we purchased in 2002 and sold during 2003.

2003 vs. 2002.  Interest income in 2003 and 2002 was $3.4 million. For both 2003 and 2002, interest income consisted primarily of interest earned from advances to affiliates for development projects, bank interest and interest earned on the $15.0 million face amount of debt securities of LCI that we purchased in 2002 and sold during 2003.

Interest Expense

2004 vs. 2003.  Interest expense increased by $7.6 million, or 25.8%, due to $6.3 million of interest expense incurred in 2004 related to the consolidation of Palmilla JV, LLC.  Our portion of minority interest income related to the One&Only Palmilla’s interest expense is $3.2 million.  Also included in interest expense is $4.4 million related to the 2.375% Convertible Senior Subordinated Notes issued in April 2004, along with a decreased benefit to interest expense attributable to our interest rate swaps on our 8 7/8% Senior Subordinated Notes of $2.6 million, due to higher LIBOR rates in 2004 and the cancellation in July 2004 of $25.0 million notional amount of our then $175.0 million of such interest rate swaps.  Capitalized interest increased by $5.4 million to a total of $5.8 million in 2004 primarily related to the Phase III expansion.

At December 31, 2004 and 2003, our variable rate debt, including the effect of interest rate swaps, and fixed rate debt were 35% and 65% (24% and 76% excluding the One&Only Palmilla) and 44% and 56%, respectively. The average cost of debt, including the effect of interest rate swaps, during both 2004 and 2003 was 6.4%.

2003 vs. 2002.  Interest expense decreased by $9.8 million, or 25.2%, due to our interest bearing debt decreasing $72.3 million during 2003 compared with 2002 and paying lower LIBOR rates on our interest rate swaps.  We reduced our interest bearing debt in 2003 primarily from excess cash generated from operations. For all of 2002 and through September 2003, we swapped $200.0 million of our 8⁷/₈% Senior Subordinated Notes for variable debt at LIBOR plus approximately 300 basis points. The LIBOR average was lower during 2003 compared to 2002 resulting in an additional reduction to interest expense.

In September 2003, we cancelled $25.0 million notional amount of our then $200.0 million of interest rate swaps in order to manage the amount of variable to fixed rate debt. After payment of interest due to us, we received $1.4 million from this cancellation and will accrete this amount to interest expense over the term of the underlying debt. At December 31, 2003 and 2002, our variable rate debt, including the effect of interest rate swaps, and fixed rate debt were 44% and 56% and 58% and 42%, respectively. The average cost of debt, including the effect of interest rate swaps, during 2003 was 6.4% compared to 7.4% in 2002.

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Other Factors Affecting Earnings and Earnings Per Share

2004 vs. 2003

Impairment of Atlantic City Land

In July 2004, the Company obtained an appraisal on undeveloped real estate that we own in Atlantic City, which indicated that the carrying amount of this real estate was not fully recoverable.  The appraisal was commissioned after the Company had received an unsolicited offer to acquire some of the undeveloped land for a price substantially less than the Company’s book value and certain other information related to third party sales of nearby comparable properties at prices substantially less than what the Company’s book value was for its undeveloped property.  As a result, during the year ended December 31, 2004, we recognized a $7.3 million impairment loss as these assets were written down to fair value less estimated costs to sell of $5.4 million.  We have entered into an agreement to sell this real estate and expect to close the sale in the second quarter of 2005.

Higher Diluted Weighted Average Number of Shares Outstanding

As of December 31, 2004, the number of fully diluted weighted average shares outstanding was 33,884,075 representing a 15% increase over 2003, reflecting the effect of a 56% increase in the average stock price during the year used to calculate the dilutive effect, along with the issuance of 3.0 million and 0.4 million shares related to the Istithmar stock purchase and BDR offering, respectively, and the exercise of 1.9 million of stock options.

2003 vs. 2002

Insurance Recovery and Replacement of Damaged Assets

During 2003 and 2002, we received $2.8 million and $1.1 million, respectively, of insurance recovery, which represents a business interruption settlement related to Hurricane Michelle’s impact on Atlantis, Paradise Island. Also during 2003, we recognized a $2.5 million gain on replacement of damaged assets due to the insurance proceeds received in excess of the net book value of assets damaged during Hurricane Michelle.

Settlement of Territorial and Other Disputes

During the fourth quarter of 2003, we recognized a final $1.5 million of income related to a net gain on settlement of territorial and other disputes with a major shareholder.

Kerzner Interactive Limited

On January 1, 2002, Kerzner Interactive Limited, our Internet gaming subsidiary, commenced operations. In February 2002, we agreed to sell 50% of Kerzner Interactive Limited to Station Casinos, Inc., which paid us at that time a non-refundable deposit of $4.5 million. Subsequently, this agreement was renegotiated and Station received an option through early January 2003 to purchase 50% of the operation in consideration for the $4.5 million previously received. During 2002, several countries made it increasingly difficult for their citizens to gamble on-line. Further, as a licensed operator in the Isle of Man, we were subject to numerous restrictions and controls on how we operated this business, which made it difficult for us to compete against companies operating under less rigorous regulations. As a result, we concluded that this business would not be economically viable in the short to medium term. We therefore discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003 and the Company and Station mutually agreed to terminate their relationship in this regard. Losses and closure costs in 2003 were more than offset by the recognition of income of the $4.5 million option consideration, which resulted in $1.3 million in income from discontinued operations, net of income tax effect for the year ended December 31, 2003.

Other Matters

Foreign Currencies

We prepare our financial statements in U.S. dollars. Our most significant non-U.S. operations are in The Bahamas. Due to current governmental policies in The Bahamas that equate one Bahamian dollar to one U.S. dollar and due to the large portion of our cash and cash equivalents being held in U.S. dollars, we believe that we do not have material market risk exposures in this jurisdiction relative to changes in foreign exchange rates. Due to the stability of the other markets in which we operate and the fact that we do not operate in any highly inflationary economies, we also believe that we do not have material market risk exposures in these jurisdictions relative to changes in foreign exchange rates.

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Consolidation of Variable Interest Entities

In December 2003, the FASB issued FIN 46R. This interpretation of Accounting Research Bulletin 51, “Consolidated Financial Statements,” addresses consolidation by business enterprises of variable interest entities which have one or both of the following characteristics: (i) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties which is provided through other interests that will absorb some or all of the expected losses of the entity or (ii) the equity investors lack one or more of the following characteristics of a controlling financial interest: (a) the direct or indirect ability to make decisions about the entity’s activities through voting rights or similar rights, (b) the obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its activities or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation of the risk of absorbing the expected losses. We adopted FIN 46R on January 1, 2004.

We have determined that Palmilla JV, LLC, in which we have a 50% equity interest, constitutes a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R, as the related operating agreement contains a put option that, if exercised, would obligate the Company to purchase the remaining 50% of the entity, resulting in our being the primary beneficiary of the entity. As such, effective January 1, 2004, we consolidated the results of operations and financial position of Palmilla JV, LLC, with the remaining 50% interest reflected as minority interest in the accompanying consolidated statement of operations and consolidated balance sheets for the year ended and as of December 31, 2004.

(C)Liquidity and Capital Resources

Going into 2005, we believe we are well positioned to fund our commitments related to our announced development projects that are now moving forward from the planning phase to actual development.  Our practice to date has been to invest our excess cash in U.S. Treasury Bills (“T-Bills”) and prime rated money markets.

This year we plan to break ground on the 600-room all-suite hotel component of the Phase III expansion, the approximately 2,000-room Atlantis, The Palm, the destination resort casino in Morocco, the approximately 500-unit condo-hotel on Paradise Island and the Ocean Club Residences & Marina.  We expect to finance these development projects during 2005 with our current cash on hand, cash flow from operations and borrowings under our Amended Credit Facility.

During 2004, we made significant progress in preparing for our upcoming development and capital needs.  We began enhancing our funding capacity in anticipation of our future development plans in April 2004 with the issuance of $230.0 million principal amount of 2.375% Convertible Senior Subordinated Notes due 2024.  In July 2004, we amended our revolving credit facility to increase the maximum amount of outstanding borrowings from $253.5 million to $500.0 million and to provide for increased total leverage.  In July 2004, we also completed an equity offering in The Bahamas of approximately 4.3 million BDRs, the equivalent of approximately 0.4 million Ordinary Shares, that resulted in net proceeds of approximately $19.1 million.  In August 2004, we sold 3.0 million Ordinary Shares to Istithmar at a price of $51.25 per share, resulting in net proceeds of $153.4 million.  These transactions allowed us to accumulate $203.9 million of short-term investments and $180.3 million in cash and cash equivalents as of December 31, 2004.  Also during the year, the One&Only Palmilla refinanced its outstanding debt which resulted in the extinguishment of a $46.5 million Kerzner guarantee.  The Amended Credit Facility was undrawn at December 31, 2004, and we have $494.0 million available after giving effect to $6.0 million in letters of credit outstanding.  The Amended Credit Facility contains customary affirmative and restrictive covenants that, among other things: (a) require periodic financial reporting, (b) require meeting certain financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the incurrence of indebtedness and (e) limit asset expenditures and dispositions outside the ordinary course of business.  See “(G) Tabular Disclosure of Contractual Obligations” below for more information.

We believe our operating cash flows, as a percentage of operating income, were higher than many of our competitors due primarily to the relinquishment (from Mohegan Sun) and management fee nature of a portion of our income (which requires minimal investment), the lack of any corporate income tax in The Bahamas and net operating loss carryforwards that offset our U.S. sourced income. We believe that available cash on hand and short-term investments, combined with funds generated from operations and availability under our Amended Credit Facility will be sufficient to finance our cash requirements over the next twelve months.  In the longer term, we may require additional funding, particularly if any of our three U.K. projects or the TCNY project proceeds, or if we identify any significant new opportunities.  Accordingly, from time to time, we evaluate our need of capital for

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major development projects and the various options available to us in the capital markets.  With respect to our investment initiatives such as BLB, Morocco and Kerzner Istithmar, along with certain other equity investments, we expect a majority of the financing will be raised at the project level, on a non-recourse or limited recourse basis to Kerzner.

Operating Activities

During 2004, we generated $136.5 million of cash flow from operating activities compared to $132.7 million in 2003 and $127.3 million during 2002.  The cash flow from operating activities in 2004 was primarily due to the contribution to net income from our Atlantis, Paradise Island operations of $102.3 million, which is net of $48.9 million of non-cash depreciation and amortization.  In addition, we earned $35.9 million of relinquishment fees from TCA, of which we received $35.4 million in cash receipts during 2004.  There are no significant related expenses associated with our relinquishment fees from TCA, other than taxes paid to the State of Connecticut.  Other sources of cash flow from operating activities include the contribution to net income of $4.9 million from our One&Only Resorts segment, which is net of $10.0 million of non-cash depreciation and amortization.  These cash flows were offset by cash outflows from operations, which included $31.9 million of cash interest payments (excluding $5.8 million of capitalized cash interest payments) and approximately $34.5 million of cash payments related to corporate expenses.

Investing Activities

During 2004, net cash outflows used in investing activities (acquisitions and capital expenditures) were $467.5 million compared to $72.6 million in 2003.

During 2004, we purchased $205.0 million principal amount of T-Bills with the proceeds received from the issuance of our 2.375% Convertible Senior Subordinated Notes and the proceeds received from the issuance of Ordinary Shares.  As of December 31, 2004, the balance of the T-Bills was $203.9 million and they have maturity dates ranging from March 2005 to September 2005.

Our business requires capital to fund our joint ventures, to develop new properties and maintain our existing properties, which consists of items such as information technology upgrades, new slot machines and improvements to the resorts, including renovations, carpeting, banquet and restaurant equipment upgrades.  During 2004, we used $119.4 million for capital expenditures, which includes $59.5 million of capital expenditures incurred primarily for the development on Paradise Island related to the Phase III expansion, including the Marina Village and the Ocean Club Villas, $3.3 million of other capital additions on Paradise Island, $17.2 million of capital additions incurred related to the completion of the redevelopment of the One&Only Palmilla and $5.6 million of capital additions related to the development of gaming projects in the United Kingdom.  The remaining balance of $33.8 million was primarily used for ongoing capital projects on Paradise Island.  We also paid $30.9 million during 2004 to complete the purchase of the assets of Club Méditerranée (Bahamas) Limited and certain adjacent land lots.  During 2004, capital expenditures were primarily funded through internally generated funds.

During 2005, we anticipate our capital expenditures will be approximately $60.0 million for maintenance projects on Paradise Island relating to renovations of certain towers of Atlantis, Paradise Island and upgrades to the food and beverage outlets.  By 2009, we plan to have renovated, refinished and updated the interior of each tower within the property, including food and beverage outlets.

In connection with the Phase III expansion, we expect our total investment (exclusive of the Harborside timeshare project, the condo-hotel, the Athol Golf Course and Ocean Club Residences & Marina) to be approximately $650.0 million.  During 2004, we spent $59.5 million and we expect to spend $230.0 million, $340.0 million and $20.5 million in 2005, 2006 and 2007, respectively.  In accordance with our amended Heads of Agreement, we have committed to substantially complete the all-suite hotel and certain other aspects of the Phase III expansion by December 2006.  We expect the second phase of the Harborside at Atlantis expansion, the approximately 500-unit condo-hotel and Ocean Club Residences & Marina to cost approximately $60.0 million, $240.0 million and $130.0 million, respectively.  These projects will be joint ventures and will be primarily financed from proceeds received from pre-sales of units.

We invested $47.4 million in connection with BLB’s acquisition of a 22.2% ownership interest in Wembley during 2004.  In February 2005, Wembley and BLB announced that they had entered into a conditional sale agreement providing for the purchase by BLB of a holding company that owns Wembley’s U.S. operations in exchange for BLB’s existing stake in Wembley plus additional cash that will be provided in the form of debt financing from a consortium of banks.  The purchase price is expected to be approximately $455.0 million. 

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Additionally, in connection with the transaction, Wembley is expected to repurchase BLB’s existing shareholding in Wembley for approximately $116.0 million.  In addition, BLB anticipates making certain infrastructure improvements at Lincoln Park.  BLB has received binding commitments from institutional lenders to provide up to $495.0 million in financing (which would be non-recourse to the BLB owners) to cover the costs of the acquisition and the infrastructure improvements.  Based on these commitments, we do not expect to provide further funding to BLB in connection with the acquisition.  Among other things, BLB’s purchase offer is conditioned on an increase in the number of authorized VLTs at Lincoln Park to approximately 4,750, the execution of a long-term revenue-sharing arrangement for the Lincoln Park facility with the State of Rhode Island (any such agreement would require the approval of the Rhode Island Senate, the Rhode Island House of Representatives and the Governor) and a tax parity arrangement with the State of Rhode Island to ensure that the tax rate imposed on Lincoln Park’s gaming operations will not exceed the tax rate imposed on any other gaming operations within the State.  The conditional sale agreement may be terminated by either party if the transaction has not been completed by May 30, 2005.

During the year ended December 31, 2004, we funded $67.0 million in subordinated completion loans to the development of the One&Only Reethi Rah, resulting in a total amount funded by Kerzner of $82.4 million since the inception of the project.  The One&Only Reethi Rah obtained financing in December 2004 and repaid $28.0 million of the completion loans, resulting in $54.4 million due from the One&Only Reethi Rah as of December 31, 2004.  See “Off Balance Sheet Arrangements” for further discussion of the One&Only Reethi Rah financing.  In addition, we loaned $1.5 million to Harborside at Atlantis during 2004 in connection with the second phase of timeshare expansion.  Further, we advanced amounts to certain affiliates in connection with various projects, including $5.8 million for the One&Only Cape Town and $1.7 million for the other proposed One&Only property in South Africa.

To date, we have invested $21.8 million in Kerzner Istithmar related to the development of Atlantis, The Palm.  During 2005 and 2006, we expect to fund an additional $60.0 million and $18.2 million, respectively, related to our $100.0 million total commitment.  The development costs of the project are estimated at $1.1 billion and Kerzner and Istithmar are currently in the process of completing project financing on a limited recourse basis from a syndicate of banks for a $700.0 million term loan facility.  The closing of the term loan facility is expected to occur in the second quarter of 2005.  Istithmar has agreed to underwrite $200.0 million of the joint venture’s limited voting Class B common stock.  In addition, each of Istithmar and Kerzner will provide, on a joint and several basis, additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.  In addition to the joint and several sponsor support, Istithmar has agreed to provide a $100.0 million guarantee to cover any post-completion debt service obligations over $55.0 million.  Further, Istithmar has agreed to provide an additional guarantee for cost overruns over $55.0 million.  We commenced construction on Atlantis, The Palm in the first quarter of 2005 and anticipate that the project will be completed in 2008.  This project is subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the necessary financing.

We have entered into an Agreement in Principle with two Moroccan companies that contemplates the creation of a joint venture that will own a destination resort casino in Morocco that we will develop and manage.  We have agreed to commit up to approximately $47.0 million in equity to the joint venture, which we expect to fund in 2005.  The project cost is estimated at $230.0 million.  Our Moroccan partners will fund the remaining equity requirement and the balance of the required financing is expected to be raised by a consortium of Moroccan banks.

In connection with the development of a casino facility in Northampton, we have incurred $1.1 million in construction in progress costs as of December 31, 2004 and expect to fund $7.0 million in each of 2005 and 2006, respectively.

In connection with the operating agreement related to the One&Only Palmilla, the owner of the other 50% interest has the right to require us to acquire its 50% interest from the owner for a price of $36.3 million, plus 50% of the One&Only Palmilla’s working capital, with the price subject to adjustment, as defined in the purchase agreement, during the first year of the option period. The purchase price during the second year of the option period is based on a formula, as defined. The option period begins on September 12, 2005 and expires on September 12, 2007.

Financing Activities

Net cash provided from financing activities was $451.1 million in 2004 as compared to net cash used in financing activities of $33.8 million in 2003. Cash received during the year consisted of net proceeds received of

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$223.7 million related to the issuance of the 2.375% Convertible Senior Subordinated Notes, $153.4 million related to the issuance of 3.0 million Ordinary Shares to Istithmar, $40.5 million in proceeds received from the exercise of share options and $19.1 million in proceeds received from the issuance of 0.4 million Ordinary Shares in connection with the BDR offering.

In December 2004, the One&Only Palmilla entered into two promissory notes totaling a principal amount of $110.0 million (the “Palmilla Notes”).  The $110.0 million of proceeds received from the Palmilla Notes were used to pay down $88.1 million of amounts previously outstanding under the Palmilla senior credit facility (the “Palmilla Senior Credit Facility”).  In connection with the Palmilla Senior Credit Facility, we previously guaranteed $46.5 million.  This guarantee was extinguished when the One&Only Palmilla repaid all amounts outstanding under the Palmilla Senior Credit Facility.

As shown in Tabular Disclosure of Contractual Obligations below, as of December 31, 2004, we do not have any significant scheduled debt repayments due until 2007, when the principal of the Palmilla Notes matures.  The issuers of the Palmilla Notes may exercise three successive one-year extensions, which, if exercised, would extend the repayment of the principal of the Palmilla Notes until 2010.  Any drawings under our Amended Credit Facility are not due until July 2009. We anticipate that prior to maturity, interest payments will be provided from cash flows from operations. We believe we are in compliance with the debt covenants of our Amended Credit Facility. If we were to take on additional financing in the future, our ability to meet our existing debt covenants is a factor in determining whether we will be able to obtain future financing to fund our capital needs.  We monitor our debt compliance on an ongoing basis and confirm compliance quarterly.  During 2004, our average cost of debt was approximately 6.4%.

Working Capital

Working capital, which equals current assets less current liabilities, was $306.5 million at December 31, 2004, reflecting a current ratio, which equals current assets divided by current liabilities, of 2.7:1. Working capital increased by $343.9 million from December 31, 2003, principally due to the net proceeds of $223.7 million from the issuance of $230.0 million principal amount of our 2.375% Convertible Senior Subordinated Notes in April 2004 and net proceeds from the issuance of Ordinary Shares of $153.4 million, offset by loans and advances to affiliates, net of repayments of $49.4 million.

Interest Rate Swap and Cap Agreements

We attempt to limit our exposure to interest rate risk by managing the mix of fixed and variable rate debt, and by entering into variable interest rate swap agreements to hedge a portion of our fixed rate debt. These interest rate swap agreements are entered into with a group of financial institutions with investment grade credit ratings, thereby minimizing counterparty credit risk.

In August and December 2001, we entered into fixed-to-variable rate swap agreements with respect to our 87/8% Senior Subordinated Notes due 2011, which were issued in August 2001. As of December 31, 2004, the aggregate notional amount of the swap agreements was $150.0 million and they mature in August 2011 concurrent with our 87/8% Senior Subordinated Notes. Under the terms of the swap agreements, we make payments based on specific spreads over six-month LIBOR and receive payments equal to the interest payments due on the notes. The spreads in excess of six-month LIBOR are 3.02% for $100.0 million, 2.95% for $25.0 million and 2.91% for the remaining $25.0 million.  During the years ended December 31, 2004 and 2003, the weighted average variable rate on the swap agreements was 4.9% and 4.2%, respectively.  Giving effect to these swap agreements, our fixed and variable rate debt represented approximately 65% and 35% (76% and 24% excluding the Palmilla Notes) as of December 31, 2004 and 56% and 44% as of December 31, 2003, respectively.

In connection with our interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense correspondingly changes by $1.5 million per annum.

The Palmilla Notes bear interest at a floating rate of one-month LIBOR plus 3.75%, however the One&Only Palmilla was required to enter into an interest rate cap agreement contemporaneously with its issuance of the Palmilla Notes.  The interest rate cap has an effective date of December 17, 2004 and a maturity of January 9, 2007.  If the one-month LIBOR rate exceeds 5.0% on a rate reset date during the period from December 17, 2004 to January 9, 2007, the counterparty will pay the One&Only Palmilla the amount equal to $110.0 million multiplied by one-month LIBOR minus 5.0% multiplied by the number of days in the period divided by 360.

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Other Matters

Critical Accounting Policies

Our critical accounting policies include those which require our most subjective or complex judgments as a result of the need to make certain estimates and assumptions when there is uncertainty as to their financial effects. Although all of the policies identified in the notes accompanying the consolidated financial statements are important to an understanding of such financial statements, the policies discussed below are considered by management to be central to their understanding because of (i) the higher level of measurement uncertainties involved in their application and (ii) the effect that changes in these estimates and assumptions could have on the consolidated financial statements.

We base our estimates on, among other things, currently available information, our historical experience and on various assumptions, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Although we believe that that these assumptions are reasonable under the circumstances, estimates would differ if different assumptions were utilized and these estimates may prove in the future to have been inaccurate. There can be no assurance that actual results will not differ from these estimates.

Stock Based Compensation.  We have elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations in accounting for our employee stock options as allowed pursuant to FASB Statement No. 123, as amended by FASB Statement No. 148 (“SFAS 123”). Accordingly, no compensation expense related to stock options has been recognized for the years ended December 31, 2004, 2003 and 2002.

If the compensation cost for our stock option plans had been determined on the basis of the fair value at the grant date for awards under those plans, consistent with SFAS 123, and our existing valuation method for our employee stock options, the Black Scholes option pricing model, we estimate that our net income for the years ended December 31, 2004, 2003 and 2002 would have been reduced by $7.4 million, $3.7 million and $6.4 million or 11%, 5% and 16%, respectively.  However, SFAS 123 requires the use of option valuation models that require the input of highly subjective assumptions, including expected stock price volatility.  The Company anticipates applying this statement for its third quarter beginning July 1, 2005, which would result in compensation expenses of approximately $3.3 million (not including tax effects) for the second half of 2005, based on option grants outstanding at December 31, 2004.  The foregoing amount does not include compensation expense for any stock options granted after January 1, 2005.  The effect of applying the fair value method of accounting for stock options on reported net income for 2004, 2003 and 2002 may not be representative of the effects for future years because outstanding options vest over a period of several years and additional awards are generally made each year.

See “Recent Accounting Pronouncements—Share Based Payment” for further discussion on stock-based compensation.

Income Taxes.  We are subject to corporate income taxes in certain jurisdictions. Accordingly, the accompanying consolidated statements of operations include a provision for income taxes based on the prevailing tax laws of those jurisdictions.

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Realization of future tax benefits related to deferred tax assets is dependent on many factors, including our ability to generate future taxable income.  We adjust the valuation allowance related to our deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2004, we had deferred tax assets, net of valuation allowance, totaling $11.2 million. In determining our net realizable tax assets, we consider our ability to carry back certain net operating losses, future taxable income and ongoing prudent and feasible tax planning strategies. We have determined that, as of December 31, 2004, a valuation allowance of $148.4 million was necessary to offset our deferred tax assets. This represents a reduction of $40.4 million from our valuation of $188.8 million at December 31, 2003; $3.5 million represents amounts released as income tax benefit and the remaining amount relates primarily to tax effected expiration of net operating loss carryforwards.  In the event that we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, or that the realization of additional deferred tax assets is more likely than not, an adjustment to the valuation allowance would occur in the period such determination is made.

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From time to time, we may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where we conduct our business.  While we believe that the tax returns we file and any tax positions we take are supportable and accurate, some tax authorities may not agree with our positions.  This can give rise to tax uncertainties which, upon audit, may not be resolved in our favor.  We have established accruals for various tax uncertainties that we believe are probable and reasonably estimable.  These accruals are based on certain assumptions, estimates and judgments including estimates of probability, estimates of amounts for settlements, associated interest and penalties.  Changes to these assumptions, estimates and judgments could have a material impact on our provision for income taxes.  For the year ended December 31, 2004, we reduced our tax accruals by $3.7 million as a result of the expiration of certain statutes of limitation.

Long-Lived Assets.  We review our long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If changes in circumstances indicate that the carrying amount of an asset that we expect to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition are estimated. If the undiscounted value of the future cash flows is less than the carrying value of the asset, the carrying value of the long-lived asset will be reduced by the amount by which the carrying value exceeds fair value. We do not believe that any such changes in circumstances have occurred which would require our long lived assets to be tested for recoverability, other than the portion of land in Atlantic City in which we recognized a $7.3 million impairment loss during 2004.

Allowance for Doubtful Trade Receivables and Amounts Due from Affiliates.  We maintain allowances for doubtful trade receivables arising from casino, hotel and other services and amounts due from affiliates.  These allowances are based upon a specific review of outstanding receivables for estimated losses resulting from our inability to collect from customers or affiliates. As of December 31, 2004, our trade receivables, net totaled $41.7 million, including an allowance for doubtful trade receivables of $6.5 million.  Bad debt expense related to gaming receivables was $1.0 million and $0.9 million for the years ended December 31, 2004 and 2003, respectively.  The allowance for doubtful accounts related to gaming remained 29% of total gaming receivables for both 2004 and 2003.  During the year ended December 31, 2004, the Company recognized $1.8 million of bad debt expense associated with certain affiliated receivables.

In extending credit, we attempt to assess our ability to collect by, among other things, evaluating the customer’s financial condition, both initially and on an ongoing basis. In evaluating the adequacy of our allowance for doubtful trade receivables, we primarily analyze trade receivable balances, the percentage by aging category and historical bad debts, among other things.

If the likelihood of collection on accounts or our ability to collect were to deteriorate, an increase to the allowance may be required. Also, should actual collections of trade receivables be different than our estimates included in the determination of our allowance, the allowance would be increased or decreased through charges or credits to selling, general and administrative expenses in the consolidated statements of operations in the period in which such changes in collection become known. If conditions change in future periods, additional allowances or reversals may be required. Such additional allowances could be significant.

Guarantees.  In connection with Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), we recognize, at the inception of a guarantee, a liability at an estimate of the guarantee’s fair value for the obligations we have undertaken in issuing a guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur.  In recording the $2.8 million fair value of the Palmilla JV, LLC guarantee in 2003, we estimated the premium that would be required by a third party to issue the same guarantee in a stand-alone arm’s length transaction with an unrelated party.  We estimated the fair value by calculating the net present value of the difference in cash flows of interest payments between the estimated interest amounts payable without the guarantee and the cash flows of those same interest payments with the guarantee.  The difference between these two amounts was $2.8 million representing the estimated fair value of the guarantee.  The components of the calculation include the amount guaranteed, the estimated interest rate of the credit facility without the guarantee, the interest rate of the facility with the guarantee, the discount rate for the net present value calculation and the estimated term of the guarantee to arrive at the approximate cash flows under each scenario.  Upon consolidation of the results of Palmilla JV, LLC in 2004, we have eliminated the fair value of the guarantee.  As of December 31, 2004, this guarantee no longer exists, as the underlying debt that was guaranteed was repaid in December 2004.

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Recent Accounting Pronouncements

Other-Than-Temporary Impairment of Investments

In March 2004, the EITF of the FASB reached a consensus on Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-01”). EITF 03-01 addresses the meaning of other-than-temporary impairment and its application to debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”) and equity securities that are not subject to the scope of SFAS 115 and not accounted for under the equity method of accounting.  As of December 31, 2004, the Company determined that EITF 03-01 had no impact on its consolidated financial statements.

Contingently Convertible Instruments

In September 2004, the EITF reached a consensus on Issue No. 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share” (“EITF 04-08”), which is effective for reporting periods ending after December 15, 2004. EITF 04-08 requires companies to include shares issuable under convertible instruments in diluted earnings per share computations (if dilutive) regardless of whether the market price trigger (or other contingent feature) has been met. In addition, prior period earnings per share amounts presented for comparative purposes must be restated. In April 2004, the Company issued contingent convertible notes. In accordance with EITF 04-08, there will be no impact on future diluted earnings per share related to these notes until the Company’s average Ordinary Share price exceeds the conversion price of $58.24 even though the market price trigger of 120% of the conversion price, or $69.89, has not been met. In that situation, the Company would reflect the additional Ordinary Shares in the calculation of diluted earnings per share using the treasury share method.  EITF 04-08 did not impact earnings per share in 2004, as the average stock price for the year did not exceed $58.24.  However, EITF 04-08 may have an effect in 2005.  On March 24, 2005, the closing price for our Ordinary Shares on the NYSE was $60.60.  If $60.60 were the average price for 2005, our number of fully diluted outstanding shares would increase by 153,789.

Share-Based Payment

In December 2004, the FASB issued a revision of SFAS 123 (“SFAS 123(R)”) that will require compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123(R) replaces SFAS 123 and is effective as of the first interim period beginning after June 15, 2005.  Based on the number of shares and awards outstanding as of December 31, 2004 (and without giving effect to any awards which may be granted in 2005), we expect that the adoption of SFAS 123(R) will impact earnings by approximately $3.3 million during 2005.

(D)Research and Development, Patents and Licenses

Not applicable.

(E)Trend Information

During the first two months of 2005, Atlantis, Paradise Island’s results were ahead of results for the same period last year.  Atlantis, Paradise Island achieved an average occupancy of 83% and an ADR of $284, which compares to an average occupancy of 80% and an ADR of $277 in 2004.  Atlantis, Paradise, Island’s RevPAR of approximately $234 was $14 higher than the same period last year.

For the first two months of 2005, Atlantis, Paradise Island’s casino contribution to net income was $12.1 million compared to $13.2 million for the first two months of 2004.  The decrease in casino contribution is primarily due to a lower table hold of 14.6% for the first two months of 2005 compared to 15.8% for the first two months of 2004.  In addition, Atlantis, Paradise Island experienced a 13.5% decrease in table drop over the same period in 2004 due primarily to a shift in the timing of visits by high end players.  For the first two months of 2005, slot win increased by 18.4% over the same period in 2004.  Slot coin-in was 26.7% higher while slot win was higher by $1.9 million.  Due to the normal volatility patterns experienced in the casino industry, particularly in the table game area, these results may not necessarily be indicative of continuing trends.

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In December 2004, we announced the development of the Ocean Club Residences & Marina.  As of February 28, 2005, we have received deposits on all of the 44 currently available for sale units at this development.

In the third quarter of 2005, we expect to open the Marina Village, which we expect will provide additional food and beverage and rental income from third-party retail operators.

Relinquishment fees and other fees earned by us from TCA were $36.8 million for the year ended December 31, 2004. We anticipate that relinquishment fees will be slightly higher for the year ending December 31, 2005 due to increases in Mohegan Sun revenues.

In connection with $150 million in principal amount of our 87/8% Senior Subordinated Notes, we have entered into interest rate swap agreements to hedge this portion of our fixed rate debt, in which the rates paid by us are at six-month LIBOR plus 291 to 302 basis points. In connection with our interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense correspondingly changes by $1.5 million per annum.

Corporate expenses were $34.5 million for the year ended December 31, 2004. We anticipate that these expenses will be higher in 2005 due to additional compensation costs and expense related to the adoption of SFAS 123(R).

(F)Off-Balance Sheet Arrangements

At December 31, 2004, our off-balance sheet arrangements and other commitments were as follows:

(a)Reethi Rah Resort Pvt. Limited – Financings ($41.0 million)

Subject to certain conditions, SRL has a right of first refusal to participate equally with us in any new hotels we develop in specified Indian Ocean territories.  If SRL elects to participate in the equity or other funding of any such project, then the management agreement for that property will be held by One&Only Management.  SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (effective January 1, 2005 the participation of SRL increased to 25%) with us in connection with the One&Only Reethi Rah.  As a result, we expect the management agreement for the One&Only Reethi Rah to be transferred to One&Only Management and expect SRL to be obligated to provide 25% of the total subordinated debt financing discussed below, with its commitment increasing to 50% of such financing as SRL’s ownership interest in One&Only Management increases to 50%.  It is likely that we will provide bridge financing to SRL to enable it to meet its financing commitment.

At December 31, 2004, Reethi Rah Resort Pvt. Limited, the owner of the development (“Reethi Pvt”), had outstanding indebtedness consisting of $55.0 million of senior secured loans provided by a group of banks, $54.4 million principal amount of unsecured subordinated loans advanced by Kerzner and $12.0 million of unsecured subordinated loans provided by SRL.  The payment of principal and interest on our and SRL's advances to Reethi Pvt is subordinate in right of payment, to the extent set forth in certain agreements, to the prior payment of the senior secured loans provided by the group of banks.  Reethi Pvt and the shareholders, Sultans of the Seas (Pvt) Ltd. (60%) and Ali Ahmed (40%), have not provided and are not expected to provide any material equity funding to this project, other than the land lease for the construction site.  We currently estimate the aggregate cost of the project to be approximately $162.0 million, which includes the costs of repairing tsunami damage and does not reflect any insurance recoveries.  Accordingly, we expect that approximately $41.0 million of subordinated debt financing will be required in the first half of 2005 to complete the project, and that we will provide most or all of this amount, either directly to Reethi Pvt or in loans to SRL to allow SRL to advance the funds to Reethi Pvt.  We will fund or arrange for funding for any additional development costs to complete the construction of the resort.

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Subsequent to December 31, 2004, we expect our financing commitment to also include a $5.0 million lease guarantee and an EBITDA guarantee.  Under the lease guarantee, we will guarantee Reethi Pvt’s obligations under leases of $5.0 million of property and equipment to be used at the resort.  Under the EBITDA guarantee, during each of the first four years of the resort’s operations, we will be obligated to provide further loans to Reethi Pvt equal to the lesser of $6.0 million or the difference between $6.0 million and the EBITDA achieved by the resort, on a non-cumulative basis, the maximum total commitment being up to $24.0 million.

The One&Only Reethi Rah is currently a development stage enterprise.  We will be required to reevaluate the One&Only Reethi Rah in connection with FIN 46R when the resort commences operations.

 (b)One&Only Kanuhura – Guarantee ($10.7 million)

In connection with our purchase of a 25% equity interest in the One&Only Kanuhura (from January 1, 2003 to December 31, 2004 we held a 20% interest), we were required to guarantee certain of its obligations to its other shareholders.  Effective January 1, 2005, our ownership interest decreased to 18.75%.  We are not obligated under these guarantees unless the property does not have excess cash available to repay certain shareholder loans.  As of December 31, 2004, the amount of senior debt owed to us was $2.4 million, excluding accrued interest. Our obligations under these guarantees expire when the underlying obligations are repaid.

(G)Tabular Disclosure of Contractual Obligations

At December 31, 2004, we believe our contractual obligations, other than the guarantees and commitments described above, were as follows (in thousands):

Contractual Cash Obligations	2005		2006		2007		2008		2009		Thereafter		Total
87/8% Senior Subordinated Notes(a)	$	35,500	$	35,500	$	35,500	$	35,500	$	35,500	$	471,000	$	648,500
2.375% Convertible Senior Subordinated Notes(b)	5,463		5,463		5,463		5,463		5,463		311,935		339,250
Palmilla Notes(c)	—		—		110,000		—		—		—		110,000
Amended Credit Facility(d)	—		—		—		—		—		—		—
Operating leases(e)	3,090		2,707		2,297		1,875		1,953		16,834		28,756
Capital leases(f)	659		451		238		13		—		—		1,361
Purchase obligations(g)	8,856		—		—		—		—		—		8,856
Atlantis, The Palm(h)	60,000		18,200		—		—		—		—		78,200
Morocco(h)	47,000		—		—		—		—		—		47,000
Total contractual cash obligations	$	160,568	$	62,321	$	153,498	$	42,851	$	42,916	$	799,769	$	1,261,923

(a)Balance represents amounts outstanding under our 87/8% Senior Subordinated Notes. In connection with these notes, interest paid to the holders on an annual basis is $35.5 million. However, in connection with our interest rate swap agreements related to the 87/8% Senior Subordinated Notes, the amount paid can vary based on LIBOR during any period. For the year ended December 31, 2004, our interest rate swap agreements reduced interest expense by $6.5 million.

(b)Balance represents amounts outstanding under our 2.375% Convertible Senior Subordinated Notes issued in April 2004.  In connection with these notes, interest paid to the holders on an annual basis is $5.5 million.  For the year ended December 31, 2004, interest expense related to these notes was $4.0 million.  The 2.375% Convertible Senior Subordinated Notes are unsecured senior subordinated obligations and mature on April 15, 2024 unless they are converted, redeemed or repurchased before the maturity date. The 2.375% Convertible Senior Subordinated Notes may be converted into cash and Ordinary Shares at an initial conversion rate of 17.1703 shares per $1,000 principal amount in accordance with the terms of the indenture. This conversion rate is equal to a conversion price of approximately $58.24 per Ordinary Share.  Upon conversion, all of the principal amount of the notes converted must be paid in cash.  The closing price of our Ordinary Shares was $60.05 on December 31, 2004 and $63.94 on February 28, 2005.

These notes are convertible, at the holder’s option, prior to the maturity date into cash and Ordinary Shares in the following circumstances:

•During any fiscal quarter commencing after the date of original issuance of the notes, if the closing sale price of our Ordinary Shares over a specified number of trading days during the previous quarter is more than 120% of the conversion price, or $69.89, of the notes;

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•If the notes are called for redemption and the redemption has not yet occurred;

•During the five trading day period immediately after any five consecutive trading day period in which the trading price of the notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of our Ordinary Shares on such day multiplied by the number of shares of our Ordinary Shares issuable upon conversion of $1,000 principal amount of the notes; or

•Upon the occurrence of specified corporate transactions.

(c)In December 2004, the One&Only Palmilla entered into the Palmilla Notes for $110.0 million.  Interest on the Palmilla Notes is paid monthly at LIBOR plus 3.75%.  In connection with the terms of the Palmilla Notes, the One&Only Palmilla entered into the Interest Rate Cap Agreement, which caps LIBOR at 5%.  The maximum contractual interest rate on the Palmilla Notes is 8.75%.

(d)As of December 31, 2004, we had $494.0 million available under the Amended Credit Facility, after giving effect to the $6.0 million in letters of credit outstanding.  There were no amounts outstanding under the Amended Credit Facility as of December 31, 2004.

(e)As of December 31, 2004, operating leases were primarily office leases, in particular the lease related to the Company’s office in Plantation, Florida.

(f)As of December 31, 2004, capital leases primarily represented $0.9 million and $0.5 million of leased equipment consisting primarily of golf carts and phone equipment at Atlantis, Paradise Island and the One&Only Palmilla, respectively.

(g)As of December 31, 2004, purchase obligations were primarily open purchase orders for hotel related provisions such as food, beverage and nonperishable goods. Purchase orders are primarily short-term in nature and generally do not exceed 90 days.

(h)For further discussion of the funding requirements for Atlantis, The Palm and Morocco, see “Liquidity and Capital Resources—Investing Activities.”

In addition, the following contingent contractual obligation, the amount of which can not accurately be estimated, is not included in the table above:

•The operating agreement for the One&Only Palmilla joint venture between us and a subsidiary of GS Emerging Market Real Estate Fund, L.P. (“GS”), our joint venture partner, provides for a put right available to GS commencing in September 2005 and ending in September 2007 (subject to extension under certain conditions).  The exercise of this put right could require us to make a substantial cash payment and, in any event, a cash payment of no less than $36.25 million to acquire our joint venture partner’s 50% interest in Palmilla JV, LLC.

It is anticipated that the Phase III expansion investment in The Bahamas will exceed $1.0 billion.  Exclusive of the Harborside at Atlantis timeshare projects, the condo-hotel, the Athol Golf Course and Ocean Club Residences & Marina, our recently announced ultra-luxury condominium project, we expect our investment to be approximately $650.0 million.

We will also be obligated to provide certain funding if the Catskills Project proceeds.  See “Item 4.  Information on the Company, (B) Business Overview—Gaming—Trading Cover New York” for more information.

(H)   Safe Harbor

For the purposes of the safe harbor, see “Forward-Looking Statements.”

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Item 6.Directors, Senior Management and Employees

(A)Directors and Senior Management

The current directors of the Company are:

Name	Country of Citizenship	Director Since
Solomon Kerzner	South Africa	1993
Peter Buckley	United Kingdom	1994
Howard Marks	United States	1994
Eric Siegel	United States	1994
Heinrich von Rantzau	Germany	2001
Howard B. Kerzner	South Africa	2004
Hamed Kazim	United Arab Emirates	2004

The current officers of the Company are:

Name	Title	Age	Officer Since
Solomon Kerzner	Chairman of the Board of Directors	69	1993
Howard B. Kerzner	Chief Executive Officer and Director	41	1995
John R. Allison	Executive Vice President—Chief Financial Officer	58	1994
Richard M. Levine	Executive Vice President—General Counsel	43	2004

The officers serve indefinitely at the pleasure of the Board of Directors.

Solomon Kerzner, Chairman of the Board of Directors:  Mr. Kerzner has been our Chairman since October 1993.  From October 1993 to June 1996, Mr. Kerzner served as our President and from October 1993 until December 2003, he served as our Chief Executive Officer.  Mr. Kerzner is the Chairman of WLG, which, together with its affiliates, as of December 31, 2004 owned approximately 12.5% of our outstanding Ordinary Shares.  Mr. Kerzner is one of the visionary leaders of the resort and gaming industries.  Prior to founding Kerzner, Mr. Kerzner pioneered the concept of an entertainment and gaming destination resort designed and managed to appeal to multiple market segments by developing Sun City, located near Johannesburg, South Africa.  Sun City features four hotels with approximately 1,300 rooms, an entertainment center that includes a 6,000-seat indoor superbowl, a 46-acre man-made lake for water sports and approximately 55,000 square feet of gaming space.  In 1992, Sun City was expanded to include The Lost City, a themed resort that features a 350-room luxury hotel and a man-made jungle in which over one million trees were transplanted.  Mr. Kerzner has been responsible for the development of 21 hotels and founded both of southern Africa’s largest hotel groups, Southern Sun Hotels and Sun International South Africa.  We do not have any interest in any of the southern African properties developed by Mr. Kerzner.  Mr. Kerzner is the father of Mr. H. B. Kerzner.

Howard B. Kerzner (“Butch Kerzner”), Chief Executive Officer and Director:  Mr. Kerzner has been our Chief Executive Officer since January 1, 2004 and a Director since December 8, 2004.  Mr. Kerzner joined Kerzner in May 1995 as Executive Vice President—Corporate Development and was President from June 1996 until December 2003.  Prior to that time, he was Director—Corporate Development of SIIL from September 1992.  Previously, Mr. Kerzner was an Associate of Lazard Frères & Co. LLC from September 1991.  Prior to that Mr. Kerzner worked for the First Boston Corporation.  Mr. Kerzner is the son of Mr. S. Kerzner.

John R. Allison, Executive Vice President—Chief Financial Officer:  Mr. Allison joined Kerzner in May 1995 as Chief Financial Officer.  Mr. Allison joined SIIL in March 1994 as Group Financial Director.  From December 1987 until February 1994, Mr. Allison was Financial Director of Sun International Inc., a resort and management holding company with interests in approximately 27 hotels in southern Africa.  Prior to that time, he was the Group Financial Director of Kimberly-Clark (South Africa) Limited for four years.  He is a fellow of the Institute of Chartered Accountants in England and Wales and a member of the South African Institute of Chartered Accountants.

Richard M. Levine, Executive Vice President-General Counsel:  Mr. Levine joined the Company in April 2004 as our Executive Vice President & General Counsel.  Mr. Levine began his legal career with the law firm of Cleary, Gottlieb, Steen & Hamilton and worked as an associate in both their New York and Tokyo offices.  Mr. Levine subsequently joined Credit Suisse First Boston as the General Counsel for its Private Equity Division and most recently was General Counsel for a private equity firm, Hellman & Friedman, LLC.

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Peter N. Buckley, Director:  Mr. Buckley has been a Director since April 1994.  Mr. Buckley was the Chairman of Caledonia through 2002, which as of December 31, 2004 beneficially owned approximately 11.2 % of our Ordinary Shares.  In 1994 he was appointed Chairman of Caledonia having been Deputy Chairman and Chief Executive since 1987.  He is also Chairman of Bristow Aviation Holdings Limited.  He is a non-executive Director of Close Brothers Group PLC and Offshore Logistics, Inc. (a NYSE listed company).

Hamed Kazim, Director:  Mr. Kazim has been a Director since December 8, 2004.  Mr. Kazim served as the Managing Partner of Ernst & Young-Dubai until May 31, 2004 when he joined The Corporate Office as Group Chief Financial Officer and Head of The Corporate Office, which is owned by the Royal Family of Dubai.  Mr. Kazim joined Arthur Andersen LLP in 1983 and remained until 2002 when its practice merged with Ernst & Young in the Middle East.  Following the merger, Mr. Kazim served as Managing Partner of the Ernst & Young-Dubai office.  During 1999 and 2000, Mr. Kazim was seconded to Dubai Internet City as CEO to start the project.  Mr. Kazim also acted as advisor to some of the largest groups in Dubai on various organizational and business issues.  Mr. Kazim is a graduate of the University of California, San Diego with a B.A. in Economics.  Mr. Kazim has been a certified public accountant since 1986 when he received his CPA with high distinction.

Howard S. Marks, Director:  Mr. Marks has been a Director since April 1994.  Mr. Marks is Chairman of Oaktree Capital Management, LLC, which manages funds in excess of $20.0 billion for institutional investors.  Previously, Mr. Marks was employed by The TCW Group, Inc. where he became Chief Investment Officer for Domestic Fixed Income and President of its largest affiliate, TCW Asset Management Company.

Eric B. Siegel, Director:  Mr. Siegel has been a Director since April 1994.  Mr. Siegel is a retired limited partner of Apollo Advisors, L.P.  Mr. Siegel is also a Director and Chairman of the Executive Committee of El Paso Electric Company (a NYSE listed company) and is a Director of Ares Capital Corporation (a NASDAQ listed company).

Heinrich von Rantzau, Director:  Mr. von Rantzau has been a Director since July 2001.  Mr. von Rantzau is a principal of Cement Merchants SA, which as of December 31, 2004 beneficially owned approximately 7.7% of our Ordinary Shares, and an executive of Deutsche Afrika-Linien GmbH, Reederei John T. Essberger and VORA Schiffahrts-und Beteiligungsgesellschaft GmbH. Mr. von Rantzau is a board member of The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited and a member of the Trade Advisory Board of Germanischer Lloyd, Lloyd’s Register of Shipping and German National Committee.

We agreed to include in the slate of directors submitted by us to our shareholders for election one individual designated by each of WLG, Caledonia and CMS, subject to their retaining a minimum beneficial ownership of our Ordinary Shares.  See “Item 7.  Major Shareholders and Related Party Transactions, (B) Related Party Transactions—Registration Rights and Governance Agreement.”  Further, in connection with the strategic investment by Istithmar in our Ordinary Shares, we agreed to add a representative of Istithmar to our Board of Directors.  As a result, Mr. Kazim took a seat on our Board of Directors.  At such time, our Board of Directors also decided to add an additional seat on our Board of Directors, which was taken by our Chief Executive Officer, Mr. H. B. Kerzner.

(B)Compensation

The aggregate cash compensation for our directors and officers, including salaries, bonuses and benefits in kind granted, for the year ended December 31, 2004 was $6.1 million.  None of the directors or officers participates in a pension plan.  We do not set aside any amounts for pension or retirement benefits for any of our directors or officers.

Effective from January 1, 2001, we have a bonus plan whereby our employees, including officers, will qualify for bonuses if we attain either certain levels of earnings or EPS, and such bonuses are calculated as a percentage of each individual’s salary.  Such percentage is based on, among other things, each employee’s level of responsibility.  Bonuses paid to our officers under this bonus plan could reach a maximum of 100% of the respective employee’s base salary in 2004.  Bonuses ranging from 37% to 61.5% were granted in 2004.

We have adopted stock option plans for our employees, officers and directors in 1995 (the “1995 Plan”), in 1997 (the “1997 Plan”), and in 2000 (the “2000 Plan”) that provide for the issuance of options to acquire an aggregate of 7,500,000 Ordinary Shares.  As of December 31, 2003, all available options under those plans had been granted.  Accordingly, on December 11, 2003, we adopted a new stock incentive plan (the “2003 Plan” and, together with the 1995 Plan, the 1997 Plan and the 2000 Plan, the “Plans”) that provides for the issuance of an aggregate of

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3,000,000 Ordinary Shares in connection with awards of stock options, restricted stock and other stock-based awards.

The 1995 Plan provides for the options to become exercisable, unless otherwise specified by the Board of Directors and subject to certain acceleration and termination provisions, after two years from the date of grant in respect of 20% of such options and thereafter in installments of 20% per year over a four-year period.  Options issued under the 1997 Plan become exercisable one year from the date of grant with respect to 20% of such options and thereafter in installments of 20% per year over a four-year period.  The 2000 Plan provides for the vesting period to begin one year after the grant date in respect of one third of such options, and thereafter in installments of one third per year over a two-year period.  The 2003 Plan provides generally for options to become exercisable 25% per year on each of the first four anniversaries of the date of grant, and for restricted stock to become vested in three equal installments on each of the second, third and fourth anniversary of the date of grant.  Options granted under the Plans have a term of 10 years from the date of grant (except that options granted under the 2003 Plan generally have a term of seven years from the date of grant) and, unless otherwise specifically provided by the Board of Directors, the option prices are equal to the market values per share on the date of grant.  Consultants may also be granted awards under the 2003 Plan.  Nonqualified stock options may be transferred to trusts with respect to which any such participants are beneficiaries and corporations or to other entities controlled by such participants.

During 2004, we granted 56,000 stock options and 18,000 restricted Ordinary Shares to our directors and officers pursuant to the 2003 Plan.  The options were granted at exercise prices ranging from $45.15 to $57.13, and the expiration date for these options ranges from April 1, 2011 through December 8, 2011.

As of March 1, 2005, total options to acquire 3,028,022 Ordinary Shares were outstanding, of which 679,392 were exercisable as of that date.  As of March 1, 2005, our officers and directors, as a group, held options to acquire approximately 121,677 Ordinary Shares (excluding exercisable and unexercisable options held by the Kerzner Family Trust and unexercisable options held by Mr. H. B. Kerzner), of which approximately 50,000 are currently exercisable.  The exercisable and unexercisable options held by the officers and directors as of March 1, 2005 (excluding exercisable and unexercisable options held by the Kerzner Family Trust and unexercisable options held by Mr. H. B. Kerzner) were granted at exercise prices ranging from $20.07 to $57.31.  The expiration dates for these options range from December 11, 2010 to December 26, 2012.

(C)Board Practices

In connection with the strategic investment in our Ordinary Shares by Istithmar, we agreed to add a representative of Istithmar to our Board of Directors.  Following receipt of the necessary regulatory approval on December 8, 2004, Mr. Kazim, a representative of Istithmar, took a seat on our Board of Directors.  Mr. H. B. Kerzner, our CEO, simultaneously joined our Board of Directors.  At our July 27, 2004 annual meeting of shareholders, our existing directors, consisting of Mr. S. Kerzner, Mr. Buckley, Mr. Marks, Mr. Siegel and Mr. von Rantzau were elected to terms set to expire at our next annual general meeting.

Our Board of Directors has appointed an audit committee of the board consisting of Mr. Buckley, Mr. Marks, Mr. Siegel and Mr. Kazim. Deloitte & Touche LLP, the Company’s independent auditor, has full and free access to meet with the audit committee, without management representatives present, to discuss the results of the audit, the adequacy of internal controls and the quality of financial reporting.  The primary function of the audit committee is to assist our Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information that will be provided to the shareholders and others, the systems of internal controls that our management and Board of Directors have established and the audit process.  The audit committee of our Board of Directors reviews the selection of our independent certified public accountants each year.  The audit committee convenes at least eight times per year.  The Audit Committee Charter can be found as Exhibit 11.1(a) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004 and the Amended and Restated Audit Committee Charter can be found as Exhibit 11.1(b) filed herewith.

We also have a Compensation Committee consisting of Mr. Siegel, Mr. Buckley, Mr. Marks and Mr. von Rantzau.  The Compensation Committee is mandated to review and adopt our executive compensation plans and policies, including the adoption of stock incentive plans and the granting of options and restricted stock to senior executives thereunder.

We do not have service contracts with any of our directors.

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Corporate Governance Standards

Pursuant to home country practices exemptions granted to us by the New York Stock Exchange, we are permitted to follow certain corporate governance practices complying with relevant Bahamian laws, which are different from those required by U.S. domestic companies under the New York Stock Exchange’s listing standards.  The New York Stock Exchange rules and our current practices relating to corporate governance have the following significant differences:

Independent Directors.  The New York Stock Exchange requires that domestic listed companies have at least a majority of independent directors on their boards, make affirmative determinations of independence and have regularly-scheduled meetings of non-management directors without management participation.  As a foreign private issuer, we are not required to satisfy this listing standard.  We have not made any determination as to whether a majority of our directors meet the independence requirements set forth in the New York Stock Exchange listing standards and we do not have regularly-scheduled meetings of non-management directors.

Audit Committee.  The New York Stock Exchange requires that a listed company have an audit committee consisting of at least three independent directors, one of which must have accounting or related financial management expertise, and that the audit committee be charged with the responsibility of selecting, monitoring and communicating with the outside auditor of the Company.  These requirements are currently effective for domestic companies, and will become applicable to foreign private issuers on July 1, 2005.  Mr. Buckley and Mr. Kazim may not be considered independent for audit committee purposes because of the Ordinary Shares owned by their respective affiliates, and we expect them to resign from the audit committee prior to July 1, 2005, whereupon a new director who satisfies the independence requirements will join the Board of Directors and be appointed to the audit committee.

Nominating/Corporate Governance and Compensation Committees.  The New York Stock Exchange requires that domestic listed companies must have a board committee composed entirely of independent directors that perform certain nominating and corporate governance functions.  We do not have a nominating and corporate governance committee, although we do convene an ad hoc independent committee to review and select new candidates for board positions.  The New York Stock Exchange also requires that domestic listed companies must have a board committee composed entirely of independent directors that perform certain compensation-related functions.  As a foreign private issuer, we are not required to satisfy these listing standards.  We have a compensation committee, but have not made any determination as to whether the directors who constitute the committee meet the independence requirements set forth in the New York Stock Exchange listing standards.

Certifications.  The New York Stock Exchange requires that a listed company’s chief executive officer must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.  As a foreign private issuer, our chief executive officer is not required to make this certification.

Corporate Governance Guidelines.  The New York Stock Exchange requires that domestic listed companies adopt detailed corporate governance guidelines.  As a foreign private issuer, we are not required to adopt, and have not adopted, such guidelines.

Shareholder Approval Policy.  Pursuant to the amendment to the corporate governance standards that was approved by the Securities and Exchange Commission on June 30, 2003, the New York Stock Exchange requires, with limited exceptions, that shareholder approval be obtained with respect to any equity-compensation plan, which is generally defined as a plan or other arrangement that provides for the delivery of equity securities (either newly issued or treasury shares) of the listed company to any employee, director or other service provider as compensation for services.  We follow Bahamian laws that do not apply specific rules to equity compensation plans; they are considered an issue of shares which does not require shareholder approval.

The New York Stock Exchange also requires that, with certain exceptions specified in its rules, shareholder approval be obtained prior to issuance of common stock or securities convertible into or exercisable for common stock (1) to a director, an officer, a substantial security holder or a party related to any of them if the number of shares of common stock which are to be issued or are issuable upon conversion exceeds either 1% of the number of shares of common stock or 1% voting power outstanding before the issuance, (2) in any transaction or series of related transactions, if the voting power of the common stock is equal to or exceeds 20% of the voting power outstanding before the issuance or if the number of shares of the common stock is equal to or exceeds 20% of the number of shares outstanding before the issuance, and (3) that will result in a change of control of the issuer.  We

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follow Bahamian laws which do not require shareholder approval with respect to the issuance of common stock or securities convertible into or exercisable for common stock.  Under Bahamian laws, these are considered an issuance of shares which does not require shareholder approval.

On June 6, 2002, the Corporate Accountability and Listing Standards Committee of the New York Stock Exchange issued a report recommending that the Exchange adopt significant changes to its corporate governance listing standards.  On August 16, 2002, the New York Stock Exchange filed with the Securities and Exchange Commission proposed changes to its corporate governance standards which reflect the findings of the Committee.  The areas of corporate governance covered by the proposed changes include the definition and role of independent directors, committees under the board of directors, corporate governance guidelines, codes of business conduct and ethics, shareholder approval of equity-compensation plans and annual certifications by chief executive officers.  On June 30, 2003, the Securities and Exchange Commission approved the portion of the proposed corporate governance standards relating to shareholder approval of equity-compensation plans, which is described under “Shareholder Approval Policy” above.  Also, in light of the promulgation by the Securities and Exchange Commission of Rule 10A-3 pursuant to Section 301 of the Sarbanes-Oxley Act, on April 4, 2003, the New York Stock Exchange filed with the Securities and Exchange Commission an amendment to the remainder of its proposed rule changes in order to reflect the requirements of Rule 10A-3.  That portion of the proposed rule changes, as amended, became effective upon the Securities and Exchange Commission’s approval on November 4, 2003.

The rules will generally continue to grant home country practices exemptions to foreign private issuers listed on the New York Stock Exchange, including us, but, pursuant to the requirements of Rule 10A-3, those provisions of the amended corporate governance standards that implement the requirements of Rule 10A-3 will be applicable to listed foreign private issuers.  Among such requirements, a foreign private issuer listed on the New York Stock Exchange will be required to have an audit committee consisting of at least three directors all of whom must be independent under the standards set forth in paragraph (b) of Rule 10A-3, and the audit committee will be required to be directly responsible for the appointment, compensation, retention and oversight of the work of the accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the issuer, unless one or more of the exemptions set forth in Rule 10A-3 apply.  These new corporate governance standards of the New York Stock Exchange will become applicable to foreign private issuers listed on the New York Stock Exchange on July 31, 2005.  The Company plans to take appropriate steps with respect to its corporate governance system by July 31, 2005 so that its audit committee satisfies the requirements set forth in Rule 10A-3.

(D)Employees

Set forth below is a table showing the approximate total number of employees at our properties worldwide by geographic location for the periods indicated.

	At December 31,
	2004	2003	2002
The Bahamas	5,803	5,785	5,800
United States	420	425	425
Other	147	75	70
Total:	6,370	6,285	6,295

In addition to the above, as of December 31, 2004, we had approximately 5,500 employees under management at our One&Only and other managed properties in Mauritius, Dubai, the Maldives and Mexico.  We do not employ a significant number of temporary workers.

Union Contract Arrangements—The Bahamas

In The Bahamas, as of December 31, 2004, approximately 3,600 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.  Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area.  The association has signed a new contract with the union that will expire on January 7, 2008.  Labor relations in The Bahamas have been unstable at times with occasional work stoppages occurring, not only at Atlantis, but also at publicly run entities such as the Bahamian Electric Corporation and Bahamas Telephone Company.  As the country’s largest private employer, we are sometimes the target of labor disputes.  See “Item 3.

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Key Information, (D) Risk Factors—Work stoppages and other labor disputes could harm our financial condition and results of operations.”

(E)Share Ownership

As of February 28, 2005, the Kerzner Family Trust, which is a trust controlled by Mr. S. Kerzner, held 853,870 options, all of which were transferred to the trust by Mr. S. Kerzner.  Such options consist of (i) 103,870 vested and exercisable options with an exercise price of $35.00 and an expiration date of January 31, 2007 and (ii) 750,000 unexercisable and unvested options with an exercise price of $36.86 and an expiration date of December 11, 2010.  As of February 28, 2005, Mr. H. B. Kerzner holds 750,000 unexercisable and unvested options with an exercise price of $36.86 and an expiration date of December 11, 2010.  As of February 28, 2005, WLG, an entity controlled by the Kerzner Family Trust, had the right to vote approximately 12.5% of our Ordinary Shares (which includes 3,995,794 Ordinary Shares held by WLG, 429,030 Ordinary Shares over which WLG has the right to vote through certain proxy arrangements with Kersaf and the 103,870 Ordinary Shares subject to currently exercisable options held by the Kerzner Family Trust).  See table in “Item 7.  Major Shareholders and Related Party Transactions, (A) Major Shareholders—Restructuring of Relationship with Majority Shareholder.”  Familienstiftung Von Rantzau-Essberger, a family trust of Heinrich von Rantzau, is the sole shareholder of CMS which beneficially owns 2,758,493 Ordinary Shares.  See table in “Item 7.  Major Shareholders and Related Party Transactions, (A) Major Shareholders.” Each of our other directors and officers beneficially owns less than 1% of outstanding Ordinary Shares.

For a description of options granted to our directors, executive officers and other key employees, see “(B) Compensation” above.

Item 7.Major Shareholders and Related Party Transactions

(A)Major Shareholders

As of February 28, 2005, we had 36,204,771 Ordinary Shares outstanding.  The following table sets forth certain information as of February 28, 2005 (or certain other dates, to the extent indicated below), regarding the beneficial ownership of our Ordinary Shares by:  (i) any person who is known to us to be the owner of more than 5% of any class of our voting securities and (ii) our directors and officers as a group.  Due to the arrangements described below, certain of our Ordinary Shares are beneficially owned by several parties.

Beneficial Owner	Number of Shares		Percent of Shares
Caledonia Investments plc (“Caledonia”)	4,051,323	(1)	11.2
Istithmar PJSC (“Istithmar”)	4,500,000	(2)	12.4
World Leisure Group Limited (“WLG”)	4,528,694	(3)	12.5
Sun International Limited (“Kersaf”)	1,134,079	(4), (6)	3.1
Baron Capital Group, Inc. (“Baron”)	5,847,532	(5)	16.2
Cement Merchants SA (“CMS”)	2,758,493	(6), (7)	7.6
FMR Corp.	4,294,750	(8)	11.9
Directors and officers as a group (excluding shares beneficially owned by the Kerzner Family Trust (9))	*		*

* Less than 5% of outstanding voting securities.

(1)Consists of:  (i) 3,622,293 Ordinary Shares held by Caledonia and (ii) 429,030 Ordinary Shares over which Caledonia has a proxy (see Note 4 below) (based upon information contained in the Schedule 13D/A filed by Caledonia on March 7, 2005.)

(2)Based upon information contained in the Schedule 13D/A filed by Istithmar on August 10, 2004.  Istithmar is an entity indirectly wholly owned by the Royal Family of Dubai.

(3)Consists of:  (i) 3,995,794 Ordinary Shares held for the account of WLG, (ii) 429,030 Ordinary Shares over which WLG has a proxy (see Note 4 below) and (iii) 103,870 Ordinary Shares subject to currently exercisable options, all of which were transferred to the Kerzner Family Trust by Mr. S. Kerzner.  The Kerzner Family Trust is controlled by Mr. S. Kerzner.

(4)Consists of (i) 50,200 Ordinary Shares held by Royale Resorts International Limited (“RRIL”) and 983,579 Ordinary Shares held by Royale Resorts Holdings Limited (“RRHL”), a wholly owned subsidiary of

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RRIL, each of which companies are jointly owned by Kersaf and CMS (73.3% by Kersaf and 26.7% by CMS) and (ii) 100,300 Ordinary Shares owned by Sun International Inc., a wholly owned subsidiary of Kersaf.

Kersaf does not have any voting rights with respect to its Ordinary Shares of the Company.  In connection with the July 2001 restructuring of our majority shareholder, Kersaf and certain of its affiliates granted irrevocable proxies, in varying amounts, to vote all of its Ordinary Shares to Caledonia, WLG and CMS (the “Kersaf Proxy Shares”).  Therefore, the amounts presented in this table for Caledonia and WLG each include 429,030 of the Kersaf Proxy Shares.  The amounts presented in this table for CMS include the remaining 276,019 of Kersaf Proxy Shares.

(5)Based upon information contained in the Schedule 13G/A filed by Baron on February 15, 2005.

(6)Amounts presented in this table reflect the beneficial ownership by each of Kersaf and CMS of the 1,033,779 Ordinary Shares held by RRIL and RRHL, 983,579 of which are held by RRHL and 50,200 of which are held by RRIL; Kersaf and CMS share dispositive power over the 1,033,779 Ordinary Shares held by RRHL and RRIL due to their joint ownership of RRHL and RRIL.

In addition, pursuant to an agreement entered in July 2001, RRHL and RRIL granted to CMS an option to purchase all or a portion of 1,150,000 of our Ordinary Shares then held by RRHL and RRIL.  The number of Ordinary Shares subject to this option is currently 276,019 Ordinary Shares.  This option expires on July 2, 2006.  Amounts presented in this table treat all of the Ordinary Shares subject to this option as being beneficially owned by both Kersaf and CMS, both due to the shared rights of disposition described in the preceding paragraph and the option.

(7)Consists of:  (i) 1,724,714 Ordinary Shares held by CMS and (ii) 983,579 Ordinary Shares held by RRHL and the 50,200 Ordinary Shares held by RRIL over which CMS and Kersaf share dispositive power as discussed in Note 6 above, which shares include 276,019 Kersaf Proxy Shares as defined and discussed in Note 4 above.

(8)Based upon information contained in the Schedule 13G/A filed by FMR Corp. and certain affiliates on February 14, 2005.

(9)If the directors and officers as a group were to exercise their vested options, they would own 0.2% of the Ordinary Shares outstanding as of February 28, 2005 (excluding shares beneficially owned by the Kerzner Family Trust).

As of February 28, 2005, we had approximately 688 holders of record of approximately 36.2 million Ordinary Shares, excluding 7.1 million Ordinary Shares held as treasury stock.  As of February 28, 2005, there were an estimated 654 U.S. holders of record holding approximately 45.21% of our Ordinary Shares.

All of our Ordinary Shares have the same voting rights.

The amounts reflected in this “Major Shareholders” section are compiled and derived from SEC filings by each of Caledonia, Istithmar, Kersaf, Baron, CMS and FMR and other sources.

In April 2004, the Company issued $230.0 million principal amount of 2.375% Convertible Senior Subordinated Notes due 2024 which, after related issuance costs, resulted in net proceeds of approximately $223.7 million.  The 2.375% Convertible Senior Subordinated Notes are our unsecured senior subordinated obligations and they mature on April 5, 2024, unless they are converted, redeemed or repurchased before the maturity date.  The 2.375% Convertible Senior Subordinated Notes may be converted into cash and Ordinary Shares at an initial conversion rate of 17.1703 shares per $1,000 principal amount in accordance with the terms of the indenture.  This conversion rate is equal to a conversion price of approximately $58.24 per Ordinary Share.

(B)Related Party Transactions

Set forth below is a summary of certain agreements that have been entered into or transactions that have occurred, since the beginning of the Company’s preceding three financial years, involving us and any of our subsidiaries, affiliates or key management.

Restructuring of Relationship with Majority Shareholder

On July 3, 2001, we announced the restructuring of our majority shareholder, SIIL, and the resolution of certain matters with SIIL and certain of its shareholders.  Pursuant to the restructuring, SIIL was dissolved and its shareholders received interests in us directly proportionate to their interests in SIIL.  SIIL was owned in equal thirds

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by Kersaf, Caledonia and WLG, a company controlled by a Kerzner family trust.  SIIL previously was governed by a shareholders agreement pursuant to which all major decisions of SIIL required the unanimous consent of its shareholders.  Kersaf operates a number of hotel, casino and resort properties in southern Africa under the “Sun International” name and there had been some confusion regarding the use of the “Sun International” name by both Kersaf and us.  In October 2001, we commenced a lawsuit against Kersaf and certain of its subsidiaries.  See “Item 8.  Financial Information, (A) Consolidated Statements and Other Financial Information—Legal Proceedings—Kersaf Litigation.”  In November 2002, we reached a further settlement with SIIL’s former shareholders to resolve certain outstanding issues.  See below “Global Settlement.” As part of the July 2001 restructuring:

•The SIIL shareholders agreement was terminated effective July 3, 2001, and SIIL was dissolved in May 2002.  SIIL’s former shareholders now hold their shares in us directly.

•CMS, a partner in Kersaf’s hotel, casino and resort management activities in southern Africa, obtained options to purchase a portion of our Ordinary Shares owned by Kersaf.  As part of the restructuring agreements, Heinrich von Rantzau, a principal of CMS, joined our Board of Directors.

•Kersaf, Caledonia and WLG agreed to certain standstill provisions through June 2006 pursuant to which each of them would refrain from proposing or consummating certain extraordinary corporate transactions involving us, including any merger or the sale of substantially all of our assets.  See below “Registration Rights and Governance Agreement.”

•Pursuant to a registration rights and governance agreement, we granted certain registration rights to Kersaf, Caledonia, WLG, CMS and certain of their respective affiliates, and Kersaf agreed to sell not less than 2.0 million of our Ordinary Shares in a registered public offering before June 30, 2002 (which date was subsequently extended to February 28, 2003), subject to certain extensions.  Kersaf satisfied this obligation by completing the Kersaf Offering on December 18, 2002.  See below “Global Settlement.”

•The duration of appointment of our directors, consisting of Mr. S. Kerzner, Mr. Buckley, Mr. Siegel, Mr. Marks and Mr. von Rantzau, were extended until our annual general shareholders meeting in 2004.

•We agreed that, after a transition period not to exceed one year from July 3, 2001, we would cease using the names “Sun” and “Sun International” and, as between the parties, Kersaf would have exclusive rights to use such names.  In July 2002, we changed our corporate name to Kerzner International Limited.  We do not believe that we have experienced any change in our business or operations as a result of the name change.

•Kersaf was granted the right to pursue a potential resort development project in Port Ghalib, Egypt, and we would have received between 25% and 50% of Kersaf’s gross receipts from this project when and if it was consummated.  However, as part of the November 2002 settlement, we relinquished all of our rights to an interest in this project.  See below “Global Settlement.”

•In July 2001, Kersaf made a one-time payment of $3.5 million to us and issued a secured note to us with a principal amount of $12.0 million and a maturity date of June 30, 2003.  In December 2001, Kersaf repaid in full the principal amount of the note and accrued interest.

•Kersaf agreed to continue to make an annual payment to us pursuant to a long-term contract, which payment was approximately $3.3 million in 2003 and 2002.  See below “—Long-Term Contract Fees.” As part of the November 2002 settlement, Kersaf’s obligation to make this payment was terminated effective December 2, 2002.

Global Settlement

In November 2002, we entered into a settlement agreement with Kersaf and certain of our other principal shareholders that, among other things, settled certain outstanding claims that we had with Kersaf and amended certain provisions of the July 2001 restructuring agreements relating to our former majority shareholder described in “Restructuring of Relationship with Majority Shareholder” above.  As part of the July 2001 restructuring agreements, Kersaf agreed to, among other things, sell at least 2.0 million of our Ordinary Shares in a registered public offering, adhere to a certain non-compete agreement, continue to make an annual payment to us pursuant to a long-term contract, which payment was approximately $3.3 million in 2003 and 2002, and grant us an interest in a proposed project in Port Ghalib, Egypt.  In October 2001, we filed a lawsuit in New York against Kersaf and certain

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of its affiliates alleging, among other things, that Kersaf had breached its non-compete obligation under the July 2001 restructuring agreements.  As part of the November 2002 settlement agreement:

•We agreed to terminate the outstanding lawsuit related to Kersaf and certain of its affiliates, and each of the parties to the settlement agreement released all other parties to the settlement agreement from any and all claims, subject to certain limited exceptions;

•Certain contractual arrangements were terminated, including Kersaf’s non-compete agreement and Kerzner’s rights in Kersaf’s project in Port Ghalib, Egypt;

•Kersaf paid us $32.0 million, plus interest accruing at a rate of 7.0% per annum from December 2, 2002, out of the proceeds of the Kersaf Offering in full satisfaction of a note delivered to us in connection with the settlement agreement;

•The date by which Kersaf was obligated to sell at least 2.0 million of our Ordinary Shares in a registered public offering was extended from October 31, 2002 to February 28, 2003, which obligation was satisfied by Kersaf by completing the Kersaf Offering on December 18, 2002; and

•Kersaf’s obligation to make the annual payment referred to above was terminated effective December 2, 2002.

Registration Rights and Governance Agreement

As part of the SIIL reorganization, we entered into a registration rights and governance agreement with Kersaf, WLG, Caledonia, CMS and certain of their respective affiliates, which was amended as part of the November 2002 settlement.  This agreement, and a related proxy, governs the voting of Kersaf’s Ordinary Shares that are subject to a proxy discussed above in “(A) Major Shareholders.” Among other things, under this agreement, as amended:

•Kersaf, Caledonia, WLG and CMS agreed to certain transfer restrictions that generally limit the ability of each party to purchase or sell our Ordinary Shares.  As part of the November 2002 settlement, this agreement was modified so that Kersaf will no longer have the right to enforce these transfer restrictions.

•Each of Kersaf, Caledonia, CMS, WLG and certain of their respective affiliates were granted certain demand registration rights that may require us to register all or part of their Ordinary Shares of Kerzner in one or more registered public offerings from time to time as follows:  (i) Kersaf agreed to sell not less than 2.0 million of our shares in a registered public offering before June 30, 2002 (which date was subsequently extended to February 28, 2003), subject to certain extensions (the “Minimum Year One Sale”), (ii) following such offering, Kersaf and certain of its affiliates have one or more demand registration rights each covering no less than 1.0 million Ordinary Shares, (iii) following March 31, 2002, Caledonia and certain of its affiliates have one or more demand registration rights each covering no less than 1.0 million Ordinary Shares, (iv) following June 30, 2003, WLG and certain of its affiliates have one demand registration right covering no less than 0.5 million Ordinary Shares and, following the earlier of June 30, 2004, and the date Caledonia and certain of its affiliates have disposed of 2.5 million of their Ordinary Shares, one or more demand registration rights each covering no less than 1.0 million Ordinary Shares, and (v) following March 31, 2002, CMS and certain of its affiliates have one or more demand registration rights each covering no less than 1.0 million Ordinary Shares.  Kersaf satisfied the Minimum Year One Sale by completing a secondary offering of 2.3 million of our Ordinary Shares on December 18, 2002.

•Each of Kersaf, Caledonia, CMS and WLG were granted the right to sell certain of their Ordinary Shares through our brokers in open market transactions.

•We submitted to our shareholders an amendment to our articles of association that was adopted in September 2001 and set the term of our existing directors to expire at our annual general meeting in 2004.

•We agreed to include in the slate of directors submitted by us to our shareholders for election one individual designated by each of WLG, Caledonia and CMS, subject to their retaining a minimum beneficial ownership of our Ordinary Shares.

•Kersaf has agreed until June 30, 2006 not to acquire any of our shares.  In addition, subject to certain rights of first refusal as between themselves, each of Caledonia, WLG and CMS has agreed not to acquire any

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additional shares of Kerzner in excess of 0.9 million, in the case of Caledonia and WLG, and 4.0 million, in the case of CMS, prior to June 30, 2006, in each case subject to certain exceptions.

•Kersaf, Caledonia, CMS and WLG agreed to refrain from proposing or consummating certain extraordinary corporate transactions involving us, including any merger or the sale of substantially all of our assets, unless an independent third party proposes such an extraordinary corporate transaction and our Board of Directors determines to enter into discussions or negotiations with that third party.

This summary is qualified in its entirety by reference to the particular provisions of the registration rights and governance agreement, which can be found as Exhibit 10.8 to our registration statement on Form F-4 filed on September 21, 2001, and the settlement agreement, which can be found as Exhibit 99.2 to our Form 6-K filed on November 8, 2002, both of which you should review carefully.

Harborside at Atlantis

In 2000, we entered into a series of promissory notes with Harborside at Atlantis to fund 50% of the construction cost of the timeshare units on Paradise Island in The Bahamas.  These notes amounted to $16.5 million at December 31, 2004.  The largest amount of loans outstanding at any one time to Harborside at Atlantis was $25.0 million during 2001.  We earn interest on these advances at a rate equal to one-month LIBOR plus 250 basis points, which was 4.9% at December 31, 2004.  The loans were made simultaneously with loans from Starwood, which mirror the amounts, terms and conditions of our loans.  Our loans and the Starwood loans are pari passu with respect to payments of principal and accrued interest and such payments will be made in cash, as it is available from the sale of timeshare units.  Of the amount advanced to Harborside at Atlantis, the Company does not anticipate repayment within the next twelve months.

We provide marketing, administrative and development services to Harborside at Atlantis from which we earned fees of $2.8 million, $1.8 million and $1.6 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Management Services and Fees

We provide development, management and marketing services to SRL, a Mauritius company in which we own a 20.4% equity interest, and to all resorts owned by SRL, through 2023.  The management services we provide to SRL are subcontracted to Kerzner by One&Only Management, a company owned 75% by us and 25% by SRL as of January 1, 2005.  We provide all development and marketing services to SRL and receive fees for providing such services.

We assigned to One&Only Management the management agreement for the One&Only Kanuhura, a Maldives company, in which we initially owned a 25% equity interest.  As of January 1, 2005, our ownership interest in the One&Only Kanuhura further decreased to 18.75% and SRL’s interest increased to 6.25%, as SRL purchased an additional 1.25% interest from us.  Pursuant to a subcontract agreement with One&Only Management, we provide comprehensive management services to the One&Only Kanuhura.  The terms of the management agreement run concurrent with the terms of a lease between the One&Only Kanuhura and the government of the Maldives to lease the One&Only Kanuhura.  That lease expires in 2026 and is subject to extension.  Similar to our agreements in Mauritius, we provide all development and marketing services to the One&Only Kanuhura.

We provide management services to the One&Only Palmilla, a deluxe, five-star property located near Cabo San Lucas.  In connection with the purchase of our 50% ownership interest in the One&Only Palmilla, we entered into long-term management and development agreements related to the property that will expire in 2022.

We provide management services to the One&Only Royal Mirage, a luxury 466-room hotel in Dubai, pursuant to a long-term management agreement with the Government of Dubai that will expire in 2019.

In June 2002, we entered into management and development agreements for the One&Only Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives that we expect to open in the second quarter of 2005.  The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2020.  SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (effective January 1, 2005 and the participation of SRL increased to 25%) with us in connection with the One&Only Reethi Rah.  We expect to transfer the management agreement for the One&Only Reethi Rah to One&Only Management.  See “Item 5. Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for further information.

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We provide management services to Harborside at Atlantis, a joint venture in which we own a 50% equity interest.

We also have management, development and/or marketing agreements with respect to each of Atlantis, The Palm (see “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm”) and the One&Only Cape Town (see “Item 4.  Information on the Company, (B) Business Overview—The Properties—One&Only—South Africa”).  As of December 31, 2004, we had not recognized any management, development or marketing fees associated with these projects, other than the $0.4 million in development fees related to Atlantis, The Palm.

Office Lease

Effective February 2002, we entered into a lease agreement with Tennyson Properties Limited, which we believe was an arm’s length transaction, whereby we are leasing office space in Buckinghamshire in the United Kingdom for a period of 15 years.  The annual rent is approximately £205,000 (which is the equivalent of approximately $395,000 at December 31, 2004) and is subject to increase every five years to the current fair market value.  Tennyson Properties Limited is owned by a family trust established by Mr. S. Kerzner.

Long-Term Contract Fees

As part of the restructuring of our then majority shareholder, SIIL, Kersaf agreed to pay us $32.1 million in December 2002.  Of this amount, $14.7 million (which represents the future payments that were to be received over the term of the underlying agreements from 2005 to 2008) is classified as deferred revenue as of December 31, 2004.  This long-term contract fee payment was established at $2.4 million in 1994 and increased at a rate of 3.3% per year and was paid annually.  We received our last payment on December 2, 2002, and pursuant to the settlement agreement with Kersaf, described above in “Global Settlement,” Kersaf’s obligation to make payments was terminated effective as of that date.  See Note 20—Gain on Settlement of Territorial and Other Disputes in the accompanying consolidated financial statements.

(C)Interests of Experts and Counsel

Not applicable.

Item 8.Financial Information

(A)Consolidated Statements and Other Financial Information

Please refer to Item 18 for our consolidated financial statements and the report of the independent registered public accounting firm.

Legal Proceedings

Other Litigation

The Company is involved in certain litigation and claims incidental to its business.  The Company does not believe, based on currently available information, that these matters will have a material adverse effect on the accompanying consolidated financial statements.

Enforceability Of Civil Liabilities

We are a Bahamian international business company incorporated under the International Business Companies Act, 2000 of the Commonwealth of The Bahamas.  Certain of our directors and executive officers reside outside the United States.  A substantial portion of the assets of such persons and most of our assets are located outside the United States.  As a result, in the opinion of Harry B. Sands and Company, our Bahamian counsel, it may be difficult or impossible to effect service of process within the United States upon such persons, to bring suit in the United States or to enforce, in U.S. courts, any judgment obtained there against such persons predicated upon any civil liability provisions of U.S. federal securities laws.  It is unlikely that Bahamian courts would entertain original actions against Bahamian companies, their directors or officers predicated solely upon U.S. federal securities laws.  Furthermore, judgments predicated upon any civil liability provisions of the U.S. federal securities laws are not directly enforceable in The Bahamas.  Rather, a lawsuit must be brought in The Bahamas on any such judgment.  Subject to consideration of private international law, in general, a judgment obtained after due trial by a court of competent jurisdiction, which is final and conclusive as to the issues in connection, is actionable in Bahamian courts and is impeachable only upon the grounds of (i) fraud, (ii) public policy and (iii) natural justice.

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Gaming debts may not be legally enforced in certain foreign jurisdictions or in certain jurisdictions within the United States.  As a result, we may be unable to collect gaming debts from patrons of our casinos who reside in such jurisdictions.

Dividend Policy

Pursuant to our Articles of Association, the Board of Directors may from time to time declare dividends.  We historically have not paid dividends and there are currently no plans to declare any dividends.

(B)Significant Changes

Except as otherwise disclosed in this Annual Report, there has been no significant change in our financial position since December 31, 2004.

Item 9.The Offer and Listing

(A)Offer and Listing Details

The Ordinary Shares do not trade on any foreign exchange.  The Ordinary Shares have been listed and traded on the NYSE since March 1, 1996.  On March 24, 2005, the closing price of our Ordinary Shares on the NYSE was $60.60.

The following tables set forth the range of high and low closing sale prices of the Ordinary Shares as reported on the NYSE during the periods shown.

For the year:

	High		Low
2004	$	62.75	$	38.47
2003	39.02		19.37
2002	31.20		18.80
2001	28.50		17.13
2000	23.75		15.88

For the quarter:

		High		Low
2004:	4th quarter	$	62.75	$	44.50
	3rd quarter	48.04		42.00
	2nd quarter	47.56		41.41
	1st quarter	46.46		38.47
2003:	4th quarter	39.02		34.78
	3rd quarter	37.60		30.11
	2nd quarter	32.21		22.25
	1st quarter	23.45		19.37

For the month:

	High		Low
2005 February	$	66.90	$	61.60
2005 January	60.33		56.05
2004 December	62.75		56.84
2004 November	57.75		50.92
2004 October	51.03		44.50
2004 September	44.58		42.00

(B)Plan of Distribution

Not applicable.

(C)Markets

Since March 1, 1996, our Ordinary Shares have been listed and traded on the NYSE.  Our Ordinary Shares are not listed on and do not trade on any other exchange.

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In July 2004, we completed an equity offering in The Bahamas of approximately 4.3 million BDRs, which are the equivalent of approximately 0.4 million Ordinary Shares.  The BDRs are listed and trade on The Bahamas International Securities Exchange.

(D)Selling Shareholders

Not applicable.

(E)Dilution

Not applicable.

(F)Expenses of the Issue

Not applicable.

Item 10.Additional Information

(A)Share Capital

Not applicable.

(B)Memorandum and Articles of Association

On March 24, 2005, the Company amended and restated its Articles of Association including, in part, the provisions of Article 93 related to circumstances and procedures pursuant to which the Company may force a Company securities holder who has been found disqualified by a Gaming Authority with jurisdiction over the Company to dispose of its securities.  A copy of our Amended and Restated Articles of Association is filed herewith as Exhibit 1.1(b).

The Restated Articles of Association of Kerzner, dated as of June 26, 2001, were filed with the SEC as an exhibit to our Form 20-F Annual Report for the year ended December 31, 2000 in file number 1-04226.  Subsequent amendments, dated as of September 24, 2001, to these Restated Articles of Association were filed with the SEC with our proxy statement for the annual general meeting held on September 24, 2001.

The Amended and Restated Memorandum of Association of Kerzner was filed with the SEC as an exhibit to our Registration Statement on Form F-4, filed on November 1, 1996 in file number 333-15409.  A subsequent amendment, dated as of May 17, 2002, to this Amended and Restated Memorandum of Association was filed with the SEC as an exhibit to our Registration Statement on Form F-4/A, filed on August 12, 2002 in file number 333-96705.

A description of certain provisions of the Company’s Amended and Restated Memorandum of Association and Restated Articles of Association is incorporated by reference to the “Description of Capital Stock” section of the Company’s Form F-3 filed with the SEC on May 23, 2002 in file number 333-88854.

Kerzner is registered under number 46,600B at the Companies Registry of The Bahamas.  Kerzner’s purpose, as stated in the Memorandum, is “to engage in any act or activity that is not prohibited under any law for the time being in force in the Commonwealth of The Bahamas.”

(C)Material Contracts

The following is a summary of each material contract in which we or any of our subsidiaries have been a party to for the past two years.

Heads of Agreement

On May 26, 2003, Kerzner entered into a new Heads of Agreement with the Government of The Bahamas.  In May 2004 and December 2004, we entered into supplements to the Heads of Agreement, pursuant to which we modified certain components involved in the Phase III expansion, which now includes a new luxury all-suite hotel, an expansion of our convention facilities, expanded water attractions and an addition to Harborside at Atlantis.  A description of the Heads of Agreement, as supplemented, and the Phase III expansion can be found at “Item 4.  Information on the Company, (B) Business Overview—Certain Matters Affecting Our Bahamian Operations—Heads of Agreement” and “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, Paradise Island.”

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2.375% Convertible Senior Subordinated Notes Indenture

In April 2004, Kerzner issued $230.0 million principal amount of 2.375% Convertible Senior Subordinated Notes due 2024 which, after related issuance costs, resulted in net proceeds of approximately $223.7 million.  All of the proceeds received from the issuance of the 2.375% Convertible Senior Subordinated Notes will be used to fund future capital expenditures and for general corporate purposes.

The 2.375% Convertible Senior Subordinated Notes may be converted into cash and Ordinary Shares at an initial conversion rate of 17.1703 shares per $1,000 principal amount in accordance with the terms of the indenture.  This conversion rate is equal to a conversion price of approximately $58.24 per Ordinary Share.

The 2.375% Convertible Senior Subordinated Notes, which are unsecured obligations, are not guaranteed by any of Kerzner’s subsidiaries and therefore are effectively subordinated to the subsidiary guarantees of the 87/8% Senior Subordinated Notes.  Interest on the 2.375% Convertible Senior Subordinated Notes is payable semi-annually and commenced on October 15, 2004.

87/8% Senior Subordinated Notes Indenture

On August 14, 2001, Kerzner and KINA (together, the “Companies”) issued $200.0 million principal amount of 87/8% Senior Subordinated Notes due 2011, which, after costs, resulted in net proceeds of approximately $194.0 million.  All of proceeds received from the issuance of the 87/8% Senior Subordinated Notes were used to repay amounts outstanding under our then-existing amended and restated revolving credit facility.

In May 2002, the Companies issued an additional $200.0 million principal amount of 87/8% Senior Subordinated Notes and used the proceeds to repay the Companies outstanding 9% Senior Subordinated Notes pursuant to the Tender Offer, Consent Solicitation and Redemption of such notes described above.

The 87/8% Senior Subordinated Notes, which are unsecured obligations, are unconditionally guaranteed by substantially all of the wholly owned subsidiaries of Kerzner and KINA.  Interest on the 87/8% Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002.  The indenture for the 87/8% Senior Subordinated Notes contains certain covenants, including limitations on the ability of the Companies to, among other things:  (i) incur additional indebtedness, (ii) incur certain liens and (iii) make certain other restricted payments.

Amended Credit Facility

On July 7, 2004, Kerzner, KINA and KIB, as co-borrowers, entered into an amended and restated revolving credit facility with a syndicate of lenders.  This facility is described in “Item 4.  Information on the Company, (A) History and Development of the Company—Amended Credit Facility.”  We had no borrowings outstanding as of December 31, 2004 under the Amended Credit Facility.  Our availability as of December 31, 2004 was $494.0 million, due to the $6.0 million in outstanding letters of credit.  In February 2005, we further amended the Amended Credit Facility (i) to conform its description of the Phase III expansion to that included in the Heads of Agreement, as supplemented in December 2004, (ii) to provide for the release from the liens granted to the holders of the property required for the proposed condo-hotel and Ocean Club Residences & Marina and (iii) to allow a deposit of up to $74.0 million of our cash and cash equivalents to secure our obligation to contribute equity capital to Atlantis, The Palm.

Mohegan Sun Agreements

In February 1998, TCA and the Mohegan Tribe entered into the Relinquishment Agreement pursuant to which TCA receives the Relinquishment Fees and a development services agreement pursuant to which TCA agreed to develop the Project Sunburst expansion for a $14.0 million development fee.  These agreements are described in “Item 4.  Information on the Company, (A) History and Development of the Company.”

Atlantis, The Palm

On September 22, 2003, we entered into agreements to form a joint venture with Nakheel LLC, an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  On June 23, 2004, we entered into an agreement with Istithmar, an entity indirectly wholly owned by the Royal Family of Dubai, which has assumed all obligations and rights of its affiliate, Nakheel LLC.  We and Istithmar have each agreed to invest $100.0 million in the form of Class A common stock in the joint venture, and Istithmar has agreed to underwrite $200.0 million of the joint venture’s limited voting Class B common stock.  In addition, each of Istithmar and Kerzner will provide, on a joint and several

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basis, additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.  In addition to the joint and several sponsor support, Istithmar has agreed to provide a $100.0 million guarantee to cover any post-completion debt service obligations over $55.0 million. Further, Istithmar has agreed to provide an additional guarantee for cost overruns over $55.0 million.  The balance of the financing is expected to be obtained through a $700.0 million syndicated term loan facility that is limited recourse to Kerzner.  The closing of the term loan facility is expected to occur in the second quarter of 2005.  The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the necessary financing.  See “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm” for further information.

Management and Development Agreements

In November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop the One&Only Cape Town, a new luxury hotel at the highest end of the market in Cape Town, South Africa.  We intend to form a joint venture in which we will own a minority interest to develop and operate this 163-room One&Only luxury hotel.

In September 2003, we agreed to form a joint venture with Nakheel LLC to develop Atlantis, The Palm.  See “Item 4.  Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm.”  As part of the transaction, Kerzner has agreed to enter into a long-term management agreement and has entered into a development agreement with a subsidiary of Kerzner Istithmar that entitles us to receive $20.0 million and reimbursement of certain expenses over the development period of Atlantis, The Palm.  We currently have a 50% ownership interest in Kerzner Istithmar, and as such, we expect to recognize $10.0 million in development fees over the development period.

In September 2002, we purchased a 50% ownership interest in the 115-room the One&Only Palmilla, a deluxe, five-star property located near Cabo San Lucas in Baja, Mexico for approximately $40.8 million, including transaction costs.  In connection with the purchase, we entered into long-term management and development agreements related to the property that will expire in 2022.  In connection with the expansion of the resort, we guaranteed $46.5 million of the debt-financing that the One&Only Palmilla obtained from third-parties.  In 2004, we also provided the One&Only Palmilla with approximately $14.5 million of completion loans.  On December 17, 2004, the One&Only Palmilla entered into two promissory notes pursuant to which it borrowed $110.0 million and all of the One&Only Palmilla’s existing loans were repaid, including Kerzner’s completion loans, and Kerzner’s $46.5 million guarantee was extinguished.  The new indenture governing the promissory notes provides recourse to Kerzner in the event certain representations and warranties are violated.  See “Item 5.  Operating and Financial Review and Prospects, (C) Operating Results—Off-Balance Sheet Arrangements.”  In connection with the operating agreement related to the One&Only Palmilla, the owner of the other 50% interest has the right to require us to acquire its 50% interest for a price of $36.3 million, plus 50% of the One&Only Palmilla’s working capital, with the price subject to adjustment, during the first year of the option period.  See “Item 5.  Operating and Financial Review and Prospects, (F) Tabular Disclosure of Contractual Obligations.”

In June 2002, we entered into management and development agreements for the One&Only Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives, that we expect to open in the second quarter of 2005.  The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2020.  SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (effective January 1, 2005, increased to 25%) with us in connection with the One&Only Reethi Rah.  We expect to transfer the management agreement for the One&Only Reethi Rah to One&Only Management.  As part of this development, we have committed to provide certain financing arrangements to the current owner.  See “Item 5.  Operating and Financial Review and Prospects, (B) Liquidity and Capital Resources—Off-Balance Sheet Arrangements.”

We have long-term management agreements with each of five hotels in Mauritius that are owned by SRL:  the One&Only Le Saint Géran, the One&Only Le Touessrok, Sugar Beach Resort, La Pirogue Hotel and Le Coco Beach Hotel.  The term of each of these management agreements was extended from 2008 until 2023 in December 2002 when we entered into an agreement with SRL to form One&Only Management for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives.  As of January 1, 2005, One&Only Management was owned 75% by us and 25% by SRL.  Subject to certain conditions, SRL’s ownership interest will increase incrementally through 2009, for no additional consideration, at which time it will own 50% of One&Only Management.  In connection with the formation of

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One&Only Management, we subcontracted to it all of our Mauritius management agreements and assigned to it the One&Only Kanuhura management agreement, and SRL purchased 20% of our debt and equity interests in the One&Only Kanuhura.  As of January 1, 2005, our ownership interest in the One&Only Kanuhura further decreased to 18.75% and SRL’s interest increased to 6.25%, as SRL purchased an additional 1.25% interest from us.  Pursuant to an additional subcontract arrangement with One&Only Management, we provide comprehensive management services to the five Mauritius resorts and receive a management fee calculated as a percentage of revenues and adjusted EBITDA, as defined.  One&Only Management also is entitled to a marketing fee calculated as a percentage of revenues, although it has subcontracted to us all marketing services and benefits thereof with respect to the five Mauritius resorts.

In July 2001, we entered into a management agreement to provide comprehensive management services to the One&Only Kanuhura in the Maldives.  In connection with the formation of One&Only Management, we assigned the One&Only Kanuhura management agreement to One&Only Management, which subsequently subcontracted such agreement back to us.  The management fee is calculated as percentages of revenue and adjusted EBITDA and it expires in 2026.  One&Only Management also receives a marketing fee calculated as a percentage of revenues, although it has subcontracted to us all marketing services, and related benefits with respect to the One&Only Kanuhura.  See “Item 5.  Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for further information.

We have a management agreement to manage the expanded One&Only Royal Mirage Hotel in Dubai, which originally opened in August 1999.  Pursuant to this agreement, we receive a management fee calculated as a percentage of revenues and gross operating profits, as defined.  The management fee schedule may be renegotiated after 10 years.  This management agreement expires in 2019.

Harborside at Atlantis Joint Venture

In 1999, we formed a joint venture with SVO (formerly Vistana, Inc.) a subsidiary of Starwood, to develop a timeshare project on Paradise Island adjacent to Atlantis, Paradise Island called Harborside at Atlantis.  We and SVO each hold a 50% interest in Harborside at Atlantis.  We have a marketing agreement in connection with Harborside at Atlantis, pursuant to which we receive marketing fees based on a percentage of timeshare sales.  We also receive development fees in connection with a development agreement with Harborside at Atlantis, pursuant to which we receive fees based on a percentage of the total construction costs.

Purchase Agreement between the Company and Colony

The Purchase Agreement among KINA, as parent, GGRI, Inc., as Seller and Colony as Buyer (the “Purchase Agreement”) was dated October 30, 2000.  The contract was entered into between the parties to effect the Resorts Atlantic City Sale described in “Item 4.  Information on the Company, (A) History and Development of the Company.”  The Resorts Atlantic City Sale was completed on April 25, 2001, for a purchase price of approximately $144.5 million, including accrued interest (the “Resorts Atlantic City Sale”).  The proceeds received from Colony consisted of approximately $127.0 million in cash and an unsecured $17.5 million note which was paid in full in March 2002.

Pursuant to the terms of the Resorts Atlantic City Sale, we granted Colony a two-year option (the “Atlantic City Option”) to acquire certain undeveloped real estate adjacent to Resorts Atlantic City that we previously owned for a purchase price of $40.0 million.  In February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we sold the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary (the “Purchaser”) of Colony RIH Holdings, Inc. for a purchase price of $40.0 million.  The sale was completed on March 18, 2004.  The purchase price was paid in the form of a promissory note which matures on March 10, 2009 (the “NJ Note”).  The NJ Note began accruing interest on September 30, 2004 at a rate of 4.0%, which rate steps up at various intervals from the closing date of the transaction.  All principal and interest due under the NJ Note is due on March 10, 2009, which date may be accelerated by us upon certain events.  The NJ Note is secured by a first mortgage on the property sold and is guaranteed by Colony RIH Holdings, Inc. (the direct parent company of the Purchaser) initially in an amount limited to $20.0 million, which will generally increase in increments of $5.0 million annually.  The NJ Note will also be guaranteed by Resorts International Hotel and Casino, Inc.  This guarantee will go into effect when that company’s outstanding public indebtedness, which is due on March 9, 2009, has been paid.

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NY Project Development Services Agreement

In March 2001, TCNY entered into a Development Services Agreement with the Stockbridge-Munsee Tribe for the development of a casino project in the Catskills region of the State of New York.  The Development Agreement was amended and restated in February 2002 and subsequently amended in both October and December 2004.  Pursuant to the Development Agreement, as amended, TCNY will provide preliminary funding, certain financing and exclusive development services to the Stockbridge-Munsee Tribe in conjunction with the Catskills Project.  If the Catskills Project is approved and ultimately developed, TCNY will earn a development fee of 5% of gross revenues (as defined in the Development Agreement) as compensation for its services (subject to certain priorities), beginning with the opening of the Catskills Project and continuing for a period of twenty years.  See “Item 4. Information on the Company, (B) Business Overview—Gaming—Trading Cove New York” for more information.

Internet Gaming Agreement

In February 2002, we agreed to sell 50% of Kerzner Interactive Limited to Station, who paid us a non-refundable deposit of $4.5 million in July 2002.  Subsequently, this agreement was restructured and Station received an option through early January 2003 to purchase 50% of the operation in consideration for the $4.5 million previously received.  Since that time, we concluded that this business would not be economically viable in the short to medium term.  We discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003 and the Company and Station mutually agreed to terminate this transaction.  See “Item 4.  Information on the Company, (B) Business Overview—Internet Gaming” for more information.

Northampton, England-Gaming License

On April 9, 2003 we announced that we had agreed to acquire from LCI for $2.1 million a property located in the city center of Northampton, England.  On March 30, 2004, we announced that the Gaming Board of Great Britain had granted us a Certificate of Consent, which has enabled us to transfer a gaming license held by LCI into our name and proceed with our plans for a casino in Northampton.  In February 2005, the Northampton project was approved by the local planning authorities and we have commenced construction on this project.  We expect to develop and operate the new casino facility on an approximate 30,000 square foot site.  See “Item 4.  Information on the Company, (B) Business Overview—Gaming—United Kingdom” for more information.

Development of Resort Casinos in London, East Manchester and Glasgow

On July 13, 2004, we announced our appointment as the preferred developer and/or operator with respect to the development and management of gaming, hotel and entertainment facilities for two sites in two key markets in the United Kingdom.  The sites for the projects are the Scottish Exhibition + Conference Centre in Glasgow and Sportcity in East Manchester.  We are negotiating binding agreements for both of these projects.  If these projects do not proceed, we will be required to write-off certain costs that have been incurred (as of December 31, 2004, we had approximately $10.4 million on our balance sheet with respect to these projects).

In addition, on July 13, 2004, we also announced that we had entered into a binding agreement with affiliates of Anschutz Entertainment Group for the development and operation of a casino and hotel resort facility at the Millennium Dome in London.  Pursuant to our agreement with Anschutz Entertainment Group, we plan to develop and operate an approximately $350.0 million resort casino and hotel.  See “Item 4.  Information on the Company, (B) Business Overview—Gaming—United Kingdom” for more information on these projects.

Morocco, Destination Resort

On July 22, 2004, we announced that Kerzner and two local Moroccan companies, SOMED and CDG, had entered into an agreement with the Government of the Kingdom of Morocco that contemplates the creation of a joint venture that will own a destination resort casino in Morocco that we will develop and manage.  In addition, Kerzner, SOMED and CDG entered into an Agreement in Principle with respect to the ownership, development and management of this resort.  The agreement with the Government and the Agreement in Principle are both subject to obtaining third-party financing and the satisfactory negotiation of definitive documents with our prospective Moroccan partners.  The cost of the project is estimated at $230.0 million.  We will initially own 50% of the joint venture, requiring Kerzner to commit up to approximately $47.0 million.  See “Item 4.  Information on the Company, (B) Business Overview—Destination Resorts—Morocco” for more information on this project.

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Bahamas Union Contract Arrangements

In The Bahamas, as of December 31, 2004, approximately 3,600 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.  Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area.  The association and the union are parties to a contract that expires on January 7, 2008.

(D)Exchange Controls

The Central Bank of The Bahamas (the “Central Bank”) must approve any payments made to companies, including us, which are non-resident companies for exchange control purposes.  The Central Bank has granted approved investment status in respect of our holding of the capital stock of our Bahamian subsidiaries.  The granting of such status will mean that all payments of a current nature, including the repatriation of dividends or other distributions to us out of the revenues of our Bahamian subsidiaries and any proceeds received on the sale of such subsidiaries will be routinely approved by the Central Bank following proper application.  Any other payments to us by our Bahamian subsidiaries will require standard approval by the Central Bank.

There currently are no limitations on the right of nonresident or foreign owners to hold or vote the Ordinary Shares imposed by foreign law or by our Articles of Association.

(E)Taxation

Certain U.S. Federal Income Tax Considerations

The following is a general discussion of certain U.S. federal income tax consequences to the acquisition, ownership and disposition of Ordinary Shares.  For purposes of this discussion, a “U.S. Holder” means an individual citizen or resident of the United States, a corporation or entity treated as a corporation organized under the laws of the United States or of any state or political subdivision thereof, or an estate or trust the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

Rules regarding partnerships are complex.  Partners in partnerships should consult their tax advisers regarding the implications of owning Ordinary Shares.

This discussion is not intended to be exhaustive and is based on statutes, regulations, rulings and judicial decisions currently in effect.  This discussion does not consider any specific circumstances of any particular U.S. Holder and applies only to U.S. Holders that hold Ordinary Shares as a capital asset.  Investors are urged to consult their tax advisers regarding the U.S. federal tax consequences of acquiring, holding and disposing of Ordinary Shares, as well as any tax consequences that may arise under the laws of any foreign, state, local or other taxing jurisdiction.

Ownership of Ordinary Shares

Dividends on Ordinary Shares paid to U.S. Holders will be treated as dividend income for U.S. federal income tax purposes to the extent of our undistributed current or accumulated earnings and profits as computed for U.S. federal income tax purposes.  In the case of an individual U.S. Holder, such dividend income will be eligible for a maximum tax rate of 15% for dividends received before January 1, 2009, provided that such holder holds the Ordinary Shares for at least 60 days of the 121-day period beginning 60 days before the date on which Ordinary Shares become ex-dividend with respect to such dividend and certain other conditions are satisfied.  Furthermore, such dividends will generally not be eligible for the dividends received deduction available to certain U.S. corporations under Section 243 of the Internal Revenue Code of 1986, as amended.

We are not a “passive foreign investment company” (a “PFIC”), a “foreign personal holding company” (an “FPHC”) or a “controlled foreign corporation” (a “CFC”) for U.S. federal income tax purposes.  We are not a CFC, since U.S. persons each owning (directly, indirectly or by attribution) 10% or more of the voting power or of our stock (“10% Shareholders”) do not collectively own more than 50% of the voting power or value of our stock, or an FPHC, since it is not the case that five or fewer individuals who are U.S. citizens or residents own (directly, indirectly, or by attribution) more than 50% of the voting power or value of our stock.  If more than 50% of the voting power or value of our stock were owned (directly, indirectly or by attribution) by 10% Shareholders, we would become a CFC and each such 10% Shareholder would be required to include in its taxable income as a constructive dividend an amount equal to its share of a portion of our undistributed income.  If more than 50% of the voting power or value of our stock were owned (directly, indirectly or by attribution) by five or fewer individuals who are citizens or residents of the United States and if at least 60% of our income consisted of certain interest,

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dividend or other enumerated types of income, we would be an FPHC.  If we were an FPHC, each U.S. Holder (regardless of the amount of stock owned by such U.S. Holder) would be required to include in its taxable income as a constructive dividend its share of our undistributed income of specified types.  If our foreign ownership interests were to decrease, or if U.S. persons were to acquire a greater ownership interest in our foreign stock holders, then it is possible that we could become a CFC or FPHC if we otherwise satisfied the tests set forth above.

We are not a PFIC because we do not anticipate that more than 75% of our annual gross income will consist of certain “passive” income or more than 50% of the average value of our assets in any year will consist of assets that produce, or are held for the production of, such passive income.  If such income and asset tests were not met and we were to become a PFIC, U.S. Holders would, in certain circumstances, be required to pay an interest charge together with tax calculated at maximum rates on certain “excess distributions” (defined to include any gain on the sale of stock).

If we were a FPHC or a PFIC, an individual U.S. Holder would not be eligible for the 15% tax rate on dividends discussed in the first paragraph of this section.  The FPHC rules were repealed by the American Jobs Creation Act of 2004, and cease to apply after December 31, 2004.

Any gain or loss on the sale or exchange of Ordinary Shares by a U.S. Holder will be a capital gain or loss.  If the U.S. Holder has held such Ordinary Shares for more than one year, such gain or loss will be a long-term capital gain or loss.

Annual filings of Form 5471 may be required from certain U.S. persons owning 10% or more of our stock.

Certain Bahamian Tax Considerations

The following is a brief and general summary of certain Bahamian tax matters as they may relate to the Company and the holders of the Ordinary Shares of the Company.  The discussion is not exhaustive and is based on Bahamian law currently in effect.

The Bahamas does not impose any income, capital gains or withholding taxes.  Therefore, the Company will not be subject to income tax in The Bahamas on an ongoing basis and if we were to pay dividends on Ordinary Shares to holders thereof, they would not be subject to a Bahamian withholding tax.  The Company, however, is subject to gaming taxes and other governmental fees and charges.  There are no reciprocal tax treaties with The Bahamas.

(F)Dividends and Paying Agents

Not applicable.

(G)Statement by Experts

Not applicable.

(H)Documents on Display

Kerzner is subject to the informational requirements of the Exchange Act and files reports and other information with the SEC.  You may read and copy all or any portion of the Annual Report and its exhibits at the public reference facilities maintained by the SEC, 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at its regional office at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.  You may request copies of all or any portion of these documents, upon payment of a duplication fee, by writing to the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.  You may obtain more information about the public reference room by calling the SEC at 1-800-SEC-0330.  Our reports and other information filed with the SEC are also available to the public from commercial document retrieval services and the website maintained by the SEC at www.sec.gov.

(I)Subsidiary Information

Please refer to “Item 4.  Information on the Company, (C) Organizational Structure” for a list of our significant subsidiaries.  A list of our significant subsidiaries is filed with this Annual Report as Exhibit 8.  See “Item 19.  Exhibits.”

Item 11.Quantitative and Qualitative Disclosures About Market Risk

Our major market risk exposure is interest rate risk directly related to our bank debt and interest rate swaps on our fixed rate debt.  As of December 31, 2004, we had interest rate swaps on $150.0 million of our fixed rate debt.

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We attempt to limit our exposure to interest rate risk by managing the mix of fixed and variable rate debt, and by entering into variable interest rate swap agreements to hedge a portion of our fixed rate debt.  See “Item 5.  Operating and Financial Review and Prospects, (B) Liquidity and Capital Resources—Interest Rate Swap Agreements” for further discussion.  These interest rate swap agreements are entered into with a number of financial institutions with investment grade credit ratings, thereby minimizing the risk of credit loss.

We prepare our financial statements in U.S. dollars.  Our most significant non-U.S. operations are in The Bahamas.  Due to current governmental policies in The Bahamas that equate one Bahamian dollar to one U.S. dollar, we believe that we do not have material market risk exposures in this jurisdiction relative to changes in foreign exchange rates.  Due to the stability of the other markets in which we operate, we also believe that we do not have material market risk exposures in these jurisdictions relative to changes in foreign exchange rates.

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment.  The fair value of fixed rate debt is based on the market value on the balance sheet date plus accrued interest to the last payment date.  The fair value of interest rate swaps is determined from representations of financial institutions and represents the discounted future cash flows through maturity or expiration using current rates, and is effectively the amount we would pay or receive to terminate the agreements.  We estimated the fair value of our $2.8 million Palmilla guarantee by calculating the net present value of the difference in cash flows of interest payments between the estimated interest amounts payable without the guarantee and the cash flows of those same interest payments with the guarantee, the difference representing the estimated fair value of the guarantee.

Interest Rate Sensitivity

The table below provides information about the Company’s derivative instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations.  For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates.  For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates.  Notional amounts are used to calculate the contractual payments to be exchanged under the contract.  Weighted average variable rates are based on implied forward rates in the yield curve at the reporting date.  The information is presented in U.S. dollar equivalents, which is the Company’s reporting currency.

December 31, 2004 (In Thousands of Dollars) Asset (Liability)																						Fair Value December 31, 2004
	Expected Maturity Date
	2005			2006			2007			2008			2009			Thereafter			Total
Fixed rate debt:
87/8% Notes	$	—		$	—		$	—		$	—		$	—		$	(400,000	)	$	(400,000	)	$	(443,915	)
Interest rate swaps:
Notional amount	$	—		$	—		$	—		$	—		$	—		$	150,000		$	150,000		$	11,839
Average pay rate (a)																						4.93		%
Average receive rate	8.875		%	8.875		%	8.875		%	8.875		%	8.875		%	8.875		%				8.875		%

(a)Based on average spreads ranging from 2.95-3.02% plus six-month LIBOR.

In connection with our interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense correspondingly changes by $1.5 million per annum.

Item 12.Description of Securities Other than Equity Securities

Not applicable.

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PART II

Item 13.Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15.Controls and Procedures

As of the end of the period covered by this report, the Company’s management (with the participation of its chief executive officer and chief financial officer) conducted an evaluation pursuant to Rule 13a-15 promulgated under the Exchange Act, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that as of the end of the period covered by this report such disclosure controls and procedures were reasonably designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the year ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

In the last two years, we have significantly enhanced our controls over financial reporting.  We added additional accounting professionals to our staff and improved the level of review of the application of accounting literature with respect to significant transactions.

Item 16A.Audit Committee Financial Expert

Our audit committee consists of Messrs. Buckley, Marks, Siegel and Kazim.  The Board of Directors has determined that our audit committee does not have an “audit committee financial expert,” as defined in new rules promulgated by the SEC.  Although a person with such qualifications does not serve on the audit committee, the Board of Directors believes that the members of the audit committee collectively possess the knowledge and experience to oversee and assess the performance of our management and auditors, the quality of our disclosure controls, the preparation and evaluation of our financial statements and our financial reporting.  Our Board of Directors also believes that the members of the audit committee collectively possess the understanding of audit committee functions necessary to diligently execute their responsibilities.  Biographical information for each member of the audit committee is available in Item 6.  Directors, Senior Management and Employees of this Annual Report.

Item 16B.Code of Ethics

We have a Code of Business Conduct and Ethics applicable to all of our employees, officers and directors (including our principal executive officer and our principal financial and accounting officer).  A copy of our Code of Business Conduct and Ethics is available in print on request and can be found as Exhibit 11.2 to our Annual Report on Form 20-F for the year ended December 31, 2003, filed on March 30, 2004.  Since its adoption in 2003, there have been no amendments or waivers to this Code of Business Conduct and Ethics.

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Item 16C.    Principal Accountant Fees and Services

The following table sets forth the aggregate fees billed or to be billed to us by Deloitte & Touche LLP or its affiliates, our principal accountants, for the following categories of fees from each of the last two years:

	2004		2003
	(in thousands)
Audit fees	$	1,533	$	1,633
Audit-related fees (1)	499		374
Tax fees (2)	780		125
Total fees	$	2,812	$	2,132

(1)Audit-related fees consist of fees related to the performance of audits and attest services not required by statute or regulations, audits of the Company’s benefit plans, due diligence services, advisory services related to Section 404 of the Sarbanes-Oxley Act of 2002, and financial accounting and reporting consultations.

(2)Tax fees consist of tax compliance, tax advice and tax planning services.

The audit committee has concluded that the provision of the non-audit services listed above is compatible with maintaining the independence of our principal accountants.

The audit committee is responsible for making a recommendation to shareholders for appointing and removing the independent auditor, setting their compensation and overseeing their work.  The audit committee has a policy for the pre-approval of all audit and permissible non-audit services provided by the independent auditor.  The audit committee pre-approved 100% of the fees for 2004.

Item 16D.Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During 2004, neither the Company nor any affiliated purchaser made any purchase of any class of equity securities that the Company has registered pursuant to Section 12 of the Securities Exchange Act of 1934.

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PART III

Item 17.Financial Statements

Not applicable.

Item 18.Financial Statements

(A)List of Financial Statements and Financial Statement Schedules

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Income	F-4
Consolidated Statements of Changes in Shareholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-9

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Item 19.Exhibits

EXHIBITS

Exhibit Numbers	Description	Incorporation by Reference to
1.1(a)	Restated Articles of Association of Kerzner dated as of June 26, 2001	Exhibit 1 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2000, filed on July 2, 2001, File No. 001-04226
1.1(b)	Amended and Restated Articles of Association of Kerzner dated as of March 24, 2005	Filed herewith as Exhibit 1.1(b)
1.2	Amendment to Restated Articles of Association of Kerzner dated as of September 24, 2001	Exhibit 3.3 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36
1.3	Amended and Restated Memorandum of Association of Kerzner	Exhibit 3.1 to Registration Statement on Form F-4, filed on November 7, 1996, File No. 333- 15409
1.4	Amendment to Memorandum of Association of Kerzner	Exhibit 3.6 to Registration Statement on Form F-4/A, filed on August 12, 2002, File No. 333-96705-36
1.5	Restated Certificate of Incorporation, as amended, of Kerzner International North America, Inc.	Exhibit 3.3 to Registration Statement on Form F-4, filed on March 20, 1997, File No. 333-23665-01
1.6	Certificate of Amendment of Restated Certificate of Incorporation of Kerzner International North America, Inc.	Exhibit 3(a)(2) to Form 10-K405 Annual Report of KINA for the fiscal year ended December 31, 1996, filed on March 20, 1997, File No. 001-04748
1.7	Certificate of Amendment of Restated Certificate of Incorporation of Kerzner International North America, Inc.	Exhibit 3.7 to Registration Statement on Form F-4/A dated August 12, 2002, in File No. 333-96705-36
1.8	Amended and Restated By-Laws of Kerzner International North America, Inc.	Exhibit 3(b) to Form 10-Q Quarterly Report of KINA for the quarter ended June 30, 1996, filed on August 7, 1996, File No. 001-04748
2.1	Form of Inter-Borrower Agreement dated as of March 10, 1997, between Kerzner and KINA	Exhibit 4(e)(4) to Form 10-K405 Annual Report of KINA for the fiscal year ended December 31, 1996, filed on March 20, 1997, File No. 001-04748
2.2(a)	Purchase Agreement dated August 9, 2001, among Kerzner and KINA, as issuers, the subsidiary guarantors party thereto, and Deutsche Banc Alex. Brown Inc., Bear Stearns & Co. Inc., CIBC World Markets Corp., Banc of America Securities LLC, Wells Fargo Brokerage Services, LLC, Fleet Securities, Inc., and The Royal Bank of Scotland PLC, as purchasers	Exhibit 2.3(a) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226
2.2(b)	Purchase Agreement dated May 9, 2002, among Kerzner and KINA, as issuers, the subsidiary guarantors party thereto, and Bear Stearns & Co. Inc., Deutsche Bank Securities Inc., CIBC World Markets Corp., Banc of America Securities LLC, Wells Fargo Brokerage Services, LLC, J.P. Morgan Securities Inc., as initial purchasers	Exhibit 2.3(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226
2.2(c)	Indenture dated as of August 14, 2001, among Kerzner and KINA, as issuers, the Guarantors party thereto, and The Bank of New York, as trustee	Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226
2.2(d)	Supplemental Indenture dated as of September 19, 2001 to Indenture dated as of August 14, 2001	Exhibit 99(a) to Form 6-K of Kerzner, filed on September 20, 2001, File No. 001-04226
2.2(e)	Second Supplemental Indenture dated as of May 20, 2002 to Indenture dated as of August 14, 2001	Exhibit 4.3 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36

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Exhibit Numbers	Description	Incorporation by Reference to
2.2(f)	Third Supplemental Indenture dated as of November 18, 2002 to Indenture dated as of August 14, 2001	Exhibit 99.2 to Form 6-K of Kerzner, filed on November 21, 2002, File No. 001-04226
2.2(g)	Fourth Supplemental Indenture dated as of May 7, 2003 to Indenture dated as of August 14, 2001	Exhibit 99(1) to Form 6-K of Kerzner, filed on June 4, 2003, File No. 001-04226
2.2(h)	Fifth Supplemental Indenture dated as of September 10, 2004 to Indenture dated as of August 14, 2001	Filed herewith as Exhibit 2.2(h)
2.2(i)	Sixth Supplemental Indenture dated as of March 24, 2005 to Indenture dated as of August 14, 2001	Filed herewith as Exhibit 2.2(i)
2.2(j)	Form of 87/8% Senior Subordinated Note due 2011	Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226
2.2(k)	Form of Guarantee with respect to 87/8% Senior Subordinated Note due 2011	Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226
2.2(l)	Registration Rights Agreement dated as of August 14, 2001, among Kerzner and KINA, as issuers, the Guarantors party thereto, and Deutsche Banc Alex. Brown Inc., Bear Stearns & Co. Inc., CIBC World Markets Corp., Banc of America Securities LLC, Wells Fargo Brokerage Services, LLC, Fleet Securities, Inc., and The Royal Bank of Scotland PLC, as initial purchasers	Exhibit 2(b) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226
2.2(m)	Registration Rights Agreement dated as of May 20, 2002, among Kerzner and KINA, as issuers, the Guarantors party thereto, and Bear Stearns & Co. Inc., Deutsche Bank Securities Inc., CIBC World Markets Corp., Banc of America Securities LLC, Wells Fargo Brokerage Services, LLC, J.P. Morgan Securities Inc., as initial purchasers	Exhibit 2.3(f) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226
2.3(a)	Purchase Agreement dated March 30, 2004, between Kerzner International Limited and Deutsche Bank Securities Inc., as Representative of the Initial Purchasers	Exhibit 1.1 to Registration Statement on Form F-3, filed on July 2, 2004, File No. 333-117110
2.3(b)	Indenture dated as of April 5, 2004, between Kerzner International Limited, as Issuer, and The Bank of New York Trust Company, N.A., as Trustee	Exhibit 4.1 to Registration Statement on Form F-3, filed on July 2, 2004, File No. 333-117110
2.3(c)	Form of 2.375% Convertible Senior Subordinated Note due 2024	Exhibit 4.2 to Registration Statement on Form F-3, filed on July 2, 2004, File No. 333-117110
2.3(d)	Registration Rights Agreement dated as of April 5, 2004, by and between Kerzner International Limited and Deutsche Bank Securities Inc., as Representative of the Initial Purchasers	Exhibit 4.3 to Registration Statement on Form F-3, filed on July 2, 2004, File No. 333-117110
4.1	Purchase Agreement among KINA, as Parent, GGRI, as Seller and Colony as Buyer dated as of October 30, 2000	Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended September 30, 2000, filed on November 14, 2000, File No. 001-04748
4.2	Promissory Note between Colony and KINA dated as of April 25, 2001	Exhibit 2 to Form 6-K of Kerzner, filed on May 8, 2001, File No. 001-04226
4.3(a)	Fourth Amended and Restated Revolving Credit Facility dated as of November 13, 2001 among Kerzner, KINA and Kerzner International Bahamas Limited, various financial institutions as Lenders, and Canadian Imperial Bank of Commerce, as administrative agent	Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended September 30, 2001, filed on November 14, 2001, File No. 001-04748
4.3(b)	Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of December 14, 2001	Exhibit 4.3(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226
4.3(c)	First Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 8, 2002	Exhibit 4.21 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36

89

Exhibit Numbers	Description	Incorporation by Reference to
4.3(d)	Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 22, 2002	Exhibit 4.3(d) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226
4.3(e)	Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of August 30, 2002	Exhibit 99.1 to Form 6-K of Kerzner, filed on December 6, 2002, File No. 001-04226
4.3(f)	Second Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of November 20, 2002	Exhibit 99.2 to Form 6-K of Kerzner, filed on December 6, 2002, File No. 001-04226
4.3(g)	Third Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 15, 2003	Exhibit 4.3(g) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226
4.3(h)	Fifth Amended and Restated Credit Agreement dated as of July 7, 2004, among Kerzner International Limited, Kerzner International North America, Inc. and Kerzner International Bahamas Limited, as the Borrowers and the Guarantors, various financial institutions, as the Lenders, JPMorgan Chase Bank, as the Administrative Agent, Deutsche Bank Securities Inc. and Wells Fargo Bank N.A., as the Co-Syndication Agents, Bank of America, N.A. and Bear Stearns Corporate Lending Inc., as the Co-Documentation Agents	Exhibit 99.1 to Registration Statement on Form F-3/A, filed on August 3, 2004, File No. 333-117110
4.3(i)	First Amendment to Credit Agreement dated as of February 15, 2005, among Kerzner International Limited, Kerzner International Bahamas Limited and Kerzner International North America, Inc., as the Borrowers, and certain Lenders party thereto	Filed herewith as Exhibit 4.3(i)
4.4(a)	Heads of Agreement dated May 26, 2003, between Kerzner and the Government of the Commonwealth of The Bahamas	Exhibit 99(2) to Form 6-K of Kerzner, filed on May 28, 2003, File No. 001-04226
4.4(b)	Supplement dated May 3, 2004 to Heads of Agreement dated as of May 26, 2003	Exhibit 99.1 to Form 6-K of Kerzner, filed on May 5, 2004, File No. 001-04226
4.4(c)	Second Supplement dated December 7, 2004 to Heads of Agreement dated as of May 26, 2003	Exhibit 99.2 to Form 6-K of Kerzner, filed on December 9, 2004, File No. 001-04226
4.5(a)	Second Amended and Restated Development Services Agreement dated as of February 6, 2002 among the Stockbridge-Munsee Tribe, the Stockbridge-Munsee Tribal Gaming Authority, Trading Cove New York, LLC, KINA and Waterford Gaming Group, LLC	Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended March 31, 2002, filed on May 15, 2002, File No. 001-04748
4.5(b)	Amendment to Second Amended and Restated Development Services Agreement dated as of October 19, 2004, among the Stockbridge-Munsee Band of Mohican Indians of Wisconsin, the Stockbridge-Munsee Tribal Gaming Authority, Trading Cove New York, LLC, Kerzner International North America, Inc. and Waterford Gaming Group, LLC	Filed herewith as Exhibit 4.5(b)
4.5(c)	Second Amendment to Second Amended and Restated Development Services Agreement dated as of December 21, 2004, among the Stockbridge-Munsee Band of Mohican Indians of Wisconsin, the Stockbridge-Munsee Tribal Gaming Authority, Trading Cove New York LLC, Kerzner International North America, Inc. and Waterford Gaming Group, LLC	Filed herewith as Exhibit 4.5(c)
4.6	Development Services Agreement dated February 7, 1998 between the Mohegan Tribal Gaming Authority and Trading Cove Associates	Exhibit 2.1 to Form 20- F/A of Kerzner for the year ended December 31, 1997, filed on September 3, 1998, File No. 001-04226
4.7	Relinquishment Agreement dated February 7, 1998, between the Mohegan Tribal Gaming Authority and Trading Cove Associates	Exhibit 2.2 to Form 20-F/A of Kerzner for the year ended December 31, 1997, filed on September 3, 1998, File No. 001-04226
4.8(a)	Agreement in Principle between Kerzner International Limited and Nakheel LLC, dated September 22, 2003	Exhibit 4.8 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226

90

Exhibit Numbers	Description	Incorporation by Reference to
4.8(b)	Resort Management Agreement Atlantis, Palm Island dated as of May 5, 2004, between Kerzner Nakheel Limited and Kerzner International Management FZ-LLC	Filed herewith as Exhibit 4.8(b)
4.8(c)	Development Agreement for the Atlantis, Palm Island dated as of May 5, 2004, between Kerzner International Development FZ-LLC, as developer, and Kerzner Nakheel Limited, as owner	Filed herewith as Exhibit 4.8(c)
4.9	Stock Purchase Agreement dated as of February 14, 2002, by and among Station Casinos, Inc., Station Online, Inc., Kerzner and Kerzner Interactive Limited	Exhibit 4.8 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226
4.10	Registration Rights and Governance Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC, Mangalitsa Limited, Cement Merchants SA, Rosegrove Limited, Royale Resorts Holdings Limited and Sun International Inc.	Exhibit C to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645
4.11	Omnibus Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC, Rosegrove Limited, Royale Resorts Holdings Limited, Royale Resorts International Limited, Sun International Inc., Sun Hotels International, Sun Hotels Limited, World Leisure Investments Limited, Solomon Kerzner, Peter Buckley, Derek Aubrey Hawton, Sun International Management Limited (a British Virgin Islands company), Cement Merchants SA, Sun International Management Limited (a Swiss company), Sun International Management (UK) Limited, Hog Island Holdings Limited and Mangalitsa Limited	Exhibit 10.9 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780
4.12	Supplemental Agreement to the Original Shareholders’ Agreement and to the Rosegrove Shareholders Agreement dated as of July 3, 2001, by and among Kersaf Investments Limited, Sun International Inc., Kerzner, Royale Resorts Holdings Limited, World Leisure Investments Limited, Sun Hotels Limited, World Leisure Group Limited, Royale Resorts International Limited, Caledonia Investments PLC, Solomon Kerzner, Sun International Management Limited (a British Virgin Islands company), Rosegrove Limited, Sun International Management Limited (a Swiss company), Mangalitsa Limited and Hog Island Holdings Limited	Exhibit A to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645
4.13	Irrevocable Proxy Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC, Mangalitsa Limited, Cement Merchants SA, Rosegrove Limited, Royale Resorts Holdings Limited and Sun International Inc.	Exhibit B to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645
4.14	Trade Name and Trademark Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited and World Leisure Group Limited, as Assignors, and Sun International Management Limited, as Assignee	Exhibit 10.12 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780
4.15	Promissory Note dated July 3, 2001 between Royale Resorts Holdings Limited, as Maker, and Kerzner, as Payee	Exhibit 10.13 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780
4.16	Stock Pledge Agreement dated as of July 3, 2001, between Royale Resorts Holdings Limited, as Pledgor, and Kerzner	Exhibit 10.14 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780
4.17	Settlement Agreement dated as of November 1, 2002, by and among Kerzner, Kersaf Investments Limited, Royale Resorts Holdings Limited, Sun International Management Limited, World Leisure Group Limited, Caledonia Investments PLC, Mangalitsa Limited and Cement Merchants SA	Exhibit 99.2 to Form 6-K of Kerzner, filed on November 8, 2002, File No. 001-04226

91

Exhibit Numbers	Description	Incorporation by Reference to
4.18	Kerzner Deferred Compensation Plan	Exhibit 99.1 to Registration Statement on Form S-8, filed on October 11, 2002, File No. 333-100522
4.19(a)	KINA Retirement Savings Plan, dated December 20, 2001	Filed herewith as Exhibit 4.19(a)
4.19(b)	Amendment 2003-1, dated December 15, 2003 to the KINA Retirement Savings Plan dated January 1, 2002	Filed herewith as Exhibit 4.19(b)
4.20	Plantation, Florida Lease Agreement	Exhibit 4.19 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226
4.21	Kerzner International Limited 2003 Stock Incentive Plan	Exhibit 4.21 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226
4.22	Master Agreement among Kerzner International North America, Inc., Colony RIH Holdings, Inc., Resorts International Hotel and Casino, Inc., Resorts Real Estate Holdings, Inc., Resorts International Hotel, Inc. and New Pier Operating Company, Inc., dated as of February 1, 2004.	Exhibit 4.22 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226
4.23	Purchase and Sale Agreement by and between Kerzner International North America, Inc., as Seller, and Resorts Real Estate Holdings, Inc., as Purchaser, dated as of February 1, 2004.	Exhibit 4.23 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226
4.24(a)	Note Indenture dated as of December 17, 2004, between Kerzner Palmilla Beach Partners, S. de R.L. de C.V., Kerzner Palmilla Hotel Partners, S. de R.L. de C.V., Kerzner Servicios Hoteleros, S. de R.L. de C.V., Kerzner Compania de Servicios, S. de R.L. de C.V. and Kerzner Palmilla Golf Partners, S. de R.L. de C.V., as Issuers, and Lasalle Bank National Association, as Trustee	Filed herewith as Exhibit 4.24(a)
4.24(b)	Guarantee Agreement dated as of December 17, 2004, between GS Emerging Market Real Estate Fund, L.P. and Kerzner International Limited, in favor of Lasalle Bank National Association	Filed herewith as Exhibit 4.24(b)
4.25	Stock Purchase Agreement dated as of July 15, 2004, between Kerzner International Limited and Istithmar PJSC	Exhibit 99.1 to Form 6-K of Kerzner, filed on July 16, 2004, File No. 001-04226
6	Computation of earnings per share	Incorporated by reference to Note 2 of the Notes to the Consolidated Financial Statements
8	Subsidiaries of Kerzner	Filed herewith as Exhibit 8
11.1(a)	Kerzner Audit Committee Charter	Exhibit 11.1 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226
11.1(b)	Amended and Restated Kerzner Audit Committee Charter	Filed herewith as Exhibit 11.1(b)
11.2	Kerzner Code of Business Conduct and Ethics	Exhibit 11.2 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2003, filed on March 30, 2004, File No. 001-04226
12.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 12.1
12.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 12.2
13.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 13.1

92

Exhibit Numbers	Description	Incorporation by Reference to
14.1	Consent of Deloitte & Touche LLP	Filed herewith as Exhibit 14.1
14.2	Consent of PricewaterhouseCoopers LLP	Filed herewith as Exhibit 14.2
14.3	Trading Cove Associates financial statements December 31, 2004, 2003 and 2002	Filed herewith as Exhibit 14.3

93

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

	Kerzner International Limited
Date: March 30, 2005	By:	/s/John R. Allison
	Name:	John R. Allison
	Title:	Executive Vice President and Chief Financial Officer

94

KERZNER INTERNATIONAL LIMITED

Consolidated Financial Statements as of December 31, 2004 and 2003 and for each of the
Three Years in the Period Ended December 31, 2004

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Kerzner International Limited:

We have audited the accompanying consolidated balance sheets of Kerzner International Limited and subsidiaries (the “Company”), as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2004.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We did not audit the financial statements of Trading Cove Associates (“TCA”), the Company’s investment in which is accounted for by use of the equity method.  The Company’s equity of $14.9 million and $14.4 million in TCA’s net assets at December 31, 2004 and 2003, respectively, and of $35.9 million, $34.0 million and $30.0 million in TCA’s net income for the years ended December 31, 2004, 2003 and 2002, respectively, are included in the accompanying consolidated financial statements.  The financial statements of TCA were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such company, is based solely on the report of such other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Kerzner International Limited and subsidiaries, as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

March 30, 2005

F-2

KERZNER INTERNATIONAL LIMITED

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

	December 31,
	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	180,341		$	60,232
Restricted cash	2,768			1,445
Short-term investments	203,940			—
Trade receivables, net	41,743			38,397
Due from affiliates	15,682			13,949
Inventories	13,453			10,418
Assets held for sale	12,289			—
Prepaid expenses and other assets	21,685			15,360
Total current assets	491,901			139,801
Property and equipment, net	1,347,640			1,154,004
Due from affiliates – non-current	81,737			34,842
Deferred tax asset, net	11,181			10,473
Deferred charges and other assets, net	40,678			33,656
Investments in associated companies	114,138			83,152
Total assets	$	2,087,275		$	1,455,928
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	659		$	304
Accounts payable and accrued liabilities	168,725			172,233
Capital creditors	16,032			4,639
Total current liabilities	185,416			177,176
Deferred revenue	20,419			14,652
Other long-term liabilities	7,099			7,290
Long-term debt, net of current maturities	754,129			417,220
Total liabilities	967,063			616,338
Minority interest	3,934			—
Commitments and contingencies (Note 23)
Shareholders’ equity:
Preference shares, $.001 par value, 100,000,000 authorized at December 31, 2004 and 2003; zero issued and outstanding at December 31, 2004 and 2003	—			—
Ordinary shares, $.001 par value, 250,000,000 authorized at December 31, 2004 and 2003; 42,971,878 and 37,355,718 issued and outstanding at December 31, 2004 and 2003, respectively	43			37
Capital in excess of par	971,952			744,246
Retained earnings	336,543			268,411
Accumulated other comprehensive loss	(13,898		)	(7,736		)
Deferred compensation	(15,593		)	(2,599		)
	1,279,047			1,002,359
Treasury stock, 7,072,029 shares at December 31, 2004 and 2003	(162,769		)	(162,769		)
Total shareholders’ equity	1,116,278			839,590
Total liabilities and shareholders’ equity	$	2,087,275		$	1,455,928

The accompanying notes are an integral part of these consolidated financial statements.

F-3

KERZNER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per share data)

	For the Year Ended December 31,
	2004			2003			2002
Revenues:
Gaming	$	130,879		$	138,587		$	129,916
Rooms	215,868			188,235			184,776
Food and beverage	151,827			130,879			131,377
Tour operations	47,115			40,790			41,063
Management, development and other fees	19,894			15,177			11,722
Other revenues	78,536			68,424			65,618
Gross revenues	644,119			582,092			564,472
Less: promotional allowances	(23,034		)	(23,579		)	(22,210		)
Net revenues	621,085			558,513			542,262
Cost and expenses:
Gaming	59,504			63,283			63,746
Rooms	39,949			33,395			33,381
Food and beverage	104,078			89,502			88,560
Tour operations	39,994			35,406			36,767
Other operating expenses	96,149			85,257			81,116
Selling, general and administrative	118,334			101,584			91,738
Corporate expenses	38,601			36,431			28, 949
Depreciation and amortization	58,948			55,782			55,486
Hurricane related expenses	3,426			—			—
Insurance recovery	—			(2,819		)	(1,100		)
Pre-opening expenses	3,258			—			—
Loss (gain) on damaged assets	1,194			(2,514		)	—
Impairment of Atlantic City land	7,303			—			—
Restructuring costs reversal	—			—			(1,000		)
Cost and expenses	570,738			495,307			477,643
Income from operations	50,347			63,206			64,619
Relinquishment fees – equity in earnings of TCA	35,909			33,960			30,041
Other income (expense):
Interest income	4,722			3,394			3,419
Interest expense, net of capitalization	(36,814		)	(29,264		)	(39,104		)
Equity in earnings (losses) of associated companies	7,455			(320		)	(5,209		)
Gain on settlement of territorial and other disputes	—			1,479			14,459
Loss on early extinguishment of debt	(1,655		)	—			(20,525		)
Other, net	1,358			(686		)	60
Other expense, net	(24,934		)	(25,397		)	(46,900		)
Income from continuing operations before income taxes and minority interest	61,322			71,769			47,760
Provision for income taxes	(424		)	(162		)	(96		)
Minority interest	7,234			(1,340		)	—
Income from continuing operations	68,132			70,267			47,664
Income (loss) from discontinued operations, net of income tax effect	—			1,305			(8,061		)
Net income	$	68,132		$	71,572		$	39,603

F-4

	For the Year Ended December 31,
	2004		2003		2002
Basic earnings per share:
Income from continuing operations	$	2.09	$	2.46	$	1.71
Income (loss) from discontinued operations, net of income tax effect	—		0.04		(0.29		)
Earnings per share-basic	$	2.09	$	2.50	$	1.42
Weighted average number of shares outstanding-basic	32,550		28,575		27,891
Diluted earnings per share:
Income from continuing operations	$	2.01	$	2.39	$	1.67
Income (loss) from discontinued operations, net of income tax effect	—		0.05		(0.28		)
Earnings per share-diluted	$	2.01	$	2.44	$	1.39
Weighted average number of shares outstanding-diluted	33,884		29,377		28,544

The accompanying notes are an integral part of these consolidated financial statements.

F-5

KERZNER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2004, 2003 and 2002

(In thousands)

										Accumulated Other									Total			Comprehensive
	Ordinary Shares				Capital in			Retained		Comprehensive			Treasury			Deferred			Shareholders’			Income (Loss)
	Shares		Amount		Excess of Par			Earnings		Income (Loss)			Stock			Compensation			Equity			for the Period
Balance at January 1, 2002	34,430		$	34	$	688,714		$	157,236	$	(8,553	)	$	(162,769	)	$	—		$	674,662
Translation reserves	—		—		—			—		419			—			—			419			$	419
Exercise of share options	808		1		14,701			—		—			—			—			14,702			—
Repurchase of ordinary shares	(16	)	—		(365		)	—		—			—			—			(365		)	—
Net income	—		—		—			39,603		—			—			—			39,603			39,603
Balance at December 31, 2002	35,222		35		703,050			196,839		(8,134		)	(162,769		)	—			729,021			40,022
Translation reserves	—		—		—			—		398			—			—			398			398
Exercise of share options	2,074		2		39,005			—		—			—			—			39,007			—
Repurchase of ordinary shares	(13	)	—		(408		)	—		—			—			—			(408		)	—
Issuance of restricted share awards	73		—		2,599			—		—			—			(2,599		)	—			—
Net income	—		—		—			71,572		—			—			—			71,572			71,572
Balance at December 31, 2003	37,356		37		744,246			268,411		(7,736		)	(162,769		)	(2,599		)	839,590			71,970
Translation reserves	—		—		—			—		606			—			—			606			606
Unrealized losses on available-for-sale securities	—		—		—			—		(639		)	—			—			(639		)	(639		)
Unrealized losses on investments in associated companies	—		—		—			—		(6,129		)	—			—			(6,129		)	(6,129		)
Exercise of share options	1,858		2		40,501			—		—			—			—			40,503			—
Issuance of restricted share awards	331		—		14,815			—		—			—			(14,815		)	—			—
Cancellation of restricted share awards	(1	)	—		(25		)	—		—			—			25			—			—
Issuance of ordinary shares	3,428		4		172,415			—		—			—			—			172,419			—
Amortization of deferred compensation expense	—		—		—			—		—			—			1,796			1,796			—
Net income	—		—		—			68,132		—			—			—			68,132			68,132
Balance at December 31, 2004	42,972		$	43	$	971,952		$	336,543	$	(13,898	)	$	(162,769	)	$	(15,593	)	$	1,116,278		$	61,970

The accompanying notes are an integral part of these consolidated financial statements.

F-6

KERZNER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

	For the Year Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income	$	68,132		$	71,572		$	39,603
Depreciation and amortization	58,948			55,782			55,486
Amortization of debt issuance costs and premiums	2,904			1,217			1,868
Impairment of Atlantic City land	7,303			—			—
Loss on early extinguishment of debt	1,655			—			20,525
Recognition of deferred compensation expense	1,796			—			—
Loss on disposition of fixed assets	544			451			227
Equity in (earnings) losses from associated companies, net of dividends received	(6,163		)	(3,646		)	5,980
Minority interest – Palmilla JV, LLC	(7,750		)	—			—
(Income) loss from discontinued operations, net of income tax effect	—			(1,305		)	8,061
Provision for doubtful receivables	3,017			1,326			3,204
Deferred income tax benefit	(3,499		)	(11,732		)	(8,184		)
Net change in working capital accounts:
Restricted cash	(1,323		)	75			101
Trade receivables	(1,977		)	(619		)	(8,754		)
Due from affiliates	(3,461		)	7,362			(4,891		)
Inventories and prepaid expenses and other assets	(5,537		)	(2,506		)	(9,086		)
Accounts payable and accrued liabilities	12,954			16,996			13,753
Net change in other balance sheet accounts:
Due from affiliates – non-current	(57		)	(598		)	(275		)
Deferred charges and other assets	741			785			(3,781		)
Deferred revenue	6,451			(3,376		)	18,028
Other long-term liabilities	980			1,674			2,866
Loss (gain) on damaged assets	1,194			(2,514		)	—
Other	(338		)	1,199			158
Net cash provided by continuing operations	136,514			132,143			134,889
Cash provided by (used in) discontinued operations	—			523			(7,619		)
Net cash provided by operating activities	136,514			132,666			127,270
Cash flows from investing activities:
Payments for property and equipment, net of insurance proceeds received	(119,398		)	(50,849		)	(39,524		)
Purchase of short-term investments and notes receivable	(204,309		)	—			(13,704		)
Loans to affiliates	(68,500		)	(15,350		)	(1,250		)
Advances to affiliates	(10,126		)	(1,653		)	(1,100		)
Repayments from affiliates	29,200			4,950			2,092
Acquisition of equity interest in associated companies	(69,191		)	—			(40,812		)
Cash resulting from the initial consolidation of Palmilla JV, LLC	7,047			—			—
Deferred contract acquisition costs	(1,631		)	(2,115		)	(214		)
Deposit and purchase of land and casino license	—			(6,147		)	—
Acquisition of assets from Club Méditerranée (Bahamas) Limited and adjacent land	(30,877		)	(20,049		)	—
Net proceeds from the sale of fixed assets	238			1,099			126
Acquisition of tour operator, net of cash acquired	—			1,384			—
Repayment of notes receivable	—			13,409			18,018
Deposits received	—			1,250			4,500
Sale of debt and equity interest in the One&Only Kanuhura	—			1,464			—
Other	—			—			(278		)
Net cash used in investing activities	(467,547		)	(72,607		)	(72,146		)

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	For the Year Ended December 31,
	2004			2003			2002
Cash flows from financing activities:
Proceeds from issuance of debt	230,000			—			206,000
Borrowings	117,068			29,600			111,000
Repayment of debt	(94,079		)	(101,898		)	(63,283		)
Early redemption of debt	—			—			(313,135		)
Debt issuance and modification costs	(14,769		)	(140		)	(4,665		)
Proceeds from exercise of share options	40,503			39,007			14,702
Net proceeds from the issuance of ordinary shares	153,366			—			—
Net proceeds from the issuance of Bahamian Depository Receipts	19,053			—			—
Repurchase of ordinary shares	—			(408		)	(365		)
Net cash provided by (used in) financing activities	451,142			(33,839		)	(49,746		)
Increase in cash and cash equivalents	120,109			26,220			5,378
Cash and cash equivalents at beginning of period	60,232			34,012			28,634
Cash and cash equivalents at end of period	$	180,341		$	60,232		$	34,012
Supplemental disclosure of cash flow and non-cash investing and financing activities:
Interest paid	$	31,887		$	27,914		$	37,586
Income taxes paid	4,776			4,166			1,871
Change in fair value of interest rate swap agreements	3,557			7,735			25,077
Equipment acquired under capital lease obligations	1,395			—			438
Note payable and taxes related to Club Méditerranée (Bahamas) Limited in connection with asset acquisition	—			18,500			—
Assets acquired and liabilities assumed, net, excluding cash, in connection with initial consolidation of Palmilla JV, LLC	62,029			—			—

The accompanying notes are an integral part of these consolidated financial statements.

F-8

KERZNER INTERNATIONAL LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in tables are in thousands of U.S. dollars, except share data)

Note 1—Organization and Basis of Presentation

Organization

Kerzner International Limited (“Kerzner”), an international resort and gaming company, was incorporated in 1993 under the laws of the Commonwealth of The Bahamas.  In these notes to our consolidated financial statements, the words “Company,” “we,” “our” and “us” refer to Kerzner together with its subsidiaries as the context may require.

We are a leading developer and operator of premier destination resorts, luxury resort hotels and gaming properties worldwide.  In our destination resorts segment (“Destination Resorts”), we own and operate the Atlantis, Paradise Island resort and casino complex (“Atlantis, Paradise Island”) located in The Bahamas.  We also own a 50% equity interest in Kerzner Istithmar Limited (“Kerzner Istithmar”), which is currently planning the development of Atlantis, The Palm, Dubai, United Arab Emirates (“Atlantis, The Palm”), and we have entered into an agreement in principle with two partners that contemplates the creation of a joint venture that will own a destination resort casino in Morocco that we will develop and manage.  In our gaming segment (“Gaming”), we developed and earn income from the Mohegan Sun Casino (“Mohegan Sun”) located in Uncasville, Connecticut.  Our Gaming segment also includes the costs associated with the planning and development of several casino and hotel facilities in the United Kingdom, equity earnings (losses) from our 37.5% investment in BLB Investors, L.L.C. (“BLB”) and our 50% investment in Trading Cove New York (“TCNY”).  In our One&Only resorts segment (“One&Only Resorts”), we operate nine beach resorts at locations in The Bahamas, Mauritius, Dubai, the Maldives and Mexico and have two resorts that are under development in the Maldives and South Africa (collectively “One&Only Resorts”).

During 2002, we operated an Internet gaming venture through a subsidiary, Kerzner Interactive Limited (“Kerzner Interactive”).  The operations of Kerzner Interactive were discontinued during the first quarter of 2003.  As a result, the operating results of Kerzner Interactive for the years ended December 31, 2003 and 2002 are presented as income (loss) from discontinued operations, net of income tax effect in the accompanying consolidated statements of operations.

As of January 1, 2004, pursuant to our adoption of Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”) issued by the Financial Accounting Standards Board (“FASB”), we have determined that Palmilla JV, LLC (“Palmilla”), a previously unconsolidated 50% owned equity method investment, must be consolidated as the operating agreement contains a provision which gives our 50% joint venture partner the right to cause us to acquire its 50% interest.  For further discussion, see Note 2—Summary of Significant Accounting Policies and Note 3—Business Acquisitions and Dispositions. 

Destination Resorts

Atlantis, Paradise Island

Through certain of our Bahamian subsidiaries, Kerzner owns and operates Atlantis, Paradise Island, our flagship property.  Atlantis, Paradise Island is an ocean-themed destination resort located on Paradise Island, The Bahamas.  Atlantis, Paradise Island features three interconnected hotel towers built around a lagoon and an extensive marine environment that includes what we believe to be the world’s largest open-air marine habitat. 

In 1999, Kerzner formed a joint venture with Starwood Vacation Ownership (“Starwood Vacation”) (formerly Vistana, Inc.), a subsidiary of Starwood Hotels and Resorts Worldwide Inc., to develop a timeshare project on Paradise Island adjacent to Atlantis, Paradise Island (“Harborside at Atlantis”).  Starwood Vacation and the Company each own a 50% interest in Harborside at Atlantis.  In 2004, we announced an expansion of Harborside at Atlantis, which included the addition of timeshare units between the Nassau harbor and the Marina at Atlantis.  The Company’s share of earnings (losses) from Harborside at Atlantis are included in equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations.  In addition, the Company earns fees for marketing and for administrative and development services provided to Harborside at

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Atlantis, which are included in management, development and other fees in the accompanying consolidated statements of operations.

In May 2003, the Company entered into a “Heads of Agreement” with the Bahamian Government with respect to the Phase III expansion (“Phase III”) on Paradise Island.  In May 2004 and December 2004, we entered into supplements to the Heads of Agreement, pursuant to which we modified certain components involved in the Phase III expansion, which includes a luxury all-suite hotel and a condo-hotel.  Certain elements of the Phase III expansion commenced in 2003, including construction of four new restaurants and additional retail space (“Marina Village”) and the completion of three luxury villas (“Ocean Club Villas”) at the One&Only Ocean Club (“Ocean Club”).  The Ocean Club Villas were completed in June 2004 and the Marina Village is expected to be completed in the third quarter of 2005.  Under the Heads of Agreement, the Company has committed to substantially complete the all-suite hotel by December 2006.  The Heads of Agreement also contemplates the completion of the condo-hotel during 2007.  See Note 23—Commitments and Contingencies—Heads of Agreement for further discussion.

In December 2004, the Company announced the development of the Ocean Club Residences & Marina, an ultra-luxury condominium project at the Ocean Club Estates, a residential development adjacent to the Ocean Club Golf Course.  We expect to form a joint venture with a Bahamian partner for this project.  We commenced pre-sales of the Ocean Club Residences & Marina in 2005 and anticipate breaking ground on the project in the second quarter of 2005.

Atlantis, The Palm

In September 2003, we announced that we had agreed to form a joint venture with Nakheel LLC (“Nakheel”), an entity owned by the Royal Family of Dubai, to develop Atlantis, The Palm.  In June 2004, we announced that we had entered into an agreement with Istithmar PJSC (“Istithmar”), an entity indirectly wholly owned by the Royal Family of Dubai, that has assumed all obligations and rights of its affiliate, Nahkeel, to form Kerzner Istithmar.  The purpose of Kerzner Istithmar is to develop Atlantis, The Palm located on The Palm, Jumeirah, a land reclamation project in Dubai.  Atlantis, The Palm will include an ocean-themed destination resort and an extensive water park situated on beachfront property.

The planning and design phase of Atlantis, The Palm commenced in 2004 and we began construction in the first quarter of 2005.  The Company anticipates that the project will be completed in 2008.  As part of this transaction, the Company entered into a long-term management agreement with the joint venture that entitles the Company to receive a base management fee based on the gross revenues generated by Atlantis, The Palm, and an incentive management fee based on operating income.  The Company also entered into a development agreement with the joint venture that entitles it to receive $20.0 million and reimbursement of certain expenses over the development period.  The Company currently has a 50% ownership interest in Kerzner Istithmar and as such, we expect to recognize $10.0 million in development fees over the development period.

Morocco

In July 2004, we announced that we and two local Moroccan companies, Société Maroc Emirates Arabs Unis de Développement (“SOMED”) and Caisse de Dépôt et de Gestion (“CDG”), had entered into an agreement with the Government of the Kingdom of Morocco for the development and management of a destination resort casino in Morocco through the formation of a joint venture of which we will initially own 50%.  In addition, we, SOMED and CDG have entered into an agreement in principle with respect to the ownership, development and management of this resort. We expect to commence construction of the project in the fourth quarter of 2005 and to complete the project during the fourth quarter of 2007.

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Gaming

Mohegan Sun

We own a 50% interest in, and are a managing partner of, Trading Cove Associates (“TCA”), a Connecticut general partnership that developed and, until January 1, 2000, managed Mohegan Sun, a casino and entertainment complex in Uncasville, Connecticut.  TCA managed Mohegan Sun from its opening in October 1996 to December 31, 1999 pursuant to a management agreement (the “Management Agreement”).  In 1998, the Mohegan Tribal Gaming Authority, an instrumentality of the Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) appointed TCA to develop a $1.0 billion expansion of Mohegan Sun for a development fee of $14.0 million.  In addition, TCA and the Mohegan Tribe entered into an agreement (the “Relinquishment Agreement”) whereby it was agreed that effective January 1, 2000, TCA would turn over management of Mohegan Sun to the Mohegan Tribe.  Pursuant to the Relinquishment Agreement, the Management Agreement was terminated and, commencing January 1, 2000, TCA receives payments of 5% of the gross revenues of Mohegan Sun for a 15-year period.  For seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the profits it receives each year (after the payment of certain expenses and the return of certain capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.

As noted above, in 1998, the Mohegan Tribe appointed TCA to develop its expansion of the Mohegan Sun Casino pursuant to a development services agreement (the “TCA Development Agreement”).  In turn, TCA subcontracted with an affiliate of the Company pursuant to a subcontract development services agreement (the “Subcontract Agreement”), which was later assigned to the Company.  In consideration for the services provided under the Subcontract Agreement, TCA paid a fee to the Company.  These fees are included within management, development and other fees in the accompanying consolidated statements of operations for the years ended December 31, 2003 and 2002.

We are one of two managing partners of TCA.  All decisions of the managing partners require the concurrence of us and the other managing partner, Waterford Gaming, L.L.C.  In the event of a deadlock, there are mutual buy-out provisions.

The Company’s investment in TCA is reflected within investments in associated companies in the accompanying consolidated balance sheets.  Equity earnings from TCA are reflected within relinquishment fees—equity in earnings of TCA in the accompanying consolidated statements of operations.

Trading Cove New York

Through Kerzner New York, Inc. (“KNY”), a wholly owned subsidiary, we own 50% of TCNY.  TCNY is managed by KNY and Waterford Development New York, LLC.  In March 2001, TCNY entered into a development services agreement (the “TCNY Development Agreement”) with the Stockbridge-Munsee band of Mohican Indians (“Stockbridge-Munsee Tribe”) for the development of a casino (the “Catskills Project”) in the Catskills region of the State of New York (for purposes of this section, the “State”).  The TCNY Development Agreement was amended and restated in February 2002 and subsequently amended in October and December 2004.  The Stockbridge-Munsee Tribe does not currently have reservation land in the State but is federally recognized and operates a casino on its reservation in Wisconsin.  The Stockbridge-Munsee Tribe has land claim litigation pending in the U.S. District Court for the Northern District of New York (the “Court”) against the State, the counties of Madison and Oneida and several municipalities to recover lands within the state that it alleges were wrongfully taken from the tribe.

In December 2004, the Stockbridge-Munsee Tribe and the State entered into the “Agreement of Settlement and Compromise to Resolve the Stockbridge-Munsee Land Claims in the State of New York” (the “NY Settlement Agreement”).  The NY Settlement Agreement provides, inter alia, that, in consideration for settling its land claim litigation, the Stockbridge-Munsee Tribe will receive, among other things, a transfer of the Catskills Project site into trust and a gaming compact (the “Compact”) with the State authorizing the Stockbridge-Munsee Tribe to engage in Class III gaming on the Catskills Project site for a period of 14 years (and renewable for an addition 7 years under

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certain conditions).  Under the Compact, the Stockbridge-Munsee Tribe will, in exchange for certain exclusivity rights related to the operation of slot machines in a geographically determined area encompassing a number of southern counties within the State, pay to the State 20% of the net win from the slot machines during the first four years of operation and 25% thereafter.

The NY Settlement Agreement is subject to numerous terms and conditions, including the enactment of State legislation approving the settlement and increasing the number of Native American casinos authorized for Sullivan and Ulster counties under the State gaming law from three to five, enactment of Federal legislation approving the settlement and directing that the Catskills Project site be taken into trust and execution of the Compact.  In February 2005, State legislation was introduced to approve the NY Settlement Agreement.  We can make no representation as to whether any of the required approvals will be obtained by the Stockbridge-Munsee Tribe or whether the Catskills Project will be completed.

Pursuant to the TCNY Development Agreement, as amended, TCNY would provide preliminary funding, certain financing and exclusive development services to the Stockbridge-Munsee Tribe in conjunction with the Catskills Project.  If the Catskills Project is approved and ultimately developed, TCNY will earn a development fee in an amount equal to 5% of gross revenues as compensation for these services (subject to certain priorities), as defined in the TCNY Development Agreement, beginning with the opening of the Catskills Project and continuing for a period of 20 years.  TCNY has secured land and/or options on approximately 400 acres of property in the Town of Thompson, County of Sullivan (the “County”), of which approximately 333 acres are currently designated for the Catskills Project.  In February 2002, the Tribe filed a Land to Trust Application with the U.S. Department of the Interior, Bureau of Indian Affairs (the “BIA”), for the Catskills Project site properties.  Should the BIA approve the Land to Trust Application and the Stockbridge-Munsee Tribe obtain other required approvals, the land could be taken into trust by the Federal Government on behalf of the Stockbridge-Munsee Tribe for the purpose of conducting Class III Gaming.

The Company’s investment in TCNY is reflected within investments in associated companies in the accompanying consolidated balance sheets.  Equity losses from TCNY are reflected within equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations.

Investment in BLB

In March 2004, we announced that we entered into a joint venture, BLB, with an affiliate of Starwood Capital Group, L.L.C. (“Starwood Capital”) and an affiliate of Waterford Group, L.L.C. (“Waterford”) for the purpose of acquiring an interest in Wembley plc (“Wembley”), which owns gaming and track operations in the United States and race tracks in the United Kingdom.  Wembley’s U.S. operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack with video lottery terminals.  BLB is owned 37.5% by each of us and Starwood, with Waterford owning the balance of 25%.  BLB has a 22.2% ownership interest in Wembley. 

On February 8, 2005, Wembley and BLB announced that they had entered into a conditional sale agreement providing for the purchase by BLB of a holding company that owns Wembley’s operations in Rhode Island and Colorado, consisting primarily of the Lincoln Park facility in Rhode Island.  The purchase price is expected to be approximately $455.0 million.  Additionally, in connection with the transaction, Wembley is expected to repurchase BLB’s existing shareholding in Wembley for approximately $116.0 million.  In addition, BLB anticipates making certain infrastructure improvements at Lincoln Park.  BLB has received binding commitments from institutional lenders to provide up to $495.0 million in financing to cover the cash costs of the acquisition and the infrastructure improvements.  Substantially all of the operating profits of Wembley’s U.S. operations are based on the video lottery terminals currently in operation at Lincoln Park.  Among other things, BLB’s purchase offer is conditioned on an increase in the number of authorized video lottery terminals at Lincoln Park.

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The acquisition and the financing arranged by BLB are subject to a number of conditions, including approval by Wembley shareholders other than BLB, necessary regulatory approvals, and the execution of a long-term revenue-sharing arrangement for the Lincoln Park facility with the State of Rhode Island (any such agreement would require the approval of the Rhode Island Senate, the Rhode Island House of Representatives and the Governor) and a tax parity arrangement with the State of Rhode Island to ensure that the tax rate imposed on Lincoln Park’s gaming operations will not exceed the tax rate imposed on any other gaming operations within the State of Rhode Island.  The conditional sale agreement may be terminated by either party if the transaction has not been completed by May 30, 2005.

One&Only Resorts

Our One&Only Resorts business consists of a collection of managed and/or owned/partially owned premier luxury resort properties that primarily operate in the five-star, deluxe-end of the market.  In December 2002, we introduced our One&Only brand for certain of our luxury resort properties.  These One&Only managed properties are located in The Bahamas, Mauritius, Dubai, Mexico and the Maldives.  We also have two properties under development which we intend to manage as One&Only properties: the One&Only Cape Town (“Cape Town”) located in the Victoria & Alfred Waterfront in Cape Town, South Africa and the One&Only Reethi Rah (“Reethi Rah”) located on North Male Atoll in the Maldives.  We intend to acquire an equity ownership interest and enter into management and development agreements in connection with Cape Town.  We currently have development and management agreements for Reethi Rah.

We manage the resorts in Mauritius, Dubai, the Maldives and Mexico under long-term management and marketing agreements and receive management and marketing fees based upon percentages of the revenues and adjusted gross operating profits of these properties.  Such amounts related to management and marketing fees from resorts in Mauritius, Dubai and the Maldives are included in management, development and other fees in the accompanying consolidated statements of operations.  Our share of earnings or losses resulting from our ownership interests in Mauritius and the Maldives are included in equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations.

The Bahamas

In Paradise Island, The Bahamas, we own and operate the Ocean Club, a high-end luxury resort hotel.  The Ocean Club features Dune, a beachfront restaurant operated by well-known restaurateur Jean-Georges Vongerichten, a championship golf course designed by Tom Weiskopf and a clubhouse with luxury, oceanfront home sites situated around the golf course.  As part of the Phase III expansion, we completed the development of three luxury villas during 2004.

Mauritius

In Mauritius, we manage and own interests in five beach resorts (“Mauritius Resorts”) including the One&Only Le Saint Géran Hotel, the One&Only Le Touessrok Hotel, La Pirogue Hotel, Le Coco Beach Hotel and Sugar Beach Resort.  As of December 31, 2004, we owned a 20.4% interest in Sun Resorts Limited (“SRL”), the company that owns the Mauritius Resorts.

The Maldives

In the Maldives, located approximately 600 miles southwest of the southern tip of India, we manage and own an interest in the One&Only Kanuhura (“Kanuhura”), a luxury resort located on Lhaviyani Atoll.  Effective August 1, 2001, we acquired a 25% ownership interest in Kanuhura for approximately $3.8 million.  Effective January 1, 2003, we reduced our ownership interest to 20%, and as of January 1, 2005, this interest was further reduced to 18.75%.  During 2002, we entered into management and development agreements for a luxury resort, Reethi Rah, which is currently being constructed on North Male Atoll in the Maldives, and is expected to open in the second quarter of 2005.

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See Note 16—Related Party Transactions—Mauritius Resorts for discussion of an agreement with SRL entered into in connection with the management of the resorts in Mauritius and the Maldives.

Dubai

In the Middle East, we manage the One&Only Royal Mirage (“Royal Mirage”) in Dubai.  Under the terms of the management agreement, we receive management fees based on a percentage of the revenues and gross operating profits of the Royal Mirage.

Mexico

In Mexico, we manage and own a 50% interest in Palmilla, a deluxe five-star One&Only property located near Cabo San Lucas in Baja, Mexico.  We entered into long-term management and development agreements related to the property that will expire in 2022.  In April 2003, Palmilla commenced an expansion project that increased the room count and significantly upgraded the amenities and public areas offered by the resort.  The expansion was completed in early 2004 and was financed by Palmilla through local project financing, which was supported by a $46.5 million guarantee from Kerzner, and by $14.5 million in completion loans, excluding accrued interest, from Kerzner.  This guarantee no longer exists as the underlying indebtedness that was guaranteed, together with our completion loans, were repaid in connection with Palmilla’s refinancing in December 2004.  See Note 13—Long-Term Debt and Note 23—Commitments and Contingencies for further discussion.

Note 2—Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Kerzner, its subsidiaries and variable interest entities subject to consolidation pursuant to FIN 46R.  All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements.  These estimates and assumptions also affect the reported amounts of revenues and costs and expenses during the reporting period.  On a regular basis, management evaluates its estimates.  Actual results could differ from those estimates.

We provide allowances for doubtful accounts arising from casino, hotel and other services and amounts due from affiliates, which are based upon a specific review of outstanding receivables.  In determining the amounts of the allowances, we are required to make certain estimates and assumptions.  Accruals for potential liabilities related to any lawsuits or claims brought against us, calculation of inventory provisions, determination of fair value of employee stock options to determine compensation expense for disclosure purposes, fair values of financial instruments and guarantees, purchase price allocations, calculation of income tax liabilities and contingencies, valuation allowance on deferred tax assets, percentage-of-completion calculations, recoverability of goodwill and realizability of notes receivable and other liabilities require that we apply significant judgment in determining the appropriate assumptions for use in the calculation of financial estimates.  We also must estimate the useful lives assigned to our assets.  Actual results may differ from these estimates and assumptions.

Cash Equivalents and Restricted Cash

We consider all of our short-term money market securities, purchased with original maturities of three months or less, to be cash equivalents.  As of December 31, 2004, restricted cash primarily relates to restricted cash held in relation to Palmilla’s long-term debt and letters of credit for one of our tour operators.  As of December 31,

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2003, restricted cash primarily related to letters of credit for one of our tour operators and a certificate of deposit associated with a revolving credit facility.

Short-Term Investments

Short-term investments consist of U.S. Treasury Bills (“T-Bills”) with readily determinable fair values.  The Company’s T-Bills are classified and accounted for as available-for-sale securities and are reported at fair market value with the resulting net unrealized holding gains or losses reported as a separate component of comprehensive income (loss) in shareholders’ equity. 

Trade Receivables, Notes Receivable and Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of gaming accounts receivable and notes receivable from affiliates.  The Company issues markers to approved casino customers following background checks and investigations of creditworthiness.  At December 31, 2004, a substantial portion of the Company’s receivables were due from customers residing in the United States.  We also had receivables due from customers residing in other foreign countries.  Business or economic conditions or other significant events in these countries could affect the collectibility of these receivables.  Notes receivable consist of amounts due from affiliates that primarily arise from construction funding made by the Company to assist in the financing of development projects.

Trade receivables, including gaming and hotel receivables, are typically non-interest bearing and are initially recorded at cost.  Accounts are written off when management deems the account to be uncollectible.  Recoveries of accounts previously written off are recorded when received.  An estimated allowance for doubtful accounts is maintained to reduce the Company’s receivables to the amount management estimates to be collectible, which approximates fair value.  The allowance is estimated based on specific review of customer accounts as well as historical collection experience and current economic and business conditions.

Inventories

Inventories are carried at the lower of cost (on a first-in, first-out basis) or market value.  Inventories consist primarily of food and beverages, operating supplies, retail and other items.  Provisions are made, as necessary, to reduce excess or obsolete inventories to their estimated net realizable value.

Assets Held for Sale

Assets held for sale as of December 31, 2004 consist of $5.4 million of undeveloped real estate which we own in Atlantic City and $6.9 million of real estate at the Ocean Club Estates.

Property and Equipment and Depreciation

Property and equipment is stated at cost and its components (other than land) are depreciated over the estimated useful lives reported below using the straight-line method.  Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements.

Buildings	40 years
Land improvements and utilities	14 years
Furniture, machinery and equipment	3-10 years

Expenditures for renewals and betterments, which increase the estimated useful life or capacity of the assets, are capitalized; expenditures for repairs and maintenance are expensed when incurred.  Gains or losses on

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dispositions of property and equipment are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Construction in progress relates to assets not yet placed in service and are not currently being depreciated.

Capitalized Interest

The Company capitalizes interest costs associated with debt incurred in connection with major construction projects and capital contributions to equity method investees who utilize such funds for construction-related activities.  When debt is not specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company’s average cost of borrowed capital.  Capitalization of interest ceases when a project is substantially complete or construction activities have ceased.  The amounts capitalized during the years ended December 31, 2004, 2003 and 2002 were $5.8 million, $0.4 million and $0.2 million, respectively.

Software and Development Costs

The Company capitalizes purchased software that is ready for service and development costs for software incurred from the time the preliminary project stage is completed until the software is ready for use.  Under the provisions of Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” the Company capitalizes costs associated with software developed or obtained for internal use when the preliminary project stage is completed.  Capitalized costs include only:  (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, and (ii) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software project.  Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose.  As of December 31, 2004 and 2003, approximately $8.3 million and $5.6 million, respectively, of these costs were capitalized and primarily related to upgrades to our Bahamian tour operator’s reservation system.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  If such review indicates that an asset may not be recoverable, an impairment loss is recognized for the excess of the carrying amount over the fair value of an asset to be held and used or over the fair value less cost to sell of an asset to be disposed or sold.  The Company has determined that for the year ended December 31, 2004, none of its long-lived assets were impaired, except for a portion of land in Atlantic City, as further discussed in Note 8—Property and Equipment, net.

Debt Issuance Costs

The Company incurs discounts, structuring fees and other costs in connection with its issuance of debt and with its amended credit facilities.  Debt issuance costs are deferred when incurred and amortized to interest expense based on the anticipated debt maturities using the straight-line method, which approximates the effective interest method.

Investments in Associated Companies

Investments in associated companies represent investments in which the Company maintains an interest in excess of 20% but less than or equal to 50% and has significant influence over the investee.  These investments are accounted for in accordance with the equity method of accounting, under which each such investment is reported at cost plus the Company’s proportionate share of the income or loss, including other comprehensive income or loss, less dividends received, of such investee since its acquisition.  In certain instances, the Company’s investment balance also includes interest capitalized during construction, as appropriate.

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Goodwill

Goodwill consists of amounts associated with certain investments in associated companies accounted for under the equity method of accounting.  This equity method goodwill is included in investments in associated companies and was $7.9 million as of December 31, 2004 and 2003.  The Company assesses such goodwill for impairment on an annual basis and has determined that there was no impairment of goodwill as of December 31, 2004 and 2003.

Capital Creditors

Capital creditors represents amounts due to vendors for capital improvement and construction related projects.

Fair Value of Guarantees

In accordance with FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), we recognize, at the inception of a guarantee, a liability equal to an estimate of the guarantee’s fair value for the obligations we have undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur. See Note 23—Commitments and Contingencies—Guarantees for the fair value of guarantees recorded.

Accumulated Other Comprehensive Income (Loss)

Financial statements of foreign entities in which the Company maintains an investment are prepared in their respective local currencies and translated into U.S. dollars at the current exchange rates for assets and liabilities and an average rate for the year for revenues and expenses.  Net gains or losses resulting from the translation of foreign financial statements are charged or credited to the currency translation adjustment component of accumulated other comprehensive income (loss).  Other comprehensive income (loss) have no tax impact as they relate to translation reserves on investments owned by foreign entities that are not subject to taxation.

Treasury Stock

Ordinary shares (the “Ordinary Shares”), which were repurchased and held in treasury, are stated at cost in the accompanying consolidated balance sheets.

Revenue Recognition

We recognize the net win from casino gaming activities (the difference between gaming wins and losses) as gaming revenues.

Hotel, food and beverage, and other operating revenues are recognized as services are performed.  Advance deposits on rooms are deferred and included in customer deposits and unearned revenues within accounts payable and accrued liabilities until services are provided to the customer.  Golf initiation fees are deferred upon receipt and then amortized into revenue on straight-line basis over their average estimated useful life.  The retail value of accommodations, food and beverage, and other services furnished to hotel/casino guests without charge is included in gross revenue and then deducted as promotional allowances.  (See “Promotional Allowances” below for further discussion.)

Revenues and expenses from tour operations include the sale of travel and leisure packages and are recognized at the time of departure.  Amounts collected in advance from guests are deferred and included in customer deposits and unearned revenues within accounts payable and accrued liabilities until such amounts are earned.

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Revenue generated from construction services performed pursuant to the terms of the TCA Development Agreement and other development agreements related to Atlantis, The Palm, Harborside at Atlantis and Reethi Rah are recognized on the percentage-of-completion basis in accordance with SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.”  The percent complete and the amount earned at the end of each accounting period is determined by the percentage of costs incurred on the project at the end of each period as a percentage of the total estimated costs of the project.  Development fees earned are included in management, development and other fees in the accompanying consolidated statements of operations.

Management, development and other fees include amounts charged to unconsolidated affiliates for hotel management, executive management and project consulting and are recorded when the appropriate revenue recognition criteria have been met.

Other revenues primarily represent incidental revenues generated from hotel and golf operations at our properties, including retail shops, telephone, rental income from retail establishments located at the properties, utilities, the Marina at Atlantis, guest activities and cancellations.  For the year ended December 31, 2004, other revenues also included incidental revenues from hotel and golf operations at Palmilla.  Other revenues also include the annual contribution payment related to a settlement with a significant shareholder.  For additional information, see Note 20—Gain on Settlement of Territorial and Other Disputes.  The detail of other revenues is as follows:

	For the Year Ended December 31,
	2004		2003		2002
Retail shops	$	14,997	$	12,347	$	11,271
Telephone	10,464		10,543		12,286
Golf revenue	11,806		7,608		7,326
Rental income	6,341		6,946		6,155
Utilities	6,933		6,689		6,704
Marina at Atlantis	4,805		4,549		4,586
Guest activities	8,726		8,701		7,620
Annual contribution payment related to settlement	3,375		3,268		3,163
Cancellations	4,744		3,257		3,143
Other hotel revenue	6,345		4,516		3,364
	$	78,536	$	68,424	$	65,618

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Promotional Allowances

The retail value of accommodations, food, beverage and other services provided to customers without charge is included in gross revenues and deducted as promotional allowances.  The estimated departmental costs of providing such promotional allowances are included in gaming cost and expenses as follows:

	For the Year Ended December 31,
	2004		2003		2002
Rooms	$	2,285	$	2,363	$	2,373
Food and beverage	6,340		6,727		6,428
Other	367		441		426
	$	8,992	$	9,531	$	9,227

Advertising Expense

We expense advertising costs as incurred.  Advertising expense was $15.1 million, $16.1 million, and $15.8 million for the years ended December 31, 2004, 2003 and 2002, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Foreign Currency

Transactions denominated in foreign currencies are recorded in local currency at actual exchange rates at the date of the transaction.  Monetary assets and liabilities denominated in foreign currencies at the balance sheet dates are reported at the rates of exchange prevailing at those dates.  Any gains or losses arising on monetary assets and liabilities from a change in exchange rates subsequent to the date of the transaction have been included in corporate expenses in the accompanying consolidated statements of operations.  These amounts were not significant for the years ended December 31, 2004, 2003 and 2002.

The financial statements of our equity method investees and certain foreign subsidiaries are translated from their respective local currencies into U.S. dollars using current and historical exchange rates.  Translation adjustments resulting from this process are reported separately and accumulated as a component of accumulated other comprehensive income (loss) in shareholders’ equity in the accompanying consolidated balance sheets.  Upon sale or liquidation of our investments, the translation adjustment would be reported as part of the gain or loss on sale or liquidation.

We do not have operations located in countries with highly inflationary economies.

Hurricane Related Expenses

Hurricane related expenses primarily consist of clean up and repair costs and complimentary goods and services to guests associated with Hurricane Frances at the Company’s Paradise Island properties.

Insurance Recovery

Insurance recovery represents proceeds received for business interruption amounts relating to Hurricane Michelle, which were recorded when realized.

Pre-Opening Expenses

Pre-opening expenses are charged to expense as incurred.  Pre-opening expenses of $3.3 million in the accompanying consolidated statement of operations for the year ended December 31, 2004 represent costs incurred

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prior to the opening of the Ocean Club Villas in June 2004 and Palmilla’s grand re-opening event in February 2004.  During the years ended December 31, 2003 and 2002, we did not incur any pre-opening expenses.

Loss (Gain) on Damaged Assets

Loss on damaged assets represents the write-off of assets damaged during Hurricane Frances.  Gain on damaged assets represents insurance proceeds received in excess of the net book value of assets damaged during Hurricane Michelle.

Costs of Management and Development Agreements

The Company expenses any costs incurred relating to the pursuit of business acquisitions while the potential acquisition process is ongoing.  When the Company enters into a definitive agreement in connection with a management or development agreement, certain direct incremental costs related to the acquisition of the agreement and paid to third parties are deferred and amortized to expense or recorded as a reduction to the related revenue, as appropriate, over the period of the underlying agreements.  Such costs are deferred only when the income on such contracts is expected to exceed the related costs incurred and the related project is considered probable.  Deferred contract acquisition costs are included in deferred charges and other assets, net in the accompanying consolidated balance sheets.

Income Taxes

We are subject to income taxes in certain jurisdictions in which we conduct business.  Accordingly, the accompanying consolidated statements of operations include a provision for income taxes based on prevailing tax laws of those jurisdictions.

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.”  Realization of future tax benefits related to deferred tax assets is dependent on many factors, including our ability to generate future taxable income.  The valuation allowance is adjusted in the period we determine it is more likely than not that deferred tax assets will or will not be realized.

Minority Interest

As of January 1, 2004, pursuant to our adoption of FIN 46R, we determined that Palmilla, a 50% owned equity method investment, must be consolidated.  As of and for the year ended December 31, 2004, we have consolidated Palmilla, with the remaining 50% interest reflected as minority interest in the accompanying consolidated statement of operations for the year ended December 31, 2004, and a minority interest liability reflected within the accompanying consolidated balance sheet as of December 31, 2004.

Effective January 1, 2003, we entered into an agreement with SRL to form One&Only (Indian Ocean) Management Limited (“One&Only Management”) for the purpose of, among other things, managing Kanuhura and the Mauritius Resorts.  As of December 31, 2004, SRL owned 20% of One&Only Management and we owned the remaining 80%.  Subject to certain conditions, SRL’s ownership interest will increase incrementally through 2009, for no additional consideration, at which time SRL will own 50% of One&Only Management.  As of and for the years ended December 31, 2004 and 2003, we have consolidated One&Only Management, with SRL’s 20% interest in the operations of One&Only Management reflected as a minority interest in the accompanying consolidated statements of operations and a minority interest liability reflected within accounts payable and accrued liabilities in the accompanying consolidated balance sheets.  Effective January 1, 2005, SRL’s ownership interest in One&Only Management increased to 25% and the Company’s ownership interest correspondingly decreased to 75%.  See Note 16—Related Party Transactions for further discussion.

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Earnings Per Share Data

The following is a reconciliation of the shares used in our earnings per share computations (shares in thousands):

	For the Year Ended December 31,
	2004	2003	2002
Weighted average shares used in basic computations	32,550	28,575	27,891
Dilutive stock options and restricted shares outstanding	1,334	802	653
Weighted average shares used in diluted computations	33,884	29,377	28,544

The net income amount used as the numerator in calculating basic and diluted earnings per share is the net income in the accompanying consolidated statements of operations.  Certain options were not included in the computation of diluted earnings per share in 2004, 2003 and 2002 because their effect would have been anti-dilutive. The number of options not included in the computation for the years ended 2004, 2003 and 2002 were 0.1 million, 2.2 million and 1.3 million, respectively.

Stock-Based Compensation

We have elected to apply Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” as interpreted in FASB Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation” in accounting for compensation under our stock option plans in lieu of the alternative fair value accounting provided for under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – An Amendment of FASB Statement No. 123” (“SFAS 123”). Accordingly, no compensation expense has been recorded for those stock options granted at option prices equal to the fair market value of the common stock at the date of grant.

SFAS 123 requires the use of option valuation models that require the input of highly subjective assumptions, including expected stock price volatility.  The effect of applying the fair value method of accounting for stock options on reported net income and earnings per share for 2004, 2003 and 2002 may not be representative of the effects for future years because outstanding options vest over a period of several years and additional awards are generally made each year.

The fair value of options granted during 2004, 2003 and 2002 was estimated as of the respective dates of grant using the Black-Scholes option-pricing model with the following assumptions.  The weighted average fair value of options granted in 2004, 2003 and 2002 was $15.40, $12.44 and $7.53, respectively.

	For the Year Ended December 31,
	2004		2003		2002
Risk-free interest rate	3.2	%	3.2	%	4.7	%
Expected volatility	32.9	%	37.2	%	37.3	%
Expected life of options in years	4		4-5		4-5
Expected dividend yield	—		—		—

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The following table illustrates the effect on net income and earnings per share if Kerzner had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation.

	For the Year Ended December 31,
	2004		2003		2002
Net income, as reported	$	68,132	$	71,572	$	39,603
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	7,357		3,699		6,448
Pro forma net income	$	60,775	$	67,873	$	33,155
Earnings per share:
Basic – as reported	$	2.09	$	2.50	$	1.42
Basic – pro forma	$	1.87	$	2.38	$	1.19
Diluted – as reported	$	2.01	$	2.44	$	1.39
Diluted – pro forma	$	1.79	$	2.31	$	1.16

During the years ended December 31, 2004 and 2003, the Company issued 0.3 millionand 0.1 millionrestricted shares, respectively, under the 2003 stock option plan to certain employees and officers.  The vesting period ranges from four to five years on either a graduated or cliff vesting basis provided that the recipient is still with the Company.  The aggregate market value of the restricted shares in 2004 and 2003 at the date of issuance of $14.8 million and $2.6 million, respectively, has been recorded as deferred compensation, as a separate component of shareholders’ equity, and is being amortized over the applicable vesting period.

Derivative Financial Instruments

The Company’s derivatives consist of interest rate swap agreements and an interest rate cap agreement used to manage the impact of interest rate changes on our long-term debt obligations and have been accounted for as fair value hedges and a cash flow hedge, respectively, in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

Reclassifications

Certain amounts included in the prior years’ consolidated financial statements have been reclassified to conform to the current year’s presentation.

Recent Accounting Pronouncements

Other-Than-Temporary Impairment of Investments

In March 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-01”).  EITF 03-01 addresses the meaning of other-than-temporary impairment and its application to debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS 115”) and equity securities that are not subject to the scope of SFAS 115 and not accounted for under the equity method of accounting.  As of December 31, 2004, the Company determined that EITF 03-01 had no impact on its consolidated financial statements.

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Contingently Convertible Instruments

In September 2004, the EITF reached a consensus on Issue No. 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share” (“EITF 04-08”), which is effective for reporting periods ending after December 15, 2004.  EITF 04-08 requires companies to include shares issuable under convertible instruments in diluted earnings per share computations (if dilutive) regardless of whether the market price trigger (or other contingent feature) has been met.  In addition, prior period earnings per share amounts presented for comparative purposes must be restated.  In April 2004, the Company issued contingent convertible notes with terms as described in Note 13—Long-Term Debt.  In accordance with EITF 04-08, there will be an impact on the future diluted earnings per share related to these notes when the Company’s average common stock price exceeds the conversion price of $58.24 even though the market price trigger of 120% of the conversion price, or $69.89, has not been met.  In that situation, the Company would reflect the additional common shares in the calculation of diluted earnings per share using the treasury stock method.  EITF 04-08 did not impact earnings per share in 2004, as the average stock price for the year did not exceed $58.24.  However, EITF 04-08 may have an effect in 2005.  On March 24, 2005, the closing price of our Ordinary Shares on the New York Stock Exchange was $60.60.  If $60.60 were the average price for 2005, our number of fully diluted outstanding Ordinary Shares would increase by 153,789.

Share-Based Payment

In December 2004, the FASB issued a revision of SFAS 123 (“SFAS 123(R)”) that will require compensation costs related to share-based payment transactions to be recognized in the statement of operations.  With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued.  In addition, liability awards will be remeasured each reporting period.  Compensation cost will be recognized over the period that an employee provides service in exchange for the award.  SFAS 123(R) replaces SFAS 123 and is effective for the Company as of the first interim reporting period beginning after June 15, 2005.  The Company expects that the adoption of SFAS 123(R) will have a material impact on its consolidated financial statements.

The Company anticipates applying SFAS 123(R) for its third quarter beginning July 1, 2005, which would result in compensation expense of approximately $3.3 million (not including tax effects) for the second half of 2005, based on option grants outstanding at December 31, 2004.  The foregoing amount does not include compensation expense for any stock options that may be granted after December 31, 2004.

Note 3—Business Acquisitions and Dispositions

Wembley

On March 10, 2004, Kerzner announced that it entered into a joint venture, BLB, with an affiliate of Starwood Capital and an affiliate of Waterford for the purpose of acquiring an interest in Wembley, which owns gaming and track operations in the United States and race tracks in the United Kingdom.  Wembley’s U.S. operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack with video lottery terminals.  BLB is owned 37.5% by each of us and Starwood Capital, with Waterford owning the balance of 25%.  We account for our investment in BLB pursuant to the equity method of accounting.

In a series of private transactions which commenced on March 10, 2004 and ended on April 16, 2004, BLB acquired a 22.2% interest in Wembley at 800 pence per share (approximately US$14.38 per share).  The Company invested $47.4 million in BLB during the first half of 2004 for its proportionate share of BLB’s interest in Wembley.  On April 20, 2004, BLB announced a cash tender offer at 860 pence per share for all of Wembley’s outstanding shares.  On July 5, 2004, BLB announced that its offer to acquire all of Wembley’s outstanding shares had lapsed due to the failure of the condition that it receive valid acceptances from at least 90% of Wembley’s outstanding shares.  BLB remains a 22.2% shareholder of Wembley.

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Kerzner Istithmar

The Company has agreed to invest $100.0 million in the form of Class A common stock in Kerzner Istithmar.  As of December 31, 2004, the Company had invested $21.8 million in Kerzner Istithmar.  See Note 19—Investments in and Equity Earnings (Losses) of Associated Companies for further discussion.

U.K. Development Projects and Acquisition of Casino License

In July 2004, we made a $2.9 million payment as consideration for our exclusive appointment as the preferred developer and operator of a proposed resort casino and hotel at the Scottish Exhibition + Conference Centre in Glasgow that we will own.  The Scottish Exhibition + Conference Centre is operated by SEC Ltd., which is 90% owned by the Glasgow City Council.  This amount is included within property and equipment, net in the accompanying consolidated balance sheets.

In April 2003, we made a $4.0 million initial payment as consideration for the development of a casino and hotel at the Millennium Dome in London, which is subject to numerous conditions, including the enactment of appropriate gambling legislation in the United Kingdom and the granting of applicable gaming board, licensing, planning and council permissions.  This amount was included in deferred charges and other assets, net in the accompanying consolidated balance sheet as of December 31, 2003, as the initial payment had been refundable if the above conditions were not met.  However, this provision expired on December 31, 2004, and as such, the $4.0 million payment was reclassified to construction in progress as of December 31, 2004.  In 2003, we also made a $1.3 million and $0.8 million payment for the acquisition of a casino license and land, respectively, in Northampton, England.

Palmilla

On September 12, 2002, we acquired a 50% ownership interest in Palmilla, a deluxe five-star One&Only property located near Cabo San Lucas in Baja, Mexico, for approximately $40.8 million, including direct acquisition costs.  This acquisition was funded through a combination of cash on hand and borrowings under our revolving credit facility as part of our strategy to expand our luxury resort business.  In connection with the purchase, we entered into long-term management and development agreements related to the property that will expire in 2022.  As part of the operating agreement, the other 50% owner has the right to require us to acquire its 50% interest for a price of $36.3 million, plus 50% of Palmilla’s working capital, with the price subject to adjustment, as defined in the purchase agreement, during the first year of the option period.  The purchase price during the second year of the option period is based on a formula, as defined.  The option period begins on September 12, 2005 and expires on September 12, 2007.  As previously described, as a result of this put option, Palmilla has been consolidated effective January 1, 2004, pursuant to FIN 46R.

In February 2004, Palmilla completed an expansion project that began in April 2003, which increased the room count and significantly upgraded the amenities and public areas offered by the resort.  The expansion was initially financed primarily through local project financing, which was supported by a Kerzner guarantee of $46.5 million and $14.5 million in completion loans from Kerzner.  This initial financing was replaced by new financing in December 2004 that is non-recourse to Kerzner, subject to certain exceptions.  For a further discussion of this guarantee, see Note 23—Commitments and Contingencies.

World Leisure Holidays Acquisition

Effective January 1, 2003, we acquired 100% of the voting equity interests of World Leisure Holidays, Inc. (“WLH”), a tour operator located in South Africa.  WLH handles reservations from the European and Asian markets for our One&Only properties primarily in Mauritius, the Maldives and Dubai.  We paid $0.6 million to SRL to acquire WLH, which amount approximated both its fair value and net book value at the date of acquisition, resulting in the recognition of no goodwill.  WLH results for the years ended December 31, 2004 and 2003 are included in the accompanying consolidated statements of operations.  The pro forma effect of this acquisition to the results of

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operations for the year ended December 31, 2002 was insignificant.  There were no contingent payments, options or commitments and there was no purchased research and development assets associated with this acquisition.

As of January 1, 2003, the assets and liabilities of WLH were as follows:

Cash and cash equivalents	$	1,990
Other current assets	416
Non-current assets	55
Current liabilities	1,813
Non-current liabilities	—

Kanuhura

On January 1, 2003, we sold 20% of our equity interest in Kanuhura to SRL at our net book value of $1.5 million, resulting in no gain or loss on the transaction.  As a result, we had a 20% ownership interest in Kanuhura.  Effective January 1, 2005, our ownership interest in Kanuhura decreased to 18.75% and SRL’s interest increased to 6.25%.  See Note 16—Related Party Transactions - Mauritius Resorts for further discussion.

Kerzner Interactive

Through a wholly owned subsidiary, the Company previously owned and operated Kerzner Interactive, an online Internet gaming site.  Kerzner Interactive allowed play only in jurisdictions that permitted online gaming and, as these jurisdictions became more restrictive in their acceptance of play, the market size was reduced and competition intensified.  Without the potential for expansion into other markets, including the United States, the outlook for new business substantially decreased.  As a result, during the first quarter of 2003, the Company discontinued the operations of Kerzner Interactive.

On February 15, 2002, the Company entered into an agreement with Station Casinos, Inc. (“Station”), pursuant to which Station agreed to purchase a 50% interest in Kerzner Interactive.  The companies later renegotiated the original agreement such that Station purchased an option from us in July 2002 for $4.5 million to buy a 50% interest in Kerzner Interactive.  The Company and Station mutually agreed to terminate this transaction.  As a result, the $4.5 million non-refundable deposit was recognized as income during the first quarter of 2003 and was offset by net losses incurred while winding down the operations of the business, including the write-down of net assets and other associated costs.

The operating results of Kerzner Interactive for the years ended December 31, 2003 and 2002 are as follows and are presented as income (loss) from discontinued operations, net of income tax effect in the accompanying consolidated statements of operations:

	For the Years Ended December 31,
	2003			2002
Revenues	$	—		$	753
Expenses	(3,195		)	(8,921		)
Other income	4,500			107
Net income (loss)	$	1,305		$	(8,061	)

As of December 31, 2003, Kerzner Interactive had cash and cash equivalents of $0.3 million and current liabilities of $0.1 million.

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Club Méditerranée (Bahamas) Limited

On October 29, 2003, the Company entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited (“Club Med”) on Paradise Island for $38.5 million.  During the year ended December 31, 2003, the Company paid $20.0 million in connection with the acquisition.  During the year ended December 31, 2004, the Company paid $3.5 million in related stamp taxes, as well as the remaining balance of $15.0 million, which was paid in September 2004 when the Company took possession of the property.  Effective with the Company’s possession of the property, we exercised an option to purchase certain adjacent land lots at a price of $5.0 million, plus $0.5 million in related stamp taxes.  The purchase price of the Club Med assets acquired was allocated to the fair value of assets acquired as indicated below.  The Company did not acquire the operations of Club Med.

Land	$	42,875
Buildings and leasehold improvements	1,146
Furniture, machinery and equipment	230
Deferred lease income	(250		)
Total Club Med acquisition	$	44,001

In addition to the acquisition of the land lots referred to above, during the year ended December 31, 2004, the Company acquired from land owners certain land lots in proximity of the Club Med property for $6.9 million.

Sale of Resorts Atlantic City

Through a wholly owned subsidiary we previously owned and operated a resort and casino property in Atlantic City, New Jersey (“Resorts Atlantic City”).  On April 25, 2001, we completed the sale of Resorts Atlantic City (the “Sale of Resorts Atlantic City”) to an affiliate of Colony Capital LLC (“Colony”).

Pursuant to the terms of the Resorts Atlantic City Sale, we granted Colony a two-year option (the “Atlantic City Option”) to acquire certain undeveloped real estate which we own, adjacent to Resorts Atlantic City, for a sale price of $40.0 million, which option could be extended by Colony for two additional one-year periods upon 45 days notice to us prior to the expiration of the then-current option period and payment to us of a $2.5 million extension payment for each renewal period.  In July 2003, and through various extensions thereafter, we and Colony agreed to extend the initial option period in exchange for an option extension payment of $1.3 million which was paid on July 9, 2003 and was accounted for as a deposit in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2003.  The Atlantic City Option has since contractually expired and in February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we agreed to sell the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary of Colony for a sale price of $40.0 million, effectively honoring the original option price.  The sale price was paid in the form of a promissory note which will mature in March 2009.  Although this transaction qualifies as a legal sale, it does not qualify as an accounting sale pursuant to SFAS No. 66, “Accounting for Sales of Real Estate.”  In accounting for the sale transaction, the option extension payment has been reflected in other deposits and unearned revenue within the accompanying consolidated balance sheet as of December 31, 2004.  The $40.0 million balance of the note is not expected to be received until March 2009.  As sufficient cumulative payments toward the purchase price were not received as of December 31, 2004, collectibility of the sales price cannot be reasonably assured.  As such, the sale has not been recognized as of December 31, 2004.  The net carrying value of the related undeveloped real estate is $40.0 million and is included in land within property and equipment, net in the accompanying consolidated balance sheets.

Effective April 25, 2001, the closing date of the Resorts Atlantic City Sale, Colony leased from us certain of the property included in the Atlantic City Option for $100,000 per month.  At that time, the lease could be terminated by either Colony or us with thirty days notice, subject to certain conditions.  The rental income resulting from this lease

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was $1.2 million for both of the years ended December 31, 2003 and 2002, and is included in other revenues in the accompanying consolidated statement of operations.  This lease terminated upon the sale of the related real estate.

Atlantic City Land

In July 2004, the Company obtained an appraisal on undeveloped real estate which we own in Atlantic City, which indicated that the carrying amount of this real estate was not fully recoverable.  The appraisal was commissioned after the Company had received an unsolicited offer to acquire some of the undeveloped land for a price substantially less than the Company’s book value and certain other information related to third party sales of nearby comparable properties at prices substantially less than what the Company’s book value was for its undeveloped property.  As a result, during the year ended December 31, 2004, we recognized a $7.3 million impairment loss as these assets were written down to fair value less estimated costs to sell of $5.4 million.  This amount was reclassified to assets held for sale in the accompanying balance sheet as of December 31, 2004, as we have entered into an agreement to sell this real estate and expect to close the sale in the second quarter of 2005.

Note 4—Cash Equivalents and Restricted Cash

Cash equivalents at December 31, 2004 and 2003 included reverse repurchase agreements (federal government securities purchased under agreements to resell those securities) under which we had not taken delivery of the underlying securities and investments in a money market fund that invests exclusively in U.S. Treasury obligations.  At December 31, 2004 and 2003, we held reverse repurchase agreements of $33.4 million and $17.2 million, respectively, all of which matured in the first week of the following month.  Also, at December 31, 2004, we held $117.0 million of money market funds.

At December 31, 2004, restricted cash included $2.3 million as a result of certain provisions related to Palmilla’s long-term debt.  At December 31, 2004 and 2003, restricted cash included $0.4 million of customer deposits related to the sale of home sites at the Ocean Club Estates.  At December 31, 2003, restricted cash included $1.0 million of a certificate of deposit held as security on a bank credit facility.

Note 5—Short-Term Investments

During 2004, the Company purchased approximately $205.0 million principal amount of T-Bills.  At December 31, 2004, the adjusted carrying value and fair value of these securities was $203.9 million with maturity dates ranging from March 2005 to September 2005.  The Company’s T-Bills are classified and accounted for as available-for-sale securities and are reported at fair market value with the resulting net unrealized holding gains or losses, net of income taxes, reported as a separate component of comprehensive income (loss).  For the year ended December 31, 2004, the Company recorded $0.6 million of unrealized holding losses in connection with its T-Bills.

Note 6—Trade Receivables, net

The Company extends credit to approved casino customers.  These receivables potentially subject the Company to concentration of credit risk.  The Company maintains an allowance for doubtful accounts to reduce the receivables to their estimated collectible amount, which approximates fair value.  The collectibility of foreign and domestic receivables could be affected by future business or economic conditions or other significant events in the United States or in the countries in which foreign customers reside. 

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Components of trade receivables, net were as follows:

	December 31,
	2004			2003
Gaming	$	16,740		$	19,224
Less: allowance for doubtful accounts	(4,853		)	(5,586		)
	11,887			13,638
Hotel and related	22,088			17,806
Other	9,389			9,006
	31,477			26,812
Less: allowance for doubtful accounts	(1,621		)	(2,053		)
	29,856			24,759
	$	41,743		$	38,397

Bad debt expense related to trade receivables was $1.2 million, $1.3 million and $3.2 million for the years ended December 31, 2004, 2003 and 2002, respectively, and is included in selling, general and administrative expenses in the accompanying statements of operations.

Note 7—Prepaid Expenses and Other Current Assets

Components of prepaid expenses and other current assets were as follows:

	December 31,
	2004		2003
Prepaid windstorm, construction and other insurance	$	12,253	$	8,577
Prepaid tour operator-related costs	1,804		1,808
Prepaid rent-current	1,422		1,551
Prepaid taxes	823		—
Other	5,383		3,424
	$	21,685	$	15,360

Windstorm, construction and other insurance as of December 31, 2004 included $5.8 million for all risk insurance related to our Paradise Island properties and $4.8 million of prepaid construction insurance in connection with the Phase III expansion.  The policy year for the windstorm insurance began on June 1, 2004 and expires May 31, 2005.  The policy term for the construction policy began on September 30, 2004 and expires on May 31, 2007.

Prepaid taxes of $0.8 million as of December 31, 2004, consists of payments made by Palmilla to the Mexican taxing authority for income and asset taxes.  At December 31, 2003, included in other prepaid expenses and other current assets is a note receivable of $0.6 million relating to a compensation advance made to an employee which was satisfied as of December 2004.

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Note 8—Property and Equipment, net

Components of property and equipment, net were as follows:

	December 31,
	2004			2003
Land	$	289,125		$	259,845
Land improvements and utilities	239,153			228,460
Buildings and leasehold improvements	764,828			654,933
Furniture, machinery and equipment	284,754			234,798
Construction in progress	106,566			53,422
	1,684,426			1,431,458
Less: accumulated depreciation	(336,786		)	(277,454		)
	$	1,347,640		$	1,154,004

Property and equipment, net increased by $193.6 million from December 31, 2003 primarily as a result of $142.4 million from the consolidation of Palmilla as of January 1, 2004 pursuant to FIN 46R.

Construction in progress as of December 31, 2004 consisted of $86.9 million of costs associated with development projects and $19.7 million related to other capital projects including $8.3 million of software related costs.  Development project costs as of December 31, 2004 primarily included $47.6 million of Phase III expansion costs, $26.4 million of costs related to the Marina Village construction on Paradise Island and $4.3 million of costs associated with the development of the Ocean Club Residences & Marina.  Also included in construction in progress as of December 31, 2004 is a $2.9 million payment made by the Company as consideration for our exclusive appointment as the preferred developer and operator of a proposed resort casino and hotel at the Scottish Exhibition + Conference Centre in Glasgow that we will own and $8.6 million related to the planning and development of several casino and hotel facilities in the United Kingdom, that we will own, as the development of such casino and hotel facilities are deemed probable.  Construction in progress as of December 31, 2003 primarily included $53.4 million of major capital and other projects in development, including $5.6 million of software related costs.

Depreciation expense was $58.9 million, $55.8 million and $55.5 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Note 9—Deferred Charges and Other Assets, net

Components of deferred charges and other assets, net were as follows:

	December 31,
	2004		2003
Debt issuance costs, net	$	21,419	$	9,561
Interest rate swap asset, net	6,833		10,505
Deposit and casino license for UK development projects	1,306		5,346
Deferred compensation plan investments	3,981		1,744
Deferred contract acquisition costs	2,906		2,115
Employee notes receivable	1,225		1,270
Interest rate cap asset	114		—
Prepaid rent	—		1,324
Other	2,894		1,791
	$	40,678	$	33,656

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Debt issuance costs, net of amortization, relates to costs incurred in connection with the issuance of our $400.0 million principal amount of our 87/8% senior subordinated notes, $230.0 million principal amount of our 2.375% convertible senior subordinated notes, our amended credit facility and the issuance of Palmilla’s notes.  The amortization of debt issuance costs included in interest expense was $3.4 million, $1.2 million and $1.9 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Interest rate swap asset is the fair value of our swap agreements as of December 31, 2004 and 2003.  This asset represents the amount that would have been received had the $150.0 million of swap agreements been terminated on those dates.  The interest rate swap asset is $8.7 million and $11.8 million as of December 31, 2004 and 2003.  In connection with the termination of $25.0 million notional amount of two of our interest rate swap agreements in September 2003 and July 2004, we received $1.4 million and $1.1 million, respectively, which was classified as a contra asset in deferred charges and other assets, net as of December 31, 2004 and 2003, and is being accreted to interest expense over the term of the underlying debt.  The balance of the contra asset as of December 31, 2004 and 2003 is $1.9 million and $1.3 million, respectively.  Interest rate cap asset is the fair value of an interest rate cap agreement for Palmilla’s notes.  For further discussion of swap terminations, the interest rate cap and debt issuance costs, see Note 13—Long-Term Debt.

In April 2003, the Company made a $4.0 million initial payment as consideration for the development of a casino and hotel at the Millennium Dome in London, which is subject to numerous conditions, including the enactment of appropriate gambling legislation in the United Kingdom and the granting of applicable gaming board, licensing, planning and council permissions.  This amount was included in deferred charges and other assets, net as of December 31, 2003, as the initial payment was refundable if the above conditions were not met.  However, this provision expired on December 31, 2004, and as such, the $4.0 million payment was reclassified to construction in progress as of December 31, 2004 as it relates to the development of a casino and hotel that we will own.  In addition, during 2003, the Company made a $1.3 million payment related to the acquisition of a casino license in Northampton, England.

Deferred contract acquisition costs primarily relate to direct incremental costs incurred in connection with the acquisition of development and management contracts in connection with Atlantis, The Palm and projects in Morocco and South Africa.

Deferred compensation plan investments relate to assets held in a rabbi trust for our deferred compensation plan.  See Note 17—Employee Benefit Plans for further discussion.

Prepaid rent relates to the long-term portion of prepaid rent for our leased offices in Plantation, Florida.  The current portion is included in prepaid expenses and other assets.

Employee notes receivable as of December 31, 2004 and 2003 includes $0.8 million related to a secured housing loan which was issued in December 2002.  Additionally, $0.4 million as of December 31, 2004 and 2003 relates to funds advanced to an employee for a secured housing loan, which is being amortized through July 2012.

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Note 10—Accounts Payable and Accrued Liabilities

Components of accounts payable and accrued liabilities were as follows:

	December 31,
	2004		2003
Accrued payroll and related benefits	$	30,511	$	29,136
Hotel advance deposits	22,270		16,399
Other deposits and unearned revenue	18,044		12,227
Accrued hotel-related costs and expenses	16,651		17,252
Trade payables	15,869		14,842
Accrued interest	13,330		10,850
Accrued gaming-related costs and expenses	12,212		11,321
Accrued tour operator-related costs and expenses	6,882		5,769
Tour operator advanced deposits	6,642		6,556
Accrued taxes	5,310		9,251
Majority shareholder settlement – deferred revenue - current	3,487		3,375
Note payable and accrued taxes related to Club Méditerranée (Bahamas) Limited	—		18,500
Other	17,517		16,755
	$	168,725	$	172,233

Note 11—Deferred Revenue

Components of deferred revenue were as follows:

	December 31,
	2004		2003
Kersaf Investments Limited settlement	$	11,166	$	14,652
Kerzner Istithmar development fee	5,215		—
Lessee prepayment	2,521		—
Other	1,517		—
	$	20,419	$	14,652

Kersaf Investments Limited settlement represents the non-current portion of a settlement payment as further discussed in Note 20—Gain on Settlement of Territorial and Other Disputes.  Kerzner Istithmar development fee represents the deferred portion of payments received from Kerzner Istithmar related to the $20.0 million development fee as discussed in Note 16—Related Party Transactions.  Lessee prepayment consists of the long-term portion of an amount paid to the Company by an entity which is operating Palmilla’s spa facility, which is amortized to other revenues over the term of the underlying lease.  The current portion of the lessee prepayment is included in the other deposits and unearned revenue component of accounts payable and accrued liabilities.

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Note 12—Other Long-Term Liabilities

Components of other long-term liabilities were as follows:

	December 31,
	2004		2003
Deferred compensation obligation	$	3,973	$	1,800
Deferred rent credit	2,437		2,269
Fair value of Palmilla guarantee	—		2,761
Other	689		460
	$	7,099	$	7,290

For more information on the deferred compensation obligation, see Note 17—Employee Benefit Plans.  The deferred rent credit relates to a building lease entered into during 2002 for our office in Plantation, Florida.  For more information on the termination and fair value of the Palmilla guarantee, see Note 23—Commitments and Contingencies.

Note 13—Long-Term Debt

Long-term debt consisted of the following:

	December 31,
	2004			2003
Fifth Amended Credit Facility (a)	$	—		$	—
$400 million 87/8% Senior Subordinated Notes due 2011 (b)	413,427			417,090
$230 million 2.375% Convertible Senior Subordinated Notes due 2024 (c)	230,000			—
Palmilla Notes (d)	110,000			—
Other (e)	1,361			434
	754,788			417,524
Less: amounts due within one year	(659		)	(304		)
	$	754,129		$	417,220

(a) Fifth Amended Credit Facility

On July 7, 2004, Kerzner entered into an amendment to our credit facility (the “Fifth Amended Credit Facility”) with a syndicate of banks (the “Lenders”).  Under the Fifth Amended Credit Facility, the maximum amount of borrowings that may be outstanding is $500.0 million (the “Commitment Amount”).  The Commitment Amount under the Fifth Amended Credit Facility may be voluntarily reduced from time to time in multiples of $1.0 million.  The Commitment Amount also shall be automatically and permanently reduced in connection with certain asset sales.  In February 2005, we further amended the Fifth Amended Credit Facility to, among other things, (i) conform its description of the Phase III expansion to that included in the Heads of Agreement, as supplemented in December 2004, and (ii) provide for the release of the liens granted to the holders of the property required for the proposed condo-hotel and Ocean Club Residences & Marina, and (iii) to allow a deposit of up to $74.0 million of our cash and cash equivalents to secure our obligation to contribute equity capital to Atlantis, The Palm.

Loans under the Fifth Amended Credit Facility bear interest at (i) the higher of (a) a base rate or (b) the Federal Funds Rate plus one-half of one percent, in either case plus an additional 0.125% to 2.00% based on a debt to EBITDA ratio during the period, as defined (the “Leverage Ratio”), (ii) the London Interbank Offered Rate

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(“LIBOR”) rate plus 1.125% to 3.00% based on the Leverage Ratio or (iii) the Federal Funds Rate plus 1.125% to 3.00% based on the Leverage Ratio.  For loans based on the Alternate Base Rate (as defined), interest is payable monthly.  For loans based on the LIBOR rate, interest is payable on the last day of each applicable interest period.  Loans under the Fifth Amended Credit Facility may be prepaid and re-borrowed at any time and are due in full in July 2009.  Commitment fees are calculated at per annum rates ranging from 0.25% to 0.60% based on the Leverage Ratio, applied to the undrawn amount of the Fifth Amended Credit Facility and are payable quarterly.

The Fifth Amended Credit Facility contains affirmative and restrictive covenants which, among other things: (a) require periodic financial reporting, (b) require meeting certain financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the incurrence of indebtedness and (e) limit asset expenditures and dispositions outside the ordinary course of business.  As of December 31, 2004, management believes the Company was in compliance with all such covenants.

The Fifth Amended Credit Facility is secured by a pledge of substantially all of our assets.

As of December 31, 2004, the Company had $494.0 million of borrowings available on the Fifth Amended Credit Facility after giving effect to $6.0 million in letters of credit outstanding.  In connection with this facility, the Company incurred $4.4 million of debt issuance costs during the year ended December 31, 2004.  These costs are being amortized to interest expense over the expected life of the facility of 5 years.  These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the Company’s consolidated balance sheet as of December 31, 2004.

(b) 87/8% Senior Subordinated Notes

In August 2001, we issued $200.0 million principal amount of 87/8% senior subordinated notes due 2011 (the “87/8% Senior Subordinated Notes”) which, after costs of $6.0 million, resulted in net proceeds of approximately $194.0 million.  All of the proceeds received from the issuance of the 87/8% Senior Subordinated Notes were used to repay amounts outstanding under a previous revolving credit facility.  In May 2002, we issued, at 103%, an additional $200.0 million of 87/8% Senior Subordinated Notes and used the proceeds of approximately $201.5 million, net of related costs of $4.5 million, to repay our 9% Senior Subordinated Notes. 

The 87/8% Senior Subordinated Notes are unconditionally guaranteed by substantially all of our wholly owned subsidiaries. Interest on these notes is paid semi-annually on February 15 and August 15.  The indenture for the 87/8% Senior Subordinated Notes contains various restrictive covenants, including limitations on the ability of the issuers and the guarantors to, among other things: (a) incur additional indebtedness, (b) incur certain liens, (c) engage in certain transactions with affiliates and (d) pay dividends and make certain other payments.  We believe we are in compliance with all such covenants as of December 31, 2004.

All of our outstanding 87/8% Senior Subordinated Notes rank pari passu with each other and are all subordinated to the Fifth Amended Credit Facility.

In connection with the issuance of the $200.0 million 87/8% Senior Subordinated Notes issued in May 2002 and August 2001 and modifications of an amended revolving credit facility, the Company paid $0.1 million and $4.7 million, respectively, of debt issuance and modification costs during the years ended December 31, 2003 and 2002.  These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the accompanying consolidated balance sheets.

(c) 2.375% Convertible Senior Subordinated Notes

In April 2004, the Company issued $230.0 million principal amount of 2.375% convertible senior subordinated notes due 2024 (the “2.375% Convertible Senior Subordinated Notes”) which, after debt issuance costs of $6.3 million, resulted in net proceeds of approximately $223.7 million.  The proceeds from the issuance of the 2.375% Convertible Senior Subordinated Notes will be used to fund future capital expenditures which may include, among other things, development costs for the Phase III expansion on Paradise Island, the Company’s equity

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investment in Kerzner Istithmar and general corporate purposes.  During the year ended December 31, 2004, a portion of these proceeds were utilized to purchase T-Bills.  The debt issuance costs are being amortized to interest expense over ten years, as there is an option to put such debt ten years from the issuance date.  These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the Company’s consolidated balance sheet as of December 31, 2004.

The 2.375% Convertible Senior Subordinated Notes are unsecured senior subordinated obligations and mature on April 15, 2024 unless they are converted, redeemed or repurchased before the maturity date.  The 2.375% Convertible Senior Subordinated Notes may be converted into cash and Ordinary Shares at an initial conversion rate of 17.1703 shares per $1,000 principal amount in accordance with the terms of the indenture.  This conversion rate is equal to a conversion price of approximately $58.24 per ordinary share.  Upon conversion, all of the principal amount of the notes converted must be paid in cash.

These notes are convertible, at the holder’s option, prior to the maturity date into cash and Ordinary Shares in the following circumstances:

•During any fiscal quarter commencing after the date of original issuance of the notes, if the closing sale price of our Ordinary Shares over a specified number of trading days during the previous quarter is more than 120% of the conversion price, or $69.89, of the notes;

•If the notes are called for redemption and the redemption has not yet occurred;

•During the five trading day period immediately after any five consecutive trading day period in which the trading price of the notes per $1,000 principal amount for each day of such period was less than 95% of the product of the closing sale price of our Ordinary Shares on such day multiplied by the number of shares of our Ordinary Shares issuable upon conversion of $1,000 principal amount of the notes; or

•Upon the occurrence of specified corporate transactions.

The 2.375% Convertible Senior Subordinated Notes are subordinated to the Fifth Amended Credit Facility and rank pari passu with our 87/8% Senior Subordinated Notes, however, they are not guaranteed by our wholly owned subsidiaries, they are effectively subordinated to our subsidiaries’ existing and future liabilities.  Interest on the 2.375% Convertible Senior Subordinated Notes is paid semi-annually in arrears on April 15 and October 15, beginning October 15, 2004.

(d) Palmilla Notes

In August 2003, Palmilla secured a senior credit facility (the “Palmilla Senior Credit Facility”) in order the finance the renovation and expansion of Palmilla.  The Palmilla Senior Credit Facility was comprised of two tranches, tranche A (“Tranche A Loan”) of $46.5 million and tranche B (“Tranche B Loan”) of $42.0 million, for a total of $88.5 million.  Of the total borrowings outstanding, $46.5 million of such amount, representing the Tranche A Loan, was guaranteed by Kerzner. 

On December 17, 2004, Palmilla entered into two promissory notes totaling a principal amount of $110.0 million (the “Palmilla Notes”).  The Palmilla Notes mature on January 9, 2007 and are governed by the terms of the Palmilla Notes and the note indenture dated December 17, 2004 (the “Palmilla Note Indenture”).  The proceeds from the Palmilla Notes were used to pay down the Tranche A Loan and Tranche B Loan related to the Palmilla Senior Credit Facility of $88.1 million, including accrued interest.  In connection with the early retirement of the Palmilla Senior Credit Facility, Palmilla wrote off $1.7 million in debt issuance costs associated with this facility.  These amounts are included in loss on early extinguishment of debt in the accompanying consolidated statements of operations.  The proceeds were also used to repay Kerzner $14.5 million in completion loans, excluding accrued interest.  In connection with the repayment in full of amounts outstanding under the Palmilla Senior Credit Facility, our $46.5 million guarantee was extinguished.

In connection with the Palmilla Notes, Palmilla paid $4.0 million in debt issuance costs during the year ended December 31, 2004, which are being amortized to interest expense over two years, the term of the Palmilla

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Notes.  These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the accompanying consolidated balance sheets. 

Interest on the Palmilla Notes is paid monthly on the ninth day of each month.  The Palmilla Notes bear interest at the London Interbank Offered Rate (“LIBOR”) plus 3.75%.  The average interest rate for the period that the notes were outstanding during 2004 was 6.15%.  The Palmilla Notes contain affirmative and restrictive covenants which, among other things, require periodic financial reporting and include limitations on Palmilla to incur certain liens.

(e) Other

Other long-term debt consists of capital leases for machinery and equipment.

Derivative Financial Instruments

Interest Rate Risk Management

We attempt to limit our exposure to interest rate risk by managing our long-term fixed and variable rate borrowings.  In August and December 2001, we entered into interest rate swap agreements (the “Swap Agreements”) designated as fair value hedges of $200.0  million principal amount of our 87/8% Senior Subordinated Notes whereby we receive fixed interest rate payments in exchange for making variable interest rate payments on our 87/8% Senior Subordinated Notes.

These Swap Agreements qualify for the “shortcut” method of accounting provided under SFAS 133, which allows for the assumption of no ineffectiveness in our hedging relationship.  Accordingly, there is no income statement impact from changes in the fair value of the Swap Agreements.  Instead, the changes in the fair value of the Swap Agreements are recorded as an asset or liability on the accompanying consolidated balance sheet with an offsetting adjustment to the carrying value of the related debt.

In September 2003, we cancelled $25.0 million notional amount of our then $200.0 million of interest rate swaps on our 87/8% Senior Subordinated Notes.  We received $1.4 million from this cancellation, which is being accreted to interest expense over the term of the underlying debt.

In July 2004, we cancelled $25.0 million notional amount of our then $175.0 million of interest rate swaps on our 87/8% Senior Subordinated Notes.  We received $1.1 million from this cancellation, of which $0.4 million was applied to our outstanding interest receivable, and $0.7 million is being accreted to reduce interest expense over the term of the underlying debt.

Included in deferred charges and other assets, net in the Company’s balance sheets at December 31, 2004 and 2003 is $8.7 million and $11.8 million, respectively, representing the fair value of the Swap Agreements as of that date.  This represents the amount we would have received had the Swap Agreements been terminated on each respective date.  This resulted in a corresponding increase to the carrying value of our 87/8% Senior Subordinated Notes.

As of December 31, 2004 and 2003, the aggregate notional principal amount of the Swap Agreements was $150.0 million and $175.0 million, respectively, and these agreements mature concurrently with the 87/8% Senior Subordinated Notes in August 2011.  For the years ended December 31, 2004, 2003 and 2002 the weighted average variable rate on the Swap Agreements was 4.93%, 4.18% and 5.49%, respectively.

As of December 31, 2004 and 2003, after giving effect to the Swap Agreements, our fixed rate borrowings represented approximately 65% and 56% and our variable rate borrowings represented 35% and 44%, respectively, of total borrowings.

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Interest Rate Cap Agreement

Pursuant to the terms of the Palmilla Notes, Palmilla was required to enter into an interest rate cap agreement contemporaneously with the issuance of the Palmilla Notes.  On December 17, 2004, Palmilla entered into an interest rate cap agreement in order to cap the LIBOR component of the interest on the Palmilla Notes at 5% (“Interest Rate Cap Agreement”).  The Interest Rate Cap Agreement is designated as a cash flow hedge as it involves the receipt of variable-rate amounts in exchange for one up-front fixed-rate payment over the life of the agreement without exchange of the underlying principal amount.  During 2004, the Interest Rate Cap Agreement was used to hedge the variable cash flows associated with the Palmilla Notes.

At December 31, 2004, the fair value of the Interest Rate Cap Agreement was $0.1 million and was included in prepaid expenses and other assets in the accompanying consolidated balance sheet.  The unrealized loss of $38,000 in 2004 for the Interest Rate Cap Agreement is included as a component of accumulated other comprehensive loss in the accompanying statement of changes in shareholders’ equity.  No hedge ineffectiveness on cash flow hedges was recognized during 2004.

Credit Exposure

We are exposed to credit-related losses in the event of non-performance by counterparties to our Swap Agreements.  We monitor the creditworthiness of the counterparties and presently do not expect default by any of the counterparties.  We do not obtain collateral in connection with our derivative financial instruments.

Guarantees

For a description of the Company’s guarantees of certain debt of affiliated entities, see Note 23—Commitments and Contingencies.

Overdraft Loan Facility

We have an unused revolving overdraft loan facility with The Bank of Nova Scotia in the amount of Bahamian $5.0 million, which is equal to U.S. $5.0 million.  The overdraft facility would bear interest at The Bank of Nova Scotia’s base rate for Bahamian dollar loans plus 1.5% with repayment, subject to annual review.  The overdraft facility is secured by substantially all of our Bahamian assets and ranks pari passu with our Fifth Amended Credit Facility.

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Debt Maturity

Aggregate annual maturities of long-term debt as of December 31, 2004, for each of the next five years and thereafter are as follows:

Year Ending December 31,
2005	$	659
2006	451
2007	110,238
2008	13
2009	—
Thereafter	630,000
	741,361
Debt premium	4,734
Interest rate swap fair value adjustment	8,693
	$	754,788

Note 14—Shareholders’ Equity

In July 2004, the Company completed an equity offering in The Bahamas of approximately 4.3 million Bahamian Depositary Receipts, the equivalent of approximately 0.4 million Ordinary Shares, that resulted in net proceeds of approximately $19.1 million.

In August 2004, the Company sold 3.0 million newly issued Ordinary Shares at a price of $51.25 per share to Istithmar, resulting in net proceeds of $153.4 million.  As a part of Istithmar’s overall investment in the Company, Istithmar also entered into purchase agreements with two of the Company’s shareholders to purchase an additional 1.5 million Ordinary Shares at $47.50 per share, the market price at the time the purchase agreements were executed.  These secondary sales closed simultaneously with Istithmar’s purchase of primary shares from the Company.  In connection with this transaction, we added a designee of Istithmar to our Board of Directors.

Note 15—Stock-Based Compensation

Stock Options

Our shareholders approved stock option plans in 1995 (the “1995 Plan”), 1997 (the “1997 Plan”) and in 2000 (the “2000 Plan,” and collectively the “Plans”) that provide for the issuance of options to acquire an aggregate of 7,500,000 Ordinary Shares.  Pursuant to the Plans, the option prices are equal to the market value per share of the Ordinary Shares on the date of the grant.  The 1995 Plan provided for the options to become exercisable, unless otherwise specified by the Board of Directors and subject to certain acceleration and termination provisions, after two years from the date of grant in respect of 20% of such options, and thereafter in installments of 20% per year over a four-year period.  The 1997 Plan provides for the same vesting schedule except that the vesting period begins one year after the grant date.  The 2000 Plan provides for the vesting period to begin one year after the grant date in respect of one third of such options, and thereafter in installments of one third per year over the remaining two-year period.  Options granted under the Plans have a term of 10 years from the date of grant.  The Plans provide for options with respect to Ordinary Shares to be granted to our directors, officers and employees.

Our Board of Directors approved a stock option plan in December 2003 (the “2003 Plan”) that provides for the issuance of options and restricted share awards to acquire an aggregate of 3,000,000 Ordinary Shares.  Pursuant to the 2003 Plan, the prices are equal to the market values per share of the Ordinary Shares on the date of grant, unless otherwise specifically provided by the compensation committee.  Unless otherwise specified by the compensation committee, options and restricted shares shall become vested and exercisable in installments of 25%

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over a four-year period.  Options and restricted shares granted under the 2003 Plan have a term of seven years from the date of grant.  The 2003 Plan provides for options with respect to Ordinary Shares to be granted to our directors, officers, employees and consultants of the Company.  During the years ended December 31, 2004 and 2003, the Company issued 0.3 million and 0.1 million, respectively, of restricted shares under the 2003 Plan to certain employees and officers.  The restricted shares’ vesting period ranges from three to five years on either a graduated or cliff vesting basis provided that the recipient is still with the Company upon vesting.  The aggregate market value of the restricted shares at the date of issuance of $14.8 million has been recorded as deferred compensation, as a separate component of shareholders’ equity, and is being amortized over the applicable vesting period.  During the year ended December 31, 2004, 700 restricted shares that were issued during 2003 were cancelled.

Our stock option plans provide for the issuance of options to acquire an aggregate of 10,500,000 of our Ordinary Shares.  As of December 31, 2004, options pursuant to these plans had been granted at exercise prices ranging from $18.13 to $57.31.  As of December 31, 2004, options to acquire 3,332,944 Ordinary Shares were outstanding, of which 935,398 were exercisable as of that date.  Nearly all of the options under the 1995 Plan, the 1997 Plan and the 2000 Plan have been granted as of December 31, 2004.

A summary of our stock option activity for 2004, 2003 and 2002 is as follows (in thousands, except per share data):

	December 31,
	2004				2003				2002
	Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share		Shares		Weighted Average Exercise Price Per Share
Outstanding at beginning of year	5,059		$	27.91	5,347		$	21.54	5,742		$	25.14
Granted	255		49.56		1,796		36.40		1,659		21.17
Exercised	(1,858	)	21.78		(2,074	)	18.81		(776	)	17.95
Forfeited and expired	(123	)	25.57		(10	)	—		(1,278	)	38.14
Outstanding at end of year	3,333		32.70		5,059		27.91		5,347		21.54
Exercisable at end of year	935		25.58		2,266		22.95		3,160		21.49
Available for grant	713				1,179				35

The weighted average exercise price and weighted average contractual life of stock options outstanding and exercisable at December 31, 2004 is as follows (in thousands, except per share data):

	Outstanding				Exercisable
Range of Exercise Prices	Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Shares	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life
$18.13 - $19.99	65	$	18.65	6.3	44	$	18.13	5.6
$20.00 - $24.99	492	20.76		7.5	319	20.72		7.4
$25.00 - $29.99	552	25.94		6.5	298	26.05		6.5
$30.00 - $34.99	76	32.44		3.1	73	32.57		2.9
$35.00 - $39.99	1,883	36.61		5.7	191	35.42		3.5
$40.00 - $49.99	143	42.39		6.0	10	41.63		3.9
$50.00 - $57.31	122	57.31		6.9	—	—		—
	3,333	$	32.70	6.0	935	$	25.58	5.6

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Stock Option Tender Offer

On May 7, 2002, our Board of Directors resolved, under certain conditions, to make available to employees and directors holding options with an exercise price higher than $32.00 per share, an offer to surrender all or some of the options granted to them under the Plans.  In exchange, such employees and directors would have the possibility, under certain conditions, to be granted new options giving the right to subscribe for 75% of the number of shares as the surrendered options.  The exercise price for the new options would be the fair market value of the Ordinary Shares on the new grant date, which would be no sooner than six months and one day after the cancellation date of the old options, subject to the conditions set forth in the tender offer documents filed with the Securities and Exchange Commission on May 27, 2002, the commencement date of the offer period.  The offer to option holders under the exchange program expired on June 25, 2002.  The 1,227,600 eligible options that were properly submitted for exchange were accepted and cancelled effective June 26, 2002.  Such options represent substantially all those that were eligible for exchange.  We granted 920,700 new options, which have similar terms to the cancelled options, in exchange for the cancelled options on December 26, 2002 at a price of $20.07.

Note 16—Related Party Transactions

In the normal course of business, the Company undertakes transactions with a number of unconsolidated affiliated companies.  Certain of the Company’s subsidiaries provide construction funding, project consulting, operating advances and management and development services to such affiliates.  Due from affiliates and management, development and other fees from affiliates consisted of the following:

							Management, Development and Other Fees
	Due From Affiliates						For the Year Ended December 31,
	December 31,
	2004			2003			2004		2003		2002
Reethi Rah	$	56,543		$	16,360		$	1,270	$	394	$	—
Harborside at Atlantis	18,414			17,391			2,826		1,847		1,579
Mauritius Resorts	6,707			6,394			9,614		7,619		7,074
Cape Town	5,790			—			—		—		—
Kanuhura	4,022			4,807			1,466		787		383
Atlantis, The Palm	2,520			—			380		—		—
South Africa	1,743			—			—		—		—
Royal Mirage	1,378			958			3,403		1,293		1,232
Trading Cove Associates	233			227			935		1,755		1,326
BLB	69			—			—		—		—
Palmilla	—			2,654			—		1,482		128
	97,419			48,791			19,894		15,177		11,722
Less: Amounts due within one year	(15,682		)	(13,949		)	—		—		—
	$	81,737		$	34,842		$	19,894	$	15,177	$	11,722

During the year ended December 31, 2004, the Company recognized $1.8 million of bad debt expense associated with certain affiliated receivables.

Reethi Rah

On December 4, 2002, the Company entered into a senior subordinated credit agreement with Reethi Rah Resort Pvt. Ltd. and various other financial institutions (the “Senior Lenders”).  The purpose of the completion loans is to provide subordinated financing for the building and developing of Reethi Rah, a new resort on North Male Atoll in the Maldives.  The loans will be subordinated to all other loans made to Reethi Rah Resort Pvt. Ltd. by the Senior Lenders and will become immediately due and payable upon termination or cancellation of our management

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agreement related to the property.  As of December 31, 2004, the Company had entered into a series of completion loans in the principal amount of $54.4 million, which is included in due from affiliates-non-current, net in the accompanying consolidated balance sheet.

As of December 31, 2004 and 2003, other amounts incurred in connection with Reethi Rah of $1.6 million and $1.0 million, respectively, primarily represent development costs that Kerzner has incurred on behalf of the resort, which will be reimbursed after the opening of the resort.

Harborside at Atlantis

In 2000, the Company entered into a series of promissory notes with Harborside at Atlantis to fund 50% of the construction cost of the timeshare units on Paradise Island in The Bahamas.  In December 2004, the Company loaned an additional $1.5 million to Harborside at Atlantis related to the development of additional timeshare units in connection with the Phase III expansion pursuant to the existing series of promissory notes.  The balance of these notes was $16.5 million and $15.0 million as of December 31, 2004 and 2003, respectively.  These promissory notes are due on December 31, 2005, however, such notes are classified as non-current in the accompanying consolidated balance sheet as of December 31, 2004 as the Company does not anticipate payment by December 31, 2005 and expects to extend this maturity date.  The Company earns interest on these advances at a rate equal to one-month LIBOR plus 250 basis points.  The average interest rate for the year ended December 31, 2004 was 4.0%.  Interest due from Harborside on these notes was $0.1 million as of December 31, 2004 and 2003.  The loans were made simultaneously with loans from Starwood Vacation, which mirror the amounts, terms and conditions of the Company’s loans.  The Company’s loans and Starwood Vacation’s loans are pari passu with respect to payments of principal and accrued interest and such payments will be made in cash, as it is available from the sale of timeshare units.

The Company provides marketing and administrative services to Harborside at Atlantis from which it earned fees of $2.5 million, $1.8 million and $1.6 million for the years ended December 31, 2004, 2003 and 2002, respectively.  Development fees earned during the year ended December 31, 2004 amounted to $0.3 million.  These amounts are included within management, development and other fees in the accompanying consolidated statements of operations.  The amount due from Harborside at Atlantis related to these services was $1.9 million and $1.8 million as of December 31, 2004 and 2003, respectively. 

Mauritius Resorts

The Company has long-term management contracts through 2023 with each of the five hotels in Mauritius that are owned by SRL: the One&Only Le Saint Géran, the One&Only Le Touessrok, La Pirogue Hotel, Sugar Beach Resort and Le Coco Beach Hotel.  Effective January 1, 2003, the Company entered into an agreement with SRL to form One&Only Management for the purpose of, among other things, managing Kanuhura and the Mauritius Resorts.  Effective January 1, 2003, SRL owned 20% of One&Only Management and the Company owned the remaining 80%.  Subject to certain conditions, SRL’s ownership interest will increase incrementally through 2009, for no additional consideration, at which time it will own 50% of One&Only Management.  Effective January 1, 2005, SRL’s ownership interest increased to 25% and our ownership interest decreased to 75%.  Pursuant to a subcontract arrangement with One&Only Management, the Company provides comprehensive management services to Kanuhura and the Mauritius Resorts and receives a management fee, which is calculated as a percentage of revenues and adjusted EBITDA, as defined.  One&Only Management is also entitled to a marketing fee as calculated as a percentage of revenues, although it has subcontracted to the Company all marketing services and benefits thereof with respect to Kanuhura and the Mauritius Resorts.  For the years ended December 31, 2004, 2003 and 2002, the Company has recognized $8.4 million, $7.4 million and $5.6 million, respectively, related to these management agreements in Mauritius.  Additionally, during 2002, the Company completed a major redevelopment of the One&Only Le Touessrok for which it earned project fees of $0.2 million and $1.5 million for the years ended December 31, 2003 and 2002, respectively.

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As of and for the years ended December 31, 2004 and 2003, the Company has consolidated One&Only Management, with SRL’s 20% interest reflected as a minority interest in the accompanying consolidated statements of operations and a minority interest liability reflected within accounts payable and accrued liabilities in the accompanying consolidated balance sheets.  The Company signed an agreement with SRL that provides for, among other things, the sale of 20% of its debt and equity interests in Kanuhura to SRL for which it received $1.5 million.  Following this sale, which was effective January 1, 2003, as of December 31, 2004 and 2003, the Company had a 20% equity interest in Kanuhura.  In connection with the incremental ownership interest increases in One&Only Management, effective January 1, 2005, the Company sold an additional 5% of its debt and equity interests in Kanuhura to SRL.  Accordingly, the Company’s equity interest in Kanuhura is now 18.75%.

Cape Town

In November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop a new luxury hotel in Cape Town, South Africa, subject to various conditions.  We intend to form a joint venture in which we will own a minority interest to develop and operate the One&Only Cape Town, a new luxury hotel on the waterfront.  As of December 31, 2004, the Company advanced $5.8 million of reimbursable costs related to the development of this luxury hotel.

Kanuhura

As described above, we assigned to One&Only Management the management agreement of Kanuhura, in which we owned a 20% interest as of December 31, 2004.  The terms of the management agreement run concurrently with the terms of a lease between Kanuhura and the government of the Republic of Maldives.  That lease expires in 2026 and is subject to extension.

During 2002, we advanced funds to Kanuhura in the amount of $3.6 million, which represented our share of funding for operations.  This advance is payable after satisfaction of certain Kanuhura financial obligations which mature no earlier than December 2007.However, during 2004, Kanuhura repaid $1.2 million, including principal and accrued interest.  These loans accrue interest at a rate of LIBOR plus 600 basis points.  The average interest rate for the year ended December 31, 2004 was 7.24%.  As of December 31, 2004, the balance of the Kanuhura advances was $2.4 million.

Fees for management services during the years ended December 31, 2004, 2003 and 2002 were $1.2 million, $0.8 million and $0.4 million, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

Atlantis, The Palm

The Company has entered into a development agreement with Kerzner Istithmar that entitles us to receive $20.0 million and reimbursement of certain expenses over the development period of Atlantis, The Palm.  We currently have a 50% ownership interest in Kerzner Istithmar, and as such, we expect to recognize $10.0 million in development fees over the development period.  For the year ended December 31, 2004, we recognized $0.4 million of development fees related to Atlantis, The Palm.  This amount is included within management, development and other fees in the accompanying consolidated statement of operations for the year ended December 31, 2004.  The $2.5 million due from Atlantis, The Palm as of December 31, 2004 primarily consists of development related costs that have been advanced to Kerzner Istithmar by the Company.

South Africa

In October 2003, we advanced $1.7 million for the purchase of land for the potential development of an additional One&Only property in South Africa.

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Royal Mirage

Fees for management services to the Royal Mirage during the year ended December 31, 2004, 2003 and 2002 were $3.4 million, $1.3 million and $1.2 million, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

Trading Cove Associates

The Company earned development fees from TCA pursuant to the TCA Development Agreement in 2002 and 2003.  In addition, the Company recorded other fees from TCA during all years presented.

Palmilla

Prior to our consolidation of Palmilla JV, LLC on January 1, 2004, fees for management services from Palmilla for both the year ended December 31, 2003 and during the period from September 12, 2002 (the date of acquisition) through December 31, 2002 were $0.1 million and are included in management, development and other fees in the accompanying consolidated statements of operations.

In April 2003, Palmilla commenced its expansion and redevelopment.  In connection with the redevelopment, the Company earned $1.3 million and $0.2 million of development and management fees, respectively, for the year ended December 31, 2003 which are included in management, development and other fees in the accompanying consolidated statements of operations.

In December 2004, Palmilla paid $0.8 million to Goldman, Sachs & Co., a related party of our 50% joint venture partner, for debt issuance costs associated with the Palmilla Notes.  This amount is included in deferred charges and other assets, net, in the accompanying consolidated balance sheet.

As of December 31, 2003, $2.7 million was due from Palmilla for management services, development fees and other advances.

Office Lease

Effective February 2002, we entered into a lease agreement with Tennyson Properties Limited, whereby we are leasing office space in Buckinghamshire in the United Kingdom for a period of 15 years.  The annual rent is approximately £205,000 (which is the equivalent of approximately $0.4 million at December 31, 2004) and is subject to increase every five years to the current fair market value.  Tennyson Properties Limited is owned by a family trust established by Mr. S. Kerzner, Chairman of the Company.

Note 17—Employee Benefit Plans

Certain of the Company’s subsidiaries participate in a defined contribution plan covering substantially all of their full-time employees.  The Company makes contributions to this plan based on a percentage of eligible employee contributions.  Total expenses for this plan were $0.4 million, $0.3 million and $0.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. 

In addition to the plan described above, union and certain other employees of Kerzner’s subsidiaries in The Bahamas are covered by multi-employer defined benefit pension plans to which employers make contributions.  In connection with these plans, the Company expensed contributions of $7.3 million, $7.0 million and $6.7 million for the years ended December 31, 2004, 2003 and 2002, respectively.

In October 2002, the Company established a deferred compensation plan (the “Deferred Compensation Plan”) for the purpose of allowing certain management of the Company to defer portions of their compensation and accumulate earnings on a tax-deferred basis.  The amount that is elected to be deferred is withheld from the

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employee’s compensation and remitted to the trustee of the Deferred Compensation Plan.  The trustee is responsible for utilizing such funds to purchase certain investments, which are held in a rabbi trust.

The compensation withheld from management, together with investment income on the Deferred Compensation Plan, is reflected as a deferred compensation obligation to participants and is classified within other long-term liabilities in the accompanying consolidated balance sheet.  The related assets which are held in the rabbi trust are classified within deferred charges and other assets in the accompanying consolidated balance sheets and are reported at cash surrender value with the resulting change in cash surrender value included in the accompanying consolidated statements of operations.  At December 31, 2004 and 2003, the balance of the liability and the corresponding asset totaled $4.0 million and $1.8 million, respectively.  During the years ended December 31, 2004 and 2003, the net change in the fair value of plan assets resulted in a charge to corporate expense of $0.1 million and $0.2 million, respectively.  During the years ended December 31, 2004 and 2003, the Deferred Compensation Plan did not have a significant impact on our operating results.

Note 18—Restructuring Reversal

In 2001, the Company incurred restructuring costs for severance payments made to employees who were terminated due to lower occupancy levels at Atlantis, Paradise Island subsequent to the terrorist attacks on September 11th.  By the end of 2002, all amounts related to the restructuring had been paid.  The remaining balance of $1.0 million was reversed in 2002 as fewer employees were released and the amounts were settled for less than originally planned.

Note 19—Investments in and Equity in Earnings (Losses) of Associated Companies

Components of investments in associated companies and equity in earnings (losses) of associated companies were as follows:

	December 31,				Ownership
	2004		2003		Interest
BLB	$	38,273	$	—	37.5	%
Palmilla	—		38,757		50.0	%
Sun Resorts Limited (Mauritius Resorts)	26,323		23,598		20.4	%
Kerzner Istithmar	21,440		—		50.0	%
Trading Cove Associates	14,908		14,427		50.0	%
Harborside at Atlantis	9,044		2,697		50.0	%
Kanuhura	2,303		1,864		20.0	%
Trading Cove New York	1,809		1,758		50.0	%
Other	38		51		50.0	%
	$	114,138	$	83,152

	For the Year Ended December 31,
	2004		2003			2002
Equity in earnings (losses) of associated companies	$	7,455	$	(320	)	$	(5,209	)
Relinquishment fees-equity in earnings of TCA	35,909		33,960			30,041

The Company’s proportionate share of earnings or losses from these entities is reflected in equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations, except for equity earnings related to its investment in TCA, which are included in relinquishment fees – equity in earnings of TCA, after income from operations but before other income (expense), in the accompanying consolidated statements of operations.

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In the normal course of business, the Company undertakes transactions with a number of unconsolidated affiliated companies.  See Note 16—Related Party Transactions for further discussion.

The following represents summarized financial information of Kerzner’s equity method investees (converted to U.S. dollars at the applicable exchange rate, where appropriate):

	For the Year Ended December 31,
	2004		2003		2002
Revenues	$	260,092	$	240,198	$	190,608
Income from operations	117,789		89,485		62,643
Income from continuing operations before income taxes	104,737		78,464		55,915
Net income	101,254		71,590		50,250

	As of December 31,
	2004		2003
Current assets	$	81,625	$	137,379
Non-current assets	568,917		519,306
Total assets	650,542		656,685
Current liabilities	78,007		117,042
Non-current liabilities	188,520		281,312
Shareholders’ equity	384,015		258,331

BLB

Kerzner invested $47.4 million in BLB during the first half of 2004 for its proportionate share of BLB’s 22.2% interest in Wembley and to fund BLB’s intended acquisition of all of Wembley’s outstanding shares.  We recognized a $3.0 million equity loss in BLB, which included our share of failed transaction costs of $3.0 million related to the intended acquisition of all of Wembley’s outstanding shares, our $1.0 million share of a hedge loss, offset by $1.0 million of our share of dividend income received by BLB from Wembley.  Also included in the investment in BLB is $8.9 million in unrealized loss related to a decline in the fair value of Wembley’s shares and $2.8 million in foreign currency translation gain.

Palmilla

In connection with the consolidation of Palmilla JV, LLC in accordance with FIN 46R, the related investment in associated company was eliminated effective January 1, 2004.  During the year ended December 31, 2003 and for the period from September 12, 2002 through December 31, 2002, the Company recognized $4.8 million and $0.1 million, respectively, in equity losses.  The equity loss for the year ended December 31, 2003 includes $4.3 million of Kerzner’s 50% share of the pre-opening expenses associated with the redevelopment of Palmilla.

Mauritius Resorts

The Company recognized $4.3 million, $2.3 million and $1.7 million of equity earnings from SRL during the years ended December 31, 2004, 2003 and 2002, respectively.  During the years ended December 31, 2004, 2003 and 2002, the Company received dividends from SRL of $1.8 million, $1.5 million and $2.3 million, respectively.

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Kerzner Istithmar

As of December 31, 2004, the Company had invested $21.8 million in Kerzner Istithmar.  As these funds were utilized by Kerzner Istithmar during the construction of Atlantis, The Palm, $0.5 million of related capitalized interest is included in the investment.  The investment has been reduced by $0.4 million, representing the portion of the development fee pertaining to our 50% ownership interest in Kerzner Istithmar.

Trading Cove Associates

Through a wholly owned subsidiary, we own a 50% interest in TCA and are a managing partner along with Waterford.  TCA and the Mohegan Tribe have entered into the TCA Development Agreement and the Relinquishment Agreement in connection with the Mohegan Sun.

Relinquishment fees represent the Company’s share of the net earnings from TCA pursuant to the Relinquishment Agreement.  In accordance with such agreement, TCA earns a fee equal to 5% of gross revenues, as defined in the Relinquishment Agreement, generated by Mohegan Sun during the 15-year period commencing on January 1, 2000, including revenue generated by Mohegan Sun’s 1998 expansion that was completed in 2002.  Revenues are defined in the Relinquishment Agreement as gross gaming revenues (other than Class II gaming revenue, i.e., bingo) and all other facility revenues.  Such revenue includes hotel revenues, food and beverage sales, parking revenues, ticket revenues and other fees or receipts from the convention/events center in the Mohegan Sun expansion and all rental or other receipts from lessees, licensees and concessionaires operating in the facility, but not the gross receipts of such lessees, licensees and concessionaires.  Such revenues exclude revenues generated by any future expansion of the Mohegan Sun.

The Company’s equity in earnings from TCA totaled $35.9 million, $34.0 million and $30.0 million for the years ended December 31, 2004, 2003 and 2002, respectively.  Such amounts do not equal 50% of the reported net income of TCA, primarily as a result of a priority distribution.  For seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the profits it receives each year (after the payment of certain expenses and the return of certain capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.  The Company received cash distributions of $35.4 million, $29.0 million and $29.3 million for the years ended December 31, 2004, 2003, and 2002, respectively.

Harborside at Atlantis

Harborside at Atlantis constructs, sells and manages timeshare units on Paradise Island, The Bahamas.  Construction of the first phase of the timeshare units was completed in February 2001 and sales of timeshare units began in May 2000.  As of December 31, 2004, 2003 and 2002, 98%, 89% and 64%, respectively, of the first phase of the timeshare units were sold.  In 2004, sales of timeshare units began on the second phase of the Harborside at Atlantis development in connection with the Phase III expansion.  As of December 31, 2004, 13% of the second phase of timeshare units were sold.

For the years ended December 31, 2004, 2003 and 2002, the Company recognized $6.7 million, $3.3 million and $(5.2) million, respectively in equity earnings (losses) from Harborside at Atlantis which includes $0.2 million, $1.8 million and $6.9 million, respectively, of charges which represent our share of construction remediation costs that arose primarily from Hurricane Michelle related damages incurred in November 2001.  Included in equity in earnings (losses) are insurance recoveries realized by Harborside at Atlantis related to the settlement of the remediation claims, our portion of which was $4.2 million and $1.5 million for the years ended December 31, 2004 and 2003, respectively.

Kanuhura

For the years ended December 31, 2004, 2003 and 2002, the Company recognized $0.4 million, ($0.1) million and $0.7 million, respectively, in equity earnings (losses) from Kanuhura.

F-45

Trading Cove New York

Through a wholly owned subsidiary, the Company owns a 50% interest in, and is a managing member of, TCNY, along with Waterford Development New York, LLC.  The Company increased its equity in losses of TCNY by expensing certain costs that TCNY capitalized due to the Company’s evaluation of the uncertainty of the recoverability of such costs.

During the years ended December 31, 2004, 2003 and 2002, the Company recognized $0.9 million, $1.1 million and $1.0 million, respectively, of equity losses in TCNY.

Note 20—Gain on Settlement of Territorial and Other Disputes

Majority Shareholder Reorganization

In July 2001, the Company announced the restructuring of its then majority shareholder, Sun International Investments Limited (“SIIL”), and the resolution of certain matters, including a territorial dispute, with SIIL and certain of its shareholders (collectively the “Reorganization”).  At the time of the Reorganization, SIIL and its shareholders beneficially owned approximately 67% of our issued and outstanding Ordinary Shares.  SIIL was itself owned in equal thirds by Sun International Limited (formerly Kersaf Investments Limited) (“Kersaf”), Caledonia Investments PLC and World Leisure Group Limited, a company controlled by a Kerzner family trust.  SIIL previously was governed by a shareholders’ agreement pursuant to which all major decisions of SIIL required the unanimous consent of its shareholders.  In connection with the Reorganization, among other things, SIIL was dissolved and the shareholders’ agreement governing SIIL was terminated.  Accordingly, SIIL’s shareholders obtained direct ownership of their Ordinary Shares.  In addition, SIIL’s shareholders agreed to certain standstill provisions in effect through June 2006, pursuant to which each of them would refrain from proposing or consummating certain extraordinary corporate transactions involving the Company, including any merger or the sale of substantially all of our assets.

Pursuant to a registration rights and governance agreement executed in connection with the Reorganization, Kerzner granted certain registration rights to SIIL’s shareholders in respect of the Ordinary Shares held by them, in part in order to facilitate the required sale of at least 2,000,000 of Kersaf’s Ordinary Shares in a registered public offering, which requirement was satisfied on December 12, 2002.  Kerzner agreed that, after a transition period not to exceed one year from June 30, 2001, it would cease, and it has ceased, using the names “Sun” and “Sun International.”  In connection with the Reorganization, Kersaf agreed to pay Kerzner $15.5 million which was paid in full in 2001.  Of this amount, we recognized a $1.5 million net gain on the settlement of this territorial dispute during the year ended December 31, 2003.

Subsequent Disputes and Settlement with Kersaf Investments Limited

As part of the Reorganization, the Company and Kersaf agreed to restructure certain agreements which included, among other things, an obligation for Kersaf to sell at least 2,000,000 shares of the Company’s shares in a registered public offering, certain non-compete agreements, the continuation of an obligation of Kersaf to pay Kerzner an annual payment of approximately $3.3 million (the “Contribution Payment”), and an agreement pursuant to which Kerzner was granted an interest in a proposed project in Port Ghalib, Egypt (the “Egypt Project”). In October 2001, the Company filed a lawsuit against Kersaf and certain related entities in New York alleging, among other things, that Kersaf had breached its non-compete obligation.  Kersaf and the Company executed a settlement agreement that resolved all of these outstanding matters on November 1, 2002.

According to the settlement agreement, among other things, (i) Kersaf was obligated, and on December 18, 2002 satisfied this obligation, to sell at least 2,000,000 shares in a registered public offering; (ii) Kersaf’s obligation to make the Contribution Payment was terminated effective December 1, 2002 and; (iii) Kersaf paid us $32.1 million in December 2002.  Of this amount, $14.7 million and $18.0 million (which represents the future payments that were to be received over the original term of the underlying Mauritius management contracts) is classified as deferred revenue as of December 31, 2004 and 2003, respectively.  The long-term portion of $11.2 million and $14.6 million as of December 31, 2004 and 2003, respectively, is included within deferred revenue and the current portion of $3.5 million

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and $3.4 million is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.  These amounts are being recognized as other revenues over the term of the original underlying Mauritius management contracts, which extended through December 2008.  The remaining amount of $9.4 million, net of $1.4 million of direct legal expenses, was recognized in the fourth quarter of 2002 as an additional gain on settlement of territorial and other disputes.  In exchange for this settlement, we agreed to terminate all existing lawsuits related to Kersaf and have released all parties from any related claims and we shall no longer have any interest in the Egypt Project.

Note 21—Loss on Early Extinguishment of Debt

During the year ended December 31, 2004, the Company recognized a $1.7 million loss on early extinguishment of debt related to the write-off of debt issuance costs associated with the Palmilla Senior Credit Facility, which was retired in December 2004 as discussed in Note 13 – Long-Term Debt.

The Company recognized a $20.5 million loss on early extinguishment of debt during the year ended December 31, 2002 in connection with the Company’s refinancing of its long-term debt.  Of this amount, $14.6 million related to our repurchase and redemption of the entire outstanding balance of $200 million principal amount of our 9% Senior Subordinated Notes during 2002.  The remaining $5.9 million related to the repurchase and redemption of our $100 million principal amount of 85/8% Senior Subordinated Notes during 2002.  This loss consisted of the premium paid on the repurchase and redemption of the notes, the non-cash charge to write-off the balance of the related debt issuance costs, the remaining unamortized discount on the notes and other direct costs.  The applicable net income tax effect was insignificant.

Note 22—Income Taxes

A significant portion of our operations are located in The Bahamas where there are no income taxes.  In 2004, 2003 and 2002, the income tax provisions relating to U.S. and other non-Bahamian operations were as follows:

	For the Year Ended December 31,
	2004			2003			2002
Current:
Federal	$	(854	)	$	7,917		$	5,939
State	3,424			3,393			2,341
Foreign	1,353			584			—
	3,923			11,894			8,280
Deferred:
Federal	(3,499		)	(11,732		)	(8,184		)
	$	424		$	162		$	96

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The effective tax rate on income varies from the statutory U.S. federal tax rate as a result of the following factors:

	For the Year Ended December 31,
	2004		2003		2002
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
Non-U.S.-source income	(28.4	)	(25.4	)	(37.0	)
State tax cost	5.0		4.7		5.8
NOLs, extraordinary item and temporary differences which a valuation allowance has been provided			—		12.8
Reduction of valuation allowance relating to prior years’ operating loss utilized	(5.1	)	(16.4	)	(20.4	)
Release of accruals for tax uncertainties	(5.4	)	—		—
Other	(0.5	)	2.3		4.0
	0.6%		0.2	%	0.2	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The components of the deferred tax assets and liabilities were as follows:

	December 31,
	2004			2003
Non-current deferred tax liabilities:
Basis difference-land held for sale	$	960		$	—
Basis differences on property and equipment	153			—
Total deferred tax liabilities	1,113			—
Non-current deferred tax assets:
NOL carryforwards	140,694			183,629
Basis differences on property and equipment	—			527
Basis differences on land held for investment, development or resale	8,169			3,961
Book accruals not yet deductible for tax return purposes	3,041			2,954
Tax credit carryforwards	3,240			3,216
Other	5,591			4,998
Total deferred tax assets	160,735			199,285
Valuation allowance for deferred tax assets	(148,441		)	(188,812		)
Deferred tax assets, net of valuation allowance	12,294			10,473
Non-current net deferred tax assets:	$	11,181		$	10,473

Realization of future tax benefits related to deferred tax assets is dependent on many factors, including our ability to generate future taxable income.  The valuation allowance is adjusted in the period we determine it is more likely than not that deferred tax assets will or will not be realized.  We considered these factors in reaching our conclusion to reduce the valuation allowance by $40.4 million, $40.6 million and $2.6 million during 2004, 2003 and 2002, respectively.  Of this reduction, $3.5 million, $11.7 million and $8.2 million represent amounts released as income tax benefit, and accordingly, reduced our provision for income taxes for the years ended December 31,

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2004, 2003 and 2002, respectively.  The remaining reduction to the valuation allowance resulted primarily from the tax effected expiration of net operating loss (“NOL”) carryforwards.

For federal income tax purposes, Kerzner International North America, Inc. (“KINA”), one of our wholly owned subsidiaries, had NOL carryforwards of approximately $402.0 million at December 31, 2004, of which $255.1 million are unrestricted as to use.  However, due to the change of ownership of KINA in 1996, $146.9 million of these NOL carryforwards (the “Pre-Change NOLs”) are limited in their availability to offset our future taxable income.  As a result of these limitations, approximately $11.3 million of Pre-Change NOLs will become available for use each year through the year 2008, with an additional $7.6 million becoming available in 2009.  The remaining Pre-Change NOLs are expected to expire unutilized, including the $93.3 million of Pre-Change NOLs that expired in 2004.

Our restricted NOL carryforwards expire as follows: $33.3 million in 2005 and $19.4 million in 2006.  Our unrestricted NOLs expire as follows: $4.1 million in 2006, $30.6 million in 2007, $56.5 million in 2008, $8.0 million in 2011, $57.0 million in 2012, $32.3 million in 2019, $17.7 million in 2020 and $48.9 million in 2021.

From time to time, we may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where we conduct our business.  While we believe that the tax returns we file and any tax positions we take are supportable and accurate, some tax authorities may not agree with our positions.  This can give rise to tax uncertainties which, upon audit, may not be resolved in our favor.  We have established accruals for various tax uncertainties that we believe are probable and reasonably estimable.  These accruals are based on certain assumptions, estimates and judgments, including estimates of probability, estimates of amounts for settlements, associated interest and penalties.  Changes to these assumptions, estimates and judgments could have a material impact on our provision for income taxes.  For the year ended December 31, 2004, we reduced our tax accruals by $3.7 million as a result of the expiration of certain statutes of limitation.  This resulted in a reduction to our provision for income taxes by the same amount.  As of December 31, 2004, we have an income tax accrual of $4.8 million related to certain tax positions which might be challenged by tax authorities.  If challenged, the amount of taxes, penalties and interest which could be assessed by taxing authorities may differ from the amount that has been accrued.

Note 23—Commitments and Contingencies

Lease Obligations

We lease office space in numerous locations throughout the United States and Europe for sales and marketing, public relations, tour operations and travel reservation services and other administrative services.  These offices support our operations throughout the world.  In addition, we have obligations under certain operating leases related to equipment acquired for our operations.

Future minimum lease obligations under various non-cancelable operating leases with terms in excess of one year at December 31, 2004 are as follows:

Year Ending December 31,
2005	$	3,090
2006	2,707
2007	2,297
2008	1,875
2009	1,953
Thereafter	16,834
	$	28,756

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Casino License

The operations of casinos in The Bahamas are subject to regulatory controls.  The operator must obtain a casino license and the license must be periodically renewed and is subject to revocation at any time.

Heads of Agreement

We have an agreement with the Bahamian Government, which is titled Heads of Agreement.  This agreement provides us with certain tax incentives in exchange for the Company investing in the expansion of Atlantis, Paradise Island.  The most significant of these incentives are the casino fee and tax incentives.

We restated our agreement with the Bahamian Government on May 26, 2003, in anticipation of the Phase III expansion on Paradise Island.  Such agreement was supplemented in both May and December 2004.  The restated Heads of Agreement, as supplemented, maintains the current basic casino tax and fee structure which calls for an annual license fee of $100,000 per thousand square feet of casino space, a minimum annual casino tax of $4.3 million on all gaming win up to $20.0 million, a 12.5% win tax on gaming win between $20.0 million and $120.0 million and a 10% win tax on gaming win in excess of $120.0 million.  The Company is entitled to a credit of $5.0 million in relation to the annual license fee and a 45% credit against all win tax on gaming win between $20.0 million and $120.0 million.

With the commencement of construction of the Phase III expansion as discussed in Note 1—Organization and Basis of Presentation, the basic tax and fee structure was amended so that all gaming win in excess of $20.0 million is subject to a win tax of 10%, and is effective for a period of 20 years after the earlier of the date of the substantial completion of the Phase III expansion and December 31, 2007.  In addition, the $5.0 million credit against the annual license fee shall remain, and the credit against win tax shall become 50% against all win tax on gaming win over $20.0 million.  These credits shall also apply from the commencement of construction of the Phase III expansion and shall expire at the end of 2024.

In order to secure the tax incentives described in the preceding paragraph, we were obligated to commence construction on certain aspects of the Phase III expansion by December 31, 2003, commence construction on certain other aspects of the Phase III expansion by June 30, 2004, and notify the Bahamian Government.  If we do not proceed with the condo-hotel and the Athol Golf Course, casino tax concessions and the joint marketing contribution from the Government will be reduced beginning in 2009 in accordance with a schedule contained in the Heads of Agreement.

The Heads of Agreement also provides for an extension of our joint marketing agreement with the Bahamian Government pursuant to which the Bahamian Government agreed to match our contribution, up to $4.0 million annually, toward the direct costs related to staging certain marketing events, public relations activities and the production and placement of advertisements in all media to promote the destination and our Paradise Island properties, including the Phase III expansion.  This joint marketing agreement will expire on December 31, 2010.

Pursuant to the Heads of Agreement, the Company is obligated to contribute $5.0 million to benefit community programs in The Bahamas as designated by the Bahamian Government.  This obligation is included in capital creditors in the accompanying consolidated balance sheet as of December 31, 2004.

Guarantees

In connection with the Palmilla operating agreement, the Company agreed that in the event that Palmilla obtained third-party debt financing for its planned redevelopment, the Company would guarantee certain amounts of such financing.  The purpose of these guarantees was to assist Palmilla in obtaining financing for its redevelopment on commercially reasonable terms.  As discussed in Note 13—Long-Term Debt, in August 2003, Palmilla secured the Palmilla Senior Credit Facility in the amount of $88.5 million, of which Kerzner guaranteed $46.5 million.  In 2003, the Company recorded the fair value of these guarantees in accordance with the provisions of FIN 45.  As

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previously described, the Company was released from these guarantees in 2004 as a result of the Palmilla refinancing.

In recording the $2.8 million fair value of the Palmilla guarantee in 2003, we estimated the premium that would be required by a third party to issue the same guarantee in a stand-alone arm’s length transaction with an unrelated party.  We estimated the fair value by calculating the net present value of the difference in cash flows of interest payments between the estimated interest amounts payable without the guarantee and the cash flows of those same interest payments with the guarantee.  The difference between these two amounts equaled $2.8 million representing the estimated fair value of the guarantee.  The components of the calculation include the amount guaranteed, the estimated interest rate of the credit facility without the guarantee, the interest rate of the facility with the guarantee, the discount rate for the net present value calculation and the estimated term of the guarantee to arrive at the approximate cash flows under each scenario.  Upon consolidation of the results of Palmilla JV, LLC in 2004, we have eliminated the fair value of the guarantee.

In connection with the Company’s purchase of a 25% initial equity interest in Kanuhura, the Company was required to guarantee certain obligations, totaling $10.7 million to its other shareholders.  The Company is not obligated under these guarantees unless the property’s senior bank debt agreement prevents available cash flow from being distributed to the shareholders, nor until Kanuhura repays certain senior debt owed.  As of December 31, 2004, the amount of senior debt owed was $2.4 million, excluding accrued interest.  The Company’s obligations under these guarantees expire when the underlying obligations are repaid.  Upon having to satisfy these guarantees, the Company would be deemed to have made a loan to the Kanuhura on the same terms of the underlying note that was satisfied.  As these guarantees were issued in July 2001 and we did not modify these guarantees after December 31, 2002, no amount has been recorded for the fair value of these guarantees.

Commitment with Reethi Rah

At December 31, 2004, Reethi Rah Resort Pvt. Limited, the owner of Reethi Rah, had outstanding indebtedness which included $54.4 million principal amount of unsecured subordinated loans advanced by Kerzner.  The Company will fund or arrange for funding for any additional development costs to complete the construction of the resort.

Atlantis, The Palm Commitment

In September 2003, the Company entered into agreements to form a joint venture with Nakheel in Dubai to develop Atlantis, The Palm.  The first phase of the project will include a resort and an extensive water theme park situated on beachfront property.  Atlantis, The Palm will be located on The Palm, Jumeirah, a land reclamation project in Dubai.  On June 23, 2004, the Company announced that it had entered into an agreement with Istithmar which assumed all obligations and rights of its affiliate, Nakheel, pursuant to which the scope of Atlantis, The Palm was increased.  The Company and Istithmar have each agreed to invest $100.0 million in the form of Class A common stock in the joint venture and Istithmar has agreed to underwrite $200.0 million of the joint venture’s limited voting Class B common stock.  As part of the transaction, Kerzner has entered into a development services agreement and a long-term management agreement with the joint venture company.  In addition, each of Istithmar and Kerzner will provide, on a joint and several basis, additional sponsor support of up to $55.0 million with respect to cost overruns and post-completion debt service obligations.

Executive and Employee Bonus Plans

We have a bonus plan whereby our employees, including officers, will qualify for bonuses if we attain certain levels of earnings and such bonuses are calculated as a percentage of each individual’s salary.  Such percentage is based on, among other things, each employee’s level of responsibility.  Bonuses paid to our officers under this bonus plan could reach a maximum of 100% of the respective employee’s base salary.  Bonuses ranging from 4% to 62% were granted in 2004 to our officers and employees.  The compensation expense related to this bonus plan amounted to $13.5 million, $13.8 million and $17.0 million for the years ended December 31, 2004, 2003 and 2002, respectively.

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Litigation, Claims and Assessments

The Company is involved in certain litigation and claims incidental to its business.  Management does not believe, based on currently available information, that these matters will have a material adverse effect on the accompanying consolidated financial statements.

Note 24—Segment Information

The Company develops and operates premier resort casinos and other properties throughout the world and manages its business in three segments: Destination Resorts, Gaming and One&Only Resorts.  Management expects that the Company’s future growth will further define and reinforce these segments.

The Destination Resorts segment, our largest segment from a revenue, net income and total assets basis, includes the Company’s flagship property, Atlantis, Paradise Island, its tour operator which supports Atlantis, Paradise Island, PIV, Inc., and its 50% investment in Harborside at Atlantis.  For 2004, the Destination Resorts segment also includes Atlantis, The Palm and costs associated with the development of a destination resort casino located in Morocco.  The Gaming segment consists of the relinquishment and development fee income from Mohegan Sun in Uncasville, Connecticut, costs associated with the potential development of casino and resort facilities in the United Kingdom at the Millennium Dome, Northampton, Glasgow and Manchester, our equity investment, through BLB, in Wembley and our equity investment in TCNY.  The One&Only Resorts segment is comprised of Kerzner’s luxury resort hotel businesses which consist of premier properties that primarily operate in the five-star deluxe end of the resort market.  The One&Only Resorts segment includes resorts located in The Bahamas, Mexico, Mauritius, the Maldives and Dubai.  We have also entered into agreements to develop and manage a second property in the Maldives and a property on the Victoria & Alfred Waterfront in Cape Town, South Africa, both of which we expect will be operated under the One&Only brand.  As each segment operates in various geographic areas, they are delineated within the tables that follow.

The Company evaluates the performance of its segments based primarily on their contribution to net income, which is their respective revenues generated after direct operating costs, and depreciation and amortization attributable to each segment.  Corporate expenses, interest income and expense, income taxes and other income and expenses are not allocated to the segments but are separately evaluated.  The accounting policies of these reportable segments are the same as those disclosed in Note 2-Summary of Significant Accounting Policies.  The following tables are an analysis of net revenues, contribution to net income and total assets, depreciation and amortization and capital additions by segment:

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Net Revenues

	For The Year Ended December 31,
	2004		2003		2002
Destination Resorts:
Atlantis, Paradise Island	$	474,611	$	463,276	$	453,834
Tour operations	26,564		28,875		29,026
Harborside at Atlantis fees	2,826		1,847		1,579
	504,001		493,998		484,439
Atlantis, The Palm fees	380		—		—
	504,381		493,998		484,439
Gaming:
Connecticut (2)	935		1,755		1,326
One&Only Resorts:
Ocean Club	37,731		34,186		31,200
Palmilla (3)	37,875		1,481		128
Other resorts (4)	15,753		10,094		8,689
Tour operations	20,551		11,915		12,037
	111,910		57,676		52,054
Other (5)	3,859		5,084		4,443
Net revenues	$	621,085	$	558,513	$	542,262

(1)Consists of revenue from Atlantis, Paradise Island, the Ocean Club Golf Course, the Company’s wholly owned tour operator, PIV, Inc., and marketing and development fee income from our interest in Harborside at Atlantis.

(2)Consists of development and other fees related to Mohegan Sun. Relinquishment fees – equity in earnings of TCA related to our Gaming segment are included as a separate component outside of income from operations in the accompanying consolidated statements of operations.

(3)Consists of revenue from Palmilla in connection with the consolidation of Palmilla JV, LLC for the year ended December 31, 2004 as a result of FIN 46R.  Revenues for the years ended December 31, 2003 and 2002 represent management and development fees related to Palmilla.

(4)Includes management, marketing and development fees from the One&Only Resorts properties located in Mauritius, Dubai and the Maldives.

(5)Includes revenue not directly attributable to Destination Resorts, Gaming or One&Only Resorts.

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Contribution to Net Income

	For The Year Ended December 31,
	2004			2003			2002
Destination Resorts:
Atlantis, Paradise Island	$	86,951		$	83,523		$	76,909
Tour operations	5,885			5.089			4,239
Harborside at Atlantis (1)	9,477			5,176			(3,634		)
	102,313			93,788			77,514
Atlantis, The Palm	346			—			—
	102,659			93,788			77,514
Gaming:
Connecticut (2)	36,843			35,715			31,367
United Kingdom	(2,182		)	(329		)	—
Other (3)	(4,357		)	(1,086		)	(931		)
	30,304			34,300			30,436
One&Only Resorts:
Ocean Club	3,644			4,720			3,999
Palmilla (4)	(1,831		)	(3,013		)	(17		)
Other resorts (5)	14,236			8,498			8,689
Direct expenses (5)	(15,919		)	(12,187		)	(8,061		)
Other (6)	4,737			2,242			1,079
	4,867			260			5,689
General corporate	(34,489		)	(32,842		)	(25,188		)
Impairment of Atlantic City land	(7,303		)	—			—
Restructuring reversal	—			—			1,000
Interest income	4,722			3,394			3,419
Interest expense, net of capitalization	(36,814		)	(29,264		)	(39,104		)
Gain on settlement of territorial and other disputes	—			1,479			14,459
Early extinguishment of debt, net of income tax effect	(1,655		)	—			(20,525		)
Other, net	1,358			(686		)	60
Provision for income taxes	(424		)	(162		)	(96		)
Palmilla minority interest (7)	4,907			—			—
Income (loss) from discontinued operations, net of income tax	—			1,305			(8,061		)
Net income	$	68,132		$	71,572		$	39,603

(1)Consists of equity in earnings, marketing, development and other fees related to Harborside at Atlantis.

(2)Consists of relinquishment fees – equity in earnings of TCA and development and other fees related to Mohegan Sun.

(3)Consists of equity in losses of BLB and TCNY and direct expenses for the gaming segment.

(4)Consists of earnings before interest and taxes, net of minority interest related to Palmilla for the year ended December 31, 2004.  Results for the years ended December 31, 2003 and 2002 include management, development and other fees and the Company’s share of net loss from Palmilla prior to the Company’s adoption of FIN 46R.

(5)Consists of management, marketing, development and other fees, net of minority interest and direct expenses related to the One&Only Resorts businesses located in Mauritius,  Dubai and the Maldives.

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(6)Consists of equity in earnings of SRL and Kanuhura. 

(7)Consists of minority interest related to the portion of Palmilla’s loss on early extinguishment of debt, interest expense and taxes, which is not allocated to the One&Only Resorts segment.

Total Assets, Depreciation and Amortization and Capital Additions

	As of December 31, 2004		Year Ended December 31, 2004
	Total Assets		Depreciation and Amortization		Capital Additions(4)
Destination Resorts:
Atlantis, Paradise Island(1)	$	1,176,264	$	48,242	$	104,081
Atlantis, The Palm	21,440		—		—
	1,197,704		48,242		104,081
Gaming:
Connecticut(2)	15,141		—		—
United Kingdom	12,069		—		5,689
Other(2)	38,274		—		—
	65,484		—		5,689
One&Only
Ocean Club	79,675		5,051		21,957
Palmilla	156,848		4,385		17,909
Other Resorts(3)	52,715		361		374
	289,238		9,797		40,240
General corporate(5)	534,849		909		265
	$	2,087,275	$	58,948	$	150,275

(1)Includes assets from Atlantis, Paradise Island, the Company’s wholly owned tour operator, PIV, Inc., the Ocean Club Golf Course and our investment in Harborside at Atlantis.

(2)Connecticut includes our investment in TCA and other includes our investments in BLB and TCNY.

(3)Includes the Company’s investments in SRL and Kanuhura.

(4)Capital additions for the year ended December 31, 2004 include payments for property and equipment of $119.4 million and acquisition of assets from Club Méditerranée (Bahamas) Limited of $30.9 million.

(5)General corporate includes $203.9 million of short-term investments and $180.3 million of cash and cash equivalents.

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	As of December 31, 2003		Year Ended December 31, 2003
	Total Assets		Depreciation and Amortization		Capital Additions(4)
Destination Resorts:
Atlantis, Paradise Island(1)	$	1,129,988	$	50,996	$	66,756
Gaming:
Connecticut(2)	14,654		—		—
United Kingdom	1,748		1		2,276
	16,402		1		2,276
One&Only
One&Only Ocean Club	63,009		3,678		802
One&Only Other Resorts(3)	81,077		247		476
	144,086		3,925		1,278
General corporate	165,452		860		588
	$	1,455,928	$	55,782	$	70,898

(1)Includes assets from Atlantis, Paradise Island, the Company’s wholly owned tour operator, PIV, Inc., the Ocean Club Golf Course and the Company’s investment in Harborside at Atlantis.

(2)Connecticut includes our investment in TCA.

(3)Includes the Company’s investments in associated companies related to the One&Only Resort businesses located in Mexico, Mauritius and the Maldives.

(4)Capital additions for the year ended December 31, 2003 are net of $6.9 million of insurance proceeds received for damaged assets Atlantis, Paradise Island related to Hurricane Michelle.

	Year Ended December 31, 2002
	Depreciation and Amortization		Capital Additions
Destination Resorts:
Atlantis, Paradise Island (1)	$	50,709	$	37,729
Gaming:
Connecticut (2)	—		—
United Kingdom	—		—
	—		—
One&Only Resorts
One&Only Ocean Club	3,951		596
One&Only Other Resorts (3)	69		721
	4,020		1,317
General Corporate	757		478
	$	55,486	$	39,524

(1)Includes assets from Atlantis, Paradise Island, the Company’s wholly owned tour operator, PIV, Inc., the Ocean Club Golf Course and the Company’s investment in Harborside at Atlantis.

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(2)Connecticut includes our investment in TCA.

(3)Includes the Company’s investments in associated companies related to the One&Only Resort businesses located in Mexico, Mauritius and the Maldives.

Note 25—Fair Value of Financial Instruments

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.  Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  The assumptions used have a significant effect on the estimated amounts reported.

The Company used the following methods and assumptions in estimating fair value disclosures for financial instruments: (a) cash and cash equivalents, restricted cash, short-term investments, trade receivables, other current assets, accounts payable, accrued liabilities and variable rate debt: the amounts reported in the accompanying consolidated balance sheets approximate fair value due to the nature and short-term maturities of such assets and liabilities; (b) fixed-rate debt: fixed rate debt is valued based upon published market quotations, as applicable (the fair value of our fixed rate debt at December 31, 2004 was approximately $731.8 million as compared to its carrying value of $643.4 million and the fair value of our fixed rate debt at December 31, 2003 was approximately $443.9 million as compared to its carrying value of $417.1 million); and (c) swap and cap agreements: the fair value of its swap and cap agreements was determined from the representations of financial institutions. The fair value of the Company’s swap agreements at December 31, 2004 and 2003 equal their carrying value of $8.7 million and $11.8 million, respectively, and the fair value of Palmilla’s cap agreement at December 31, 2004 was $0.1 million.  These amounts are included in deferred charges and other assets in the accompanying consolidated balance sheets.

Note 26—Supplemental Condensed Consolidating Financial Information

Our 87/8% Senior Subordinated Notes were co-issued by the Company and one of its wholly owned subsidiaries, KINA.  The 87/8% Senior Subordinated Notes are guaranteed by substantially all of our wholly owned subsidiaries (the “Subsidiary Guarantors”) and are jointly and severally irrevocably and unconditionally guaranteed.  The following supplemental financial information sets forth condensed consolidated balance sheets, statements of operations and statements of cash flows for each of the co-issuers of the 87/8% Senior Subordinated Notes, Kerzner and KINA, and, on a combined basis, for the Subsidiary Guarantors and non-guarantor subsidiaries.

F-57

Condensed Consolidating Balance Sheet at December 31, 2004

	Kerzner		KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	840	$	3,836		$	172,555		$	3,110	$	—		$	180,341
Restricted cash	—		—			445			2,323		—			2,768
Short-term investments	—		—			203,940			—		—			203,940
Trade receivables, net	43		622			42,225			1,796		(2,943		)	41,743
Due from affiliates	659,668		20,553			(665,026		)	7,268		(6,781		)	15,682
Inventories	—		—			10,867			2,586		—			13,453
Assets held for sale	—		5,416			6,873			—		—			12,289
Prepaid expenses and other assets	173		66			25,229			1,791		(5,574		)	21,685
Total current assets	660,724		30,493			(202,892		)	18,874		(15,298		)	491,901
Property and equipment, net	—		40,064			1,140,840			142,198		24,538			1,347,640
Due from affiliates - non-current	58,035		200,000			(176,235		)	—		(63		)	81,737
Deferred tax asset, net	—		11,181			—			—		—			11,181
Deferred charges and other assets, net	13,050		10,549			11,624			4,032		1,423			40,678
Investment in subsidiaries	631,933		10			—			—		(631,943		)	—
Investments in associated companies	2,302		—			112,519			—		(683		)	114,138
Total assets	$	1,366,044	$	292,297		$	885,856		$	165,104	$	(622,026	)	$	2,087,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	—	$	—		$	495		$	164	$	—		$	659
Accounts payable and accrued liabilities	7,139		20,634			139,704			12,795		(11,547		)	168,725
Due to affiliates - current	—		—			2,252			1,021		(3,273		)	—
Capital creditors	—		—			15,536			496		—			16,032
Total current liabilities	7,139		20,634			157,987			14,476		(14,820		)	185,416
Deferred revenue	—		412			16,381			3,626		—			20,419
Other long-term liabilities	—		3,973			3,178			52		(104		)	7,099
Long-term debt, net of current maturities	238,693		404,734			361			110,341		—			754,129
Total liabilities	245,832		429,753			177,907			128,495		(14,924		)	967,063
Minority interest	3,934		—			—			—		—			3,934
Shareholders’ equity	1,116,278		(137,456		)	707,949			36,609		(607,102		)	1,116,278
Total liabilities and shareholders’ equity	$	1,366,044	$	292,297		$	885,856		$	165,104	$	(622,026	)	$	2,087,275

F-58

Condensed Consolidating Balance Sheet at December 31, 2003

	Kerzner		KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	143	$	17,026		$	39,207		$	—	$	3,856		$	60,232
Restricted cash	—		—			1,445			—		—			1,445
Trade receivables, net	61		69			38,084			—		183			38,397
Due from affiliates	259,366		21,923			(272,489		)	6,699		(1,550		)	13,949
Inventories	—		—			10,418			—		—			10,418
Prepaid expenses and other assets	125		657			20,881			—		(6,303		)	15,360
Total current assets	259,695		39,675			(162,454		)	6,699		(3,814		)	139,801
Property and equipment, net	—		52,862			1,077,231			—		23,911			1,154,004
Due from affiliates - non-current	19,889		200,000			(185,047		)	—		—			34,842
Deferred tax asset, net	—		10,473			—			—		—			10,473
Deferred charges and other assets, net	10,971		9,643			13,042			—		—			33,656
Investment in subsidiaries	566,984		10			—			—		(566,994		)	—
Investments in associated companies	1,864		—			87,534			—		(6,246		)	83,152
Total assets	$	859,403	$	312,663		$	830,306		$	6,699	$	(553,143	)	$	1,455,928
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	—	$	—		$	304		$	—	$	—		$	304
Accounts payable and accrued liabilities	7,974		22,603			144,130			1,340		(3,814		)	172,233
Capital creditors	—		—			4,639			—		—			4,639
Total current liabilities	7,974		22,603			149,073			1,340		(3,814		)	177,176
Deferred revenue	—		—			14,652			—		—			14,652
Other long-term liabilities	—		4,561			2,729			—		—			7,290
Long-term debt, net of current maturities	11,839		405,251			130			—		—			417,220
Total liabilities	19,813		432,415			166,584			1,340		(3,814		)	616,338
Shareholders’ equity	839,590		(119,752		)	663,722			5,359		(549,329		)	839,590
Total liabilities and shareholders’ equity	$	859,403	$	312,663		$	830,306		$	6,699	$	(553,143	)	$	1,455,928

F-59

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2004

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Casino and resort revenues	$	—		$	—		$	540,415		$	37,945		$	(5,109	)	$	573,251
Less: promotional allowances	—			—			(23,034		)	—			—			(23,034		)
	—			—			517,381			37,945			(5,109		)	550,217
Tour operations	—			—			47,115			—			—			47,115
Management, development and other fees	—			17,928			11,361			9,546			(18,941		)	19,894
Other revenues	—			255			3,375			229			—			3,859
Affiliated sales	—			—			10,790			—			(10,790		)	—
	—			18,183			590,022			47,720			(34,840		)	621,085
Equity in subsidiaries’ earnings	65,042			—			—			—			(65,042		)	—
Cost and Expenses:
Casino and resort expenses	—			—			288,949			25,060			(14,329		)	299,680
Tour operations	—			—			40,003			—			(9		)	39,994
Selling, general and administrative	—			648			107,252			12,801			(2,367		)	118,334
Management fee	1,380			—			14,983			1,565			(17,928		)	—
Corporate expenses	8,906			12,274			17,264			—			157			38,601
Depreciation and amortization	—			19			54,544			4,385			—			58,948
Hurricane related expenses	—			—			3,426			—			—			3,426
Pre-opening expenses	—			—			541			3,090			(373		)	3,258
Loss on damaged assets	—			—			1,194			—			—			1,194
Impairment of Atlantic City land	—			7,303			—			—			—			7,303
	10,286			20,244			528,156			46,901			(34,849		)	570,738
Income (loss) from operations	54,756			(2,061		)	61,866			819			(65,033		)	50,347
Relinquishment fees - equity in earnings of TCA	—			—			35,909			—			—			35,909
Other income (expense):
Interest income	511			1,605			4,096			62			(1,552		)	4,722
Affiliated interest income	(2,076		)	18,278			—			—			(16,202		)	—
Affiliated interest expense	—			—			(16,202		)	—			16,202			—
Interest expense, net of capitalization	2,076			(35,966		)	3,347			(7,823		)	1,552			(36,814		)
Equity in earnings of associated companies	439			—			7,016			—			—			7,455
Loss on early extinguishment of debt	—			—			—			(1,655		)	—			(1,655		)
Other, net	—			—			1,344			14			—			1,358
Other expense, net	950			(16,083		)	(399		)	(9,402		)	—			(24,934		)
Income (loss) from continuing operations before income taxes and minority interest	55,706			(18,144		)	97,376			(8,583		)	(65,033		)	61,322
Benefit (provision) for income taxes	3,675			440			(3,949		)	(581		)	(9		)	(424		)
Minority interest	8,751			—			—			(1,517		)	—			7,234
Net income (loss)	$	68,132		$	(17,704	)	$	93,427		$	(10,681	)	$	(65,042	)	$	68,132

F-60

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2003

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Casino and resort revenues	$	—		$	—		$	525,773		$	—		$	(4,732	)	$	521,041
Less: promotional allowances	—			—			(23,579		)	—			—			(23,579		)
	—			—			502,194			—			(4,732		)	497,462
Tour operations	—			—			40,790			—			—			40,790
Management, development and other fees	—			17,558			7,034			8,143			(17,558		)	15,177
Other revenues	—			1,816			3,268			—			—			5,084
Affiliated sales	—			—			10,143			—			(10,143		)	—
	—			19,374			563,429			8,143			(32,433		)	558,513
Equity in subsidiaries’ earnings	71,362			—			—			—			(71,362		)	—
Cost and Expenses:
Casino and resort expenses	—			(6		)	284,704			—			(13,261		)	271,437
Tour operations	—			—			35,420			—			(14		)	35,406
Selling, general and administrative	(275		)	1,184			103,436			(218		)	(2,543		)	101,584
Management fee	1,400			—			14,658			1,500			(17,558		)	—
Corporate expenses	5,401			11,034			19,053			—			943			36,431
Depreciation and amortization	—			49			55,733			—			—			55,782
Insurance recovery	—			—			(2,819		)	—			—			(2,819		)
Gain on damaged assets	—			—			(2,514		)	—			—			(2,514		)
	6,526			12,261			507,671			1,282			(32,433		)	495,307
Income (loss) from operations	64,836			7,113			55,758			6,861			(71,362		)	63,206
Relinquishment fees – equity in earnings of TCA	—			—			33,960			—			—			33,960
Other income (expense):
Interest income	1,793			175			1,426			—			—			3,394
Affiliated interest income	(9,103		)	18,278			(1		)	—			(9,174		)	—
Affiliated interest expense	—			—			(9,174		)	—			9,174			—
Interest expense, net of capitalization	9,103			(36,009		)	(2,358		)	—			—			(29,264		)
Equity in losses of associated companies	(51		)	—			(269		)	—			—			(320		)
Gain on settlement of territorial and other disputes	1,479			—			—			—			—			1,479
Other, net	(775		)	104			(15		)	—			—			(686		)
Other expense, net	2,446			(17,452		)	(10,391		)	—			—			(25,397		)
Income (loss) from continuing operations before income taxes and minority interest	67,282			(10,339		)	79,327			6,861			(71,362		)	71,769
Benefit (provision) for income taxes	—			3,732			(3,732		)	(162		)	—			(162		)
Minority interest	—			—			—			(1,340		)	—			(1,340		)
Income (loss) from continuing operations	67,282			(6,607		)	75,595			5,359			(71,362		)	70,267
Income (loss) from discontinued operations, net of income tax effect	4,290			—			(2,985		)	—			—			1,305
Net income (loss)	$	71,572		$	(6,607	)	$	72,610		$	5,359		$	(71,362	)	$	71,572

F-61

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2002

	Kerzner			KINA			Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Casino and resort revenues	$	—		$	—		$	512,025		$	(4,781	)	$	507,244
Less: promotional allowances	—			—			(22,210		)	—			(22,210		)
	—			—			489,815			(4,781		)	485,034
Tour operations	—			—			41,063			—			41,063
Management, development and other fees	—			16,801			11,722			(16,801		)	11,722
Other revenues	—			1,280			3,163			—			4,443
Affiliated sales	—			—			10,339			(10,339		)	—
	—			18,081			556,102			(31,921		)	542,262
Equity in subsidiaries’ earnings	39,262			—			—			(39,262		)	—
Cost and Expenses:
Casino and resort expenses	—			—			279,646			(12,843		)	266,803
Tour operations	—			—			36,772			(5		)	36,767
Selling, general and administrative	2,361			1,297			90,352			(2,272		)	91,738
Management fee	1,100			—			15,701			(16,801		)	—
Corporate expenses	5,771			9,095			14,083			—			28,949
Depreciation and amortization	—			75			55,411			—			55,486
Insurance recovery	—			—			(1,100		)	—			(1,100		)
Restructuring costs reversal	—			—			(1,000		)	—			(1,000		)
	9,232			10,467			489,865			(31,921		)	477,643
Income from operations	30,030			7,614			66,237			(39,262		)	64,619
Relinquishment fees – equity in earnings of TCA	—			—			30,041			—			30,041
Other income (expense):
Interest income	1,474			704			1,241			—			3,419
Affiliated interest income	1,046			18,249			—			(19,295		)	—
Affiliated interest expense	—			—			(19,295		)	19,295			—
Interest expense, net of capitalization	(846		)	(36,638		)	(1,620		)	—			(39,104		)
Equity in earnings (losses) of associated companies	(658		)	—			(4,551		)	—			(5,209		)
Gain on settlement of territorial and other disputes	14,459			—			—			—			14,459
Loss on early extinguishment of debt	(5,901		)	(14,624		)	—			—			(20,525		)
Other, net	—			(158		)	218			—			60
Other expense, net	9,574			(32,467		)	(24,007		)	—			(46,900		)
Income (loss) from continuing operations before income taxes	39,604			(24,853		)	72,271			(39,262		)	47,760
Benefit (provision) for income taxes	(1		)	2,238			(2,333		)	—			(96		)
Income (loss) from continuing operations	39,603			(22,615		)	69,938			(39,262		)	47,664
Loss from discontinued operations, net of income tax effect	—			—			(8,061		)	—			(8,061		)
Net income (loss)	$	39,603		$	(22,615	)	$	61,877		$	(39,262	)	$	39,603

F-62

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2004

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(398,528	)	$	(13,174	)	$	557,237		$	(5,165	)	$	(3,856	)	$	136,514
Cash flows from investing activities:
Payments for property and equipment, net of insurance proceeds received	—			(16		)	(101,465		)	(17,917		)	—			(119,398		)
Purchase of short-term investments and notes receivable	—			—			(204,309		)	—			—			(204,309		)
Loans to affiliates	(67,000		)	—			(1,500		)	—			—			(68,500		)
Advances to affiliates	—			—			(10,126		)	—			—			(10,126		)
Repayments from affiliates	29,200			—			—			—			—			29,200
Acquisition of equity interest in associated companies	—			—			(69,191		)	—			—			(69,191		)
Cash resulting from the initial consolidation of Palmilla JV, LLC	—			—			—			7,047			—			7,047
Deferred contract acquisition costs	—			—			(1,631		)	—			—			(1,631		)
Acquisition of assets from Club Méditerranée (Bahamas) Limited	—			—			(30,877		)	—			—			(30,877		)
Net proceeds from the sale of fixed assets	—			—			233			5			—			238
Net cash used in investing activities	(37,800		)	(16		)	(418,866		)	(10,865		)	—			(467,547		)
Cash flows from financing activities:
Proceeds from issuance of debt	230,000			—			—			—			—			230,000
Borrowings	—			—			5,000			112,068			—			117,068
Repayment of debt	—			—			(5,544		)	(88,535		)	—			(94,079		)
Debt issuance and modification costs	(5,897		)	—			(4,479		)	(4,393		)	—			(14,769		)
Proceeds from exercise of share options	40,503			—			—			—			—			40,503
Net proceeds from the issuance of ordinary shares	153,366			—			—			—			—			153,366
Net proceeds from the issuance of Bahamian Depository Receipts	19,053			—			—			—			—			19,053
Net cash provided by (used in) financing activities	437,025			—			(5,023		)	19,140			—			451,142
Increase (decrease) in cash and cash equivalents	697			(13,190		)	133,348			3,110			(3,856		)	120,109
Cash and cash equivalents at beginning of period	143			17,026			39,207			—			3,856			60,232
Cash and cash equivalents at end of period	$	840		$	3,836		$	172,555		$	3,110		$	—		$	180,341

F-63

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2003

	Kerzner			KINA			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	(17,874	)	$	(8,776	)	$	158,080		$	713	$	132,143
Cash provided by discontinued operations	—			—			523			—		523
Net cash provided by (used in) operating activities	(17,874		)	(8,776		)	158,603			713		132,666
Cash flows from investing activities:
Payments for property and equipment, net of insurance proceeds received	—			(14		)	(50,835		)	—		(50,849		)
Loans to affiliates	(15,350		)	—			—			—		(15,350		)
Advances to affiliates	(21,433		)	21,991			(2,211		)	—		(1,653		)
Repayments from affiliates	—			—			4,950			—		4,950
Deferred contract acquisition costs	—			—			(2,115		)	—		(2,115		)
Deposit and purchase of land and casino license	—			—			(6,147		)	—		(6,147		)
Acquisition of assets from Club Méditerranée (Bahamas) Limited	—			—			(20,049		)	—		(20,049		)
Net proceeds from the sale of fixed assets	—			848			251			—		1,099
Acquisition of tour operator, net of cash acquired	—			—			1,384			—		1,384
Repayment of notes receivable	13,339			—			70			—		13,409
Deposits received	—			—			1,250			—		1,250
Sale of debt and equity interest in One & Only Kanuhura	1,464			—			—			—		1,464
Net cash provided by (used in) investing activities	(21,980		)	22,825			(73,452		)	—		(72,607		)
Cash flows from financing activities:
Borrowings	—			—			29,600			—		29,600
Repayment of debt	—			(19		)	(101,879		)	—		(101,898		)
Debt issuance and modification costs	—			—			(140		)	—		(140		)
Proceeds from exercise of share options	39,007			—			—			—		39,007
Repurchase of ordinary shares	(408		)	—			—			—		(408		)
Net cash provided by (used in) financing activities	38,599			(19		)	(72,419		)	—		(33,839		)
Increase (decrease) in cash and cash equivalents	(1,255		)	14,030			12,732			713		26,220
Cash and cash equivalents at beginning of period	1,398			2,996			26,475			3,143		34,012
Cash and cash equivalents at end of period	$	143		$	17,026		$	39,207		$	3,856	$	60,232

F-64

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2002

	Kerzner			KINA			Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	9,314		$	(7,332	)	$	135,088		$	(2,181	)	$	134,889
Cash used in discontinued operations	—			—			(7,619		)	—			(7,619		)
Net cash provided by (used in) operating activities	9,314			(7,332		)	127,469			(2,181		)	127,270
Cash flows from investing activities:
Payments for property and equipment, net of insurance proceeds received	—			(14		)	(39,510		)	—			(39,524		)
Purchase of short-term investments and notes receivable	(13,704		)	—			—			—			(13,704		)
Loans to affiliates	(1,250		)	—			—			—			(1,250		)
Advances to affiliates	88,271			(1,389		)	(87,982		)	—			(1,100		)
Repayments from affiliates	—			—			2,092			—			2,092
Acquisition of equity interest in associated companies	—			—			(40,812		)	—			(40,812		)
Deferred contract acquisition costs	—			—			(214		)	—			(214		)
Net proceeds from the sale of fixed assets	—			—			126			—			126
Repayment of notes receivable	—			18,018			—			—			18,018
Deposits received	4,500			—			—			—			4,500
Other	—			(158		)	(120		)	—			(278		)
Net cash provided by (used in) investing activities	77,817			16,457			(166,420		)	—			(72,146		)
Cash flows from financing activities:
Proceeds from issuance of debt	—			206,000			—			—			206,000
Borrowings	—			—			111,000			—			111,000
Repayment of debt	—			(70		)	(63,213		)	—			(63,283		)
Debt issuance and modification costs	—			(4,301		)	(364		)	—			(4,665		)
Proceeds from exercise of share options	14,702			—			—			—			14,702
Repurchase of ordinary shares	(365		)	—			—			—			(365		)
Early redemption of debt	(104,135		)	(209,000		)	—			—			(313,135		)
Net cash provided by (used in) financing activities	(89,798		)	(7,371		)	47,423			—			(49,746		)
Increase (decrease) in cash and cash equivalents	(2,667		)	1,754			8,472			(2,181		)	5,378
Cash and cash equivalents at beginning of period	4,065			1,242			18,003			5,324			28,634
Cash and cash equivalents at end of period	$	1,398		$	2,996		$	26,475		$	3,143		$	34,012

F-65

EX-1.1(B)

EXHIBIT 1.1(b)

KERZNER INTERNATIONAL LIMITED

Amended and Restated

ARTICLES OF ASSOCIATION

PRELIMINARY AND CONSTRUCTION

1.(1) In these Articles, except where the subject or context otherwise requires:

“Articles” means the articles of association of the Company on the date hereof as the same may be amended from time to time;

the “board” means the directors or any of them acting as the board of directors of the Company;

“business day” means a day (other than a Saturday or a Sunday) or any other day declared to be a public holiday under the Public Holidays Act, Chapter 30 of the Statute Laws of the Commonwealth;

“Commonwealth” means the Commonwealth of The Bahamas;

“The International Business Companies Act” means the International Business Companies Act 2000, Chapter 309 of the Statute Laws of the Commonwealth, including any modification or re-enactment thereof for the time being in force;

“Company” means Kerzner International Limited, the company to which these Articles apply.

“director” means a director of the Company;

“dollar”, or “$” means the lawful currency of the United States of America;

“holder” means, in relation to any shares, the member whose name is entered in the register of members as the holder of such shares;

“member” means the holder of any shares in the Company whose name is entered on the register of members;

“Ordinary Shares” means ordinary shares of $0.01 each of the Company, without reference to a series, having the rights set forth in these Articles;

“Preference Shares” means the Preference Shares of $0.01 each of the Company having the rights set forth in these Articles;

“secretary” means the secretary of the Company and includes a joint, assistant, deputy or temporary secretary and any other person appointed to perform the duties of the secretary;

“shares” means shares in the Company including the Ordinary Shares and the Preference Shares.

(2) Save as aforesaid or as otherwise defined herein any words or expressions defined in the International Business Companies Act (but excluding any modification thereof not in force at the date of adoption of these Articles) shall, if not inconsistent with the subject or the context, bear the same meaning in these Articles.

(3) For the purposes of these Articles, references to writing include references to any visible substitute for writing and to anything partly in one form and partly in another form; words denoting the singular number include the plural number and vice versa; words denoting the masculine gender include the feminine gender and vice versa; and references to persons include references to bodies corporate, partnerships, joint ventures, trusts or other enterprises.

2.In addition to the registered office of the Company in the Commonwealth, which shall be at such place as the directors shall from time to time appoint, the Company may have an office for the transaction of business at any other place, and meetings of the Company or of the directors may be held either within or without the Commonwealth at such place as the directors may determine.

SHARES

3.The authorized share capital of the Company at the date of adoption of these Articles is $350,000 divided into 250,000,000 Ordinary Shares of $0.001 each and 100,000,000 Preference Shares of $0.001 each.  Preference Shares may be issued by the Directors from time to time in one or more Series having such rights as the board may by resolution determine.  All the shares of the Company shall be in registered form, shall be fully paid for at the time of issuance and shall be non-assessable.

4.Without prejudice to any special rights previously conferred on the holders of existing shares in the Company, any Preference Shares in the Company may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of share capital or otherwise, as the board may from time to time by resolution determine.  Preference Shares may be voting, non-voting or voting only for specific purposes or in specific circumstances; provided, however, that the Company shall be prohibited from issuing any non-voting Preference Shares which are not entitled to elect at least one director of the Company in the specific case where an event of default in the payment of dividends has occurred and is continuing with respect to such shares.

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5.Where at any time the share capital is divided into different classes or series of shares, the rights attached to any class or series (unless otherwise provided by the terms of issue of the shares of that class or series) may only be varied or abrogated with the sanction of a resolution of the board and either (i) the consent in writing of the holders of a majority in nominal value of the issued shares of the class or series or (ii) the sanction of a resolution of members holding shares of that class or series passed at a separate general meeting of the holders of the shares of that class or series.

CERTIFICATES

6.The board may elect that no certificates be issued with respect to the shares of the Company.  In the event that the board does not so elect, every person whose name is entered as a member in the register of members shall, without payment, be entitled to a certificate under the common seal of the Company specifying the share or shares held by him, provided that in respect of a share or shares held jointly by several persons the Company shall not be bound to issue more than one certificate, and delivery of a certificate for a share to one of several joint holders shall be sufficient delivery to all.

7.A share certificate defaced, lost or destroyed may be renewed or replaced on payment of such fee, if any, as may be prescribed, and on such terms, if any, as to evidence and indemnity as the directors think fit.

PURCHASE OF SHARES

8.Subject to and in accordance with the provisions of the International Business Companies Act and without prejudice to any relevant special rights attached to any class or series of shares, the Company may with the agreement of the holders of the relevant shares purchase any of its own shares of any class or series (including redeemable shares) at any price (whether at par or above or below par), and any shares to be so purchased may be selected by the Company in any manner whatsoever.

TRANSFER AND TRANSMISSION OF SHARES

9.Subject to Article 10, the instrument of transfer of any share in the Company shall be executed by the transferor (or its duly authorized agent), and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof.

10.Shares in the Company shall be transferred in any usual or common form.  The transfer agent for the Company or the Company’s board may determine if a form of transfer is usual or common in the case of any question or dispute concerning a transfer.

11.The board may:

(a)decline to register a transfer of shares unless the instrument of transfer is accompanied by the certificate or certificates of the shares

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to which it relates (subject to the board’s right to dispense with certificates pursuant to Article 6), and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer; and

(b)suspend the registration of transfers during the fourteen days prior to a general meeting.

12.The executors or administrators of a deceased sole holder of a share shall be the only persons recognized by the Company as having any title to the share.  In the case of a share registered in the names of two or more holders, the survivors or the executors or administrators of the deceased survivor shall be the only persons recognized by the Company as having any title to the share.

13.Any person becoming entitled to a share in consequence of the death or bankruptcy of a member shall, upon such evidence being produced as may from time to time be required by the board, have the right, either to be registered as a member in respect of the share or, instead of being registered himself, to make such transfer of the share as the deceased or bankrupt person could have made; but the directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by the deceased or bankrupt person before the death or bankruptcy.

14.A person becoming entitled to a share by reason of the death or bankruptcy of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company.

AMENDMENT OF COMPANY’S ARTICLES OR MEMORANDUM OF ASSOCIATION

15.The board shall have the power to amend the Company’s Articles or Memorandum of Association by a vote of a majority of the directors present at a meeting or by a written consent signed by a majority of directors then in office.

ALTERATION OF CAPITAL

16.The Company may, by a resolution of the holders of Ordinary Shares, increase the share capital by such sum to be divided into shares of such amount as the resolution shall prescribe.

17.The Company may, by resolution of the board (and the holders of the Ordinary Shares, if and to the extent, required by the International Business Companies Act):

(a)consolidate and divide its share capital into shares of larger amount than its existing shares;

(b)subdivide its existing shares, or any of them or divide the whole or any part of its share capital into shares of smaller amount than is fixed by the

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Articles; or

(c)reduce its share capital in any manner and with and subject to any incident authorized and consent required by law.

GENERAL MEETINGS

18.A general meeting shall be held once in every year at such time (not being more than fifteen months after the holding of the last preceding general meeting) and at such place as may be prescribed by the board.

19.In default of a general meeting so held, a general meeting shall be held in the month next following and may be convened by any two or more members holding Ordinary Shares carrying at least one-tenth of the votes of all members entitled to vote at general meetings, in the same manner as nearly as possible as that in which meetings are to be convened by the board and any such meeting shall be held at such place as the members convening the meeting may designate in the notice thereof.

20.The above-mentioned general meetings shall be called annual general meetings; all other general meetings shall be called extraordinary.

21.The board may, whenever it thinks fit, convene an extraordinary general meeting, and extraordinary general meetings shall also be convened by the board on the requisition, in accordance with Section 59 of the International Business Companies Act, of members of the Company holding not less than one-tenth of the paid-upcapital of the Company, or, in default, may be convened by such requisitionists, as provided by Section 59(2) of the International Business Companies Act.

PROCEEDINGS AT GENERAL MEETINGS

22.(1) Thirty-days’ notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting and, in case of special business, the general nature of that business, shall be given in the manner hereinafter mentioned, or in such other manner, if any, as may be prescribed by the Company in general meeting, to such persons as are under the Articles entitled to receive such notices from the Company.

(2) Every notice convening a general meeting shall include a statement having reasonable prominence that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him, and that a proxy need not also be a member.

23.All business shall be deemed special that is transacted at an extraordinary general meeting, as shall all business that is transacted at an annual general meeting with the exception of (i) sanctioning a dividend, (ii) the consideration of the accounts, balance-sheets and the ordinary report of the directors and

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auditors, and (iii) election of directors and other officers in the place of those retiring by rotation.

24.No business shall be transacted by any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, members present in person or by proxy holding at least a majority of each series then outstanding of Ordinary Shares shall be a quorum.

25.Where within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place and where at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum.

26.The chairman, if any, of the board shall preside as chairman at every general meeting of the Company.

27.Where there is no such chairman or at any meeting he is not present within fifteen minutes after the time appointed for holding the meeting or at which he is unwilling to act as chairman, the directors in office prior to such meeting who are present shall choose some one of their number to be chairman.

28.(1) The chairman may, with the consent of any meeting (on a class-by-class basis) at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

(2) When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of any original meeting.

(3) Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

29.At any general meeting a resolution put to the vote of the meeting shall be decided on a voice call or show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by at least two members present in person or by proxy holding Ordinary Shares carrying at least one-tenth of the votes of all members entitled to vote at the meeting or by the chairman and unless a poll is so demanded, a declaration by the chairman that a resolution has, on a voice call or show of hands, been carried or carried unanimously or by a particular majority or lost, and an entry to that effect in the book of the proceedings of’ the Company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favor of or against that resolution.

30.If a poll is duly demanded it shall be taken in such manner as the chairman directs, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

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31.The demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman and a demand so withdrawn shall not be taken to have invalidated the result of the voice call or show of hands taking place before the demand was made.

VOTES OF MEMBERS

32.Every member shall have one vote for each Ordinary Share of which he is the holder.  Voting rights of Preference Shares (if any) shall be as specified in accordance with Article 4.

33.In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members.

34.A member of unsound mind, or in respect of whom an order has been made by any court having jurisdiction with respect to persons of unsound mind, may vote, whether on a voice call, show of hands or on a poll, by his committee or other person in the nature of a committee appointed by that court.

PROXIES

35.(1) The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under the common seal or under the hand of an officer or attorney so authorized.

(2)An instrument appointing a proxy may be in the following form or in any other form which the board may approve:

“I                                                of                                                   being a member of Kerzner International Limited, hereby appoint                                of                                         as my                                                                         proxy to vote for me and on my behalf at the general meeting of the Company to be held on the      day of and at any adjournment thereof.”

Signed this         day of

36.The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a certified copy of that power or authority shall be deposited at the registered office of the Company not less than forty-eight hours, before the holding of the meeting at which the person named in the instrument proposes to vote, or shall be delivered in person to the secretary of the Company at such meeting or such person or persons as may be designated by the secretary of the Company at such meeting, and in default the instrument of proxy shall not be treated as valid.

37.A vote given in accordance with the terms of an instrument of proxy shall be valid

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notwithstanding the previous death or insanity of the principal or revocation of the instrument of proxy, or the authority under which the instrument of proxy was executed, or transfer of the shares in respect of which the vote is given, provided no intimation in writing of the death, insanity, revocation or transfer shall have been received at the registered office of the Company before the meeting or adjourned meeting at which the instrument or proxy is used.

CORPORATE REPRESENTATIVES

38.Any body corporate which is a member of the Company may by resolution of its directors or other governing body or by authority to be given under seal or under the hand of an officer duly authorized by it authorize such person as it thinks fit to act as its representative at any meeting of the Company or at any separate meeting of the holders of any class or series of shares and such authority may be general or in respect of specific meetings.  A person so authorized shall be entitled to exercise the same power on behalf of the grantor of the authority as the grantor could exercise if it were an individual member of the Company and the grantor shall for the purposes of these Articles be deemed to be present in person at any such meeting if a person so authorized is present at it.

CLASS MEETINGS
SERIES MEETINGS

39.All provisions of these Articles relating to general meetings of the Company shall apply mutatis mutandis to every separate meeting of the holders of any class or series of shares in the capital of the Company.

DIRECTORS

40.Unless otherwise determined by a resolution of the board, the number of the directors shall be seven.

41.Subject to the provisions of Articles 42 to 44 the directors shall be appointed and may be removed in accordance with the International Business Companies Act.

42.If the board so determines, holders of Ordinary Shares may propose candidates for nomination to the board in accordance with such procedures and terms as the board shall in its discretion determine, subject to such procedures being in accordance with applicable laws, rules and regulations including rules or regulations of any stock exchange or quotation system on which the Company’s shares are listed or quoted.

43.It shall be presumed that it is in the best interests of the Company to allow directors to participate in meetings of the board or of committees thereof by telephonic communication as set forth in Article 57 and, accordingly, it shall be a term of appointment of each director that he irrevocably consents to the holding of such meetings in the manner set forth in Article 57.

44(1) At each annual general meeting, directors shall be elected by resolution of the holders of Ordinary Shares in accordance with these Articles (including

8

provisions as to nomination contained in Article 42).  Subject to early resignation or removal as provided in these Articles or the International Business Companies Act, any director so appointed shall hold office until the date of the next annual general meeting of the Company, or if later, the date his successor is duly elected and qualified.

(2) If any director resigns or is removed prior to the expiration of his term on the applicable annual general meeting date, his successor shall be appointed by a majority vote of the directors remaining at such time.

EXECUTIVE DIRECTORS

45.The board may appoint one or more of its body to be the holder of any one or more executive office (except that of auditor) under the Company and may enter into an agreement or arrangement with any director for his employment by the Company or for the provision by him of any services outside the scope of the ordinary duties of a director.  Any such appointment, agreement or arrangement may be made upon such terms, including terms as to remuneration, as the board determines, and any remuneration which is so determined may be in addition to or in lieu of any ordinary remuneration as a director.  The board may revoke or vary any such appointment but without prejudice to any rights or claims which the person whose appointment is revoked or varied may have against the Company by reason thereof.

46.Any appointment of a director to an executive office shall terminate if he ceases to be a director but without prejudice to any rights or claims which he may have against the Company by reason of the termination of such appointment. A director appointed to an executive office shall not ipso facto cease to be a director if his appointment to such executive office terminates.

47The emoluments of any director holding executive office for his services as such shall be determined by the board, and may be of any description, and (without limiting the generality of the foregoing) may include admission to or continuance of membership of any scheme (including any share acquisition scheme) or fund instituted or established or financed or contributed to by the Company for the provision of pensions, life assurance or other benefits for employees or their dependents, or the payment of a pension or other benefits to him or his dependents on or after retirement or death, apart from membership of any such scheme or fund.

POWERS AND DUTIES OF THE BOARD

48.The business of the Company shall be managed by the board, which may exercise all such powers of the Company as are not, by the International Business Companies Act or by these Articles, required to be exercised by the Company in general or extraordinary meetings subject nevertheless to these Articles and to the International Business Companies Act.

PROCEEDINGS OF DIRECTORS

49.(1) The directors may meet together for the dispatch of business, adjourn and

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otherwise regulate their meetings, as they think fit.

(2) Questions arising at any meeting shall be decided by a majority of votes.

(3) A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors.  Directors shall be given reasonable notice (which, except in the case of emergencies, shall be not less than three business days) of the time and place appointed for such meeting of the directors, which notice may be waived by any or all directors at any time before or after such meeting.

50.The quorum necessary for the transaction of the business of the directors may be fixed by the directors and unless so fixed shall be four.

51.The continuing directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to the Articles as the necessary quorum of directors, the continuing directors may act for the purpose of summoning a general meeting of the Company, but for no other purpose.

52.The directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting.

53.The directors may delegate any of their powers to committees consisting of such members of the Company or members of their body as they think fit.   Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors.

54.A committee may elect a chairman of their meetings; if no such chairman is elected or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting.

55.(1) A committee shall meet and adjourn as determined by the board and otherwise as they think proper.

(2) Questions arising at any meeting shall be determined by a majority of votes of the members present.

56.A resolution in writing signed by a simple majority of the directors entitled to vote on that resolution at a meeting of the board or of the members of an existing committee of the board with authority to consider and act on the matter (not being less than the number of directors required to form a quorum of the board) shall be as valid and effectual as if it had been passed at a meeting of the board or (as the case may be) a committee of the board duly convened and held and for this purpose a resolution may consist of several documents to the same effect, each signed by one or more directors.

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57.A meeting of the board or of a committee of the board may, if all the directors consent, consist of a conference between directors who are not all in one place, but of whom each is able (directly or by telephonic communication) to speak to each of the others, and to be heard and recognized by each of the others.  A director taking part in such a conference shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly.  Such a meeting shall be deemed to take place where the largest group of those participating in the conference is assembled, or, if there is no such group, where the chairman of the meeting then is.  The word “meeting” in these Articles’ shall be construed accordingly.

58.The board shall cause minutes to be made in books provided for the purpose:

(a)of all appointments of officers made by the board;

(b)of the names of the directors, members or others present at each meeting of the directors and of any committee of the directors; and

(c)of all resolutions and proceedings at all meetings of the Company and of the board and of committees of the board.

POWERS OF ATTORNEY

59.The board may from time to time and at anytime by power of attorney appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the board under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the board may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities and discretion vested in him.

THE SEAL

60.The seal of the Company shall not be affixed to any instrument except by the authority of a resolution of the directors, and in the presence of at least two directors and of the secretary or such other person as the directors may appoint for the purpose; and those two directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the Company is so affixed in their presence.

DIVIDENDS AND RESERVE

61.The board may from time to time declare and pay to the members of the Company such quarterly dividends as appear to the directors to be justified by the profits of the Company.

62.No dividend shall be paid otherwise than out of profits or surplus available for the

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purpose in accordance with the International Business Companies Act.

63.The directors may, before recommending any dividend, set aside out of the profits of the Company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies or for equalizing dividends or for any other purpose to which the profits of the Company may be properly applied and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (other than shares of the Company), as the directors may from time to time think fit.

64.Where several persons are registered as joint holders of any share any one of them may give effectual receipts for any dividend payable on the share.

65.No dividend shall bear interest against the Company.

ACCOUNTS

66.The directors shall cause true accounts to be kept:

(a)of the sums of money received and expended by the Company and the matter in respect of which such receipt and expenditure takes place; and

(b)of the assets and liabilities of the Company.

67.The books of account shall be kept at the registered office of the Company or at such other place or places as the directors think fit and shall always be open to the inspection of the directors.

68.The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the Company except as conferred by statute or authorized by the directors or by the Company in general meeting.

69.Once at least in every year the directors shall lay before the Company in general meeting a profit and loss account for the period since the preceding account or (in the case of the first account) since the incorporation of the Company, made up to a date not more than six months before such meeting.

70.(1) A balance-sheet shall be made out in every year and laid before the Company in general meeting, made up to a date not more than six months before such meeting.

(2) The balance-sheet shall be accompanied by a report of the board as to the state of the Company’s affairs and the amount which they recommend to be paid by way of dividend and the amount, if any, which they propose to carry to a reserve fund.

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71.A copy of the balance-sheet and report shall, seven days previous to the meeting, be sent to the persons entitled to receive notices of general meetings in the manner in which notices are to be given hereunder.

NOTICES

72.(1) A notice may be given by the Company to any member either personally or by sending it by post to him to his registered address.

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter (by air-mail if to an address outside the country from which it is sent) containing the notice and, unless the contrary is proved, to have been effected three days after posting (or seven days if sent to an address outside the country from which it is sent).

73.A notice may be given by the Company to the joint holders of a share by giving the notice to the joint holder named first in the register in respect of the share.

74.A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a member by sending it through the post in a prepaid letter addressed to them by name or by the title of representatives of the deceased or trustees of the bankrupt, or by any like description, at the address, if any, supplied for the purpose by the persons claiming to be so entitled, or (until such · an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death or bankruptcy has not occurred.

75.Notice of every general meeting shall be given in some manner hereinbefore authorized to the members of the Company, including any person entitled to a share in consequence of the death or bankruptcy of a member, who, but for his death or bankruptcy, would be entitled to receive notice of the meeting and to every director. No other persons shall be entitled to receive notices of general meetings.

INDEMNITY

76.The Company shall, subject to the provisions of Article 80, indemnify to the fullest extent permitted by the International Business Companies Act any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether external or internal to the Company by reason of the fact that he is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such suit, action or proceeding if he acted in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his

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conduct was unlawful.

77.Subject to Article 80, expenses incurred by a director or officer in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled under Article 76 to be indemnified by the Company in respect of such expenses.

78The board shall from time to time cause the Company to purchase and maintain insurance from reputable insurance carriers on behalf of any person who is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such with reasonable limits and subject to reasonable and customary deductibles, for so long as such insurance is available from such carriers.

79.The Company’s indemnification under Article 76 of any person who is or was a director or officer of the Company, or is or was serving, at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be reduced by amounts such person receives as indemnification (i) under any policy of insurance purchased and maintained on his behalf by the Company, (ii) from such other corporation, partnership, joint venture, trust or other enterprise, or (iii) under any other applicable indemnification provision.

80.(a)It shall be a condition of the Company’s obligation to indemnify or advance expenses, under Articles 76 and 77 that the person asserting, or proposing to assert, the right to be indemnified, promptly after receipt of notice of commencement of any action, suit or proceeding in respect of which a claim or indemnification is or is to be made against the Company notify the Company of the commencement of such action, suit or proceeding, including therewith a copy of all papers served and the name of counsel retained or to be retained by such person in connection with such action, suit or proceeding, and thereafter to keep the Company timely and fully apprised of all developments and proceedings in connection with such action, suit or proceeding or as the Company shall request; and the fees and expenses of any counsel retained by a person asserting or proposing to assert, the right to be indemnified under Article 76 shall be at the expense of such person unless the counsel retained shall have been approved by the Company in writing, which approval shall not be unreasonably withheld.

(b)If a claim for indemnification or advancement of expenses under Articles 76 and 77 is not paid in full by the Company within forty five (45) days after a written claim therefor has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses of prosecuting such claim.

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81.To the fullest extent permitted by the International Business Companies Act as it exists on the date hereof or as it may hereafter be amended, no director or officer of the Company shall be liable to the Company or its members for monetary or other damages for breach of fiduciary duty as a director or officer.

82.The provisions of Articles 76 to 81 shall continue as to, and for the benefit of, a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

83.No amendment to or repeal of the provisions of Articles 76 to 82 shall apply to or have any effect on the eligibility for, or entitlement to, indemnification advancement of expenses and the other rights provided by, or granted pursuant to, Articles 76 to 82 for or with respect to any acts or omissions of any director or officer occurring prior to any such amendment or repeal.

DISQUALIFIED SHAREHOLDER PROVISIONS

84(A)If the Company becomes, and so long as it remains, either a holding company or an intermediary holding company subject to regulation under any Gaming Laws, all Securities (as hereinafter defined) of the Company shall be held subject to the applicable provisions of such Gaming Laws.  If any person (as hereinafter defined) which beneficially owns Securities of the Company (i) is requested or required pursuant to any Gaming Law to appear before, or submit to the jurisdiction of, or provide information to, any Gaming Authority and either refuses to do so or otherwise fails to comply with such request or requirement within a reasonable period of time or (ii) is determined or shall have been determined by any Gaming Authority not to be suitable or qualified with respect to the actual or beneficial ownership of Securities of the Company, then at the election of the Company (unless otherwise required by any Gaming Authority or Gaming Law):  (a) each such person owning such Securities in the Company hereby agrees to sell to the Company and the Company shall have the absolute right in its sole discretion to repurchase, any or all of the Securities of the Company beneficially owned by such person at a price determined pursuant to paragraph (C) hereof; or (b) each such person owning such Securities in the Company hereby agrees to otherwise dispose of his or her interest in the Company within the 120 day period commencing on the date on which the Company receives notice from a Gaming Authority of such holder’s unsuitability or disqualification (or an earlier time if so required by a Gaming Authority or any Gaming Law) and the Company shall have no obligation to repurchase, any or all of the Securities of the Company beneficially owned by such person.  The operation of this Article 84 shall not be stayed by an appeal from a determination of any Gaming Authority.

(B)If the Company intends to repurchase Securities beneficially owned by any person referred to in clause (i) or (ii) of paragraph (A) hereof, it shall notify the person in writing of such intention, specifying the Securities to be repurchased, the date, time and place when such repurchase will be consummated (the “Repurchase Date”), which date in no event will be earlier than three business days after the date of such notice, and the price at which such Securities will be repurchased (it being sufficient for the purposes of this

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Article 84 for the Company to indicate generally that the price will be determined in accordance with paragraph (C) hereof).  If the Company gives the notice provided for by the preceding sentence (the “Repurchase Notice”), such notice shall be deemed to constitute a binding agreement on the part of the Company to repurchase, and on the part of the person notified to sell, the Securities referred to in such Notice in accordance with this Article 84. Following the Repurchase Date (or an earlier date if required by any Gaming Authority or Gaming Law), no dividends will be payable on and no voting rights will be available to the holders of any Securities covered by such Repurchase Notice which has not been duly delivered by the holder thereof for repurchase by the Company.  If, following such Repurchase Date, any Securities with respect to which a Repurchase Notice has been given have not been duly delivered by the holder thereof for repurchase by the Company, the Company shall deposit in escrow or otherwise hold in trust for the benefit of such holder an amount equal to the aggregate Market Price (as hereinafter defined) of the stock to be repurchased except that to the extent New Shares (as hereinafter defined) are to be repurchased and the Purchase Price (as hereinafter defined) thereof shall have been publicly disclosed or otherwise made available to the Company, the amount deposited in escrow or otherwise segregated with respect to such New Shares may be the lesser of the Market Price thereof on the date of the Repurchase Notice and the Purchase Price thereof.  The establishment of such an account shall in no way alter the amount otherwise payable to any person pursuant to this Article 84.  No interest shall be paid on or accrue with respect to any amount so deposited or held.

(C)(i)In the event that the person to whom a Repurchase Notice is directed pursuant to paragraph (B) hereof has acquired actual or beneficial ownership of Securities within the 24-month period terminating on the date of such Notice (“New Shares”), the price at which the Company shall repurchase such New Shares as are covered by the Repurchase Notice shall be the lesser of the Market Price thereof on the date of such Notice and the Purchase Price thereof.

(ii)In the event that the person to whom a Repurchase Notice is directed pursuant to paragraph (B) hereof has acquired actual or beneficial ownership of any or all of his or her Securities prior to the 24-month period terminating on the date of such Notice (“Old Shares”), the price at which the Company shall repurchase such Old Shares as are covered by the Repurchase Notice shall be the Market Price thereof on the date of the Repurchase Notice.

(iii)The Company shall have the option in its sole discretion of designating which of the Securities beneficially owned by any person referred to in clause (i) or (ii) of paragraph (A) hereof are subject to the Repurchase Notice and, for purposes hereof, it shall be sufficient for the Company to indicate generally that Securities shall be repurchased based on the order in which they were purchased or based on the reverse of such order.

(iv)Any person to whom a Repurchase Notice is given pursuant to the provisions of this Article shall have the burden of establishing to the

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satisfaction of the Company the dates on which and prices at which such person acquired the Securities subject to such Notice.

(D)For the purposes of this Article 84:

(1)“Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the rules and regulations under the Exchange Act.

(2)“Exchange Act” means the U.S. Securities and Exchange Act of 1934, as amended.

(3)“Gaming Authority” means any government, court, or federal, state, local, international or foreign governmental, administrative or regulatory and licensing body, agency, authority or official, which regulates, has authority over, or otherwise asserts jurisdiction over gaming activities (or proposed gaming activities), gaming operations or facilities conducted by the Company or any of its subsidiaries or Affiliates, within any gaming jurisdictions (domestic and foreign and the political subdivisions thereof), whether now or hereafter existing.

(4)“Gaming Law” means any federal, state, local, international or foreign law, statute, order, ordinance or interpretation pursuant to which any Gaming Authority possesses or asserts regulatory or licensing authority over gaming activities, operations or facilities within any gaming jurisdictions (domestic and foreign and the political subdivisions thereof), and all rules and regulations promulgated by such Gaming Authority thereunder.

(5)“Market Price” means the average of the last sale prices of a Security on the Composite Tape for New York Stock Exchange Listed Stocks for each of the 15 consecutive trading days (the “Valuation Period”) commencing 16 trading days prior to the date in question; provided that if such Security is not quoted on the Composite Tape, such average last sale price shall be derived from the average last sale prices on the New York Stock Exchange, or, if such Security is not listed on such exchange, on the principal United States securities exchange registered under the Exchange Act on which such Security is listed, or, if such Security is not listed on any such exchange, the average of the closing bid quotations with respect to such a Security during the Valuation Period on the Nasdaq National Market or any system then in use, or if no such quotations are available, the fair market value of such a Security on the date in question as determined by the Board of Directors in good faith.

(6)A “person” means any individual, firm, corporation, limited liability company, trust or other entity.

(7)A person shall be a “beneficial owner” of any Securities:

(i)which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

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(ii)which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or

(iii)which are beneficially owned, directly or indirectly, by any other Person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Securities.

(8)“Purchase Price” means the price paid to acquire a share of Securities, exclusive of commissions, taxes and other fees and expenses, adjusted for any stock split, stock dividend, combination of shares or similar event.

(9)“Securities” means any shares of capital stock, bonds, notes, convertible debentures, warrants or other instruments that represent a share in the Company or a debt owed by the Company.

(E)A majority of the Board of Directors shall have the power and duty to determine for the purposes of this Article 84 on the basis of information known to them after reasonable inquiry, whether clause (i) or (ii) of paragraph (A) hereof applies to any person who beneficially owns Securities of the Company such that the Company shall have the right to repurchase shares of Securities held by such person or require the disposition of such person’s interest in the Company pursuant to this Article 84.

ADOPTED

24^th day of March, 2005

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EX-2.2(H)

EXHIBIT 2.2(h)

EXECUTION COPY

KERZNER INTERNATIONAL LIMITED

KERZNER INTERNATIONAL NORTH AMERICA, INC.

As Issuers

8.875% Senior Subordinated Notes due 2011

FIFTH SUPPLEMENTAL INDENTURE

Dated as of September 10, 2004

Supplementing the Indenture dated as of August 14, 2001, among Kerzner International Limited and Kerzner International North America, Inc., as Issuers, the Guarantors named therein and The Bank of New York Trust Company, N.A., as Trustee

THE BANK OF NEW YORK TRUST COMPANY, N.A.

As Trustee

SUPPLEMENTAL INDENTURE dated as of September 10, 2004, among Kerzner International Limited (formerly known as Sun International Hotels Limited), an international business company organized under the laws of the Commonwealth of The Bahamas (the “Company” or “Kerzner International”), Kerzner International North America, Inc. (formerly known as Sun International North America, Inc.), a Delaware corporation and a wholly owned subsidiary of the Company (together with the Company, the “Issuers”); Kerzner International Development Services (UK) Ltd., Kerzner UK Hotel Properties Ltd., Kerzner International Palm Island Limited, Kerzner International UAE Limited, Kerzner International Employment Services Ltd., Kerzner International Development FZ-LLC (Dubai Free Zone), Kerzner International Management FZ-LLC (Dubai Free Zone), Kerzner Investments Acquisitions Limited, One&Only Management Limited and One&Only Resorts Limited (collectively, the “Additional Guarantors”); and The Bank of New York Trust Company, N.A. (formerly known as The Bank of New York) (the “Trustee”), as Trustee under the Indenture referred to herein.

WHEREAS the Issuers, the Guarantors and the Trustee heretofore executed and delivered an Indenture dated as of August 14, 2001, in respect of the Issuers’ 8.875% Senior Subordinated Notes due 2011, as supplemented by the Supplemental Indenture dated September 19, 2001, the Second Supplemental Indenture dated May 20, 2002, the Third Supplemental Indenture dated November 18, 2002 and the Fourth Supplemental Indenture dated May 7, 2003 (such indenture, as supplemented, the “Indenture”);

WHEREAS, the Additional Guarantors each have agreed to become a “Guarantor” under the Indenture, in each case in order to unconditionally guarantee all of the Issuers’ obligations under the Securities pursuant to a Guarantee on the terms and conditions set forth herein; and

WHEREAS, pursuant to Section 9.1 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture;

NOW, THEREFORE, the Issuers, the Additional Guarantors and the Trustee agree as follows for the equal and ratable benefit of the Holders of the Securities:

ARTICLE I

Guarantee

SECTION 1.01.  a.  Guarantees.

(i)            In consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the Additional Guarantors hereby irrevocably and unconditionally guarantees, as of the respective effective dates shown on Schedule I hereto, jointly and

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severally, on a senior subordinated basis (the “Guarantee”) to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Securities or the obligations of the Issuers under the Indenture or the Securities, that: (w) the principal and premium (if any) of and interest (and Liquidated Damages, if any) on the Securities will be paid in full when due, whether at the maturity or interest payment date, by acceleration, call for redemption, upon an Change of Control Offer, an Asset Sale Offer or otherwise; (x) all other obligations of the Issuers to the Holders or the Trustee under the Indenture or the Securities will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Securities; and (y) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration, call for redemption, upon an Offer to Purchase or otherwise.  Failing payment when due of any amount so guaranteed for whatever reason, each Additional Guarantor shall be obligated to pay the same before failure so to pay becomes an Event of Default.

(ii)           Each Additional Guarantor hereby agrees that its obligations with regard to this Guarantee shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or the Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Issuers, any action to enforce the same or any other circumstances that might otherwise constitute a legal or equitable discharge or defense of a guarantor.  Each Additional Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers or right to require the prior disposition of the assets of the Issuers to meet its obligations, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Securities and the Indenture.

(iii)          If any Holder or the Trustee is required by any court or otherwise to return to either the Issuers or any Additional Guarantor, or any Custodian, Trustee, or similar official acting in relation to either the Issuers or such Additional Guarantor, any amount paid by either the Issuers or such Additional Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.  Each Additional Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.  Each Additional Guarantor further agrees that, as between such Additional Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations

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guaranteed hereby may be accelerated as provided in Section 6.2 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Issuers of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.2 of the Indenture, those obligations (whether or not due and payable) will forthwith become due and payable by each of the Additional Guarantors for the purpose of this Guarantee.

(iv)          Each Additional Guarantor and by its acceptance of a Security issued hereunder each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Additional Guarantor set forth in Section 1.01(a)(i) not constitute a fraudulent transfer or conveyance for purpose of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar United States Federal or state law.  To effectuate the foregoing intention, the Holders and such Additional Guarantor hereby irrevocably agree that the obligations of such Additional Guarantor under its guarantee set forth in Section 1.01(a)(i) shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Additional Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to the following paragraph of this Section 1.01(a)(iv), result in the obligations of such Additional Guarantor under such guarantee not constituting such a fraudulent transfer or conveyance.

Each Additional Guarantor that makes any payment or distribution under Section 1.01(a)(i) shall be entitled to a contribution from each other Guarantor equal to its Pro Rata amount of such payment or distribution so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.  For purposes of the foregoing, the “Pro Rata amount” of any Guarantor means the percentage of the net assets of all Guarantors held by such Additional Guarantor, determined in accordance with GAAP.

b.             Execution and Delivery of Guarantee

To evidence its Guarantee set forth in Section 1.01(a), each Additional Guarantor agrees that a notation of such Guarantee substantially in the form annexed to the Indenture as Exhibit B shall be endorsed on each Security authenticated and delivered by the Trustee and that this Supplemental Indenture shall be executed on behalf of such Additional Guarantor by one Officer by manual or facsimile signature.

Each Additional Guarantor agrees that its Guarantee set forth in Section 1.01 shall remain in full force and effect and apply to all the Securities notwithstanding any failure to endorse on each Security a notation of such Guarantee.

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If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless.

The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in the Indenture on behalf of each Additional Guarantor.

c.             Certain Bankruptcy Events.

Each Additional Guarantor hereby covenants and agrees that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of either of the Issuers, such Additional Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees not to take the benefit of any such stay of execution, whether under Section 362 or 105 of the United States Bankruptcy Code or otherwise.

d.             Limitation on Merger, Consolidation, etc. of Additional Guarantors.

No Additional Guarantor shall consolidate or merge with or into (whether or not such Additional Guarantor is the surviving person) another person (other than either Issuer or another Guarantor) unless (i) subject to the provisions of the following paragraph, the person formed by or surviving any such consolidation or merger (if other than such Additional Guarantor) assumes all the obligations of such Additional Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such person shall unconditionally guarantee, on a senior subordinated basis, all of such Additional Guarantor’s obligations under such Additional Guarantor’s Guarantee and the Indenture on the terms set forth in the Indenture; and (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred or be continuing.

Notwithstanding the foregoing, upon the sale or disposition (whether by merger, stock purchase, or otherwise) of an Additional Guarantor in its entirety to an entity which is not a Subsidiary or the designation of a Subsidiary as an Unrestricted Subsidiary, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of Section 4.13 of the Indenture), such Additional Guarantor will be deemed released from its obligations under its Guarantee of the Securities; provided, however, that any such termination shall occur only to the extent that all obligations of such Additional Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of either Issuer or any of their Subsidiaries shall also terminate upon such release, sale or transfer.

SECTION 1.02.  Trustee’s Acceptance.  The Trustee hereby accepts this Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture.

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ARTICLE II

Miscellaneous

SECTION 2.01.  Interpretation.Upon execution and delivery of this Supplemental Indenture, the Indenture shall be modified and amended in accordance with this Supplemental Indenture, and all the terms and conditions of both shall be read together as though they constitute one instrument, except that, in case of conflict, the provisions of this Supplemental Indenture will control.  The Indenture, as modified and amended by this Supplemental Indenture, is hereby ratified and confirmed in all respects and shall bind every Holder of Securities.  In case of conflict between the terms and conditions contained in the Securities and those contained in the Indenture, as modified and amended by this Supplemental Indenture, the provisions of the Indenture, as modified and amended by this Supplemental Indenture, shall control.

SECTION 2.02.  Conflict with Trust Indenture Act.If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control.  If any provision of this Supplemental Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the provision of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be.

SECTION 2.03.  Severability.  In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 2.04.  Terms Defined in the Indenture.  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Indenture.  Where the context requires, the term “Guarantors” includes both the “Additional Guarantors” (defined herein) and the “Guarantors” party to the Indenture.

SECTION 2.05.  Headings.  The Article and Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 2.06.  Benefits of Supplemental Indenture, etc.  Nothing in this Supplemental Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the Holders of the Securities, any benefit of any legal or equitable right, remedy or claim under the Indenture, this Supplemental Indenture or the Securities.

SECTION 2.07.  Successors.  All agreements of the Issuers and the Additional Guarantors in this Supplemental Indenture shall bind their successors.  All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

SECTION 2.08.  Trustee Not Responsible for Recitals.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the Issuers.

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SECTION 2.09.  Certain Duties and Responsibilities of the Trustee.  In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided.

SECTION 2.10.  Governing Law.  This Supplemental Indenture shall be governed by and construed in accordance with the internal laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflicts of law.The Issuers and each Additional Guarantor hereby irrevocably submit to the jurisdiction of any New York State court sitting in the Borough of Manhattan in the City of New York or any Federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplemental Indenture, and irrevocably accepts for itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts.  The Issuers and each Additional Guarantor irrevocably waive, to the fullest extent they may effectively do so under applicable law, trial by jury and any objection which they may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Nothing herein shall affect the right of the Trustee or any securityholder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Issuers or any Additional Guarantor in any other jurisdiction.

SECTION 2.11.  Duplicate Originals.  All parties may sign any number of copies or counterparts of this Supplemental Indenture.  Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, each party hereto has caused this Supplemental Indenture to be signed by its officer thereunto duly authorized as of the date first written above.

KERZNER INTERNATIONAL LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Executive Vice President and Chief Financial Officer
by	/s/William C. Murtha
	Name:	William C. Murtha
	Title:	Authorized Signatory
KERZNER INTERNATIONAL NORTH AMERICA, INC.,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Chief Executive Officer
by	/s/William C. Murtha
	Name:	William C. Murtha
	Title:	Senior Vice President and Corporate Counsel
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
by	/s/Craig A. Kaye
	Name:	Craig A. Kaye
	Title:	Assistant Treasurer
ADDITIONAL GUARANTORS:
KERZNER INTERNATIONAL DEVELOPMENT SERVICES (UK) LTD.,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory

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KERZNER UK HOTEL PROPERTIES LTD.,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INTERNATIONAL PALM ISLAND LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INTERNATIONAL UAE LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INTERNATIONAL EMPLOYMENT SERVICES LTD.,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INTERNATIONAL DEVELOPMENT FZ-LLC (DUBAI FREE ZONE),
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INTERNATIONAL MANAGEMENT FZ-LLC (DUBAI FREE ZONE),
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
KERZNER INVESTMENTS ACQUISITIONS LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory

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ONE&ONLY MANAGEMENT LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory
ONE&ONLY RESORTS LIMITED,
by	/s/John R. Allison
	Name:	John R. Allison
	Title:	Authorized Signatory

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SCHEDULE I

Additional Guarantor	Effective Date of Guarantee
Kerzner International Development Services (UK) Ltd.	May 13, 2003
Kerzner UK Hotel Properties Ltd.	July 30, 2003
Kerzner International Palm Island Limited	September 17, 2003
Kerzner International UAE Limited	September 26, 2003
Kerzner International Employment Services Ltd.	January 30, 2004
Kerzner International Development FZ-LLC (Dubai Free Zone)	February 11, 2004
Kerzner International Management FZ-LLC (Dubai Free Zone)	February 11, 2004
Kerzner Investments Acquisitions Limited	March 2, 2004
One&Only Management Limited	March 31, 2004
One&Only Resorts Limited	March 31, 2004

11

EX-2.2(I)

EXHIBIT 2.2(i)

KERZNER INTERNATIONAL LIMITED

KERZNER INTERNATIONAL NORTH AMERICA, INC.

As Issuers

8.875% Senior Subordinated Notes due 2011

SIXTH SUPPLEMENTAL INDENTURE

Dated as of March 24, 2005

Supplementing the Indenture dated as of August 14, 2001, among Kerzner International Limited and Kerzner International North America, Inc., as Issuers, the Guarantors named therein and The Bank of New York Trust Company, N.A., as Trustee

THE BANK OF NEW YORK TRUST COMPANY, N.A.

As Trustee

SUPPLEMENTAL INDENTURE dated as of March 24, 2005, among Kerzner International Limited (formerly known as Sun International Hotels Limited), an international business company organized under the laws of the Commonwealth of The Bahamas (the “Company” or “Kerzner International”), Kerzner International North America, Inc. (formerly known as Sun International North America, Inc.), a Delaware corporation and a wholly owned subsidiary of the Company (together with the Company, the “Issuers”); the Guarantors listed on the attached Schedule I (collectively, the “Additional Guarantors”); and The Bank of New York Trust Company, N.A. (formerly known as The Bank of New York) (the “Trustee”), as Trustee under the Indenture referred to herein.

WHEREAS the Issuers, the Guarantors and the Trustee heretofore executed and delivered an Indenture dated as of August 14, 2001, in respect of the Issuers’ 8.875% Senior Subordinated Notes due 2011, as supplemented by the Supplemental Indenture dated September 19, 2001, the Second Supplemental Indenture dated May 20, 2002, the Third Supplemental Indenture dated November 18, 2002, the Fourth Supplemental Indenture dated May 7, 2003 and the Fifth Supplemental Indenture dated September 10, 2004 (such indenture, as supplemented, the “Indenture”);

WHEREAS, the Additional Guarantors each have agreed to become a “Guarantor” under the Indenture, in each case in order to unconditionally guarantee all of the Issuers’ obligations under the Securities pursuant to a Guarantee on the terms and conditions set forth herein; and

WHEREAS, pursuant to Section 9.1 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture;

NOW, THEREFORE, the Issuers, the Additional Guarantors and the Trustee agree as follows for the equal and ratable benefit of the Holders of the Securities:

ARTICLE I

Guarantee

SECTION 1.01.    a.Guarantees.

(i)In consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the Additional Guarantors hereby irrevocably and unconditionally guarantees, as of the respective effective dates shown on Schedule I hereto, jointly and severally, on a senior subordinated basis (the “Guarantee”) to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Securities or the obligations of the Issuers under the Indenture or the Securities, that: (w) the principal and premium (if any) of and interest (and Liquidated Damages, if any) on the Securities will be paid in full when due, whether at the maturity or interest payment date, by acceleration, call for redemption, upon an Change of Control Offer, an Asset Sale Offer or otherwise; (x) all other obligations of the Issuers to the Holders or the Trustee under the Indenture or the Securities will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Securities; and (y) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, they will be paid in full when due

2

or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration, call for redemption, upon an Offer to Purchase or otherwise.  Failing payment when due of any amount so guaranteed for whatever reason, each Additional Guarantor shall be obligated to pay the same before failure so to pay becomes an Event of Default.

(ii)Each Additional Guarantor hereby agrees that its obligations with regard to this Guarantee shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or the Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Issuers, any action to enforce the same or any other circumstances that might otherwise constitute a legal or equitable discharge or defense of a guarantor.  Each Additional Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers or right to require the prior disposition of the assets of the Issuers to meet its obligations, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Securities and the Indenture.

(iii)If any Holder or the Trustee is required by any court or otherwise to return to either the Issuers or any Additional Guarantor, or any Custodian, Trustee, or similar official acting in relation to either the Issuers or such Additional Guarantor, any amount paid by either the Issuers or such Additional Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.  Each Additional Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.  Each Additional Guarantor further agrees that, as between such Additional Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 6.2 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Issuers of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.2 of the Indenture, those obligations (whether or not due and payable) will forthwith become due and payable by each of the Additional Guarantors for the purpose of this Guarantee.

(iv)Each Additional Guarantor and by its acceptance of a Security issued hereunder each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Additional Guarantor set forth in Section 1.01(a)(i) not constitute a fraudulent transfer or conveyance for purpose of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar United States Federal or state law.  To effectuate the foregoing intention, the Holders and such Additional Guarantor hereby irrevocably agree that the obligations of such Additional Guarantor under its guarantee set forth in Section 1.01(a)(i) shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Additional Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor

3

under its Guarantee or pursuant to the following paragraph of this Section 1.01(a)(iv), result in the obligations of such Additional Guarantor under such guarantee not constituting such a fraudulent transfer or conveyance.

Each Additional Guarantor that makes any payment or distribution under Section 1.01(a)(i) shall be entitled to a contribution from each other Guarantor equal to its Pro Rata amount of such payment or distribution so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.  For purposes of the foregoing, the “Pro Rata amount” of any Guarantor means the percentage of the net assets of all Guarantors held by such Additional Guarantor, determined in accordance with GAAP.

b.Execution and Delivery of Guarantee.

To evidence its Guarantee set forth in Section 1.01(a), each Additional Guarantor agrees that a notation of such Guarantee substantially in the form annexed to the Indenture as Exhibit B shall be endorsed on each Security authenticated and delivered by the Trustee and that this Supplemental Indenture shall be executed on behalf of such Additional Guarantor by one Officer by manual or facsimile signature.

Each Additional Guarantor agrees that its Guarantee set forth in Section 1.01 shall remain in full force and effect and apply to all the Securities notwithstanding any failure to endorse on each Security a notation of such Guarantee.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless.

The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in the Indenture on behalf of each Additional Guarantor.

c.Certain Bankruptcy Events.

Each Additional Guarantor hereby covenants and agrees that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of either of the Issuers, such Additional Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees not to take the benefit of any such stay of execution, whether under Section 362 or 105 of the United States Bankruptcy Code or otherwise.

d.Limitation on Merger, Consolidation, etc. of Additional Guarantors.

No Additional Guarantor shall consolidate or merge with or into (whether or not such Additional Guarantor is the surviving person) another person (other than either Issuer or another Guarantor) unless (i) subject to the provisions of the following paragraph, the person formed by or surviving any such consolidation or merger (if other than such Additional Guarantor) assumes all the obligations of such Additional Guarantor pursuant to a supplemental indenture in form reasonably satisfactory to the Trustee, pursuant to which such person shall unconditionally guarantee, on a senior subordinated basis, all of such Additional Guarantor’s obligations under such Additional Guarantor’s Guarantee and the Indenture on the terms set forth

4

in the Indenture; and (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred or be continuing.

Notwithstanding the foregoing, upon the sale or disposition (whether by merger, stock purchase, or otherwise) of an Additional Guarantor in its entirety to an entity which is not a Subsidiary or the designation of a Subsidiary as an Unrestricted Subsidiary, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of Section 4.13 of the Indenture), such Additional Guarantor will be deemed released from its obligations under its Guarantee of the Securities; provided, however, that any such termination shall occur only to the extent that all obligations of such Additional Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of either Issuer or any of their Subsidiaries shall also terminate upon such release, sale or transfer.

SECTION 1.02.  Trustee’s Acceptance.  The Trustee hereby accepts this Supplemental Indenture and agrees to perform the same under the terms and conditions set forth in the Indenture.

ARTICLE II

Miscellaneous

SECTION 2.01.  Interpretation.  Upon execution and delivery of this Supplemental Indenture, the Indenture shall be modified and amended in accordance with this Supplemental Indenture, and all the terms and conditions of both shall be read together as though they constitute one instrument, except that, in case of conflict, the provisions of this Supplemental Indenture will control.  The Indenture, as modified and amended by this Supplemental Indenture, is hereby ratified and confirmed in all respects and shall bind every Holder of Securities.  In case of conflict between the terms and conditions contained in the Securities and those contained in the Indenture, as modified and amended by this Supplemental Indenture, the provisions of the Indenture, as modified and amended by this Supplemental Indenture, shall control.

SECTION 2.02.  Conflict with Trust Indenture Act.  If any provision of this Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is required under the TIA to be part of and govern any provision of this Supplemental Indenture, the provision of the TIA shall control.  If any provision of this Supplemental Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the provision of the TIA shall be deemed to apply to the Indenture as so modified or to be excluded by this Supplemental Indenture, as the case may be.

SECTION 2.03.  Severability.  In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 2.04.  Terms Defined in the Indenture.  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Indenture.  Where the context requires, the term “Guarantors” includes both the “Additional Guarantors” (defined herein) and the “Guarantors” party to the Indenture.

SECTION 2.05.  Headings.  The Article and Section headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

5

SECTION 2.06.  Benefits of Supplemental Indenture, etc.  Nothing in this Supplemental Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the Holders of the Securities, any benefit of any legal or equitable right, remedy or claim under the Indenture, this Supplemental Indenture or the Securities.

SECTION 2.07.  Successors.  All agreements of the Issuers and the Additional Guarantors in this Supplemental Indenture shall bind their successors.  All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

SECTION 2.08.  Trustee Not Responsible for Recitals.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the Issuers.

SECTION 2.09.  Certain Duties and Responsibilities of the Trustee.  In entering into this Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided.

SECTION 2.10.  Governing Law.  This Supplemental Indenture shall be governed by and construed in accordance with the internal laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflicts of law.The Issuers and each Additional Guarantor hereby irrevocably submit to the jurisdiction of any New York State court sitting in the Borough of Manhattan in the City of New York or any Federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplemental Indenture, and irrevocably accepts for itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts.  The Issuers and each Additional Guarantor irrevocably waive, to the fullest extent they may effectively do so under applicable law, trial by jury and any objection which they may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Nothing herein shall affect the right of the Trustee or any securityholder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Issuers or any Additional Guarantor in any other jurisdiction.

SECTION 2.11. Duplicate Originals.  All parties may sign any number of copies or counterparts of this Supplemental Indenture.  Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement.

[Remainder of page intentionally left blank]

6

IN WITNESS WHEREOF, each party hereto has caused this Supplemental Indenture to be signed by its officer thereunto duly authorized as of the date first written above.

KERZNER INTERNATIONAL LIMITED,
	by	/s/John R. Allison
		Name:	John R. Allison
		Title:	Executive Vice President-Finance & Chief Financial Officer
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Assistant Secretary
KERZNER INTERNATIONAL NORTH AMERICA, INC.,
	by	/s/John R. Allison
		Name:	John R. Allison
		Title:	Chief Executive Officer
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Senior Vice President and Corporate
			Counsel
THE BANK OF NEW YORK TRUST COMPANY,
N.A., AS TRUSTEE,
	by	/s/Craig Kaye
		Name:	Craig Kaye
		Title:	Assistant Vice President

7

ADDITIONAL GUARANTORS:
KERZNER INTERNATIONAL MARINE PROJECTS LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER INVESTMENTS PENNSYLVANIA, INC.,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
	KERZNER INVESTMENTS BLB, INC.,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
ONE&ONLY RESORTS (DEUTSCHLAND) GMBH,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
ONE&ONLY RESORTS (FRANCE) EURL,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER UK LEISURE PROPERTY HOLDINGS LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER UK LEISURE OPERATIONS HOLDINGS LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory

8

KERZNER GREENWICH HOTEL LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER GREENWICH CASINO LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
	KERZNER GLASGOW LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER MANCHESTER LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER UK GAMING LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER NORTHAMPTON LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER INTERNATIONAL MOROCCO HOLDINGS LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory

9

KERZNER INTERNATIONAL DEVELOPMENT (MOROCCO) LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER INTERNATIONAL MANAGEMENT (MOROCCO) LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
KERZNER INVESTMENTS MOROCCO LIMITED
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory
ONE&ONLY RESORTS (SOUTHERN AFRICA) (PTY) LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title	Authorized Signatory
WORLD LEISURE HOLIDAYS (PTY) LIMITED,
	by	/s/William C. Murtha
		Name:	William C. Murtha
		Title:	Authorized Signatory

10

SCHEDULE I

Additional Guarantors	Effective Date of Guarantee
Kerzner International Marine Projects Limited	October 15, 2004
Kerzner Investments BLB, Inc.	February 11, 2005
Kerzner Investments Pennsylvania, Inc.	October 2, 2002
Kerzner UK Leisure Property Holdings Limited	October 13, 2004
Kerzner UK Leisure Operations Holdings Limited	October 13, 2004
Kerzner Greenwich Hotel Limited	October 12, 2004
Kerzner Greenwich Casino Limited	October 12, 2004
Kerzner Northampton Limited	March 10, 2003
Kerzner Glasgow Limited	October 12, 2004
Kerzner UK Gaming Limited	March 10, 2003
Kerzner Manchester Limited	October 12, 2004
Kerzner Investments Morocco Limited	October 13, 2004
Kerzner International Morocco Holdings Limited	October 13, 2004
Kerzner International Management (Morocco) Limited	October 13, 2004
Kerzner International Development (Morocco) Limited	March 7, 2005
One&Only Resorts (Deutschland) Gmbh	November 24, 1999
One&Only Resorts (France) EURL	May 2003
One&Only Resorts (Southern Africa) (Pty) Limited	March 13, 2003
World Leisure Holidays (Pty.) Limited	March 13, 2003

11

EX-4.3(I)

EXHIBIT 4.3(i)

EXECUTION COPY

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of February 15, 2005 (this “Amendment”), to the Existing Credit Agreement (as defined below) is made by Kerzner International Limited, a corporation organized under the laws of The Commonwealth of the Bahamas (“KIL”), Kerzner International Bahamas Limited, a corporation organized under the laws of The Commonwealth of the Bahamas (“KIBL”), Kerzner International North America, Inc., a Delaware corporation (“KINA”, KIHL, KIBL and KINA each individually, a “Borrower”, and collectively the “Borrowers”), and certain of the Lenders (such capitalized term and other capitalized terms used in this preamble and the recitals below to have the meanings set forth in, or are defined by reference in, Article I below).

W I T N E S S E T H:

WHEREAS, the Borrowers, the Lenders, JPMorgan Chase Bank, acting through one or more of its agencies, branches or affiliates as the Administrative Agent, Deutsche Bank Securities Inc. and Wells Fargo Bank, N.A., as Co-Syndication Agents and Bank of America, N.A. and Bear Stearns Corporate Lending Inc., as Co-Documentation Agents are party to the Fifth Amended and Restated Credit Agreement, dated as of July 7, 2004 (as amended or otherwise modified prior to the date hereof, the “Existing Credit Agreement”, and as amended by this Amendment and as the same may be further amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”); and

WHEREAS, the Borrowers have requested that the Lenders amend certain provisions of the Existing Credit Agreement and the Lenders are willing, on the terms and subject to the conditions hereinafter set forth, to modify the Existing Credit Agreement as set forth below;

NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1.  Certain Definitions.  The following terms when used in this Amendment shall have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):

“Amendment” is defined in the preamble.

“Amendment Effective Date” is defined in Article III.

“Borrower” is defined in the preamble.

“Credit Agreement” is defined in the first recital.

“Existing Credit Agreement” is defined in the first recital.

SECTION 1.2.  Other Definitions.  Terms for which meanings are provided in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings.

ARTICLE II

AMENDMENTS AND MODIFICATIONS TO CREDIT AGREEMENT

Effective on (and subject to the occurrence of) the Amendment Effective Date, the provisions of the Existing Credit Agreement and each other Loan Document (to the extent necessary to give effect thereto) referred to below are hereby modified in accordance with this Article II.  Except as expressly so modified, the Existing Credit Agreement shall continue in full force and effect in accordance with its terms.

SECTION 2.1. Amendments to Article I.  Section 1.1 of the Existing Credit Agreement is hereby amended by:

(a)inserting the following definitions in the appropriate alphabetical order:

“First Amendment” means the First Amendment to Credit Agreement, dated as of February 15, 2005 among the Borrowers and the Lenders party thereto.

“First Amendment Effective Date” means February 15, 2005.

(b)amending and restating the definition of “Atlantis Phase III” in its entirety, as follows:

“Atlantis Phase III” means the expansion of Atlantis, Paradise Island comprised of an approximately 600-room, all-suite hotel to be built on Paradise Island, The Bahamas.

SECTION 2.2.  Release of Collateral.  The Lenders hereby agree to release the Liens granted by KIL or any of its Subsidiaries to the Administrative Agent for the benefit of the Secured Parties (and hereby authorize the Administrative Agent to execute amendments to any Loan Documents necessary to give effect to such releases) in the following:

(a)a deposit of $74,000,000 in cash, Cash Equivalent Investments and/or marketable securities made by KIL or such Subsidiary to secure KIL or such Subsidiary’s obligations to contribute equity capital under a certain joint venture agreement with respect to the Atlantis, The Palm resort development in Dubai, U.A.E.; and

(b)(i) the property described in the “Ocean Club Survey Plan” attached hereto as Schedule I and (ii) an area of up to 8 acres described in a survey delivered to the

Administrative Agent (and reasonably satisfactory to the Administrative Agent) no later than 45 days from the date hereof.

ARTICLE III

CONDITIONS TO EFFECTIVENESS

This Amendment and the amendments contained herein shall become effective on the date (the “Amendment Effective Date”) when each of the conditions set forth in this Article III shall have been fulfilled to the satisfaction of the Administrative Agent.

SECTION 3.1.  Counterparts.  The Administrative Agent shall have received counterparts hereof executed on behalf of the Borrowers and the Required Lenders.

SECTION 3.2.  Costs and Expenses, etc.  The Administrative Agent shall have received for the account of each Lender, all fees, costs and expenses due and payable pursuant to Section 10.3 of the Credit Agreement, if then invoiced.

SECTION 3.3.  Satisfactory Legal Form.  The Administrative Agent and its counsel shall have received all information, and such counterpart originals or such certified or other copies of such materials, as the Administrative Agent or its counsel may reasonably request, and all legal matters incident to the effectiveness of this Amendment shall be satisfactory to the Administrative Agent and its counsel.  All documents executed or submitted pursuant hereto or in connection herewith shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel.

ARTICLE IV

MISCELLANEOUS

SECTION 4.1.  Cross-References.  References in this Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this Amendment.

SECTION 4.2.  Loan Document Pursuant to Existing Credit Agreement.  This Amendment is a Loan Document executed pursuant to the Existing Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement, as amended hereby, including Article X thereof.

SECTION 4.3.  Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 4.4.  Counterparts.  This Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be an original and all of which shall constitute together but one and the same agreement.  Delivery of an executed

counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 4.5.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

SECTION 4.6.  Full Force and Effect; Limited Amendment.  Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Existing Credit Agreement and the Loan Documents shall remain unchanged and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms.  The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or modification of any other term or provision of the Existing Credit Agreement or any other Loan Document or of any transaction or further or future action on the part of any Obligor which would require the consent of the Lenders under the Existing Credit Agreement or any of the Loan Documents.

SECTION 4.7.  Representations and Warranties.  In order to induce the Lenders to execute and deliver this Amendment, the Borrowers hereby represents and warrants to the Lenders, on the Amendment Effective Date, after giving effect to this Amendment, all statements set forth in Section 5.2.1 of the Credit Agreement are true and correct as of such date, except to the extent that any such statement expressly relates to an earlier date (in which case such statement was true and correct on and as of such earlier date).

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written.

KERZNER INTERNATIONAL BAHAMAS LIMITED
By:	/s/Giselle Pyfrom
	Name:	Giselle Pyfrom
	Title:	Director
KERZNER INTERNATIONAL LIMITED
By:	/s/Giselle Pyfrom
	Name:		Giselle Pyfrom
	Title:		Authorized Signatory
KERZNER INTERNATIONAL NORTH AMERICA, INC.
By:	/s/Giselle Pyfrom
	Name:	Giselle Pyfrom
	Title:	Authorized Signatory

JPMORGAN CHASE BANK, N.A.
(formerly known as JPMORGAN CHASE BANK)
By:	/s/Donald Shokrian
	Name:		Donald Shokrian
	Title:		Managing Director
SCOTIABANK (BAHAMAS) LTD.
By:	/s/Edward B. Curry
	Name:		Edward B. Curry
	Title:		Senior Corporate Manager
			Commercial Banking Centre
BANK OF SCOTLAND
By:	/s/Amena Nabi
	Name:		Amena Nabi
	Title:		Assistant Vice President
BANK OF AMERICA, N.A.
By:	/s/Brian D. Corum
	Name:		Brian D. Corum
	Title:		Senior Vice President
BEAR STEARNS CORPORATE LENDING INC.
By:	/s/Victor Bulzacchelli
	Name:		Victor Bulzacchelli
	Title:		Vice President
DEUTSCHE BANK TRUST COMPANY AMERICAS
By:	/s/Steven P. Lapham
	Name:		Steven P. Lapham
	Title:		Managing Director
By:	/s/Brenda Casey
	Name:	Brenda Casey
	Title:	Vice President

EXPORT DEVELOPMENT CANADA
By:	/s/Ian Cameron
	Name:			Ian Cameron
	Title:			Asset Management
By:			/s/Sheila Salloum
			Name:		Sheila Salloum
			Title:		Asset Management
THE ROYAL BANK OF SCOTLAND PLC
By:		/s/David Apps
		Name:			David Apps
		Title:			Senior Vice President
CIBC, INC.
By:		/s/Dean J. Decker
		Name:			Dean J. Decker
		Title:			Managing Director
					CIBC World Markets Corp., AS AGENT

EX-4.5(B)

EXHIBIT 4.5(b)

EXECUTION COPY

2ND AMENDMENT TO
SECOND AMENDED & RESTATED
DEVELOPMENT SERVICES AGREEMENT

THIS 2ND AMENDMENT TO SECOND AMENDED & RESTATED DEVELOPMENT SERVICES AGREEMENT (the “Agreement”) is made as of the 21st day of December, 2004, by and among the Stockbridge-Munsee Band of Mohican Indians of Wisconsin, a federally recognized Indian tribe (hereafter referred to as the “Tribe”), the Stockbridge-Munsee Tribal Gaming Authority, an instrumentality of the Tribe, (hereinafter referred to as the “Authority”), Trading Cove New York, LLC, a Delaware limited liability company (hereinafter referred to as the “Developer”), Kerzner International North America, Inc., (formerly Sun International North America, Inc.) a Delaware corporation (hereinafter referred to as “KINA”) and Waterford Gaming Group, LLC, a Delaware limited liability company (hereinafter referred to as “Waterford”).  KINA and Waterford are hereinafter collectively referred to as the “Developer Guarantors.”

WHEREAS, the Tribe, the Authority, the Developer and the Developer Guarantors entered into a Second Amended & Restated Development Services Agreement dated February 6, 2002, which agreement was amended pursuant to an Amendment to Second Amended & Restated Development Services Agreement dated October 19, 2004 (collectively, the “Second Amended Agreement”); and

WHEREAS, on December 7, 2004 the Tribe and the State of New York (“New York”) have entered into a settlement agreement, a copy of which is attached hereto and made a part hereof as Exhibit “A” (the “Settlement Agreement”), pursuant to which the Tribe has agreed to settle the Land Claim in accordance with the terms and conditions set forth in the Settlement Agreement; and

WHEREAS, Section II (A)(3)(k) of the Settlement Agreement provides, inter alia, that the Federal Settlement Legislation to be enacted to implement its terms shall provide that the Tribe will be substituted as a defendant in place of the United States in any action by another Indian tribe claiming that the Federal Settlement Legislation resulted in a taking of its property rights under the Fifth Amendment, United States Constitution, to land or natural resources or claims thereto, that are the subject of the claims asserted in the action now pending in the Untied States District Court for the Northern District of New York entitled Stockbridge-Munsee Community vs. The State of New York, (Civil Action 86-CV-1140); and that, under the terms of the Settlement Agreement, the Federal Settlement Legislation must provide that the aggregate of damages awarded in such actions, if any, not exceed the sum of Thirty Five Million ($35,000,000) dollars, and that any recovery by the Oneida Indian Nation of New York (the “Nation”) be offset by the value of benefits received by the Nation pursuant to the Federal Settlement Legislation; and further that any such damages award may be paid out over a period not to exceed ten (10) years.

WHEREAS, Section II (A)(3)(j) of the Settlement Agreement provides, inter alia, that the Federal Settlement Legislation to be enacted to implement its terms shall provide that the Tribe and the Oneida Indian Tribe of Wisconsin will be substituted as defendants in place of the United States in any action by another Indian tribe claiming that the Federal Settlement Legislation resulted in a taking of its property rights under the Fifth Amendment, United States Constitution, to the land or natural resources, or claims thereto, that are the subject of the claims asserted in the action now pending in the United States District Court for the Northern District of New York entitled Oneida Nation of New York, et al., v. State of New York, et al. (Civil Action No. 74-CV-187); and that, under the terms of the Settlement Agreement, the Federal Settlement Legislation must provide that any damages awarded in any such action by the Oneida Indian Nation of New York (the “Nation”) not exceed the sum of approximately Eighty-Four Million ($84,000,000) dollars (based on a projected total value of the Oneida Land Claim of $1.2 billion, which value will be finally determined by Congress, where the Nation shares in the total award based on the ratio of its population to the total population of plaintiff Oneida Tribes in the United States, or approximately seven percent (7%)); and that any recovery by the Oneida Indian Nation of New York (the “Nation”) be offset by the value of benefits received by the Nation pursuant to the Federal Settlement Legislation; and that the Tribe and the Oneida Indian Tribe of Wisconsin shall share any liability to all claimant Indian tribes that are found eligible to recover according to the following formula:  seventy percent (70%) by the Tribe and thirty percent (30%) by the Oneida Indian Tribe of Wisconsin; and further that any such damages award(s) may be paid out over a period not to exceed ten (10) years.

WHEREAS, pursuant to Article IX, Section C of the Settlement Agreement, the Tribe’s obligation to pay any NY Litigation Liability shall be solely satisfied from revenues generated in New York; and

WHEREAS, the parties desire to enter into this Agreement in order for Developer to assist the Tribe with payment of the NY Litigation Liability, if any, as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises herein contained, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.Section 6.4 is amended by adding the following new subsection (c):

“(c) In the event the Tribe incurs a liability pursuant to and in accordance with the terms and conditions of Article II, Section (A)(3)(j) and (k) of the Settlement Agreement entered into between the Tribe and the State of New York dated December 7, 2004 (the “Settlement Agreement”), and the Tribe makes a payment to satisfy the liability in accordance with the provisions of those sections and Article IX, Section (C) of said Settlement Agreement, Developer agrees to reimburse the Tribe in an amount equal to twenty percent (20%) of the payments actually made by the Tribe.  Amounts payable by Developer to the Tribe under this Section 6.4(c) shall only be made through a deduction by the Tribe from Developer Fees due and owing Developer, shall be paid over a period

not to exceed 10 years consistent with the payment schedule established by the Tribe to satisfy the Settlement Agreement liabilities, if any, and shall not be reimbursable to Developer from the proceeds of financing or otherwise.”

2.All other terms and conditions of the Second Amended Agreement shall remain in full force and effect and are hereby ratified by the parties.

IN WITNESS WHEREOF, the Tribe, the Authority, the Developer and the Developer Guarantors have executed this Agreement on and as of the date first written above.

THE TRIBE
STOCKBRIDGE-MUNSEE BAND
OF MOHICAN INDIANS
By:	/s/Robert Chicks
	Name:  Robert Chicks
	Its:  Tribal Council President
THE AUTHORITY
STOCKBRIDGE-MUNSEE TRIBAL
GAMING AUTHORITY
By:	/s/Robert Chicks
	Name:  Robert Chicks
	Its:  Chairperson
(Signatures continued on next page)

DEVELOPER:
TRADING COVE NEW YORK, LLC
By:			Waterford Development New York, LLC Member
By:		/s/Len Wolman
		Name:  Len Wolman
		Its:  Chief Executive Officer
By:	Kerzner New York,
	Inc. (formerly Sun
	Cove New York, Inc.)
	Member
By:	/s/William C. Murtha
	Name:  William C. Murtha
	Its:  Senior Vice President & Secretary
DEVELOPER GUARANTORS:
KERZNER INTERNATIONAL NORTH
AMERICA, INC.
By:	/s/William C. Murtha
	Name: William C. Murtha
	Its: Senior Vice President
	& Corporate Counsel
WATERFORD GAMING GROUP, LLC
By:	/s/Len Wolman
	Name:  Len Wolman
	Its:  Chief Executive Officer

EX-4.5(C)

EXHIBIT 4.5(c)

AMENDMENT TO

SECOND AMENDED & RESTATED

DEVELOPMENT SERVICES AGREEMENT

THIS AMENDMENT TO SECOND AMENDED & RESTATED DEVELOPMENT SERVICES AGREEMENT is made as of the 19^th day of October, 2004, by and among the Stockbridge-Munsee Band of Mohican Indians of Wisconsin, a federally recognized Indian tribe (hereafter referred to as the “Tribe”), the Stockbridge-Munsee Tribal Gaming Authority, an instrumentality of the Tribe, (hereinafter referred to as the “Authority”), Trading Cove New York, LLC, a Delaware limited liability company (hereinafter referred to as the “Developer”), Kerzner International North America, Inc., (formerly Sun International North America, Inc.) a Delaware corporation (hereinafter referred to as “KINA”) and Waterford Gaming Group, LLC, a Delaware limited liability company (hereinafter referred to as “Waterford”).  KINA and Waterford are hereinafter collectively referred to as the “Developer Guarantors.”

WHEREAS, the Tribe, the Authority, the Developer and the Developer Guarantors entered into a Second Amended & Restated Development Services Agreement dated February 6, 2002 (the “Second Amended Agreement”); and

WHEREAS, the parties desire to amend the Second Amended Agreement as herein set forth;

NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises herein contained, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.        Section 6.4(a) is amended by increasing the Developer Financial Assistance from “up to Ten Million ($10,000,000.00) Dollars” to “up to Fifteen Million ($15,000,000.00) Dollars,” and the first sentence of Section 6.4(a) is amended accordingly.

2.        Section 6.4(b) is amended by deleting the last sentence thereof and inserting the following sentence:  “Developer agrees that a total of Eight Million ($8,000,000.00) Dollars of Developer’s Financial Assistance (inclusive of the purchase price of the Property) will not be reimbursable to the Developer from the proceeds of financing or otherwise.”

3.        Section 11.2 is amended by deleting the date “December 31, 2002” in the second line thereof and inserting the date “December 31, 2006.”

4.        Section 11.3 is amended by deleting the date “December 31, 2004” and the third line thereof and inserting the date “December 31, 2008.”

5.        All other terms and conditions of the Second Amended Agreement shall remain in full force and effect and are hereby ratified by the parties.

IN WITNESS WHEREOF, the Tribe, the Authority, the Developer and the Developer Guarantors have executed this Agreement on and as of the date first written above.

[SIGNATURE PAGE TO FOLLOW]

THE TRIBE
STOCKBRIDGE-MUNSEE BAND
OF MOHICAN INDIANS
By:	/s/Robet Chicks
	Name: Robert Chicks
	Its: Tribal Council President
THE AUTHORITY
STOCKBRIDGE-MUNSEE TRIBAL
GAMING AUTHORITY
By:	/s/Robert Chicks
	Name: Robert Chicks
	Its: Chairperson
DEVELOPER:
TRADING COVE NEW YORK, LLC
By:		Waterford Development New York, LLC
		Member
By:	/s/Len Wolman
	Name: Len Wolman
	Its: Chief Executive Officer
By:		Kerzner New York, Inc. (formerly Sun
		Cove New York, Inc.)
		Member
By:	/s/William C. Murtha
	Name: William C. Murtha
	Its: Senior Vice President & Secretary

DEVELOPER GUARANTORS:
KERZNER INTERNATIONAL NORTH
AMERICA, INC.
By:	/s/William C. Murtha
	Name: William C. Murtha
	Its: Senior Vice President
	& Corporate Counsel
WATERFORD GAMING GROUP, LLC
By:	/s/Len Wolman
	Name: Len Wolman
	Its: Chief Executive Officer

EX-4.8(B)

Exhibit 4.8(b)

EXECUTION COPY:

* Indicates where text has been omitted pursuant to a request for confidential treatment.  The omitted text has been filed separately with the Securities and Exchange Commission.

RESORT MANAGEMENT AGREEMENT

ATLANTIS, PALM ISLAND

between

KERZNER NAKHEEL LIMITED

and

KERZNER INTERNATIONAL MANAGEMENT FZ-LLC

Dated as of 5th May, 2004

TABLE OF CONTENTS

Article
1.	Interpretation; Definitions		6
2.	Appointment; Delegation of Authority, Standard of Care		10
	2.1	Appointment	10
	2.2	Delegation of Authority	10
	2.3	Standard of Care	11
3.	Term; Renewals		11
	3.1	Term	11
	3.2	Renewal	11
4.	Preopening Activities		11
	4.1	Preopening Services	11
	4.2	Costs and Expenses	12
	4.3	Funding of Preopening Expenses	13
5.	Management of the Resort		13
	5.1	Manager’s Obligations	13
	5.2	Owner’s Obligations	16
	5.3	Annual Operating Budget	18
	5.4	Capital Budgets	20
	5.5	Special Provisions Regarding Finance and Accounting	22
6.	Entrenchment Provisions		24
7.	Management Fees and Reimbursables		25
	7.1	Management Fees	25
	7.2	Payment of Fees	25
	7.3	Reimbursement of Expenses	26
8.	Insurance		27
	8.1	Procurement of Insurance	27
	8.2	Insurance Policy Endorsements	28
	8.3	Insurance Certificates	28
9.	Resort Employees		28

2

	9.1	Resort Employees	28
	9.2	Hiring; Retention	28
	9.3	Resort Employee Costs	29
	9.4	Work Visas; Permits	29
	9.5	Employee Perks	29
	9.6	Termination of Employees	29
10.	Right to Inspect		30
11.	Damage and Destruction		30
	11.1	Damage	30
	11.2	Manager’s Right to Reconstruct	30
	11.3	Retention of Construction Manager	30
	11.4	Destruction	30
12.	Alterations and Improvements		31
13.	Intellectual Property		31
	13.1	Trade Name	31
	13.2	Management and Marketing Information	32
14.	Assignment		32
	14.1	Manager’s Assignment	32
	14.2	Owner’s Consent Rights	32
	14.3	Owner’s Assignment	33
	14.4	Successors and Assigns	33
15.	Claims and Liability		33
	15.1	Claims and Liability	33
	15.2	No Representation or Warranty	33
	15.3	Insurance Coverage	33
	15.4	Survival	34
16.	Applicable Law; Arbitration; Performance During Disputes		34
	16.1	Governing Law; Jurisdiction	34
	16.2	Arbitration	34
	16.3	Performance During Disputes	35

3

17.	Termination		35
	17.1	Owner’s Termination Rights	35
	17.2	Manager’s Termination Rights	35
18.	Force Majeure		36
19.	Notices		37
20.	Miscellaneous		38
	20.1	Entire Agreement; Authorization	38
	20.2	Interest	38
	20.3	No Waivers; Amendments	38
	20.4	Funding of Owner Accounts	39
	20.5	Manager’s Right to Request Instructions	39
	20.6	Independent Contractors	39
	20.7	Conflicts	39
	20.8	Severability	39
	20.9	Confidentiality	39
	20.10	Counterparts	40
	20.11	No Third Party Beneficiaries	40
	20.12	Expenses	40
	20.13	Agent for Service	40

4

RESORT MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (this “Agreement”) is made as of the day of May, 2004 (the “Effective Date”).

BETWEEN:

KERZNER NAKHEEL LIMITED,a company incorporated in the British Virgin Islands and having its registered office at Trident Trust Company, Trident Chambers, Wickhams Cay, P.O. Box 146, Road Town, Tortola, British Virgin Islands (hereinafter referred to as the “Owner”), and

KERZNER INTERNATIONAL MANAGEMENT FZ LLC, a Free Zone Limited Liability Company incorporated in Dubai Technology and Media Free Zone and having its registered office at Boutique No. 14, Dubai Technology and Media Free Zone, Dubai, United Arab Emirates (hereinafter referred to as the “Manager”).

RECITALS:

WHEREAS:

A.Manager is knowledgeable and experienced in managing and promoting hotels and resorts, and has (and/or its Affiliates have) performed such services throughout the world;

B.The Owner is developing an international luxury resort hotel expected to comprise of approximately 2,000 rooms and related facilities including an extensive water-theme park located on The Palm Jumeirah, Dubai, United Arab Emirates and to be named Atlantis, The Palm (the “Resort,” as further defined in Section 1.2); and

C.The Resort is located on certain parcels of land more particularly described in Exhibit A, attached hereto and made a part hereof (the “Resort Site,” as further defined in Section 1.2).

D.The Owner and Manager wish to enter into this Agreement pursuant to which the Owner appoints the Manager to manage and conduct the business of the Resort, and Manager accepts such appointment on the terms and conditions herein contained.

AGREEMENTS

In consideration of the mutual promises, covenants and agreements contained herein, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

5

ARTICLE 1

INTERPRETATION AND DEFINITIONS

Interpretation.

1.1In this Agreement:

(a)the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by such words;

(b)Article headings and any Table of Contents are for convenience and shall not be used in its interpretation;

(c)unless the context clearly indicates a contrary intention, any expression which denotes –

(i)any gender includes the other genders;

(ii)a natural “Person” includes an artificial person and vice versa;

(iii)the singular includes the plural and vice versa;

Definitions

1.2Capitalized terms in this Agreement shall have the meanings set forth below:

“Adjusted Profits” shall mean the earnings of the Business calculated in accordance with GAAP plus any interest or amortization payments.

“Affiliate” shall mean, as to a party, any corporation or other entity or person controlled by, under common control with, or which controls, directly or indirectly, such party.  For the purposes hereof, “control” means the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of the person in question.

“Annual Operating Budget” shall mean the annual operating budget of the Business for each Fiscal Year finally adopted by the parties in accordance with Section 5.3 of this Agreement.

“Base Management Fee” has the meaning set forth in Section 7.1.

“Business” shall mean the business of the Resort, including the operation of any and all hotel rooms, restaurants, bars, convention and meeting facilities, entertainment venues, golf courses and other sporting facilities, parking facilities, retail outlets and any other ancillary amenities and facilities conducted at the Resort or located on the Resort Site during the Term.

6

“Capital Budget” shall mean the annual capital budget of the Business for each Fiscal Year finally adopted by the parties in accordance with Section 5.4 of this Agreement.

“CPI Index” shall mean the consumer prices index as published by the Dubai Chamber of Commerce and Industry or, if the foregoing index shall no longer be published, any index of the value of the United States of American dollar or its purchasing power in the United States of America as shall be published by the Department of Labor of the United States of America, or any other independent third party, as shall be selected by the parties.

“Emergency Situation” shall have the meaning set forth in Section 5.4(b).

“Environmental Laws” shall have the meaning set forth in Section 5.2(g).

“FF&E” shall have the meaning set forth in Section 4.1(d).

“Fiscal Year” shall mean each of the Business’s financial years, which shall commence on January 1^st and end on December 31^st.

“Funds Request” shall have the meaning set forth in Section 5.5.

“Gross Revenues” shall mean any and all revenues directly or indirectly received by, accrued to or derived from the operation of the Business including all income and proceeds of sales of every kind (whether in cash or on credit) including hotel revenue, room service, catering, food and beverage sales, parking revenues, retail sales, ticket revenues or other fees or receipts from the convention/event center, rental or other receipts, including retail rental receipts, spa, health club, beauty salon and fitness center revenues, golf membership dues, greens fees, cart fees and related golf club revenues received from tenants, transient guests, lessees, licensees and concessionaires and other persons occupying space at or otherwise utilizing the Resort facilities and/or rendering services to the Resort guests (but not including the gross receipts of such lessees, licensees, concessionaires or other persons), all income from catering operations conducted outside the Resort, all subsidy payments, government allowances and awards, any other form of incentive payments or awards from any source whatsoever which are attributable to the operation of the Resort and the proceeds of business interruption and use and occupancy insurance actually received by the Manager or the Owner with respect to the operation of the Resort (after deduction from the proceeds of all necessary expenses incurred in the adjustment or collection thereof), but excluding value added tax, similar turnover taxes and levies and any other direct room or room sales related taxes, fees or levies, any bad debts, any proceeds from the sale of furnishings, equipment or other capital assets of the Resort and the proceeds from any contents insurance, as reflected in the audited accounts of the

7

Owner relating to the Business for the year in question and as calculated in accordance with GAAP.

“GAAP” shall mean those conventions, rules, procedures and practices, consistently applied, comprising the Generally Accepted Accounting Principles of the United States.  If Owner and Manager cannot in any instance agree on what constitutes GAAP, then the accounting firm then or most recently engaged to prepare the audited financial statements of the Owner in respect of the Resort shall make the determination on the request of either party.  Any financial or accounting terms not otherwise defined herein shall be construed and applied according to GAAP.

“Hazardous Materials” shall have the meaning set forth in Section 5.2(g).

“Incentive Management Fee” has the meaning set forth in Section 7.1.

“Independent Expert” shall have the meaning set forth in Section 5.3(c).

“Initial Term” shall have the meaning set forth in Section 3.

“LIBOR” shall mean:

(a)the interest rate for US Dollar deposits for a 1 month period which appears on Reuters screen page LIBOR 01 (or such other screen display or service as may replace it for the purpose of displaying British Bankers’ Association LIBOR Rates for US Dollar deposits in the London interbank market) at or about 11.00 a.m. (London time) on the day that a payment is due to be made under this Agreement; and

(b)if no such interest rate appears on Reuters screen page LIBOR 01 (or such replacement) then LIBOR shall be as reported by any publicly available source of similar market date selected by Manager that, in Manager’s reasonable judgment, accurately reflects such rate).

“Management Accounts” shall mean the quarterly, un-audited accounts prepared in respect of the Business to include a balance sheet, cash-flow statement and income statement.

“Management Fees” shall mean, collectively, the Base Management Fees and the Incentive Management Fees set forth in Section 7.1.

“Quarterly Management Reports” shall mean reports prepared by Manager on a quarterly basis providing general commentary on the state of the Business, and the quarterly financial results, which might include references to factors that are having, or could in the immediate future have, a material effect on the Business,

8

forecasts and projections for the Business going forward and guest survey information.

“the Territory” shall mean, collectively, Morocco, Egypt, Afghanistan, Bahrain, Cyprus, Iran, Iraq, Israel, Palestine, Jordan, Kuwait, Kyrgyzstan, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia, Syria, Tajikistan, Turkey, Turkmenistan, UAE, Uzbekistan and Yemen.

“OS&E” shall have the meaning set forth in section 4.1(d).

“Opening Date” shall mean the date upon which the Resort first opens for guests

“Operating Account” shall have the meaning set forth in Section 5.5.

“Operating Expenses” shall mean all those ordinary and necessary expenses of the Business, incurred in the operation of the Resort in accordance with this Agreement, including Resort Employee personnel costs, the cost of maintenance and utilities, the costs of advertising, marketing, and business promotion, and administrative expenses, all as reflected in the audited accounts relating to the Business for the year in question and as determined in accordance with GAAP.  Notwithstanding the foregoing description, the following shall not constitute Operating Expenses: (i) property taxes; (ii) interest and principal repayment of loans; (iii) capital expenses; (iv) rentals of real and personal property; (v) depreciation and amortization of capitalized assets; (vi) costs and expenses of Owner or Owner’s personnel, including entertainment expenses, salaries, wages and employee benefits of Owner’s employees, directors’ fees and the expenses of directors or Owner’s employees to attend board meetings; and (vii) professional fees and costs, including the fees and disbursements of attorneys, accountants and appraisers, incurred directly or indirectly in connection with any category of expense that is not itself an Operating Expense.

“Operating Income” shall mean, for the year in question, the Gross Revenues for that year minus the Operating Expenses for that year.

“Owner’s Representatives” shall have the meaning set forth in Section 5.2(f).

“Pre-opening Expenses” shall have the meaning set forth in Section 4.2.

“Pre-opening Expenses Estimate” shall have the meaning set forth in Section 4.2.

“Proceedings” shall have the meaning set forth in Section 16.1.

“Required Standard” shall mean the standards consistent with the standards of quality of international luxury resorts from time to time and to a standard not less than those generally prevailing from time to time in other resorts managed by the

9

Manager or its Affiliates, or as otherwise agreed to by the parties, taking into consideration the quality of the facilities and amenities of the Resort.

“Renewal Term” shall have the meaning set forth in Section 3.

“Reserve Fund” shall have the meaning set forth in Section 5.2(c).

“Reserve Fund Account” shall have the meaning set forth in Section 5.5.

“Resort” has the meaning given in Recital B, together with and including any expansions or modifications of the Resort and/or the Resort Site made during the Term.

“Resort Employee” shall mean any individual employed at the Resort or elsewhere in connection with the Business including, without limitation, any key executives who may be employed by an entity other than Owner pursuant to Section 9.1.

“Resort Site” has the meaning given in Recital C together with any and all real property acquired, leased or otherwise occupied by Owner or Owner’s Affiliate on which Business is conducted during the Term.

“Term” shall have the meaning set forth in Section 3.

“Trade Marks and Trade Name Licence Agreement” shall mean the agreement of even date entered into between Kerzner International Limited and Kerzner Nakheel Limited.

“US$” shall mean the currency of the United States of America.

ARTICLE 2

APPOINTMENT; DELEGATION OF AUTHORITY; STANDARD OF CARE

2.1Appointment.  During the Term, the Owner appoints and engages the Manager to manage the Resort and to direct, control and generally conduct the Business of the Resort on the terms contained in this Agreement, and the Manager accepts such appointment.

2.2Delegation of Authority.  Except as otherwise specified in this Agreement, the management and operation of the Resort shall be under the exclusive supervision and control of Manager, and Manager shall be responsible for the proper and efficient management and operation of the Resort, in accordance with the Annual Operating Budget and the approved Capital Budget. Except as otherwise specified in this Agreement, Manager shall have discretion and control — free

10

from interference, interruption, or disturbance — in all matters relating to the management and operation of the Resort, including, without limitation: charges for rooms and commercial space; credit policies; food and beverage services; employment policies; granting of concessions or leasing of shops and agencies within the Resort; receipt, holding, and disbursement of funds; maintenance of bank accounts; procurement of inventories, supplies, furniture, fixtures, equipment and services; promotion and publicity; retention of professional consultants to assist Manager, including lawyers, accountants, auditors and other professionals, delegate powers and rights and such other activities as are specifically provided for elsewhere in this Agreement or are otherwise reasonably necessary for the proper and efficient management and operation of the Resort.

2.3Standard of Care.  In fulfilling its obligations hereunder, Manager, or as the case may be, Manager’s Affiliates shall (i) act as a reasonable and prudent operator of the Resort, having regard to the status of the Resort, and (ii) at all times act in a manner which preserves the character, standards, and reputation of the Resort consistent with the Required Standard.

ARTICLE 3

TERM; RENEWALS

3.1Term.  The term of this Agreement shall commence on the Effective Date and shall continue for a period of twenty-five (25) years from the later of (i) the Effective Date, or (ii) the Opening Date (the “Initial Term”),  subject to termination in accordance with the provisions of Article 17 of this Agreement, and renewal in accordance with Subsection 3.2, below.

3.2Renewal.  Provided Manager is not in default of this Agreement, Manager shall have the right to renew this Agreement for two (2) additional ten (10) year periods (each, a “Renewal Term”), exercisable by Manager upon not less than one year’s written notice to Owner prior to the expiration of the then current Term.  The Initial Term and each Renewal Term are collectively referred to herein as the “Term”.

ARTICLE 4

PRE-OPENING ACTIVITIES

4.1Pre-opening Services.  The parties agree that certain activities must be undertaken so the Resort can function properly on the opening date of the Resort, or with respect to Resort expansions, on the opening of such expansions.  Accordingly, prior to the opening of the Resort or a Resort expansion, as applicable, Manager shall, at Owner’s expense, provide or shall arrange and supervise through consultants, Affiliates or other persons, the following pre-opening services:

11

(a)hiring and training of Resort Employees as more fully described in Article 9;

(b)pre-marketing and marketing programs, including pre-opening promotion and opening celebrations;

(c)administering and coordinating with Owner applications for or transfers of licenses, permits, approvals, and other instruments necessary for the management and operation of the Resort as contemplated by this Agreement;

(d)causing the purchase of operating supplies and equipment (“OS&E”); and furniture, fixtures and equipment (“FF&E”) to the extent not purchased and installed by Owner during the development of the Resort;

(e)preparing necessary budgets;

(f)negotiating concession contracts and/or leases for retail outlets, office space, and lobby space in the Resort, as applicable;

(g)coordinating the testing of Resort operations;

(h)providing a task force of experts and personnel to supervise and assist with certain pre-opening and opening operations; and

(i)rendering such other services incidental to the preparation and organization of the Resort’s management and operation as may be required.

4.2Costs and Expenses.  The costs and expenses relating to the activities described in Section 4.1 for the initial development of the Resort and each subsequent expansion, (each, “Pre-opening Expenses”) shall include, without limitation: salaries, wages, and benefits (including those of personnel of Manager and its Affiliates); interim office space costs; legal, accounting, and other professional fees; telecommunications expenses; staff hiring and training costs; travel and moving expenses; opening celebration costs; utilities, including, without limitation, heat, air conditioning, light, power, water, and any sewage treatment and disposal costs; costs not chargeable to the cost of constructing the Resort; advertising and promotion expenses; the reasonable travel, living, and other out-of-pocket expenses of personnel from the corporate and regional offices of Manager and its Affiliates; miscellaneous expenses; and a reasonable charge for administrative time and overhead expenses of Manager and its Affiliates.  Manager shall prepare and submit to Owner an estimate of Pre-opening Expenses for each phase of development, including cash flow requirements (each, a “Pre-opening Expenses Estimate”). Manager shall use reasonable efforts to adhere to

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the Pre-opening Expenses Estimates; provided, however, it is understood and agreed that changes in development plans, business plans, market conditions, currency fluctuations, general economic conditions and other unforeseen circumstances may make adherence to the Pre-opening Expense Estimate impractical or impossible, and Manager shall be entitled to depart from the Pre-opening Expenses Estimates and incur Pre-opening Expenses in excess of the Pre-opening Expenses Estimate as may be required in the performance of Manager’s pre-opening services.  Manager shall notify Owner promptly of any substantial change from the Pre-opening Expenses Estimates and shall provide all information in relation to such change as Owner may reasonably request.  Furthermore, if the opening date of the Resort or the completion of a subsequent expansion is delayed from the originally projected dates, the Pre-opening Expenses Estimate shall be revised to reflect any increases in Pre-opening Expenses caused by such delay.  To the extent such a delay causes an increase in Pre-opening Expenses, Owner shall promptly pay such increased Pre-opening Expenses in accordance with Section 4.3. Increased Pre-opening Expenses shall include all out-of-pocket cancellation penalties if Manager cancels reservations made for guestrooms, meeting rooms, and other Resort facilities as a result of such delay.  Within one hundred twenty (120) days after the opening date of the Resort or the opening of a subsequent expansion, Manager shall provide to Owner an accounting describing and showing in reasonable detail the total amount of incurred Pre-opening Expenses.

4.3Funding of Pre-opening Expenses.  Pre-opening Expenses incurred in accordance with this Article 4 shall be borne solely by Owner as a capital expense and shall not be classified as an Operating Expense.  Owner shall fund Pre-opening Expenses into a pre-opening bank account controlled by Manager, requiring the joint signatures of a designee from each of Owner and Manager, in advance installments in the currency designated by Manager and in accordance with the cash flow requirements determined by Manager for the activities described in this Article 4, or as otherwise reasonably requested by Manager.  Pre-opening Expenses incurred or paid by Manager shall be promptly reimbursed to Manager from such account, and Manager shall provide a statement of account to Owner for such Pre-opening Expenses.  If following the opening date of the Resort or the opening of subsequent expansions there are outstanding Pre-opening Expenses which have not been paid, Manager shall be entitled to deduct such amounts (plus interest thereon if such Pre-opening Expenses were paid by Manager) from the amounts otherwise to be distributed to Owner pursuant to Article 7.

ARTICLE 5

MANAGEMENT OF THE RESORT

5.1Manager’s Obligations.  Manager shall, in accordance with the Annual Operating Budget approved by Owner in accordance with Section 5.2, and subject to the

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terms of this Agreement, establish, define, alter and vary from time to time the policies and procedures to be observed in the conduct of the Business, including all administrative, accounting, budgeting, marketing, personnel, operational and other practices and procedures to be observed and applied in relation to the operation of the Business.  Subject only to the express limitations set forth in Article 6, Manager shall, as exclusive agent for Owner for such purposes, procure the management, administration, control and conduct of the Business.  To that end, Manager shall utilize its resources and skills to supervise, monitor, approve or otherwise oversee, or procure the supervision, monitoring or approval, as the case may be, of the following:

(a)the selection and appointment of all Resort Employees including without limitation a general manager for the Resort, other senior executives, department heads of the Resort as may be considered by Manager to be necessary from time to time, provided that the Manager shall consult with Owner with respect to the selection and appointment of the general manager and financial controller;

(b)the determination of the number of and selection and employment of Resort Employees and the terms of service and the remuneration payable to all Resort Employees, including all prerequisites of employment;

(c)the conduct of negotiations with trade unions as applicable with any part of the Business which may have an association, and the entering into of agreements with such trade unions;

(d)the procurement and sale of FF&E and OS&E, and of such services and other merchandise as may be required for the proper operation and maintenance of the Business, including the conduct of the centralized purchasing of such FF&E and OS&E;

(e)the retention and periodic renewal, as applicable, of permits, licenses and approvals required in connection with the conduct of the Business or assisting Owner with same;

(f)the administration of such functions as are usually carried out by managers, secretaries and accountants of a business enterprise similar to that which is conducted at the Resort;

(g)the improvement, extension and development of the Business;

(h)the completion and submission of returns and the compliance with other formalities required by any value added taxes, real property taxes, business license fees, business income tax municipal or other government fees

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applicable to the Resort (but not any of Owner’s personal tax requirements);

(i)the procurement of all Resort insurance policies pursuant to the terms of Article 8, and processing of insurance claims under such insurance policies;

(j)the planning and execution of all major advertising and promotional campaigns for the Business;

(k)the determination and establishment of all tariffs, prices and rates for all of the facilities offered at the Resort in respect of the Business;

(1)the establishment and maintenance of Resort accounting systems and internal controls;

(m)the establishment and maintenance of bank accounts related to the operation of the Business in accordance with Section 5.5(a) of this Agreement;

(n)the establishment of standard planning, budgeting, accounting and reporting systems for the Business, and maintenance of proper and efficient operation of all such systems, in order that:

(i)proper Business books of account and records are kept as required by law and GAAP;

(ii)an Annual Operating Budget and Capital Budget for each fiscal year is prepared and submitted to Owner in accordance with the provisions of Section 5.2 and 5.4(a) respectively;

(iii)quarterly unaudited financial statements in respect of the Business, together with Quarterly Management Reports are prepared and circulated to Owner not later than six weeks after the end of the quarter to which they related;

(iv)the Resort’s annual audited financial statements are prepared in accordance with GAAP and submitted Owner not later than one hundred twenty (120) days after the end of its financial years; and

(v)all Resort books of account and other Resort records are available for inspection by Owner in accordance with Article 10.

(o)generally, the doing or procurement of whatever else may be necessary to carry out Manager’s mandate as described in this Agreement.

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5.2Owner’s Obligations.  During the Term, Owner shall have the obligations set forth below:

(a)Licenses and Permits.  Owner shall obtain and maintain, with Manager’s assistance and cooperation, all governmental permissions, licenses and permits required to be held in Owner’s name (or at the request of Owner, the name of an individual on its behalf or a combination thereof) that are necessary to enable Manager to operate the Resort in accordance with the terms of this Agreement, and shall cooperate with Manager’s efforts to obtain and maintain such permits and licenses.  Such business shall include, but not be limited to, business licenses, marine permits, event and entertainment operation licenses, fishing licenses and alcoholic beverage licenses permitting the Resort to sell and serve unlimited quantities and qualities of alcohol to Resort guests.

(b)Operating Funds.  The performance by Manager of its responsibilities under this Agreement are conditioned upon Owner providing sufficient funds to Manager on a timely basis to enable Manager to perform its obligations hereunder.  Owner shall provide all funds necessary to enable Manager to manage and operate the Resort in accordance with the terms of this Agreement and the applicable Annual Operating Budget and, without limiting Owner’s obligation in this regard, it is understood that these funds shall be paid for from Gross Revenues, to the extent available.

(c)Capital Funds.  Subject to funds availability and the limitations of the approved Capital Budget, Owner shall expend such amounts for renovation programs, furnishings, equipment and ordinary Resort capital replacement items as are required from time to time to (a) maintain the Resort in good order and repair, (b) comply with the Required Standards, and (c) comply with governmental regulations and orders.  Owner and Manager shall cooperate fully with each other in establishing appropriate procedures and timetables for Owner to undertake capital replacement projects.

(d)Reserve Fund.  It is recognized that expenditures for capital replacements are incapable of precise calculation in advance.  Therefore, each calendar month after the effective date of this Agreement, the following amounts shall be deposited in cash into a reserve fund (the “Reserve Fund”) to pay for capital replacements:

(i)Two percent (2%) of Gross Revenues for any partial year of the Resort’s operation after the Resort openings;

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(ii)Three percent (3%) of Gross Revenues for first full year of the Resort’s operation; and

(iii)Four percent (4%) of Gross Revenues for the second and each successive full year of the Resort’s operation.

Any expenditures for capital replacements during any calendar year which have been included in an approved Capital Budget may be made without Owner’s additional approval.  Any amounts remaining in the Reserve Fund at the close of each calendar year shall be carried forward and retained in the Reserve Fund until fully used in accordance with an approved Capital Budget item.  To the extent the Reserve Fund is insufficient at a particular time to meet the spending requirements set forth in the approved Capital Budget or to the extent the Reserve Fund plus anticipated contributions for the ensuing calendar year is less than the budgeted expenditures set forth in the approved Capital Budget for the ensuing calendar year, then, in either such event, Manager shall give Owner written notice thereof at least thirty (30) days before the anticipated date such funds will be needed.  Owner shall supply the necessary funds by deposit to the Reserve Fund at least fifteen (15) days before the anticipated date such funds will be needed.  All proceeds from the sale of capital items no longer needed for the operation of the Resort shall be deposited to the Reserve Fund.  Sale of such items shall be at the reasonable discretion of Manager, and conducted in a commercially reasonable manner.  Upon termination of this Agreement for whatever reason, or upon sale of the Resort, Manager’s right to expend any unused portion of the Reserve Fund shall terminate and the balance of the fund shall be paid over to Owner, less any undisputed sums then due to Manager.

(e)Payments to Manager.  Owner shall promptly pay to Manager all amounts due Manager under this Agreement in the manner and at the times described in this Agreement.

(f)Owner’s Representative.  Manager shall have the right to deal solely with the Owner’s Representative on all matters relating to this Agreement and/or the Resort.  Manager may rely upon statements and representations of Owner’s Representatives as being from and binding upon Owner.  Owner shall designate the Owner’s Representatives prior to the commencement of Manager’s duties hereunder.  Owner may change its Owner’s Representatives from time to time by providing written notice to Manager in the manner provided for herein.

(g)Environmental Matters.  If any Hazardous Material (hereinafter defined) is discovered at any time on any portion of the Resort in violation of or as would reasonably be expected to result in liability under any Environmental Law, or if any Environmental Law (hereinafter defined) is violated at any time, Owner at its expense shall promptly remove, remediate or abate such Hazardous Material (and all contaminated soil and

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containers), take all other necessary steps to remedy the problem in accordance with all Environmental Laws and comply with all Environmental Laws.  Owner, at its expense, shall also indemnify, defend and hold harmless Manager from and against any and all claims, losses, liabilities, damages (including consequential, punitive and exemplary damages), penalties or other liabilities arising out of such presence or required removal of Hazardous Materials on or at the Resort or any portion thereof, or the violation of any Environmental Laws, unless such claims, losses, liabilities, damages, penalties or other liabilities are caused by the gross negligence of Manager or any of its employees, agents, representatives or affiliates.  For the purposes of this provision (i) “Environmental Law” shall mean any current or future governmental rule, regulation, law, regional or international treaty and/or other enactment now or hereafter in effect and applicable to the Resort or any portion thereof or to activities carried on thereat or with respect thereto (whether of a national, regional, state, international or local government, agency or instrumentality), regulating, relating to, or imposing liability or standards of conduct concerning the use, generation, treatment, storage, disposal or abatement of Hazardous Materials; and (ii) “Hazardous Materials” shall mean any substance or material containing one or more of the following: hazardous material, hazardous waste, hazardous substance, regulated substance, petroleum, pollutant, contaminant or asbestos, as such terms are defined in any applicable Environmental Law, in such concentration(s) or amount(s) as may require clean-up or removal, or which could reasonably be expected to present a risk of harm to guests, invitees or Resort employees.

(h)Work Permits.  Upon the request of Manager, Owner ,shall use all reasonable efforts to obtain, extend and renew visas, permits to stay and work permits for Resort Employees and their dependents for the purposes of this Agreement, provided that the priniciple administrative burden of so doing shall be borne by the Manager, and the costs thereof shall be an Operating Expense.  In furtherance thereof, Owner shall, without limitation (i) make any required applications for visas, permits to stay, and work permits for Resort Employees and their dependents; (ii) provide all supporting documents in respect thereof as Manager may reasonably request (other than documentation required to be provided by the Resort employee); and (iii) assist and cooperate with Manager in all reasonable respects.

5.3Annual Operating Budget.

(a)Preparation of Annual Operating Budget.  Manager shall provide to Owner its pro forma Annual Operating Budget for pre-opening expenses and the first partial Fiscal Year no later than sixty (60) days prior to the scheduled

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commencement of operations.  Thereafter, Manager shall provide to Owner a draft Annual Operating Budget on or before 31^st October of each Fiscal Year for the following Fiscal Year.  The parties will use their respective reasonable endeavours to finalise the Annual Operating Budget by 31^st December of each Fiscal Year for such following Fiscal Year.  Manager shall ensure that the Annual Operating Budget is prepared in accordance with GAAP.  Manager shall, as part of the Annual Operating Budget, provide Owner sufficient details with respect to proposed capital expenditures and major building expenditures, an estimate of costs and expenses, revenue and profit, a marketing budget and a schedule of replacement of furniture, in each case, for the following Fiscal Year.

(b)Approval of Annual Operating Budget.  Owner shall indicate its approval or disapproval of the Annual Operating Budget in writing no later than 1 December of each Fiscal Year.  If Owner does not indicate its approval or disapproval in writing by 1 December of each Fiscal Year, then the Annual Operating Budget proposed by Manager shall be deemed to be approved by Owner and effective as of 31 December.

(c)Dispute Regarding Annual Operating Budget.  If the Owner and Manager are unable to agree on the Annual Operating Budget or any part thereof, then:

(i)after the parties have met in an effort to resolve any issues in dispute, either of the parties is entitled to request that the Independent Expert be appointed to settle the issue in dispute. (The party which makes such request shall be the “Disputing Party”, and the other party the “Non-Disputing Party” for the purposes of this Article 5.3). The Independent Expert shall act as expert and not as arbitrator and the costs of the Independent Expert shall be paid by the unsuccessful party or, if the Independent Expert does not agree entirely with either party, otherwise as the Independent Expert shall determine.

(ii)The Independent Expert shall be such chartered accountant or firm of chartered accountants or consultant with recognized expertise in hotel management and feasibility studies in relation to the matter to be determined as shall be selected by the Non-Disputing Party from three nominations put forward by the Disputing Party; provided that if the Non-Disputing Party does not wish to select any of the three persons nominated by the Disputing Party, then the matter will be referred to a chartered accountant to be appointed by the President or the acting President of the Institute of Chartered Accountants in England and Wales (or any successors of that institute); and

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(iii)If the issues in dispute have not been resolved prior to commencement of the Fiscal Year in question, then Manager must proceed to implement that part of the Annual Operating Budget as is not in dispute and the balance will be suspended until resolved and until resolved will be replaced by the amount included in the approved Annual Operating Budget for the previous fiscal year adjusted per item by the percentage (%) increase in the CPI Index over the previous Fiscal Year.

(d)Adherence to Annual Operating Budget.  Manager shall use all reasonable efforts to act in accordance with the Annual Operating Budget (as modified by any subsequent changes agreed between Owner and Manager). However, it is understood that the Annual Operating Budget is an estimate only and that inflation, currency fluctuation, general market conditions, changes in business plans and strategies and unforeseen circumstances may make adherence to the Annual Operating Budget impracticable, and Manager shall be entitled to depart from it due to any such circumstances.  Manager shall promptly notify and consult with Owner regarding any substantial change from the Annual Operating Budget, and to make any necessary adjustments to the Annual Operating Budget as Owner and Manager shall agree in light of unforeseen circumstances.

5.4(a)Capital Budgets.  Manager shall, not less than sixty (60) days prior to the commencement of each fiscal year, submit to Owner for approval a recommended capital budget for the ensuing full or partial fiscal year, for furnishings, equipment and ordinary Resort capital replacement items as shall be required to operate the Resort in accordance with the Required Standard (each, a “Capital Budget”). Manager shall take into consideration, among other factors, the amount of funds available to pay for the proposed capital expenditures.  Owner’s approval of the Capital Budget shall not be unreasonably withheld, conditioned or delayed.  Owner and Manager shall meet to discuss the proposed Capital Budget and Owner shall be required to make specific written objections to a proposed Capital Budget in the manner and within the same time periods specified in Section 5.3 with respect to the Annual Operating Budget.  If Owner does not approve the Capital Budget, Manager will only spend such amounts as are approved by Owner, which approval shall not be unreasonably withheld, conditioned, or delayed; provided, however, that until any disputed Capital Budget item(s) have been resolved, Manager shall be entitled to spend for capital expenditures funds then in the reserve account but only for items for which such expenditures were allocated in the Capital Budget or as otherwise approved by Owner.  Manager shall not incur any expenses for Capital Improvements in excess of the Capital Budget without the prior approval of Owner.

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After a Capital Budget has been adopted, it shall be subject to review and modification in the event unpredicted or unanticipated capital expenditures are required during any calendar year, or in the event of unexpected occurrences having a material effect on the Business.  Manager and Owner each agree not to unreasonably withhold, condition or delay its consent to a proposed modification of a Capital Budget.  Any amendment that is mutually agreed upon shall be set forth in writing and signed by both parties.  It is acknowledged by Owner that capital expenditures required as a result of an Emergency Situation shall not reduce amounts available pursuant to the Capital Budget or otherwise hereunder, other than to the extent a Capital Budget item is subsumed within the capital expenditures required as a result of the occurrence of the emergency.

(b)General Maintenance Non-Capital Replacements; Emergency Expenditures.

(i)Subject to funds availability (and the limitations of the approved Operating Budget), Manager shall cause the Resort to be maintained in good repair and condition, including FF&E, and in conformity with the Required Standard and applicable laws, rules and regulations, and shall authorize routine maintenance, repairs and alterations as Manager from time to time reasonably deems necessary.

(ii)Notwithstanding the foregoing, maintenance (or other) expenditures in excess of budgeted amounts may be made if reasonably deemed necessary by Manager in the event of an emergency situation which creates a risk to life, safety or significant damage to the Resort property (each an “Emergency Situation”), provided Manager makes good faith, reasonable efforts to notify Owner as soon as Manager becomes aware of the Emergency Situation giving rise to the expenditures (but in all events within twenty-four (24) hours following the Emergency Situation) and the amount of such expenditures is reasonable in the circumstances (but in no event shall non-budgeted Emergency Situation expenditures exceed Two Hundred Thousand and no/100 Dollars ($200,000.00) per year without Owner’s consent); it being understood that Manager shall have no liability or responsibility for any failure to take any action in connection with an Emergency Situation, if such action is not taken as a result of this Two Hundred Thousand and No/100 Dollars ($200,000.00) limitation.

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5.5Special Provisions Regarding Finance and Accounting.

(a)Bank Accounts.

(i)Owner expressly authorizes Manager to establish the following bank accounts on Owner’s behalf at a bank or banks selected by Manager and approved by Owner:

(a)an account or accounts, bearing the name of the Resort, at a bank or banks having a branch reasonably convenient to the Resort for the purposes of depositing all funds received in the operation of the Resort and paying all Operating Expenses of the Business, including any Management Fees payable under this Agreement and all other charges and amounts due to Manager under this Agreement (collectively, the “Operating Account”); and

(b)the separate interest-bearing account for the Capital and Reserve Funds (the “Reserve Fund Account”).

(ii)Manager’s designees shall be the only Persons authorized to draw from the Operating Account, and the Reserve Fund Account, and Manager shall be entitled to make deposits in and withdrawals from all of such accounts, in accordance with the terms of this Agreement and Manager’s standard accounting policies and practices.  As regards the Reserve Fund Account, the Manager shall inform the Owner of its intention to make any withdrawals on that account.  Manager shall establish controls to ensure accurate reporting of all transactions involving such accounts and take prudent and reasonable measures to prevent fraud or embezzlement of the Business’ funds.

(iii)The Operating Account and the Reserve Fund Account shall be accounts of the Owner, and any funds therein shall be the property of the Owner.  Unless due to the negligence, bad faith or any willful act of the Manager, any loss suffered in an Operating Account or the Reserve Fund Account or any other bank account established pursuant to this Agreement, or in any investment of funds into any such account, shall be borne by Owner, and Manager shall have no liability or responsibility therefore.

(b)Disbursement of Funds to Owner; Owner’s Provision of Funds.

(i)Unless the parties agree otherwise, on or about the last day of each calendar month, Manager shall disburse to Owner, as directed by

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Owner, any funds remaining in the Operating Account after payment of all Operating Expenses and other amounts payable in accordance with the terms of this Agreement, the deposit of the amount due for such month in the Reserve Fund Account and the retention by Manager of an amount (the “Minimum Balance”) sufficient to cover (a) all accrued but unpaid Management Fees and Reimbursable Expenses plus (b) the monthly payroll expense for all Resort Personnel, plus (c) an additional amount of working capital to be established by the parties in the Annual Operating Budget for each Fiscal Year; provided, however, that Manager shall only be obligated to disburse funds to Owner from the Operating Account if and to the extent that the Operating Account contains funds in excess of the Minimum Balance.  Any amounts remaining in the Operating Account on the termination of this Agreement shall be disbursed to Owner; provided, however, that Manager may deduct and retain prior to such disbursement any and all amounts due and payable by Owner to Manager under this Agreement and which have not been paid.

(ii)Owner shall commit the financial and other resources necessary to permit the Resort to be operated and maintained in accordance with the Required Standard and Owner shall establish and maintain, at its sole expense, a financing program for the Resort to ensure that sufficient funds exist at all times to meet all financial requirements of the Resort.  Pursuant to the foregoing obligation, Owner shall deposit into the Operating Account on or before the commencement of the operating term, in addition to any amounts required to be provided by Owner in the first Annual Operating Budget, the amount of initial working capital as agreed between the parties.  In addition, if at any time Manager reasonably determines that the available funds in the Operating Account are insufficient to allow for the uninterrupted and efficient operation of the Resort in accordance with the Annual Operating Budget for the relevant Fiscal Year and the terms of this Agreement, Manager shall notify Owner of the existence and amount of the shortfall, giving all reasonable details thereof, including the reasons therefore (a “Funds Request”) and, within fifteen (15) days following the delivery of the Funds Request, Owner shall deposit into the Operating Account the funds requested by Manager in the Funds Request.  If the Owner fails to make such deposit, Manager may elect, without obligation, to make on Owner’s behalf payment of any such due and unpaid obligations of Owner and Owner shall pay interest to Manager on any such advances from the date falling 15 days after the delivery of the Funds Request to the date of payment by Owner at a rate equal to LIBOR + 500bps and Manager shall be

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entitled to reimburse itself therefore, with interest as aforesaid, out of any available funds from the operation of the Resort.

(c)Annual Audits. Each Fiscal Year the books of account and records of the Business shall be audited by a qualified and experienced independent chartered accountant selected by the Owner from an internationally recognized firm with offices in reasonable proximity to the Resort, with such audit services being provided from such location. At all reasonable times such auditor shall bave unfettered access to all books of account and records relating to the Business and the Manager shall be obliged to furnish whatever information such auditor will reasonably call for. Copies of the audited balance sheet and income statement and all other information relating to the operation of the Resort shall be made available to each of the parties hereto.

(d)Pledge of Credit. Other than in the normal course of business, the Manager shall not be entitled to pledge the credit of the Owner nor to borrow funds in its name. At no time shall it be entitled to alienate, hypothecate or otherwise encumber any of the moneys or assets which are the property of the Owner or of the Resort, nor shall it be entitled to lend any such moneys or assets, whether with or without security.

ARTICLE 6

ENTRENCHMENT PROVISIONS

6.1Entrenched Provisions. Notwithstanding anything to the contrary contained in this Agreement, the Manager nor any of its Affiliates shall engage in any of the following acts, procedures or matters except with the prior written approval of the Owner:

(a)The establishment and opening of new lines of business as agent for the Owner except those directly related to the operation of the Resort.

(b)The purchase or sale of assets not provided for in any budget approved by the Owner.

(c)Borrowing, providing of guarantees or indemnities otherwise than in the ordinary course of the Business.

(d)The appointing of the Owner’s lawyers or accountants.

(e)Demolishing, removing, scrapping, selling or disposing of any item forming part of the Resort and the related facilities and amenities, their furnishings, fixtures, furniture, equipment or motor vehicles other than in the ordinary and usual course of business or as provided in the Annual Operating Budget or Capital Budget.

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(f)For a period of ten (10) years from the Opening Date, not directly or indirectly develop or manage within the Territory:any other “Atlantis”property, any property including a dolphin interactive facility or property including water features costing more than fifty percent (50%) of the amount invested by the Owner in constructing the Resort.

ARTICLE 7

MANAGEMENT FEES AND REIMBURSABLE EXPENSES

7.1Management Fees.  As remuneration for the Manager’s services in managing and conducting the Business during the Term, the Owner shall pay to the Manager in respect of each of the Fiscal Years following the commencement of operations, or, in respect of the partial period from the commencement of operations to the 31^st of December next, or the Fiscal Year in which this Agreement terminates, from the commencement of that Fiscal Year to the date of such termination (a “Partial Fiscal Year”):

(a)A management fee in the amount equal to * of Gross Revenues for each Fiscal Year or Partial Fiscal Year, as the case may be during the first five (5) years of the Term, and thereafter in the amount equal to * of Gross Revenues during the remainder of the Term (the “Base Management Fee”); and

(b)An incentive management fee for a Fiscal Year or a Partial Fiscal Year, as the case may be, in an amount equal to * of Operating Income during the first five (5) years of the Term, and thereafter in the amount equal to * of Operating Income during the remainder of the Term (the “Incentive Management Fee”).

7.2Payment of Fees.

(a)The Base Management Fee and the Incentive Management Fee referred to in Section 7.1 (collectively, the “Management Fees”) shall be paid by the Owner to the Manager in United States Dollars, free of bank commission and any other deductions at such place(s) as the Manager may designate from time to time, monthly in arrears, within ten days of the date of the end of the month in respect of the month in question, provided that, should any adjustment be required at the end of the Fiscal Year (or Partial Fiscal Year) in question in view of the Gross Revenues or Operating Income for that Fiscal Year (or Partial Fiscal Year), the necessary adjustment shall be made by the parties in accordance with Section 7.2(d).

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(b)Within thirty (30) days after Owner receives the audited financial statements for any Fiscal Year signed by Owner’s auditors, Manager shall cause to be prepared and delivered to Owner a statement, certified by the Manager’s auditors, showing the calculation and payment of the Management Fees to be paid to Manager pursuant to 7.1 above for that Fiscal Year, and appropriate adjustments shall be made for any overpayment or underpayment of the fees to be paid to Manager pursuant to 7.1 above during such Fiscal Year.  The party owing money as a result of any overpayment or underpayment during such Fiscal Year shall pay such amount to the other party within thirty (30) days after such statement has been delivered by Manager to Owner.

(c)If for any reason the appointment of the Manager is terminated at a date other than at the end of a Fiscal Year, audited accounts shall be prepared by the Owner as at the date of such termination in order to give effect to the provisions of Section 7.2.(a).

(d)The Incentive Management Fee shall be calculated by reference to the annual audited financial statements of Owner, but shall be paid at quarterly intervals, within fourteen (14) days after the completion of Owner’s quarterly Management Accounts for the first three quarters, and after the signature and certification of the said annual financial statements in respect of each of Owner’s Fiscal Years.  Each such payment at the end of the first three quarters shall be computed on a cumulative basis by reference to the quarterly Management Accounts for the preceding quarter, and on completion, signature and certification of Owner’s annual financial statements for that Fiscal Year the Incentive Management Fee for the whole of that year shall be computed and certified by the Manager’s auditors.

(e)All Management Fees shall be paid from the Operating Account.

7.3Reimbursement of Expenses.  The following shall be reimbursable by the Owner:

(a)Marketing Costs; Reservation Services.  The Owner acknowledges that the Manager and its Affiliates operate an international marketing and sales organization with offices in Europe, Africa and the U.S.A. and have representation through general sales agents in other territories.  Owner shall reimburse Manager and Manager’s Affiliates for all costs and expenses related to marketing and promoting the Resort.  In addition, a proportionate share of the overhead marketing office costs of Manager and Manager’s Affiliates will be recharged to the Owner, including a proportional share of costs and expenses related to brand advertising, marketing, promotion, retail services, information technology and internet applications.  Budget for the above will be submitted annually in the marketing budget included as part of the Annual Operating Budget.  The

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above costs and expenses are exclusive of any reservation services provided to the Resort by Manager or Manager’s Affiliates, which costs shall be charged to the Resort at rates comparable to those charged to other properties managed by Manager’s Affiliates.

(b)Manager Technical Staff

(i)Owner shall bear and accordingly reimburse Manager, for all travel and out-of-pocket expenses directly attributable to the carrying out by Manager of its management services in terms of this Agreement and incurred by, among others, Manager’s management executives, food and beverage executives, marketing and sales executives, gaming executives, design and construction executives, accounting and computer systems executives, and other specialist executive personnel shall be regarded as reimbursable Operating Expenses, without any profit or premium.  Such expenses shall be generally included in the Annual Operating Budget.

(ii)The salaries and wages and other payroll costs and moving and related expenses, without any profit or premium, of employees of Manager attributable to any extended periods where they are seconded to the employment of the Owner and the Resort.

(iii)Manager shall be entitled to charge a commercially reasonable reservation fee agreed with Owner in respect of any reservation services which Owner and Manager may agree to be rendered by Manager to Owner in respect of the Resort, which services, for the avoidance of doubt, are not included in the marketing services provided hereunder.

(c)Manner of Payment.  Payment to the Manager of reimbursable expenses, traveling and out of pocket expenses shall be made in United States Dollars, free of bank commissions and other deductions, at such place(s) as may be designated by the Manager from time to time, and this within thirty (30) days of Manager’s invoice and relevant support documentation being submitted to the Resort accounts receivable department, and shall be paid out of the Operating Account.

ARTICLE 8

INSURANCE

8.1Procurement of Insurance.  The Manager shall take out and shall maintain on behalf of and in agreement with the Owner (as an Operating Expense), at all times from the Effective Date, and throughout the continuance of this Agreement, under

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such insurance policies issued by such insurers as the Owner and the Manager shall agree, adequate insurance coverage in relation to the Resort and the related facilities (with Manager’s interest noted thereon, save with respect to the general public liability policy, in respect of which the Manager shall be named as an additional insured) and their operation against risks mutually agreed by the Manager and the Owner.  Such insurances shall be reviewed by Manager annually and may include, without limitation, property (including windstorm and flooding insurance), commercial general liability, umbrella and excess liability, general public, automobile, appropriate workers’ compensation, business interruption, terrorism, employment practice liability and such other insurance (including fidelity/crime coverage and employment practices liability) against other insurable risks which, at the time, are commonly insured against by owners of similar resort premises in the Resort’s market area, with due regard being or to be given to the then existing circumstances and to the type, construction, design, use and occupancy of the Resort.  The Manager and the Owner shall agree the level and the adequacy of all insurance and the insurance companies by which all insurance policies shall be written

8.2Insurance Policy Endorsements.  Each insurance policy obtained under this Article 8 shall provide, and include an endorsement to the effect, that its cover shall not lapse or be terminated, suspended or altered until thirty (30) days after the relevant insurer has given notice to that effect to the Manager at the Resort and to the Owner at its address as stated in this Agreement (or such other address as it may from time to time notify to the relevant insurer for such purpose).

8.3Insurance Certificates.  The Manager shall supply copies of each of the insurance policies obtained under this Article 8 to the Owner forthwith upon effecting the same and of each insurance certificate and premium receipt forthwith upon receiving same.  The Owner and its representatives shall be entitled to have access to the originals of all insurance policies and to have produced to the Owner any other evidence it may from time to time reasonably require that all the said policies are in full force and effect.

ARTICLE 9

RESORT EMPLOYEES

9.1Resort Employees.  Except for certain key Resort Employees who at Manager’s election may be employees of Manager or any of its Affiliates, all Resort Employees shall at all times be the employees of Owner.

9.2Hiring; Retention.  With respect to all Resort Employees, Manager shall have full discretion to hire, promote, supervise, direct, train, fix compensation, and generally establish and maintain all employment policies and practices, subject to the following:

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(a)Manager’s employment policies and practices shall comply with all applicable laws, regulations, and orders of any competent government authority.

9.3Resort Employee Costs.  The payroll and related costs for all Resort Employees including, without limitation, salaries, wages, payroll taxes, social security, employer contributions to retirement plans, contributions to worker’s compensation funds, provident fund contributions, and other taxes and charges, and employee benefits (including, without limitation, tax equalization benefits, overseas premiums, stock incentive plans, cost of living allowances, mobilization and relocation costs, fees and costs related to visas, permits to stay, and work permits for Resort Employees and their dependents, vacations, automobiles, housing for Resort Employees and their dependents, and schooling for dependents) shall be Operating Expenses.

9.4Work Visas; Permits.  Upon the request of Manager, Owner shall use best efforts to obtain visas, permits to stay, and work permits for Resort Employees and their dependents and for other individuals designated by Manager in connection with the development, opening or operation of the Resort, provided that the principle administrative burden of so doing shall be borne by Manager, and the costs thereof shall be an Operating Expense.  Owner shall, without limitation, (i) make any required applications for visas, permits to stay, and work permits for Resort Employees and their dependents, (ii) provide all supporting documents requested by Manager, and (iii) assist and cooperate with Manager in all respects.

9.5Employee Perks.  Manager shall determine which, if any, Resort Employees shall reside in the Resort, and Manager shall be permitted to provide complimentary accommodations and amenities to its Affiliates’ employees and representatives living at or visiting the Resort for the purpose and duration of their business related to the management or operation of the Resort.  No Person shall otherwise be given gratuitous accommodations or services without prior approval of Owner and Manager except in accordance with usual practices of the hotel and travel industry.

9.6Termination of Employees.  Upon Termination, an escrow fund shall be established from Gross Revenues (or with funds provided by Owner if Gross Revenues are insufficient) to reimburse Manager for all Resort Employee liability costs and expenses incurred by Manager arising out of either the transfer or termination of employment of Resort Employees, including, without limitation, severance and seniority payments, reasonable transfer costs, and unemployment compensation. Owner shall indemnify, defend, and hold Manager harmless from and against all claims, losses, liabilities, penalties, costs, and expenses (including, without limitation, attorneys’ fees and expenses and litigation costs and expenses),

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damages (including, without limitation, consequential, punitive, and exemplary damages), and third party claims based on or arising from any claim made by any Resort Employee or any liability to any Resort Employee arising out of or connected with the foregoing.  This section 9.6 shall survive termination of this Agreement.

ARTICLE 10

RIGHT TO INSPECT

10.1Owner’s Right to Inspect.  The Owner and/or its duly authorized representatives shall have the right to enter the Resort at all reasonable times for the purpose of inspecting the same and during standard business hours for inspecting the books and records of the Business.

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1Damage.  If the Resort or any portion thereof shall be damaged or destroyed at any time or times during the Term by fire or any casualty risk or otherwise, Owner shall, at Owner’s cost and expense and with due diligence, repair, rebuild or replace the same so that after such repairing, rebuilding or replacing, the facilities in question shall be substantially the same as prior to such damage or destruction.

11.2Manager’s Right to Reconstruct.  If Owner fails to undertake such work or to commence and seriously pursue such work within ninety (90) days after the fire or other casualty, or shall fail to complete the same diligently within a reasonable time, Manager may, but shall not be obligated to, undertake or complete such work or procure that such work is undertaken or completed for the account of Owner, and the proceeds of insurance, if any, shall be made available to Manager.  Manager shall further have the right to procure that the proceeds from the insurance (if any) be applied to such repairing, rebuilding or replacing, and in the event of any shortfall in claim monies due to inadequate insurance, Owner will be responsible for the difference.

11.3Retention of Construction Manager.  During the course of repairs, rebuilding or replacement pursuant to section 11.1 or section 11.2, Manager may elect to procure the performance of necessary or desirable construction management services in regard thereto on the same basis as set out in Article 4, in which event Owner shall pay Manager a fee and reimburse its expenses on the same basis as set out in Article 4.

11.4Destruction.  If Owner determines not to rebuild, repair or replace any affected facility as set forth in section 11.1 by reason of it not being economically feasible

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to do so, Owner shall compensate Manager for its loss of income under this Agreement in respect of the cessation of Management Fees being generated by the Business, and failing agreement between Owner and Manager as to the amount of such compensation, either party may refer the matter to arbitration in terms of Article 16 for the determination of such amount.

ARTICLE 12

ALTERATIONS AND IMPROVEMENTS

12.1Alterations and Improvements.  Manager shall have the right to procure that, from time to time, such renewals, replacements, alterations, additions or improvements are effected to the Resort, which are customarily made in the operation of first class Resort facilities subject always to the Annual Operating Budget and Capital Budget.  The costs of such customary renewals, replacements, alterations, additions or improvements shall be charged directly to the Reserve Fund in accordance with Section 5.2.

ARTICLE 13

INTELLECTUAL PROPERTY

13.1Trade Name.  The name of the Resort shall be Atlantis, The Palm, or such other name as agreed between the Owner and the Manager, which name shall include the brand “Atlantis”. The name of the Resort shall be used in all references to the Resort.  All rights in and to the name Atlantis (or any version thereof), and any logo, mark, design, style used in connection with such name from time to time shall be exclusively vested in the Manager’s Affiliate, Kerzner International Limited (“KZL”), and the Owner shall not have any rights thereto; provided however, that during the Term Owner shall have a non-exclusive, royalty free, revocable and limited license to use the Atlantis mark in conjunction with the name of the Resort and merchandise and services provided at the Resort in accordance with the terms and conditions of the Tradename and Trademark Licensing Agreement.  If the name of the Resort includes the name “Kerzner”or “Kerzner International”or any other or additional brand, logo, mark, design, style or trade name in use by Manager from time to time, including the mark “The Dig”, the Owner shall not have the rights to such name.  The Manager may refer to the Resort by such name in publications of its own activities not specifically connected with the Resort.  The Manager shall also be entitled to promote the Resort as an Atlantis or a Kerzner International hotel and display Atlantis and Kerzner International literature and literature from other Kerzner affiliated brands in the Resort, as the Manager may determine in accordance with its group brand strategy from time to time during the Term.  Owner represents and warrants to Manager that Owner has obtained intellectual property rights to the trade name “The Palm.”During the Term, Manager shall have a nonexclusive royalty free,

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revocable and limited license to use The Palm mark in conjunction with the operations and marketing of the Resort.

13.2Management and Marketing Information.  Owner acknowledges that Manager or one of its Affiliates is or will become the owner or licensee of certain intellectual property, including (i) software in use at one or more resorts managed by Manager or Manager’s Affiliates and all source and object code versions thereof and all related documentation, flow charts, user manuals, listing and service/operator manuals and any enhancements, modifications or substitutions thereof; (ii) trade secrets, know-how and other proprietary information relating to the operating methods, procedures and policies distinctive to other resorts managed by Manager or Manager’s Affiliates; (iii) customer information, customer lists, personal guest profiles, information and data regarding guest preferences from other resorts managed by Manager or Manager’s Affiliates; and (iv) trade names, trademarks and service marks, including those referenced in Section 13.1 above (herein collectively called “Intellectual Property”). Manager may utilize the Intellectual Property in connection with the operation of the Resort to the extent Manager deems appropriate for the purpose of carrying out its agreements and obligations hereunder, but such use shall be strictly on a non-exclusive basis, and neither such use nor anything contained in this Agreement shall confer any proprietary license or other rights in the Intellectual Property upon Owner (other than as set forth in Section 13.1) or any third parties.

ARTICLE 14

ASSIGNMENT

14.1Manager’s Assignment.  Manager shall be entitled at any time, without the consent of Owner (or if such consent is an inalienable right under any provision of applicable law, then Owner shall grant such consent) to:

(a)           cede, assign and delegate its rights and obligations under this Agreement to any company which controls, is controlled by or is under common control with Manager and which will agree in writing to be bound to the provisions of this Agreement; and/or

(b)assign its right, conditionally or otherwise, to receive payments hereunder.

14.2Owner’s Consent Rights.  Except as set forth in Section 14.1 above, Manager shall not cede, assign or delegate its rights or obligations under this Agreement without the prior written consent of Owner, which consent shall not unreasonably be withheld.

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14.3Owner’s Assignment.  Owner shall not cede, assign or delegate its rights or obligations under this Agreement without the prior written consent of Manager, which consent shall not unreasonably be withheld.

14.4Successors and Assigns.  The terms and conditions of this Agreement shall be binding upon and ensure to the benefit of the third parties to which either Manager or Owner may validly cede, assign and delegate their respective rights and obligations in terms of Articles 14.1, 14.2 and 14.3.

ARTICLE 15

CLAIMS AND LIABILITY

15.1Claims and Liability.  Owner and Manager mutually agree for the benefit of each other to look only to the appropriate insurance coverages in effect pursuant to this Agreement in the event any demand, claim, action, damage, loss, liability or expense occurs as a result of injury to person or damage to property, regardless of whether any such demand, claim, action, damage, loss, liability or expense is caused or contributed to, by or results from the negligence of Owner or Manager or their subsidiaries, affiliates, employees, directors, officers, agents or independent contractors, and regardless of whether the injury to person or damage to property occurs in and about the Resort or elsewhere as a result of the performance of this Agreement. Nevertheless, in the event the insurance proceeds are insufficient or there is no insurance coverage to satisfy the demand, claim, action, loss, liability or expense, Owner agrees, at its expense, to indemnify and hold Manager and its subsidiaries, affiliates, officers, directors, employees, agents and independent contractors harmless to the extent of the liability or excess liability, as the case may be, unless such liability or excess liability arises by reason of any act or omission of Manager or any of its agents, officers, employees or representatives, which act or omission is grossly negligent, willful misconduct or outside the scope of Manager’s authority as provided herein.

15.2No Representation or Warranty.  Except as expressly provided in this Agreement, neither party makes any warranties or guarantees to the other, either express or implied, with respect to the subject matter of this Agreement, and both parties disclaim and waive any implied warranties or warranties imposed by law.

15.3Insurance Coverage.  Nothing in this Agreement shall entitle either the Owner on the one hand or the Manager on the other hand to make any claim against each other to the extent that it is able to obtain compensation or reimbursement from any of the insurances provided for in Article 8. Except as otherwise provided in this Agreement, to the extent of insurance coverage, Manager and Owner each waives, releases and discharges the other from all claims or demands which each may have or acquire against the other, or against each other’s subsidiaries,

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affiliates, directors, officers, agents, employees, independent contractors or partners, with respect to any claims for any losses, damages, liabilities or expenses (including attorneys’ fees) incurred or sustained by either of them on account of injury to persons or damage to property or business arising out of the ownership, management, development, operation and maintenance of the Resort, regardless of whether any such claim or demand may arise because of the fault of negligence of the other party or its subsidiaries, affiliates, officers, employees, directors, agents or independent contractors.  Each policy of insurance shall contain a specific waiver of subrogation reflecting the above with respect to insured claims.

15.4Survival.  The parties agree that the waivers and disclaimers of liability, indemnities, releases from liability, and limitations on liability expressed in this Article 15 shall survive the expiry or earlier termination for any reason of this Agreement and shall apply whether in contract, equity, tort or otherwise, even in the event of the fault, negligence, including sole negligence, strict liability, or breach of Manager or Owner.

ARTICLE 16

APPLICABLE LAW; ARBITRATION

16.1Governing Law; Jurisdiction.  This Agreement shall be governed by and construed in accordance with the laws of England without regard to the conflicts of laws rules thereof.  Each party agrees that any proceeding, suit or action arising out of or in connection with this Agreement (“Proceedings”) may only be brought subject to the Arbitration provisions of Section 16.2, below, in the courts of England.  Each party also agrees that a judgment against it in Proceedings brought in any jurisdiction in accordance with this section 16.1 shall be conclusive and binding upon it and may be enforced in any other jurisdiction.  Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this section 16.1. Each party waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in such court.  Nothing in this Agreement shall affect the right of any party to the Agreement to serve process in any manner permitted by law.

16.2Arbitration.  Except as otherwise specified in this Agreement, any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the Rules of the London Court of International Arbitration (or any similar successor rules thereto) as are in force on the date when a notice of arbitration is received.  The number of arbitrators shall be one unless either party to the arbitration requests otherwise, in which case there shall be three arbitrators, one selected by each party and the third selected by the arbitrators selected by Owner and Manager.  The language to be used in the proceedings shall be English.  The place of arbitration shall be London or such

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other place as the parties may agree.  The decision of the arbitration board shall be final and binding upon the parties, and such decision shall be enforceable through any courts having jurisdiction and particularly the Dubai courts.  The costs and expenses of arbitration shall be allocated and paid by the parties as determined by the arbitrators.

16.3Performance During Disputes.  It is mutually agreed that during any kind of controversy, claim, disagreement or dispute, including a dispute as to the validity of this Agreement, Manager and Owner shall continue their performance of the provisions of this Agreement.  Manager shall be entitled to injunctive relief from a civil court or other competent authority to maintain possession in the event of a threatened eviction during any dispute, controversy, claim or disagreement arising out of this Agreement.

ARTICLE 17

TERMINATION

17.1Owner’s Termination Rights.  Notwithstanding anything to the contrary herein contained, Owner may terminate this Agreement if:

(a)Manager is placed in bankruptcy or insolvency, voluntarily or otherwise (except for the purpose of amalgamation or reconstruction) or shall have a receiver or judicial manager appointed for all or a substantial portion of Manager’s property; or

(b)for a period of sixty (60) days (or such longer period as may be reasonable, having regard to the nature of the default and the prevailing circumstances) after written notice has been served on it and without reasonable cause, Manager neglects, omits, refuses or fails to discharge or diligently take action to discharge any of its material obligations hereunder, whether through the operation of law or otherwise; or

(c)if, during the period of the first two (2) complete fiscal years of the Business following the Opening Date, Kerzner International Limited ceases to be the ultimate owner of at least seventy-five percent (75%) of its initial investment in the Owner, whether directly or through a parent company of Owner.

17.2Manager’s Termination Rights.  Notwithstanding anything to the contrary herein contained, Manager may terminate this Agreement if:

(a)Owner is placed in bankruptcy or insolvency, voluntarily or otherwise (except for the purpose of amalgamation or reconstruction) or shall have a

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receiver or judicial manager appointed for all or a substantial portion of Owner’s property;

(b)for a period of sixty (60) days (or such longer period as may be reasonable, having regard to the nature of the default and the prevailing circumstances) after written notice has been served on it and without reasonable cause, Owner neglects, omits, refuses or fails to discharge or diligently take action to discharge any of its material obligations hereunder, whether through the operation of law or otherwise; or

(c)Manager determines in its discretion that its ability to participate in other gaming jurisdictions is jeopardized as a result of matters relating to Owner, shareholders of Owner or any of their Affiliates, or Owner’s Businesses and arising outside of Manager’s control in respect of this Agreement.

(d)The rights granted in Articles 17.1 and 17.2 shall be in addition to any and all rights and remedies for breach of contract granted by the laws as designated by Section 16.1.

(e)In the event Manager terminates this Agreement pursuant to Article 17.2(c), Manager shall give owner thirty (30) days notice and shall cooperate with owner in Owner’s search for a substitute manager and will co-operate in the hand-over of the Business, provided that Owner shall reimburse Manager for all reasonable and proper costs of so doing.

ARTICLE 18

FORCE MAJEURE

18.1Force Majeure.  If by reason of war, terrorism, explosion, bombing, revolution, riots, civil commotion, strikes, lockout, inability to obtain labour or materials, fire, flood, storm, earthquake, hurricanes, tornado, drought, failure of infrastructure or utility services or the structural integrity of the Project, fundamental access to Resort, environmental impact on the Project, erosion, tidal waves, settlement of dredged areas or other acts or elements, accident, government restrictions or appropriation or other causes, whether like or unlike the foregoing, beyond its reasonable control of, the Manager is unable to perform in whole or in part its obligations under this Agreement, then the Manager shall be relieved of those obligations to the extent it is so unable to perform and such inability to perform so caused shall not make such party liable to the other.

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ARTICLE 19

NOTICES

19.1Notices.  The parties choose the following addresses for the delivery of all notices and other communications hereunder:

To the Owner:

c/o Istithmar (PJSC)
Emirates Towers, Level 47
Sheikh Zayed Road
P. O. Box 17000
Dubai, UAE

Attn:Ahmed Butti, Chief Executive Officer

Tel:971-4-390-2100

Fax:971-4-390-3818

and:

c/o Kerzner International Palm Island Limited
Coral Towers
Executive Offices
P. O. Box N- 4777
Paradise Island, Bahamas

Attn:Giselle M. Pyfrom

Tel:242-363-6019

Fax:242-363-2767

To the Manager:

Kerzner International Management FZ LLC
Boutique Office No. 14,
Dubai Media City,
Dubai, UAE
Attention: George Markantonis

Tel:971-4-391-1139

Fax:971-4-366-4699

With copies to:

Kerzner International Limited
Coral Towers
Executive Offices
P. O. Box N-4777
Paradise Island, Bahamas

Attn:Giselle M. Pyfrom, General Counsel

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Tel:242-363-6019

Fax:242-363-2767

provided that any party shall be entitled to change its address to any other address which is not a post office box or poste restante by giving the other party notice to that effect.

19.2All notices in terms of this Agreement:

(a)shall be in writing;

(b)shall either be delivered by hand or sent by fax, courier or by prepaid registered post to the address determined in accordance with the provisions of this Article 19;

(c)be deemed to have been received on the date of delivery if delivered by hand or sent by fax, courier or on the tenth day after posting if sent by prepaid registered post.

ARTICLE 20

MISCELLANEOUS

20.1Entire Agreement; Authorization.  This document and the documents referred to herein constitutes the sole record of the agreement between the parties in respect of the management of the Resort.  No party shall be bound by any representation, warranty, promise or the like not recorded herein.  Owner and Manager represent and warrant to each other that their respective legal entities have full power and authority to execute this Agreement and be bound by and perform the terms hereof.

20.2Interest.  Owner shall be liable for and shall pay interest to Manager on all overdue payments to Manager in terms of this Agreement.  Such interest shall be calculated at LIBOR + 500 bps.  Owner shall furthermore be liable for and shall pay all legal costs, including collection costs and commissions, incurred by Manager in enforcing its rights hereunder.

20.3No Waivers; Amendments.  No failure or delay by Manager or Owner to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement, or to exercise any right or remedy consequent upon the breach thereof, shall constitute a waiver of any such breach or any subsequent breach of such covenant, agreement, term or condition.  No covenant, agreement, term, or condition of this Agreement and no breach thereof shall be waived, altered or modified except by written instrument, signed by the party against whom the same is sought to be enforced.  No waiver of any breach shall affect or alter this Agreement, but each and every covenant, agreement, term and condition of this

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Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach.

20.4Funding of Owner Accounts.  Notwithstanding anything to the contrary set out in this Agreement, Manager shall not be obligated to perform its duties and shall be excused from its obligations and responsibilities hereunder to the extent that funds to be provided by Owner are not available to allow Manager to perform such duties pursuant to the provisions of this Agreement.

20.5Manager’s Right to Request Instructions.  At any time, Manager may, if it reasonably deems it to be necessary or appropriate, request written instructions from Owner within a reasonable period prior to the necessity for taking action with respect to any matter contemplated by this Agreement where the approval of the Owner is required, and may defer action thereon pending receipt of such written instructions.  Owner shall promptly respond to any such request for written instructions.  Actions taken by Manager, its officers, employees and representatives in accordance with the written instructions of Owner, or failures to act by such persons pending the receipt of such written instructions, shall be deemed to be proper conduct within the scope of Manager’s authority under this Agreement.

20.6Independent Contractors.  Manager shall be an independent contractor with respect to the performance of its duties hereunder.  Neither Manager nor its employees or other agents employed in the performance of such duties shall be deemed to be agents, partners, joint venturers, representatives or employees of Owner, except to the extent of the agency expressly created under this Agreement.

20.7Conflicts.  Other than as set forth in Article 6.1(f), nothing contained in this Agreement shall be construed so as to restrict or prevent, in any manner, Manager from engaging in any other businesses or investments during the Term, including, without limitation, any similar or competitive operations to those of Owner, anywhere in the world.  Owner acknowledges that Manager and/or its Affiliates operate and/or manage other hotels, casinos and resorts presently and may in the future operate and/or manage additional hotels, casinos and resorts in different areas of the world, and that marketing efforts may cross over into the same markets and with respect to the same potential customer base.

20.8Severability.  Any provision of this Agreement which may for any reason be held to be unlawful or invalid shall be severable from the remaining provisions of this Agreement, which shall remain in full force and effect.

20.9Confidentiality.  The parties agree that the matters set forth in this Agreement are strictly confidential.  In addition, the parties agree to keep strictly confidential all information of a proprietary or confidential nature about or belonging to the other party or to any Affiliate of such party to which the other party gains or has access

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by virtue of the relationship between the parties.  Except as disclosure may be required to obtain the advice of professionals or consultants, or financing for the Resort and/or the Business from an institutional lender, or in furtherance of a permitted assignment of this Agreement, or as may be required by law or by the order of any government, regulatory authority, or tribunal or otherwise to comply with legal requirements (including reporting requirements applicable to companies the shares or stock of which are traded on any stock exchange anywhere in the world) whether or not having the force of law, each party shall make every effort to ensure that such information is not disclosed to the press or to any other third Person without the prior consent of the other party.  The obligations set forth in this Section 20.9 shall survive any termination or expiration of this agreement.  The parties shall cooperate with one another on all public statements, whether written or oral and no matter how disseminated, regarding their contractual relationship as set forth in this Agreement or the performance of their respective obligations under this Agreement.

20.10Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that each of the parties hereto need not sign the same counterpart; provided, however,that this Agreement shall not be effective until each party has signed at least one counterpart.

20.11No Third Party Beneficiaries.  The parties do not intend to confer upon any Person other than the parties hereto any rights or remedies hereunder or that any term hereof should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999 by any such Person.

20.12Expenses.  All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such expense.

20.13Agent for Service.

(a)The Manager irrevocably appoints Christopher Pearson of Norton Rose, Kempson House, P. O. Box 570, Camomile Street, London, EC3A 7AN, United Kingdom to be its agent for the receipt of any claim form, application notice, order or judgment or other document relating to any Proceedings (each a “Service Document”) and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent.  If the agent at any time ceases for any reason to act as such, the Manager shall appoint a replacement agent having an address for service in England or Wales and shall notify the other parties of the name and address of the replacement agent.  Failing such appointment and notification, the Owner shall be

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entitled by notice to the manager to appoint a replacement agent to act on behalf of the Manager.  The provisions of this Section 16(a) applying to service on an agent apply equally to service on a replacement agent.  A copy of any Service Document served on an agent shall be sent by post to the Manager.  Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

(b)The Owner irrevocably appoints Simon Roderickof Allen & Overy LLP, One New Change, London, EC4M 9QQ, United Kingdom to be its agent for the receipt of any Service Document and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent.  If the agent at any time ceases for any reason to act as such, the Owner shall appoint a replacement agent having an address for service in England or Wales and shall notify the other parties of the name and address of the replacement agent.  Failing such appointment and notification, the Manager shall be entitled by notice to the Owner to appoint a replacement agent to act on behalf of the Owner.  The provisions of this Section 16(b) applying to service on an agent apply equally to service on a replacement agent.  A copy of any Service Document served on an agent shall be sent by post to the Owner.  Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

[SIGNATURE PAGE TO FOLLOW]

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Exhibit A – Resort Site

Lots 18 to 27 on the Crescent of the Palm – Jumeirah, Dubai, UAE

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Made in two originals this 5^th day of May, 2004.

SIGNED for and on behalf of KERZNER NAKHEEL LIMITED:
By:	/s/ Sultan Ahmed Bin Sulayem		/s/ Howard B. Kerzner
	Name: Sultan Ahmed Bin Sulayem		Name: Howard B. Kerzner
	Title:  Director		Title:  Director
/s/ Sahia Ahmad			/s/ Giselle Pyfrom
		Witness:	Witness:
SIGNED for and on behalf of KERZNER INTERNATIONAL MANAGEMENT FZ-LLC:
By:	/s/ Richard Lindsay		/s/ Sahia Ahmad
	Name: Richard Lindsay		Witness:
	Title:  Authorized Signatory

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EX-4.8(C)

Exhibit 4.8(c)

EXECUTION COPY

DEVELOPMENT AGREEMENT

FOR THE

ATLANTIS, PALM ISLAND

BY AND BETWEEN

KERZNER INTERNATIONAL DEVELOPMENT FZ LLC

AS DEVELOPER

AND

KERZNER NAKHEEL LIMITED

AS OWNER

5th May, 2004

DEVELOPMENT AGREEMENT

This Development Agreement (as the same may be amended, modified or supplemented from time to time, this “Agreement”)is made and entered into this day of May, 2004 (the “Effective Date”), by and between KERZNER NAKHEEL LIMITED, a British Virgin Island company with offices at Trident Trust Company, Trident Chambers, Wickhams Cay, P.O. Box 146, Road Town, Tortola, BVI (the “Owner”)and (ii) KERZNER INTERNATIONAL DEVELOPMENT FZ LLC, a United Arab Emirates Free Zone Limited Liability Company having its registered office at Boutique Office No. 19, Dubai Media City, Dubai, United Arab Emirates (the “Developer”).The Owner and the Developer are sometimes hereinafter referred to as the “Parties.”

W I T N E S S E T H:

WHEREAS, Owner is the lessee of those certain parcels of real property located on The Palm Jumeirah, Dubai, United Arab Emirates consisting of approximately 125 acres of land, more particularly described in Exhibit ”A” attached hereto and made a part hereof, together with any property subsequently acquired or controlled by Owner for the purposes of developing or expanding a destination resort to be known as Atlantis, The Palm (collectively, the “Real Property”), together with any and all infrastructure and improvements currently existing or developed in the future (collectively, the “Improvements”and together with the Real Property, “Atlantis, Palm Island”or the “Resort”); and

WHEREAS, Owner desires to develop the Resort in one or more phases (each a “Phase”and collectively, the “Project”)through the development of, among other components, Phase I of the Project to include the following:   an approximate US$1.1 billion development project consisting of an approximate 2,000-room luxury hotel and an extensive water-theme park as more particularly described in the Phase I development plan attached hereto and made a part hereof as Exhibit ”B”; and

WHEREAS, Developer (together with its Affiliates, as hereinafter defined) has experience and expertise related to development and construction oversight services involving luxury resort hotels and ancillary facilities; and

WHEREAS, Developer is prepared to provide certain development services to the Owner with respect to the development of the Project to be undertaken with respect to the Resort during the Term of this Agreement (as hereinafter defined); and

WHEREAS, Owner desires to retain Developer to provide such services on an exclusive basis, and Developer is willing to provide such services to Owner, subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties covenant and agree as follows:

ARTICLE 1

THE PROJECT

Section 1.01  The Project.  The subject matter of this Agreement is the development of the Project in one or more Phases as may be determined by the Owner from time to time during the Term hereof.

ARTICLE 2

TERM

Section 2.01  Term.  The term of this Agreement shall commence on the Effective Date and continue through the completion date of all Phases of the Project (the “Term”)(unless sooner terminated in accordance with the provisions of this Agreement, or upon mutual agreement of the parties). For the purposes hereof, the Term of this Agreement shall continue through the term of the Management Agreement, defined in Section 9.02 below.

ARTICLE 3

APPOINTMENT OF DEVELOPER AND DEVELOPER’S SERVICES

Section 3.01  Appointment.  Owner hereby retains Developer as its exclusive Developer for the Project and in connection therewith, to perform or provide the services described in this Agreement relating to the development of the Project. Developer hereby agrees to provide the services set forth herein, and such additional services as may from time to time be mutually agreed.

Section 3.02  Developer’s Obligations.  Subject to Owner’s approval of Developer’s actions with respect to the Project, Developer shall be primarily responsible for the following: scheduling, coordinating and directing the Project, including, without limitation, (a) managing Project development and construction until the issuance of the necessary governmental permits which allow the lawful use and occupancy of all portions of the Project, (b) supervision of the completion of any “punch-list” or incomplete items involving any component of the Project, (c) providing reports to Owner periodically as to the status of the development of the Project, and (d) coordinating all construction and other services related to construction typically provided in connection with the development of projects similar to such Project and customary or necessary to prosecute the Project to a successful completion. The scope of the services to be performed by Developer under this Agreement (“the Developer’s Services”) are more particularly described in Exhibit ”C” attached hereto and made a part hereof. Developer shall perform its obligations subject to the following:

(i)Budget. Although Developer will use commercially reasonable efforts to complete each Phase of the Project within the construction schedule and development budget established and approved by Owner (each such budget being herein referred to as a “Budget”), it is understood that agreement as to any construction schedule or Budget shall not constitute or be deemed to

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constitute a guaranty or warranty of such schedule or Budget by Developer nor shall any construction schedule or Budget serve as a measure of Developer’s performance. Notwithstanding the foregoing, it is understood and agreed that Developer shall not make expenditures in excess of the amounts provided in the applicable Budget without the consent of Owner (which consent shall not be unreasonably withheld, conditioned or delayed), except for those expenditures undertaken pursuant to Section 8.02 of this Agreement, and provided further that Developer shall have the right to make line item variances and adjustments to Budget line items in an amount not to exceed ten percent (10%). All of the foregoing services are to be performed in conjunction with the contractors, project manager, architects, attorneys and other consultants recommended by Developer and retained by Owner pursuant to contracts negotiated and recommended by Developer. Notwithstanding the foregoing, Developer will not be responsible for day-to-day onsite supervision of the Project; such onsite supervision being the sole responsibility of a project manager (whether as a third party contractor or through direct employment of a project management team) (“Project Manager”) and general contractor to be selected by Owner with the assistance and recommendations of Developer.

(ii)Disclaimer: Developer is not responsible for, and gives no warranty or representation as to structural integrity of the Real Property, the development of the site, its fitness for purpose or any environmental impact on the Real Property.

(iii)Affiliates. Developer may perform certain of its obligations hereunder and otherwise act by and through or in concert with one or more Affiliates (as defined below) provided that the foregoing shall not diminish any of Developer’s obligations or responsibilities hereunder. Owner recognizes that personnel of Developer or its Affiliates shall not be precluded from working upon other projects of Developer or its Affiliates, provided that such work does not interfere with the performance of Developer’s obligations hereunder. An “Affiliate”is defined herein to include any entity which is owned or controlled by Developer, or any of its direct or indirect principal shareholders, members, or partners, or which directly or indirectly owns a majority interest in or controls Developer, or is under common control with or by Developer’s principal shareholders, members, or partners.

ARTICLE 4

CONTROL OF PROJECT

Section 4.01  Development Objectives.  Developer shall develop in consultation with Owner, and the Consultants (as defined in Section 4.02 below) to the extent necessary, the various themes, goals and objectives for each Phase of the Project which shall result in a development plan for that Phase of the Project and which shall be approved by Owner. The development plan shall (i) identify the major requirements of each Project Phase, (ii) formulate

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the budget estimates and timetables and construction schedules for each Project Phase, and (iii) be approved by Owner. The Developer may use as the basis for hard construction costs and scheduling estimates the information provided by construction contractors and other Consultants for various aspects of the Project, which information shall be reviewed and verified by Developer. A preliminary development plan for the Project, approved by Owner, is attached hereto as Exhibit ”B.”

Section 4.02  Selection of the Contractors, Architect and Consultants.  Developer shall review, select and facilitate Owner’s retention of, as more particularly described below (i) a contractor, contractors, or construction manager for each Phase of the Project (the “Contractor(s)”), (ii) the design and production architect or architects for each Phase of the Project (the “Architect(s)”), and (iii) civil, structural, mechanical, electrical, plumbing and other engineers, interior decorating consultants and space planners, scheduling consultants, construction consultants and other consultants as Developer recommends be engaged by Owner, or which may otherwise be necessary or appropriate for each Phase of the Project (collectively referred to herein as the “Consultants”).All fees paid to the Contractor, the Architect and the Consultants shall be at the sole cost and expense of, and be paid by, Owner on a timely basis in accordance with the requisition and payment procedures established by Developer and shall be in addition to the fees and reimbursements paid to the Developer as set forth herein.

(i)Engagement of Architect Project Manager and Consultants. Owner shall engage an Architect(s), Project Manager and/or Consultants, based on the recommendations of Developer, familiar with the design of hotel facilities and for the purpose of performing certain services in connection with the construction of each Project Phase, including site development. All agreements with the Architect(s), Project Manager and the Consultants shall be in a form of contracts prepared by Developer for execution by Owner.

(ii)Plan Development. Developer shall maintain a liaison with and coordinate the activities of the Architects and Consultants to produce schematic design documents, design development documents, and final plans and specifications for each Project Phase in accordance with the recommendations of Developer and as approved by Owner. Owner shall implement alternative solutions whenever design details adversely affect construction cost, feasibility, project quality, or the construction timetable.

(iii)Proposal Review and Bid Process. Developer shall conduct a review of proposals for the construction of each Phase of the Project, and Developer shall negotiate any construction contract, on behalf of Owner, prior to the award of such construction contract or contracts to a qualified Contractor or Contractors and/or Construction Manager.

(iv)Contracts. Developer shall recommend Contractors and/or a Construction Manager and the Owner shall enter into a construction management agreement and related contracts, or a general contract for the construction of the Project. Developer shall prepare for review and approval by Owner, such approval not to be unreasonably withheld, conditioned, or delayed, and

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execution by Owner of, all required contract documents and agreements necessary for construction of the Project. All contracts shall be in a form negotiated, prepared by Developer and recommended to Owner for execution.

(v)Contract Documents. Any contract relating to the construction of the Project (the “Contract Documents”)shall require the Contractors to be responsible for providing, or causing to be provided, as applicable, all materials, equipment and labor necessary to construct and equip the Project as necessary, including site development, and shall be consistent with subparagraph (vi) below. The scope of the Contract Documents shall require the Contractors to construct the Project, or cause the construction of the Project, as applicable, in accordance with the plans and specifications prepared by the Architect, including any changes or modifications thereto, which plans and specifications are to be recommended to Owner by Developer and approved by Owner, such approval not to be unreasonably withheld or delayed.

(vi)Construction Administration. During the construction of each Phase of the Project, the Developer shall act as the Owner’s representative for all of Owner’s construction administration duties and responsibilities. Developer shall be solely responsible for all construction contract and construction management administration during the construction phase of each Project Phase. Developer shall interpret and decide on matters concerning the performance of any Contractor, and the requirements of the Contract Documents. Developer shall have the authority to reject work that does not conform to the Contract Documents. Developer shall conduct inspections to determine the date or dates of substantial completion and the date of final completion of the Project facilities.

Section 4.03  Bid Procedures and Awards.  With the Developer’s review and approval, and subject to the provisions hereof, the Contractor(s) shall be responsible for the method to be used in selecting subcontractors and in awarding subcontracts in accordance with subcontract forms approved by Developer.

Section 4.04  Status Reports.  To the extent requested by Owner, during the pre-development phase of each Project Phase, Developer shall provide a monthly status report to reflect the Project status. Following the start of construction, Developer shall report on a monthly basis to Owner, or more frequently as reasonably requested by Owner, regarding the progress of construction activities.

Section 4.05  Developer to Nominate Key Personnel.  During the construction of each phase of the Project, Developer shall nominate at least two (2) key persons to supervise on a full-time basis the Developer’s Services provided under this Agreement.

Section 4.06  Relationship of Developer to Owner.  In carrying out its duties and obligations hereunder, Developer’s relationship to Owner shall be that of an independent contractor. Developer’s project manager, key personnel, executive personnel and support staff that are employed in connection with Developer’s services hereunder in connection with the

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Project shall be and shall remain employees, agents or representatives, as the case may be, of Developer and shall not by virtue of their employment with Developer in connection with Developer’s services hereunder, be deemed employees of Owner. Developer agrees to handle the payroll for its employees, withhold from their wages and salaries and make all tax filings and payments with respect to such employees as is required by law, provided, however, that these wage and salary expenses shall be reimbursable to Developer pursuant to Section 6.02 below. In its capacity as aforesaid, Developer shall act for and on behalf of Owner as its representative, and all contracts, permits, licenses, variances and other such documents shall be for and in the name of Owner. Developer shall not be required to make any payments on behalf of Owner or the Project except to the extent that funds are made available by Owner; and, should Developer expend any of Developer’s funds in conjunction with the Project, such funds shall be reimbursed by Owner in accordance with the provisions of Section 6.02 of this Agreement.

Section 4.07  Relationship of Developer to Contractor(s) and Consultants.  Developer shall not have control or charge of and shall not be responsible for the design of the Project or portion thereof, construction means, methods, techniques, sequences or procedures, for the acts or omissions of the Contractor(s), subcontractors, the Architect and Consultants (except those on the staff of Developer or its Affiliates), or any other persons performing any such work on the Project, or for the failure of any of them to carry out their work in accordance with their respective contract documents. Owner shall contract directly with all Contractors, Architects, and Consultants.

ARTICLE 5

OWNER’S OBLIGATIONS

Section 5.01  Obligations of Owner.  During the Term, Owner shall have the obligations set forth below:

(i)Approvals. Owner shall grant approval or deny approval, within fifteen (15) days of request, for actions of Developer with respect to the Project;

(ii)Payments to Developer. Owner shall promptly pay, or make sufficient funds available to Developer to pay, the fees and reimbursements provided for herein, and all Project costs and expenses whether or not set forth in the applicable Budget (which shall include, without limitation, all fees and expenses of the Project’s construction managers, contractors, architects, attorneys and other consultants);

(iii)Insurance. Owner shall procure and maintain (or cause to be procured and maintained by the Architects, Consultants and Contractors) throughout the Term, and at Owner’s expense, insurance coverage as set forth on Exhibit ”D” hereto;

(iv)Financing. Owner shall arrange and negotiate any necessary financing for the development of the Project;

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(v)Authorizations and Permits. Owner and Developer shall cooperate with each other to obtain and maintain all necessary zoning, design and other permits and approvals required for development of the Project;

(vi)Access. Provide Developer and Contractors with access to the Project site at all times; and

(vii)Cooperation. Owner shall do all things and provide all such assistance and cooperation to the Developer as may be necessary and reasonable to assist Developer in the performance of its obligations.

ARTICLE 6

DEVELOPER’S FEE

Section 6.01  Developer’s Fee.  Owner and Developer shall engage in good faith negotiations to determine Developer’s fee (the “Developer’s Fee”) for each respective Phase of the Project. For Phase I of the Project, Owner shall pay to Developer a fixed Developer’s Fee in the amount of Twenty Million dollars (US$20,000,000.00). Three Million dollars (US$3,000,000.00) of the Developer’s Fee for Phase I shall be paid on the Effective Date. Additional advances against the remainder of the total Developer’s Fee shall be paid on a monthly basis, without set-off, deduction or counterclaim, during the applicable development period of Phase I of the Project based upon Developer’s good faith estimate of the total fee payable and the duration of the development period for Phase I. The amount of the monthly installments shall be modified from time to time to reflect changes to the Budget and/or construction schedule. Costs and expenses to be reimbursed to Developer shall be paid within thirty (30) days after Developer’s requisition therefore.

Section 6.02  Reimbursements to Developer.  Owner shall reimburse Developer for any and all of the following costs and expenses incurred by Developer in conjunction with the Project:

(i)the third party costs of obtaining all necessary inspections, tests, approvals, permits and governmental fees, licenses and bonds legally necessary or required by Owner for the proper execution and completion of Developer’s Services;

(ii)the third party costs of all materials and supplies necessary for the proper execution and completion of Developer’s Services including ordinary and necessary third party out-of-pocket costs and expenses for airfare, hotels, meals, couriers, photocopying, postage, entertainment expenses and other similar corporate overheads incurred by the Developer in connection with the day-to-day execution of Developer’s Services (and budgeted on an ongoing basis for approval by Owner);

(iii)payments made by Developer on behalf of Owner or the Project;

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(iv)all costs associated with the inspection of the Project and the status thereof by representatives of Developer, as Developer shall, in its sole discretion, deem necessary from time to time, including, but not limited to, all travel, meals, entertainment and other out-of-pocket expenses of Developer’s employees incurred in the performance of this Agreement, in accordance with reasonable protocols to be established between Owner and Developer;

(v)any costs incurred pursuant to and in accordance with the terms of Section 8.02;

(vi)all Project related costs, expenses and overheads in connection with the presence of and activities of Developer’s staff servicing the Project site, including but not limited to, salaries, wages and benefits of Developer’s staff (including those key personnel referred to in Section 4.05), provision of fully fitted-out office space with power back-up, air conditioning, UPS, furniture, fixtures and equipment, utilities, telephone, postage, courier services, photocopying, stationery and related office expenses provided that any head-office, corporate-allocated, or other off-site costs of Developer shall not be eligible for reimbursement; and

(vii)any other costs reasonably associated with Developer’s Services.

Developer shall submit statements covering such items to Owner, and Owner shall pay to Developer or its Affiliate(s), as applicable, the amount indicated thereon promptly upon the receipt of such statements. Developer shall keep appropriate records to document all reimbursable expenses paid by Developer, which records will be made available for inspection by Owner or its agents upon request.

Section 6.03  Credits to Owner.  Developer shall credit to Owner all discounts, commissions, rebates or similar cost savings obtained in connection with Developer’s development of the Project.

Section 6.04  Taxes.  Owner shall be responsible for payment of all value added, goods and services, sales, withholding or similar taxes (but not income or gross receipts taxes payable by Developer by virtue of the receipt of the Developer’s Fee) and any other governmental fees, if any, levied on or deducted from any amounts payable to Developer or any of its Affiliates pursuant to this Agreement. The amount of such value added, goods and services, sales, withholding or similar taxes (but not income or gross receipts taxes payable by Developer by virtue of the receipt of the Developer’s Fee) shall be payable by Owner to Developer or such Affiliate together with the payment to which it relates, or as otherwise required by applicable law, so that the amount actually received by Developer or such Affiliate in respect of such payment (after payment of such taxes) equals the full amount stated to be payable in respect of such payment. To the extent applicable law requires any such taxes to be paid by Owner directly to a governmental authority, Owner shall pay such taxes promptly, and receipts or other proof of such payment shall be provided to Developer or such affiliate promptly upon receipt.

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ARTICLE 7

CLAIMS AND LIABILITY

Section 7.01  Claims and Liability.  Owner and Developer mutually agree for the benefit of each other to look only to the appropriate insurance coverages in effect pursuant to this Agreement in the event any demand, claim, action, damage, loss, liability or expense occurs as a result of injury to person or damage to property, regardless of whether any such demand, claim, action, damage, loss, liability or expense is caused or contributed to by, or results from, the negligence of Owner or Developer or their subsidiaries, Affiliates, employees, directors, officers, agents or independent contractors, and regardless of whether the injury to person or damage to property occurs in and about the Resort or elsewhere as a result of the performance of this Agreement. Nevertheless, as to Developer, in the event the insurance proceeds are insufficient or there is no insurance coverage to satisfy the demand, claim, action, loss, liability or expense, and the same did not arise out of the gross negligence or willful misconduct of Developer, Owner agrees, at its expense, to indemnify and hold Developer and its subsidiaries, Affiliates, and each of their respective officers, directors, employees, agents and independent contractors harmless to the extent of the liability or excess liability, as the case may be.

Section 7.02  Survival.  The provisions of this Article 7 shall survive any cancellation, termination or expiration of this Agreement and shall remain in full force and effect until such time as the applicable statute of limitation shall cut off all demands, claims, actions, damages, losses, liabilities and expenses which are the subject of the provisions of this Article 7.

ARTICLE 8

CLOSURE, EMERGENCIES AND DELAYS

Section 8.01  Events of Force Majeure.  Developer shall have the authority after consultation with Owner if circumstances allow, but otherwise in Developer’s sole discretion, to cease work on the Project in order to protect the Resort and/or the health, safety and welfare of the guests and/or employees of the Resort for reasons beyond the reasonable control of Developer, such as, but not limited to, acts of war, insurrection, civil strife and commotion, labor unrest, weather conditions (including, without limitation, hurricanes, typhoons, tornadoes, cyclones, other severe storms, winds and lightning), earthquakes, volcanic eruptions, disease, contagious illness, epidemics, governmental regulations and orders, shortage or lack of adequate supplies or lack of skilled or unskilled employees, failure of infrastructure services or structural integrity of the Project, fundamental access to Resort, environmental impact on the Project, erosion, tidal waves, settlement of dredged areas, other catastrophic events and other acts of God. In any such event or similar events (each, an “Event of Force Majeure”), Developer may cease work on all or any part of the Project then in progress, postpone or cancel work on the Project then contemplated, and provide immediate notice thereof to Owner specifying the circumstances of the Event of Force Majeure, providing any supporting documentation as may be available to evidence such circumstances, and shall periodically update the Owner on the progress of the Event of Force Majeure during the course of the resulting interruption of work on the Project. Developer may restart and commence the Project when Developer deems that the Project may be

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undertaken without jeopardy to the Resort, its guests and employees; provided, however, that if such stoppage is for a continuous period of more than ninety (90) consecutive days, Developer shall not restart the Project without Owner’s consent, which shall not be unreasonably withheld, conditioned or delayed.

Developer and Owner agree, except monetary obligations and except as otherwise provided herein, that the time within which a party is required to perform an obligation and Developer’s right to develop the Project under this Agreement shall be extended for a period of time equivalent to the period of delay caused by any Event of Force Majeure.

Section 8.02  Emergencies.  In the event of an emergency situation which creates a risk to life, safety or significant damage to the Resort (each an “Emergency Situation”), Developer shall make good faith, reasonable efforts to notify Owner as soon as Developer becomes aware of the Emergency Situation (but in all events within twenty-four (24) hours following the Emergency Situation) and Developer may make such non-budgeted expenditures as are reasonable in the circumstances (but in no event shall non-budgeted Emergency Situation expenditures exceed One Million and No/100 Dollars ($1,000,000.00) without Owner’s consent); it being understood that Developer shall have no liability or responsibility for any failure to take any action in connection with an Emergency Situation, if the action is not taken as a result of this One Million and No/100 Dollars ($1,000,000.00) limitation or because the other requirements for Emergency Situation expenditures are otherwise not satisfied.

ARTICLE 9

TERMINATION RIGHTS

Section 9.01  Bankruptcy and Dissolution.  If either party is voluntarily or involuntarily dissolved or declared bankrupt or insolvent by a court of competent jurisdiction, or commits an act of bankruptcy, or if a company enters into liquidation, whether compulsory or voluntary, otherwise than for the purpose of amalgamation or reconstruction, or compounds with its creditors, or has a receiver appointed over all or any part of its assets, or passes title in lieu of foreclosure, the other party may terminate this Agreement immediately upon serving notice to the other party, without liability on the part of the terminating party.

Section 9.02  Termination of Management Agreement.  Either party may terminate this Agreement if that Management Agreement, to be entered into by and among Kerzner International Management FZ-LLC (the “Manager”)and Owner (the “Management Agreement”)expires or is terminated upon default in accordance with its terms, provided however, only the party not in default under the Management Agreement may terminate this Agreement pursuant to this Section 9.02. This Agreement shall also terminate in the event of a casualty or condemnation which results in the termination of the Management Agreement.

Section 9.03  (a) Owner’s Default.  The following shall, at the election of Developer, constitute an event of default by Owner under this Agreement (each such event being referred to herein as an “Owner’s Default”):

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(i)Owner fails to pay any fees to Developer for a period of thirty (30) days after the due date (or, for amounts that are due upon demand or presentation of an invoice, thirty (30) days after the receipt of such written demand or presentation of such invoice) ; provided however that if Developer makes a good faith effort to cure such default within the thirty day cure period but such default by its nature cannot reasonably be cured within such period, the cure period shall be extended by a reasonable period not to exceed one hundred and twenty (120) days.

(ii)Owner fails to keep or perform any material duty, obligation, covenant or agreement of Owner under this Agreement (other than a payment obligation referenced in subsection (i) above), and the continuation of such failure for a period of thirty (30) days after the receipt of written notice of such failure from Developer.

(iii)Any material license or permit required for Developer’s performance under the Agreement is suspended for a period in excess of thirty (30) days (through no fault of Developer).

On the occurrence of any Owner’s Default, Developer shall have the right to terminate this Agreement by written notice to Owner.

(b)Developer Default.  The following shall, at the election of Owner, constitute an event of default by Developer under this Agreement (such event being referred to herein as the “Developer Default”):

(i)Developer fails to keep or perform any material duty, obligation, covenant or agreement of Developer under the agreement, and the continuation of such failure for a period of thirty (30) days after the receipt of written notice from Owner; provided however that if Developer makes a good faith effort to cure such default within the thirty day cure period but such default by its nature cannot reasonably be cured within such period, the cure period shall be extended by a reasonable period not to exceed one hundred and twenty (120) days.

On the occurrence of any Developer’s Default, Owner shall have the right to terminate this Agreement by written notice to Developer.

(c)Failure of Financing.  In the event that the Owner fails to obtain the necessary financing for the Project by the 31st December, 2004, either party may serve thirty (30) days written notice to the other, at the expiration of which this Agreement shall terminate, subject to any fees or reimbursable expenses up to that date owed to Developer shall be payable and paid by Owner.

Section 9.04  Delays.   Notwithstanding any other provision of this Agreement, if any event of the type described in Article 8 occurs after the Effective Date and Developer is unable

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to continue development of the Resort for a period of ninety (90) days, Developer shall have the option to terminate this Agreement upon thirty (30) days’ prior written notice to Owner, without liability on the part of the Developer, its parent or their subsidiaries or Affiliates.

Section 9.05  Transition Upon Termination.  Upon any termination of this Agreement, all fees and payments due to Developer as of the effective date of termination, including all accrued and unpaid fees and reimbursable charges and expenses, shall be paid to Developer within ten (10) days after delivery to Owner of an itemized statement of such fees and payments. Developer shall be entitled to exercise the right of set off provided in Section 11.14 hereof with respect to such fees, charges and expenses. In addition, Developer will provide reasonable cooperation to Owner in order to effect an orderly transition of the Project to Owner or as Owner’s nominee, subject to Developer being reimbursed any costs or expenses of so doing.

Section 9.06  Indemnification re Future Business.  Owner shall indemnify and hold Developer and its Affiliates harmless from and against all costs, expenses, claims and liabilities, including reasonable attorneys’ fees, arising or resulting from the failure of Owner, following the expiration or earlier termination (for whatever cause) of this Agreement, (i) to perform its obligations pursuant to any contracts assigned to Owner or Owner’s designee pursuant to Section 9.05 above, or (ii) to honor and fulfill all obligations of Owner under any contracts or leases entered into in the ordinary course of business by Developer as agent of Owner within the scope and terms of this Agreement prior to such expiration or termination, or (iii) to honor all purchase orders and to pay all payables arising out of the operation by Developer of the Resort in the ordinary course of business in accordance with the provisions of this Agreement prior to such expiration or termination.

ARTICLE 10

APPLICABLE LAW AND ARBITRATION

Section 10.01  Applicable Law.  The interpretation, validity and performance of this Agreement shall be governed by the procedural and substantive laws of England, and any and all disputes, except those specifically referred to below, shall be brought and maintained within that jurisdiction. If any judicial authority holds or declares that the law of another jurisdiction is applicable, this Agreement shall remain enforceable under the laws of that jurisdiction.

Section 10.02  Arbitration. Except as otherwise specified in this Agreement, any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the Rules of the London Court of International Arbitration (or any similar successor rules thereto) as are in force on the date when a notice of arbitration is received. The number of arbitrators shall be one unless either party to the arbitration requests otherwise, in which case there shall be three. The language to be used in the proceedings shall be English. The place of arbitration shall be London or such other place as the parties may agree. The decision of the arbitration board shall be final and binding upon the parties, and such decision shall be enforceable through any courts having jurisdiction and particularly the Dubai courts. The costs and expenses of arbitration shall be allocated and paid by the parties as determined by the arbitrators.

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Section 10.03 Performance During Disputes. It is mutually agreed that during any kind of controversy, claim, disagreement or dispute, including a dispute as to the validity of this Agreement or the validity of a notice to terminate this Agreement, Developer and Owner shall continue their performance of the provisions of this Agreement. Developer shall be entitled to injunctive relief from a civil court or other competent authority to maintain possession in the event of a threatened eviction during any dispute, controversy, claim or disagreement arising out of this Agreement.

ARTICLE 11

GENERAL PROVISIONS

Section 11.01 Authorization. Owner and Developer represent and warrant to each other that their respective legal entities have full power and authority to execute this Agreement and to be bound by and perform the terms hereof. On request, each party shall furnish the other evidence of such authority.

Section 11.02 Relationship. Owner and Developer shall not be construed as joint venturers or partners of each other by reason of this Agreement and neither shall have the power to bind or obligate the other except as set forth in this Agreement.

Section 11.03 Developer’s Contractual Authority in the Performance of this Agreement. Notwithstanding any provision hereof to the contrary, Developer is authorized to make, enter into and perform in the name of, as agent for, and for the account of Owner any contracts reasonably deemed necessary by Developer to perform its obligations under this Agreement and otherwise in conformity with the provisions hereof . In exercising its authority hereunder, Developer shall be entitled to execute and enter into contracts without the specific approval of Owner so long as each such contract (i) requires annual expenditures or otherwise establishes annual liability of Fifty Thousand and No/100 Dollars ($50,000.00) or less and (ii) has a term (excluding options in favor of Developer or Owner to renew) of one (1) year or less or (iii) can be cancelled without penalty upon sixty (60) days’ notice or less. Any contract that does not satisfy the conditions set forth in the preceding sentence shall require the prior approval in each instance of Owner, unless the particular expenditure is authorized in an applicable budget. Owner agrees to promptly respond to any request for approval and further agrees that its consent shall not be unreasonably withheld, conditioned, or delayed. Subject to Section 11.06, Developer shall be authorized to enter into contracts with Affiliates of Developer, but only so long as the terms and provisions thereof are on competitive terms and conditions available from unrelated and unaffiliated third parties.

Section 11.04 Further Actions. Owner and Developer agree to execute all contracts, agreements and documents and to take all actions reasonably necessary to comply with the provisions of this Agreement and the intent hereof.

Section 11.05 Successors and Assigns. Owner’s consent shall not be required for Developer to assign its rights, interests or obligations as Developer hereunder to an entity (each, a “KZL Permitted Assignee”)in which Kerzner International Limited, a Bahamian corporation (“KZL”) owns, directly or indirectly, at least fifty and one-tenth percent (50.1%) of the

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ownership interests, and in which KZL or a KZL Permitted Assignee has the sole power to direct management. Developer shall have the right to pledge or assign its right to receive the Developer’s Fees hereunder without the prior written consent of Owner.

Developer’s consent shall not be required for Owner to assign its rights, interests, or obligations as Owner to any affiliate or successor in interest which may result from any merger, consolidation or reorganization with, or any sale or assignment to, any corporation, individual, partnership or other entity which shall acquire all or substantially all of Owner’s business or the Resort, or any affiliate or successor thereof.

Section 11.06 Disclosure of Related Party Transactions. Developer shall disclose to Owner all transactions and agreements with any of its Affiliates related to this Agreement, which shall be subject to Owner’s prior written consent, which shall not be unreasonably conditioned, withheld, or delayed, except that no Owner consent shall be required for transactions or agreements that are (i) in the aggregate in any year, in the amount of Fifty Thousand and No/100 Dollars ($50,000.00) or less and (ii) have a term of twelve (12) months or less (or can be cancelled without penalty upon sixty (60) days notice or less).

Section 11.07 Notices. All notices or other communications provided for in this Agreement shall be in writing and shall be either hand delivered, delivered by certified mail, postage prepaid, return receipt requested, delivered by an overnight delivery service, or delivered by facsimile machine (with an executed original sent the same day by an overnight delivery service), addressed as set forth on Exhibit ”E” hereto. Notices shall be deemed delivered on the date that is four (4) calendar days after the notice is deposited in the mail (not counting the mailing date) if sent by certified mail, or if hand delivered, on the date the hand delivery is made, or if delivered by facsimile machine during business hours, on the date the transmission is made (or the next business day if not transmitted during business hours). If given by an overnight delivery service, the notice shall be deemed delivered on the fourth business day following the date that the notice is deposited with the overnight delivery service. The addresses given above may be changed by any party by notice given in the manner provided herein.

Section 11.08 Documents. Owner shall furnish Developer copies of all leases, title documents, property tax receipts and bills, insurance statements, all financing documents (including notes and mortgages) relating to the Resort and such other documents pertaining to the Resort as Developer shall request.

Section 11.09 Waivers. No failure or delay by Developer or Owner to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement, or to exercise any right or remedy consequent upon the breach thereof, shall constitute a waiver of any such breach or any subsequent breach of such covenant, agreement, term or condition. No covenant, agreement, term, or condition of this Agreement and no breach thereof shall be waived, altered or modified except by written instrument signed by the party against whom the same is sought. No waiver of any breach shall affect or alter this Agreement, but each and every covenant, agreement, term and condition of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof.

Section 11.10 Changes. Any change to or modification of this Agreement must be evidenced by a written document signed by the Parties.

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Section 11.11 Captions. The captions for each Article and Section are intended for convenience only.

Section 11.12 Severability. If any of the terms and provisions hereof shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any of the other terms or provisions hereof. If, however, any material part of a party’s rights under this Agreement shall be declared invalid or unenforceable (specifically including Developer’s right to receive its Developer’s Fees), the party whose rights have been declared invalid or unenforceable shall have the option to terminate this Agreement upon thirty (30) days’ written notice to the other party, without liability on the part of the terminating party.

Section 11.13 Interest. Any amount payable to Developer or Owner by the other which has not been paid when due shall accrue interest beginning on the date due at the lesser of: (a) the highest legal limit permitted under the laws of England or (b) LIBOR (as such term is defined in the Operating Agreement) plus five percent (5%).

Section 11.14 Set off. Without prejudice to Developer’s right to terminate this Agreement pursuant to the provisions of this Agreement, Developer may at any time and without notice to Owner set off or transfer any sum or sums held by Developer or any of its Affiliates to the order or on behalf of Owner in respect of all sums due to Developer under the terms of this Agreement.

Section 11.15 Third Party Beneficiary. This Agreement is exclusively for the benefit of the parties hereto and it may not be enforced by any party other than the Parties, and shall not give rise to liability to any third party other than the authorized successors and assigns of the parties hereto.

Section 11.16 Brokerage. Owner and Developer represent and warrant to each other that neither has sought the services of a broker, finder or agent in this transaction, and neither has employed, nor authorized, any other person to act in such capacity. Owner and Developer each hereby agrees to indemnify and hold the other harmless from and against any and all claims, loss, liability, damage or expense (including reasonable attorneys’ fees) suffered or incurred by the other party as a result of a claim brought by a person or entity engaged or claiming to be engaged as a finder, broker or agent by the indemnifying party.

Section 11.17 Survival of Covenants. Any covenant, term or provision of this Agreement which, in order to be effective, must survive the termination of this Agreement, shall survive any such termination.

Section 11.18 Estoppel Certificate. Owner and Developer agree to furnish to the other party, from time to time upon request, an estoppel certificate in such reasonable form as the requesting party may request, stating whether there have been any defaults under this Agreement known to the party furnishing the estoppel certificate, and such other information relating to the Resort as may be reasonably requested.

Section 11.19 Other Agreements. Except to the extent as may now or hereafter be specifically provided, nothing contained in this Agreement shall be deemed to modify any other agreement between Owner and Developer with respect to the Resort or any other property. This

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Agreement contains the entire agreement between Owner and Developer regarding the development of the Resort.

Section 11.20 Periods of Time. Whenever any determination is to be made or action is to be taken on a date specified in this Agreement, if such date shall fall on a Thursday or a Friday or legal holiday under the laws of United Arab Emirates, then in such event, said date shall be extended to the next day which is not a weekend or legal holiday in such location.

Section 11.21 Preparation of Agreement. This Agreement shall not be construed more strongly against either party regardless of who is responsible for its preparation.

Section 11.22 Exhibits. All exhibits attached hereto are incorporated herein by reference and made a part hereof as if fully rewritten or reproduced herein.

Section 11.23 Projections. Owner acknowledges that any written or oral budgets, construction and development schedules, or other similar information that has been (prior to execution of this Agreement) or will be (during the Term) provided by Developer, or any affiliate of Developer, to Owner is for information purposes only, and that Developer, and any such affiliate, do not guarantee that the Resort will achieve the construction and development results set forth in any such budgets, construction or development schedules, or other similar information. Owner further acknowledges that (i) any such budgets, construction or development schedules, or other similar information are based on assumptions and estimates; (ii) unanticipated events may occur subsequent to the date of preparation of such budgets, construction or development schedules, or other similar information which impact the Resort; and (iii) the actual construction and development results achieved by the Resort are likely to vary from the estimates contained in any such budgets, construction or development schedules, or other similar information, and such variations might be material.

Section 11.24 U.S. Currency. Unless otherwise expressly stated herein, all dollar amounts stated in this Agreement shall refer to United States Dollars.

Section 11.25 Attorneys’ Fees and Other Costs. The parties to this Agreement shall bear their own attorneys’ fees in relation to negotiating and drafting this Agreement. Should Owner or Developer engage in litigation pursuant to Section 10.01 to enforce their respective rights pursuant to this Agreement, the prevailing party shall have the right to indemnity by the non-prevailing party for an amount equal to the prevailing party’s reasonable attorneys’ fees, court costs and expenses arising therefrom.

Section 11.26 Indemnification of Developer. Owner shall indemnify, defend, and hold Developer harmless from and against any and all actions, suits, claims, penalties, losses, damages and expenses, including reasonable attorneys’ fees, based upon or arising out of Developer’s performance of its services hereunder, or out of any occurrence or event happening in or about the Resort or in connection with the Project or occurring in connection with the operation or development of the Project, or with respect to any preopening activities contemplated hereunder, including any alleged breach, or investigation relating to a possible breach, of any legal requirement (collectively “Claims”), except to the extent such Claims are based upon Developer’s gross negligence or willful misconduct. This provision shall survive the expiration or termination of this Agreement.

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Section 11.27 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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The parties hereto have executed this Agreement as of the date first written above.

OWNER:
KERZNER NAKHEEL LIMITED
By:	/s/ Sultan Ahmed Bin Sulayem
Name: Sultan Ahmed Bin Sulayem
Title: Director
In witness:		/s/ Sahia Ahmad
By:	/s/ Howard B. Kerzner
Name: Howard B. Kerzner
Title: Director
In witness:		/s/ Giselle Pyfrom
DEVELOPER:
KERZNER INTERNATIONAL
DEVELOPMENT FZ-LLC
By:	/s/ Richard Lindsay
Name: Richard Lindsay
Title: Authorized Signatory
In witness:		/s/ Sahia Ahmad

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EX-4.19(A)

EXHIBIT 4.19(a)

KERZNER INTERNATIONAL NORTH AMERICA, INC. RETIREMENT SAVINGS PLAN

(Amended and restated effective January 1, 2002)

TABLE OF CONTENTS

ARTICLE I	DEFINITIONS	2
ARTICLE II	PARTICIPATION	9
ARTICLE III	CONTRIBUTIONS	10
ARTICLE IV	PARTICIPANT ACCOUNTS	16
ARTICLE V	LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS	17
ARTICLE VI	THE TRUST	22
ARTICLE VII	INVESTMENT DIRECTIONS	23
ARTICLE VIII	CREDITS TO PARTICIPANTS	24
ARTICLE IX	VESTING	25
ARTICLE X	WITHDRAWALS AND LOANS	28
ARTICLE XI	DISTRIBUTION OF BENEFITS	33
ARTICLE XII	SPECIAL PROVISIONS FOR TOP-HEAVY PLANS	40
ARTICLE XIII	THE ADMINISTRATIVE COMMITTEE	42
ARTICLE XIV	AMENDMENTS, TERMINATIONS AND LIABILITIES	44
ARTICLE XV	MISCELLANEOUS	45
APPENDIX A	PARTICIPATING EMPLOYERS	47

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KERZNER INTERNATIONAL NORTH AMERICA, INC. RETIREMENT SAVINGS PLAN

PREAMBLE

The Plan set forth in this document is known as the Kerzner International North America, Inc. Retirement Savings Plan (formerly known as the Sun International North America, Inc. Retirement Savings Plan).

The Plan was originally established by Resorts International Hotel, Inc. in the form of a non-standardized prototype plan to provide retirement benefits for its eligible employees effective January 18, 1982.  The Plan was amended from time to time to comply with current law and to make certain desirable changes.

Effective January 1, 2000, the Sun International Resorts, Inc. Retirement Savings Plan (the “SIRI Plan”) was merged with and into the Plan and the sponsorship of the Plan was transferred from Resorts International Hotel, Inc. to Kerzner International North America, Inc. (then known as Sun International North America, Inc.).

Effective January 1, 2000, the Plan was amended and restated in its entirety into an individually designed plan.  The Plan was also amended to (i) comply with the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997 and the Internal Revenue Service Restructuring and Reform Act of 1998, and (ii) make certain other desired changes.

Effective January 1, 2002, the Plan is hereby amended to (i) comply with the requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001 that are effective January 1, 2002 and the Job Creation and Worker Assistance Act of 2002, (ii) permit catch-up deferrals for participants age 50 and over, and (iii) make certain other desired changes.

The Plan set forth in this document shall apply only to an employee who terminates employment on or after January 1, 2002 or, with respect to any provision with an earlier effective date as specified in this document, such earlier date.  The rights and benefits, if any, of other employees shall be determined in accordance with the provisions of the Plan as it existed prior to such date.

ARTICLE I

DEFINITIONS

As used herein, the following terms shall have the following meanings, unless the context clearly indicates otherwise.

Section 1.1“Accounts” shall mean the various accounts maintained under the Plan for each Participant to which shall be credited the Contributions made by or on behalf of such Participant.  A Participant’s Accounts may include his “Deferral Account,” his “Discretionary Profit Sharing Contribution Account,” his “Matching Account,” his “Qualified Employer Contribution Account,” and his “Rollover Account,” as further described in Article IV.

Section 1.2“Affiliated Company” shall mean any corporation which is included within a controlled group of corporations (within which the Company is also included) as determined under section 1563(a) of the Code without regard to sections 1563(a)(4) and (e)(3)(C) of the Code; provided, however, that for the purposes of Section 5.6 such determination under section 1563(a) of the Code shall be made by substituting the phrase “at least 50 percent” for the phrase “at least 80 percent” each place it appears in section 1563(a)(1) of the Code.

Section 1.3“Beneficiary” shall mean any person or persons (including a fiduciary or fiduciaries, whether individual or corporate) designated by a Participant or otherwise determined to be entitled to a benefit hereunder pursuant to Section 11.6.

Section 1.4“Board” shall mean the Board of Directors of the Company.

Section 1.5“Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 1.6“Committee” shall mean the administrative committee appointed by the Board in accordance with the provisions of Article XIII.

Section 1.7“Company” shall mean Kerzner International North America, Inc. (formerly known as Sun International North America, Inc.).

Section 1.8“Compensation” shall mean the total remuneration paid by an Employer to an Employee during each Plan Year and reported on IRS Form W-2, other than bonuses, any amounts withheld from a Participant’s paycheck for taxes or other reasons, or taxable income due to stock option exercises, plus any amount contributed to the Plan which qualifies as “Deferral Contributions” as defined in Section 3.2 or any amount contributed by the Employee through salary reduction to another 401(k) plan maintained by the Employer, a cafeteria plan maintained by the Employer pursuant to section 125 of the Code or a transportation fringe benefit plan maintained pursuant to section 132(f) of the Code which is not includable in the gross income of the Participant.  For purposes of calculating Deferral Contributions under Section 3.2, Compensation shall exclude taxes withheld and reported on IRS Form W-2 and any amount contributed by the Employee through salary reduction to (a) any 401(k) plan maintained by the Employer other than the Plan, (b) a cafeteria plan maintained by the Employer pursuant to

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section 125 of the Code or (c) a transportation fringe benefit plan maintained pursuant to section 132(f) of the Code, which is not includable in the gross income of the Participant.  For purposes of Article V, Compensation shall include bonuses and taxable income due to stock option exercises, and, at the election of the Company, exclude any amount contributed to the Plan which qualifies as “Deferral Contributions” as defined in Section 3.2 or any amount contributed by the Employee through salary reduction to another 401(k) plan maintained by the Employer, a cafeteria plan maintained by the Employer pursuant to section 125 of the Code, a qualified transportation fringe benefit plan maintained by the Employer pursuant to section 132(f) of the Code and/or remuneration paid to the Employee while he was not a Participant in the Plan.  Notwithstanding anything herein to the contrary, effective January 1, 1998, any amounts deducted on a pre-tax basis for group health coverage because the Employee is unable to certify that he or she has other health coverage, so long as the Employer does not request or collect information regarding the Employee’s other health coverage as part of the enrollment process for the Employer’s health plan, shall be treated as an amount contributed by the Employer pursuant to a salary reduction agreement to a cafeteria plan for purposes of determining the Employee’s Compensation.  Compensation in excess of the applicable limit under section 401(a)(17) of the Code shall be disregarded with respect to any Plan Year.

Section 1.9“Contributions” shall mean monies paid into the Fund by or on behalf of a Participant.  A Participant’s Contributions may include his “Deferral Contributions,” his “Discretionary Profit Sharing Contributions,” his “Matching Contributions” and his “Qualified Employer Contributions” as further described in Article III.

Section 1.10“Determination Year” shall mean the Plan Year for which a determination is being made of an Employee’s Highly Compensated Employee status pursuant to Section 1.20.

Section 1.11“Disability” shall mean a total and permanent inability to meet the requirements of the Participant’s customary employment which can be expected to last for a continuous period of not less than 12 months.

Section 1.12“Effective Date” shall mean January 1, 2002, or, with respect to any provision with an earlier effective date as specified in this document, such earlier date. The original “Effective Date” of the Plan shall mean January 18, 1982.

Section 1.13“Eligible Employee” shall mean any Employee, other than (a) an Employee whose terms and conditions of employment are determined through collective bargaining, unless the collective bargaining agreement provides for the Employee’s participation in the Plan, (b) an individual who performs services for the Employer as a leased employee within the meaning of section 414(n) of the Code, (c) an Employee who, as to the United States, is a non-resident alien with no U.S. source income from the Employer, and (d) an individual classified by the Company or an Affiliated Company as an independent contractor or any other individual who is not classified by the Company or an Affiliated Company as an employee for purposes of withholding federal employment taxes, regardless of any contrary governmental or judicial determination relating to such employment status or tax withholding obligation.  If an individual in such a non-employee classification is subsequently reclassified as, or determined to

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be, an employee by the Internal Revenue Service, any other governmental agency or authority, or a court, or if an Employer or Affiliated Company is required to reclassify such an individual as an employee as a result of such reclassification or determination (including any reclassification by an Employer or Affiliated Company in settlement of any claim or action relating to such individual’s employment status), such individual shall become eligible to become a Participant in this Plan from the later of the actual or effective date of such reclassification or determination.

Section 1.14“Employee” shall mean all individuals employed by the Company or a Participating Employer, including leased employees within the meaning of section 414(n)(2) of the Code.

Section 1.15“Employer” shall mean the Company and/or any Participating Employer either collectively or individually as the context requires.

Section 1.16“Employment Commencement Date” shall mean the date on which the Employee first performs an Hour of Service for an Employer.

Section 1.17“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may from time to time be amended.

Section 1.18“415 Compensation” shall mean the total of a Participant’s wages, salary and other amounts paid by an Employer and reported on IRS Form W-2, and Deferral Contributions under this Plan and any amount contributed pursuant to a salary reduction election to another 401(k) plan maintained by the Employer, a cafeteria plan maintained pursuant to section 125 of the Code or a transportation fringe benefit plan maintained pursuant to section 132(f) of the Code, which is not includable in the gross income of the Participant. Notwithstanding the foregoing, effective January 1, 1998, any amounts deducted on a pre-tax basis for group health coverage because the Employee is unable to certify that he or she has other health coverage, so long as the Employer does not request or collect information regarding the Employee’s other health coverage as part of the enrollment process for the Employer’s health plan, shall be treated as an amount contributed by the Employer pursuant to a salary reduction agreement to a cafeteria plan for purposes of determining the Employee’s 415 Compensation.

Section 1.19“Fund” shall mean the total corpus of the Trust.

Section 1.20“Highly Compensated Employee” shall mean:

(a)Each Employee who performed services for an Employer or an Affiliated Company during the Determination Year and who:

(i)was at any time in the Determination Year or the preceding Determination Year a five-percent owner (as defined in section 416(i) of the Code and the regulations issued thereunder); or

(ii)for the preceding Determination Year—

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(A)received 415 Compensation from the Employer or an Affiliated Company in excess of $80,000, as adjusted by the Secretary of the Treasury in accordance with section 414(q) of the Code; and

(B)was a member of the group consisting of the top twenty percent (20%) of Employees when ranked on the basis of 415 Compensation paid during such preceding Determination Year.

(b)For purposes of determining the number of Employees in the top-paid group under subparagraph (a)(ii)(B), Employees who have less than six months of service, Employees who work less than 17½ hours per week or less than six months per year, Employees who have not attained age 21 and nonresident aliens shall be excluded.

(c)A former employee shall be treated as a Highly Compensated Employee if such employee was a Highly Compensated Employee when such employee incurred a Severance from Service Date, or if such employee was a Highly Compensated Employee at any time after attaining age 55.

Section 1.21“Hour of Service” shall mean each hour for which an Employee is directly or indirectly paid or entitled to payment by the Company or an Affiliated Company for the performance of employment duties, pursuant to the provisions of section 2530.200b-2(a)(1) of ERISA, which is incorporated herein by reference.

Section 1.22“Investment Fund” shall mean any one of the funds comprising the Fund.

Section 1.23“Non-Highly Compensated Employee”, shall mean an Employee who is not a Highly Compensated Employee.

Section 1.24“Normal Retirement Age” shall mean age 65.

Section 1.25“Participant” shall mean any Employee who meets the participation requirements of Article II.

Section 1.26“Participating Employer” shall mean each Affiliated Company listed on Appendix A and each other Affiliated Company which, with the consent of the Board, adopts this Plan and joins in the corresponding Trust Agreement.  An Affiliated Company which is a foreign corporation as defined in Section 7701(a)(5) of the Code may only adopt this Plan on behalf of its Employees who are citizens of the United States or resident aliens of the U.S. with U.S. source income.

Section 1.27“Period of Severance” shall mean a 12-consecutive month period beginning on an individual’s Severance from Service Date or any anniversary thereof and ending on the next succeeding anniversary of such date during which the individual is not credited with at least one Hour of Service.  In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the date of such absence or

5

the first anniversary of such absence shall not constitute a Period of Severance.  For the purposes of this Section, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the individual, (b) by reason of the birth of a child of the individual, (c) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.  In order to receive credit for absence under this Section, an individual shall provide to the Committee, in the form and manner prescribed by the Committee, information establishing (a) that the absence from work is for reasons set forth in this paragraph and (b) the number of days for which there was such an absence.  Nothing in this Section shall be construed as expanding or amending any maternity or paternity leave policy of the Employer.

Section 1.28“Plan” shall mean the Kerzner International North America, Inc. Retirement Savings Plan (formerly known as the Sun International North America, Inc. Retirement Savings Plan) as set forth herein and as it may from time to time be amended.

Section 1.29“Plan Year” shall mean a period of 12 months commencing on any January 1 and ending on the following December 31.

Section 1.30“Qualified Domestic Relations Order” shall mean a judgment, decree or order (including approval of a property settlement agreement) made pursuant to a state domestic relations law (including a community property law) which:

(a)relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant (the “Alternate Payee”);

(b)creates or recognizes the existence of the Alternate Payee’s right to, or assigns to the Alternate Payee the right to, receive all or a portion of the benefits payable to a Participant under this Plan;

(c)specifies (i) the name and last known mailing address (if any) of the Participant and each Alternate Payee covered by the order, (ii) the amount or percentage of the Participant’s Plan benefits to be paid to the Alternate Payee, or the manner in which such amount or percentage is to be determined, and (iii) the number of payments or the period to which the order applies and each plan to which the order relates; and

(d)does not require the Plan to (i) provide any type or form of benefit, or any option not otherwise provided under the Plan, (ii) provide increased benefits, or (iii) pay benefits to the Alternate Payee that are required to be paid to another Alternate Payee under a prior Qualified Domestic Relations Order.

Section 1.31“Qualified Military Service” shall mean service in the uniformed services (as defined in chapter 43 of title 38, United States Code) by any Employee if such Employee is entitled to reemployment rights under such chapter with respect to such service.

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Section 1.32“Reemployment Commencement Date” shall mean the first day on which an individual performs an Hour of Service after incurring a Period of Severance.

Section 1.33“Required Distribution Date” shall mean:

(a)in the case of a Participant or a former Participant who is a five-percent (5%) owner (within the meaning of section 416(i) of the Code) with respect to the Plan Year in which the Participant attains age 70½, April 1 of the calendar year following the calendar year in which the Participant attains age 70½; and

(b)in the case of all other Participants, April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70½, or (ii) the calendar year in which the Participant has a Severance from Service Date.

Section 1.34“Severance from Service Date” shall mean the earlier of (a) the date on which an individual quits, retires, is discharged or dies, or (b) the first anniversary of the first day of a period in which an individual remains absent from service (with or without pay) with the Employer for any reason other than a quit, retirement, discharge or death, such as vacation, holiday, sickness, disability, leave of absence or layoff.

Section 1.35“Spouse” shall mean the spouse or surviving spouse of the Participant, as the context requires; provided, that a former spouse shall be treated as the spouse or surviving spouse to the extent provided under a Qualified Domestic Relations Order.

Section 1.36“Trust” shall mean the trust established pursuant to and forming a part of this Plan to receive and control the assets of the Plan.

Section 1.37“Trustee” shall mean the persons or corporation acting, at any time, as trustee of the Trust.

Section 1.38“Valuation Date” shall mean the last day of each calendar quarter and any other date, as determined by the Committee, that is closer to the event requiring valuation of any Investment Fund shares credited to a Participant’s Accounts under the Plan.  Notwithstanding the foregoing, for purposes of determining the amount of the benefit to be distributed to a Participant pursuant to Article XI, “Valuation Date” shall mean the date on which the Investment Funds in which the Participant’s Accounts are invested are liquidated, in accordance with uniform and nondiscriminatory procedures determined by the Committee.

Section 1.39“Years of Service” shall mean the service credited to an Employee for purposes of determining the Employee’s eligibility to participate in the Plan and the Employee’s vested interest in the Employee’s Accounts.  The following rules shall apply in calculating Years of Service under this Plan:

(a)An Employee shall be credited with full and partial Years of Service for the period from the Employee’s Employment Commencement Date or Reemployment

7

Commencement Date to the Employee’s Severance from Service Date.  Years of Service shall be calculated on the basis that 12 consecutive months of employment equal one year.  For this purpose, partial years of service shall be aggregated.

(b)If an Employee retires, quits or is discharged, the period commencing on the Employee’s Severance from Service Date and ending on the first date on which the Employee again performs an Hour of Service shall be taken into account, if such date is within 12 consecutive months of the date on which the Employee last performed an Hour of Service.

(c)If an Employee is absent from work for a reason other than one specified in Section 1.39(b) and within 12 months of the first day of such absence, the Employee retires, quits or is discharged, the period commencing on the first day of such absence and ending on the first day the Employee again performs an Hour of Service shall be taken into account, if such day is within 12 months of the date the Employee’s absence began.

(d)Notwithstanding the foregoing, if an Employee is absent for Qualified Military Service under leave granted by the Employer or Affiliated Company or required by law, and, thereafter, while the Employee’s reemployment rights are protected by law, returns to the active employment with the Employer or Affiliated Company while the Employee’s re-employment rights are protected by law or on a temporary leave of absence authorized by the Employer or Affiliated Company in accordance with standard personnel policies announced to the Employees, provided that the Employee immediately returns to the active employment with the Employer or Affiliated Company after the end of such leave of absence, the entire period of absence shall be taken into account.

(e)For purposes of determining an Employee’s eligibility to participate in the Plan under Section 2.1, and the Employee’s vested interest under Section 6.2, Years of Service shall include all periods described in paragraphs (a), (b), (c) and (d) above (including those periods during which the Employee was a leased employee within the meaning of section 414(n) or 414(o) of the Code where section 414(n)(5) does not apply to negate the applicability of section 414(n) of the Code) whether or not the Employee qualified as an Employee during those periods.

(f)Notwithstanding anything herein to the contrary, effective January 1, 2003, an Employee of Kerzner International California, Inc. shall be credited with prior service for eligibility and vesting purposes by treating the Employee’s original hire date with Pinehurst Resorts, Inc. or Troon Gold, L.L.P. as his Employment Commencement Date.

Notwithstanding the foregoing, years of service and partial years of service credited under the terms of the Sun International Resorts, Inc. Retirement Savings Plan immediately prior to the date that such plan was merged with and into the Plan shall be credited as Years of Service; provided, however, that service for any period shall not be counted twice.

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ARTICLE II

PARTICIPATION

Section 2.1Participation.  Each Eligible Employee who was a Participant in the Plan on December 31, 2001 shall remain a Participant on January 1, 2002, if he is then an Eligible Employee.  Each Employee hired on or after the Effective Date of this amendment and restatement who has attained age 21 shall become a Participant at the beginning of the next available payroll period following the date on which he completes one-quarter (1/4) of a Year of Service.

Section 2.2Change of Job Classification and Transfers.  In the event a change of job classification or a transfer to an Affiliated Company results in a Participant no longer qualifying as an Eligible Employee, such Employee shall cease to be a Participant as of the effective date of such change of job classification or transfer, but the Employee shall not be deemed to have incurred a Severance from Service Date.  Should such Employee again qualify as an Eligible Employee, he shall become a Participant as of the effective date of such change.  If the Affiliated Company maintains a qualified retirement plan which permits the transfer of a Participant’s Accounts from this Plan to such plan, such Participant, upon notice in the form and at the time prescribed by the Committee, may elect to have the value of his Accounts transferred to such other plan; provided, however, that the Committee, in its sole discretion, may refuse to allow a transfer if such transfer would violate the provisions of section 411(d)(6) of the Code and the regulations thereunder.

Section 2.3Re-Entry.  A Participant or an Employee who has completed one-quarter (1/4) or more of a Year of Service as of his Severance from Service Date, and who is subsequently reemployed by the Employer, shall resume or become a Participant on the first day of the payroll period next following the date he is reemployed.  An Employee who has not completed a Year of Service as of his Severance from Service Date, and who is subsequently reemployed by the Employer, shall be eligible to participate as provided in section 2.1; provided, however, that service prior to the Employee’s Severance from Service Date shall be canceled if he has incurred a Period of Severance of 5 consecutive years.

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ARTICLE III

CONTRIBUTIONS

Section 3.1General Requirements.  Participants are not required to make Contributions hereunder.  In order to make Contributions, a Participant shall make an election, in the manner prescribed by the Committee, to reduce Compensation and make Deferral Contributions in accordance with the provisions of this Article III, which shall become effective on the first day of the payroll period next following the receipt of such election or as otherwise prescribed by the Committee.  Notwithstanding the foregoing, the Committee, in its sole discretion, may amend or revoke a Participant’s election at any time, if the Committee determines that Contributions or allocations to such Participant’s Account would otherwise exceed the limitations of Article V.

Section 3.2Deferral Contributions.  A Participant shall be eligible to contribute Deferral Contributions into the Fund each Plan Year in accordance with the following subsections:

(a)A Participant’s Deferral Contributions into the Fund shall be any amount up to 100% of the Compensation otherwise payable to the Participant during each payroll period and contributed into the Fund.

(b)A Participant who attains age 50 prior to the end of a Plan Year may elect to authorize the Employer, in accordance with procedures established by the Committee and subject to any limitations imposed by the Committee, to make additional Deferral Contributions to the Plan by reducing his Compensation for any pay period or periods by an amount not to exceed $1,000 in any Plan Year (or such other amount as may be applicable under section 414(v) of the Code), reduced by, to the extent required by applicable Treasury regulations, any other elective deferrals contributed on the Participant’s behalf pursuant to section 414(v) of the Code for the Plan Year; provided, however, that Deferral Contributions shall be treated for purposes of applying the limitations of Articles V and XII as contributed under subsection (a) above in lieu of this subsection unless the Participant is unable to make additional Deferral Contributions under subsection (a) above for the Plan Year due to limitations imposed by the Plan or applicable federal law.

Section 3.3Discretionary Profit Sharing Contributions.  Each Employer may contribute such amounts, if any, as shall be determined by its board of directors, in its sole discretion, on behalf of its Employees who participate in the Plan.  Discretionary Profit Sharing Contributions shall be allocated, as of the last day of such Plan Year, to the Discretionary Profit Sharing Contribution Account of each eligible Participant who was employed during the Plan Year in the proportion that each such Participant’s Compensation for the Plan Year bears to the total Compensation of all such Participants for the Plan Year.

Section 3.4Matching Contributions.  The Company, at its discretion, may make Matching Contributions to the Plan on behalf of Employees who participate in the Plan in an

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amount not to exceed fifty percent (50%) of each Participant’s first 4% of Compensation payable to the Participant during each payroll period and contributed as Deferral Contributions pursuant to Section 3.2(a); provided, however, that a Participant shall be eligible to receive a Matching Contribution for a payroll period only if he is employed on the last day of such payroll period.  Notwithstanding the foregoing, effective January 1, 2003, the amount of the Matching Contributions shall be one-hundred percent (100%) of each Participant’s Deferral Contributions made pursuant to Section 3.2(a), up to 2% of Compensation payable to the Participant during each payroll period; provided, however, that a Participant shall be eligible to receive a Matching Contribution for a payroll period only if he is employed on the last day of such payroll period.  No Matching Contributions shall be made to the Plan with respect to any Deferral Contributions made pursuant to Section 3.2(b).

Section 3.5Rollover Contributions.  The Plan shall accept, as “Rollover Contributions” made on behalf of any Eligible Employee, cash equal to (1) all or a portion of the amount received by the Eligible Employee as a distribution (excluding the portion of any such distribution that consists of after-tax employee contributions) from an eligible rollover plan (as defined in Section 11.10(b)(ii)), or (2) an amount transferred directly to the Plan (pursuant to section 401(a)(31) of the Code) on the Eligible Employee’s behalf by the trustee of an eligible rollover plan (as defined in Section 11.10(b)(ii)), but only if the deposit qualifies as a rollover as defined in section 402 of the Code (or, section 408 of the Code, with respect to a rollover from an individual retirement account described in section 408(a) of the Code or an individual retirement annuity described in section 408(b) of the Code).

If the amount received does not qualify as a Rollover Contribution, the amount shall be refunded to the Eligible Employee.

Section 3.6Limitation on Deferral Contributions.  Notwithstanding anything contained herein to the contrary, a Participant’s total Deferral Contributions made pursuant to Section 3.2(a) together with elective deferrals (as defined in section 402(g) of the Code) under any other plan or arrangement maintained by the Employer or an Affiliated Company during any calendar year, excluding elective deferrals made to any such plan pursuant to section 414(v) of the Code, shall not exceed the dollar limitation in effect under section 402(g) of the Code for any calendar year.

Section 3.7Return of Deferral Contributions.  If the Participant’s Deferral Contributions made under Section 3.2(a) and his elective deferrals made under any other qualified cash or deferred arrangement maintained pursuant to section 401(k) of the Code for a taxable year, exceed the maximum dollar amount excludable from gross income under section 402(g) of the Code (after any Deferral Contributions have been returned to the Participant pursuant to Article V), the Participant shall allocate to the Plan or to such other qualified cash or deferred arrangement the excess deferrals.  The Participant shall notify the Committee of such allocation in writing no later than the March 1 following the Participant’s taxable year in which the excess deferrals were made. If the sum of a Participant’s elective deferrals from the Plan and any other plan or arrangement maintained by the Employer or an Affiliated Company exceed the maximum dollar amount excludable from gross income under section 402(g) of the Code for the

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calendar year, the Participant shall be deemed to have notified the Committee of such excess deferrals.   Notwithstanding any other provisions of the Plan, not later than the April 15 following the close of the taxable year, the Committee may cause the Trustee to distribute to the Participant the excess deferrals (adjusted for any income or loss attributable thereto and subject, however, to the withholding of taxes and other amounts as though such amounts were current remuneration) allocated to the Plan by the Participant pursuant to this Section.  In the event a Participant receives a distribution of excess Deferral Contributions pursuant to this Section 3.7, the Participant shall forfeit any Matching Contributions (plus income thereon determined as described in Section 5.5(e)) allocated to the Participant by reason of the distributed Deferral Contributions.  For purposes of determining the necessary forfeiture, Matching Contributions previously distributed pursuant to Section 5.5(d) shall be treated as forfeited under this Section 3.7.

Section 3.8Contributions to the Fund.  Amounts representing a Participant’s Deferral Contributions shall be deducted from payrolls pursuant to a salary reduction agreement between the Employer and the Participant, and such amounts shall be contributed to the Fund as soon as administratively practicable, but in no event later than the 15th business day of the month following the month in which such Deferral Contributions were withheld from the Participant’s Compensation.  Discretionary Profit Sharing Contributions shall be made no later than the last date on which amounts so paid may be deducted for federal income tax purposes for the taxable year of the Employer in which the Plan Year ends.  Matching Contributions for any payroll period shall normally be contributed to the fund as soon as administratively practicable, but in no case later than the time prescribed by law for taking a deduction for federal income tax purposes.Qualified Employer Contributions for any Plan Year shall be made no later than 12 months after the close of the Plan Year to which the contribution relates, unless otherwise prescribed by law.  The requirements of this section 3.7 shall not apply to contributions made pursuant to section 3.14.

Section 3.9Suspension or Change in Rates of Contributions.  A Participant may suspend or change the rate of his Deferral Contributions by submitting a request, in the manner and at the times prescribed by the Committee, prior to the first day of the payroll period as of which the suspension or change is to become effective.  All Contributions by a Participant shall be suspended without any request on his part for any month in which he is on leave of absence without Compensation.  Such suspension shall continue until the first day of the month following the termination of such leave, and Participants shall not be permitted to pay suspended Contributions.

Section 3.10Deductibility of Contributions.  Contributions under the Plan are conditioned upon their deductibility under section 404 of the Code and, to the extent the deduction is disallowed, shall be returned to the Employer or the Participant as appropriate within one year after the disallowance of the deduction.  For purposes of this Section, a Contribution which is not deductible in the current taxable year of the Employer but may be deducted in taxable years of the Employer subsequent to the year in respect of which it is made, shall not be considered to be disallowed.  Notwithstanding the foregoing, the maximum amount

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which may be returned to the Employer or a Participant shall be the value of the Contribution on the date it is returned.

Section 3.11Mistake.  In the case of a Contribution which is made under a mistake of fact, such Contribution shall be returned to the Employer or the Participant, as appropriate, within one year after the payment of the Contribution.  Notwithstanding the foregoing, the maximum amount which may be returned to the Employer or a Participant shall be the value of the Contribution on the date it is returned.

Section 3.12Contributions Conditioned on Plan Qualification.  All Contributions under the Plan are conditioned on the initial qualification of the Plan under sections 401(a) and 401(k) of the Code, and if the Plan is found not to so qualify, it shall be terminated in accordance with the provisions of Section 14.2 and the Fund shall be distributed to the Participants and the Employer, as appropriate, within one year after the denial of such qualification.

Section 3.13Records.  All Contributions transferred to the Trustee under the Plan shall be accompanied by instructions from the Committee to the Trustee that:  (a) identify the Participant on whose behalf the Contribution is being made; and (b) state whether the Contribution represents a Deferral Contribution under Section 3.2, a Discretionary Profit Sharing Contribution under Section 3.3 or a Matching Contribution under Section 3.4.

Section 3.14Contributions For Periods of Military Service.  Notwithstanding any provision of this Plan to the contrary, all contributions with respect to periods of Qualified Military Service shall be provided in a manner consistent with Code section 414(u), as follows:

(a)Deferral Contributions.  The Employer shall permit a reemployed Participant (who is reemployed while his reemployment rights are protected by law) to make additional Deferral Contributions during the period which begins on the date of the reemployment of such Participant and has the same length as the lesser of:

(i)the product of 3 and the period of Qualified Military Service which resulted in such rights, and

(ii)5 years.

The amount of additional Deferral Contributions permitted under this subsection (a) is the maximum amount of the Deferral Contributions that the Participant would have been permitted to make under the Plan during the period of Qualified Military Service if the Participant had continued to be employed by the Employer during such period and received compensation as determined under subsection (e).  Proper adjustment shall be made to the amount determined under the preceding sentence for any Deferral Contributions actually made during the period of such Qualified Military Service.

(b)Discretionary Profit Sharing Contributions.  The Employer shall contribute to the Plan on behalf of a Participant an amount equal to the Discretionary Profit

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Sharing Contribution that would have been allocated under Section 3.3 had the Participant continued to be employed and received Compensation during the applicable period of military service.

(c)Matching Contributions.  The Employer shall make a Matching Contribution on behalf of a Participant with respect to any additional Deferral Contributions made by the Participant pursuant to subsection (a) on the same basis Matching Contributions would have been made under Section 3.4 had such Deferral Contributions actually been made during the period of Qualified Military Service.

(d)Qualified Employer Contributions.  The Company shall contribute to the Plan, on behalf of each Participant who returns from Qualified Military Service as described in Section 1.31, an amount equal to the Qualified Employer Contributions that would have been required under Section 3.15 had such Participant continued to be employed and received Compensation during the period of Qualified Military Service.

(e)Limitation on Crediting of Earnings and Forfeitures.  Nothing in this Section 3.14 shall be construed as requiring (i) any crediting of earnings to a Participant with respect to any Deferral Contribution, Discretionary Profit Sharing Contribution or Matching Contribution before such contribution is actually made, or (ii) any allocation of any forfeiture with respect to the period of Qualified Military Service.

(f)Compensation.  For purposes of this Section 3.14, a reemployed Participant shall be treated as receiving Compensation and 415 Compensation during a period of Qualified Military Service equal to:

(i)the Compensation and 415 Compensation the Participant would have received during such period if the Participant were not in Qualified Military Service, determined based on the rate of pay the Participant would have received from the Employer but for absence during the period of Qualified Military Service, or

(ii)if the Compensation and 415 Compensation the Participant would have received during such period was not reasonably certain, the Participant’s average Compensation during the 12-month period immediately preceding the Qualified Military Service (or, if shorter, the period of employment immediately preceding the Qualified Military Service).

(g)Inapplicability of Certain Limitations.  If any contributions are made by a Participant or the Employer in accordance with this Section 3.14:

(i)any such contribution shall not be subject to any otherwise applicable limitation contained in, and the Plan shall not be treated as failing to meet the requirements of, Section 3.6, 5.6, 5.8, and shall not be taken into account in applying such limitations to other contributions or benefits under the Plan with respect to the year in which the contribution is made;

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(ii)any such contribution shall be subject to the limitations referred to in subparagraph (g)(i) with respect to the year to which the contribution relates (in accordance with rules prescribed by the Secretary of the Treasury); and

(iii)the Plan shall not be treated as failing to meet the requirements of Sections 5.2, 5.4 and 5.5 or Article XII by reason of such contributions.

Section 3.15Qualified Employer Contributions.  The Company may, in its discretion, make Qualified Employer Contributions for a Plan Year that (a) shall be allocated to some or all Non-Highly Compensated Employees who have met the eligibility requirements of Article II pro rata on the basis of the Deferral Contributions or Compensation for the Plan Year or in a uniform dollar amount, as determined by the Company, in an amount that is necessary to help satisfy any or all of the tests in Sections 5.2, 5.4 or 5.5 or (b) shall be allocated in the manner prescribed by the Company to correct any operational or demographic failure pursuant to any correction program or policy established by the Internal Revenue Service or the Department of Labor.

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ARTICLE IV

PARTICIPANT ACCOUNTS

Section 4.1Deferral Account.  Deferral Contributions made on behalf of a Participant shall be allocated to his Deferral Account and shall be invested in accordance with the provisions of Article VII.

Section 4.2Discretionary Profit Sharing Contribution Account.  Discretionary Profit Sharing Contributions made on behalf of a Participant shall be allocated to his Discretionary Profit Sharing Contribution Account and shall be invested in accordance with the provisions of Article VII.

Section 4.3Matching Account.  Matching Contributions made on behalf of a Participant shall be allocated to his Matching Account and shall be invested in accordance with the provisions of Article VII.

Section 4.4Qualified Employer Contribution Account.  Qualified Employer Contributions made on behalf of a Participant in respect of any Plan Year shall be allocated to his Qualified Employer Contribution Account and shall be invested in accordance with the provisions of Article VII.

Section 4.5Rollover Account.   Rollover Contributions transferred to the Plan on a Participant’s behalf pursuant to Section 3.5 shall be allocated to the Participant’s Rollover Account and shall be invested in accordance with the provisions of Article VII.

Section 4.6Maintenance of Accounts.  With respect to each Participant, the Trustee shall maintain separately the Accounts referred to in Sections 4.1, 4.2, 4.3, 4.4 and 4.5.  The Committee shall furnish the Trustee with instructions in accordance with Section 3.13 enabling the Trustee to allocate properly all Contributions under the Plan to said Accounts.  In making such allocation, the Trustee shall be fully entitled to rely on the instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto.

Section 4.7Statements.  The Trustee shall furnish each Participant statements at least annually reflecting the current fair market value of the Participant’s Accounts under the Plan.

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ARTICLE V

LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

Section 5.1General Requirements.  For any Plan Year, (a) Contributions under the Plan shall not exceed the limitations on deductions imposed under section 404(a)(3) of the Code; (b) the Plan shall satisfy the coverage requirements of section 410(b)(1) of the Code; (c) the Plan shall satisfy the average deferral percentage test set forth in Section 5.2; (d) the Plan shall satisfy the average contribution percentage test set forth in Section 5.4; and (e) the Plan shall satisfy the limitation on use of percentage tests set forth in Section 5.5 when applicable.

Section 5.2Average Deferral Percentage Test.  The average deferral percentage for Highly Compensated Employees who are Participants for the Plan Year shall not exceed the greater of (a) or (b) as follows:

(a)The average deferral percentage for the current Plan Year for Participants who are Non-Highly Compensated Employees, multiplied by 1.25, or

(b)The average deferral percentage for the current Plan Year for all Participants who are Non-Highly Compensated Employees, multiplied by 2.0; provided that the average deferral percentage for Highly Compensated Employees who are Participants may not exceed the average deferral percentage for Non-Highly Compensated Employees who are Participants by more than two percentage points.

Notwithstanding the foregoing, the average deferral percentage test for 2002 shall be performed based on the average deferral percentage for the prior Plan Year for Participants who are Non-Highly Compensated Employees.

Section 5.3Average Deferral Percentage.  For purposes of Section 5.2, the term “average deferral percentage” as applied to a specified group of Participants shall mean the average of the ratios, calculated separately for each such Participant in such group of:

(a)the amount of (i) Deferral Contributions (excluding any Deferral Contributions taken into account in determining the average contribution percentage in Section 5.4(a), distributed to a Non-Highly Compensated Employee pursuant to a claim for distribution under Section 3.7, returned to the Participant pursuant to Section 5.6(c), contributed pursuant to Section 3.2(b) and any other elective deferrals made pursuant to section 414(v) of the Code), plus (ii) at the election of the Employer, the amount of Qualified Employer Contributions paid to the Plan on behalf of each such Participant for such Plan Year, to

(b)the Participant’s Compensation for such Plan Year; provided, however, that the Committee may determine, for any Plan Year, to consider only that Compensation paid to a Participant while he was a Participant in the Plan.

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For the purposes of this Section, the deferral percentage of a Highly Compensated Employee who is a Participant under this Plan and who has made elective deferrals under any other qualified cash or deferred arrangement (excluding plans that are not permitted to be aggregated under Treas. Reg. §1.401(k)-1(b)(3)(ii)(B)) maintained by the Employer or an Affiliated Company pursuant to section 401(k) of the Code shall be the sum of his deferral percentages under all such plans.

Section 5.4Average Contribution Percentage Test.  The term “average contribution percentage test” shall mean the numerical test set forth in Section 5.2 substituting for the term “average deferral percentage” the term “average contribution percentage.” Notwithstanding the foregoing, the average contribution percentage test for 2002 shall be performed based on the average contribution percentage for the prior Plan Year for Participants who are Non-Highly Compensated Employees.

(a)The term “average contribution percentage” as applied to a specified group of Participants shall mean the average of the ratios, calculated separately for each such Participant in such group of:

(i)the amount of (a) Matching Contributions paid to the Plan on behalf of such Participant for such Plan Year (excluding Matching Contributions that are distributed or returned to the Company under Section 3.7 or 5.6), plus (B) at the discretion of the Company, Deferral Contributions made under Section 3.2(a) (excluding elective deferrals made pursuant to section 414(v) of the Code), plus, at the election of the Employer, Qualified Employer Contributions paid to the Plan on behalf of such Participant for such Plan Year, to

(ii)the Participant’s Compensation for such Plan Year; provided, however, that the Committee may determineto consider only that Compensation paid to a Participant while he was a Participant in the Plan.

(b)Deferral Contributions may be taken into account under this Section only to the extent necessary to satisfy the average contribution percentage test, and only to the extent that the Plan continues to satisfy the average deferral percentage test set forth in Section 5.2 without taking into account such Deferral Contributions.

(c)Matching Contributions may be taken into account under this Section only the extent that they are not used to satisfy the average deferral percentage test.

(d)If a Highly Compensated Employee participates in any other plan of the Employer to which Employer matching contributions, Employee contributions or elective deferrals are made, all such contributions shall be aggregated for purposes of this Section (excluding plans that are not permitted to be aggregated under Treas. Reg. §1.401(m)-1(b)(3)(ii)).

Section 5.5Correction of Excess Contributions.

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(a)Excess Deferral Contributions shall be returned to Highly Compensated Employees in the manner set forth in Section 5.5(c) hereof if the limitations under Section 5.2 or 5.4 are exceeded.  Excess Deferral Contributions to be returned to Highly Compensated Employees shall be determined by:

(i)reducing the actual deferral percentage of Highly Compensated Employee(s) with the highest average deferral percentage until the nondiscrimination test of Section 5.2 has been satisfied or until the actual deferral percentage of such Highly Compensated Employee(s) is equal to the actual deferral percentage of the Highly Compensated Employee with the next highest average deferral percentage;

(ii)repeating the process in paragraph (i) above until the nondiscrimination test of Section 5.2 is satisfied; and

(iii)converting into a dollar amount any reduction in the actual deferral percentage of each affected Highly Compensated Employee.

(b)The amount of excess Matching Contributions to be returned to Highly Compensated Employees shall be determined in the manner set forth in Section 5.5(a) above.  Excess Matching Contributions, if any, shall be returned to Highly Compensated Employees in the manner set forth in Section 5.5(d) hereof.

(c)Should the average deferral percentage of Highly Compensated Employees for a Plan Year exceed the restrictions described in Section 5.2, the excess Highly Compensated Employees’ Deferral Contributions (determined under Section 5.5(a)) shall be distributed from the Deferral Account of the Highly Compensated Employee(s) with the greatest amount of Deferral Contributions for the Plan Year or until the Deferral Contributions made by such Highly Compensated Employee(s) equals the Deferral Contributions made by the Highly Compensated Employee(s) with the next greatest amount of Deferral Contributions for the Plan Year.  Distributions shall first be made with respect to Deferral Contributions that are not taken into account in determining Matching Contributions pursuant to Section 3.4.  This process shall be repeated until all the excess Deferral Contributions attributable to the applicable test have been distributed.  For purposes of this subsection (c), Deferral Contributions made under Section 3.2(b) and any other elective deferrals made pursuant to section 414(v) of the Code shall not be taken into account.

(d)Notwithstanding the foregoing, at the election of the Committee and in accordance with rules uniformly applicable to all affected Participants, the average deferral percentage reduction described in this Section may be accomplished, in whole or in part, by recharacterizing the excess Deferral Contributions as Deferral Contributions made under Section 3.2(b) to the extent permitted by Code section 414(v) and regulations issued thereunder.  In the event a Participant’s excess Deferral Contributions are recharacterized as Deferral Contributions made under Section 3.2(b) pursuant to this subsection (d), the Participant shall forfeit any Matching Contributions (plus income thereon determined as described in Section 5.5(e)) allocated to the Participant by reason of the recharacterized Deferral Contributions.

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(e)Should the average contribution percentage of Highly Compensated Employees for a Plan Year exceed the restrictions described in Section 5.3, the excess Highly Compensated Employees’ Matching Contributions (determined under Section 5.5(b)) shall be distributed or, if forfeitable, forfeited from the Matching Account of the Highly Compensated Employee with the greatest actual contribution percentage in the manner described in section 5.5(c) hereof.  Amounts to be forfeited shall include a proportionate share of earnings.

(f)The distribution or forfeiture of excess Contributions pursuant to subsection (c) or (d) above shall be made within two and one half (2-1/2) months following the close of such Plan Year, if administratively practicable, but in no event later than the last day of the twelve month period following the close of such Plan Year.  Any Matching Contributions (excluding Matching Contributions that are distributed or forfeited pursuant to the provisions of subsection (d)) plus related earnings that have been allocated to a Participant on account of excess Deferral Contributions that are returned pursuant to subsection (c) shall be forfeited.  Amounts forfeited shall, at the discretion of the Committee, be used to (i) pay any administrative expenses of the Plan, (ii) fund benefits required to be restored under Section 9.3 or (iii) reduce the Employer’s obligation to make Matching Contributions allocated under Section 3.4.

(g)Notwithstanding anything in this Section to the contrary, for any Highly Compensated Employee who is an active Participant in the Plan while simultaneously eligible to participate in any other qualified retirement plan maintained by the Employer or an Affiliated Company (excluding any such plan which is not permitted to be aggregated with the Plan pursuant to Treas. Reg. §1.401(k)-1(b)(3)(ii)(B) or §1.401(m)-1(b)(3)(ii)) under which the Employee has made employee contributions or elective deferrals, or is credited with employer matching contributions for the year, the Committee shall coordinate corrective actions under this Plan and such other plan for the year.

Section 5.6Maximum Allocation to Participants.

(a)Notwithstanding any other provision of this Plan, the amount of the Annual Addition to each Participant’s Accounts for any Plan Year may not exceed the lesser of:

(i)$40,000 (as adjusted under section 415(d) of the Code), or

(ii)one-hundred percent (100%) of the total 415 Compensation paid to the Participant during a Plan Year.

(b)For purposes of this Section, “Annual Addition” means (i) the sum of all contributions by the Participant or by the Employer or an Affiliated Company hereunder or under any other defined contribution plan maintained by either, except elective deferrals distributed pursuant to Section 3.7 or Deferral Contributions made pursuant to Section 3.2(b) or any other elective deferrals made pursuant to section 414(v) of the Code; (ii) all forfeitures allocated to the Participant’s accounts under such plans; and (iii) all amounts described in sections 415(1)(1) (relating to contributions allocated to individual medical accounts which are part of a pension or

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annuity plan) and 419A(d)(2) (relating to post-retirement medical or life insurance benefit accounts for key employees of the Code.

(c)If a Participant’s Annual Addition exceeds the amount specified in Section 5.8(a), as a result of the reallocation of forfeitures, a reasonable error in estimating the Participant’s Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of section 402(g) of the Code) or such other circumstances as permitted by law, the Committee shall determine which portion, if any, of such excess amount is attributable to the Participant’s Deferral Contributions, and/or Discretionary Profit Sharing Contributions, and/or Matching Contributions and/or Qualified Employer Contributions, if any, until such amount has been exhausted.  To the extent any portion of a Participant’s Deferral Contributions are determined to be excess under this Section, such Deferral Contributions, with income thereon, shall be returned to the Participant as soon as administratively practicable.  To the extent any portion of the Discretionary Profit Sharing Contributions, Matching Contributions or Qualified Employer Contributions allocable to a Participant are determined to be excess under this Section, while the Participant remains an Eligible Employee, his excess Discretionary Profit Sharing Contributions, Matching Contributions, and/or Qualified Employer Contributions shall be held in a suspense account (which shall share in investment gains and losses of the Fund) by the Trustee until the following Plan Year (or any succeeding Plan Years), at which time such amounts shall be allocated to the Participant’s Accounts before any Discretionary Profit Sharing Contributions, Matching Contributions or Qualified Employer Contributions are made on his behalf for the Plan Year.  When the Participant ceases to be an Eligible Employee, his excess Discretionary Profit Sharing Contributions and/or Matching Contributions and/or Qualified Employer Contributions held in the suspense account shall be allocated in the following Plan Year (or any succeeding Plan Years) to the Accounts of other Participants in the Plan.  Furthermore, the Committee shall perform any other actions as may be necessary to preserve the Plan’s status as a qualified plan.

Section 5.7Aggregation.  For purposes of Sections 5.2, 5.4 and 5.5, the Plan shall be aggregated and treated as a single plan with other plans maintained by the Employer or an Affiliated Company to the extent that the Plan is aggregated with any such other plan for purposes of satisfying section 410(b) (other than section 410(b)(2)(a)(ii)) of the Code.

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ARTICLE VI

THE TRUST

Section 6.1Establishment of Trust.  All assets of the Plan shall be held in the Trust forming a part of the Plan established by the execution of a trust agreement by and between the Company and the Trustee.  No part of the principal or income of the Trust shall be used for, or diverted to, purposes other than the exclusive benefit of the Participants and their beneficiaries and defraying reasonable expenses of administering the Plan to the extent not otherwise paid by the Company.  No person shall have any interest in or right to any part of the earnings of the Fund, or any right in, or to, or under the Trust or any part of the assets thereof, except as and to the extent expressly provided in the Plan.

Section 6.2Removal of Trustee.  All Contributions under the Plan received by the Trustee together with any earnings thereon, shall be held, managed and administered by the Trustee in accordance with the terms and conditions of the Trust Agreement.  The Committee may remove the Trustee at any time upon such notice as is required by the Trust Agreement.  Upon such removal or upon resignation of the Trustee, the Committee shall designate a successor Trustee.

Section 6.3Investment Funds.  The Fund shall consist of separate Investment Funds selected by the Committee.  The Committee may, in its discretion, establish additional funds and may terminate any fund from time to time.  The Investment Funds may include, but shall not be limited to, funds managed by the Trustee, or by an Investment Company regulated under the Investment Company Act of 1940.  The Investment Funds may, in whole or in part, be invested in any common, collective, or commingled trust fund maintained by the Trustee, which is invested principally in property of the kind specified for that particular Investment Fund and which is maintained for the investment of the assets of plans and trusts which are qualified under the provisions of section 401(a) of the Code and exempt from Federal taxation under the provisions of section 501(a) of the Code, and during such period of time as an investment through any such medium exists the declaration of trust of such trust shall constitute a part of the Trust.

Section 6.4Investment Direction.  All Contributions under the Plan that are allocated to any separate Account of a Participant in accordance with Article IV shall be invested by the Trustee in shares of the Investment Funds as directed by the Participant pursuant to Article VII, which shares shall be credited to the Participant’s separate Account.  If the Participant fails to direct any assets held in his Accounts, such assets shall be invested as directed by the Committee or its delegate.

Section 6.5Reinvestment of Income.  All interest, dividends, capital gains, distributions and other income received with respect to any shares of an Investment Fund credited to any separate Account of a Participant under the Plan shall be reinvested by the Trustee in additional shares of the same Investment Fund and credited to the Participant’s separate Account.

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ARTICLE VII

INVESTMENT DIRECTIONS

Section 7.1Investment of Contributions. Investments of a Participant’s Contributions shall be made in such percentages as the Participant may direct to the Investment Funds available.  The percentage allocation of a Participant’s future Contributions to be paid into and invested in the Investment Funds may be changed not more frequently than once each pay period in the manner prescribed by the Committee.

Section 7.2Investment of Rollover Account.  In accordance with rules and regulations issued by the Committee, each Participant shall have the right to direct that his Rollover Account, if any, be invested in the manner prescribed in Section 7.1.

Section 7.3Transfer of Investments.  A Participant may, in the manner and at the times prescribed by the Committee, transfer any portion, in whole percentage increments, of his interest in any Investment Fund to any one or a combination of the other Investment Funds.

Section 7.4Notice.  Any direction or notice pursuant to Section 7.1, 7.2 and/or 7.3 shall be made in accordance with such rules as may be established by the Committee.

Section 7.5Reliance on Investment Direction.  All investment directions or notices by Participants pursuant to Section 7.1, 7.2 or 7.3 shall be furnished by the Participant directly to the Trustee in the manner prescribed by the Trustee or timely furnished by the Committee to the Trustee.  In making any investment of Plan assets, the Trustee shall be fully entitled to rely on such directions or notices furnished by the Participant or the Committee.

Section 7.6Fiduciary Responsibility.  This Plan is intended to constitute a plan described in section 404(c) of the Employee Retirement Security Act of 1974, as amended, and Title 29 of the Code of Federal Regulations §2550.404c-1.  Neither the Company, the Employer, the Committee, the Trustee nor any other Plan fiduciary shall be liable for any losses which are the direct and necessary result of investment instructions provided by any Participant, beneficiary or Alternate Payee.

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ARTICLE VIII

CREDITS TO PARTICIPANTS

Section 8.1Crediting of Accounts.  Contributions by or for a Participant shall be credited to his Accounts as provided in Article IV.  The Committee or its delegate shall keep appropriate records so that the distinction between Accounts and amounts attributable to each may be maintained as credits are shifted from one Investment Fund to another pursuant to Article VII.

Section 8.2Valuation of Funds.  For purposes of distributions to a Participant or his Beneficiary, the amount of any Investment Fund shares credited to a separate Account of a Participant shall be determined by the fair market value of the shares as of the following dates:

(a)in the case of a withdrawal payment of amounts from an Investment Fund, on the Valuation Date coinciding with or immediately preceding the effective date of the withdrawal payment; and

(b)in the case of a distribution under Article XI, the Valuation Date related to the date of distribution.

Section 8.3Commingling of Assets.  The Trustee may hold a Participant’s Accounts in one or more commingled funds if accounting records are maintained in such a form that all investment events, including both realized and unrealized gains and losses as well as receipt of dividends and interest, occurring during each interval between Valuation Dates will be allocated to the Participant’s Account or Accounts with respect to which such investment event or events occurred.

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ARTICLE IX

VESTING

Section 9.1Vesting Schedule.

(a)A Participant shall be fully vested in the balance of his Deferral Account and his Qualified Employer Contribution Account at all times.

(b)A Participant hired by the Employer prior to January 1, 1998 shall vest in amounts contributed to his Discretionary Profit Sharing Contribution Account and Matching Account during a Plan Year (including subsequent earnings and losses on these amounts) in accordance with the following schedule:

Years of Service	Vested Interest
Less than 1	0%
1	33-1/3 %
2	66-2/3 %
3	100%

(c)A Participant hired by the Employer on or after January 1, 1998 shall vest in amounts contributed to his Discretionary Profit Sharing Contribution Account and Matching Account during a Plan Year (including subsequent earnings and losses on these amounts) in accordance with the following schedule:

Years of Service	Vested Interest
Less than 1	0%
1	20%
2	40%
3	60%
4	80%
5 or more	100%

(d)A Participant’s interest in his Discretionary Profit Sharing Contribution Account and Matching Account shall in any case become 100% vested upon his attainment of Normal Retirement Age or upon the occurrence of a Disability or death.

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Section 9.2If a Participant has received a distribution from his Discretionary Profit Sharing Contribution Account or his Matching Account, at a time when he has less than a one hundred percent (100%) vested interest in such Account, his vested interest in such Account at all times prior to the date on which he incurs a Period of Severance of 5 consecutive years, shall be an amount “X” determined by the formula X=P(AB+(RxD))-(RxD), when:

“P” =the Participant’s vested interest as determined under subsection (b) on the date of reference.

 “AB” =the balance, as of the date of reference, of the Participant’s Discretionary Profit Sharing Contribution Account or Matching Account.

“D” =the amount of the distribution.

“R” =the ratio of AB to the balance, immediately following the distribution, of the Participant’s Discretionary Profit Sharing Contribution Account or Matching Account.

In the event that the Participant has received more than one such distribution, his vested interest in such Account shall be an amount “X(n)” determined by the formula

X(n)=P[AB+((R(1)xD(1))+(R(2)xD(2))+...+(R(n)xD(n))]-[(R(1)xD(1))+(R(2)xD(2))+...+ (R(n)xD(n))], when D(1) is the amount of the first such distribution, D(2) is the amount of the second such distribution, and so forth, and R(1) is the ratio of the AB to the balance of the Discretionary Profit Sharing Contribution Account or Matching Account following the first distribution, R(2) is the ratio of AB to the balance of the Discretionary Profit Sharing Contribution Account or Matching Account immediately following the second distribution, and so forth.

Section 9.3Effect of Periods of Severance for Vesting Purposes.  For purposes of determining a Participant’s vested interest in his Discretionary Profit Sharing Account and his Matching Account, the following rules shall apply:

(a)Except as otherwise provided in this Section, in the case of any Participant who has incurred a Period of Severance and is subsequently reemployed by the Employer, Years of Service and any partial Year of Service before the Participant’s Severance from Service Date shall be aggregated with Years of Service and any partial Year of Service after the Participant’s Reemployment Commencement Date.

(b)In the case of any Participant who is reemployed after incurring five consecutive Periods of Severance, Years of Service after such five-year period shall not be taken into account for the purposes of determining the vested interest attributable to Matching Deposits made before such five-year period.

Section 9.4Forfeitures.

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(a)If a Participant is not fully vested in his Discretionary Profit Sharing Account and Matching Account as described in Section 9.1 at the time he incurs a Severance from Service Date, the unvested portion of the Participant’s Accounts shall be forfeited as of the earlier of:

(i)the date on which he receives a distribution of his entire vested interest in his Accounts; or

(ii)the last day of the Plan Year in which he incurs five consecutive year Period of Severance.

A Participant whose vested Account balance is zero shall be deemed to have received a distribution of his Accounts as of his Severance from Service Date.

(b)If a Participant is rehired by the Employer before incurring Period of Severance of 5 consecutive years, any amount forfeited under subsection (a) shall be restored to his Discretionary Profit Sharing Account and Matching Account; provided, however, that, if the Participant has previously received a distribution of the nonforfeitable portion of his Discretionary Profit Sharing Account and Matching Account, such restoration shall occur if, and only if, he repays the full amount of such distribution prior to the earlier of (i) the fifth anniversary of the date of his reemployment with the Employer; or (ii) his incurrence of  five consecutivePeriods of Severance.   Such restoration shall be made from currently forfeited amounts in accordance with subsection (a), or from additional contributions by the Employer.

(c)Amounts forfeited in accordance with subsection (a) or Section 3.7 in a Plan Year shall be used to first restore future amounts required to be restored in accordance with subsection (b) with respect to the Plan Year.  After such restoration, if any, is made, such amounts shall be used to reduce future Discretionary Profit Sharing Account and Matching Contributions made by the Employer by which the former Participant was employed, or to defray administrative costs of the Plan as determined by the Company.

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ARTICLE X

WITHDRAWALS AND LOANS

Section 10.1Withdrawals.  A Participant may request a withdrawal of up to the entire amount in his Accounts upon giving notice in the manner and at the time prescribed by the Committee.  All such withdrawals shall be subject to the following limitations:

(a)Except as provided in subsection (b) below, no amounts may be withdrawn from a Participant’s Accounts unless he has attained age 59-1/2.  A Participant who has attained age 59-1/2 may withdraw all or a portion of the his vested Accounts at any time, exclusive of the amount of any outstanding loan under Section 10.3.

(b)If the Committee determines, on a uniform, nondiscriminatory basis, and on the basis of all relevant facts and circumstances, that a withdrawal is requested on account of an immediate and heavy financial need of the Participant, and the withdrawal is necessary to satisfy such financial need, the Committee may permit the Participant to withdraw the vested portion of his Accounts, excluding amounts contributed to the Qualified Employer Contribution Account and the earnings in his Deferral Account accrued after December 31, 1988.  A withdrawal request shall be deemed to be on account of an immediate and heavy financial need if it is on account of:

(i)expenses for medical care described in section 213(d) of the Code incurred by the Participant, his Spouse or dependents, as defined in section 152 of the Code, (or as the distribution is necessary for such persons to obtain such medical care);

(ii)costs directly related to the purchase (excluding mortgage payments) of a principal residence for the Participant;

(iii)payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse or his dependents;

(iv)the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant’s principal residence; or

(v)such other circumstances as may be prescribed by the Secretary of the Treasury or his delegate.

A distribution shall not be treated as necessary to satisfy an immediate and heavy financial need of a Participant to the extent the amount of the distribution is in excess of the amount required to relieve the financial need or to the extent such need may be satisfied from other resources that are reasonably available to the Participant.  The amount of an immediate and heavy financial need of a Participant shall include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution.  A Participant’s

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resources shall include those assets of his spouse and minor children that are reasonably available to the Participant.

(c)Unless otherwise provided in subsection (d), a Participant who requests a withdrawal pursuant to subsection (b) must certify, on a form provided by the Committee, that his financial need cannot be relieved:

(i)through reimbursement or compensation by insurance or otherwise;

(ii)by reasonable liquidation of the Participant’s assets to the extent such liquidation would not itself cause an immediate and heavy financial need;

(iii)by cessation of contributions to the Plan; or

(iv)by other distributions from the Plan, by other distributions or loans from plans maintained by any employer or by borrowing from commercial sources on reasonable commercial terms.

(d)If the certification described in subsection (c) is not provided by the Participant, a distribution will only be made on account of financial hardship if:

(i)the Participant has obtained all other distributions and loans available under all plans maintained by the Employer or an Affiliated Company; and

(ii)Deferral Contributions and any other Employee contributions under all plans maintained by the Employer or an Affiliated Company are suspended for 6 months following the receipt of the financial hardship withdrawal.  The Participant’s Deferral Contributions under Section 3.2 shall automatically resume following the required period of suspension, unless the Participant elects otherwise.

Section 10.2Payment of Withdrawal.  Any withdrawals shall be taken proportionately from each Investment Fund in which the Participant’s Accounts are invested, unless the Committee, in a uniform and nondiscretionary manner, permits Participants to select from which Investment Fund amounts are to be withdrawn.  Amounts shall be paid within sixty (60) days of the effective date of the withdrawal.  Distribution shall be made in cash.  Withdrawals on account of financial hardship shall be distributed first from the vested portion of the Participant’s Matching, Qualified Employer Contribution and Rollover Accounts and then, if there is financial need remaining, from the Participant’s Deferral Account.

Section 10.3Loans.

(a)A Participant who is an Employee of an Employer and any other Beneficiary who is a party-in-interest, as that term is defined in section 3(14) of ERISA, may request a loan.  Only two outstanding loans are permitted for each Participant or Beneficiary.

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(b)There shall be no minimum loan amount.

(c)In no event shall the amount of the loan, when added to the outstanding balance of all prior loans to such Participant or Beneficiary made under this Plan and all other qualified retirement plans sponsored by the Employer or an Affiliated Company, exceed the lesser of:

(i)$50,000, reduced by the excess (if any) of (a) the highest outstanding balance of all loans to the Participant under qualified retirement plans sponsored by the Employer or an Affiliated Company during the 12-month period ending on the day before the date on which such loan was made, over, (B) the outstanding balance of all such loans immediately before the loan in question was made; or

(ii)50% of the sum of the vested balances credited to his accounts under all defined contribution plans sponsored by the Employer or an Affiliated Company.

Notwithstanding (ii) above, loans made to Participants and Beneficiaries under this Plan shall be further limited to 50% of the vested balance credited to the Participant’s or Beneficiary’s Accounts.

(d)Applications for a loan must be submitted in the manner as prescribed by the Committee.  All such loans shall be subject to the final approval of the Committee, in its sole discretion, which discretion shall be exercised as to all eligible individuals on a reasonably equivalent basis; provided, however, that the Committee may make reasonable distinctions among prospective borrowers on the basis of creditworthiness.  The Committee shall have the right to require any applicant for a loan to secure the written consent of any party for whose benefit there exists a Qualified Domestic Relations Order in respect to the Participant’s interest under the Plan.  Subject to considerations relating to a Participant’s or Beneficiary’s creditworthiness and ability or deemed ability to repay the loan, loans shall not be made available to Participants and Beneficiaries who are or were Highly Compensated Employees in an amount greater than the amount available to other Participants or Beneficiaries.

(e)All loans shall be made upon such terms and conditions as the Committee shall determine, which shall include provisions for repayment and adequate security, and interest on the unpaid principal at a fixed or variable rate of interest commensurate with the interest rates charged by persons in the business of lending money on a national basis for loans that would be made under similar circumstances, as determined by the Committee from time to time.

(f)Unless otherwise specified, no loan shall have a term in excess of five years, except in the case of a loan used to acquire the Participant’s or Beneficiary’s principal residence, and the loan shall be repaid on a schedule providing for level amortization determined by the Committee.

(g)The monthly payments due on all new loans made on or after January 1, 2001 shall be repaid by the Participant through payroll withholding.  An outstanding loan shall

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be considered in default no later than 3 months following the date that payroll withholding ends or is insufficient to make the loan repayment.  All loans made prior to January 1, 2001 shall be repaid in accordance with the terms of the applicable loan note.

(h)If a Participant who is repaying a loan through payroll withholding is granted a leave of absence that is for a period of not more than one year and during which the Participant’s Compensation is insufficient to pay the required loan installment, payment of the loan may be waived during the leave of absence in accordance with rules and procedures established by the Committee.  In the event of such a waiver, a Participant may repay the amounts that were so waived upon return to active employment or the loan may be reamortized over the remaining term of the loan, in accordance with rules and procedures established by the Committee; provided, however, that, subject to the requirements of subsection (e), the loan may be reamortized over a longer period if the installments due after the leave ends (or, if earlier, after the first year of the leave) are not less than those required under the terms of the original loan and the requirements of subsection (f) are met.

(i)If a Participant has a loan outstanding during a period of Qualified Military Service, the Committee may permit loan repayments to be suspended during the period of Qualified Military Service in accordance with Code section 414(u) and, if so suspended, upon the Participant’s reemployment by the Employer within the time during which the Participant’s right to reemployment is protected by applicable law, the loan payment schedule shall resume with the original maturity date of the promissory note adjusted to reflect such period of Qualified Military Service.

(j)Each loan shall be considered a separate Investment Fund for purposes of Article V.  All loans shall be taken proportionately from each Investment Fund, in which the Participant’s or Beneficiary’s Accounts are invested.

(k)If any loan to a Participant is unpaid on the date that he or his Beneficiary applies for a distribution of the balance of his Accounts pursuant to Article XI, such loan, in all events and notwithstanding the terms thereof, shall become immediately due and payable on such date, and the amount thereof, together with any accrued unpaid interest thereon, shall be deducted from the amount of any distribution to which the Participant or his Beneficiary may become entitled.

(l)The conditions and terms of all such loans shall be applied in a uniform and consistent manner with respect to all Participants.

(m)A loan may be partially or fully prepaid at any time without penalty with additional cash payments.  Notwithstanding the foregoing, partial prepayment is not permitted for loans made on or after January 1, 2001.

(n)In the event of a default, foreclosure on the promissory note will not occur until a distributable event occurs under Article XI.

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(o)A loan shall be considered in default if the Participant:

(i)breaks a promise under the Promissory Note;

(ii)makes a false or misleading statement in obtaining the loan; or

(iii)dies, becomes insolvent, makes assignment for the benefit of creditors, has an entry of judgement against him, has the whole or part of his property attached, or files a petition in bankruptcy or a petition in bankruptcy is filed against the Participant.

Section 10.4Instructions.  All loans or withdrawal payments to a Participant or Beneficiary under the Plan shall be made by the Trustee from the appropriate Account of the Participant only upon receipt of instructions, written or otherwise at the discretion of the Committee, furnished by the Participant to the Trustee setting forth the amount of the loan or withdrawal payment and the name and address of the recipient.  In making any such loan or withdrawal payment under the Plan, the Trustee shall be fully entitled to rely on the instructions furnished by the Participant.

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ARTICLE XI

DISTRIBUTION OF BENEFITS

Section 11.1Lump Sum Distribution after Termination.  If a Participant incurs a Severance from Service Date for any reason other than death, the total amount in all of his Accounts shall be distributable to him in one lump sum payment, unless the Participant elects, in the manner and at the time provided by the Committee, to have such distributable amounts payable in another form prescribed by Section 11.2.  Distribution shall be made in cash.  Distribution shall normally be made as soon as administratively practicable following the Severance from Service Date, but no earlier than the Valuation Date coinciding with or immediately following his Severance from Service Date; provided however, that no distribution shall be made to a Participant prior to his Normal Retirement Date unless the Participant consents to the distribution in accordance with Section 11.4.  The Participant shall have the right to elect a distribution of the entire value of his Accounts at any time after the Severance from Service Date and before he reaches his Required Distribution Date.  If the Participant does not consent to an immediate distribution under this Article XI upon his Severance from Service Date, the entire value of the Participant’s Accounts shall be paid to the Participant no later than his Required Distribution Date.  Notwithstanding the foregoing, if the total nonforfeitable amount credited to the Accounts of the terminated Participant does not exceed $5,000 at the time the distribution is to commence, the Committee shall distribute such amount in a lump sum without the Participant’s consent as soon as administratively practicable following the annual date selected each year by the Committee on which the Committee will make such distributions to all terminated Participants.  Notwithstanding the preceding sentence, any eligible rollover distribution in excess of $1,000 but not in excess of $5,000 made after the effective date of final regulations issued by the Department of Labor with respect to section 401(a)(31)(B) of the Code shall be transferred directly to the individual retirement plan of a designated trustee or insurer, unless the Participant elects to receive such distribution or roll such distribution over to an eligible retirement plan.  Any amounts not distributed under this Section shall continue to be subject to investment direction by the Participant in accordance with the provisions of Article VII.

Section 11.2Optional Form of Distribution.  The Participant may elect to have the balance of his Accounts distributed in equal installment payments on a monthly, quarterly, semiannual or annual basis over a fixed period not to exceed the life expectancy of the Participant or the combined life expectancies of the Participant and Beneficiary (determined at the time the distribution commences) payable in cash.

Section 11.3Consent Rules.  The Committee shall furnish to each Participant who elects to receive a distribution from his Accounts prior to his Normal Retirement Age written information relating to the Participant’s right to defer payment until Normal Retirement Age, the modes of payment available, the relative values of each form of payment, and the Participant’s right to make a direct rollover as set forth in Section 11.10.  Such information must be supplied not less than thirty days nor more than ninety days prior to the benefit commencement date.

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Notwithstanding the preceding sentence, a Participant’s benefit commencement date may occur less than thirty days after such information has been supplied to the Participant, provided that, after the Participant has received such information and has been advised of the right to a thirty day period to make a decision regarding the distribution, the Participant affirmatively elects a distribution.

Section 11.4Distribution at Death.  If a Participant’s employment terminates by reason of his death, or he dies prior to receiving all installments due under Section 11.2, his Beneficiary shall be entitled to receive a distribution in full of the total amount remaining in his Accounts.  Such distribution shall be in a lump sum or, at the election of the Beneficiary, in the manner and at the time provided by the Committee. Notwithstanding the foregoing, if the Beneficiary is the Participant’s Spouse, distribution may be deferred, at the election of the Spouse, in the manner set forth in Section 11.1, but not to a date later than what would have been the Participant’s Normal Retirement Date.  A Spouse may elect to receive the balance of the Participant’s Accounts in any form that would have been available to the Participant on his Severance from Service Date.

Section 11.5Written Instructions.  All distributions under the Plan shall be made by the Trustee only upon receipt of written instructions furnished by the Committee setting forth the amount and manner of the distribution and the name and address of the recipient.  In making any such distribution under the Plan, the Trustee shall be fully entitled to rely on the instructions furnished by the Committee and shall be under no duty to make any inquiry or investigation with respect thereto.

Section 11.6Required Distributions.  Distribution of a Participant’s Account shall commence before the 60th day following the close of the Plan Year in which the Participant attains his Normal Retirement Age or he has a Severance from Service Date, whichever occurs last.  Notwithstanding anything herein to the contrary, a Participant’s interest in his Account(s) (a) shall be distributed to him no later than the Required Distribution Date, or (b) shall be distributed beginning no later than the Required Distribution Date in installments pursuant to Section 11.2; provided, that the period over which distributions are made does not extend beyond the life expectancy of the Participant or the joint life expectancies of the Participant and his designated Beneficiary.  If distribution in the form of installments has commenced in accordance with clause (b) of the preceding sentence and the Participant dies before his entire interest has been distributed to him, his remaining interest shall be distributed over the remaining number of installments payable as of the date of his death.  If the Participant dies before distribution of his Account has begun, the Participant’s entire interest shall be distributed within five years after his death.  The preceding sentence shall not apply, however, if any portion of the Participant’s interest is payable to (or for the benefit of) a designated Beneficiary over a period not extending beyond the life expectancy of such Beneficiary and distribution begins not later than one year after the date of the Participant’s death or such later date permitted under applicable regulations.  If the designated Beneficiary is the surviving Spouse of the Participant, distributions are not required to begin earlier than the date on which the Participant would have attained his Normal Retirement Date.  If the surviving Spouse dies before distributions begin, the five-year distribution requirement shall be applied as if the surviving Spouse were the Participant.

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Prior to January 1, 2003, all distributions shall be determined and made in accordance with the regulations promulgated under section 401(a)(9) of the Code that were proposed in 1987, including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the proposed regulations.  Effective January 1, 2003, all distributions shall be determined and made in accordance with the final regulations promulgated under section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Q&A-1(d) of section 1.401(a)(9)-5 of the final regulations; provided, however, that, if a Participant’s benefit commencement date is prior to January 1, 2003, the amount of any installment payments after January 1, 2003 shall not be decreased by the application of the final regulations.

Section 11.7Designation of Beneficiary.  Each Participant shall, by written notice to the Committee, designate a Beneficiary or Beneficiaries to receive any payment to which such Participant may be entitled under the Plan at the time of his death.  If a Participant designates a Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) other than or in addition to his Spouse, the Spouse of the Participant must consent in writing to such Beneficiary designation on a form provided by the Committee, which consent shall be irrevocable.  Such consent shall state the specific non-Spouse Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) who will receive the benefit, shall acknowledge the financial effect of the election on the Spouse’s right to benefits under the Plan, and shall be witnessed by the Secretary of the Committee, a Plan representative designated by the Committee or a notary public.  The spousal consent requirement may be waived if it is established, to the satisfaction of the Committee, that the consent may not be obtained because there is no Spouse, because the Spouse cannot be located after reasonable efforts have been made, or because other circumstances exist to excuse spousal consent under applicable regulations.  Any Beneficiary designation made by a Participant which does not meet the requirements of this Section shall be deemed null and void.  The Participant shall have the right to change a Beneficiary designation or any subsequent Beneficiary    subject to the spousal consent provisions of this Section.  In the absence of an effective Beneficiary designation, any amounts distributable after the death of a Participant shall be paid to the Participant’s Spouse or, if there is no Spouse, to the Participant’s estate.

Section 11.8Claims Procedure.

(a)In the event that the Committee denies, in whole or in part, a claim for benefits by a Participant or his beneficiary, the Committee shall furnish notice of the denial to the claimant, setting forth:

(i)the specific reasons for the denial;

(ii)specific reference to the pertinent Plan provisions on which the denial is based;

(iii)a description of any additional information necessary for the claimant to perfect the claim and an explanation of why such information is necessary; and

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(iv)the procedure for the appeal of such denial and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review.

If the claim does not involve disability benefits, the notice described above shall be forwarded to the claimant within ninety (90) days of the Committee’s receipt of the claim; provided, however, that in special circumstances the Committee may extend the response period for up to an additional ninety (90) days, provided that the Committee so notifies the claimant in writing and specifies the reason or reasons for such extension.

If the claim involves disability benefits, the notice described above shall be forwarded to the claimant within forty-five (45) days of the Committee’s receipt of the claim; provided, however, that in special circumstances the Committee may extend the response period for up to an additional sixty (60) days.  If special circumstances require an extension of time for processing the claim, a written notice of an extension of up to thirty (30) days will be provided to the claimant before the end of the initial forty-five (45) day period that specifies the reason or reasons for such extension.  If, prior to the end of the initial thirty (30) day extension, the Committee determines that a decision cannot be rendered within the extension period, the determination period may be extended for up to an additional thirty (30) days if the claimant is notified of the second extension before the end of the initial extension.

(b)Within sixty (60) days of receipt of a notice of claim denial that does not involve disability benefits, a claimant or his duly authorized representative may petition the Committee in writing for a full and fair review of the denial.  In connection with any such appeal, the claimant or his duly authorized representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits and shall have the opportunity to submit issues and comments in writing to the Committee.  The Committee shall review the denial and communicate its decision to the claimant in writing within sixty (60) days of receipt of the petition; provided, however, that the Committee may extend the response period in special circumstances for up to an additional sixty (60) days.  Written notice of the extension shall be sent to the claimant prior to the commencement of the extension.

(c)Within one-hundred and eighty (180) days of receipt of a notice of claim denial that involves disability benefits, a claimant or his duly authorized representative may petition the Committee in writing for a full and fair review of the denial.  In connection with any such appeal, the claimant or his duly authorized representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits and shall have the opportunity to submit issues and comments in writing to the Committee.  The Committee shall review the denial and communicate its decision and the reasons therefor to the claimant in writing within forty-five (45) days of receipt of the petition; provided, however, that the Committee may extend the response period in special circumstances for up to an additional forty-five (45) days.  Written notice of the extension shall be sent to the claimant prior to the commencement of the extension.

36

(d)The Committee shall furnish notice of its final decision on the appeal made pursuant to subsection (b) or (c) above, as applicable, to the claimant in writing, setting forth:

(i)the specific reasons for the decision,

(ii)specific references to the pertinent Plan provisions on which the decision is based,

(iii)a description of the claimant’s right to, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits, and

(iv)a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA.

Section 11.9Rights of Alternate Payees.

(a)General.  Except as otherwise provided in this Section 11.10, an Alternate Payee shall have no rights to a Participant’s Accounts and shall have no rights under this Plan other than those rights specifically granted to the Alternate Payee pursuant to a Qualified Domestic Relations Order.  Notwithstanding the foregoing, an Alternate Payee shall have the right to make a claim for any benefits awarded to the Alternate Payee pursuant to a Qualified Domestic Relations Order, as provided in Section 11.9.  Any interest of an Alternate Payee in the Accounts of a Participant, other than an interest payable solely upon the Participant’s death pursuant to a Qualified Domestic Relations Order which provides that the Alternate Payee shall be treated as the Participant’s Beneficiary, shall be separately accounted for by the Trustee in the name and for the benefit of the Alternate Payee.

(b)Distribution.

(i)Notwithstanding anything in this Plan to the contrary, a Qualified Domestic Relations Order may provide that any portion of a Participant’s Accounts payable to an Alternate Payee shall be distributed immediately or at any other time specified in the order, but no later than the latest date Plan benefits would be payable to the Participant.  If the order does not specify the time at which benefits shall be payable to the Alternate Payee, the Alternate Payee may elect to have benefits payable in accordance with Section 11.1 as of the Participant’s Severance from Service Date or Required Distribution Date, if earlier, or in accordance with Section 11.5, but as of the Alternate Payee’s death; provided, however, that in the event the amount payable to the Alternate Payee under the Qualified Domestic Relations Order does not exceed $5,000, such amount shall be paid to the Alternate Payee in a lump sum as soon as practicable following the Committee’s receipt of the order and verification of its status as a Qualified Domestic Relations Order.

37

(ii)Except as provided in paragraph (i), if a Qualified Domestic Relations Order does not provide the form of distribution of benefits payable to an Alternate Payee, the Alternate Payee shall have the right to elect distribution in any form provided under Article XI, except that benefits to be paid in installments may not be paid over a period exceeding the life expectancy of the Alternate Payee, determined as of the date of the first distribution.

(iii)If the Qualified Domestic Relations Order does not specify the Participant’s Accounts, or Investment Funds in which such Accounts are invested, from which amounts shall be paid to, or separately accounted for, an Alternate Payee, such amounts shall be distributed, or segregated, from the Participant’s Accounts, and the Investment Funds in which such Accounts are invested, on a pro rata basis.

(c)Withdrawals. An Alternate Payee shall not be permitted to make any withdrawals under Article X.

(d)Death Benefits.  Unless a Qualified Domestic Relations Order provides to the contrary, an Alternate Payee shall have the right to designate a Beneficiary in the same manner as provided in Section 11.8 with respect to a Participant, (except that no spousal consent shall be required), who shall receive benefits payable to an Alternate Payee which have not been distributed at the time of the Alternate Payee’s death.  If the Alternate Payee does not designate a Beneficiary, or if the Beneficiary predeceases the Alternate Payee, benefits payable to the Alternate Payee which have not been distributed shall be paid to the Alternate Payee’s estate.

(e)Investment Direction.  An Alternate Payee shall have the right to direct investment of any portion of a Participant’s Accounts payable to the Alternate Payee under such order in the same manner as provided in Section 6.4 with respect to a Participant, which amounts shall be separately accounted for by the Trustee in the Alternate Payee’s name.

Section 11.10Direct Rollovers.

(a)Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section 11.10, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution paid directly to an eligible rollover plan, as defined below, specified by the distributee in a direct rollover.

(b)Definitions.

(i)“Eligible Rollover Distribution.”  An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payment (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more; any

38

distribution to the extent such distribution is required under section 401(a)(9) of the Code; and any hardship withdrawal.

(ii)“Eligible Rollover Plan.” An eligible rollover plan shall mean (1) an individual retirement account described in section 408(a) of the Code, (2) an individual retirement annuity described in section 408(b) of the Code (other than an endowment contract), (3) an annuity plan described in section 403(a) of the Code, (4) a qualified plan the terms of which permit the acceptance of rollover distributions, (5) an eligible deferred compensation plan described in section 457(b) of the Code that is maintained by an eligible employer described in section 457(e)(i)(A) of the Code and that shall separately account for the distribution, or (6) an annuity contract described in section 403(b) of the Code; provided, however, that, with respect to a distribution (or portion of a distribution) consisting of after-tax employee contributions, “eligible rollover plan” shall mean a plan described in clause (4) that separately accounts for such amounts or a plan described in clause (1) or (2).

(iii)“Distributee.”  A distributee includes an Employee or former Employee.  In addition, the Employee’s or former Employee’s surviving Spouse and the Employee’s or former Employee Spouse or former Spouse who is the alternate payee under a Qualified Domestic Relations Order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the Spouse or former Spouse.

(iv)“Direct Rollover.”  A direct rollover is a payment by the plan to the eligible rollover plan specified by the distributee.

39

ARTICLE XII

SPECIAL PROVISIONS FOR TOP-HEAVY PLANS

Section 12.1General Rule.  Notwithstanding any provision in the Plan to the contrary, for any Plan Year in which the Plan is determined to be a Top-Heavy Plan, the provisions of this Article XII shall become effective.

Section 12.2Determination of Top-Heavy Status.  The Plan shall be considered a Top-Heavy Plan for the Plan Year, if, as of the last day of the first Plan Year and thereafter, as of the last day of the preceding Plan Year (the “Determination Date”):

(a)the value of the sum of all Accounts of Participants who are Key Employees (as defined below) exceeds 60% of the sum of all Accounts of all Participants, or

(b)the Plan is part of an Aggregation Group and such Aggregation Group is determined to be a Top-Heavy Group (as defined in section 416(g)(2)(B) of the Code).

In determining the value of a Participant’s Accounts, such Accounts shall be valued as of the most recent Valuation Date within the twelve-month period ending on the applicable Determination Date.  The value of the Accounts shall be increased by the aggregate distributions made with respect to such Employee under the Plan during the 1-year period ending on the Determination Date plus the aggregate in-service distributions made with respect to such Employee under the Plan during the 5-year period ending on the Determination Date.

In determining the above Top-Heavy ratio, the account balances of an Employee (a) who is a Non-Key Employee (defined for purposes of this Article as an Employee who is not a Key Employee) but who was a Key Employee in any prior Plan Year, or (b) who has not performed services for the Employer maintaining the Plan at any time during the 1-year period ending on the applicable Determination Date are disregarded.

A Key Employee is defined as any Employee, former Employee or the Beneficiary of such Employee who, at any time during the Plan Year is:  (a) an officer of the Employer having annual 415 Compensation greater than $130,000 or such other amount as may be in effect under Code section 416(i)(1)(A)(i) for any Plan Year; (b) a five percent (5%) owner of the Employer; or (c) a one-percent (1%) owner of the Employer having annual 415 Compensation from the Employer of more than one-hundred-fifty-thousand dollars ($150,000).

For purposes of this Section, Aggregation Group means (a) each plan of the Employer or an Affiliated Company in which a Key Employee participates, including any terminated plans which are maintained within the five year period ending on the applicable Determination Date, and (b) each other plan of the Employer or an Affiliated Company which enables such plan to meet the requirements of section 401(a)(4) or 410 of the Code.  The foregoing notwithstanding, the Employer may treat any plan maintained by the Employer or an Affiliated Company not required to be included in the Aggregation Group as being part of such group if such group

40

would continue to meet the requirements of sections 401(a)(4) and 410 of the Code with such plan being taken into account.

Section 12.3Minimum Contributions.  For any Plan Year in which the Plan is determined to be a Top-Heavy Plan pursuant to Section 12.2, the Matching Contributions for such Plan Year for each Participant who is a Non-Key Employee shall not be less than the lesser of

(a)3% of the Participant’s 415 Compensation for such Plan Year, or

(b)the percentage at which Matching Contributions and Deferral Contributions are made or are required to be made under the Plan for the Plan Year for the Key Employee for whom such percentage is the highest, excluding any elective deferrals made pursuant to Section 414(v) of the Code.  Notwithstanding the foregoing, if a Participant is also participating in another defined contribution plan maintained by the Employer, the minimum contribution hereunder may be reduced in accordance with regulations issued under section 416(f) of the Code.  If a Participant is also participating in a defined benefit plan maintained by the Employer, ‘5%’ shall be substituted for ‘3%’ in paragraph (a) of this Section.

The Matching Contributions referred to above shall be provided to each Non-Key Employee who is a Participant and who has not separated from service at the end of the Plan Year, regardless of such Employee’s number of Hours of Service, Compensation, or whether such Employee had made any contribution to the Plan.

41

ARTICLE XIII

THE ADMINISTRATIVE COMMITTEE

Section 13.1Appointment of Committee.  The Board shall appoint a Committee of not less than three persons who shall have authority to control and manage the operation and administration of the Plan, but shall have no authority or duty to manage and control the assets of the Fund except as is otherwise specifically provided herein.  Such Committee shall be the Administrator of the Plan for purposes of ERISA.

Section 13.2Interpretation of Plan Provisions.  The Committee shall have the exclusive right to construe the Plan, to make factual determinations, and to determine any question which may arise in connection with its application or administration.  Its decisions or actions in respect thereof shall be conclusive and binding upon the Employer and upon any and all Participants, their beneficiaries and their respective heirs, distributees, executors, administrators and assigns; subject, however, to the right of the Participant or his beneficiary to file a written claim under the provisions of Section 11.7.  The Committee shall have the responsibility to inform the Board of any changes that it deems necessary to be made to the Plan to maintain compliance with current law or regulation, to correct any errors or omissions in the Plan document, or to facilitate the administration of the Plan.

Section 13.3Committee Records.  The Committee shall maintain or cause to be maintained such accounts and records as shall be necessary and appropriate to reflect the administration of the Plan and the interests of all Participants and their beneficiaries.  Any Participant or his beneficiary shall be entitled to examine at any reasonable time any such accounts and records directly pertaining to him or his interest.

Section 13.4Allocation of Duties.  The Committee shall elect from its number a Chairman and a Secretary.  The Chairman shall preside at all meetings, and the Secretary shall keep written minutes of the meeting and other actions of the Committee.  In addition, the Committee may:

(a)appoint from its number such subcommittees with such powers as the Committee shall determine;

(b)authorize one of its number to execute and deliver any instrument on the Committee’s behalf;

(c)employ accounting, legal, medical, and investment counsel and such clerical and other services as it deems necessary or appropriate in carrying out its duties under the Plan;

(d)allocate fiduciary responsibilities (other than Trustee responsibilities except to the extent that the Plan or the Trust Agreement specifically permit or allow the

42

Committee to direct the Trustee) among themselves or among persons (including corporate persons) named by them in accordance with the following provisions:

(i)Fiduciary responsibilities may be allocated by the Committee by naming in writing the fiduciary to whom the responsibility is allocated, with a description of the responsibility and an outline of the duties involved.

(ii)The fiduciary so named shall indicate his acceptance of the responsibility by executing the written instrument naming him and a copy of the executed document shall be attached to the Plan.

(iii)For purposes of this subsection, a Trustee responsibility is a responsibility to manage or control the assets of the Plan.

Section 13.5Compensation.  No Committee member shall be entitled to compensation for his services as such, but shall be entitled to be reimbursed by the Company for any and all reasonable expenses actually incurred by him in connection with such services.  All fees, salaries, and other costs of providing services to the Committee shall be paid by the Fund, unless, in its discretion, the Company determines to pay such expenses.

Section 13.6Meetings.  The Committee shall hold an annual meeting and such special meetings as any member may call upon due notice.  A quorum shall consist of a majority of the membership, and all actions shall be taken pursuant to a majority vote of those members present.

Section 13.7Committee Rules.  Subject to the limitations contained herein, the Committee may from time to time establish such rules for the transaction of business and for the administration of the Plan as it deems necessary or desirable; provided, the same shall not conflict with any of the provisions of the Plan.

Section 13.8Indemnification.  The Company agrees to indemnify each member of the Committee against any and all claims, losses, damage, expense and liability arising from his responsibilities in connection with the Plan, unless same has been adjudged to be due to his own gross negligence or willful misconduct.

43

ARTICLE XIV

AMENDMENTS, TERMINATIONS AND LIABILITIES

Section 14.1Right to Amend Reserved.  The provisions of this Plan may be amended at any time and from time to time by action of the Board; provided, that no amendment shall be effective unless the Plan, as so amended, shall continue to be for the exclusive benefit of Participants, their beneficiaries and Alternate Payees.  No amendment shall deprive any Participant or beneficiary of any of the benefits to which he is entitled under this Plan with respect to contributions previously made, nor shall any amendment eliminate or reduce a protected benefit as described in section 411(d)(6) of the Code except as provided in section 412(c)(8) of the Code or in applicable regulations.  No Plan amendment shall decrease the vested interest in any Participant’s Accounts, nor shall any amendment change any vesting schedule under the Plan unless each Participant having at least three Years of Service at the end of the period described in this sentence is permitted to elect, within a period beginning on the date such amendment is adopted and ending 60 days after the latest of: (a) the day the amendment is adopted, (b) the day the amendment becomes effective, or (c) the day the Participant is issued written notice of the amendment, to have his nonforfeitable percentage computed under the Plan without regard to such amendment.  Notwithstanding the foregoing, any modification or amendment of the Plan may be made retroactively, if necessary or appropriate to qualify or maintain the Plan as a plan meeting the requirements of the Code and ERISA, as now in effect or hereafter amended, or any other provisions of law, as now in effect or hereafter amended or adopted, and any regulation issued thereunder.

Section 14.2Right to Terminate Reserved.  The Plan may be terminated or contributions thereunder may be discontinued at any time by action of the Board, if the Board shall determine that action is necessary or desirable.  The Company shall then decide whether to terminate the Trust and make distributions in accordance with the Plan.  Following any such discontinuance, no new Participants shall be eligible for coverage under the Plan, and the Employer shall make no further contributions.  Upon any complete or partial termination or discontinuance of contributions, the interest of each affected Participant under the Plan shall be nonforfeitable.

Section 14.3Liability of Employer.  The Employer shall have no liability in respect of payment under the Plan, except to pay over to the Trustee the Contributions provided for in Sections 3.2, 3.3, 3.4 and 3.15, and each Participant and/or his Beneficiary shall look solely to the Fund for distribution of benefits under the Plan.

Section 14.4Successor Employers.  Unless this Plan be sooner terminated, a successor employer of the Employees of the Employer may continue this Plan and Trust  by joining with the Trustee in executing an appropriate supplemental agreement.  Such successor employer shall IPSO FACTO succeed to all the rights, powers, and duties of the Employer hereunder.  In such event, the Plan shall not be deemed to have terminated and the employment of any Employee who is continued in the employ of such successor Employer shall be deemed not to have been terminated or severed for any purposes hereunder.

44

ARTICLE XV

MISCELLANEOUS

Section 15.1Plan Not an Employment Contract.  The establishment of the Plan shall not be held or construed to confer upon any person any legal right to be continued as an Employee, and the Employer expressly reserves the right to discharge any Employee, and to adjust his compensation, whenever the interest of the Employer, in its sole judgment, may so require.

Section 15.2Benefits Not Assignable.  Except with respect to federal tax liens, federal income tax withholding, withdrawals and loans under Article X, and offsets for judgements and settlements described in section 401(a)(13)(C) of the Code, no amount payable under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge or seizure; and no such amount shall be in any manner subject to the debts, contracts, liabilities, engagements or torts of any Participant or his beneficiary.  Notwithstanding the foregoing, the Committee shall direct the Trustee to comply with a Qualified Domestic Relations Order.  Upon receipt of any judgment, decree or order (including approval of a property settlement agreement) relating to the provision of payment by the Plan to an Alternate Payee pursuant to a state domestic relations law, the Committee shall promptly notify the affected Participant and any Alternate Payee of the receipt of such judgment, decree or order and shall notify the affected Participant and any Alternate Payee of the Committee’s procedure for determining whether or not the judgment, decree or order is a Qualified Domestic Relations Order.  The Committee shall establish a procedure to determine the status of a judgment, decree or order as a Qualified Domestic Relations Order and to administer Plan distributions in accordance with Qualified Domestic Relations Orders.  Such procedure shall be in writing, shall include a provision specifying the notification requirements enumerated above, shall permit an Alternate Payee to designate a representative for receipt of communications from the Committee and shall include such other provisions as the Committee shall determine, including provisions required under applicable regulations.

Section 15.3Incompetence of Participant.  If a Participant or beneficiary entitled to receive any benefits hereunder is a minor or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, such benefits shall be paid to such persons as the Committee shall designate or to the duly appointed guardian.  Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.

Section 15.4Merger With Another Plan.  This Plan shall not merge or consolidate with, or transfer its assets or liabilities to, any other plan, unless each Participant would (if such other plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated).

Section 15.5Gender.  The masculine whenever used herein shall include the feminine.

45

Section 15.6Controlling Laws.  Construction, validity and administration of this Plan shall be governed by the laws of the State of Delaware except to the extent that such laws have been specifically superseded by ERISA.

IN WITNESS WHEREOF, and as evidence of the adoption of this instrument as the Plan, the duly authorized officer of the Company has caused the Plan to be executed this 20 day of December, 2002.

ATTEST:	KERZNER INTERNATIONAL NORTH AMERICA, INC.
/s/ Charles Adamo	/s/ John Allison
	Name: John Allison
	Title: Chief Executive Officer

46

APPENDIX A

PARTICIPATING EMPLOYERS

Kerzner International North America, Inc.

ISS, Inc.

PIV, Inc.

Kerzner International Development Group, Inc.

Kerzner International Marketing, Inc.

Kerzner International Nevada, Inc.

Kerzner International New York, Inc.

Kerzner International Resorts, Inc.

Kerzner International Development Services, Inc. —  effective October 1, 2002

Kerzner International California, Inc. – effective January 1, 2003

Kerzner International Management Services, Inc. – effective October 1, 2002

47

EX-4.19(B)

EXHIBIT 4.19(b)

AMENDMENT 2003-1

TO THE

KERZNER INTERNATIONAL NORTH AMERICA, INC.

RETIREMENT SAVINGS PLAN

(As amended and restated effective January 1, 2002)

Pursuant to the authority reserved to Kerzner International North America, Inc. (the “Employer”) under Section 14.1 of the Kerzner International North America, Inc. Retirement Savings Plan (the “Plan”), the Plan is hereby amended as follows:

1.Effective as of January 1, 2003, Section 1.8 of the Plan is hereby amended to read, in its entirety, as follows:

“Section 1.8 ‘Compensation’ shall mean the total remuneration paid by an Employer to an Employee during each Plan Year and reported on IRS Form W-2, other than bonuses or taxable income due to stock option exercises, plus any amount contributed to the Plan which qualifies as “Deferral Contributions” as defined in Section 3.2 or any amount contributed by the Employee through salary reduction to another 401(k) plan maintained by the Employer, a cafeteria plan maintained by the Employer pursuant to section 125 of the Code or a transportation fringe benefit plan maintained pursuant to section 132(f) of the Code which is not includable in the gross income of the Participant. Notwithstanding the foregoing, for purposes of calculating Deferral Contributions under Section 3.2, Compensation shall include bonuses paid by the Employer to the Employee after December 31, 2003.  For purposes of Article V, Compensation shall include bonuses and taxable income due to stock option exercises, and, at the election of the Company, exclude any amount contributed to the Plan which qualifies as “Deferral Contributions” as defined in Section 3.2 or any amount contributed by the Employee through salary reduction to another 401(k) plan maintained by the Employer, a cafeteria plan maintained by the Employer pursuant to section 125 of the Code, a qualified transportation fringe benefit plan maintained by the Employer pursuant to section 132(f) of the Code and/or remuneration paid to the Employee while he was not a Participant in the Plan.  Notwithstanding anything herein to the contrary, effective January 1, 1998, any amounts deducted on a pre-tax basis for group health coverage because the Employee is unable to certify that he or she has other health coverage, so long as the Employer does not request or collect information regarding the Employee’s other health coverage as part of the enrollment process for the Employer’s health plan, shall be treated as an amount contributed by the Employer pursuant to a salary reduction

agreement to a cafeteria plan for purposes of determining the Employee’s Compensation.  Compensation in excess of the applicable limit under section 401(a)(17) of the Code shall be disregarded with respect to any Plan Year.”

2.A new subsection (c) is hereby added to the end of Section 3.2 of the Plan, to read, in its entirety, as follows:

“(c)  Notwithstanding anything in this Plan to the contrary, a Participant’s Deferral Contributions deducted from any paycheck shall not exceed 100% of the total remuneration paid by the Employer to the Participant during the applicable pay period, plus any amount deducted from the Participant’s paycheck and contributed to the Plan which qualifies as “Deferral Contributions” as defined in this Section 3.2,” excluding (i) bonuses paid by the Employer to the Participant prior to January 1, 2004, and (ii) any amounts deducted from the Participant’s paycheck for any reason other than a contribution to this Plan.”

3.This Amendment 2003-1 is effective January 1, 2003.

To record the adoption of this Amendment 2003-1, the Employer has caused its authorized officer to affix its corporate name and seal hereto this 15 day of December, 2003.

Attest:	KERZNER INTERNATIONAL
	NORTH AMERICA, INC.
/s/ Charles Adamo	/s/ John Allison

2

EX-4.24(A)

EXHIBIT 4.24(a)

KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V.,
KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.,
KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.,
KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and
KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.

(collectively, Issuers)

and

LASALLE BANK NATIONAL ASSOCIATION

(Trustee)

NOTE INDENTURE

Location:     The One & Only Palmilla

        Los Cabos, Mexico

Dated as of December 17, 2004

PREPARED BY AND UPON

FILING RETURN TO:

Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, New York  10038
U.S.A.
Attention:  William P. McInerney, Esq.

TABLE OF CONTENTS

ARTICLE 1 - DEFINITIONS; INTERPRETATION
Section 1.01	Definitions	1
Section 1.02	Accounting Terms	24
Section 1.03	General	24
ARTICLE 2 - ISSUE OF NOTES
Section 2.01	No Limit on Issue	25
Section 2.02	Notes Deemed to be Outstanding	25
Section 2.03	Conditions Precedent to the Issue of Notes	25
Section 2.04	Issue of Notes	26
Section 2.05	Form of Notes	27
Section 2.06	Registration	27
Section 2.07	Transfers of Notes	28
Section 2.08	Inspection of Registers	28
Section 2.09	Title to Registered Notes	28
Section 2.10	Mutilation, Loss, Theft or Destruction	28
Section 2.11	Cancellation of Notes	28
ARTICLE 3 - PAYMENT MECHANICS
Section 3.01	Requirements of Payment	29
Section 3.02	Additional Provisions	29
Section 3.03	Priority of Payments	29
ARTICLE 4 - SECURITY AND ASSET DEALING
Section 4.01	Charges and Security Interest	29
Section 4.02	Holders of Security	30
Section 4.03	Further Assurances	30
Section 4.04	Power of Attorney	30
Section 4.05	Dealings with the Security Trust Agreement and the Pledge	31
Section 4.06	No Obligation to Advance Funds	31
ARTICLE 5 - CANCELLATION AND DISCHARGE
Section 5.01	Cancellation and Destruction	31
Section 5.02	Non-Presentation of Notes	31
Section 5.03	Unclaimed Moneys	31
Section 5.04	Discharge	32

i

ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
Section 6.01	Issuer Representations
Section 6.02	Survival of Representations	32
		45
ARTICLE 7 - ISSUER COVENANTS
Section 7.01	Affirmative Covenants	45
Section 7.02	Negative Covenants	57
ARTICLE 8 - INSURANCE; CASUALTY; CONDEMNATION
Section 8.01	Insurance	65
Section 8.02	Casualty	69
Section 8.03	Condemnation	69
Section 8.04	Restoration	70
Section 8.05	Casualty/Condemnation Generally	73
ARTICLE 9 - DEFAULTS
Section 9.01	Event of Default	74
Section 9.02	Remedies	76
Section 9.03	Exculpation	78
Section 9.04	Manager Termination	79
ARTICLE 10 - RESERVE FUNDS
Section 10.01	Required Repair Funds	80
Section 10.02	Tax and Insurance Escrow Fund	81
Section 10.03	Replacements and Replacement Reserve	81
Section 10.04	Interest Reserve Interest	82
Section 10.05	Reserve LC	82
Section 10.06	Reserve Funds, Generally	83
ARTICLE 11 - MATTERS CONCERNING THE TRUSTEE
Section 11.01	Duties of the Trustee	85
Section 11.02	Rights of Trustee	90
Section 11.03	Individual Rights of Trustee	91
Section 11.04	Trustee’s Disclaimer	91
Section 11.05	Notice of Defaults	92
Section 11.06	Compensation and Indemnity	92
Section 11.07	Replacement of Trustee	92
Section 11.08	Resignation or Removal of Trustee; Conflict of Interest	93
Section 11.09	Successor Trustee	94
Section 11.10	Authorization and Duties of Trustee	94
Section 11.11	Trustee Not Required to Give Security	95
Section 11.12	Trustee May Deal In Notes	95

ii

Section 11.13	Administration of the Trust and Protection of the Trustee	95
Section 11.14	Service Providers.	97
ARTICLE 12 - SUPPLEMENTAL INDENTURES
Section 12.01	Supplemental Trust Indentures	97
Section 12.02	Further Assurances	97
Section 12.03	Amendment or Modification	98
ARTICLE 13 - NOTEHOLDER MEETINGS AND APPROVALS
Section 13.01	Conduct of Meetings	98
Section 13.02	Extraordinary Resolution	99
Section 13.03	Signed Instruments	100
Section 13.04	Binding Effect of Resolutions	100
ARTICLE 14 - MISCELLANEOUS
Section 14.01	Survival	100
Section 14.02	Trustee’s Discretion	100
Section 14.03	Notices	100
Section 14.04	Governing Law	102
Section 14.05	Modification, Waiver in Writing	103
Section 14.06	Delay Not a Waiver	103
Section 14.07	Trial by Jury	104
Section 14.08	Headings	104
Section 14.09	Severability	104
Section 14.10	Preferences	104
Section 14.11	Waiver of Notice	104
Section 14.12	Expenses; Indemnity	104
Section 14.13	Offsets, Counterclaims and Defenses	106
Section 14.14	No Joint Venture or Partnership; No Third Party Beneficiaries	106
Section 14.15	Publicity	106
Section 14.16	Waiver of Marshalling of Assets	107
Section 14.17	Waiver of Counterclaim	107
Section 14.18	Conflict; Construction of Documents; Reliance	107
Section 14.19	Brokers and Financial Advisors	107
Section 14.20	Prior Agreements	108
Section 14.21	Duplicate Originals, Counterparts	108
Section 14.22	Joint and Several Liability	108
ARTICLE 15 - EXECUTION
Section 15.01	Effective Upon Execution	108

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THIS NOTE INDENTURE (the “Indenture”) made as of the 17th day of December, 2004, between KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V., KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V., KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V., KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V., each a limited liability company with variable capital (sociedad de responsabilidad limitada de capital variable), duly organized and validly existing under the laws of the United Mexican States and each having an address at Palmilla Resort & Golf Club Apartado Postal 52, 33400 San Jose Del Cabo, BCS, Mexico(hereinafter collectively the “Issuers”) and LASALLE BANK NATIONAL ASSOCIATION, having an address at 35 S. LaSalle Street, Suite 1625, Chicago, Illinois 60603, as note trustee and collateral agent for the benefit of the Holders of the Notes (as such terms are hereinafter defined) (hereinafter the “Trustee”).

RECITALS

The parties hereto have duly authorized the execution and delivery of this Indenture to provide for the issuance of the Notes to be issued by the Issuers as provided herein in an aggregate principal amount of $110,000,000.

All things necessary to make the Notes when executed by the Issuers and authenticated and delivered by the Trustee hereunder and duly issued by the Issuers, the valid and legally binding obligations of the Issuers enforceable in accordance with their terms, and to make this Indenture a valid and legally binding agreement of the Issuers and the Trustee for the benefit of the Noteholders enforceable in accordance with its terms, have been done.

ARTICLE 1 - DEFINITIONS; INTERPRETATION

Section 1.01  Definitions.  For purposes of this Indenture, the Notes, the Security Trust Agreement and the other Financing Documents, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the following meanings:

“Acceptable Counterparty” shall mean any counterparty to the Interest Rate Cap Agreement that has and shall maintain, until the expiration of the applicable Interest Rate Cap Agreement a long-term unsecured debt rating of at least “AA” by S&P and “Aa2” from Moody’s, which rating shall not include a “t” or otherwise reflect a termination risk.

“Additional Insolvency Opinion” shall have the meaning set forth in Section 6.01(dd)(iii) hereof.

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

“Affiliated Manager” shall mean, collectively, Kerzner International Management Services, Inc. and Kerzner International Management Services Mexico, S. de R.L. de C.V. or any Manager in which any Issuer, Principal, or Guarantor has, directly or indirectly, any legal, beneficial or economic interest.

“Annual Budget” shall mean the operating budget, including all planned Capital Expenditures, for the Property prepared by the Issuers for the applicable Fiscal Year or other period.

“Applicable Interest Rate” shall having the meaning set forth in the Note.

“Approved Annual Budget” shall have the meaning set forth in Section 7.01(k)(iv) hereof.

“Assignment of Golf Management Agreement” shall mean that certain Assignment of Management Agreement, dated as of the date hereof, among the Trustee, the Issuers and Golf Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Assignment of Management Agreement” shall mean that certain Assignment of Management Agreement, dated as of the date hereof, among the Trustee, the Issuers and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Assignment of Spa Management Agreement” shall mean that certain Assignment of Management Agreement, dated as of the date hereof, among the Trustee, the Issuers and Spa Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation.

“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other foreign or domestic, federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other foreign or domestic, federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other foreign or domestic, federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (d) such Person consenting to or acquiescing in or joining in an application for the appointment of a custodian, sindico conciliador, receiver, trustee, or examiner for such Person or any portion of the Property; or (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due.

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“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights (including, but not limited to, the Mexican Ley de Concursos Mercantiles).

“Basic Carrying Costs” shall mean, for any period, the sum of the following costs:  (a) Taxes, (b) Other Charges and (c) Insurance Premiums.

“Beach Issuer” shall mean Kerzner Palmilla Beach Partners, S. de R.L. de C.V.

“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in Mexico or New York, New York or Chicago, Illinois, United States of America are not open for business.

“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs and tenant improvements).

“Cash Management Account” shall have the meaning set forth in the Note.

“Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Issuers, Manager and Trustee, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Cash Trap Event” shall have the meaning set forth in the Cash Management Agreement.

“Casualty” shall have the meaning set forth in Section 8.02 hereof.

“Casualty Consultant” shall have the meaning set forth in Section 8.04(d) hereof.

“Casualty Retainage” shall have the meaning set forth in Section 8.04(e) hereof.

“CNBV” shall mean the Mexican Comisión Nacional Bancaria y de Valores.

“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

“Collateral Assignment of Interest Rate Cap Agreement” shall mean that certain Collateral Assignment of Interest Rate Cap Agreement, dated as of the date hereof, executed by Issuers in connection with the issuance of the Notes in favor of Trustee for the benefit of the Noteholders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

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“Condemnation” shall mean a temporary or permanent taking (including an expropriation under Mexican law) by any Mexican Governmental Authority of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.

“Condemnation Proceeds” shall have the meaning set forth in Section 8.04(a)(iv) hereof.

“Condominium” shall mean that certain condominium regime created pursuant to the Condominium Documents.

“Condominium Documents” shall mean, collectively, that certain Public Deed Number 36,681 dated April 10, 1991 granted before Mr. Armando Antonio Aguilar Rubial, Notary Public No. 1 of La Paz, Baja California Sur, which Public Deed creates the condominium regime of the Palmilla Tourist Development and contains the condominium incorporation and subdivision of parcels, together with the lot description (memoria descriptiva) and the rules and regulations of the Condominium.

“Condominium Laws” shall have the meaning set forth in Section 6.01(nn).

“Corporate Trust Office” shall mean the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which as of the Closing Date is 135 S. LaSalle Street, Suite 1625, Chicago, Illinois 60603, Attention:  Global Securitization Trust Services Group—Palmilla Los Cabos Notes due January 9, 2007.

“Counterparty” shall mean, with respect to the Interest Rate Cap Agreement,            , and with respect to any Replacement Interest Rate Cap Agreement, any substitute Acceptable Counterparty.

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, the Notes together with all interest accrued and unpaid thereon and all other sums due to Trustee or Noteholders in respect of the obligations under the Notes, the Indenture and the other Financing Documents.

“Debt Service” shall mean with respect to any particular period of time, scheduled principal and/or interest payments under this Indenture, the Notes and the other Financing Documents.

“Default” shall mean the occurrence of any event hereunder or under any other Financing Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.

“Default Rate” shall have the meaning defined in the Notes.

“Dollars” or “$” shall mean lawful money of the United States of America.

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a

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federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” shall mean (1) LaSalle Bank National Association (provided that the rating by S&P, Moody’s and Fitch for LaSalle Bank National Association’s short term unsecured debt obligations or commercial paper and long term unsecured debt obligations does not decrease below its current rating) or such lower rating as may be acceptable to the Rating Agencies or (2) any other federal or state-chartered depository institution or trust company, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s).

“Embargoed Person” shall have the meaning set forth in Section 6.01(KK) hereof.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Event” shall have the meaning set forth in Section 11.01(a)(ix) hereof.

“Event of Default” shall have the meaning set forth in Section 9.01(a) hereof.

“Excess Cash Flow” shall have the meaning set forth in the Cash Management Agreement.

“Extraordinary Resolution” means a resolution passed by Noteholders holding sixty-six and two thirds per cent (66 2/3%) of the principal amount of the issued and outstanding Notes.

“Financing Documents” shall mean, collectively, this Indenture, the Notes, the Security Trust Agreement, the Pledge, the Assignment of Golf Management Agreement, the Assignment of Management Agreement, the Assignment of Spa Management Agreement, the Guaranty, the Cash Management Agreement, the Collateral Assignment of Interest Rate Cap Agreement, the Securitization Cooperation Agreement and all other documents executed and/or delivered in connection with the issuance of the Notes.

“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Notes.

“Fitch” shall mean Fitch, Inc.

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“GAAP” shall mean generally accepted accounting principles in the United States of America (“US GAAP”) as of the date of the applicable financial report; provided that, with respect to any Issuer’s individual annual financial statements required to be provided to Trustee under this Indenture, the term “GAAP” shall mean generally accepted accounting principles in effect in Mexico (“Mexican GAAP”) as of the date of such annual financial statements, provided, further, that such annual financial statements shall be prepared in English (or prepared in Spanish and accompanied by an English translation).

“Goldman” shall mean Goldman Sachs Emerging Markets Real Estate Fund.

“Golf Issuer” shall mean Kerzner Palmilla Golf Partners, S. de R.L. de C.V.

“Golf Management Agreement” shall mean that certain Golf Facility Management Agreement, dated December 5, 2003, between Golf Issuer and Golf Manager, or, if the context requires, the Replacement Golf Management Agreement.

“Golf Manager” shall mean Troon Mexico, S. de R.L. de C.V.

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision of the United States of America or the United Mexican States thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government or quasi governmental issues (including, without limitation, any court).

“Gross Income from Operations” shall mean all income and proceeds (whether in cash or on credit, and computed on an accrual basis, but excluding non-recurring income and proceeds) received by any Issuer or Manager for the use, occupancy or enjoyment of the Property, or any part thereof, or received by any Issuer or Manager for the sale of any goods, services or other items sold on or provided from the Property in the ordinary course of the Property operation, including without limitation:  (a) all income and proceeds received from rental of rooms, Leases and commercial space, meeting, conference and/or banquet space within the Property including net parking revenue; (b) all income and proceeds received from food and beverage operations, including catering services conducted from the Properties even though rendered outside of the Property; (c) all income and proceeds from business interruption, rental interruption and use and occupancy insurance with respect to the operation of the Property (after deducting therefrom all necessary costs and expenses incurred in the adjustment or collection thereof); (d) all Awards for temporary use (after deducting therefrom all costs incurred in the adjustment or collection thereof and in Restoration of the Property); (e) all income and proceeds from judgments, settlements and other resolutions of disputes with respect to matters which would be includable in this definition of “Gross Income from Operations” if received in the ordinary course of the Property operation (after deducting therefrom all necessary costs and expenses incurred in the adjustment or collection thereof); and (f) interest on credit accounts, rent concessions or credits, and other required pass-throughs and interest on Reserve Funds to the extent Issuers are entitled to such interest under this Indenture and the Cash Management Agreement; but excluding, (1) gross receipts received by lessees, licensees or concessionaires of the Property; (2) consideration received at the Property for hotel accommodations, goods and services to be provided at other hotels, although arranged by, for or on behalf of any Issuer or

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Manager; (3) income and proceeds from the sale or other disposition of goods, capital assets and other items not in the ordinary course of the Property operation; (4) federal, state and municipal excise, sales and use taxes collected directly from patrons or guests of the Property as a part of or based on the sales price of any goods, services or other items, such as gross receipts, room, admission, cabaret, value-added or equivalent taxes; (5) Awards (except to the extent provided in clause (d) above); (6) refunds of amounts not included in Operating Expenses at any time and uncollectible accounts; (7) gratuities collected by the Property employees; (8) the proceeds of any financing; (9) other income or proceeds resulting other than from the use or occupancy of the Property, or any part thereof, or other than from the sale of goods, services or other items sold on or provided from the Property in the ordinary course of business; (10) any credits or refunds made to customers, guests or patrons in the form of allowances or adjustments to previously recorded revenues; (11) payments made to Issuers pursuant to the Interest Rate Cap Agreement; and (12) any disbursements to any Issuer from the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Interest Reserve Fund, or any other escrow fund established by the Financing Documents.  Notwithstanding the foregoing, Gross Income from Operations shall not include any unrealized translation profit on remeasuring the Pesos.

“Guarantor” shall mean, collectively, Goldman and Kerzner.

“Guaranty” shall mean that certain Guaranty Agreement, dated as of the date hereof, from Guarantor to Trustee for the benefit of Noteholders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

“Hotel Issuer” shall mean Kerzner Palmilla Hotel Partners, S. de R.L. de C.V.

“Hotel Service Issuer” shall mean Kerzner Servicios Hoteleros, S. de R.L. de C.V.

“Improvements” shall mean the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land.

“Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (a) all indebtedness or liability of such Person (including, without limitation, amounts for borrowed money and indebtedness in the form of mezzanine debt and preferred equity); (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens (other than Liens constituting Permitted Encumbrances), whether or not the obligations have been assumed.

“Independent Director” or “Independent Manager” shall mean a Person who is not at the time of initial appointment, or at any time while serving as a director or manager, as applicable, and has not been at any time during the preceding five (5) years:  (a) a stockholder,

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director (with the exception of serving as the Independent Director or Independent Manager), officer, employee, partner, member, attorney or counsel of any Issuer or Principal or any Affiliate of either of them; (b) a creditor, customer, supplier or other person who derives any of its purchases or revenues from its activities with any Issuer or Principal or any Affiliate of either of them; (c) a Person controlling or under common control with any such stockholder, director, officer, partner, member, customer, supplier or other Person; or (d) a member of the immediate family of any such stockholder, director, officer, employee, partner, member, customer, supplier or other Person.  Notwithstanding anything to the contrary contained herein, a natural Person who satisfies the foregoing definition other than clause (b) shall not be disqualified from serving as an Independent Director or Independent Manager of the applicable Person if such natural Person is an independent director provided by a nationally recognized company that provides professional independent directors in the ordinary course of its business.  A natural Person who otherwise satisfies the foregoing definition, except for being the independent director of more than one Issuer or a “special purpose entity” affiliated with any Issuer or Principal, shall not be disqualified from serving as an Independent Director or Independent Manager if such Person is an independent director provided by a nationally-recognized company that provides professional independent directors in the ordinary course of its business.  As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise and a “special purpose entity” is an entity, whose organizational documents contain restrictions on its activities substantially similar to those set forth in the definition of Special Purpose Entity in this Indenture.

“Individual Parcel” shall mean the particular portion of the Land and the Improvements thereon contributed by an Issuer to the Security Trust Agreement, together with all rights pertaining to such portion of the Land and Improvements.

“Initial Note” shall mean, collectively, that certain Promissory Note A and that certain Promissory Note B in the aggregate principal amount of One Hundred Ten Million and No/100 Dollars ($110,000,000), in each case issued as of the Note Issuance Date and made by Issuers, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time as provided herein.

“Initial Noteholder” shall mean Column Financial, Inc., in its capacity as the assignee of Initial Purchaser of one or more of the Notes.

“Initial Purchaser” shall mean Credit Suisse First Boston LLC.

“Insolvency Opinion” shall mean, collectively, that certain non-consolidation opinion letter delivered by Creel, Garcia-Cuellar y Muggenburg, S.C., that certain non-consolidation opinion letter delivered by Cravath, Swaine & Moore LLP and such other non-consolidation opinions as may be required hereunder, in each case dated the date hereof and delivered in connection with the issuance of the Notes.

“Insurance Premiums” shall have the meaning set forth in Section 8.01(b) hereof.

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“Insurance Proceeds” shall have the meaning set forth in Section 8.04(a) hereof.

“Interest Period” shall have the meaning set forth in the Note.

“Interest Rate Cap Agreement” shall have the meaning set forth in the Note.

“Interest Reserve Account” shall have the meaning set forth in Section 10.04 hereof.

“Interest Reserve Fund” shall have the meaning set forth in Section 10.04 hereof.

“Issuer” shall mean any of Beach Issuer, Golf Issuer, Hotel Issuer, Hotel Service Issuer or Service Company Issuer.

“Issuer Order” and “Issuer Request” shall mean a written order or request signed in the name of an Issuer by any one of its authorized officers and delivered to the Trustee at least five (5) Business Day prior to the date of the requested action specified therein.

“Kerzner” shall mean Kerzner International Limited.

“Land” shall mean the real property contributed by Beach Issuer, Golf Issuer and Hotel Issuer to the Security Trust Agreement, as fully described in the Security Trust Agreement.

“Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of the Property, and (a) every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and (b) every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, provided that the term “Lease” shall not include any short-term arrangements with transient guests of the hotel located in the Improvements or the golf course located at the Property pursuant to which such guests acquire a right to use or occupy all or a portion of the Property.

“Legal Requirements” shall mean all country, federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, official standards (normas tecnicas), ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to any Issuer, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.

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“Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit reasonably acceptable to Servicer on behalf of Trustee (either an evergreen letter of credit or one which does not expire until at least thirty (30) Business Days after the Maturity Date) in favor of Trustee for the benefit of Noteholders and entitling Trustee to draw thereon in Chicago, Illinois or New York, New York, issued by a U.S. Eligible Institution or the U.S. agency or U.S. branch of a foreign Eligible Institution.  If at any time the bank issuing any such Letter of Credit shall cease to be an Eligible Institution, Trustee shall have the right upon ten (10) Business Days’ prior notice to Issuers to draw down the same in full and hold the proceeds of such draw in accordance with the applicable provisions hereof unless within such ten (10) Business Day period Issuers have delivered an extension thereof or a replacement Letter of Credit issued by an Eligible Institution meeting the requirements set forth herein.

“LIBOR” shall having the meaning set forth in the Notes.

“Licenses” shall have the meaning set forth in Section 6.01(v) hereof.

“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting any Issuer, the Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.

“Lockbox Account” shall have the meaning set forth in the Notes.

“Lockbox Bank” shall have the meaning set forth in the Notes.

“Management Agreement” shall mean the management agreement entered into by and between Issuers and the Manager, pursuant to which the Manager is to provide management and other services with respect to the Property, or, if the context requires, the Replacement Management Agreement.

“Manager” shall mean, collectively, Kerzner International Management Services, Inc. and Kerzner International Management Services Mexico, S. de R.L. de C.V., or, if the context requires, a Qualified Manager who is managing the Property in accordance with the terms and provisions of this Indenture.

“Material Adverse Effect” shall mean any material adverse effect upon (i) the business operations, economic performance or financial condition of the Issuers taken as a whole or the Property, (ii) the ability of Issuers to perform, in all material respects, their obligations under this Indenture and each of the other Financing Documents or (iii) the enforceability or validity of the Security Trust Agreement, the Pledge, any other Financing Document, the perfection or priority of any Lien created under any Financing Document or the remedies of Trustee for the benefit of Noteholders under any Financing Document.

“Maturity Date” shall have the meaning defined in the Notes.

“Maximum Legal Rate” shall have the meaning set forth in the Notes.

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“Mexico” shall mean the United Mexican States.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Net Cash Flow” shall mean, for any period, the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period.

“Net Cash Flow Schedule” shall have the meaning set forth in Section 7.01(k)(ii) hereof.

“Net Operating Income” shall mean, for any period, the amount obtained by subtracting Operating Expenses for such period from Gross Income from Operations for such period.

“Net Proceeds” shall have the meaning set forth in Section 8.04(a)(iv) hereof.

“Net Proceeds Deficiency” shall have the meaning set forth in Section 8.04(g) hereof.

“NOI” shall have the meaning set forth in Section 10.05(a).

“Note A” shall mean that certain Promissory Note A in the original principal amount of Sixty Five Million and No/100 Dollars ($65,000,000), issued as of the Note Issuance Date and made by Issuers, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time as provided herein.

“Note B” shall mean that certain Promissory Note B in the original principal amount of Forty Five Million and No/100 Dollars ($45,000,000), issued as of the Note Issuance Date and made by Issuers, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time as provided herein.

“Note Issuance Date” means the date upon which the Notes are issued and signed by the Issuers pursuant to the terms of this Indenture.

“Noteholders” or “Holders” means, at any time, the Persons holding any one or more of the Notes issued under the terms of this Indenture and entered in the Register as holders of such Note or Notes.

“Noteholders’ Approval” means an instrument signed in one or more counterparts by all the Registered Holders of Notes at the time of issuance of the approval, or approved pursuant to resolution, in accordance with the provisions of this Indenture.

“Notes” shall mean, collectively, the Initial Note and all other notes issued hereunder, governed by the provisions of this Indenture and at the time of determination then being outstanding.

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“Obligations” means all present and future debts, expenses and liabilities, direct or indirect, absolute or contingent, due, owing, or accruing due, or owing, from time to time by the Issuers hereunder or under the Notes and the other Financing Documents.

“Officer’s Certificate” shall mean a certificate delivered to Initial Purchaser, Initial Noteholder or Trustee by any Issuer or Issuers, as the case may be, which is signed by an authorized senior officer of such Issuer (if the Officer’s Certificate is being delivered by such Issuer) or of any Issuer (if the Owner’s Certificate is being delivered by Issuers).

“Operating Expenses” shall mean the sum of all costs and expenses of operating, maintaining, directing, managing and supervising the Property (excluding, (i) depreciation and amortization, (ii) any Debt Service, or (iii) any Capital Expenditures in connection with the Property, incurred by Issuers or by Manager on behalf of Issuers pursuant to the Management Agreement, or as otherwise specifically provided therein, which are properly attributable to the period under consideration under Issuers’ system of accounting, including without limitation:  (a) the cost of all food and beverages sold or consumed and of all necessary chinaware, glassware, linens, flatware, uniforms, utensils and other items of a similar nature, including such items bearing the name or identifying characteristics of the hotels as Issuers and/or Manager shall reasonably consider appropriate (“Operating Equipment”) and paper supplies, cleaning materials and similar consumable items (“Operating Supplies”) placed in use (other than reserve stocks thereof in storerooms).  Operating Equipment and Operating Supplies shall be considered to have been placed in use when they are transferred from the storerooms of the Property to the appropriate operating departments; (b) salaries and wages of personnel of the Property, including costs of payroll taxes and employee benefits (which benefits may include, without limitation, a pension plan, medical insurance, life insurance, travel accident insurance and an executive bonus program) and the costs of moving employees, personnel, their families and their belongings to the area in which the Property is located at the commencement of their employment at the Property and other administrative and general operating expenses not otherwise specifically referred to in this definition.  Except as otherwise expressly provided under the Management Agreement with respect to employees regularly employed at the Property, the salaries or wages of other employees or executives of Manager, Guarantor or any of its Affiliates shall in no event be Operating Expenses, but they shall be entitled to free room and board and the free use of all facilities at such times as they visit any Individual Parcel exclusively in connection with the management of such Individual Parcel.  Notwithstanding the foregoing, if it becomes necessary for a Guarantor employee or an employee or executive of Guarantor Affiliate to temporarily perform services at any Individual Parcel of a nature normally performed by personnel of the Property, his or her salary (including any Issuer’s or Manager’s payroll taxes and employee benefits) as well as his or her traveling expenses will be Operating Expenses and he or she will be entitled to free room, board and use of the facilities as aforesaid, while performing such services; (c) the cost of all other goods and services obtained by Issuers or Manager in connection with its operation of the Property including, without limitation, heat and utilities, office supplies including any operating leases and all services performed by third parties; (d) the cost of repairs to and maintenance of the Property other than Capital Expenditures; (e) insurance premiums and losses incurred on any self-insured risks, provided that Issuers and Manager have specifically approved in advance such self-insurance or insurance is unavailable to cover such risks.  Insurance premiums on policies for more than one year will be pro rated over the period of insurance and premiums under blanket policies will be allocated

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among properties covered; (f) all Taxes and Other Charges (other than federal, state or local income taxes and franchise taxes or the equivalent) payable by or assessed against Issuers or Manager with respect to the operation of the Property; (g) legal fees, administrative and general expenses, security costs, trustee expenses, master condominium association fees and fees of any firm of independent certified public accounts designated from time to time by Issuers (the “Independent CPA”) for services directly related to the operation of the Property; (h) the costs and expenses of technical consultants and specialized operational experts for specialized services in connection with non-recurring work on operational, legal, functional, decorating, design or construction problems and activities, including the reasonable fees of Guarantor or any Guarantor subsidiary or division in connection therewith, provided that such costs and expenses are reasonable and customary; (i) all expenses for advertising for the Property and all expenses of sales promotion, marketing, advertising and public relations activities; (j) all out-of-pocket expenses and disbursements determined by the Independent CPA to have been reasonably, properly and specifically incurred by Issuers, Manager, Guarantor or any of their Affiliates pursuant to, in the course of and directly related to, the management and operation of the Property under the Management Agreement.  Without limiting the generality of the foregoing, such charges may include all reasonable travel, telephone, telegram, radiogram, cablegram, air express and other incidental expenses, but, excluding costs relating to the offices maintained by any Issuer, Manager, Guarantor or any of their Affiliates other than any sales offices maintained off-site or offices maintained at the Individual Parcel for the management of such Individual Parcel; (k) the cost of any reservations system, any accounting services or other group benefits, programs or services from time to time made available to properties in the Issuers’ system; (l) the cost associated with any retail Leases; (m) any management fees, basic and incentive fees or other fees and reimbursables paid or payable to Manager under the Management Agreement or Golf Manager under the Golf Management Agreement; and (n) all costs and expenses of owning, maintaining, conducting and supervising the operation of the Property to the extent such costs and expenses are not included above.  Notwithstanding anything herein contained to the contrary, Operating Expenses shall not include, and shall not be deemed to include, (i) any unrealized translation loss on remeasuring the Pesos and (ii) any costs or expenses, including, but not limited to, the costs and expenses of technical consultants and other specialized operational workers, incurred in connection with any Capital Expenditure program (including pre-opening costs), where such costs and expenses are capitalized to the Property as permitted by GAAP.

“Other Charges” shall mean all ground rents, maintenance charges, Condominium charges and assessments, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.

“Payment Date” shall have the meaning set forth in the Notes.

“Permitted Encumbrances” shall mean, collectively (a) the Liens and security interests created by the Financing Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy or liens that are being contested in accordance with Section 7.01(j)(iii) hereof, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent or that are being contested in accordance with Section 7.01(b) hereof, (d) Liens on equipment and other personalty used on the Property, if any, granted in connection

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with the financing of such equipment or other personalty permitted by the Loan Documents, (e) access and utility easements which do not have a Material Adverse Effect, and (f) such other title and survey exceptions as Initial Noteholder or Trustee has approved or may approve in writing in Initial Noteholder’s or Trustee’s sole discretion.

“Permitted Equipment Financing” shall have the meaning set forth in clause (t) of the definition of the term “Special Purpose Entity”.

“Permitted Investments” shall have the meaning set forth in the Cash Management Agreement.

“Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

“Personal Property” shall mean all the movable property and rights and interests pledged by the Issuers pursuant to the Pledge and all other personal property owned by any Issuer and encumbered by any of the Financing Documents, together with all rights pertaining to such property.

“Pesos” shall mean lawful money of Mexico.

“Physical Conditions Report” shall mean that certain report of a Hotel Resort, dated November 18, 2004, prepared by Merritt & Harris, Inc.

“Pledge” shall mean the Pledge Without Transmission of Possession (Prenda Sin Transmision de Posesion), as the same may be amended, modified, restated or supplemented from time to time, created on the collateral described therein and granted by Issuers to secure the payment of the Notes.

“Policies” shall have the meaning specified in Section 8.01(b) hereof.

“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C. §1701 et seq. and (d) all other Legal Requirements relating to money laundering or terrorism.

“Principal” shall mean, collectively, Palmilla Holdings I, LLC and Palmilla Holdings II, LLC.

“Property” shall mean, collectively, each and every Individual Parcel and all Personal Property.

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“Provided Information” shall mean any and all financial and other information provided at any time by, or on behalf of, any Issuer or Guarantor with respect to the Property, any Issuer, Principal, Guarantor and/or Manager.

“Qualified Golf Manager” shall mean either (a) Golf Manager or (b) a management organization possessing similar reputation and experience as Golf Manager in managing a golf course of comparable class, luxury and quality as the golf course at the Property.

“Qualified Manager” shall mean either (a) Manager or (b) in the reasonable judgment of Servicer on behalf of Trustee, a reputable and experienced management organization (which may be an Affiliate of an Issuer) possessing experience in managing properties similar in size, scope, use and value as the Property, provided, that Issuers shall have obtained prior written confirmation from the applicable Rating Agencies that management of the Property by such Person will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof.

“Qualified Spa Manager” shall mean either (a) Spa Manager or (b) a management organization possessing similar reputation and experience as Spa Manager in managing a spa facility of comparable class, luxury and quality as the spa facility at the Property.

“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally recognized statistical rating agency which has been approved by Trustee.

“Register” means the register or registers providing for the registration of Notes and the registration of transfers and exchanges of Notes, which register the Trustee will cause to be kept.

“Registered Holder” shall mean any Noteholder who appears on the Register as the owner and holder of one or more Notes.

“Related Party” shall have the meaning set forth in Section 6.01(mm) hereof.

“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note.

“Rents” shall mean, with respect to each Individual Parcel, all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Issuers or their agents or employees from any and all sources arising from or attributable to the Individual Parcel, and proceeds, if any, from business interruption or other loss of income or insurance, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms, golf course and other recreational facilities, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease, license,

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concession or other grant of the right of the use and occupancy of property or rendering of services by any Issuer or any operator or manager of the hotel, the golf course or the commercial space located in the Improvements or at the Property or acquired from others (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores, and offices, and deposits securing reservations of such space), license, lease, sublease and concession fees and rentals, health club membership fees, food and beverage wholesale and retail sales, service charges, vending machine sales.

“Replacement Golf Management Agreement” shall mean, collectively, either (a) a management agreement with a Qualified Golf Manager substantially in the same form and substance as the Golf Management Agreement, or (b) a management agreement with a Qualified Golf Manager, which management agreement shall be reasonably acceptable to the Servicer, on behalf of the Trustee in form and substance, provided, with respect to this clause (b), an assignment of management agreement substantially in the form then used by Servicer (or of such other form and substance reasonably acceptable to Servicer, on behalf of the Trustee) shall be executed and delivered to Trustee by Issuers and such Qualified Golf Manager at Issuers’ expense.

“Replacement Interest Rate Cap Agreement” means an interest rate cap agreement from an Acceptable Counterparty with terms identical to the Interest Rate Cap Agreement except that the same shall be effective in connection with replacement of the Interest Rate Cap Agreement following a downgrade, withdrawal or qualification of the long-term unsecured debt rating of the Counterparty; provided that to the extent any such interest rate cap agreement does not meet the foregoing requirements, a “Replacement Interest Rate Cap Agreement” shall be such interest rate cap agreement approved in writing by each of the Rating Agencies with respect thereto.

“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to the Servicer, on behalf of the Trustee in form and substance, provided, with respect to this subclause (ii), Servicer, at its option, may require that Issuers obtain confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any class thereof; and (b) an assignment of management agreement substantially in the form then used by Servicer (or of such other form and substance reasonably acceptable to Servicer, on behalf of the Trustee), executed and delivered to Trustee by Issuers and such Qualified Manager at Issuers’ expense.

“Replacement Reserve Account” shall have the meaning set forth in Section 10.03(a) hereof.

“Replacement Reserve Fund” shall have the meaning set forth in Section 10.03(a) hereof.

“Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 10.03(a) hereof.

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“Replacement Spa Management Agreement” shall mean, collectively, either (a) a management agreement with a Qualified Spa Manager substantially in the same form and substance as the Spa Management Agreement, or (b) a management agreement with a Qualified Spa Manager, which management agreement shall be reasonably acceptable to the Servicer, on behalf of the Trustee in form and substance, provided, with respect to this clause (b), an assignment of management agreement substantially in the form then used by Servicer (or of such other form and substance reasonably acceptable to Servicer, on behalf of the Trustee) shall be executed and delivered to Trustee by Issuers and such Qualified Spa Manager at Issuers’ expense.

“Replacements” shall have the meaning set forth in Section 10.03(a) hereof.

“Required Repair Account” shall have the meaning set forth in Section 10.1(a) hereof.

“Required Repair Fund” shall have the meaning set forth in Section 10.1(a) hereof.

“Required Repairs” shall have the meaning set forth in Section 10.1(a) hereof.

“Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Interest Reserve Fund, the Required Repair Fund, and any other escrow fund established pursuant to the Financing Documents.

“Reserve LC” shall mean the NOI LC or the Spa LC.

“Responsible Officer” shall mean a person designated by Trustee as an authorized officer of Trustee in connection with the administration of the Notes in accordance with this Indenture.

“Restaurant Lease” shall mean that certain Agreement, dated May 26, 2003, between Charlie Trotter Enterprises, Inc. and Hotel Issuer.

“Restoration” shall mean the repair and restoration of any Individual Parcel after a Casualty or Condemnation as nearly as possible to the condition such Individual Parcel was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Trustee.

“Restricted Party” shall mean (a) any Issuer, Principal, Affiliated Manager, Palmilla JV, LLC, GSEM Palmilla LLC and Kerzner Investment Palmilla, Inc. and (b) any shareholder, partner, member, non-member manager and any direct or indirect legal or beneficial owner of any Issuer, Principal, Affiliated Manager, Palmilla JV, LLC, GSEM Palmilla LLC and Kerzner Investment Palmilla, Inc.

“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.

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“Sale” or “Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance or pledge of a legal or beneficial interest.

“Securities” shall have the meaning set forth in the Securitization Cooperation Agreement.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Securitization” shall have the meaning set forth in the Securitization Cooperation Agreement.

“Securitization Cooperation Agreement” shall mean that certain letter agreement dated the date hereof between Issuers and Column Financial, Inc.

“Security Trust Agreement” shall mean that certain Amended and Restated Trust Agreement Number 0023, established with Security Trust Trustee to secure the payment of the Notes and the performance of the other Obligations, as the same has been or may be amended, restated or supplemented from time to time.

“Security Trust First Beneficiary” shall mean Trustee, as first beneficiary under the Security Trust Agreement.

“Security Trust Second Beneficiary” shall mean, collectively, Beach Issuer, Golf Issuer, Hotel Issuer, Palmilla Holdings I, LLC and Palmilla Holdings II, LLC, each as second beneficiary under the Security Trust Agreement.

“Security Trust Trustee” shall mean Banco J.P. Morgan, S.A., Institución de Banca Múltiple, J.P. Morgan Grupo Financiero, División Fiduciaria, as trustee under the Security Trust Agreement.

“Service Company Issuer” shall mean Kerzner Compañía de Servicios, S. de R.L. de C.V.

“Servicer” shall mean Orix Capital Markets, LLC or such other Person designated in writing pursuant to Section 11.14 hereof by a majority of the Noteholders to act as Servicer, and who shall have accepted in writing such appointment to so act, on behalf of the Trustee for the benefit of the Noteholders, with power and responsibility to perform all responsibilities identified as being performed by the Servicer hereunder and as may be more specifically described in a servicing agreement between the Noteholders and the Servicer, either prior to or upon any Securitization, as shall be determined by the a majority of the Noteholders.  The Servicer may be a Noteholder designated as such in writing by a majority of the Noteholders.  It is understood and agreed that any servicing agreement may provide that the Servicer may take certain actions, or refrain from an action, only with the consent of a specified portion (which may be all) of the Noteholders.

“Spa LC” shall have the meaning set forth in Section 10.05(b).

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“Spa Management Agreement” shall mean that certain Spa Operation Agreement, dated September 19, 2003, between Hotel Issuer and Spa Manager, or, if the context requires, the Replacement Spa Management Agreement.

“Spa Manager” shall mean Mandara Spa de Mexico, S. de R.L. de C.V.

“Special Purpose Entity” shall mean a corporation, limited partnership or limited liability company which at all times on and after the date hereof:

(a)  is organized solely for the purpose of (i) acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Property or its Individual Parcel, entering into this Indenture with the Trustee, refinancing the Property or its Individual Parcel in connection with a permitted repayment of the Notes, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (ii) acting as a general partner of the limited partnership that owns the Property or an Individual Parcel or member of the limited liability company that owns the Property or an Individual Parcel;

(b)  is not engaged and will not engage in any business unrelated to (i) the acquisition, development, ownership, management or operation of the Property or its Individual Parcel, (ii) acting as general partner of the limited partnership that owns the Property or an Individual Parcel; or (iii) acting as a member of the limited liability company that owns the Property or an Individual Parcel, as applicable;

(c)  other than, in the case of Hotel Issuer, the ownership of seven (7) residences currently utilized as employee housing, does not have and will not have any material assets other than its Individual Parcel and personal property necessary or incidental to the ownership and operation of the Property or its Individual Parcel or its partnership interest in the limited partnership or the member interest in the limited liability company that owns the Property or an Individual Parcel or acts as the general partner or managing member thereof, as applicable;

(d)  has not engaged in, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of partnership or membership interests (if such entity is a general partner in a limited partnership or a member in a limited liability company) or amendment of its limited partnership agreement, articles of incorporation, articles of organization, by-laws, certificate of formation or operating agreement (as applicable) with respect to the matters set forth in this definition;

(e)  if such entity is a limited partnership, has, as its only general partners, Special Purpose Entities that are corporations, limited partnerships or limited liability companies;

(f)  if such entity is a corporation, has at least two (2) Independent Directors, and has not caused or allowed and will not cause or allow the board of directors of such entity to take any action requiring the unanimous affirmative vote of one hundred percent

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(100%) of the members of its board of directors unless two Independent Directors shall have participated in such vote;

(g)  if such entity is a limited liability company with more than one member, has at least one member that is a Special Purpose Entity that is a corporation that has at least two Independent Directors and that owns at least one percent (1.0%) of the equity of the limited liability company;

(h)  if such entity is a limited liability company with only one member, is a limited liability company organized in the State of Delaware that has (i) as its only member a non-managing member, (ii) at least two (2) Independent Managers and has not caused or allowed and will not cause or allow the board of managers of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the managers unless two (2) Independent Managers shall have participated in such vote and (iii) at least two (2) springing members that will become the non-managing members of such entity upon the dissolution of the existing non-managing member;

(i)  if such entity is (i) a limited liability company, has articles of organization, a certificate of formation and/or an operating agreement, as applicable, (ii) a limited partnership, has a limited partnership agreement, or (iii) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity will not:  (A) dissolve, merge, liquidate, consolidate; (B) sell all or substantially all of its assets or the assets of the Issuers or any Issuer (as applicable); (C) engage in any other business activity, or amend its organizational documents with respect to the matters set forth in this definition without the consent of the Servicer on behalf of Trustee for the benefit of Noteholder; or (D) without the affirmative vote of two Independent Directors and of all other directors of the corporation (that is such entity or the general partner or managing or co-managing member of such entity), file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest;

(j)  is and will remain solvent and pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due, and is maintaining and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(k)  will not fail to correct any known misunderstanding regarding the separate identity of such entity;

(l)  will maintain its accounts, books and records separate from any other Person and will file its own tax returns, except to the extent that it is required to file consolidated tax returns by law;

(m)  will maintain its own records, books, resolutions and agreements;

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(n)  other than as provided in the Cash Management Agreement, (i) will not commingle its funds or assets with those of any other Person and (2) will not participate in any cash management system with any other Person;

(o)  will hold its assets in its own name;

(p)  will conduct its business in its name, in the name of “One and Only Palmilla” (in the case of an Issuer) or in a name franchised or licensed to it by an entity other than an Affiliate of Issuers or any Issuer, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (dd) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Issuers or the applicable Issuer;

(q)  will maintain its financial statements, accounting records and other entity documents separate from any other Person and has not permitted and will not permit its assets to be listed as assets on the financial statement of any other entity except as required by GAAP; provided, however, that any such consolidated financial statement shall contain a note indicating that its separate assets and liabilities are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity;

(r)  will pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations;

(s)  will observe all partnership, corporate or limited liability company formalities, as applicable;

(t)  has and will have no Indebtedness other than (i) indebtedness evidenced by the Notes and the other Financing Documents, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property or its Individual Parcel and the routine administration of Issuers or any Issuer, in amounts not to exceed one percent (1%) of the principal balance of the Notes which liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a note and are paid when due, and which amounts are normal and reasonable under the circumstances, (iii) in the case of an Issuer, indebtedness incurred in connection with the financing of equipment and other personal property used on the Property, provided that the aggregate amount of such indebtedness from all Issuers does not exceed $512,000 at any one time (the “Permitted Equipment Financing”), and (iv) such other liabilities that are permitted pursuant to this Indenture;

(u)  other than in connection with the Permitted Equipment Financing and the indebtedness evidenced by the Notes and the other Financing Documents, will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as permitted pursuant to this Indenture or the other Financing Documents;

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(v)  will not acquire obligations or securities of its partners, members or shareholders or any other Affiliate;

(w)  will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including, but not limited to, paying for shared office space and services performed by any employee of an Affiliate;

(x)  maintains and uses and will maintain and use separate stationery, invoices and checks bearing its name or, in the case of an Issuer, the name “One and Only Palmilla”.  The stationery, invoices, and checks utilized by the Special Purpose Entity or utilized to collect its funds or pay its expenses shall bear its own name or, in the case of an Issuer, the name “One and Only Palmilla” and shall not bear the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity’s agent;

(y)  other than pursuant to the Financing Documents, will not pledge its assets for the benefit of any other Person;

(z)  other than, in the case of an Issuer, pursuant to its use of the name “One and Only Palmilla,” will hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of Issuers and any Issuer and not as a division or part of any other Person, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (dd) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Issuers or the applicable Issuer;

(aa)  will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(bb)  will not make loans to any Person or hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity);

(cc)  will not identify its partners, members or shareholders, or any Affiliate of any of them as a division or part of it, and shall not identify itself as a division of any other Person;

(dd)  will not enter into or be a party to, any contract or agreement with any of its Affiliates, constituents or owners, or any guarantors of any of its obligations or any Affiliate of any of the foregoing except (A) in the ordinary course of its business and on terms which are intrinsically fair, commercially reasonable and are no less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party and (B) in connection with this Indenture and the other Financing Documents;

(ee)  except as set forth in the organizational documents of the Issuers as of the Note Issuance Date, will not have any obligation to, and will not, indemnify its partners, officers, directors or members, as the case may be, unless such an obligation is fully

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subordinated to the Debt and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation;

(ff)  if such entity is a corporation, it shall consider the interests of its creditors in connection with all corporate actions;

(gg)  other than, in the case of an Issuer, the Permitted Equipment Financing, does not and will not have any of its obligations guaranteed by any Affiliate;

(hh)  complies and will comply with all of the terms and provisions contained in its organizational documents.  The statement of facts contained in its organizational documents are true and correct and will remain true and correct; and

(ii)  in the case of a limited liability company (sociedad de responsabilidad limitada de capital variable) organized in Mexico, observes all formalities in all material respects applicable to such types of entities in the Mexican General Corporations Law (Ley General de Sociedades Mercantiles), and has by-laws (estatutos sociales) which provide that, for so long as the Notes are outstanding and the limited liability company’s assets continue to be subject to the Liens securing the Debt, the limited liability company shall not take any of the following actions:

(i)  the dissolution, liquidation, consolidation, merger or sale of all or substantially all of the assets of the company, except with the unanimous approval of all of its members;

(ii)  the engagement by any Issuer in any business other than the ownership, leasing, maintenance and operation of the Property or its Individual Parcel; and

(iii)  the filing, or consent to the filing, of a bankruptcy or insolvency petition (concurso mercantil), any general assignment for the benefit of creditors or the appointment of a receiver, liquidator, síndico, assignee, trustee, sequestrator, custodian or any similar official for any Issuer or a substantial portion of its properties without the unanimous vote of all members of the limited liability company.

“State” shall mean Mexico or the State or Commonwealth in the United States of America, as applicable, in which the Property or any part thereof is located.

“Substitute Guarantor” shall mean a Person with (a) $250,000,000 in net worth and (b) $20,000,000 in liquidity, including for purposes of determination (i) availability under any existing lines of credit and (ii) outstanding capital commitments by “Qualified Institutional Investors” or “Accredited Investors” (as such terms are defined under the Securities Act) pursuant to subscription or other similar agreements or arrangements.

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“Survey” shall mean that certain survey of the One & Only Palmilla Hotel located at Los Cabos, Baja California Sur, Mexico, dated November 30, 2004, by Pedro Sotres Hernandez, Surveyor.

“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 10.02(a) hereof.

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or any part thereof.

“Threshold Amount” shall have the meaning set forth in Section 7.01(v) hereof.

“Title Insurance Policy” shall mean a title insurance policy in a form (acceptable to Initial Purchaser) issued with respect to the Property and insuring the Trustee that the Security Trust Agreement creates a valid first lien on the applicable Property.

“Transfer” shall have the meaning set forth in Section 7.02(j)(ii) hereof.

“Transferee” shall have the meaning set forth in Section 7.02(j)(v) hereof.

“Transferee Related Entities” shall have the meaning set forth in Section 7.02(j)(vi) hereof.

“Trustee” shall have the meaning set forth on the first page hereof.

“Trustee Indemnified Party” or “Trustee Indemnified Parties” shall mean the Trustee, any of its directors, officers, shareholders, agents or employees.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect from time to time in the State or Commonwealth of the United States of America in which the Property or any part thereof is located.

“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are direct obligations of the United States of America for the payment of which its full faith and credit is pledged.

Section 1.02  Accounting Terms.  All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP.

Section 1.03  General.  The division of this Indenture into sections and the insertion of headings are for convenience of reference only and shall not affect the interpretation of this Indenture.  Any reference in this Indenture to any act or statute or any section thereof shall be deemed to be a reference to such act, statute or section as amended or re-enacted from time to time, except as otherwise provided herein.  Words importing the singular number include the plural and vice versa.  Any defined term used in the singular preceded by “any” shall be taken to indicate any number of the members of the relevant class.  Any reference in this

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Indenture to any Person shall include the successors and permitted assigns of such Person.  All references to sections and schedules are to sections and schedules in or to this Indenture unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Indenture shall refer to this Indenture as a whole and not to any particular provision of this Indenture.  Wherever a representation, warranty or certificate is based upon the knowledge of any Issuer or Issuers, the knowledge of each Issuer shall be imputed to each other Issuer and Issuers.

ARTICLE 2 - ISSUE OF NOTES

Section 2.01  No Limit on Issue.  The aggregate principal amount of the Notes authorized to be issued under this Indenture and outstanding at any one time shall be limited to the amount of $110,000,000 and subject to compliance with Section 2.03.

Section 2.02  Notes Deemed to be Outstanding.  Every Note signed and delivered by the Issuers hereunder shall be deemed to be outstanding until it shall be cancelled or delivered to the Trustee for cancellation, or moneys for the payment thereof shall have been set aside pursuant hereto.

Section 2.03  Conditions Precedent to the Issue of Notes.  (a)  No Note shall be signed by the Trustee and issued hereunder unless on the Note Issuance Date relating thereto each of the following conditions shall be satisfied:

(i)  No Event of Default.  No event shall have occurred and be continuing which would constitute an Event of Default or, with the giving of notice or lapse of time or both, would constitute an Event of Default, nor shall the issue of the Note, with the giving of notice or lapse of time or both, constitute or result in the occurrence of an Event of Default;

(ii)  Representations.  The representations and warranties of the Issuers set forth in herein and in the other Financing Documents shall be true and accurate in all material respects;

(iii)  Security Trust Agreement and Pledge.  The Issuers shall have executed the Security Trust Agreement and the Pledge, and shall have presented for registration the Security Trust Agreement and the Pledge with the corresponding public registries in Mexico and shall have received stamped copies thereof confirming receipt of the relevant documentation by such public registries;

(iv)  No Insolvency.  No Issuer is insolvent within the meaning thereof in the Bankruptcy Code; ands

(v)  Conditions Precedent in Other Documents.  Any terms, conditions, including conditions precedent, set forth in the Security Trust Agreement and in the Pledge, have been fully and properly satisfied in the judgment and discretion of the Initial Purchaser.

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(vi)  Appointment of Process Agent.  The Issuers shall have granted their appointed process agent (as provided in Section 14.04 hereof) a power-of-attorney for lawsuits and collections, in form and substance satisfactory to Initial Purchaser.

(vii)  Registration of Notes with CNBV.  The Notes shall have been approved for registration with the Special Section (Sección Especial) of the National Registry of Securities (Registro Nacional de Valores) maintained by the CNBV.

(b)  The Trustee shall have no responsibility for determining the satisfaction of any such conditions, nor for the delivery, receipt or custody of any agreements, documents or other materials specified in the Security Trust Agreement, or in the Pledge or in this Agreement, which are required to be delivered to or received by any party other than the Trustee.  With respect to any agreements, documents or other materials which are to be received by the Trustee, the Trustee shall have no responsibility for the review of such documents, but shall be responsible only to receive such agreements, documents or other materials as are actually delivered to it, and any review thereof and determination with respect to compliance with the requirements of this Agreement or the Security Trust Agreement or the Pledge shall be made by the Noteholders.

Section 2.04  Issue of Notes.  The Notes to be issued hereunder shall be issued subject to the following terms, conditions and attributes:

(a)  the Notes shall be issued in the form of the Exhibit A attached hereto and made a part hereof;

(b)  the Notes shall bear interest from the Note Issuance Date at the rate specified in the Notes issued and should there be an Event of Default at any time, including failure to pay in accordance with any stated payment obligation, interest shall be payable on the amount in default at the Default Rate;

(c)  the principal of the Notes, together with interest, if any, thereon, will be payable as specified in the Notes issued;

(d)  every Note, whether issued originally or in exchange for one or more other Notes, shall be entitled to the payments as designated in the issued form of Note;

(e)  wherever in this Indenture or the Notes there is mention, in any context, of the payment of interest, such mention shall be deemed to include the payment of interest on amounts in default;

(f)  the Notes may be assigned or otherwise transferred by Initial Purchaser and thereafter any Noteholder, provided that such assignment or other transfer in the United States of America is effected pursuant to an exemption from any applicable federal and state securities laws, which may be exemptions provided by Rule 144A under the Securities Act, Regulation D under the Securities Act, Regulation S under the Securities Act or any other exemption from registration available under the applicable federal and state securities laws in the United States of America; and

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(g)  the terms and conditions of this Indenture are otherwise met.

Section 2.05  Form of Notes.  (a)  All Notes issued hereunder shall be in substantially the form of Exhibit A hereto, shall be signed by the Issuers, and shall be authenticated by the Trustee, to be validly issued hereunder.  The Trustee’s certificates of authentication for the Notes shall be in substantially the following form:

This Note is one of the Notes referred to in the above-mentioned Indenture.

[                                                  ], as Trustee
By:
	Authorized Officer

or

[                                                    ], as Trustee
By:
	as Authenticating Agent

(b)  The following legend shall be placed on each Note:

THIS NOTE MAY BE ASSIGNED OR OTHERWISE TRANSFERRED BY THE INITIAL PURCHASER THEREOF AND THEREAFTER BY ANY HOLDER THEREOF, PROVIDED THAT SUCH ASSIGNMENT OR OTHER TRANSFER IN THE UNITED STATES OF AMERICA IS EFFECTED PURSUANT TO AN EXEMPTION FROM ANY APPLICABLE FEDERAL AND STATE SECURITIES LAWS IN THE UNITED STATES OF AMERICA, WHICH MAY BE THE EXEMPTIONS PROVIDED BY RULE 144A UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), REGULATION D UNDER THE SECURITIES ACT, REGULATION S UNDER THE SECURITIES ACT OR ANY OTHER EXEMPTION FROM REGISTRATION AVAILABLE UNDER ANY SUCH APPLICABLE REGISTRATION REQUIREMENT.

Section 2.06  Registration.  The Issuers shall cause to be kept at the Corporate Trust Office of Trustee a register (the “Register”), for the registration or transfer of the Notes.  The Register shall be maintained by the Trustee, acting as the agent of the Issuers for this purpose, and the Trustee, is hereby appointed as “Registrar” for the purpose of registering Notes and transfers of Notes as provided herein.  The name and address of the Holder of each Note, records of any transfers of the Notes and the name and address of any transferee of a Note shall be entered in the Register under such reasonable regulations as the Trustee may prescribe, and the Issuers shall be entitled to treat the Person whose name and address is entered in the Register as the Holder of a Note or Notes as the owner of such Note(s) for all purposes.  There shall be no more than one Registered Holder for each Note.  The Trustee may appoint one or more co-registrars, and the term “Registrar” includes any such co-registrar.  The Registrar shall (i) at

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all reasonable times during office hours make the Register available to the Issuers and to any Person authorized by the Issuers in writing for inspection and the making of copies thereof or extracts therefrom and (ii) mail a copy of the Register to the Issuers and to any other such Person promptly after request therefor from the Issuers.

Section 2.07  Transfers of Notes.  No transfer of a Note shall be valid unless (a) such Note shall have been surrendered to the Trustee for cancellation whereupon, a new Note or Notes of an equal aggregate principal amount shall be issued to the transferee in exchange therefor or (b) such Note has been validly endorsed and assigned to the transferee and notice of such assignment and transfer has been given to the Trustee for recordation in the Register.  The registered Holder for the time being of any Note shall be entitled to the principal moneys and interest evidenced by such Notes free from all equities or rights of set-off, counterclaim or compensation between the Issuers and the original or any intermediate Noteholder thereof and all Persons may act accordingly.

Section 2.08  Inspection of Registers.  The Register maintained by the Issuers at the Corporate Trust Office of Trustee shall, at all reasonable times, be open for inspection by any Noteholders.  Every Registered Holder of a Note, by receiving and holding such a Note, agrees with the Trustee that neither the Issuers, the Trustee, nor any of their respective agents, shall be held accountable by reason of the disclosure of such information as to the names and addressed of such Noteholders, regardless of the sources from which such information was derived.

Section 2.09  Title to Registered Notes.  The Person in whose name the Notes shall be registered shall be deemed and regarded as the owner thereof for all purposes of this Indenture and payment of or on account of the principal of or interest on such Notes shall be made only to or upon the order in writing of such Registered Holder thereof.

Section 2.10  Mutilation, Loss, Theft or Destruction.  In case any of the Notes issued hereunder shall become mutilated or be lost, stolen or destroyed, the Issuers shall, at the request of a Noteholder, issue, and thereupon the Trustee shall certify and deliver, a new Note upon surrender or cancellation of the mutilated Note, or in the case of a lost, stolen or destroyed Note, in lieu of and in substitution for the same, and the substituted Note shall be in a form approved by the Trustee and shall be entitled to the benefit of this Indenture identically with the Note replaced.  In case of loss, theft or destruction, the applicant for a substituted Note shall furnish to the Issuers and to the Trustee such evidence of such loss, theft or destruction as shall be satisfactory to them in their discretion and shall also furnish an indemnity or note satisfactory to them in their discretion.  The applicant shall pay all reasonable expenses incidental to the issuance of any substituted Note.

Section 2.11  Cancellation of Notes.  Upon payment in full to any Noteholder, pursuant to the terms of the applicable Note, and the delivery by such Noteholder to the Trustee of the fully repaid Notes then held by such Noteholder, for cancellation, the Trustee shall cancel such Notes pursuant hereto.  Notes may only be repaid in accordance with the terms of such Note, the Note shall specifically contemplate whether repayment may be made by way of prepayment, and will specify the terms, and conditions, of such prepayment.

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ARTICLE 3 - PAYMENT MECHANICS

Section 3.01  Requirements of Payment.  The Notes shall specifically provide for the requirements for payment, including repayment of principal and payment of interest and costs and expenses, and the Issuers agree, subject to all of the terms and conditions of this Indenture and the Notes, that payment shall be made in the manner, at the times, in the amounts, and otherwise, as provided in the Notes.

Section 3.02  Additional Provisions.  The Issuers shall be required to honor the terms and conditions, and to make each and every of the payments, required by the terms of each Note, as issued, in favor of the Trustee for the benefit of Noteholders, and specifically shall be required to honor each and every of the conditions and provisions of this Indenture and the other Financing Documents, all of such conditions and provisions to be paid, performed and undertaken, in favor of the Trustee for the benefit of the Noteholders.

Section 3.03  Priority of Payments.  (a)  All payments or collections received under the Notes on or before an Event of Default that are available pursuant to the Cash Management Agreement for payments on the Notes (after any amounts payable to the Trustee hereunder) with respect to any Payment Date, or any other unscheduled payments received under the Notes, this Indenture or the other Financing Documents that are so available, will be distributed in the following order of priority (the “Priority of Payments”):

(i)  First, to the payment of all accrued and unpaid interest on Note A at the Interest Rate provided in Note A;

(ii)  Second, to the payment of principal on Note A in an amount equal to Note A’s pro rata portion (based on the principal balance outstanding) of the principal portion of the amount that is due and payable on the Notes on such date;

(iii)  Third, to the payment of all accrued and unpaid interest on Note B at the Interest Rate provided in Note B; and

(iv)  Fourth, to the payment of principal on Note B in an amount equal to Note B’s pro rata portion (based on the principal balance outstanding) of the principal portion of the amount that is due and payable on the Notes on such date.

(b)  Any Prepayment Premium will be allocated between the Notes, pro rata, based on the respective amounts of principal then being prepaid on each Note

(c)  On or after an Event of Default, any such payments, collections or prepayment shall be applied by Trustee for the benefit of the Noteholders to any amounts then due and owing in any manner in the discretion of the Servicer on behalf of Trustee.

ARTICLE 4 - SECURITY AND ASSET DEALING

Section 4.01  Charges and Security Interest.  In consideration of the premises and the sum of One Dollar ($1.00) paid to it by the Trustee, the receipt and sufficiency of which

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is hereby acknowledged, and in pursuance of each and every power and authority enabling it to do so, and for the purposes of securing the due payment of the principal amount of the Notes and of the interest thereon (including interest on amounts in default) (the “Note Amount”), together with the payment of all other sums, if any, from time to time due hereunder to such Noteholders or to the Trustee, or their successors and assigns, and the payment of all other moneys, if any, for the time being and from time to time owing pursuant hereto, the Notes or the other Financing Documents and the performance by the Issuers of their obligations hereunder and thereunder, the Issuers agree to grant, in favor of the Trustee and its successors and assigns in the trust, as trustee and collateral agent for the benefit of such Noteholders, all of the Issuers’ right, title and interest in and to the Property, and the Issuers agree to grant a security interest in and to all such present and after acquired real or immovable and personal or movable property of every nature and kind used or to be used in the Property.  The Issuers agree that the Security Trust Agreement and the Pledge are intended to carry out the intent of this provision, and to provide a valid and enforceable lien, charge, encumbrance and security interest in and to the Property, and no Notes shall be issued other than where a valid and perfected first priority security interest on the Property has been created by the Issuers in favor of the Trustee for the benefit of the Holders pursuant to the Security Trust Agreement and the Pledge.

Section 4.02  Holders of Security.  The Property and security interests, hypothecations, mortgages, pledges and charges, cessions and transfers thereon and thereof and all rights hereby conferred on the Trustee, its successors and assigns under this Indenture, the Notes, the Pledge and the Security Trust Agreement shall be held for the benefit and security of the Holders of Notes as security for the payment of the principal of and interest on such Notes in the manner herein and therein provided and of all other sums from time to time due hereunder or under the other Financing Documents to such Holders or to the Trustee and for the purposes and subject to the conditions, provisions, covenants and stipulations herein contained, subject specifically to the segregation, allocation and priority herein provided.  However, until the Trustee has determined or become bound to realize pursuant to the Security Trust Agreement and Pledge, the Issuers shall be suffered and permitted in the same manner and to the same extent as if these presents had not been executed, but subject to the express terms hereof, and of the Notes, the Pledge and the Security Trust Agreement to possess, dispose of, operate, and manage the Property, to control the conduct of their business and to take and use the rents, income, dividends, profits and issues of the Property, and claims and demand in judgment or otherwise, forming part of the Property, but subject, always, to the terms of this Indenture and of the Notes, the Pledge and the Security Trust Agreement.

Section 4.03  Further Assurances.  The Issuers shall forthwith, and from time to time, execute and do all deeds, documents and things which, in accordance with an opinion of legal counsel to the Trustee, are reasonably necessary for giving the Trustee the lien and security interest upon the Property intended to be created by the Security Trust Agreement and the Pledge and for conferring upon the Trustee such power of sale (or the right to cause a sale), and other powers over the Property as are expressed by the Security Trust Agreement and the Pledge to be conferred.

Section 4.04  Power of Attorney.  The Trustee hereby agrees to act as the holder of the power of attorney of the present and future Holders of all Notes to the extent necessary or desirable for the purposes of creating, maintaining or enforcing the Security Trust

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Agreement and the Pledge under applicable laws.  Each Holder, by the acceptance of its Note, accepts and confirms, on its own behalf and on behalf of its successors and assigns, the appointment of the Trustee as the attorney of the present and future Holders for such purposes.  The provisions of this Section shall be deemed to form part of and be included in any indenture supplemental hereto as well as in the Notes.

Section 4.05  Dealings with the Security Trust Agreement and the Pledge.  The Trustee shall act as first beneficiary under the Security Trust Agreement and as pledgee under the Pledge, for and on behalf of the Holders of the Notes.  The Trustee shall deal with, and shall exercise the rights, under the Security Trust Agreement and the Pledge, at the direction of the Noteholders.

Section 4.06  No Obligation to Advance Funds.  The Trustee will not be required to pay premiums of insurance, taxes or charges for public utility services and late payments, or costs of repair or maintenance of the Property or legal fees or disbursements of counsel except to funds available and provided therefor by the Issuers as provided for in Section 10.02 hereof.

ARTICLE 5 - CANCELLATION AND DISCHARGE

Section 5.01  Cancellation and Destruction.  All Notes shall, forthwith after payment as described in this Indenture and the relevant Note, and the Notes have been delivered to the Trustee, be cancelled by it.  All Notes cancelled or required to be cancelled under this or any other provision of this Indenture shall be destroyed after the requisite period of retention by the Trustee, in accordance with the Trustee’s customary procedures, and, if required by the Issuers, the Trustee shall furnish to it a destruction certificate setting out the designating numbers of the Notes so destroyed.

Section 5.02  Non-Presentation of Notes.  In case a Holder shall fail to present for payment any Note on the date due or on the date fixed for redemption thereof or on the maturity date of such Note, as the case may be, or shall not accept payment on account thereof and give such receipt therefor, if any, as the Trustee may require, the principal moneys and/or the interest payable, as the case may be, shall be set aside, either in the deposit department of the Trustee or in financial institution, in trust to be paid to the Holder of such Note upon due presentation or surrender thereof in accordance with the provisions of this Indenture; and thereupon the principal moneys and/or the interest payable on or represented by each Note in respect whereof such moneys have been set aside, shall be deemed to have been paid, and not to be outstanding for any purpose hereof, and the Holder thereof shall thereafter have no right in respect thereof except that of receiving payment of the moneys so set aside by the Trustee upon due presentation and surrender thereof.

Section 5.03  Unclaimed Moneys.  Any moneys set aside under Section 5.02 and not claimed by and paid to Holders of Notes as provided in Section 5.02 within three (3) years (or by the expiry of such lesser period as would result in a claim therefor being statute barred under the laws of the State of New York) after the date of such setting aside shall be repaid to the Issuers by the Trustee on demand and thereupon the Trustee and Trustee shall be released from all further liability with respect to such moneys and thereafter the Holders of the

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Notes in respect of which such moneys were so repaid to the Issuers shall have no rights in respect thereof except to obtain payment of the moneys due thereon from the Issuers up to such time as the right to proceed against the Issuers for recovery of such moneys has become statute barred under the laws of the State of New York.

Section 5.04  Discharge.  The Trustee shall, after satisfaction of the obligations hereunder and under the other Financing Documents, including specifically the payment in full of the indebtedness evidenced by the Notes and the performance of the other Obligations, at the request and expense of the Issuers take all actions reasonably necessary to release and discharge this Indenture and execute and deliver such instruments as it shall be advised by legal counsel are requisite for that purpose and to release the Issuers from their covenants herein contained (other than the provisions relating to the indemnification of the Trustee), upon proof being given to the reasonable satisfaction of the Trustee that the principal and the interest (including interest on amounts in default, if any) on all the Notes and all other moneys payable hereunder have been paid in accordance with the terms of this Indenture and that all the Notes having matured have been duly cancelled.  Trustee shall, upon the written request and at the expense of Issuers (it being understood and agreed that such expenses shall be limited to reasonable out-of-pocket expenses incurred by Trustee, including, without limitation, applicable recording charges and taxes), cause the security interests created by the Security Trust Agreement and the Pledge to be terminated if the other terms and conditions of this Section 5.04 have been satisfied.

ARTICLE 6 - REPRESENTATIONS AND WARRANTIES

Section 6.01  Issuer Representations.  Each Issuer represents and warrants (as to itself in each instance where the representation or warranty relates to Issuers or Issuer and as to its Individual Parcel where the representation or warranty relates to the Property or Individual Parcel) as of the Note Issuance Date that:

(a)  Organization.Each Issuer has been duly organized and is validly existing under the laws of Mexico with requisite power and authority to own its properties and to transact the businesses in which it is now engaged.  Each Issuer is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations.  Each Issuer possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged, and the sole business of each Issuer is the ownership, management and/or operation of the Property.  The ownership interests of each Issuer are as set forth on the organizational chart attached hereto as Schedule 6.01A.

(b)  Proceedings.Each Issuer has taken all necessary action to authorize the execution, delivery and performance of this Indenture and the other Financing Documents to which it is a party.  This Indenture and such other Financing Documents have been duly executed and delivered by or on behalf of Issuers and constitute legal, valid and binding obligations of Issuers enforceable against Issuers in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally.

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(c)  No Conflicts.The execution, delivery and performance of this Indenture and the other Financing Documents by Issuers will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Financing Documents) upon any of the property or assets of any Issuer pursuant to the terms of its by-laws (estatutos sociales) or any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which any Issuer is a party or by which any Issuer’s property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over any Issuer or any Issuer’s properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any such Governmental Authority required for the execution, delivery and performance by Issuers of this Indenture or any other Financing Documents has been obtained and is in full force and effect.

(d)  Litigation.There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or, to any Issuer’s knowledge, threatened (i) in writing against any Issuer, Principal, Guarantor or the Property, which actions, suits or proceedings, if determined against such Issuer, Principal, Guarantor or the Property, are reasonably likely to have a Material Adverse Effect, or (ii) that are not adequately covered by insurance.

(e)  Agreements.Except as otherwise set forth on Schedule 6.01E, no Issuer is a party to any agreement or instrument or subject to any restriction which is reasonably likely to have a Material Adverse Effect.  No Issuer is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which such Issuer or the Property is bound which is reasonably likely to have a Material Adverse Effect.  No Issuer has any material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Issuer is a party or by which such Issuer or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property as permitted pursuant to clause (t) of the definition of “Special Purpose Entity” set forth in Section 1.1 hereof and (b) obligations under the Financing Documents.

(f)  Title.Security Trustee is the record owner of the Property and each Issuer owns its Personal Property free and clear of all Liens whatsoever, except the Permitted Encumbrances.  Issuers hold the Security Trust Second Beneficiary’s rights free and clear of all Liens whatsoever, except the Permitted Encumbrances.  The Permitted Encumbrances in the aggregate do not have a Material Adverse Effect.  The Security Trust Agreement and the Pledge, when properly registered in the public registries of the jurisdictions where the Land is located and of the domicile of each Issuer, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien in and to the Property, subject only to Permitted Encumbrances and (b) perfected security interests in and to, and perfected collateral assignments of, Issuers’ right, title and interest in and to all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances.  To Issuers’ knowledge, there are no claims for payment for work, labor or materials affecting the Property which are or

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may become a Lien prior to, or of equal priority with, the Liens created by the Financing Documents.

(g)  Solvency.Issuers have (a) not entered into the transaction or executed or issued the Notes, this Indenture or any other Financing Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under such Financing Documents.  The fair saleable value of Issuers’ assets exceeds and will, immediately following the issuance of the Notes, exceed Issuers’ total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  The fair saleable value of Issuers’ assets is and will, immediately following the issuance of the Notes, be greater than Issuers’ probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured.  Issuers’ assets do not and, immediately following the issuance of the Notes will not, constitute unreasonably small capital to carry out their business as conducted or as proposed to be conducted.  No Issuer intends to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by such Issuer and the amounts to be payable on or in respect of obligations of such Issuer).  No petition in bankruptcy has been filed against such Issuer or any Affiliate in the immediately preceding seven (7) years, and neither any Issuer nor any Affiliate has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors in the immediately preceding seven (7) years.  Neither any Issuer nor any of its Affiliates are contemplating either the filing of a petition by it under any applicable bankruptcy or insolvency laws or the liquidation of all or a major portion of any Issuer’s assets or properties, and no Issuer has knowledge of any Person contemplating the filing of any such petition against it or such Affiliates.

(h)  Full and Accurate Disclosure.  To each Issuer’s knowledge, no statement of fact made by Issuer in this Indenture or in any of the other Financing Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading.  There is no material fact presently known to any Issuer which has not been disclosed to Initial Noteholder which has, or is reasonably likely to have, a Material Adverse Effect.

(i)  No Plan Assets.  No Issuer or Principal is an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of any Issuer constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.  In addition, (a) no Issuer or Principal is a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with any Issuer are not subject to any state statute regulating investments of, or fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Indenture.

(j)  Compliance.Except as otherwise set forth in the Physical Conditions Report or environmental report or disclosed in writing to the Initial Purchaser, Issuers and the Property (including the use thereof) comply in all material respects with all Legal Requirements

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applicable to the operation and maintenance of the Property, including, without limitation, building and zoning ordinances and codes and Prescribed Laws.  No Issuer is in material default or violation of any order, writ, injunction, decree or demand of any Governmental Authority.  To each Issuer’s knowledge, there has not been committed by any Issuer or any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Issuers’ obligations under any of the Financing Documents.

(k)  Financial Information.All financial data, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Initial Purchaser (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of the Property as of the date of such reports, and (iii) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein.  Except for Permitted Encumbrances, Issuers do not have any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to any Issuer and reasonably likely to have a Material Adverse Effect, except as referred to or reflected in said financial statements.  Since the date of such financial statements, there has been no material adverse change in the financial condition, operation or business of any Issuer from that set forth in said financial statements.

(l)  Condemnation.Except as otherwise disclosed in the Title Insurance Policy, no Condemnation or other proceeding has been commenced or, to each Issuer’s knowledge, is threatened or contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.

(m)  Federal Reserve Regulations.No part of the proceeds of the Notes will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Indenture or the other Financing Documents.

(n)  Utilities and Public Access.  Except as set forth in the Title Insurance Policy or the survey of the Property provided to Initial Purchaser in connection with the issuance of the Notes, and subject to the Condominium Documents, the Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property for its intended uses.  All public utilities necessary or convenient to the full use and enjoyment of the Property are located either in the public right-of-way abutting the Property (which are connected so as to serve the Property without passing over other property) or in recorded easements serving the Property and such easements are set forth in and insured by the Title Insurance Policy.  All roads necessary for the use of the Property for its current purpose have been completed and dedicated to public use and accepted by all Governmental Authorities.

(o)  Payment of Taxes.Issuers have paid all Taxes due and payable on or prior to the date hereof (other than Taxes being contested in accordance with the terms set forth

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in Section 7.01(b)), including all property taxes (predial) relating to the Property and asset taxes (imperesto al activo) relating to the Personal Property.

(p)  Separate Lots.  The Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of the Property; provided, however, Lot AP-6A and Lot AP-6B have a single cadastral number for the payment of property taxes (impuesto predial) and Lots APG-1 through APG-18 and AS-4 have a single cadastral number for the payment of property taxes (impuesto predial).

(q)  Assessments.Other than Condominium charges and assessments, and except as otherwise disclosed in Schedule 6.01Q or as set forth in the Title Insurance Policy, there are no pending or, to each Issuer’s knowledge, proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

(r)  Enforceability.The Financing Documents are not subject to any right of rescission, set-off, counterclaim or defense by any Issuer, Principal or Guarantor, including the defense of usury, nor would the operation of any of the terms of the Financing Documents, or the exercise of any right thereunder, render the Financing Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors’ rights and the enforcement of debtors’ obligations), and neither any Issuer, Principal nor Guarantor have asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

(s)  No Prior Assignment.  There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding.

(t)  Insurance.Issuers have obtained and have delivered to Trustee certified copies of all Policies (or certificates and other evidence reasonably satisfactory to Trustee evidencing the existence of the same) reflecting the insurance coverages, amounts and other requirements set forth in this Indenture.  Except as set forth in Schedule 6.01T, no outstanding claims have been made under any property insurance Policies and no Issuer has done, by act or omission, anything which would materially impair the coverage of any Policies.

(u)  Use of Property.The Property is used exclusively as a hotel and golf course and other appurtenant and related uses.

(v)  Certificate of Occupancy; Licenses.All certifications, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits and any applicable liquor license required under applicable law for the legal use, occupancy and operation of the Property as a hotel (collectively, the “Licenses”), have been obtained and are in full force and effect, except where the failure to obtain such Licenses does not have, and is not reasonably expected to have, a Material Adverse Effect.  Issuers shall keep and maintain all Licenses necessary for the operation of the Property as a hotel, except where the failure to keep and maintain such Licenses does not have, and is not reasonably expected to have, a Material

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Adverse Effect.  The use being made of the Property is in conformity with the certificate of occupancy issued for the Property.

(w)  Intentionally Omitted.

(x)  Physical Condition.To Issuers’ knowledge, and except as set forth in the Physical Conditions Report, the Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects.  To Issuers’ knowledge, and except as set forth in the Physical Conditions Report, there exists no structural or other material defects or damages in the Property, whether latent or otherwise, and no Issuer has received notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

(y)  Boundaries.To Issuers’ knowledge, except as set forth on the Survey, the Title Insurance Policy or the Physical Condition Report, all of the improvements which were included in determining the appraised value of the Property lie wholly within the boundaries and building restriction lines of the Property, and no improvements on adjoining properties encroach upon the Property, and no easements or other encumbrances upon the Property encroach upon any of the improvements, so as to affect the value or marketability of the Property except (i) those which are insured against by the Title Insurance Policy or are Permitted Encumbrances and (ii) a portion of a staircase giving access from the hotel Individual Parcel to the beach is located within the boundaries of the Federal Maritime Zone under concession by the Federal Government of Mexico.

(z)  Leases.The Property is not subject to any Leases other than the Leases described in Schedule 6.01Z attached hereto and made a part hereof.  Issuers are the owner and lessor of landlord’s interest in the Leases.  No Person has any possessory interest in the Property or right to occupy the same except under and pursuant to the provisions of the Leases.  The current Leases are in full force and effect and, to Issuers’ knowledge, there are no defaults thereunder by either party and there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder.  No Rent has been paid more than one (1) month in advance of its due date.  All work to be performed prior to the date hereof by Issuers under each Lease has been performed as required and has been accepted by the applicable tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Issuers to any tenant has already been received by such tenant.  There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of the Rents received therein which is still in effect.  To Issuers’ knowledge, no tenant has assigned its Lease or sublet all or any portion of the premises demised and no such tenant holds its leased premises under assignment or sublease.  To Issuers’ knowledge, no tenant under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are

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a part.  No tenant under any Lease has any right or option to lease additional space in the Improvements.

(aa)  Survey.To Issuers’ knowledge, the Survey for the Property delivered in connection with this Indenture does not fail to reflect any material matter affecting the Property or the title thereto.

(bb)  Principal Place of Business; State of Organization.  Each Issuer’s principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Indenture.  Each Issuer is organized under the laws of Mexico.

(cc)  Filing and Recording Taxes.All transfer taxes, deed stamps, intangible taxes, value added taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the transfer of the Property to Issuers have been paid.  All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Financing Documents, including, without limitation, the Security Trust Agreement and the Pledge, have been paid, and, under current Legal Requirements, the Security Trust Agreement and the Pledge are enforceable against the settlers or pledgors, as the case may be, in accordance with their respective terms, subject to principles of equity, public policy and bankruptcy, insolvency and other laws generally applicable to creditors’ rights and the enforcement of debtors’ obligations.

(dd)  Special Purpose Entity/Separateness.  (i)  Until the Debt has been paid in full, each Issuer hereby represents, warrants and covenants that (A) such Issuer is, shall be and shall continue to be a Special Purpose Entity, provided that the requirements set forth in the definition of the term “Special Purpose Entity” will not apply to such Issuer’s relationship with the other Issuers, and (B) Principal is, shall be and shall continue to be a Special Purpose Entity.

(ii)  The representations, warranties and covenants set forth in Section 6.01(dd)(i) shall survive for so long as any amount remains payable to Trustee for the benefit of Noteholders under this Indenture or any other Financing Document.

(iii)  All of the assumptions made in the Insolvency Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all respects and any assumptions made in any subsequent non-consolidation opinion required to be delivered in connection with the Financing Documents (an “Additional Insolvency Opinion”), including, but not limited to, any exhibits attached thereto, will have been and shall be true and correct in all respects.  Each Issuer has complied and will comply with, and Principal has complied and Issuers will cause Principal to comply with, all of the assumptions made with respect to each Issuer and Principal in the Insolvency Opinion.  Each Issuer will have complied and will comply, or cause Principal to comply, with all of the assumptions made with respect to such Issuer and Principal in any Additional Insolvency Opinion.  Each entity other than an Issuer or Principal with respect to which an assumption shall be made in any Additional Insolvency Opinion will have complied and will comply with all of the assumptions made with respect to it in any Additional Insolvency Opinion.

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(ee)  Management Agreement.As of the date hereof, the Management Agreement is in full force and effect and, to Issuers’ knowledge, there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default by Issuers thereunder that would have a Material Adverse Effect.

(ff)  Golf Management Agreement.  As of the date hereof, the Golf Management Agreement is in full force and effect and, to Issuers’ knowledge, there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default by Issuers thereunder that would have a Material Adverse Effect.

(gg)  Spa Management Agreement.  As of the date hereof, the Spa Management Agreement is in full force and effect and, to Issuers’ knowledge, there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default by Issuers thereunder that would have a Material Adverse Effect.

(hh)  Illegal Activity.No portion of the Property has been or will be purchased with proceeds of any illegal activity.

(ii)  No Change in Facts or Circumstances; Disclosure.  To the best of Issuers’ knowledge, all information submitted by any Issuer to Initial Purchaser and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the issuance of the Notes or in satisfaction of the terms thereof and all statements of fact made by any Issuer in this Indenture or in any other Financing Document, are accurate, complete and correct in all material respects.  To the best of Issuers’ knowledge, there has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise has, or may reasonably be expected to have, a Material Adverse Effect.  Issuers have disclosed to Trustee all material facts and have not failed to disclose any material fact that could cause any Provided Information or representation or warranty made herein to be materially misleading.

(jj)  Investment Company Act.No Issuer is (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (b) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

(kk)  Embargoed Person.  At all times throughout the term of the Notes, including after giving effect to any Transfers permitted pursuant to the Financing Documents, (a) none of the funds or other assets of any Issuer, Principal or Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including, but not limited to, the International Emergency

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Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in any Issuer, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the issuance of the Notes by Issuers or the purchase of the Notes by Initial Purchaser or Initial Noteholder is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in any Issuer, Principal or Guarantor, as applicable, with the result that the investment in any Issuer, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the issuance of the Notes by Issuers or the purchase of the Notes by Initial Purchaser or Initial Noteholder is in violation of law; and (c) none of the funds of any Issuer, Principal or Guarantor have been derived from any unlawful activity by any Issuer, Principal or Guarantor with the result that the investment in any Issuer, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the issuance of the Notes by Issuers or the purchase of the Notes by Initial Purchaser or Initial Noteholder is in violation of law.

(ll)  Cash Management Account.  (i)  This Indenture, together with the other Financing Documents, creates a valid and continuing lien and security interest (under Mexican law or as such terms are defined under the Uniform Commercial Code of the State, as applicable) in the Lockbox Accounts and the Cash Management Account in favor of Trustee, for the benefit of Holders, which lien and security interest are prior to all other Liens, other than Permitted Encumbrances, and are enforceable as such against creditors of and purchasers from Issuers.  Other than in connection with the Financing Documents and except for Permitted Encumbrances, Issuers have not sold or otherwise conveyed the Lockbox Accounts and Cash Management Account;

(ii)  The Cash Management Account constitutes a “deposit account” within the meaning of the Uniform Commercial Code of the State.

(iii)  Pursuant and subject to the terms hereof, each Lockbox Bank has agreed to comply with all instructions originated by Trustee, without further consent by any Issuer, directing disposition of the applicable Lockbox Account and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities; and

(iv)  The Lockbox Accounts and Cash Management Account are not in the name of any Person other than Issuers, as pledgor, or Trustee, for the benefit of Noteholders, as pledgee.

(mm)  SPE Prior Act Representations.  Except as set forth on Schedule 6.01MM and subject to the limitation that the requirements set forth below in this Section 6.01(mm) are not applicable to an Issuer’s relationship with the other Issuers, each Issuer hereby represents and warrants to Trustee for the benefit of Noteholders that since its formation or the formation of the applicable Principal, as applicable:

(i)  (i)  neither such Issuer nor any Principal has owned any material asset or property other than (A) its Individual Parcel, and (B) incidental personal property necessary for

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the ownership or operation of the Property or its Individual Parcel other than the Parcel in the Condominium designated as AP-9A which parcel was previously owned by the Hotel Issuer and, provided further that, Issuers represent and warrant that such parcel was (a) vacant at the time owned by Hotel Issuer, (b) there are no continuing obligations or liability with respect to such parcel, and (c) there are no known environmental conditions existing with respect to such parcel in violation of applicable law;

(ii)  neither such Issuer nor any Principal has engaged in any business other than the ownership, management and operation of the Property or its Individual Parcel and Issuer has conducted and operated its business as presently conducted and operated;

(iii)  neither such Issuer nor any Principal has entered into any contract or agreement with any of its Affiliates, constituents, or owners, or any guarantors of any of its obligations or any Affiliate of any of the foregoing (individually, a “Related Party”) except upon terms and conditions that are commercially reasonable and substantially similar to those available in an arm’s-length transaction with an unrelated party and in connection with this Indenture;

(iv)  neither such Issuer nor any Principal has incurred any Indebtedness other than (A) subject to clause (xxiv) below, acquisition financing with respect to the Property; construction financing with respect to the Improvements and certain off-site improvements required by municipal and other authorities as conditions to the construction of the Improvements; and first mortgage financings secured by the Property (or financing secured by security trusts holding title to the Property); and Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements and other similar instruments executed and delivered in connection with such financings, (B) unsecured trade payables and operational debt not evidenced by a note, and (C) Indebtedness incurred in the financing of equipment and other personal property used on the Property;

(v)  neither such Issuer nor any Principal has made any loans to any Person or held evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity);

(vi)  each of such Issuer and each Principal has remained solvent and has paid its debts and liabilities from its own assets and generally as the same have became due;

(vii)  each of such Issuer and each Principal has allocated fairly and reasonably any overhead expenses that have been shared with an Affiliate, including paying for office space and services performed by any employee of an Affiliate or Related Party;

(viii)  each of such Issuer and each Principal has done or caused to be done all things necessary to observe all its organizational formalities and to preserve its existence or has promptly taken curative action with respect thereto;

(ix)  (A) each of such Issuer and each Principal has maintained all of its accounts (including bank accounts), books and records separate from those of any other Person; (B) each of such Issuer and each Principal has maintained separate financial statements and its

41

assets have not been listed as assets on the financial statement of any other Person except as required by GAAP and Financial Accounting Standards Board Interpretation No. 46R; provided, however, that any such consolidated financial statement shall contain a note indicating that its separate assets and liabilities are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity; (C) each of such Issuer and each Principal has filed its own tax returns and has not filed a consolidated federal income tax return with any other Person, except to the extent that Issuer was required to file consolidated tax returns by law; and (D) each of such Issuer and each Principal has maintained its books, records, resolutions and agreements as official records;

(x)  (A) other than in connection with the operation and management of the Property or, in the case of such Issuer, pursuant to its use of the name “One and Only Palmilla,” each of such Issuer and each Principal has been, and at all times has held itself out and identified itself as a separate and distinct entity and has conducted business under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of such Issuer or another Issuer and not as a division or part of any other Person, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in subsection (iii) above, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of such Issuer; (B) has not identified itself or any of its Affiliates as a division or part of the other; and (C) other than in connection with the operation and management of the Property or, in the case of such Issuer, pursuant to its use of the name “One and Only Palmilla,” has used separate stationery, invoices and checks bearing its own name and not the name of any Affiliate;

(xi)  other than in connection with the operation and management of the Property or, in the case of such Issuer, pursuant to its use of the name “One and Only Palmilla,” each of such Issuer and each Principal has corrected any known misunderstanding regarding its status as a separate entity;

(xii)  each of such Issuer and each Principal has maintained adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(xiii)  neither such Issuer nor any Principal has, nor have any of its constituent parties, sought or effected the liquidation, dissolution, winding up, liquidation, consolidation or merger, in whole or in part of any Issuer;

(xiv)  other than in connection with (A) in the case of such Issuer, acquisition financing with respect to the Property, (B) in the case of such Issuer, construction financing with respect to the Improvements and certain off-site improvements required by municipal and other authorities as conditions to the construction of the Improvements, (C) in the case of such Issuer, first mortgage financings secured by the Property (or financing secured by security trusts holding title to the Property), (D) Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements and other similar instruments executed and delivered in connection with such financings described in clauses (A), (B) and (C), and (E) in the case of such Issuer, the Permitted Equipment Financing, neither such Issuer nor any Principal has commingled its funds

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or other assets with those of any Affiliate or constituent party or any other Person, and each of such Issuer and each Principal has held all of its assets in its own name;

(xv)  each of such Issuer and each Principal has maintained its assets in such a manner that it would not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any other Person;

(xvi)  neither such Issuer nor any Principal has guaranteed or become obligated for the debts of any other Person, except for the debts of the other Issuers or Issuers, as applicable, pursuant to (A) acquisition financing with respect to the Property, (B) construction financing with respect to the Improvements and certain off-site improvements required by municipal and other authorities as conditions to the construction of the Improvements, (C) first mortgage financings secured by the Property (or financing secured by security trusts holding title to the Property), (D) Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements and other similar instruments executed and delivered in connection with such financings described in clauses (A), (B) and (C), and (E) in the case of such Issuer, the Permitted Equipment Financing, neither such Issuer nor any Principal has held itself out to be responsible for or to have its credit available to satisfy the debts or obligations of any other Person;

(xvii)  each of such Issuer and each Principal is presently conducting its businesses so that the assumptions made with respect to such Issuer or Principal, as applicable, in the Insolvency Opinion are currently true and correct in all material respects;

(xviii)  neither such Issuer nor any Principal has permitted any Affiliate or constituent party independent access to its bank accounts;

(xix)  each of such Issuer and each Principal has paid the salaries of each of its own employees (if any) from its own funds and has maintained a sufficient number of employees (if any) in light of its contemplated business operations;

(xx)  each of such Issuer and each Principal has compensated each of its consultants and agents from its own funds for services provided to it and pay from its own assets all obligations of any kind incurred;

(xxi)  neither such Issuer nor any Principal has acquired any obligations or securities of any of its Affiliates;

(xxii)  such Issuer has not acquired or held any equity interest or subsidiary interest in any entity and, other than Issuers, no Principal has acquired or held any equity interest or subsidiary interest in any entity except that Beach Issuers briefly owned a subsidiary known as CP Baja, S.A. de C.V. but such subsidiary engaged in no activities and has been liquidated;

(xxiii)  neither such Issuer nor any Principal has pledged its assets for to secure the obligations of any other Person other than with respect to loans or other indebtedness secured by the Property and no such pledge remains outstanding except in connection with the issuance of the Notes;

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(xxiv)  neither such Issuer nor any Principal has incurred any Indebtedness that is still outstanding other than, in the case of an Issuer, the Permitted Equipment Financing, and indebtedness that is evidenced by the Financing Documents or permitted under the Financing Documents;

(xxv)  such Issuer is and always has been duly formed and validly existing under the laws of Mexico, each Principal is and always has been duly formed and validly existing under the laws of the State of Delaware and each of such Issuer and each Principal is and has always been duly qualified to do business and in good standing in all other jurisdictions where it is required to be or to have been qualified to do business;

(xxvi)  neither such Issuer nor any Principal has any judgments or liens of any nature against it except for tax liens not yet due or delinquent;

(xxvii)  each of such Issuer and each Principal is in material compliance with all laws, regulations, and orders applicable to it and has received all permits necessary for it to operate;

(xxviii)  neither such Issuer nor any Principal is involved in any material dispute with any taxing authority;

(xxix)  subject to clause (xxviii), each of such Issuer and each Principal has paid all taxes which it owes;

(xxx)  neither such Issuer nor any Principal is now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding, which has not been settled, dismissed or otherwise proceeded to conclusion and none of which has had or can be reasonably expected to have a Material Adverse Effect;

(xxxi)  each of such Issuer and each Principal has materially complied with the separateness covenants referred to in the Insolvency Opinion; and

(xxxii)  neither such Issuer nor any Principal has any material contingent or actual obligations not related to the Property.

(nn)  Condominium Documents.  To Issuer’s knowledge, after inquiry, the Condominium Documents comply with all applicable local, state and federal laws, rules and regulations which affect the establishment and maintenance of condominiums in the State relating to condominiums (collectively, the “Condominium Laws”).  To Issuer’s knowledge, after inquiry, the Condominium Documents are in full force and effect and there are no defaults thereunder by any party.  Each Issuer has paid all common expenses, assessments, maintenance fees and other charges due in connection with the Condominium in accordance with the Condominium Documents.  To Issuer’s knowledge, after inquiry, the Condominium Documents have not been amended, modified or supplemented by any document that is not of public record and there is no agreement, document or instrument to which the Condominium is a party that affects the Condominium or any obligations of Issuers with respect to the Condominium or the Property that is not of public record.

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Section 6.02  Survival of Representations.  Each Issuer agrees that all of the representations and warranties of Issuers set forth in Section 6.01 and elsewhere in this Indenture and in the other Financing Documents shall survive for so long as any amount remains outstanding under the Notes.  All representations, warranties, covenants and agreements made in this Indenture or in the other Financing Documents by any Issuer shall be deemed to have been relied upon by Initial Purchaser, Initial Noteholder and Trustee notwithstanding any investigation heretofore or hereafter made by Initial Purchaser, Initial Noteholder or Trustee or on its behalf.

ARTICLE 7 - ISSUER COVENANTS

Section 7.01  Affirmative Covenants.  From the date hereof and until payment and performance in full of all obligations under the Financing Documents or the earlier reconveyance of title to the Property held by Security Trust Trustee pursuant to the Security Trust Agreement to Issuers or release and discharge of the security interests created by the Security Trust Agreement and the Pledge (and all related obligations) in accordance with the terms of this Indenture and the other Financing Documents, Issuers hereby covenant and agree with Trustee, for the benefit of Noteholders, as set forth in this Section 7.01.  All such covenants and agreements shall be enforced, and all associated rights shall be exercised, by the Servicer on behalf of the Trustee for the benefit of the Noteholders, and all related documents to be delivered to the Trustee, amounts to be deposited with the Trustee and all accounts to be maintained by the Trustee shall be so delivered, deposited and maintained in accordance with the Cash Management Agreement or otherwise by the Servicer on behalf of the Trustee for the benefit of the Noteholders.

(a)  Existence; Compliance with Legal Requirements.  To the extent necessary to avoid a material adverse change in the financial condition or business condition of any Issuer, Issuers shall do or cause to be done with the reasonable promptness all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all material Legal Requirements applicable to Issuers and the Property, including, without limitation, Prescribed Laws.  There shall never be committed by any Issuer and Issuers shall use commercially reasonable efforts not to permit any other Person in occupancy of or involved with the operation or use of the Property to commit any act or omission affording the sovereign or federal government or any state or local government the right of forfeiture against the Property or any part thereof or any monies paid in performance of Issuers’ obligations under any of the Financing Documents.  Issuers shall at all times maintain, preserve and protect in all material respects all franchises and trade names and preserve all the remainder of their property used or useful in the conduct of its business and shall keep the Property in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided herein, in the Security Trust Agreement and the Pledge.  After prior notice to Trustee, Issuers, at their own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Issuers or the Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and remains uncured; (ii) intentionally omitted; (iii) such proceeding shall not result in a default under any material agreement to which any Issuer is subject and such proceeding shall

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be conducted in accordance with all applicable statutes, laws and ordinances; (iv) neither the Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (v) Issuers shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (vi) such proceeding shall suspend the enforcement of the contested Legal Requirement against Issuers and the Property; and (vii) Issuers shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Trustee, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith.  Trustee may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Trustee, the validity, applicability or violation of such Legal Requirement is finally established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost.

(b)  Taxes and Other Charges.  Issuers shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof as the same become due and payable; provided, however, Issuers’ obligation to directly pay Taxes shall be suspended for so long as Issuers comply with the terms and provisions of Section 2.4 of the Note or contests such Taxes and Other Charges pursuant to this Section 7.01(b).  Issuers shall furnish to Trustee no later than ten (10) days prior to the date the same shall become delinquent receipts for the payment of the Taxes and the Other Charges; provided, however, Issuers are not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Trustee pursuant to Section 10.02 hereof.  Issuers shall not suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Property, and shall promptly pay for all utility services provided to the Property.  After prior notice to Trustee, Issuers, at their own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (a) no Default or Event of Default has occurred and remains uncured; (b) intentionally omitted; (c) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Issuers are subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (d) neither the Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (e) Issuers shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (f) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Individual Parcel; and (g) Issuers shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Trustee, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon.  Trustee may pay over any such cash deposit or part thereof held by or on behalf of Trustee to the claimant entitled thereto at any time when, in the judgment of Trustee, the entitlement of such claimant is established or the applicable Individual Parcel (or part thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the rights of Trustee under the Security Trust Agreement and/or the Pledge being primed by or being subject to any related Lien.

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(c)  Litigation.  Issuers shall give prompt notice to Trustee of any litigation or governmental proceedings pending or threatened in writing against any Issuer, Principal and Guarantor which might reasonably be expected to have a Material Adverse Effect.

(d)  Access to Property.  Issuers shall permit agents, representatives and employees of Trustee to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice, provided such inspections do not materially interfere with the use and operation of the Property.

(e)  Notice of Default.  Issuers shall promptly advise Trustee of any material adverse change in any Issuer’s, Principal’s or Guarantor’s condition, financial or otherwise, or of the occurrence of any Event of Default of which any Issuer has knowledge.

(f)  Cooperate in Legal Proceedings.  Issuers shall reasonably cooperate with Trustee with respect to any proceedings before any court, board or other Governmental Authority which may in any way materially and adversely affect the rights of Trustee hereunder or any rights obtained by Trustee under any of the other Financing Documents and, in connection therewith, permit Trustee, at its election, to participate in any such proceedings.

(g)  Perform Financing Documents.  Issuers shall pay when due all costs, fees and expenses to the extent required under the Financing Documents executed and delivered by, or applicable to, Issuers.

(h)  Award and Insurance Benefits.  Issuers shall cooperate with Trustee in obtaining for Trustee the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with the Property to the extent Trustee is entitled to same under the terms of this Indenture, the Security Trust Agreement or the Pledge, and Trustee shall be reimbursed for any expenses incurred in connection therewith (including attorneys’ fees and disbursements, and the payment by Issuers of the expense of an appraisal on behalf of Trustee in case of Casualty or Condemnation affecting the Property or any part thereof) out of such Insurance Proceeds.

(i)  Further Assurances.  Issuers shall, at Issuers’ sole cost and expense:

(i)  furnish to Trustee all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Issuers pursuant to the terms of the Financing Documents or which are reasonably requested by Trustee in connection therewith;

(ii)  execute and deliver to Trustee such documents, instruments, certificates, assignments and other writings, and do such other acts reasonably necessary, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Issuers under the Financing Documents, as Trustee may reasonably require;

(iii)  do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and

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purposes of this Indenture and the other Financing Documents, as Trustee shall reasonably require from time to time; and

(iv)  pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Security Trust Agreement, the Pledge, the other Financing Documents, any mortgage supplemental thereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of any of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Security Trust Agreement, the Pledge, any mortgage supplemental thereto, any security instrument with respect to the Property or any instrument of further assurance, and any amendment or other modification of any of the foregoing documents, except where prohibited by law so to do.

(j)  Maintenance of Property.  (i)  Issuers shall cause the Property to be maintained in a good and safe condition and repair.  The Improvements and the Personal Property shall not be removed, demolished or materially altered (except for replacement of the Personal Property in the ordinary course of business) without the prior consent of Trustee.

(ii)  Issuers shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or allow the cancellation of any Policy, or do or permit to be done thereon anything that may in any way materially impair the value of the Property or the security of the Security Instrument or the Pledge.  Issuers will not, without the prior written consent of Trustee, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof.

(iii)  Issuers will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Property and never permit to exist beyond the due date thereof in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests hereof except for the Permitted Encumbrances.  After prior notice to Trustee, Issuers, at their own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application such liens or security interests, provided that (a) no Default or Event of Default has occurred and remains uncured; (b) intentionally omitted; (c) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Issuers are subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (d) neither the Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (e) Issuers shall promptly upon final determination thereof pay the amount of any such liens or security interests, together with all costs, interest and penalties which may be payable in connection therewith; (f) such proceeding shall suspend the collection of such contested liens or security interests from the

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applicable Individual Parcel; and (g) Issuers shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Trustee, to insure the payment of any such liens or security interests, together with all interest and penalties thereon.  Trustee may pay over any such cash deposit or part thereof held by or on behalf of Trustee to the claimant entitled thereto at any time when, in the judgment of Trustee, the entitlement of such claimant is established or the applicable Individual Parcel (or part thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the rights of Trustee under the Security Trust Agreement and/or the Pledge being primed by or being subject to any related Lien.

(k)  Financial Reporting.  (i)  Issuers will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP (or such other accounting basis reasonably acceptable to Trustee), proper and accurate books, records and accounts reflecting all of the financial affairs of each Issuer and all items of income and expense in connection with the operation of the Property.  Trustee shall have the right from time to time at all reasonable times during normal business hours upon reasonable prior notice to examine such books, records and accounts at the office of any Issuer or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Trustee may reasonably require.  After the occurrence and during the continuance of an Event of Default, Issuers shall pay any costs and expenses incurred by Trustee to examine Issuers’ accounting records with respect to the Property, as Trustee shall determine to be necessary or appropriate in the protection of Trustee’s interest.

(ii)  Issuers will furnish, or cause to be furnished, to Trustee annually, within one hundred twenty (120) days following the end of each Fiscal Year of Issuers, (A) a complete copy of each Issuer’s individual annual financial statements prepared in Pesos and audited by a “Big Four” accounting firm or other independent certified public accountant acceptable to Trustee in accordance with GAAP (or such other accounting basis acceptable to Trustee) covering such Issuer’s Individual Parcel for such Fiscal Year and containing statements of profit and loss for such Issuer and its Individual Parcel and a balance sheet for such Issuer and (B) a completed copy of a consolidated annual financial statements prepared in Dollars for the Principals and Palmilla JV LLC audited by a “Big Four” accounting firm or other independent certified public accountant acceptable to Trustee in accordance with GAAP (or such other accounting basis acceptable to Trustee) covering the Property for such Fiscal Year and containing consolidated statements of profit and loss for Issuers and the Property and a consolidated balance sheet for Issuers.  Such statements shall set forth the financial condition and the results of operations for an Individual Parcel (in case of financial statements furnished pursuant to clause (A) above) or the Property (in case of financial statements furnished pursuant to clause (B) above) for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses.  The consolidated annual financial statements shall be accompanied by (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior Fiscal Year, (ii) a list of tenants, if any, occupying more than twenty percent (20%) of the total floor area of the Improvements as of the last day of the Fiscal Year, (iii) if there are Leases in the aggregate affecting more than twenty percent (20%) of the total floor area of the Improvements, a breakdown showing the year in which each Lease then in effect expires and the percentage of total rentable area of the Improvements and the base rent with respect to which

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Leases shall expire in each such year, (iv) a schedule audited by such independent certified public accountant reconciling Net Operating Income to Net Cash Flow (the “Net Cash Flow Schedule”), which shall itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow deemed material by such independent certified public accountant, (v) occupancy reports, room rate reports, RevPAR calculations, STR reports (or other market competition reports) for the Property, and (vi) an Officer’s Certificate certifying that, to such officer’s knowledge, each annual financial statement presents fairly the financial condition and the results of operations of Issuers and the Property being reported upon and that such financial statements have been prepared in accordance with GAAP or such other accounting basis as Trustee shall reasonably accept and as of the date thereof whether, to such officer’s knowledge, there exists an event or circumstance which constitutes a Default or Event of Default under the Financing Documents executed and delivered by, or applicable to, Issuers, and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same.

(iii)  Issuers will furnish, or cause to be furnished, to Trustee on or before forty-five (45) days after the end of each calendar month the following items, accompanied by an Officer’s Certificate stating that, to such officer’s knowledge such items are true, correct, accurate, and complete in all material respects and fairly present the financial condition and results of the operations of Issuers and the Property as of such date (subject to normal year-end adjustments):  (i) an occupancy report for the subject month, including an average daily rate during such month; (ii) monthly and year-to-date operating statements (including Capital Expenditures) prepared for each calendar month, noting Net Operating Income, Gross Income from Operations, and Operating Expenses (not including any contributions to the Replacement Reserve Fund), and, upon Trustee’s request, other information necessary and sufficient to fairly represent the financial position and results of operation of the Property during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses, all in form satisfactory to Trustee; (iii) a reconciliation of the monthly statement as prepared on an accrual basis with a monthly statement prepared on a cash basis; and (iv) a Net Cash Flow Schedule.

(iv)  For the partial year period commencing on the date hereof, and for each Fiscal Year thereafter, Issuers shall submit to Trustee an Annual Budget not later than forty-five (45) days prior to the commencement of such period or Fiscal Year in form reasonably satisfactory to Trustee.  At all times during the term of the Notes when there is a Cash Trap Event in effect, the Annual Budget so submitted to Trustee (and the applicable expenses budgeted or projected to be incurred during the period when a Cash Trap Event is in effect) shall be subject to the approval of Servicer on behalf of Trustee, which shall not be unreasonably withheld or delayed (each such Annual Budget, an “Approved Annual Budget”).  Notwithstanding anything to the contrary contained herein, the approval by Servicer on behalf of Trustee of any Annual Budget shall not be required if such Annual Budget submitted by Issuers provide for projected Net Cash Flow which is in excess of an amount determined by subtracting the Capital Expenditures for the preceding Fiscal Year from $8.0 million (with respect to an Annual Budget for Fiscal Year 2008) or $9.0 million (with respect to an Annual Budget for Fiscal Year 2009), as applicable, and provides for expenses that are comparable to the expenses for the preceding year (with increases for fixed costs) and with such other changes as are reasonably consistent with income growth, marketing conditions and other variable items that

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fluctuate with occupancy levels.  Servicer on behalf of Trustee shall use good faith efforts to respond within five (5) Business Days after Trustee’s receipt of Issuers’ proposed Annual Budget.  If Servicer on behalf of Trustee fails to respond to such request within five (5) Business Days, and Issuers send a second request for approval of such Annual Budget containing a legend clearly marked in not less than fourteen (14) point bold face type, underlined, in all capital letters “REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN 5 BUSINESS DAYS”, the approval of Servicer on behalf of Trustee shall be deemed given if no objection is made by Servicer within five (5) Business Days after receipt thereof.  In the event that Servicer objects to a proposed Annual Budget submitted by Issuers which requires the approval of Servicer on behalf of Trustee hereunder, Servicer on behalf of Trustee shall advise Issuers of such objections within five (5) Business Days after receipt thereof (and deliver to Issuers a reasonably detailed description of such objections) and Issuers shall promptly revise such Annual Budget and resubmit the same to Trustee.  Servicer on behalf of Trustee shall advise Issuers of any objections to such revised Annual Budget within five (5) Business Days after receipt thereof (and deliver to Issuers a reasonably detailed description of such objections) and Issuers shall promptly revise the same in accordance with the process described in this subsection until Servicer approves or is deemed to have approved the Annual Budget.  Until such time that Servicer approves or is deemed to have approved a proposed Annual Budget which requires the approval of Servicer on behalf of Trustee hereunder, the most recently Approved Annual Budget shall apply; provided that such Approved Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums, utilities expenses, union labor and fixed increases under previously executed agreements; provided, further, that the Approved Annual Budget shall be adjusted to reflect increased variable expenses as a result of increased occupancy levels from the prior year.

(v)  In the event that a Cash Trap Event is in effect, if Issuers must incur an extraordinary Operating Expense or Capital Expenditure (other than an Emergency Expense) not set forth in the Approved Annual Budget (each, an “Extraordinary Expense”), then Issuers shall promptly deliver to Trustee a reasonably detailed explanation of such proposed Extraordinary Expense for the approval of Servicer on behalf of Trustee, which approval shall not be unreasonably withheld or delayed.  Notwithstanding anything to the contrary contained herein, no approval from Servicer shall be required if (i) a single Extraordinary Expense is equal to or less than five percent (5%) of the amount set forth in the Approved Annual Budget for such expense, or (ii) if no sum was budgeted for such expense in the Approved Annual Budget, the Extraordinary Expense is less than or equal to five percent (5%) of the Approved Annual Budget, provided that all Extraordinary Expenses in any Fiscal Year do not exceed five percent (5%) of the Approved Annual Budget or (iii) an emergency exists which requires the immediate expenditure of the Extraordinary Expense to preserve the value of the Property or to protect the health and safety of persons located on the Property or adjacent to the Property or (iv) such expense is an expense required to be made to cause the Property to comply with the terms of this Agreement or the other Financing Documents.

(vi)  Any reports, statements or other information required to be delivered under this Indenture shall be delivered (i) in paper form, (ii) on a diskette, and (iii) if requested by Trustee and within the capabilities of Issuers’ data systems without change or modification thereto, in electronic form and prepared using a Microsoft Word for Windows or WordPerfect

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for Windows files (which files may be prepared using a spreadsheet program and saved as word processing files).

(l)  Business and Operations.  Each Issuer will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Property.  Each Issuer will qualify to do business and will remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of the Property, except to the extent that the failure to do so would not have a Material Adverse Effect.

(m)  Title to the Property.  Issuers will warrant and defend (a) the title to the Property and every part thereof, subject only to Permitted Encumbrances, and (b) the validity and priority of the Security Trust Agreement and the Pledge, subject only to Permitted Encumbrances, in each case against the claims of all Persons whomsoever.  Issuers shall reimburse Trustee for any losses, costs, damages or expenses (including reasonable attorneys’ fees and court costs) incurred by Trustee if an interest in the Property, other than as permitted hereunder, is claimed by another Person.

(n)  Costs of Enforcement.  In the event (a) that a foreclosure procedure is initiated under the Security Trust Agreement or the Pledge, (b) of the foreclosure of any mortgage, deed of trust, trust agreement or pledge prior to or subsequent to the Security Trust Agreement or the Pledge in which proceeding Trustee is made a party, or (c) of the bankruptcy, concurso mercantil, insolvency, rehabilitation or other similar proceeding in respect of any Issuer or any of its Affiliates or an assignment by any Issuer or any of its constituent Persons for the benefit of its creditors, or (d) Trustee, on behalf of any Issuer, attempts to remedy any Event of Default hereunder, Issuers, their respective successors or permitted assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including attorneys’ fees and costs, incurred by Trustee or Issuers in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes.

(o)  Estoppel Statement.  (i)  Trustee and Issuers shall within thirty (30) days of a written request furnish the other party with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Notes, (ii) the unpaid principal amount of the Notes, (iii) the Applicable Interest Rate of the Notes, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Notes, this Indenture, the Security Trust Agreement, the Pledge and the other Financing Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

(ii)  At Trustee’s request (which may be made no more than one (1) time in any calendar year), Issuers shall request tenant estoppel certificates from each commercial tenant leasing space at the Property in the form required by such tenant’s lease or, at Issuers’ election, in the form previously accepted by Trustee.

(iii)  Issuers shall use commercially reasonable efforts (but shall not be required to expend any money), within forty-five (45) Business Days after request, to furnish Trustee with

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a statement, duly executed, acknowledged and certified by the Board of Surveillance of the Condominium setting forth (i) whether or not there are any defaults or conditions that, with the passage of time or the giving of notice, or both, would constitute a default under the Condominium Documents, (ii) whether or not all common expenses, assessments, maintenance fees and other charges due in connection with the Condominium Documents have been paid and (iii) such other statements as Trustee may reasonably require.

(p)  Construction Cost; Use of Proceeds.  The aggregate cost of construction incurred by Issuers in the development, redevelopment and renovation of the Property was not less than $102,000,000 (including pre-opening expenses).  Issuers shall use the proceeds of the Notes received by them on the Note Issuance Date to (a) refinance the Property and/or repay and discharge any existing loans relating to the Property, (b) pay all past-due Basic Carrying Costs, if any, with respect to the Property, (c) make initial deposits into the Reserve Funds on the Note Issuance Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the issuance of the Notes, (e) fund any working capital requirements of the Property, (f) repayment of subordinated debt and guaranty fees and obligations in favor of Kerzner International North America, Inc., (g) payment of accrued management fees payable to Manager and (h) distribute the balance, if any, to Issuers.

(q)  Performance by Issuers.  Issuers shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Financing Document executed and delivered by Issuers subject to all applicable notice, grace and cure periods therein.

(r)  CNBV Fees.  Issuers shall (i) comply at all times with the requirements imposed by CNBV while this Indenture shall remain in full force and effect or the Notes shall remain outstanding and (ii) pay any and all fees or other charges payable to CNBV in connection with the Notes and promptly forward to Trustee an original official receipt or a copy thereof or other documentation issued by CNBV evidencing the payment of such fees or charges.

(s)  No Joint Assessment.  No Issuer shall suffer, permit or initiate the joint assessment of the Property (a) with any other real property constituting a tax lot separate from the Property, and (b) which constitutes real property with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of the Property.

(t)  Leasing Matters.  Any Leases with respect to the Property executed after the date hereof, for more than 1,600 square feet shall be approved by Trustee, which approval shall not be unreasonably withheld and shall be deemed granted if Trustee shall not have disapproved same in writing within fifteen (15) Business Days after Issuers’ request for approval, so long as the written request to Trustee for approval contains a legend clearly marked in not less than fourteen (14) point bold face type, underlined, in all capital letters “REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN 15 BUSINESS DAYS”.  Upon request, Issuers shall furnish Trustee with executed copies of all Leases.  All proposed Leases shall be on commercially reasonable terms and shall not contain any terms which would materially affect Trustee’s rights under the Financing Documents.  All Leases executed after the date hereof shall provide that they are subordinate to the Security Trust Agreement and the

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Pledge and that the lessee agrees to attorn to Trustee or any purchaser at a sale by foreclosure or power of sale.  Issuers (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Property involved except that no termination by Issuers or acceptance of surrender by a tenant of any Leases shall be permitted unless by reason of a tenant default and then only in a commercially reasonable manner to preserve and protect the Property; provided, however, that no such termination or surrender of any Lease covering more than 1,600 square feet will be permitted without the consent of Trustee; provided, further, that notwithstanding anything to the contrary contained in this Section 7.01(t), (A) consent to the termination or surrender of the Restaurant Lease shall not be withheld if Hotel Issuer shall enter into a new Lease with a replacement tenant that has or has had a restaurant or food establishment operation serving a clientele similar to the clientele frequenting the Property and having a strong regional or national reputationand (B) Hotel Issuer may, upon not less than fifteen (15) Business Days notice to, but without the approval of, Trustee, terminate or accept a surrender of the Restaurant Lease in the event Issuers shall elect to self manage the applicable facility and operation; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Financing Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Financing Documents; and (vi) shall execute and deliver at the request of Trustee all such further assurances, confirmations and assignments in connection with the Leases as Trustee shall from time to time reasonably require.  Notwithstanding anything to the contrary contained herein, no Issuer shall enter into a Lease of all or substantially all of the Property without Trustee’s prior consent.

(u)  Alterations.  Issuers shall obtain Trustee’s prior consent to any alterations to any Improvements, which consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, Trustee’s consent shall not be required in connection with (i) any alterations in connection with Required Repairs, Replacements or Restorations performed in accordance with the terms and provisions of this Indenture, (ii) alterations provided for in any Annual Budget, (iii) (A) any emergency alterations in response to a material threat of danger to the safety and well-being of hotels guests and employees of Issuers or a material threat of injury to or destruction of the Improvements or (B) alterations that are required by a change in the applicable law, provided that, in the case of clause (A) or (B), Issuers shall give notice thereof to Trustee, together with a reasonably detailed description of the alteration and the emergency or change in law giving rise to such alteration (it being understood and agreed that if the cost of such alterations exceed $2,000,000, the excess costs shall be the liability of the Issuers in accordance with Section 9.03(a)(vi) until such alteration has been approved by Servicer for the Trustee, such approval not to be unreasonably withheld, conditioned or delayed); or (iv) alterations that will not have a Material Adverse Effect; provided that the alterations under clause (iv) above (I) are made in connection with tenant improvement work performed pursuant to the terms of any Lease executed on or before the date hereof or (II) do not adversely affect any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements and the aggregate cost thereof does not exceed Five Hundred Thousand and 00/100 Dollars ($500,000).

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If the total unpaid amounts due and payable with respect to alterations to the Improvements at the Property (other than such amounts to be paid or reimbursed by tenants under the Leases or to be paid from any applicable Reserve Fund) shall at any time exceed Five Hundred Thousand and 00/100 Dollars ($500,000) (the “Threshold Amount”), Issuers shall promptly deliver to Trustee as security for the payment of such amounts and as additional security for Issuers’ obligations under the Financing Documents any of the following:  (A) cash, (B) U.S. Obligations, (C) other securities having a rating acceptable to Trustee and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof in connection with any Securitization, or (D) a completion and performance bond or an irrevocable letter of credit (payable on sight draft only) issued by a financial institution having a rating by S&P of not less than “A-1+” if the term of such bond or letter of credit is no longer than three (3) months or, if such term is in excess of three (3) months, issued by a financial institution having a rating that is acceptable to Trustee and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof in connection with any Securitization.  Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on the Property (other than such amounts to be paid or reimbursed by tenants under the Leases) over the Threshold Amount and, subject to the terms of Section 10.06, Trustee shall (or, with respect to a letter of credit or performance bond, may) apply such security from time to time to pay for such alterations in accordance with the procedures and requirements set forth in Section 10.03 relating to the disbursement of funds from the Replacement Reserve Account.

(v)  Operation of Property.  (i)  Issuers shall cause the Property to be operated, in all material respects, in accordance with the Management Agreement (or Replacement Management Agreement) as applicable; provided, however, that no Issuer shall be deemed to be in default hereunder if Manager, and not Issuers, is in default under the terms of the Management Agreement or Replacement Management Agreement and Issuers are otherwise complying with the provisions of this Section 7.01(v).  In the event that the Management Agreement expires or is terminated (without limiting any obligation of Issuers to obtain Trustee’s consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Indenture), Issuers shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable.  Any breach of the covenants contained in this Section 7.01(v) with respect to the Management Agreement shall not result in an Event of Default as long as Issuers are actively seeking Trustee’s consent to enter into a Replacement Management Agreement with Manager or another Qualified Manager or, in the case of a termination, the Manager is replaced within thirty (30) days by a Qualified Manager pursuant to Section 9.04.

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by Issuers under the Management Agreement and do all things necessary to preserve and to keep unimpaired their material rights thereunder; (B) promptly notify Trustee of any material default under the Management Agreement of which they are aware; (C) promptly deliver to Trustee a copy of each material financial statement, business plan, capital expenditures plan, notice, report and estimate received by Issuers under the Management Agreement; and (D) use commercially

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reasonable efforts to enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Manager under the Management Agreement, in a commercially reasonable manner.

(w)  Golf Operation.  (i)  Issuers shall cause the golf course at the Property to be operated, in all material respects, in accordance with the Golf Management Agreement; provided, however, that no Issuer shall be deemed to be in default hereunder if the Golf Manager, and not Issuers, is in default under the terms of the Golf Management Agreement and Issuers are otherwise complying with the provisions of this Section 7.01(w).  In the event that the Golf Management Agreement expires or is terminated (without limiting any obligation of Issuers to obtain Trustee’s consent to any termination or modification of the Golf Management Agreement in accordance with the terms and provisions of this Indenture), Issuers shall promptly enter into a Replacement Golf Management Agreement with Golf Manager or with a Qualified Golf Manager.  Any breach of the covenants contained in this Section 7.01(w) with respect to the Golf Management Agreement shall not result in an Event of Default as long as Issuers are actively seeking Trustee’s consent to enter into a Replacement Golf Management Agreement with Golf Manager or Qualified Golf Manager or, in the case of a termination, Golf Manager is replaced within thirty (30) days by Qualified Golf Manager pursuant to Section 9.04.

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by Issuers under the Golf Management Agreement and do all things necessary to preserve and to keep unimpaired their material rights thereunder; (B) promptly notify Trustee of any material default under the Golf Management Agreement of which they are aware; (C) promptly deliver to Trustee a copy of each material financial statement, business plan, capital expenditures plan, notice, report and estimate received by Issuers under the Golf Management Agreement; and (D) use commercially reasonable efforts to enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Golf Manager under the Golf Management Agreement, in a commercially reasonable manner.

(x)  Spa Operation.  (i)  Issuers shall cause the spa facility at the Property to be operated, in all material respects, in accordance with the Spa Management Agreement; provided, however, that no Issuer shall be deemed to be in default hereunder if the Spa Manager, and not Issuers, is in default under the terms of the Spa Management Agreement and Issuers are otherwise complying with the provisions of this Section 7.01(x).  In the event that the Spa Management Agreement expires or is terminated (without limiting any obligation of Issuers to obtain Trustee’s consent to any termination or modification of the Spa Management Agreement in accordance with the terms and provisions of this Indenture), Issuers shall promptly enter into a Replacement Spa Management Agreement with Spa Manager or with a Qualified Spa Manager.  Any breach of the covenants contained in this Section 7.01(x) with respect to the Spa Management Agreement shall not result in an Event of Default as long as Issuers are actively seeking Trustee’s consent to enter into a Replacement Spa Management Agreement with Spa Manager or Qualified Spa Manager or, in the case of a termination, Spa Manager is replaced within thirty (30) days by Qualified Spa Manager pursuant to Section 9.04.

(ii)  Issuers shall:  (A) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by Issuers

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under the Spa Management Agreement and do all things necessary to preserve and to keep unimpaired their material rights thereunder; (B) promptly notify Trustee of any material default under the Spa Management Agreement of which they are aware; (C) promptly deliver to Trustee a copy of each material financial statement, business plan, capital expenditures plan, notice, report and estimate received by Issuers under the Spa Management Agreement; and (D) use commercially reasonable efforts to enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Spa Manager under the Spa Management Agreement, in a commercially reasonable manner.

(iii)  Notwithstanding anything to the contrary contained in this Section 7.01(x), upon fifteen (15) Business Days notice to Trustee, Issuers may elect to terminate the Spa Management Agreement in accordance with the terms thereof or consent to the termination or surrender of the Spa Management Agreement and elect to self manage the spa facility and operation at the Property, provided that Kerzner (thereafter, a “Qualified Spa Manager”) shall have theretofore initiated a spa program and is then operating and managing a spa facility of comparable class, luxury and quality as the spa facility located at the Property on the date hereof.

(y)  Condominium.  (i)  Issuers shall comply with all of the terms, covenants and conditions of the Condominium Documents applicable to Issuers, as the same shall be in force and effect from time to time.

(ii)  Issuers shall pay all assessments for common charges and expenses made against the Condominium units owned by Issuers pursuant to the Condominium Documents as the same shall become due and payable.

(iii)  Issuers shall comply with any state, local or federal law, rule and regulation applicable to the Condominium as it relates to the Property.

(iv)  Issuers shall take all actions as may be reasonably necessary from time to time to preserve and maintain the Condominium in accordance with the Condominium Laws.

(v)  Issuers (A) irrevocably waive any applicable law which grants to Issuers rights in the event of a Casualty or a Condemnation which are inconsistent with the provisions of Article 8 hereof and (B) expressly agrees to the application of the insurance proceeds and condemnation awards in accordance with Article 8 hereof.

Section 7.02  Negative Covenants.  From the date hereof until payment and performance in full of all obligations of Issuers under the Financing Documents or the earlier reconveyance of title to the Property held by Security Trust Trustee to Issuers or release of the Lien of the Pledge in accordance with the terms of this Indenture and the other Financing Documents, each of the Issuers covenants and agrees with Trustee that it will not do, directly or indirectly, any of the covenants or agreements set forth in this Section 7.02.  All such covenants and agreements shall be enforced, and all associated rights shall be exercised, by the Servicer on behalf of the Trustee for the benefit of the Noteholders, and all related documents to be delivered to the Trustee, amounts to be deposited with the Trustee and all accounts to be maintained by the Trustee shall be so delivered, deposited and maintained in accordance with the Cash

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Management Agreement or otherwise by the Servicer on behalf of the Trustee for the benefit of the Noteholders.

(a)  Operation of Property.  (i)  No Issuer shall, without Trustee’s prior consent (which consent shall not be unreasonably withheld or delayed):  (A) surrender, terminate or cancel the Management Agreement; provided, that Issuers may, without Trustee’s consent, replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (B) reduce or consent to the reduction of the term of the Management Agreement; (C) increase or consent to the increase of the amount of any charges under the Management Agreement; or (D) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect.

(ii)  Subject to Section 7.01(w)(iii), no Issuer shall, without Trustee’s prior consent (which consent shall not be unreasonably withheld or delayed):  (A) surrender, terminate or cancel the Golf Management Agreement; provided, that Issuers may, without Trustee’s consent, replace the Golf Manager so long as the replacement manager is a Qualified Golf Manager pursuant to a Replacement Golf Management Agreement; (B) reduce or consent to the reduction of the term of the Golf Management Agreement; (C) increase or consent to the increase of the amount of any charges payable to Golf Manager or reduce or consent to the reduction of the amount payable to Issuers under the Golf Management Agreement; or (D) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Golf Management Agreement in any material respect.

(iii)  Subject to Section 7.01(x)(iii), no Issuer shall, without Trustee’s prior consent (which consent shall not be unreasonably withheld or delayed):  (A) surrender, terminate or cancel the Spa Management Agreement; provided, that Issuers may, without Trustee’s consent, replace the Spa Manager so long as the replacement manager is a Qualified Spa Manager pursuant to a Replacement Spa Management Agreement; (B) reduce or consent to the reduction of the term of the Spa Management Agreement; (C) increase or consent to the increase of the amount of any charges payable to Spa Manager or reduce or consent to the reduction of the amount payable to Issuers under the Management Agreement; or (D) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Spa Management Agreement in any material respect.

(iv)  Following the occurrence and during the continuance of an Event of Default, no Issuer shall exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Management Agreement without the prior consent of Trustee, which consent may be withheld in Trustee’s sole discretion.

(b)  Liens.  No Issuer shall create, incur, assume or suffer to exist any Lien on any portion of the Property or permit any such action to be taken, except:

(i)  Permitted Encumbrances; and

(ii)  Liens created by or permitted pursuant to the Financing Documents.

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(c)  Dissolution.  No Issuer shall (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of the Property, (c) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the properties or assets of such Issuer except to the extent permitted by the Financing Documents, (d) modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction where such qualification is required for such Issuer to own its assets or conduct its business or (e) cause the Principal to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Principal would be dissolved, wound up or liquidated in whole or in part, or (ii) amend, modify, waive or terminate the certificate of incorporation or bylaws of the Principal, in each case, without obtaining the prior consent of Trustee.

(d)  Intentionally Omitted.

(e)  Debt Cancellation.  No Issuer shall cancel or otherwise forgive or release any claim or debt (other than in connection with termination of Leases in accordance herewith) owed to Issuers by any Person, except for adequate consideration and in the ordinary course of Issuers’ business or if such cancellation, forgiveness or release is prudent and commercially reasonable.

(f)  Zoning.  No Issuer shall initiate or consent to any zoning reclassification of any portion of the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Trustee.

(g)  Intentionally Omitted.

(h)  Principal Place of Business and Organization.  No Issuer shall change its principal place of business set forth in the introductory paragraph of this Indenture without first giving Trustee thirty (30) days prior notice.  No Issuer shall change the place of its organization as set forth in Section 6.01(cc) without the consent of Trustee, which consent shall not be unreasonably withheld or delayed.  Upon Trustee’s request, Issuers shall execute and deliver additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Trustee’s lien or security interest in the Property as a result of such change of principal place of business or place of organization.

(i)  ERISA.  (i)  No Issuer shall engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Trustee of any of its rights under the Note, this Indenture or the other Financing Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

(ii)  Each Issuer further covenants and agrees to deliver to Trustee such certifications or other evidence from time to time throughout the term of the Notes, as requested by Trustee in its sole discretion, that (i) such Issuer is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within

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the meaning of Section 3(32) of ERISA; (ii) such Issuer is not subject to any state statute regulating investments of, or fiduciary obligations with respect to, governmental plans; and (iii) one or more of the following circumstances is true:

(1)  Equity interests in each Issuer are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

(2)  Less than twenty-five percent (25%) of each outstanding class of equity interests in each Issuer is held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

(3)  Each Issuer qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

(j)  Transfers.  (i)  Each Issuer acknowledges that Initial Noteholder has examined and relied, and each Noteholder will rely, on the experience of Issuers and their respective general partners, members, principals and (if Issuer is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to purchase the Notes, and will continue to rely on Issuers’ ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the obligations contained in the Financing Documents.  Each Issuer acknowledges that Trustee has a valid interest in maintaining the value of the Property so as to ensure that, should Issuers default in the repayment of the Debt or the performance of the obligations contained in the Financing Documents, Trustee can recover the Debt by a sale of the Property.

(ii)  Except to the extent otherwise set forth in this Section 7.02(j), no Issuer shall, nor shall any Issuer permit any Restricted Party to, (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Property or any part thereof or any legal or beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party (collectively, a “Transfer”), other than pursuant to Leases of space in the Improvements to tenants in accordance with the provisions of Section 7.01(t).  Notwithstanding anything to the contrary contained herein or in the other Financing Documents, Transfers of interests in Guarantor or in any Person having any direct or indirect legal or beneficial interest in Guarantor shall not be prohibited or restricted in any manner whatsoever, including by sale, merger, consolidation or otherwise.

(iii)  A Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Issuers agree to sell the Property or any part thereof for a price to be paid in installments; (ii) an agreement by Issuers leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Issuers’ right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership

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interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests; (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal or the resignation of the managing agent (including, without limitation, an Affiliated Manager) other than in accordance with Section 7.02(a) hereof.

(iv)  Notwithstanding the provisions of this Section 7.02(j), the following Transfers shall be permitted hereunder:  (A) the sale or transfer, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock in a Restricted Party; provided, however, no such sales or transfers shall result in the change of voting control in the Restricted Party, and (B) the sale or transfer, in one or a series of transactions, of not more than forty-nine percent (49%) of the limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party; provided, however, no such sales or transfers shall result in the change of voting control in the Restricted Party, and (C) transfers of direct or indirect ownership interests in the Issuers, Principals or the Property (1) by Goldman to Kerzner or (2) by Kerzner to Goldman, pursuant to which transfer a change of control of the Issuers may occur.  Each of the Transfers described in this Section 7.02(j)(iv) shall satisfy the following conditions:  (a) Trustee shall receive no less than thirty (30) days’ prior written notice of such proposed Transfer, (b) if after giving effect to any of the foregoing Transfers, more than forty-nine percent (49%) in the aggregate of direct or indirect interests in a Restricted Party are owned by any Person and its Affiliates that owned less than forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the date hereof, Issuers shall, no less than thirty (30) days prior to the effective date of any such Transfer, deliver to Trustee an Additional Insolvency Opinion reasonably acceptable to Trustee and acceptable to the Rating Agencies, (c) each Issuer and Principal, if applicable, continue to satisfy all the representations and covenants set forth in Section 6.01(dd) of this Indenture following such Transfer, (d) in the case of a Transfer under (iv)(C) above, any existing guarantor of the obligations of the Issuers under any of the Financing Documents shall affirm its obligations under its applicable guaranty or one (1) or more substitute guarantors reasonably acceptable to Trustee shall have assumed all of the liabilities and obligations of such guarantor, and (e) Issuers covenant and agree to pay all reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Trustee in connection with such Transfer.

(v)  Notwithstanding the provisions of this Section 7.02(j), Goldman and Kerzner shall each have a collective one-time right during the term of the Notes to transfer direct or indirect ownership interests in the Property (but not the Property) to one or more third parties (each individually or collectively, “Transferee”), provided that Trustee receives sixty (60) days prior written notice of such Transfer and no Event of Default has occurred and is continuing, and further provided that the following additional requirements are satisfied:

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(A)  Issuers are and shall remain Special Purpose Entities that are able to satisfy all the representations and covenants set forth in Section 6.01(dd) of this Indenture;

(B)  Transferee shall assume any applicable obligations of Issuers or the Principals under the Financing Documents in a manner satisfactory to Trustee in all respects, and Issuers shall provide evidence satisfactory to Trustee that all required approvals, if any, relating to the Transfer and the assumption of such obligations by Transferee have been obtained;

(C)  Issuers or Transferee, at its sole cost and expense, shall deliver to Trustee an Additional Insolvency Opinion reflecting such Transfer satisfactory in form and substance to Trustee;

(D)  Transferee shall be approved by the Rating Agencies, which approval, if required by Trustee, shall take the form of a confirmation in writing from such Rating Agencies to the effect that such Transfer will not result in a requalification, reduction, downgrade or withdrawal of the ratings in effect immediately prior to such assumption or transfer for the Securities or any class thereof issued in connection with a Securitization which are then outstanding;

(E)  Issuers shall pay any and all reasonable out-of-pocket costs incurred by Trustee and the Rating Agencies in connection with such Transfer (including, without limitation, the reasonable fees and disbursements of Trustee’s and Rating Agencies’ attorneys);

(F)  Transferee or Transferee’s principals must have demonstrated expertise in owning and operating hotel properties similar in size, class and operation to the Property, which expertise shall be reasonably determined by Trustee (or Transferee or Transferee’s Principals employ a Qualified Manager in lieu of having direct managerial experience required hereunder); and

(G)  Prior to any release of Guarantor, one (1) or more Substitute Guarantors shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty executed by Guarantor or execute a replacement guaranty reasonably satisfactory to Trustee.

(H)  Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Issuers and Guarantor herein shall be released from all liability under this Indenture, the Notes, the Security Trust Agreement and the other Financing Documents accruing after such Transfer.  The foregoing release shall be effective upon the date of such Transfer, but Trustee agrees to provide written evidence thereof reasonably requested by Issuers.

(vi)  Notwithstanding the provisions of this Section 7.02(j), and in addition to other transfer rights under Section 7.02, the Issuers shall have the right to transfer the Property to a Transferee, provided that Trustee receives sixty (60) days prior written notice of such Transfer

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and no Event of Default has occurred and is continuing, and further provided that the following additional requirements are satisfied:

(A)  Issuers shall pay Trustee a transfer fee equal to one percent (1%) of the outstanding principal balance of the Notes at the time of such transfer;

(B)  Transferee shall be Special Purpose Entity;

(C)  Transferee and Transferee’s principals must be able to satisfy all the representations and covenants set forth in Section 6.01(dd) of this Indenture, no Event of Default shall otherwise occur as a result of such Transfer, and Transferee and Transferee’s principals shall deliver (1) all organizational documentation reasonably requested by Trustee, which shall be reasonably satisfactory to Trustee and (2) all certificates, agreements and covenants reasonably required by Trustee;

(D)  Transferee shall assume all of the obligations of Issuers under the Financing Documents in a manner satisfactory to Trustee in all respects, including, without limitation, by entering into an assumption agreement in form and substance satisfactory to Trustee and Issuers shall provide evidence satisfactory to Trustee that all required approvals, if any, relating to the Transfer and the assumption of such obligations by Transferee have been obtained;

(E)  Issuers or Transferee, at its sole cost and expense, shall deliver to Trustee an Additional Insolvency Opinion reflecting such Transfer satisfactory in form and substance to Trustee;

(F)  Transferee shall be approved by the Rating Agencies, which approval, if required by Trustee, shall take the form of a confirmation in writing from such Rating Agencies to the effect that such Transfer will not result in a requalification, reduction, downgrade or withdrawal of the ratings in effect immediately prior to such assumption or transfer for the Securities or any class thereof issued in connection with a Securitization which are then outstanding;

(G)  Issuers shall pay any and all reasonable out-of-pocket costs incurred by Trustee and the Rating Agencies in connection with such Transfer (including, without limitation, the fees and disbursements of Trustee’s and Rating Agencies’ attorneys and all recording fees, title insurance premiums and mortgage and intangible taxes);

(H)  Transferee or Transferee’s principals must have demonstrated expertise in owning and operating hotel properties similar in size, class and operation to the Property, which expertise shall be reasonably determined by Trustee (or Transferee or Transferee’s Principals employ a Qualified Manager in lieu of having direct managerial experience required hereunder);

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(I)  Transferee and Transferee’s principals shall, as of the date of such transfer, have an aggregate net worth and liquidity reasonably acceptable to Trustee;

(J)  Transferee, Transferee’s principals and all other entities which may be owned or Controlled directly or indirectly by Transferee’s principals (“Transferee Related Entities”) must not have been party to any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within seven (7) years prior to the date of the proposed Transfer;

(K)  There shall be no material litigation or regulatory action pending or threatened against Transferee, Transferee’s principals or Transferee Related Entities which is not reasonably acceptable to Trustee;

(L)  Transferee, Transferee’s principals and Transferee Related Entities shall not have defaulted under its or their obligations with respect to any other Indebtedness in a manner which is not reasonably acceptable to Trustee;

(M)  Prior to any release of Guarantor, one (1) or more Substitute Guarantors shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty executed by Guarantor or execute a replacement guaranty reasonably satisfactory to Trustee; and

(N)  (i) The hotel Individual Parcel shall be managed by a Qualified Manager pursuant to a Replacement Management Agreement; (ii) the golf Individual Parcel shall be managed by a Qualified Golf Manager pursuant to a Replacement Golf Management Agreement, and (iii) the spa shall be managed by a Qualified Spa Manager pursuant to a Replacement Spa Management Agreement.

Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Issuers and Guarantor herein shall be released from all liability under this Indenture, the Notes, the Security Trust Agreement and the other Financing Documents accruing after such Transfer.  The foregoing release shall be effective upon the date of such Transfer, but Trustee agrees to provide written evidence thereof reasonably requested by Issuers.

(k)  Condominium Documents.  (i)  Issuers shall not, without the Trustee’s prior written consent, amend, modify or supplement in any material respect, or consent to or suffer any material amendment, modification or supplementation of any of the Condominium Documents.  Issuers shall not, without the Trustee’s prior written consent, terminate or consent to or suffer the termination of any of the Condominium Documents.

(ii)  Issuers shall not, without the Trustee’s prior written consent, transfer any of its rights and obligations to any other party to the Condominium Documents, which consent shall not be unreasonably withheld or delayed.

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(iii)  Issuers shall not, without the Trustee’s prior written consent, take (and hereby assigns to Trustee any right it may have to take) any action to terminate the Condominium, withdraw the Condominium from the Condominium Laws, or cause a partition of the Condominium.

(iv)  Issuers shall not, without the Trustee’s prior written consent, exercise any right it may have to vote for, (A) any additions or improvements to the common elements of the Condominium, except as such additions or improvements are completed in accordance with Section 8.04 hereof, (B) any borrowing on behalf of the Condominium or (C) the expenditure of any insurance proceeds or condemnation awards for the repair or restoration of the related Improvements other than in accordance with Section 8.04 hereof.

ARTICLE 8 - INSURANCE; CASUALTY; CONDEMNATION

Section 8.01  Insurance.  (a)  Issuers shall obtain and maintain, or cause to be maintained, insurance for Issuers and the Property providing at least the following coverages:

(i)  comprehensive all risk insurance on the Improvements and the Personal Property, including contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each case (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of this Indenture shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, but the amount shall in no event be less than the outstanding principal balance of the Notes; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of One Hundred Thousand and No/100 Dollars ($100,000) for all such insurance coverage; and (D) containing an “Ordinance or Law Coverage” or “Enforcement” endorsement if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses.  In addition, Issuers shall obtain coastal windstorm insurance in amounts and in form and substance satisfactory to Trustee in the event the Property is located in any coastal region, provided that the insurance shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i) and provided further that coastal windstorm insurance shall not be required with respect to the golf course located at the Property;

(ii)  commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, such insurance (A) to be on the so-called “occurrence” form with a combined limit of not less than Two Million and No/100 Dollars ($2,000,000) in the aggregate and One Million and No/100 Dollars ($1,000,000) per occurrence (and, if on a blanket policy, containing an “Aggregate Per Location” endorsement); (B) to continue at not less than the aforesaid limit until required to be changed by Trustee in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards:  (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors; (4) blanket contractual liability for all legal contracts; and (5) contractual liability covering the indemnities contained herein and in the other Financing Documents to the extent the same is available;

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(iii)  business income insurance (A) with loss payable to Trustee; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twenty-four (24) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the projected gross income from the Property for a period of twenty-four (24) months from the date of such Casualty (assuming such Casualty had not occurred) and notwithstanding that the policy may expire at the end of such period.  The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Issuers’ reasonable estimate of the gross income from the Property for the succeeding twenty-four (24) month period.  All proceeds payable to Trustee pursuant to this subsection shall be held by Trustee and shall be applied at Trustee’s sole discretion (but after consultation with Issuers) to (I) the obligations secured by the Financing Documents from time to time due and payable hereunder and under the Note or (II) Operating Expenses approved by Trustee in its reasonable discretion; provided, however, that nothing herein contained shall be deemed to relieve Issuers of their obligations to pay the obligations secured by the Financing Documents on the respective dates of payment provided for in the Note and the other Financing Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;

(iv)  at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Property coverage form does not otherwise apply, (A) owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;

(v)  if the Property includes commercial property, worker’s compensation insurance with respect to any employees of Issuers, as required by any Governmental Authority or Legal Requirement;

(vi)  comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Trustee on terms consistent with the commercial property insurance policy required under subsection (i) above;

(vii)  umbrella liability insurance in an amount not less than Fifty Million and No/100 Dollars ($50,000,000) per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (ii) above;

(viii)  motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, including umbrella coverage, of Two Million and No/100 Dollars ($2,000,000);

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(ix)  if the Property is or becomes a legal “non-conforming” use, ordinance or law coverage and insurance coverage to compensate for the cost of demolition or rebuilding of the undamaged portion of the Property along with any reduced value and the increased cost of construction in amounts as requested by Trustee;

(x)  the commercial property and business income insurance required under Sections 8.01(a)(i) and (iii) above shall cover perils of terrorism and acts of terrorism and Issuers shall maintain commercial property and business income insurance for loss resulting from such perils and acts on terms (including amounts) consistent with those required under Sections 8.01(a)(i) and (iii) above at all times during the term of the Notes so long as Trustee determines that either (I) prudent owners of real estate comparable to the Property in Mexico securing non-recourse financings provided by institutional lenders from the United States of America are maintaining same or (II) prudent institutional lenders (including, without limitation, investment banks) from the United States of America to such owners are requiring that such owners maintain such insurance in connection with non-recourse financings secured by real estate comparable to the Property in Mexico; provided, however, in the event that losses arising from perils and acts of terrorism (collectively, “Terrorism Losses”) are excluded from the insurance required under Sections 8.01(a)(i) and (iii) above, then Issuers shall either (A) maintain such coverage through a policy or policies covering multiple locations so long as such coverage is on terms consistent with those required under Sections 8.01(a)(i) and (iii) above with a deductible of not greater than $100,000 and such coverage is in an amount equal to, the lesser of (a) the outstanding principal balance of the Notes (provided such policy contains a waiver of coinsurance) or (b) the sum of the business income insurance equal to 100% of the projected gross income from the Property for a period of twenty-four (24) months from the date that the Property is repaired or replaced and operations are resumed plus the Full Replacement Cost and further provided that if any claim is made (unless on a per occurrence basis) under such policy or policies reducing the amount of coverage below that which is required to be maintained under this Section 8.01(a)(x), then Issuers shall increase the amount of such policy or policies to an amount that satisfies the requirements of Section 8.01(a)(x), or (B) Issuers shall obtain a stand-alone policy or policies that covers solely the Property against Terrorism Losses, which stand-alone policy or policies shall be on terms consistent with those required under Sections 8.01(a)(i) and (iii) above with a deductible of not greater than $100,000 and such coverage is in an amount equal to, the lesser of (a) the outstanding principal balance of the Notes (provided such policy contains a waiver of coinsurance) or (b) the sum of the business income insurance equal to 100% of the projected gross income from the Property for a period of twenty-four (24) months from the date that the Property is repaired or replaced and operations are resumed plus the Full Replacement Cost.  Notwithstanding the foregoing, in no event shall Issuers be required to pay annual premiums for insurance covering such Terrorism Losses in excess of an amount equal to two and one-half times the cost of a stand-alone policy or policies that covers the Property on the date hereof (i.e., if the cost exceeds such limit, Issuers shall obtain as much coverage as is available at a cost equal to such limit);and

(xi)  upon sixty (60) days’ notice, such other reasonable insurance and in such reasonable amounts as Trustee from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located.

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(b)  All insurance provided for in Section 8.01(a) shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be (to the extent not specified in Section 8.01(a)) subject to the approval of Trustee as to insurance companies, amounts, deductibles, loss payees and insureds.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “A” or better (and the equivalent thereof) by at least two (2) of the Rating Agencies rating the Securities (one of which shall be S&P if they are rating the Securities and one of which will be Moody’s if they are rating the Securities), or if only one Rating Agency is rating the Securities, then only by such Rating Agency.  The Policies described in Section 8.01(a) (other than those strictly limited to liability protection) shall designate Trustee as loss payee.  Not less than ten (10) days prior to the expiration dates of the Policies theretofore furnished to Trustee, certificates of insurance evidencing the Policies accompanied by evidence satisfactory to Trustee of payment of the premiums due thereunder (the “Insurance Premiums”), shall be delivered by Issuers to Trustee.

(c)  Any blanket insurance Policy shall specifically allocate to the Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Property in compliance with the provisions of Section 8.01(a).

(d)  All Policies provided for or contemplated by Section 8.01(a), except for the Policy referenced in Section 8.01(a)(v), shall name Issuers as the insured and Trustee as the additional insured, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Trustee providing that the loss thereunder shall be payable to Trustee.

(e)  All Policies provided for in Section 8.01 shall contain clauses or endorsements to the effect that:

(i)  no act or negligence of any Issuer, or anyone acting for any Issuer, or of any tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Trustee is concerned;

(ii)  the Policies shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days’ notice to Trustee and any other party named therein as an additional insured;

(iii)  the issuers thereof shall give notice to Trustee if the Policies have not been renewed fifteen (15) days prior to its expiration; and

(iv)  Trustee shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.

(f)  If at any time Trustee is not in receipt of written evidence that all Policies are in full force and effect, Trustee shall have the right, without notice to Issuers (or, upon three (3) Business Days’ notice to Issuers if such notice period shall end not later than five (5)

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Business Days prior to the date upon which the Policies are to expire), to take such action as Trustee deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Trustee in its sole discretion deems appropriate.  All premiums incurred by Trustee in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Issuers to Trustee upon demand and, until paid, shall be secured by the Security Trust Agreement and the Pledge and shall bear interest at the Default Rate.

Section 8.02  Casualty.  If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”) such that the estimated cost of Restoration exceeds One Million and No/100 Dollars ($1,000,000), Issuers shall give prompt notice of such damage to Trustee and shall promptly commence and diligently prosecute the completion of the Restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Trustee and otherwise in accordance with Section 8.04.  Issuers shall pay all costs of such Restoration whether or not such costs are covered by insurance.  Trustee may, but shall not be obligated to, make proof of loss if not made promptly by Issuers.  In addition, Trustee may participate in any settlement discussions with any insurance companies with respect to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal to or greater than Four Million and No/100 Dollars ($4,000,000) and Issuers shall deliver to Trustee all instruments required by Trustee to permit such participation.

Section 8.03  Condemnation.  Issuers shall promptly give Trustee notice of the actual or threatened commencement of any proceeding for the Condemnation of the Property and shall deliver to Trustee copies of any and all papers served in connection with such proceedings.  Trustee may participate in any such proceedings, and Issuers shall from time to time deliver to Trustee all instruments requested by it to permit such participation.  Issuers shall, at their expense, diligently prosecute any such proceedings, and shall consult with Trustee, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Issuers shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Indenture and the Debt shall not be reduced until any Award shall have been actually received and applied by Trustee, after the deduction of expenses of collection, to the reduction or discharge of the Debt.  Trustee shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note.  If the Property or any portion thereof is taken by a condemning authority, Issuers shall promptly commence and diligently prosecute the Restoration of the Property and otherwise comply with the provisions of Section 8.04.  If the Property is sold, through foreclosure or otherwise, prior to the receipt by Trustee of the Award, Trustee shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.

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Section 8.04  Restoration.  (a)The following provisions shall apply in connection with the Restoration:

(i)  If the Net Proceeds shall be less than Four Million and No/100 Dollars ($4,000,000) and the costs of completing the Restoration shall be less than Four Million and No/100 Dollars ($4,000,000), the Net Proceeds will be disbursed by Trustee to Issuers upon receipt, provided there is no Event of Default at the time of such disbursement and Issuers hereby covenant and agree to comply with the conditions set forth in Section 8.04(b), (vii), (viii), (ix) and (x) during the Restoration and Issuers expeditiously commence and satisfactorily complete with due diligence the Restoration in accordance with the terms of this Indenture.

(ii)  If the Net Proceeds shall be greater than Four Million and No/100 Dollars ($4,000,000) and the costs of completing the Restoration shall be greater than Four Million and No/100 Dollars ($4,000,000), the Net Proceeds will be disbursed by Trustee to Issuers upon receipt, provided that all of the condition set forth in Section 8.04(b) are met and Issuers deliver to Trustee a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Indenture.

(iii)  The term “Net Proceeds” for purposes of this Section 8.04 shall mean:  (i) the net amount of all insurance proceeds received by Trustee pursuant to Section 8.01 (a)(i), (iii), (iv), (vi), (ix) and (x) as a result of such damage or destruction, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”), or (ii) the net amount of the Award, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Condemnation Proceeds”), whichever the case may be.

(b)  The Net Proceeds shall be made available to Issuers for Restoration upon the approval of Trustee in its reasonable discretion that all or some of the following conditions are met:

(i)  no Event of Default shall have occurred and be continuing;

(ii)  the costs of completing the Restoration shall be equal to or less than Thirty Million and No/100 Dollars ($30,000,000);

(iii)  intentionally omitted;

(iv)  subject to excusable delays due to acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppages, shortages of labor or materials or other cases beyond the reasonable control of Issuers, Issuers shall commence the Restoration as soon as reasonably practicable (but in no event later than sixty (60) days after such Casualty or Condemnation, whichever the case may be, occurs) (it being understood and agreed that, among other things, the engagement of an architect, engineer or construction manager shall constitute commencement of Restoration for purposes of this Section 8.01(b)(iv)) and shall diligently pursue the same to satisfactory completion;

(v)  any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Property as a result of the

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occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 8.01(a)(iii), if applicable, or (3) by other funds of Issuers;

(vi)  Trustee shall be reasonably satisfied that the Restoration will be completed on or before the earliest to occur of (1) the Maturity Date, (2) such time as may be required under applicable Legal Requirements or (3) the expiration of the insurance coverage referred to in Section 8.01(a)(iii);

(vii)  the Property and the use thereof after the Restoration will be in material compliance with and permitted under all applicable Legal Requirements;

(viii)  the Restoration shall be done and completed by Issuers in compliance with all applicable Legal Requirements;

(ix)  such Casualty or Condemnation, as applicable, does not result in the permanent loss of material access to the Property or the related Improvements;

(x)  the Condominium Documents shall remain in full force and effect;

(xi)  Issuers shall deliver, or cause to be delivered, to Trustee a signed detailed budget approved in writing by Issuers’ architect or engineer stating the entire cost of completing the Restoration, which budget shall be reasonably acceptable to Trustee; and

(xii)  the Net Proceeds together with any cash or cash equivalent deposited by Issuers with Trustee are in an amount sufficient in Trustee’s reasonable discretion to cover the estimated cost of the Restoration, taking into account the budget delivered to Trustee in subsection (xi) above.

(c)  The Net Proceeds shall be held by Trustee in an interest-bearing account and, until disbursed in accordance with the provisions of Section 8.04(b), shall constitute additional security for the Debt and other obligations under the Financing Documents.  The Net Proceeds shall be disbursed by Trustee to, or as directed by, Issuers from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Trustee that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property which have not either been fully bonded to the satisfaction of Trustee and discharged of record or in the alternative fully insured to the satisfaction of Trustee by the title company issuing the Title Insurance Policy.

(d)  In the event that the estimated cost of Restoration exceeds Four Million and No/100 Dollars ($4,000,000), all plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Trustee and by an independent consulting engineer selected by Trustee (the “Casualty Consultant”), such approval (A) not to be unreasonably withheld or delayed and (B) to be deemed granted if Trustee shall not have disapproved same in writing within twenty (20) Days after Issuers’ request for

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approval, so long as the written request to Trustee for approval contains a legend clearly marked in not less than fourteen (14) point bold face type, underlined, in all capital letters “REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN TWENTY (20) DAYS”.  Trustee shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration for contracts in excess of $250,000, as well as the contracts under which they have been engaged, shall be subject to prior review and acceptance by Trustee and the Casualty Consultant, , such approval (A) not to be unreasonably withheld or delayed and (B) to be deemed granted if Trustee shall not have disapproved same in writing within fifteen (15) Days after Issuers’ request for approval, so long as the written request to Trustee for approval contains a legend clearly marked in not less than fourteen (14) point bold face type, underlined, in all capital letters “REQUEST DEEMED APPROVED IF NO RESPONSE WITHIN FIFTEEN (15) DAYS”.  All costs and expenses incurred by Trustee in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant’s fees, shall be paid by Issuers.

(e)  In no event shall Trustee be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage.  The term “Casualty Retainage” shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed.  The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in Section 8.04(b), be less than the amount actually held back by Issuers from contractors, subcontractors and materialmen engaged in the Restoration.  The Casualty Retainage shall not be released until the Casualty Consultant certifies to Trustee that the Restoration has been completed in accordance with the provisions of Section 8.04(b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Trustee receives evidence satisfactory to Trustee that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Trustee will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Trustee that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Trustee or by the title company issuing the Title Insurance Policy.  If required by Trustee, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.

(f)  Trustee shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

(g)  If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Trustee in consultation with the Casualty Consultant, be sufficient to pay in

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full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Issuers shall deposit the deficiency (the “Net Proceeds Deficiency”) with Trustee before any further disbursement of the Net Proceeds shall be made.  The Net Proceeds Deficiency deposited with Trustee shall be held by Trustee and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to Section 8.04(b) shall constitute additional security for the Debt and other obligations under the Financing Documents.

(h)  The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Trustee after the Casualty Consultant certifies to Trustee that the Restoration has been completed in accordance with the provisions of Section 8.04(b), and the receipt by Trustee of evidence satisfactory to Trustee that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Trustee to Issuers, provided no Event of Default shall have occurred and shall be continuing.

(i)  All Net Proceeds not required (a) to be made available for the Restoration or (b) to be returned to Issuers as excess Net Proceeds pursuant to Section 8.04(h) may be retained and applied by Trustee in accordance with Section 2.3(b) of the Notes toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Trustee in its sole discretion shall deem proper, or, at the discretion of Trustee, the same may be paid, either in whole or in part, to Issuers for such purposes as Trustee shall approve, in its discretion, so long as Trustee either commences to apply such Net Proceeds to Restoration in accordance with the terms and conditions of this Indenture or applies such Net Proceeds toward the payment of the outstanding principal balance of the Notes, in each case within thirty (30) days of receipt thereof.

(j)  In the event Security Trust First Beneficiary conveys, sells or otherwise transfers (or takes steps to effect a conveyance, sale or other transfer of) the Security Trust Second Beneficiary’s interest under the security trust formed pursuant to the Security Trust Agreement, or other transfer of title to the Property in extinguishment in whole or in part of the Debt all right, title and interest of Issuers in and to the Policies that are not blanket Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Trustee or other transferee in the event of such other transfer of title.

(k)  Notwithstanding anything to the contrary contained in this Section 2.3(b), in the event the costs of completing any Restoration shall exceed Thirty Million and No/100 Dollars ($30,000,000) and Servicer on behalf of Trustee elects not to make Net Proceeds available to Issuers, the Issuers may, within sixty (60) days, offer such election by Servicer on behalf of Trustee to prepay the Debt in whole, but not in part, without the payment of any prepayment premium or penalty.

Section 8.05  Casualty/Condemnation Generally.  In all matters pertaining to insurance, Casualty, Condemnation and/or Restoration, the Issuers’ covenants and agreements shall be enforced, and all associated rights shall be exercised, by the Servicer on behalf of the Trustee for the benefit of the Noteholders, and all related documents to be delivered to the

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Trustee, amounts to be deposited with the Trustee and all accounts to be maintained by the Trustee shall be so delivered, deposited and maintained by the Servicer or Cash Manager, as the case may be, on behalf of the Trustee for the benefit of the Noteholders.

ARTICLE 9 - DEFAULTS

Section 9.01  Event of Default.  (a)  Each of the following events shall constitute an event of default hereunder (an “Event of Default”):

(i)  if any portion of the Debt is not paid when due;

(ii)  if any of the Taxes or Other Charges are not paid on or before the same are due and payable (and such non-payment, in case of Other Charges (other than Condominium charges and assessments with respect to which no notice shall be required) continues for five (5) Business Days following notice thereof to Issuers), except to the extent sums sufficient to pay such Taxes and Other Charges have been deposited with Trustee in accordance with Section 10.02 hereof or those Taxes or Other Charges being contested in accordance with the terms and provisions of this Indenture;

(iii)  if the Policies are not kept in full force and effect or if the Policies or insurance certificates or other evidence of insurance acceptable to Trustee are not delivered to Trustee within 10 days after written notice thereof from Trustee;

(iv)  if Issuers Transfer or otherwise encumbers any portion of the Property in violation of the provisions of this Indenture;

(v)  if any representation or warranty made by Issuers herein or in any other Financing Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished in connection with the Financing Documents shall have been false or misleading in any material respect as of the date the representation or warranty was made; provided, however, that if (1) such misrepresentation was not intentional, and (2) the condition causing the representation or warranty to be false is susceptible of being cured, the same shall be an Event of Default hereunder only if the same is not cured within thirty (30) days after written notice to Issuers from Trustee; and provided, further, if the condition causing the representation or warranty to be false is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and Issuers shall have commenced to cure such condition within such thirty (30) day period and thereafter diligently proceeds to cure the same, then such thirty (30) day period shall be extended for such an additional period of time as is reasonably necessary for Issuers in the exercise of due diligence to cure such condition, such additional period not to exceed one hundred fifty (150) days;

(vi)  if any Issuer, Principal or any Guarantor shall make an assignment for the benefit of creditors;

(vii)  if a receiver, liquidator, síndico or trustee shall be appointed for any Issuer, Principal or Guarantor, or if any Issuer, Principal or Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for concurso mercantil, bankruptcy, reorganization or

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arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Issuer, Principal or Guarantor, or if any proceeding for the dissolution or liquidation of Issuers, Principal or Guarantor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Issuers, Principal or Guarantor, upon the same not being discharged, stayed or dismissed within ninety (90) days;

(viii)  if any Issuer attempts to assign its rights under this Indenture or any of the other Financing Documents or any interest herein or therein in contravention of the Financing Documents;

(ix)  if any Issuer breaches any of its respective covenants contained in Sections 6.01(dd) and (kk), and any such breach is not cured within fifteen (15) Business Days after written notice to Issuers from Trustee;

(x)  with respect to any term, covenant or provision set forth herein which specifically contains a notice requirement or grace period, if Issuers shall be in default under such term, covenant or condition after the giving of such notice or the expiration of such grace period;

(xi)  if any of the assumptions contained in the Insolvency Opinion delivered to Trustee in connection with the issuance of the Notes, or in the Additional Insolvency Opinion delivered subsequent to the issuance of the Notes, is or shall become untrue in any material respect;

(xii)  if a material default has occurred and continues beyond any applicable cure period under the Management Agreement, the Golf Management Agreement or the Spa Management Agreement (or any Replacement Management Agreement, Replacement Golf Management Agreement or Replacement Spa Management Agreement, as applicable) and (A) if such default permits the Manager, Golf Manager or Spa Manager, as applicable, to terminate or cancel the Management Agreement, the Golf Management Agreement or the Spa Management Agreement (or any Replacement Management Agreement, Replacement Golf Management Agreement or Replacement Spa Management Agreement, as applicable) or (B) if the Management Agreement, the Golf Management Agreement or the Spa Management Agreement (or any Replacement Management Agreement, Replacement Golf Management Agreement or Replacement Spa Management Agreement, as applicable) is terminated and in the case of either (A) or (B) a Qualified Manager, Qualified Golf Manager or Qualified Spa Manager, as applicable, is not appointed within forty five (45) days thereafter;

(xiii)  if (A) any provision of the applicable statutes pursuant to which the Condominium was established or any section, sentence, clause, phrase or word or the application thereof in any circumstance is held invalid and such invalidity materially adversely affects the security interest of the Security Trust Agreement or Trustee’s rights under the Financing Documents; (B) the Condominium shall become subject to an action for partition by any condominium unit owner which could reasonably be expected to result in partition and said action has been commenced and not dismissed within sixty (60) days after commencement

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thereof; or (C) the Condominium is withdrawn from the condominium regime established under the Condominium Laws;

(xiv)  if Issuers fail to comply with the covenants as to Prescribed Laws set forth in Section 7.01(a) hereof;

(xv)  with respect to any term, covenant or provision set forth herein or in any other Financing Document which specifically contains a notice requirement, grace period or both, if Issuers shall be in default under such term, covenant or condition after the giving of such notice, the expiration of such grace period or both, as applicable; or

(xvi)  if Issuers shall continue to be in Default under any of the other terms, covenants or conditions of this Indenture not specified in subsections (i) to (xiv) above, or under any of the terms, covenants or conditions in any other Financing Document not specified in Section (xv) above, for ten (10) days after notice to Issuers from Trustee, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Trustee in the case of any other Default; provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and provided, further, that Issuers shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Issuers in the exercise of due diligence to cure such Default, such additional period not to exceed sixty (60) days.

(b)  Upon the occurrence of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter, in addition to any other rights or remedies available to it pursuant to this Indenture and the other Financing Documents or at law or in equity, Trustee, and Servicer on its behalf, for the benefit of Noteholders may take such action, without notice or demand, that Trustee or Servicer deems advisable to protect and enforce its rights against Issuers and in and to the Property, including, without limitation, declaring the Debt to be immediately due and payable, and Trustee for the benefit of Noteholders may enforce or avail itself of any or all rights or remedies provided in the Financing Documents against Issuers and the Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and all other obligations of Issuers hereunder and under the other Financing Documents shall immediately and automatically become due and payable, without notice or demand, and Issuers hereby expressly waive any such notice or demand, anything contained herein or in any other Financing Document to the contrary notwithstanding.

Section 9.02  Remedies.  (a)  Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Trustee against Issuers under this Indenture or any of the other Financing Documents executed and delivered by, or applicable to, Issuers or at law or in equity may be exercised by Trustee at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Trustee shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Financing Documents.  Any such actions taken by Trustee shall be cumulative and concurrent and may be pursued

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independently, singularly, successively, together or otherwise, at such time and in such order as Trustee may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Trustee permitted by law, equity or contract or as set forth herein or in the other Financing Documents.  Without limiting the generality of the foregoing, Issuers agree that if an Event of Default is continuing (i) Trustee is not subject to any “one action” or “election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges provided to Trustee shall remain in full force and effect until Trustee has exhausted all of its remedies against the Property and a foreclosure procedure has been initiated under the Security Trust Agreement or the Pledge and the proceeds of such foreclosure procedure are applied in full satisfaction of the Debt or the Debt has been otherwise paid in full.

(b)  Right to Cure Defaults.  Upon the occurrence and during the continuance of any Event of Default, Trustee may, but without any obligation to do so and without notice to or demand on Issuers and without releasing Issuers from any obligation hereunder, make any payment or do any act required of Issuers hereunder in such manner and to such extent as Trustee may deem necessary to protect the security of the Security Trust Agreement and the other Financing Documents.  Trustee is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property for the benefit of Noteholders or to foreclose or cause the foreclosure under the Security Trust Agreement or collect the Debt, and the cost and expense thereof (including reasonable attorneys’ fees to the extent permitted by law), with interest at the Default Rate, shall constitute a portion of the Debt and shall be due and payable to Trustee upon demand.  All such costs and expenses incurred by Trustee in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate for the period after notice from Trustee that such cost or expense was incurred to the date of payment to Trustee.  All such costs and expenses incurred by Trustee together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by and subject to the Security Trust Agreement and the other Financing Documents and shall be immediately due and payable upon demand by Trustee therefor.

(c)  The rights, powers and remedies of Trustee under this Indenture shall be cumulative and not exclusive of any other right, power or remedy which Trustee for the benefit of Noteholders may have against Issuers pursuant to this Indenture or the other Financing Documents, or existing at law or in equity or otherwise.  Trustee’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Trustee may determine in Trustee’s sole discretion.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default with respect to Issuers shall not be construed to be a waiver of any subsequent Default or Event of Default by Issuers or to impair any remedy, right or power consequent thereon.

(d)  All rights, powers, privileges and other remedies of Trustee hereunder shall be enforced and exercised by Servicer on behalf of Trustee for the benefit of Noteholders.

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Section 9.03  Exculpation.  (a)  Subject to the qualifications below, Trustee shall not enforce the liability and obligation of Issuers to perform and observe the obligations contained in the Notes, this Indenture, the Security Trust Agreement or the other Financing Documents by any action or proceeding wherein a money judgment shall be sought against Issuers, except that Trustee may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Trustee to enforce and realize upon its interest under the Notes, this Indenture, the Security Trust Agreement and the other Financing Documents, or in the Property, the Rents, or any other collateral given to Trustee pursuant to the Financing Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Issuers only to the extent of Issuers’ interest in the Property, in the Rents and in any other collateral given to Trustee, and Trustee, by accepting the Notes, this Indenture, the Security Trust Agreement and the other Financing Documents, agrees for itself and its successors and assigns that it and its successors and assigns shall not sue for, seek or demand any deficiency judgment against Issuers or any of its Affiliates in any such action or proceeding under, or by reason of, or in connection with, the Note, this Indenture, the Security Trust Agreement or the other Financing Documents.  The provisions of this Section shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Financing Documents; (b) impair the right of Trustee for the benefit of Noteholders to name any Issuer as a party defendant in any action or suit for foreclosure and sale under the Security Trust Agreement or the Pledge; (c) affect the validity or enforceability of or any Guaranty made in connection with the issuance of the Notes or any of the rights and remedies of Trustee under the Financing Documents; (d) impair the right of Trustee to obtain the appointment of a receiver; (e)  impair the enforcement of the Security Trust Agreement or the Pledge; (f) constitute a prohibition against Trustee to seek a deficiency judgment against Issuers in order to fully realize the security granted by the Security Trust Agreement or the Pledge or to commence any other appropriate action or proceeding in order for Trustee to exercise its remedies against the Property; or (g) constitute a waiver of the right of Trustee to enforce the liability and obligation of Issuers under the terms of this Indenture, by money judgment or otherwise, to the extent of any actual out of pocket loss, damage, cost, expense, liability, claim or other obligation incurred by Trustee or Noteholders (including attorneys’ fees and costs reasonably incurred) arising out of or in connection with the following:

(i)  fraud or intentional misrepresentation by Issuers or any Guarantor in connection with the issuance of the Notes or in connection with the Financing Documents;

(ii)  if any Issuer fails to maintain its status as a Special Purpose Entity as required by, and in accordance with, the terms and provisions of this Indenture;

(iii)  a breach of any representation or warranty set forth in Section 6.01(kk) hereof;

(iv)  the misappropriation or conversion by or on behalf of Issuers of (A) any Insurance Proceeds paid by reason of any Casualty, (B) any Awards received in connection with a Condemnation, or (C) any Rents following an Event of Default, in each case only to the extent of the amounts received by Issuers;

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(v)  any security deposits, advance deposits or any other deposits collected with respect to the Property which are not delivered to Trustee upon a foreclosure of the Property or action in lieu thereof under the Security Trust Agreement, except to the extent any such security deposits, advance deposits or other deposits were applied in accordance with the terms and conditions of any of the Leases or reservation rules and policies prior to such foreclosure or action in lieu thereof;

(vi)  any alterations pursuant to Section 7.01(u)(iii) hereof, the aggregate cost of which alterations exceed Two Million and No/100 Dollars ($2,000,000) and which are not otherwise approved as required by such section;

(vii)  if any Issuer fails to obtain Trustee’s prior consent to any Indebtedness for borrowed money as required by this Indenture;

(viii)  if any Issuer files a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; and

(ix)  if any Issuer fails to pay any Non-Excluded Taxes as required by the provisions of each Note.

(b)  Notwithstanding anything to the contrary in this Indenture, the Note or any of the Financing Documents, (A) Trustee shall not be deemed to have waived any right which Trustee may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Obligations in accordance with the Financing Documents, and (B) the Debt shall be fully recourse to any Issuer (i) in the event of:  (a) intentionally omitted; (b) the filing of an involuntary petition against any Issuer under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law if and only if such Issuer has acted in concert with, colluded or conspired with the petitioning creditors for any involuntary petition from any Person in order to cause the filing thereof to interfere with the enforcement rights of Trustee; (c) any Issuer consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Issuer or any portion of the Property if and only if such Issuer has acted in concert with, colluded or conspired with the Persons bringing such application; (d) any Issuer making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due, and, with respect to such events described in the foregoing clauses (b) and (c), either any or all of Issuers, Principal or Guarantor has acted in concert with, colluded or conspired to cause such condition or event in order to interfere with the enforcement of Trustee’s rights and remedies; or (ii) if any Issuer fails to obtain Trustee’s prior consent to any Transfer as required by this Indenture.

Section 9.04  Manager Termination.  If (a) an Event of Default occurs and is continuing, (b) the Manager, Golf Manager or Spa Manager shall become bankrupt or insolvent or (c) a material default occurs under the Management Agreement, the Golf Management Agreement or the Spa Management Agreement beyond any applicable grace and cure periods, Issuers shall, at the request of Servicer on behalf of Trustee, terminate the Management Agreement, the Golf Management Agreement or the Spa Management Agreement and replace

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the Manager, Golf Manager or Spa Manager with a Qualified Manager, Qualified Golf Manager or Qualified Spa Manager pursuant to a Replacement Management Agreement, Replacement Golf Management Agreement or Replacement Spa Management Agreement, as applicable.

ARTICLE 10 - RESERVE FUNDS

Section 10.01  Required Repair Funds.  (a)  Deposits.  Issuers shall perform the repairs at the Property as more particularly set forth on Schedule 10.01 hereto (such repairs hereinafter collectively referred to as “Required Repairs”).  Subject to excusable delays due to acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppages, shortages of labor or materials or other cases beyond the reasonable control of Issuers, Issuers shall complete the Required Repairs on or before the required deadline for each repair as set forth on Schedule 10.01.  Upon the occurrence and during the continuance of an Event of Default, Trustee, at its option, may withdraw all Required Repair Funds from the Required Repair Account and Trustee may apply such funds either to completion of the Required Repairs or toward payment of the Debt in such order, proportion and priority as Trustee may determine in its sole discretion.  Trustee’s right to withdraw and apply Required Repair Funds shall be in addition to all other rights and remedies provided to Trustee under this Indenture and the other Financing Documents.  On the Closing Date, Issuers shall deposit with Trustee the amount set forth on such Schedule 10.01 hereto to perform the Required Repairs multiplied by one hundred twenty-five percent (125%).  Amounts so deposited with Trustee shall be held by Trustee in accordance with Section 10.06 hereof.  Amounts so deposited shall hereinafter be referred to as Issuers’ “Required Repair Fund” and the account in which such amounts are held shall hereinafter be referred to as Issuers’ “Required Repair Account.”

(b)  Release of Required Repair Funds.  Trustee shall disburse to Issuers the Required Repair Funds from the Required Repair Account from time to time, but not more frequently than once in any ten (10) day period, upon satisfaction by Issuers of each of the following conditions:  (a) Issuers shall submit a written request for payment to Trustee at least ten (10) days prior to the date on which Issuers requests such payment be made and specifies the Required Repairs to be paid, (b) on the date such request is received by Trustee and on the date such payment is to be made, no Default or Event of Default shall exist and remain uncured, (c) Trustee shall have received an Officer’s Certificate (i) stating that all Required Repairs to be funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, such Officer’s Certificate to be accompanied by a copy of any license, permit or other approval by any Governmental Authority required to commence and/or complete the Required Repairs, (ii) identifying each Person that supplied materials or labor in connection with the Required Repairs to be funded by the requested disbursement, and (iii) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such Officer’s Certificate to be accompanied by evidence of payment satisfactory to Trustee, (d) intentionally omitted, and (e) Trustee shall have received such other evidence as Trustee shall reasonably request that the Required Repairs to be funded by the requested disbursement have been completed and are paid for or will be paid upon such disbursement to Issuers.  Trustee shall not be required to make disbursements from the Required Repair Account unless such requested disbursement is in an

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amount greater than $5,000 (or a lesser amount if the total amount in the Required Repair Account is less than $5,000, in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 10.01(b).

Section 10.02  Tax and Insurance Escrow Fund.  Issuers shall pay to Trustee on each Payment Date (a) one twelfth of the Taxes and the Condominium charges and assessments that Trustee estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Trustee sufficient funds to pay all such Taxes thirty (30) days prior to their respective due dates, and (b) one twelfth of the Insurance Premiums that Trustee estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Trustee sufficient funds to pay all such Insurance Premiums thirty (30) days prior to the expiration of the Policies (said amounts in (a) and (b) above hereinafter called the “Tax and Insurance Escrow Fund”).  The Tax and Insurance Escrow Fund and the payment of the monthly Debt Service, shall be added together and shall be paid as an aggregate sum by Issuers to Trustee.  Trustee will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Issuers pursuant to Section 7.01(b) hereof.  In making any payment relating to the Tax and Insurance Escrow Fund, Trustee may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof, except where Issuers are contesting the Taxes in accordance with the terms and provisions of this Indenture and have notified Trustee in writing of such contest.  If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 7.01(b) hereof, Trustee shall, in its reasonable discretion, return any excess to Issuers or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund.  Any amount remaining in the Tax and Insurance Escrow Fund after the Debt has been paid in full shall be returned to Issuers.  In allocating such excess, Trustee may deal with the Person shown on the records of Trustee to be the owner of the Property.  If at any time Trustee reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes and Insurance Premiums by the dates set forth in (a) and (b) above, Trustee shall notify Issuers of such determination and Issuers shall increase its monthly payments to Trustee by the amount that Trustee estimates is sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes and/or thirty (30) days prior to expiration of the Policies, as the case may be.

Section 10.03  Replacements and Replacement Reserve.

(a)  Replacement Reserve Fund.  Issuers shall pay to Trustee (i) on each Payment Date commencing with the Payment Date occurring in January 2005, one twelfth (1/12) of two percent (2%) of Gross Income from Operations for the calendar month two (2) months prior to the month in which such Payment Date occurs, (ii) on each Payment Date commencing with the Payment Date occurring in January 2006, one twelfth (1/12) of three percent (3%) of Gross Income from Operations for the calendar month two (2) months prior to the month in which such Payment Date occurs, and (iii) on each Payment Date thereafter, one twelfth (1/12) of four percent (4%) of Gross Income from Operations for the calendar month two (2) months prior to the month in which such Payment Date occurs, which is the amount (the “Replacement Reserve

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Monthly Deposit”) reasonably estimated for the calendar month two (2) months prior to the month in which such Payment Date occurs by Trustee in its sole discretion to be due for replacements and repairs required to be made to the Property during the calendar year (collectively, the “Replacements”).  Amounts so deposited shall hereinafter be referred to as Issuers’ “Replacement Reserve Fund” and the account in which such amounts are held shall hereinafter be referred to as Issuers’ “Replacement Reserve Account.”

(b)  Disbursements from Replacement Reserve Account.  Trustee shall make disbursements from the Replacement Reserve Fund as requested by Issuers, and approved by Trustee, no more frequently than once in any thirty (30) day period of no less than $5,000.00 upon delivery by Issuers of Trustee’s standard form of draw request accompanied by copies of paid invoices for the amounts requested or invoices showing payments due, together with such evidence as Trustee shall reasonably request that the Replacements to be reimbursed or funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable Legal Requirements, and, if required by Trustee for requests in excess of $10,000.00 for a single item, releases from all parties furnishing materials and/or services in connection with the requested payment.  Trustee may require an inspection of the Property at Issuers’ expense prior to making a monthly disbursement in order to verify completion of replacements and repairs of items in excess of $10,000.00 for which reimbursement is sought; provided that Trustee may not require such inspection more frequently than twice during any calendar year unless the average monthly disbursement from the Replacement Reserve Fund during the trailing twelve (12) month period exceeds $250,000 (at which time Trustee may require such inspections prior to making any monthly disbursement from the Replacement Reserve Fund).

(c)  Balance in the Replacement Reserve Account.  The insufficiency of any balance in the Replacement Reserve Account shall not relieve Issuers from their obligation to fulfill all preservation and maintenance covenants in the Financing Documents.

Section 10.04  Interest Reserve Interest.  (a)    Issuers shall pay to Trustee on the date hereof the sum of $750,000, which amount shall be deposited with and held by Trustee for the benefit of Noteholders as additional security for payment of the Debt, provided that if the Net Operating Income for the trailing twelve (12) month period for the Property exceeds $11,000,000 on any one of January 9, 2007, January 9, 2008 or January 9, 2009, then all amounts then held in the Interest Reserve Account shall be released to Issuers, provided that no Event of Default shall have occurred and be continuing.  Notwithstanding the foregoing, if the Net Operating Income for the trailing twelve (12) month period for the Property does not exceed $11,000,000 on any such date, but thereafter exceeds $11,000,000 as of each Payment Date occurring in (a) April and July of the same calendar year or (b) July and October of the same calendar year, then all amounts then held in the Interest Reserve Account shall be released to Issuers, provided that no Event of Default shall have occurred and be continuing.  All such amounts so deposited shall hereinafter be referred to as the “Interest Reserve Fund” and the account to which such amounts are held shall hereinafter be referred to as the “Interest Reserve Account.”

Section 10.05  Reserve LC.

(a)  Issuers shall deliver to Trustee on the date hereof a Letter of Credit in an amount equal to $2,500,000 (the “NOI LC”).  The NOI LC shall be released by Trustee to

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Issuers in the event the Net Operating Income for the trailing twelve (12) month period for the Property exceeds $9,500,000 on any Payment Date occurring in January, April, July or October during the term of the Notes (commencing with the Payment Date occurring in January 2006), provided that no Event of Default shall have occurred and be continuing.

(b)  Issuers shall deliver to Trustee on the date hereof a Letter of Credit in an amount equal to $2,500,000 (the “Spa LC”).  Issuers shall have the right to reduce the amount of the Spa LC from time to time by an amount equal to the reduction (other than a reduction by payment) in the amount of the termination fee payable by Hotel Issuer pursuant to Section 2.7 of the Spa Management Agreement, provided that the amount of the Spa LC shall not be less than the amount of such potential termination fee at any time.  In connection with such reduction, Issuers shall deliver (i) a replacement Spa LC for the reduced amount and (ii) a calculation of the potential termination fee, together with an Officer’s Certificate certifying that such calculation has been determined in accordance with Section 2.7 of the Spa Management Agreement.

(c)  Each Reserve LC shall be additional security for the payment of the Debt.  Upon the occurrence and during the continuance of an Event of Default, Trustee shall have the right, at its option, to draw on any Reserve LC and to apply the proceeds thereof to payment of the Debt in such order, proportion or priority as Trustee may determine.  Trustee’s right to draw on any Reserve LC and apply the proceeds thereof in accordance with this Section 10.05 shall be in addition to all other rights and remedies provided to Trustee under the Financing Documents.

(d)  In addition to any other right Trustee may have to draw upon any Reserve LC pursuant to the terms and conditions of this Indenture, Trustee shall have the additional rights to draw in full any Reserve LC:  (i) if the Reserve LC is an evergreen letter of credit, if Trustee has received a notice from the issuing bank that such Reserve LC will not be renewed and a replacement Reserve LC is not provided at least thirty (30) days prior to the date on which such Reserve LC is scheduled to expire; (ii) if the Reserve LC has a stated expiration date, if Trustee has not received a notice from the issuing bank that it has renewed such Reserve LC at least thirty (30) days prior to the date on which such Reserve LC is scheduled to expire and an extension of such Reserve LC or a replacement Reserve LC is not provided at least thirty (30) days prior to the date on which such Reserve LC is scheduled to expire; or (iii) upon receipt of notice from the issuing bank that such Reserve LC will be terminated (except if a replacement Reserve LC is provided).  Notwithstanding anything to the contrary contained in the above, Trustee is not obligated to draw any Reserve LC upon the happening of an event specified in (i), (ii) or (iii) above and shall not be liable for any losses sustained by Issuers due to the insolvency of the bank issuing any Reserve LC if Trustee has not drawn such Reserve LC.

Section 10.06  Reserve Funds, Generally.  (a)  Issuers grant to Trustee a first-priority perfected security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional security for payment of the Debt.  Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt.  Upon the occurrence of an Event of Default, Trustee may, in addition to any and all other rights and remedies available to Trustee, apply any sums then present in any or all of the Reserve Funds to the payment of the Debt in any order in its sole discretion.  The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Trustee for the benefit of Noteholders.

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(b)  Issuers shall not, without obtaining the prior consent of Trustee, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Trustee as the secured party, to be filed with respect thereto.

(c)  The Reserve Funds shall be held in an Eligible Account and shall bear interest at a money market rate selected by Trustee.  All interest or other earnings on a Reserve Fund shall be added to and become a part of such Reserve Fund and shall be disbursed in the same manner as other monies deposited in such Reserve Fund, except for any such taxes applicable to the interest or income earned on the Tax and Insurance Escrow Funds which is retained by Trustee.  Issuers shall have the right to direct Trustee to invest sums on deposit in the Eligible Account in Permitted Investments provided (a) such investments are then regularly offered by Trustee for accounts of this size, category and type, (b) such investments are permitted by applicable federal, state and local rules, regulations and laws, (c) the maturity date of the Permitted Investment is not later than the date on which the applicable Reserve Funds are required for payment of an obligation for which such Reserve Fund was created, and (d) no Event of Default shall have occurred and be continuing.  Issuers shall be responsible for payment of any federal, state or local income or other tax applicable to the interest or income earned on the Reserve Funds to the extent Issuers are entitled to such interest under this Indenture and the Cash Management Agreement.  No other investments of the sums on deposit in the Reserve Funds shall be permitted except as set forth in this Section 10.06(c).  Issuers shall bear all reasonable costs associated with the investment of the sums in the account in Permitted Investments.  Such costs shall be deducted from the income or earnings on such investment, if any, and to the extent such income or earnings shall not be sufficient to pay such costs, such costs shall be paid by Issuers promptly on demand by Trustee.  Trustee shall have no liability for the rate of return earned or losses incurred on the investment of the sums in Permitted Investments.

(d)  Issuers shall indemnify Trustee and hold Trustee harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established.  Issuers shall assign to Trustee all rights and claims Issuers may have against all Persons supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided, however, that Trustee may not pursue any such right or claim unless an Event of Default has occurred and remains uncured.

(e)  In all matters pertaining to the Reserve Funds or the Reserve LC, the Issuers’ covenants and agreements shall be enforced, and all associated rights shall be exercised, by the Servicer on behalf of the Trustee for the benefit of the Noteholders, and all related documents to be delivered to the Trustee, amounts to be deposited with the Trustee and all accounts to be maintained by the Trustee shall be so delivered, deposited and maintained by the Servicer on behalf of the Trustee for the benefit of the Noteholders.

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ARTICLE 11 - MATTERS CONCERNING THE TRUSTEE

Section 11.01  Duties of the Trustee.  (a)  The duties, responsibilities and liabilities of the Trustee in respect of the Financing Documents and the other duties and liabilities of the Trustee under this Indenture shall be as follows:

(i)  The Trustee (and the Servicer on its behalf) shall have the full power and authority to do all things not inconsistent with the provisions of this Indenture or any other Financing Document that it may deem advisable in order to enforce the provisions hereof or thereof or to take any action with respect to a default or an Event of Default hereunder or thereunder, or to institute, appear in or defend any suit or other proceeding with respect hereto or thereto, or to protect the interests of the Holders; provided, however, that notwithstanding the foregoing or any other provisions of this Indenture to the contrary, the Notes shall be serviced by the Servicer and the powers vested in the Servicer hereunder shall not be exercised by the Trustee except as expressly set forth herein.  Neither the Trustee nor any of its directors, officers, shareholders, agents or employees (each, a “Trustee Indemnified Party” and, collectively, the “Trustee Indemnified Parties”) shall be answerable to or accountable for, except for its or their own bad faith, willful misconduct or negligence, and the Issuers agree to indemnify and save harmless the Trustee Indemnified Parties from, any costs, expenses, liabilities and damages that any of them may incur or sustain, in good faith and without willful misconduct or negligence, in the exercise and performance of the Trustee’s powers and duties hereunder and the acceptance or administration of the trust or trusts hereunder, under the Indenture or under any other Financing Document, including the cost and expense of defending themselves against any claim or liability in connection with the exercise or performance thereof; provided, however, that if it is found that any such claim or liability has resulted from the bad faith, willful misconduct or negligence of any Trustee Indemnified Party in the performance of its duties hereunder, such Trustee Indemnified Party shall repay such portion of the reimbursed amounts that is attributable to expenses incurred in relation to that portion of its acts or omissions that is the subject of such finding.  If any Trustee Indemnified Party is entitled to receive indemnification hereunder with respect to any such action or proceeding brought by a third party, the Issuers shall be entitled to assume the defense of any such action or proceeding with counsel reasonably satisfactory to such Trustee Indemnified Party who shall not, except with the consent of such Trustee Indemnified Party, be counsel to the Issuers or any Affiliate thereof.  Upon assumption by the Issuers of the defense of any such action or proceeding, such Trustee Indemnified Party shall have the right to participate in such action or proceeding and to retain its own separate counsel, but the Issuers shall not be liable for any legal fees or expenses of such a separate counsel subsequently incurred by such Trustee Indemnified Party in connection with the defense thereof unless (i) the Issuers have agreed to pay such fees and expenses or (ii) counsel provided by the Issuers pursuant to the foregoing is counsel to the Issuers and such Trustee Indemnified Party shall have been advised by such counsel that representation of such Trustee Indemnified Party by such counsel provided by the Issuers pursuant to the foregoing would be inappropriate due to actual or potential conflicting interests between the Issuers and such Trustee Indemnified Party, including situations in which there are one or more legal defenses available to such Trustee Indemnified Party that are different from or additional to those available to the Issuers; provided, however, that the Issuers shall not, in connection with any such action or proceeding, or separate but substantially similar action or proceeding arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time, in addition to any local

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counsel, for any such Trustee Indemnified Party.  The Issuers shall not consent to the terms of any compromise or settlement of any action defended by the Issuers in accordance with the foregoing without the prior consent of the Trustee Indemnified Party.  The Issuers shall not be required to indemnify any Trustee Indemnified Party for any amount paid or payable by such Trustee Indemnified Party in settlement of any action, proceeding or investigation without the prior written consent of the Issuers, which consent shall not be unreasonably withheld.  Promptly after receipt by any Trustee Indemnified Party of notice of its involvement (or the involvement of any of its Affiliates or such Affiliate’s directors, officers, shareholders, agents or employees) in any action, proceeding or investigation, such Trustee Indemnified Party shall, if a claim for indemnification in respect thereof is to be made against the Issuers hereunder, notify the Issuers in writing of such involvement, but the failure of such Trustee Indemnified Party to provide such notice shall neither cause the forfeiture of the right to receive indemnity hereunder nor limit such right, except to the extent, if any, that the Issuers are prejudiced by the failure of the Trustee Indemnified Party to promptly give such notice.  The Issuers’ indemnification obligations under this Section 11.01(i) shall survive payment of the Notes and any resignation, removal or replacement of the Trustee.  The indemnification provided herein is limited in each case to actual damages and does not extend to consequential damages.

(ii)  The Trustee shall be authorized to make, at the expense of the Issuers, all required refilings of any Financing Document to preserve the liens created thereby to the extent not so done by the Issuers, the Servicer as provided herein or therein, but shall have no obligation to take any action to protect, preserve or enforce any rights or interests in the Financing Documents or towards the execution or enforcement of the trusts hereby or thereby created which, in its opinion, shall be likely to involve expense or liability to the Trustee, unless the Trustee shall have received an agreement satisfactory to the Trustee in its sole discretion to indemnify it against such liability and expense.  The Trustee shall not be required to ascertain or inquire as to the performance or observance of any of the covenants or agreements contained herein, or in any other Financing Document or in any other instruments to be performed or observed by the Issuers or any other party to any Financing Document (including, without limitation, the necessity or desirability under any applicable state law to re-record, re-register or re-file any Financing Document).  In accepting the trusts hereunder and under the Financing Documents, the Trustee is acting solely as Trustee hereunder and not in its individual capacity and all Persons, other than the Issuers and the Holders, having any claim against the Trustee arising by reason hereof shall look only to the Property for payment or satisfaction thereof except as provided herein.

(iii)  The Trustee shall incur no liability in acting upon any signature, notice, request, consent, certificate, opinion, or other instrument reasonably believed by it to be genuine.  In administering the trusts, the Trustee may exercise any of the powers hereof directly or through its agents or attorneys and may, at the expense of the Issuers, consult with counsel, accountants and other skilled Persons to be selected and employed by it, and the reasonable expenses thereof shall be paid by the Issuers, and the Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice of any such Person nor for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

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(iv)  The Trustee shall have no duty to make, arrange or ensure the completion of any recording, filing or registration of any Financing Document, any instrument of further assurance, any instrument constituting part of any of the Property, or any amendments or supplements to any of said instruments and the Trustee shall have no duty to make, arrange or ensure the completion of the payment of any fees, charges or taxes in connection therewith (and the Trustee may act with respect to the Financing Documents and pay out deposited monies without regard thereto), or to give any notice thereof, or to make, arrange or ensure the completion of the payment of or be under any duty in respect of any tax, assessment or other governmental charge that may be levied or assessed on any of the Property or any part thereof or against the Issuers.  Notwithstanding the foregoing, the Trustee agrees that it will notify the Issuers in writing of any filings, fees, taxes or other payments required in connection with the satisfaction of the Issuers’ obligations hereunder and under the other Financing Documents known to any Responsible Officer of the Trustee assigned to its Corporate Trust Office and actively involved in the administration of the Loan.

(v)  Whenever, in administering the trust, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee may, in the absence of bad faith on the part of the Trustee, request and rely upon (unless other evidence in respect thereof be specifically prescribed herein or in any Financing Document) an Officer’s Certificate of the Issuers, and such Officer’s Certificate shall be full warrant to the Trustee for any action taken, suffered or omitted by it on the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as it may deem reasonable.

(vi)  Whenever, in administering the trust, the Trustee shall be permitted whether pursuant to the terms of this Indenture or any other Financing Document, to determine to grant or withhold its consent to or waiver or approval of any matter described herein or therein or to take or omit to take any action or course of conduct permitted or required hereunder or thereunder, the Trustee shall be fully protected in making such determination based solely upon the written direction of the Servicer or, absent such direction, (a) on the basis of the related submission required by this Indenture or by such other Financing Document, as the case may be, or (b) if a standard for such determination is specified herein or therein, on the basis of its determination in good faith as to whether or not such standard has been satisfied, or (c) if no such standard is specified, on the basis of its determination in good faith as to (x) with respect to any act, omission or course of conduct, whether such act, omission or course of conduct is reasonable (which determination may be made solely on the basis of advice from professionals selected by the Trustee with reasonable care) and (y) with respect to the selection of any professional, whether the party proposing the engagement of such professional is motivated primarily by interests contrary to those of the Holders in making such proposal; provided, that in each case, that the Trustee grants or withholds its consent or approval or takes any other action on a timely basis.  The Trustee shall not be required to seek the individual consents or approvals of the Holders with respect to any such consent or approval unless the same shall be explicitly required by the terms of this Indenture or such other Financing Document, as the case may be.  Without limiting the generality of the foregoing, in the event the approval of the Trustee is requested by the Servicer with respect to a settlement of an insurance claim pursuant to the Indenture, the Trustee shall be fully protected in granting such approval based on directions from the Servicer.

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(vii)  The Trustee shall have no obligation to see to the payment or discharge of any liens (other than the liens of the Financing Documents, and then only to the extent therein provided), or to see to the application of any payment of the principal of or interest on any Note secured thereby or to the delivery or transfer to any Person of any property released from any such lien, or to give notice to or make demand upon any mortgagor, mortgagee, trustor, beneficiary or other Person for the delivery or transfer of any such property.

(viii)  The Trustee shall not be concerned with or accountable to any Person for the use or application of any deposited monies that shall be released or withdrawn in accordance with the provisions hereof or of any other Financing Document or of any property or securities or the proceeds thereof that shall be released from the lien hereof or thereof in accordance with the provisions hereof or thereof and the Trustee shall have no liability for the acts of other parties hereto that are not in accordance with the provisions hereof.

(ix)  Trustee shall not be charged with knowledge of any Event of Default hereunder or under any other Financing Document (except default in the payment of monies to the Trustee that the Issuers are required to pay or cause to be paid to the Trustee on or before a specified date and except default in the delivery of any certificate, opinion or other document expressly required to be delivered to the Trustee by any provision hereof or any Financing Document) or any condition which after notice and/or the passage of time would constitute an Event of Default or any other fact, circumstance or event the occurrence of which would require the Trustee to give any notice or otherwise take any action (any such Event of Default, condition, circumstance or other event, an “Event”), unless either (i) a Responsible Officer of the Trustee assigned to its Corporate Trust Office shall have actual knowledge of such Event or (ii) written notice of such Event shall have been given to and received by the Trustee, by any Issuer, the Servicer or any Holder or Holders of at least 25% in aggregate principal amount of the Notes.

(x)  The Trustee shall not be responsible of any act or omission of the Servicer and Servicer shall not be responsible for any act or omission of the Trustee.

(xi)  Except during the continuance of an Event of Default, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee.

(xii)  In the absence of actual knowledge on the part of a Responsible Officer to the contrary or bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Indenture.

(xiii)  In the case an Event of Default known to the Trustee has occurred and is continuing, the Trustee shall exercise (subject, in all cases, to the rights and powers vested in the Servicer pursuant to this Indenture), with respect to the Notes, such of the rights and powers

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vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs.

(xiv)  No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith, except that:

(A)  the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved by a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and

(B)  the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith and without negligence in accordance with the directions of the Noteholders or the Servicer required by this Indenture relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes or the Financing Documents.

(xv)  At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any of the Property may at the time be located, the Issuers and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of a majority of the Noteholders, the Issuers shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, of all or any part of the Collateral, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 11.01.  If the Issuers do not join in such appointment within 15 days after the receipt by them of a request so to do, or in case an Event of Default has occurred and is continuing, the Trustee alone shall have power to make such appointment.

(xvi)  If any written instrument from the Issuers should be required by any co-trustee or separate trustee so appointed to more fully verify such co-trustee’s or separate trustee’s power with respect to such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer.

(xvii)  Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms:

(A)  The Notes shall be authenticated and delivered, and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely, by the Trustee.

(B)  The rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment

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shall be conferred or imposed upon and exercised or performed by the Trustee (or by the Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee), except to the extent that, under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee.

(C)  The Trustee, at any time, by an instrument in writing executed by it, with the consent of the Issuers evidenced by a Board Resolution, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 11.01, and, if an Event of Default has occurred and is continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the consent of the Issuers.  Upon the written request of the Trustee, the Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal.  A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 11.01

(D)  No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder.  Any fees or expenses of any co-trustee or separate trustee shall not be an expense of the Trustee.

(E)  Any at of Noteholders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.

Section 11.02  Rights of Trustee.  (a)  The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person.  The Trustee need not investigate any fact or matter stated in such document.

(b)  Any request or direction of the Issuers mentioned herein shall be sufficiently evidenced an Issuer request and any resolution of a board of directors may be sufficiently evidenced by a resolution of such board of directors.

(c)  Before the Trustee acts or refrains from acting, it may require an Officer Certificate or an opinion of counsel.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer Certificate or opinion of counsel.

(d)  The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through delegates, agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder.

(e)  The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

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(f)  The Trustee may consult with counsel, and the advice or opinion of such counsel or any opinion of counsel shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in reliance thereon.

(g)  The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Noteholders pursuant to this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Noteholders pursuant to this Indenture, unless such Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(h)  The Trustee shall not be bound to make any investigation into the facts or matters stated in any document, but the Trustee, in its direction, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuers, personally or by an agent or attorney; and

(i)  The Trustee shall not be required to give any bond or surety in respect of the execution of the trust created hereby or the powers granted hereunder.

(j)  With respect to all conditions to be satisfied or determinations permitted or required to be made by or to the satisfaction of the Trustee hereunder with respect to the closing the Trustee shall be entitled to receive and rely conclusively upon a certificate or instruction from the Initial Purchaser.

(k)  With respect to the exercise of all rights, powers and authority of the Trustee hereunder, and with respect to any actions permitted or required to be taken by the Trustee hereunder, the Trustee shall at all times be entitled to request, rely, and act only upon, the written instruction of the Noteholders, and in the absence of such instruction and indemnity reasonably acceptable to the Trustee with respect thereto, the Trustee shall have no obligation to act.

(l)  With respect to all matters relating to the ongoing administration and servicing of the Notes, including without limitation all matters relating to monitoring and enforcing the Issuers’ obligations hereunder, the Trustee shall enter into such servicing agreements as the Noteholder shall request, with such servicers, master servicers and/or special servicers (including the initial Servicer) as shall be selected and designated by a majority of the Noteholders, and the Trustee shall have no responsibility or liability therefore.

Section 11.03  Individual Rights of Trustee.  The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuers or its Affiliates with the same rights it would have had if it were not Trustee.

Section 11.04  Trustee’s Disclaimer.  The Trustee (i) shall not be responsible for, and makes no representation, as to the validity or adequacy of this Indenture or the Notes and (ii) shall not be accountable for the Issuers’ use of the proceeds from the Notes, or

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responsible for any statement of the Issuers in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.

Section 11.05  Notice of Defaults.  If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to each Noteholder and the Issuers with a copy to the Rating Agency, notice of such Default within thirty (30) calendar days after obtaining actual knowledge of such Default.  Except in the case of a Default in payment of principal of or interest on any Note, the Trustee may withhold the notice, and be protected against liability in withholding such notice, if, and so long as the Trustee in good faith determines that withholding the notice is in the best interests of the Noteholders and shall so advise the Issuers in writing.  Where a notice of the occurrence of an Event of Default has been given to the Noteholders pursuant to this Section 11.05 and the Event of Default is thereafter cured, the Trustee shall give notice that the Event of Default is no longer continuing to the Noteholders within thirty (30) calendar days after a Responsible Officer of the Trustee obtains actual knowledge that the Event of Default has been cured.

Section 11.06  Compensation and Indemnity.  (a)  On the Note Issuance Date and from time to time thereafter, the Trustee shall receive any costs, fees and expenses of its counsel and a fee, agreed to in writing between the Trustee and the Noteholders, payable monthly and calculated in the same manner as interest is calculated under the Notes from the monthly payments required under the Notes in advance upon the outstanding principal balance of the Notes as of the related Determination Date and payable in accordance with the Cash Management Agreement, as compensation for its services as Trustee hereunder.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Issuers shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services.  Such expenses shall include, but will not be limited to, the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents (including any receiver), delegates, counsel, accountants and experts.  The Issuers shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorney’s fees) incurred by it in connection with the administration of this trust and the performance of its duties in its various capacities hereunder including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.  The Trustee shall notify the Issuers and the Noteholders promptly of any claim for which it may seek indemnity.  Failure by the Trustee to so notify the Issuers shall not relieve the Issuers of its obligations hereunder.  The Issuers need not reimburse any expense or indemnity against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, negligence or bad faith.

(b)  The payment obligations to the Trustee pursuant to this Section 11.06 shall survive the resignation or removal of the Trustee and the discharge of this Indenture.

Section 11.07  Replacement of Trustee.  The Trustee may resign its trust and be discharged from all further duties and liabilities hereunder by giving to the Noteholders thirty (30) days prior notice in writing or such shorter notice as the Noteholders may accept as sufficient.  In addition, the Trustee shall resign upon the request of a majority of the Noteholders.

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In the event of the Trustee resigning or being removed or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Noteholders shall forthwith appoint a new Trustee by Noteholders’ Approval.  On any new appointment, the Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Trustee.  Any company into which the Trustee may be merged or with which it may be consolidated or amalgamated or any company resulting from any merger, consolidation or amalgamation to which the Trustee shall be a party, shall be the successor Trustee under this Indenture without the execution of any instrument or any further act.  If no successor Trustee is appointed within thirty (30) days of the aforesaid notice being provided, the Trustee or any of the Noteholders may apply, at the cost of the Issuers, to a court of competent jurisdiction to appoint a successor.

Section 11.08  Resignation or Removal of Trustee; Conflict of Interest.  (a)  The Trustee may resign its trust, after giving sixty (60) days’ notice in writing to Noteholders or such shorter notice as the Noteholders, may accept as sufficient, after the Trustee becomes aware that it has a material conflict of interest it shall provide the Noteholders with written notice of the nature of that conflict.  If, notwithstanding the foregoing provisions of this section, the Trustee has such a material conflict of interest, the validity and enforceability of this Indenture and of the Notes issued hereunder shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest.  The Trustee represents to Initial Purchaser and Initial Noteholder that, to the best of its knowledge, at the time of the execution and delivery hereof, no material conflict of interest exists in the Trustee’s role as a fiduciary hereunder.  Upon any resignation, the Trustee shall be discharged from all further duties and liabilities under this indenture.

(b)  In the event of the Trustee resigning or being removed or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Noteholders shall forthwith appoint a new Trustee; failing such appointment by the retiring Trustee or any Holder may apply to any applicable Governmental Authority, for the appointment of a new Trustee at the Issuers’ expense.  Any new Trustee so appointed shall be subject to removal by the Noteholders.  On any new appointment the new Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Trustee.  The expense of any act, document or other instrument or thing required under this Section shall be paid by Issuers.

(c)  Any new or successor Trustee shall, forthwith upon appointment, become vested with all the estates, properties, rights, powers and trusts of its predecessors in the trusts hereunder, with like effect as if originally named as Trustee herein.  Nevertheless, upon the written request of the successor Trustee or of the Noteholders and upon payment of all outstanding fees and expenses properly payable to the Trustee hereunder, the Trustee ceasing to act shall execute and deliver an instrument assigning and transferring to such successor Trustee, upon the trusts herein expressed, all the rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver all property and money held by such Trustee to the successor Trustee so appointed in its place.  Should any deed, conveyance or instrument in writing from the Trustee on behalf of the Issuers be required by any new Trustee for more fully and certainly vesting in and confirming to it such estates, properties, rights, powers and trusts, then any and all such deeds, conveyances and instruments in writing shall, on the request of the

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new or successor Trustee, be made, executed, acknowledged and delivered by the Issuers, as the case may be.

(d)  Any company into which the Trustee may be consolidated or amalgamated or any company resulting from any merger, consolidation or amalgamation to which the Trustee shall be a party shall be a successor Trustee under this indenture without the execution of any instrument or any further act; provided that such successor Trustee shall not have a material conflict of interest in its role as a fiduciary under this Indenture.

Section 11.09  Successor Trustee.  Upon the written request of any successor Trustee, the Trustee ceasing to act shall, upon receiving payment for any outstanding fees and expenses, execute and deliver an instrument assigning and transferring to such successor Trustee, upon the trusts herein expressed, all the rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver all property and money held by such Trustee to the successor Trustee so appointed in its place.  Should any deed, conveyance or instrument in writing from the Issuers be required by any new Trustee for more fully and certainly vesting in and confirming to it such estates, properties, rights, powers and trusts, then any and all such deeds, conveyances and instruments in writing shall on the request of said new Trustee, be made, executed, acknowledged and delivered by the Issuers.

Section 11.10  Authorization and Duties of Trustee.  (a)  In the exercise of the rights, duties and obligations prescribed or conferred by the terms of this Indenture, the Trustee shall act honestly and in good faith and shall exercise the care, diligence and skill that a reasonably prudent Trustee would exercise in comparable circumstances.  For greater certainty, provided that the Trustee fulfills the above noted standard of care and there is no willful misconduct or gross negligence on the part of the Trustee or its officers, directors, employees or agents, the Trustee shall not be liable for any act or default on the part of any agent employed by it.

(b)  Trustee shall be authorized to take such action as trustee on behalf of the Noteholders and to exercise such powers under the Financing Documents as are delegated to Trustee by the terms hereof or thereof, together with such powers as are reasonably incidental thereto.

(c)  By their acquisition of the Notes, the Noteholders hereby authorize and direct Trustee to act on their behalf in all respects in connection with the Financing Documents (but subject to Section 13.02 hereof) and agree with Issuers that Issuers shall only be required to and shall only deal with Trustee and each Noteholder shall be bound by any acts of Trustee; provided that Issuers shall not be entitled to rely upon any acts of Trustee, and Noteholders shall not be bound by any acts of Trustee, that (i) amend or otherwise modify in writing this Indenture or any other Financing Document, (ii) waive any Event of Default or (iii) contradicts any Extraordinary Resolution, a copy of which has been provided to Issuers; provided further that with respect to each matter under clause (i), (ii) or (iii) above, Issuers shall be entitled to rely upon copies of the applicable Noteholders’ Approval or Extraordinary Resolution provided to Issuers by Trustee.

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Section 11.11  Trustee Not Required to Give Security.  The Trustee shall not be required to give any security in respect of the execution of the trusts and powers of this Indenture or otherwise in respect of the premises.

Section 11.12  Trustee May Deal In Notes.  The Trustee may buy, sell, lend upon and deal in the Notes and generally contract and enter into financial transactions with the Issuers without being liable to account for any profits made thereby.

Section 11.13  Administration of the Trust and Protection of the Trustee.  By way of supplement to the provisions of any law of the State of New York from time to time relating to trustees and in addition to any other provision of this Indenture for the relief of the Trustee, it is expressly declared as follows:

(a)  the Trustee may in relation to these presents act on the opinion or advice of or information obtained from any legal counsel, auditor, or other expert, whether obtained by the Trustee or by the Trustee or otherwise, but will not be bound to act upon the opinion or advice or information and will not be responsible for any loss occasioned by so acting or not acting in good faith, as the case may be, and may pay proper and reasonable compensation for all legal and other advice as aforesaid; any advice or opinion or information may be sent or obtained by letter, telegram, cablegram or by electronic facsimile transmission, and the Trustee will not be liable for acting on any advice, opinion or information purporting to be conveyed by any of these means although the same will contain some error or will not be authentic;

(b)  except where some other mode of proof is required by this Indenture, the Trustee will be at liberty to accept a certificate signed by an officer of the Issuers, provided that the Trustee examines the same and determines that such certificate complies with the applicable requirements of this Indenture (i) as to any statement of facts as conclusive evidence of the truth of the statement, (ii) as to any particular act or transaction or step or thing which, in the opinion of the officers so certifying, is expedient, as sufficient evidence that the act, transaction, step or thing is expedient, and (iii) as to any expenditure made or indebtedness incurred by the Trustee or any successor trustee to the Trustee as sufficient evidence that the expenditure or indebtedness was made or incurred for the purpose set forth in the certificate; and the Trustee will be in no way bound to call for further evidence or be responsible for any loss that may be occasioned by its failing to do so; however, the Trustee may cause to be made any independent investigations as it may reasonably require and the expense thereof (together with interest at the rate of interest charged to the Trustee by its bankers from the date of the Trustee’s expenditure to the date of its reimbursement) will be paid by the Trustee upon demand and will be payable out of any funds coming into the possession of the Trustee; if as a result of any independent investigation the Trustee is not satisfied as to any matter or thing set forth in the certificate, the Trustee may refuse to act thereon;

(c)  in the exercise of the rights and duties prescribed or conferred by the terms of this Indenture, the Trustee will act honestly and in good faith and exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances;

(d)  the Trustee may, but is not required to, employ any agents or other assistants as it may reasonably require for the proper discharge of its duties hereunder and will

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not be responsible for any misconduct on the part of any agents or other assistants or for any liability incurred by any Person as a result of not appointing such agents or other assistants and may pay reasonable remuneration for all services performed for it in the discharge of the trusts hereof without taxation of any costs or fees of any counsel, and will be entitled to receive reasonable remuneration for all services performed by it in the discharge of the trusts hereof and compensation for all disbursements, costs, liabilities and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the trusts hereof; all such remuneration, disbursements, costs, liabilities and expenses and all remuneration and expenses incidental to the preparation, execution and recording of this Indenture or of any instrument ancillary or supplemental hereto and to the preparation, execution and issue of Notes or other Financing Documents, whether done or incurred at the request of the Trustee or the Issuers, will bear interest at the rate of interest charged to the Trustee by its bankers from the date of the same being incurred or expended until the date of reimbursement and will (together with such interest) be paid by the Trustee upon demand and will be payable out of any funds coming into the possession of the Trustee.  Where the Trustee has delegated its duties pursuant to this section, it shall be deemed to have satisfied its duty of care, if such delegation is reasonable;

(e)  wherever by this Indenture the Trustee is authorized to employ or consult counsel and to pay costs, the costs need not be taxed unless the Trustee deems it necessary to tax the same but may be agreed to by the Trustee and paid as a lump sum; costs paid by the Trustee under the provisions of this Section in good faith will not be disallowed in the taking of any accounts by reason only of the fact that the costs are greater than they might have been if taxed, or by reason of their not being taxed, but the costs so paid by the Trustee will, if not improperly incurred by it, be allowed and paid to the Trustee and will be payable out of any funds coming into the possession of the Trustee; any counsel employed or consulted by the Trustee may, but need not, be counsel for the Trustee;

(f)  the Trustee, in its individual or any other capacity, may, sell, own, lend upon, become a pledgee of and deal with the Notes and generally contract and enter into financial transactions with or act as bankers for the Issuers or otherwise, without being liable to account for any profits made thereby; provided, however, that except as expressly provided in this Indenture, the Trustee shall not have any right of set-off, combination, consolidation or banker’s lien against, and no right to otherwise deduct from, any funds on deposit in the Lockbox Account or the Cash Management Account or in any other account from time to time maintained by the Issuers with the Trustee and all investments thereof for any amount owed to it by virtue of any of the foregoing dealings or activities;

(g)  the Trustee will not be liable for or by reason of the statements or implications of fact or law contained in or arising out of anything contained in this Indenture or in the Notes or be required to verify the same, but all statements or implications will be deemed to have been made by the Trustee only, and it will not be the duty of the Trustee, except as herein otherwise specifically provided, to see to the registration or filing or renewal of this Indenture, if necessary, or to keep itself informed or advised as to the payment by the Trustee of any taxes or assessments or premiums of insurance or other payments which the Trustee should make or to require payments to be made, it being hereby agreed and declared that as to all matters and things in this subsection, the duty and responsibility will rest upon the Issuers and not upon the Trustee

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and the failure of the Trustee to discharge this duty and responsibility will not in any way render the Trustee liable or cast upon it any duty or responsibility for breach of which it would be liable;

(h)  the Trustee may in the exercise of all or any of the trusts, powers and discretions vested in it hereunder act by its officers; the Trustee may delegate to any Person the performance of any of the trusts and powers vested in it by this Indenture or the other Financing Documents subject to the limitation set forth in Section 11.08, and any delegation may be made upon such terms and conditions as the Trustee may think to be in the interest of the holders of Notes and the Trustee shall have no responsibility for the actions of any such delegate; and

(i)  the regularity and validity of all acts, consents, requests and directions of the Issuers will, for the protection of the Trustee, be deemed conclusively proved by a certificate duly executed by an officer of the Issuers; the Trustee will not be responsible for any error made or act done by it resulting from reliance upon the signature of any officer of the Issuers or of any Person on whose signature the Trustee may be called upon to act or refrain from acting under this Indenture.

Section 11.14  Service Providers.  A majority of the Noteholders shall designate a servicer, initially the Servicer designated herein, to service the obligations of the Issuers with respect to the Notes, the Financing Documents and the Property, as may be generally described herein, with such powers as are specifically delegated to the Servicer herein and as designated by a majority of the Noteholders, whether pursuant to this Indenture, a servicing agreement or otherwise, together with such other powers as are reasonably incidental thereto.  Issuers shall be responsible for the payment of such Servicer’s fees and expenses for servicing, master servicing or subservicing, including, without limitation, any fee or expense for any special servicing and any fees and expenses of such servicer, including, without limitation, in connection with a release of the Property, satisfaction of any Financing Document, assumption of the Notes, modification of the Notes made at Issuers’ request, any requests by Issuers for waivers or consents, protective advances, and the enforcement of the Financing Documents.  Issuers shall have the right to rely on any notices given by the Servicer with the same force and affect as if Trustee had given such notices.

ARTICLE 12 - SUPPLEMENTAL INDENTURES

Section 12.01  Supplemental Trust Indentures.  Supplemental Trust Indentures may be issued, from time to time, to evidence those matters agreed between the Issuers and the Trustee, and supplemental Trust Indentures may be issued, to document and evidence such matters from time to time.  The execution of a supplemental Trust Indenture by the Trustee shall be evidence that such supplemental Trust Indenture documents the amendment, modification or other agreement, permitted by the terms of this Indenture.

Section 12.02  Further Assurances.  From time to time the Trustee and the Issuers shall, when so directed by this Indenture, execute, acknowledge and deliver, by their proper officers, deeds or instruments supplemental to this Indenture, which thereafter shall form part of this Indenture, or any other deeds or instruments, or do and perform any other acts and things for any one or more of the purposes of hypothecating, mortgaging, pledging, ceding, transferring or assuring to or confirming or vesting in the Trustee, or charging in favor of the

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Trustee, any Property now owned or hereafter acquired by the Issuers; adding to the limitations or restrictions specified in the terms, provisions and conditions of this Indenture further limitations or restrictions, thereafter to be observed, with respect to dealing with the Property or the release of Property from the charges and security interest created hereby; and adding to the terms, provisions and conditions contained in this Indenture for the protection of the Noteholders or providing for Events of Default in addition to those herein specified.  It is also specifically acknowledged and agreed that such further agreements, and further assurances as provided therein, as shall be agreed from time to time between the Trustee and the Issuers, and set out in a Note or other Financing Documents, shall specifically be permitted to be entered into and agreed, and notwithstanding any such changes, additions, or deletions, shall form Notes and other Financing Documents issued under the terms of this Indenture if so noted.

Section 12.03  Amendment or Modification.  No modification or amendment to the terms of this Indenture, whether by supplemental deeds or indentures or otherwise, shall be effective unless and until sanctioned by a Noteholders’ Approval.  Issuers acknowledge and agree that the terms and provisions of this Indenture and the other Financing Documents may be amended or otherwise modified pursuant to and in accordance with the terms and provisions of the Securitization Cooperation Agreement.

ARTICLE 13 - NOTEHOLDER MEETINGS AND APPROVALS

Section 13.01  Conduct of Meetings.  Meetings of the Holders of the Notes shall be convened, held and conducted in the manner following:

(a)  Calling of Meetings.  At any time and from time to time the Trustee or any Noteholder, at the expense of the Issuers, may call a meeting of Noteholders in New York City, New York or at such other place as the Trustee may in any case determine or approve.

(b)  Notice of Meetings.  Unless the Noteholders waive such notice, at least five (5) clear days’ previous notice of such meeting shall be given to the Noteholders and such notice shall state the time when, and the place where, said meeting is to be held and shall specify in general terms the nature of the business to be transacted thereat, but it shall not be necessary to specify in the notice the text of the resolutions to be passed.

(c)  Quorum.  At any meeting of the Noteholders, subject as herein provided, a quorum shall consist of two or more Persons present in person holding either personally or as proxies for Holders not less than thirty percent (30%) of principal amount of the Notes.  In the event of a quorum not being present on the date for which the meeting is called within thirty (30) minutes after the time fixed for the holding of such meeting, the meeting shall be adjourned to be held at a place and upon a date and at an hour to be fixed by the Trustee who shall give not less than five (5) days’ notice of the date and time to which such meeting is adjourned and of the place where such adjourned meeting is to be held and at such adjourned meeting a quorum shall consist of the Noteholders then and there represented in person or by proxy and voting.

(d)  Chairman.  The Noteholders and proxies for Noteholders present shall choose one of their number to be Chairman.

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(e)  Voting.  Every question submitted to a meeting, except an Extraordinary Resolution, shall be decided in the first place by a majority of the votes given on a show of hands and shall be binding on all Noteholders.  A poll shall be taken on every Extraordinary Resolution.  On a poll each Noteholder shall have one vote for every One Thousand Dollars ($1,000.00) principal amount of Notes of which such Noteholder shall then be the holder according to the Register.  Votes may be given in person or by proxy and a proxy need not be a Noteholder.

(f)  Regulations.  The Trustee may make and from time to time vary such regulations as it shall think fit providing for and governing the conduct at meetings of Noteholders.

Section 13.02  Extraordinary Resolution.  A resolution, adopted under this Section 13.02 shall be binding upon all the Noteholders and the Trustee shall be bound to give effect thereto accordingly.  Save as herein expressly otherwise provided, no action shall be taken at a meeting of the Noteholders which changes any provision of this Indenture or changes or prejudices the exercise of any right of any Noteholder except by Extraordinary Resolution.  In addition to the powers conferred upon them by any other provisions of this Indenture or by law, the Holders holding the Notes shall have the following powers exercisable from time to time as a Noteholders’ Approval exercisable by Extraordinary Resolution:

(a)  power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Noteholders and/or the Trustee against the Issuers, or against the Property, whether such rights arise under this Indenture or the Notes or, with respect to the rights of the Trustee only, otherwise;

(b)  power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture or in any Note which shall be agreed to by the Issuers and to authorize the Trustee to concur in and execute any indenture supplemental hereto embodying any such modification, change, addition or omission;

(c)  power to direct or authorize the Trustee to exercise any power, right, remedy or authority given to it by this Indenture in any manner specified in any such Noteholders’ Approval or to refrain from exercising any such power, right, remedy or authority;

(d)  power to waive and direct the Trustee accelerating payment or commencing realization to waive any Event of Default hereunder and/or cancel any declaration made by the Trustee pursuant to Section 9.02, either unconditionally or upon any condition specified in such Noteholders’ Approval;

(e)  power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other securities of the Issuers;

(f)  power to remove the Trustee from office and to appoint a new Trustee or Trustees; and

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(g)  power to amend, alter or repeal any Noteholders’ Approval previously passed or sanctioned by the Noteholders.

Section 13.03  Signed Instruments.  Any resolution or instrument signed in one or more counterparts by the Holders of sixty-six and two-thirds percent (66-2/3%) of the aggregate principal amount of the Notes then outstanding shall have the same force and effect as an Extraordinary Resolution duly passed at a meeting of the Noteholders.

Section 13.04  Binding Effect of Resolutions.  Every resolution passed in accordance with this Indenture at a meeting of the Holders shall be binding upon all Holders of Notes whether present or absent from such meeting, and every document in writing signed by the Holders shall be binding upon all Holders of Notes whether signatories thereto or not, and each and every Holder of Notes shall be bound by the effect of every such resolution and document in writing.

ARTICLE 14 - MISCELLANEOUS

Section 14.01  Survival.  This Indenture and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the issuance of the Notes, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Financing Documents.  Whenever in this Indenture any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party.  All covenants, promises and agreements in this Indenture, by or on behalf of Issuers, shall inure to the benefit of the legal representatives, successors and assigns of Trustee.

Section 14.02  Trustee’s Discretion.  Whenever pursuant to this Indenture, exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Trustee, the decision of Trustee to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Trustee and shall be final and conclusive.  Whenever this Indenture expressly provides that Trustee may not withhold its consent or its approval of an arrangement or term, such provisions shall also be deemed to prohibit Trustee from delaying or conditioning such consent or approval.

Section 14.03  Notices.  All notices, consents, approvals and requests required or permitted hereunder or under any other Financing Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a notice to the other parties hereto in the manner provided for in this Section 14.03):

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If to Trustee:		LaSalle Bank National Association 135 South LaSalle Street, Suite 1625 Chicago, Illinois 60603 Attention: Global Securitization Trust Services Group Palmilla Los Cabos Notes due January 9, 2007 Facsimile No.
	with a copy to:	Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Attention: [Edmund Taylor] Facsimile No. [(212) 325-8106
	with a copy to:	Column Financial, Inc. One Madison Avenue New York, New York 10019 Legal and Compliance Department Attention: Casey McCutcheon, Esq. Facsimile No. (212) 326-8282
	with a copy to:	Cadwalader, Wickersham & Taft LLP 100 Maiden Lane New York, New York 10038 Attention: William P. McInerney, Esq. Facsimile No. (212) 504-6666
If to Issuers:		c/o Kerzner International North America 1000 South Pine Island Road Plantation, Florida 33324-3906 Attention: John Allison Facsimile No. (954) 809-2346
	with a copy to:	Goldman Sachs Emerging Markets Real Estate Fund c/o Goldman Sachs 85 Broad Street New York, New York 10004 Attention: Peter Weidman Facsimile No. (212) 357-5505
	with a copy to:	Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, New York 10019-7475 Attention: Kevin J. Grehan, Esq. Facsimile No. (212) 474-3700

A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery

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on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a machine-generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming.

Section 14.04  Governing Law.  (A)  THIS INDENTURE WAS NEGOTIATED IN THE STATE OF NEW YORK, THE NOTES WERE ISSUED BY ISSUERS AND ACCEPTED BY TRUSTEE IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTES DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS INDENTURE, THE NOTES AND THE OTHER FINANCING DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER FINANCING DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE OR COUNTRY IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH COUNTRY, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL FINANCING DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.  TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS INDENTURE, THE NOTE AND THE OTHER FINANCING DOCUMENTS, AND THIS INDENTURE, THE NOTE AND THE OTHER FINANCING DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

(B)  ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST TRUSTEE OR ISSUERS ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE OTHER FINANCING DOCUMENTS MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH ISSUER HEREBY IRREVOCABLY SUBMITS TO THE

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JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  EACH ISSUER DOES HEREBY DESIGNATE AND APPOINT, WITH DOMICILE AT:

CT CORPORATION
111 EIGHTH AVENUE
NEW YORK, NEW YORK 10011

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR DELIVERED TO ISSUERS IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON ISSUERS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  ISSUERS (I) SHALL GIVE PROMPT NOTICE TO TRUSTEE OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

Section 14.05  Modification, Waiver in Writing.  No modification, amendment, extension, discharge, termination or waiver of any provision of this Indenture, or of the Note, or of any other Financing Document, nor consent to any departure by Issuers therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided herein, no notice to, or demand on Issuers, shall entitle Issuers to any other or future notice or demand in the same, similar or other circumstances.

Section 14.06  Delay Not a Waiver.  Neither any failure nor any delay on the part of Trustee in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Financing Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Indenture, the Note or any other Financing Document, Trustee shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Indenture, the Note or the other Financing Documents, or to declare a default for failure to effect prompt payment of any such other amount.

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Section 14.07  Trial by Jury.  EACH ISSUER AND TRUSTEE HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE FINANCING DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH ISSUER AND TRUSTEE, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH ISSUER AND TRUSTEE ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH ISSUER AND TRUSTEE.

Section 14.08  Headings.  The Article and/or Section headings and the Table of Contents in this Indenture are included herein for convenience of reference only and shall not constitute a part of this Indenture for any other purpose.

Section 14.09  Severability.  Wherever possible, each provision of this Indenture shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Indenture shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Indenture.

Section 14.10  Preferences.  Trustee shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Issuers to any portion of the obligations of Issuers hereunder or under the other Financing Documents.  To the extent Issuers makes a payment or payments to Trustee, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Trustee.

Section 14.11  Waiver of Notice.  Each Issuer hereby expressly waives, and shall not be entitled to, any notices of any nature whatsoever from Trustee except with respect to matters for which this Indenture or the other Financing Documents specifically and expressly provide for the giving of notice by Trustee to Issuers and except with respect to matters for which such Issuer is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.

Section 14.12  Expenses; Indemnity.  (a)  Issuers covenant and agree to pay or, if Issuers fail to pay, to reimburse, Trustee upon receipt of notice from Trustee for all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Trustee in connection with (i) the preparation, negotiation, execution and delivery of this Indenture, the other Financing Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for

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Issuers (including without limitation any opinions requested by Trustee as to any legal matters arising under this Indenture and the other Financing Documents with respect to the Property); (ii) except as otherwise provided in this Indenture, Issuers’ ongoing performance of and compliance with Issuers’ respective agreements and covenants contained in this Indenture and the other Financing Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Indenture, the other Financing Documents and any other documents or matters requested by Trustee; (iv) securing Issuers’ compliance with any requests made pursuant to the provisions of this Indenture; (v) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Trustee all required legal opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of Trustee pursuant to this Indenture and the other Financing Documents; (vi) enforcing or preserving any rights, either in response to third party claims or in prosecuting or defending any action or proceeding or other litigation, in each case against, under or affecting Issuers, this Indenture, the other Financing Documents, the Property, or any other security given for the Debt; and (vii) enforcing any obligations of or collecting any payments due from Issuers under this Indenture, the other Financing Documents or with respect to the Property or in connection with any refinancing or restructuring of the credit arrangements provided under this Indenture in the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided, however, that Issuers shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Trustee.  Any cost and expenses due and payable to Trustee may be paid from any amounts in the Cash Management Account.

(b)  Issuers shall indemnify, defend and hold harmless Trustee from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for Trustee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Trustee shall be designated a party thereto), that may be imposed on, incurred by, or asserted against Trustee in any manner relating to or arising out of (i) any breach by Issuers of their obligations under, or any material misrepresentation by Issuers contained in, this Indenture or the other Financing Documents, or (ii) the use or intended use of the proceeds of the Notes (collectively, the “Indemnified Liabilities”); provided, however, that Issuers shall not have any obligation to Trustee hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Trustee.  To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Issuers shall pay the maximum portion that they are permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Trustee.

(c)  Issuers covenant and agree to pay for or, if Issuers fail to pay, to reimburse Trustee for, any fees and expenses incurred by any Rating Agency in connection with any Rating Agency review of the Financing Documents or any transaction contemplated thereby or any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of this Indenture or any other Financing Document and the Trustee

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shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation.

Section 14.13  Offsets, Counterclaims and Defenses.  Any assignee of Trustee’s interest in and to this Indenture, the Note and the other Financing Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Issuers may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Issuers in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Issuers.

Section 14.14  No Joint Venture or Partnership; No Third Party Beneficiaries.  (a)  Issuers and Trustee intend that the relationships created hereunder and under the other Financing Documents be solely that of borrower and lender.  Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Issuers and Trustee nor to grant Trustee any interest in the Property other than that of mortgagee, beneficiary, lender, collateral agent, or trustee.

(b)  This Indenture and the other Financing Documents are solely for the benefit of Trustee and Issuers and nothing contained in this Indenture or the other Financing Documents shall be deemed to confer upon anyone other than Trustee and Issuers any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of the Initial Noteholder to acquire the Notes are imposed solely and exclusively for the benefit of Trustee and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that the Initial Noteholder will refuse to acquire the Notes in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Trustee if, in Trustee’s sole discretion, Trustee deems it advisable or desirable to do so.

Section 14.15  Publicity.  All news releases, publicity or advertising by Issuers, Trustee, Initial Purchaser or their respective Affiliates through any media intended to reach the general public which refers to the Financing Documents or the transactions evidenced by the Financing Documents, to any Issuer, Trustee, Initial Purchaser, Initial Noteholder, or any of their respective Affiliates shall be subject to, (i) in case of release, publicity or advertising by any Issuer or any of its Affiliates, the prior approval of Trustee (after a Securitization), Initial Purchaser or Initial Noteholder (prior to a Securitization), (ii) in case of release, publicity or advertising by Trustee or any of its Affiliates, the prior approval of Issuers, Initial Purchaser and Initial Noteholder, (iii) in case of release, publicity or advertising by Initial Purchaser, Initial Noteholder or any of its Affiliates, the prior approval of Issuers (except in connection with a Securitization, in which case approval of Issuers shall not be required).  In addition, neither any Issuer, Trustee, Initial Purchaser, Initial Noteholder nor any of their respective Affiliates shall be prohibited from disclosing to any Person any information to the extent reasonably necessary or desirable to comply with applicable law (including, without limitation, applicable federal or state securities laws) or any required filings with any Governmental Authority or regulatory agency or

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with the New York Stock Exchange or any other nationally or globally recognized securities exchange.

Section 14.16  Waiver of Marshalling of Assets. To the fullest extent permitted by law, each Issuer, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Issuers, Issuers’ partners and others with interests in Issuers, and of the Property, or to a sale in inverse order of alienation in the event Security Trust First Beneficiary conveys, sells or otherwise transfers Security Trust Second Beneficiary’s interest under the security trust formed pursuant to the Security Trust Agreement, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Trustee under the Financing Documents to a sale of the Property for the collection of the Debt without any prior or different resort for collection or of the right of Trustee to the payment of the Debt out of the net proceeds of the Property in preference to every other claimant whatsoever.

Section 14.17  Waiver of Counterclaim.  Each Issuer hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Trustee or its agents.

Section 14.18  Conflict; Construction of Documents; Reliance.  In the event of any conflict between the provisions of this Indenture and any of the other Financing Documents, the provisions of this Indenture shall control.  The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Financing Documents and that such Financing Documents shall not be subject to the principle of construing their meaning against the party which drafted same.  Issuers acknowledge that, with respect to the issuance of the Notes, Issuers shall rely solely on their own judgment and advisors in issuing the Notes without relying in any manner on any statements, representations or recommendations of Trustee or any parent, subsidiary or Affiliate of Trustee.  Trustee shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Financing Documents or any other agreements or instruments relating to the transactions contemplated thereunder by virtue of the ownership by it or any parent, subsidiary or Affiliate of Trustee of any equity interest any of them may acquire in Issuers, and Issuers hereby irrevocably waive the right to raise any defense or take any action on the basis of the foregoing with respect to Trustee’s exercise of any such rights or remedies.  Issuers acknowledges that Trustee, Initial Noteholder or their Affiliates engage in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Issuers or their Affiliates.

Section 14.19  Brokers and Financial Advisors.  Issuers and Trustee hereby represent that in connection with the issuance of the Notes they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders (other than Initial Purchaser or its Affiliates).  Issuers and Trustee hereby agree to indemnify, defend and hold the other party harmless from and against any and all claims, liabilities, costs and expenses of any kind (including attorneys’ fees and expenses) in any way relating to or arising from a claim by any Person (other than Initial Purchaser or its Affiliates) that such Person acted on behalf of Issuers or Trustee in connection with the transactions contemplated herein.  The provisions of this

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Section 14.19 shall survive the expiration and termination of this Indenture and the payment of the Debt.

Section 14.20  Prior Agreements.  This Indenture and the other Financing Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, including, without limitation, the Term Sheet dated on or about October 7, 2004 (as amended) between Kerzner International Limited and Column Financial Inc. are superseded by the terms of this Indenture and the other Financing Documents.

Section 14.21  Duplicate Originals, Counterparts.  This Indenture may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original.  This Indenture may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Indenture.  The failure of any party hereto to execute this Indenture, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.

Section 14.22  Joint and Several Liability.  The parties hereto acknowledge that the defined term “Issuers” has been defined to collectively include each Issuer.  It is the intent of the parties hereto in determining whether (a) a breach of a representation or a covenant has occurred, (b) there has occurred a Default or Event of Default, or (c) an event has occurred which would create recourse obligations under Section 9.03 of this Indenture, that any such breach, occurrence or event with respect to any Issuer shall be deemed to be such a breach, occurrence or event with respect to all Issuers and that all Issuers need not have been involved with such breach, occurrence or event in order for the same to be deemed such a breach, occurrence or event with respect to every Issuer.  The obligations and liabilities of each Issuer shall be joint and several.

ARTICLE 15 - EXECUTION

Section 15.01  Effective Upon Execution.  Upon the execution hereof by the parties hereto, this Indenture shall be binding on the Issuers, in favor of the Trustee and the Holders, and shall enure to the benefit of the Trustee and the Holders, from time to time.

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IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper officers duly authorized in that behalf.

ISSUERS:
KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name:	John R. Allison
KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name:	John R. Allison
KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name:	John R. Allison
KERZNER COMPANIA de SERVICIOS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name:	John R. Allison
KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name:	John R. Allison

TRUSTEE:
LASALLE BANK NATIONAL ASSOCIATION
By:	/s/Alyssa Steal
	Name:	Alyssa Steal
	Title:	FVP

EX-4.24(B)

EXHIBIT 4.24(b)

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (the “Guaranty”) is executed as of December 17, 2004, by GS EMERGING MARKET REAL ESTATE FUND, L.P., a Cayman Island exempted limited partnership, having an address at c/o Goldman Sachs, 85 Broad Street, New York, New York  10004 (“Goldman”) and KERZNER INTERNATIONAL LIMITED, a Bahamian corporation, having an address at c/o Kerzner International North America, 1000 South Pine Island Road, Plantation, Florida  33324-3906 (“Kerzner; together with Goldman, “Guarantor”), in favor of LASALLE BANK NATIONAL ASSOCIATION, a national banking association, having an address at 35 S. LaSalle Street, Suite 1625, Chicago, Illinois 60603, in its capacity as note trustee and collateral agent (“Trustee”), for the benefit of Noteholders (as herein defined).

W I T N E S S E T H :

WHEREAS, pursuant to certain promissory notes, dated of even date herewith (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Notes”), executed by KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V., KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V., KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V., KERZNER COMPANIA DE SERVICIOS, S. de R.L. de C.V. and KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V., each a limited liability company with variable capital (sociedad de responsabilidad limitada de capital variable) (collectively, “Issuers”) and issued pursuant to that certain Note Indenture dated as of the date hereof between Issuers and Trustee (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Indenture”), Issuers have become indebted to Noteholders (as defined in the Indenture) in the original principal amount of One Hundred Ten Million and No/100 Dollars ($110,000,000) (such indebtedness, the “Note Indebtedness”), which Note Indebtedness is secured by that certain Amended and Restated Trust Agreement dated as of the date hereof (as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time, the “Security Trust Agreement”) and further evidenced, secured or governed by other instruments and documents executed in connection with the issuance of the Notes (together with the Notes, the Indenture and the Security Trust Agreement, collectively, the “Financing Documents”);

WHEREAS, Initial Noteholder (as defined in the Indenture) is not willing to purchase the Notes or otherwise extend credit to Issuers unless Guarantor unconditionally guarantees payment and performance to Trustee for the benefit of Noteholders of the Guaranteed Obligations (as herein defined);

WHEREAS, Guarantor is the owner of a direct or indirect interest in Issuers, and Guarantor will directly benefit from the issuance of the Notes, it being understood that the proceeds of the Notes shall be advanced to Issuers; and

WHEREAS, Guarantor has been provided copies of, and has reviewed, each of the Financing Documents.

NOW, THEREFORE, as an inducement to Trustee to perform its obligations under the Indenture and for Initial Noteholder to purchase the Notes, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I

NATURE AND SCOPE OF GUARANTY

1.1  Guaranty of Obligation.  Guarantor hereby irrevocably and unconditionally guarantees to Trustee for the benefit of Noteholders the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise.  Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary obligor.

1.2  Definition of Guaranteed Obligations.  (a)  As used herein, the term “Guaranteed Obligations” means the obligations and liabilities of Issuers to Trustee or Noteholders for any loss, damage, cost, expense, liability, claim and any other obligation incurred by Trustee or Noteholders (including attorneys’ fees and costs reasonably incurred) arising out of or in connection with the matters described in Section 9.03 of the Indenture (other than Section 9.03(a)(ix)), a copy of which Indenture is attached hereto as Exhibit A.  The provisions of Section 9.03 are hereby incorporated into this Guaranty to the same extent and with the same force as if fully set forth herein.

(b)  Notwithstanding anything to the contrary contained herein or in any other Financing Document, with respect to Guarantor’s obligations and liabilities for the Guaranteed Obligations, the parties hereby agree (and by accepting this Guaranty, Trustee on behalf of Noteholders hereby agrees) that all of the Guaranteed Obligations of Guarantor under this Guaranty are recourse obligations of Guarantor, but not of any direct or indirect member, shareholder, partner, principal, affiliate, employee, officer, director, agent or representative of Guarantor (other than any Issuer) and none of such direct or indirect member, shareholder, partner, principal, affiliate, employee, officer, director, agent or representative of Guarantor (other than any Issuer) shall have any liability in its personal or individual capacity, but instead, all parties shall look solely to the property and the assets of Guarantor for satisfaction of any Guaranteed Obligations of any nature required to be paid by Guarantor to Trustee for the benefit of Noteholders under this Guaranty.

1.3  Nature of Guaranty.  This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor.  The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Trustee with respect to the Guaranteed Obligations.  This Guaranty may be enforced by Trustee for the benefit of Noteholders and shall not be discharged by the assignment or negotiation of all or part of the Notes.

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1.4  Guaranteed Obligations Not Reduced by Offset.  The Guaranteed Obligations and the liabilities and obligations of Guarantor to Trustee hereunder, shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Issuers, or any other party, against Trustee or any Noteholder or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

1.5  Payment By Guarantor.  If all or any part of the Guaranteed Obligations shall not be punctually paid when due, whether at demand, maturity, acceleration or otherwise, Guarantor shall, immediately upon demand by Trustee on behalf of Noteholders, and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Trustee for the benefit of Noteholders at Trustee’s address as set forth herein.  Such demand(s) may be made at any time coincident with or after the time payment of all or part of the Guaranteed Obligations is due, and may be made from time to time with respect to the same or different items of Guaranteed Obligations.  Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.

1.6  No Duty To Pursue Others.  It shall not be necessary for Trustee or any Noteholder (and Guarantor hereby waives any rights which Guarantor may have to require Trustee or any Noteholder), in order to enforce the obligations of Guarantor hereunder, first to (a) institute suit or exhaust its remedies against Issuers or others liable on the Note Indebtedness or the Guaranteed Obligations or any other Person, (b) enforce Trustee’s rights for the benefit of Noteholders against any collateral which shall ever have been given to secure the Note Indebtedness, (c) enforce Trustee’s rights for the benefit of Noteholders against any other guarantors of the Guaranteed Obligations, (d) join Issuers or any other Person liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (e) exhaust any remedies available to Trustee for the benefit of Noteholders against any collateral which shall ever have been given to secure the Note Indebtedness, or (f) resort to any other means of obtaining payment of the Guaranteed Obligations.  Neither Trustee nor any Noteholder shall be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.

1.7  Waivers.  Guarantor agrees to the provisions of the Financing Documents, and hereby waives notice of (a) any loan or advances made by, or on behalf of, any Noteholder to Issuers, (b) acceptance of this Guaranty, (c) any amendment or extension of the Notes, the Indenture or of any other Financing Documents, (d) the execution and delivery by Issuers and Trustee of any loan or credit agreement or of Issuers’ execution and delivery of any promissory notes or other documents arising under the Financing Documents or in connection with the Property, (e) the occurrence of any breach by Issuers or an Event of Default, (f) any Noteholder’s transfer or disposition of the Guaranteed Obligations or any part thereof, (g) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (h) protest, proof of non-payment or default by Issuers, and (i) any other action at any time taken or omitted by Trustee or any Noteholder, and, generally, all demands and notices of every kind in connection with this Guaranty, the Financing Documents, any documents or

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agreements evidencing, securing or relating to any of the Guaranteed Obligations, except as specifically provided for herein.

1.8  Payment of Expenses.  In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, promptly after written demand by Trustee, pay Trustee for the benefit of Noteholders all reasonable costs and expenses (including court costs and attorneys’ fees) incurred by Trustee on behalf of Noteholders in the enforcement hereof or the preservation of Trustee’s rights hereunder.  The covenant contained in this Section 1.8 shall survive the payment and performance of the Guaranteed Obligations.

1.9  Intentionally Omitted.

1.10  Effect of Bankruptcy.  In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law, or any judgment, order or decision thereunder, Trustee or any Noteholder must rescind or restore any payment, or any part thereof, received by Trustee or any Noteholder in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Trustee shall be without effect, and this Guaranty shall remain in full force and effect. It is the intention of Issuers and Guarantor that Guarantor’s obligations hereunder shall not be discharged except by Guarantor’s performance of such obligations and then only to the extent of such performance.

1.11  Intentionally Omitted.

1.12  Waiver of Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary contained in this Guaranty, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates, but only for so long as the Debt shall remain outstanding, any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of Trustee or any Noteholder), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Issuers or any other Person liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty or otherwise.  Notwithstanding anything contained herein to the contrary, nothing contained herein shall prohibit or be deemed to prohibit the execution and delivery by Goldman and Kerzner of a Contribution Agreement between themselves, and the performance of the terms therein, relating to their respective payment and reimbursement obligations arising out of or related to this Guaranty; provided that neither the foregoing provisions of this sentence nor the execution, delivery or performance by Goldman or Kerzner of such Contribution Agreement shall in any way affect, limit or otherwise modify (or be deemed to affect, limit or otherwise modify) the rights of Trustee or any Noteholder hereunder.

1.13  Issuers.  The term “Issuer” as used herein shall include any new or successor corporation, association, partnership (general or limited), joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of any Issuer or any interest in any Issuer.

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ARTICLE II

EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR’S OBLIGATIONS

To the extent permitted by law, Guarantor hereby consents and agrees to each of the following, and agrees that Guarantor’s obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:

2.1  Modifications.  Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Notes, the Indenture, the other Financing Documents, or any other document, instrument, contract or understanding between Issuers and Trustee on behalf of Noteholders, or any other Person, pertaining to the Guaranteed Obligations or any failure of Trustee to notify Guarantor of any such action.

2.2  Adjustment.  Any adjustment, indulgence, forbearance or compromise that might be granted or given by Trustee on  behalf of Noteholders to any Issuer or any guarantor or indemnitor.

2.3  Condition of Issuers or Guarantor.  The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of any Issuer, Guarantor or any other Person at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of any Issuer or Guarantor, or any sale, lease or transfer of any or all of the assets of any Issuer or Guarantor, or any changes in the shareholders, partners or members of any Issuer or Guarantor; or any reorganization of any Issuer or Guarantor.

2.4  Invalidity of Guaranteed Obligations.  The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (a) the Guaranteed Obligations, or any part thereof, exceeds the amount permitted by law, (b) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (c) the officers or representatives executing the Notes, the Indenture or the other Financing Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (d) the Guaranteed Obligations violate applicable usury laws, (e) the Issuers have valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Issuers (except for payment and performance of the Guaranteed Obligations, and then only to the extent of such payment and performance by Issuers), (f) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (g) the Notes, the Indenture or any of the other Financing Documents have been forged or otherwise are irregular or not genuine or authentic, it being

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agreed that Guarantor shall remain liable hereon regardless of whether Issuers or any other Person be found not liable on the Guaranteed Obligations or any part thereof for any reason.

2.5  Release of Obligors.  Any full or partial release of the liability of Issuers on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other Person, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other Persons will be liable to pay or perform the Guaranteed Obligations, or that Trustee will look to other Persons to pay or perform the Guaranteed Obligations.

2.6  Other Collateral.  The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.

2.7  Intentionally Omitted.

2.8  Release of Collateral.  Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.

2.9  Care and Diligence.  The failure of Trustee, any Noteholder or any other Person to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Trustee or any Noteholder (a) to take or prosecute any action for the collection of any of the Guaranteed Obligations or (b) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (c) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.

2.10  Unenforceability.  The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.

2.11  Offset.  Any existing or future right of offset, claim or defense of Issuers against Trustee or any other Person, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or

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the transactions creating the Guaranteed Obligations) or otherwise (except for payment and performance of the Guaranteed Obligations, and then only to the extent of such payment and performance).

2.12  Merger.  The reorganization, merger or consolidation of any Issuer into or with any other corporation or entity.

2.13  Preference.  Any payment by Issuers to Trustee or any Noteholder is held to constitute a preference under bankruptcy laws, or for any reason Trustee or any Noteholder is required to refund such payment or pay such amount to Issuers or other Person.

2.14  Other Actions Taken or Omitted.  Any other action taken or omitted to be taken with respect to the Financing Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce Trustee to enter into the Financing Documents and to induce Initial Noteholder to purchase the Notes, Guarantor represents and warrants to Trustee as follows:

3.1  Benefit.  Guarantor is an affiliate of Issuers, is the owner of a direct or indirect interest in Issuers, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.

3.2  Familiarity and Reliance.  Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of the Issuers and is familiar with the value of any and all collateral intended to be created as security for the payment of the Notes or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.

3.3  No Representation By Trustee.  Neither Trustee, any Noteholder nor any other Person has made any representation, warranty or statement to Guarantor in order to induce the Guarantor to execute this Guaranty.

3.4  Guarantor’s Financial Condition.  As of the date hereof, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.  Guarantor hereby represents and

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warrants that its Net Worth (hereinafter defined) as September 30, 2004 is $1,097,956,000.  Guarantor agrees that, except for the payment of employee salaries and benefits and dividends in the ordinary course, not to voluntary dispose of its assets other than on an arms-length basis in exchange for fair consideration.  For purposes hereof, “Net Worth” shall mean the excess of total assets of Guarantor and its subsidiaries at such time over the total liabilities of Guarantor and its subsidiaries at such time, in each case as determined on a consolidated basis in accordance with GAAP.

3.5  Legality.  The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any applicable law, statute or regulation of any court or governmental agency or body having jurisdiction over the Guarantor (except for such violations that would not reasonably be expected to result in a material adverse effect on the financial condition of Guarantor, any Issuer or the Property), or constitute a default under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor (except for such violations that would not reasonably be expected to result in a material adverse effect on the financial condition of Guarantor, any Issuer or the Property).  This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other rights and to general equity principles.

3.6  Survival.  All representations and warranties made by Guarantor herein shall survive the execution hereof.

ARTICLE IV

SUBORDINATION OF CERTAIN INDEBTEDNESS

4.1  Subordination of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and liabilities of Issuers to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Issuers thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the Person in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor.  The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Issuers (arising as a result of subrogation or otherwise) as a result of Guarantor’s payment of all or a portion of the Guaranteed Obligations.  Upon the occurrence of an Event of Default or Default, Guarantor shall not receive or collect, directly or indirectly, from Issuers or any other Person any amount upon the Guarantor Claims.

4.2  Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving Guarantor as debtor, Trustee on behalf of Noteholders shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon

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Guarantor Claims.  Guarantor hereby assigns such dividends and payments to Trustee for the benefit of Noteholders.  Should Trustee for the benefit of Noteholders receive, for application upon the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Issuers and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment to Trustee for the benefit of Noteholders in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Trustee to the extent that such payments to Trustee on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Trustee had not received dividends or payments upon the Guarantor Claims.

4.3  Payments Held in Trust.  In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Trustee for the benefit of Noteholders an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Trustee for the benefit of Noteholders, and Guarantor covenants promptly to pay the same to Trustee for the benefit of Noteholders.

4.4  Liens Subordinate.  Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Issuers’ assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Issuers’ assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Trustee for the benefit of Noteholders presently exist or are hereafter created or attach.  Without the prior written consent of Trustee, Guarantor shall not (a) exercise or enforce any creditor’s right it may have against Issuers or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Issuers held by Guarantor.

ARTICLE V

MISCELLANEOUS

5.1  Waiver.  No failure to exercise, and no delay in exercising, on the part of Trustee for the benefit of Noteholders, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right.  The rights of Trustee hereunder shall be in addition to all other rights provided by law.  Subject to the further provisions of Section 5.5, no consent, or any modification or waiver of any provision of, this Guaranty, nor any consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved.  No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

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5.2  Intentionally Omitted.

5.3  Notices.  All notices, consents, approvals and requests required or permitted hereunder or under any other Financing Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a notice to the other parties hereto in the manner provided for in this Section 5.3:

Guarantor:	c/o Kerzner International North America 1000 South Pine Island Road Plantation, Florida 33324-3906 Attention: John Allison Facsimile No. (954) 809-2346
with a copy to:	Goldman Sachs Emerging Markets Real Estate Fund c/o Goldman Sachs 85 Broad Street New York, New York 10004 Attention: Peter Weidman Facsimile No. (212) 357-5505
with a copy to:	Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, New York 10019-7475 Attention: Kevin J. Grehan, Esq. Facsimile No. (212) 474-3700
Trustee:	LaSalle Bank National Association 135 South LaSalle Street, Suite 1625 Chicago, Illinois 60603 Attention: Global Securitization Trust Services Group                  Palmilla Los Cabos Notes due January 9, 2007 Facsimile No. [                                          ]
with a copy to:	Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Attention: Edmund Taylor Facsimile No. (212) 325-8106

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with a copy to:	Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Legal and Compliance Department Attention: Casey McCutcheon, Esq. Facsimile No. (212) 326-8282
with a copy to:	Cadwalader, Wickersham & Taft LLP 100 Maiden Lane New York, New York 10038 Attention: William P. McInerney, Esq. Facsimile No. (212) 504-6666

A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a machine-generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming.

5.4  Governing Law.  This Guaranty shall be governed in accordance with the State of New York and the applicable law of the United States of America.

5.5  Invalid Provisions.  If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.

5.6  Amendments.  This Guaranty may be amended only by an instrument in writing executed by the party or an authorized representative of the party against whom such amendment is sought to be enforced.

5.7  Parties Bound; Assignment; Joint and Several.  This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Trustee, assign any of its rights, powers, duties or obligations hereunder.  If Guarantor consists of more than one person or entity, the obligations and liabilities of each such person or entity shall be joint and several.

5.8  Headings.  Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty.

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5.9  Recitals.  The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.

5.10  Counterparts.  To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required.  It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all Persons required to bind any party, appear on each counterpart.  All counterparts shall collectively constitute a single instrument.  It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

5.11  Rights and Remedies.  If Guarantor becomes liable for any indebtedness owing by Issuers to Trustee or any Noteholder, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Trustee hereunder shall be cumulative of any and all other rights that Trustee may ever have against Guarantor.  The exercise by Trustee for the benefit of Noteholders of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.

5.12  Intentionally Omitted.

5.13  Other Defined Terms.  Any capitalized term utilized herein shall have the meaning as specified in the Indenture, unless such term is otherwise specifically defined herein.

5.14  Entirety.  THIS GUARANTY EMBODIES THE FINAL AND ENTIRE AGREEMENT OF GUARANTOR AND TRUSTEE WITH RESPECT TO GUARANTOR’S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTOR AND TRUSTEE AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND TRUSTEE, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.  THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND TRUSTEE.

5.15  Waiver of Right To Trial By Jury.  EACH PARTY HERETO AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER SUCH PARTY EACH HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF

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RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTES, THE INDENTURE, THE SECURITY TRUST AGREEMENT, OR THE OTHER FINANCING DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH PARTY HERETO AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  EACH PARTY HERETO IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY TRUSTEE OR GUARANTOR, AS THE CASE MAY BE.

5.16  Reinstatement in Certain Circumstances.  If at any time any payment of the principal of or interest under the Notes or any other amount payable by the Issuers under the Financing Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Issuer or otherwise, the Guarantor’s obligations hereunder with respect to such payment shall be reinstated as though such payment has been due but not made at such time.

5.17  Cooperation.  Guarantor acknowledges and agrees that Initial Purchaser (as defined in the Indenture) may assign all of its rights under this Guaranty, the Notes and the other Financing Documents to Initial Noteholder on the date hereof.  Guarantor further acknowledges that Initial Noteholder or its successors or assigns may (i) sell this Guaranty, the Notes and other Financing Documents to one or more investors as a whole loan, (ii) participate the Debt secured in part by this Guaranty to one or more investors, (iii) deposit this Guaranty, the Notes and other Financing Documents with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the indebtedness evidenced by the Notes or interest therein to investors (the transactions referred to in clauses (i) through (iv) are hereinafter each referred to as “Secondary Market Transaction”).  Guarantor shall cooperate with Initial Noteholder or its successors or assigns in effecting any such Secondary Market Transaction consistent with the terms and provisions of the Securitization Cooperation Agreement (as defined in the Indenture).  It is understood that the information provided by Guarantor to Initial Purchaser or Initial Noteholder or their successors or assigns may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information; provided that in no event shall such offering documents include financial information about Goldman other than a brief statement of the total amount of assets and liabilities of Goldman.

[NO FURTHER TEXT ON THIS PAGE]

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EXECUTED as of the day and year first above written.

GUARANTOR:
GS EMERGING MARKET REAL ESTATE FUND, L.P.
By:	GSEM Advisors, L.L.C., its general partner
	By:	/s/Peter Weidman
		Name:	Peter Weidman
		Title:	Vice President
KERZNER INTERNATIONAL LIMITED
By:	/s/John R. Allison
	Name:	John R. Allison
	Title:	Executive Vice President Finance and Chief Financial Officer

EX-8

EXHIBIT 8

Listing of Significant Subsidiaries of Kerzner International Limited as of December 31, 2004

Name of Company	Country of Incorporation
Kerzner International Bahamas Limited(1)	The Bahamas
Kerzner International North America, Inc.(2)	United States
Kerzner Investments Palmilla, Inc.(3)	The Bahamas
One&Only Management(4)	British Virgin Islands
Kerzner International Management Limited(5)	British Virgin Islands

(1)Owner of substantially all of the Bahamian subsidiaries.  Directly or indirectly wholly owns ten subsidiaries, all of which are organized in the Commonwealth of The Bahamas.

(2)Owner of all of the U.S. subsidiaries.  Directly or indirectly wholly owns 19 subsidiaries, 16 of which are organized in the United States and three of which are organized in Mexico and relate to the management and development of the One&Only Palmilla.

(3)Owner of the 50% interest in the One&Only Palmilla.

(4)Operator of the five Mauritius management agreements and the One&Only Kanuhura management agreement.  Through the year ended December 31, 2004, Kerzner held an 80% ownership interest in One&Only Management, which decreased to 75% effective January 1, 2005.

(5)Owner of the management agreement for the One&Only Royal Mirage in Dubai.  Also receives marketing and administrative fees from One&Only Management related to the Mauritius and the One&Only Kanuhura management agreements.

EX-11.1(B)

EXHIBIT 11.1(b)

KERZNER INTERNATIONAL LIMITED

AMENDED AND RESTATED AUDIT COMMITTEE CHARTER

DATED AS OF AUGUST 10, 2004

I.PURPOSE

The Audit Committee is a committee of the Board of Directors.  The primary function of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing the integrity of (i) the financial information which will be provided to the stockholders and others, (ii) the system of disclosure controls and (iii) the system of internal controls regarding finance, accounting, legal compliance, and ethics that management and the Board have established. The Audit Committee is also responsible for overseeing the Company’s compliance with legal and regulatory requirements (in conjunction with the Compliance Committee), the independent auditors’ qualifications and independence, and the performance of the Company’s internal audit function, the independent auditor and the overall audit process.  The independent auditor is ultimately accountable and reports directly to the Audit Committee.  The Audit Committee has the sole authority and is directly responsible for the selection, evaluation, oversight and, where appropriate, replacement of the independent auditor (or the nomination of the independent auditor to be proposed for stockholder approval.)

The Audit Committee will be responsible for preparing the audit committee report required by the rules of the Securities and Exchange Commission (SEC) to be included in the Company’s annual report.

The Audit Committee will fulfill these responsibilities by carrying out the activities enumerated in Sections III-VI of this Charter.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally acceptable accounting principles and applicable rules and regulations.  These are the responsibility of management and the independent auditor.

II.COMPOSITION AND COMPENSATION OF THE AUDIT COMMITTEE

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The Audit Committee shall consist of at least three directors, all of whom have no relationship to the Company that may interfere with the exercise of their independence from management and the Company, that in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. Any disallowed compensatory arrangement shall, per se, disqualify a director from serving on the Company’s Audit Committee.  In addition, each member of the Audit Committee shall meet the independence and expertise requirements set forth in the New York Stock Exchange Listing Standards, as modified or supplemented.

All members of the Audit Committee shall be financially literate (i.e. have a working familiarity with basic finance and accounting practices), as determined by the Board in its business judgment, or shall become financially literate within a reasonable period of time after his or her appointment to the Audit Committee.  The Board shall determine whether at least one member of the Audit Committee qualifies as an “audit committee financial expert” in compliance with the criteria established by the SEC and other relevant regulators.  The existence of such member, including his or her name and whether or not he or she is independent, shall be disclosed in periodic filings as may required by the SEC.

The members of the Audit Committee shall be elected and may be replaced by the Board.  Unless a Chair is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership. The duties and responsibilities of a member of the Audit Committee are in addition to those duties of such member as a member of the Board.

No member of the Audit Committee may serve simultaneously on the audit committees of more than two other public companies, unless the Board determines that such simultaneous service would not impair such director’s ability to serve effectively on the Audit Committee and such determination is disclosed in the Company’s annual report.

No member of the Audit Committee may receive, directly or indirectly, any compensation from the Company other than (i) fees paid to directors for service on the Board (including customary perquisites and other benefits that all directors receive), (ii) additional fees paid to directors for service on a committee of the Board (including the Audit Committee) or as the chairperson of any committee and (iii) a pension or other deferred compensation for prior services that is not contingent on future services on the Board.

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III.CONTINUOUS ACTIVITIES – GENERAL

The Audit Committee shall:

1.Provide an open avenue of communication among the independent auditors, financial and senior management, the internal audit function and the Board.

2.Encourage continuous improvement of, and foster adherence to, the Company’s policies, procedures and practices at all levels.

3.Have the authority to obtain advice and assistance from outside legal, accounting, or other advisors as it deems appropriate to perform its duties and responsibilities, without having to obtain approval from the Board.

4.In conjunction with the Company’s Compliance Committee, establish, review and update periodically a Code of Ethical Conduct and ensure that management has established a system to enforce this Code.  Ensure that the code is in compliance with all applicable rules and regulations.

5.In conjunction with the Company’s Compliance Committee, review management’s monitoring of the Company’s compliance with the Code of Ethical Conduct, and ensure that the Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy legal requirements.

6.Establish the appropriate funding for compensation to the independent auditor and to any advisers that the Audit Committee chooses to engage.

7.Meet four times per year or more frequently as circumstances require.  The Audit Committee may ask members of management or others to attend meetings and provide pertinent information as necessary. Each regularly scheduled meeting shall conclude with an executive session of the Audit Committee absent members of management and on such terms and conditions as the Audit Committee may elect.  As part of its job to foster open communication, the Audit Committee should meet periodically and separately with (i) management, (ii) the director of the internal auditing function and (iii) the independent auditors in executive sessions to discuss any matters that the Audit Committee or any of these groups believe should be discussed privately.

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8.Confirm and assure the independence of the independent auditor.  With respect to the independence of the independent auditor, the Audit Committee must:

(a)Ensure that the independent auditor submits on a periodic basis to the Audit Committee a formal written statement delineating i) all relationships between the independent auditor and the Company (which must comply with Independence Standards Board Standard No. 1, as may be modified or supplemented), ii) the independent auditors’ internal quality-control procedures and iii) any material issues raised by the most recent internal quality-control review or peer review of the outside auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to any independent audit carried out by the independent auditors, and any steps taken to deal with any such issues;

(b)Actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor;

(c)Consider whether, in order to assure the continuing independence of the independent auditors, there should be regular rotation of the lead and reviewing audit partners (in addition to the rotation every five years required pursuant to Section 10A(j) of the Exchange Act) or of the independent audit firm;

(d)Based upon the information provided and ascertained pursuant to Sections 8(a) through (c) above, the Committee shall evaluate the independent auditors’ qualifications, performance and independence (including a review and evaluation of the lead partner) and present its conclusions and recommendations to the Board.

9.Instruct the independent auditor that the Board and the Audit Committee are the independent auditors’ clients.

10.Review and approve the appointment, replacement, reassignment or dismissal of the director of the Company’s internal audit function and periodically review his or her performance.

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11.Inquire of management and the independent auditor about significant risks or exposures and assess the steps management has taken to minimize such risk to the Company.

12.Consider and review with the independent auditor:

(a)The adequacy of the Company’s internal controls including computerized information system controls, security, staffing levels and budgets, as well as the performance of the director of the Company’s internal audit function;

(b)Related findings and recommendations of the independent auditor together with management’s responses; and

(c)The material issues on which the national office of the independent auditor was consulted by the Company’s audit team.

13.Consider and review with management and the independent auditor:

(a)Significant findings during the year, including the status of previous audit recommendations;

(b)Any difficulties encountered in the course of audit work including any restrictions on the scope of activities or access to required information, any accounting adjustments noted or proposed but passed as immaterial for other reasons, any communications between the outside audit team and the independent auditors’ national office and any management or internal control letters proposed but never issued by the independent auditor to the Company.  The Audit Committee shall be responsible for the resolution of disagreements among the Company’s management, the independent auditors and the internal auditors regarding financial reporting; and

(c)The quality and adequacy of the Company’s internal controls, including reviewing any management internal control report, any significant internal control deficiencies or material weaknesses, any fraud involving management or others significantly involved in the Company’s internal controls and procedures and any changes implemented in light of material control deficiencies or weaknesses.

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14.Periodically, but not less than annually, assess the performance of the Audit Committee by consulting with independent auditors, internal auditors and Company counsel on how audit committee best practices relate to current Audit Committee practices, and institute appropriate change.

15.Set guidelines for Audit Committee education and orientation to assure understanding of the business and the environment in which the Company operates and to report periodically to the Board as a result of the foregoing.

IV.CONTINUOUS ACTIVITIES REGARDING REPORTING: SPECIFIC POLICIES

1.Advise financial management and the independent auditor that they are expected to provide a timely analysis of significant current financial reporting issues and practices including the following:

(a)Selection of new or changes to accounting policies;

(b)Estimates, judgments, and uncertainties;

(c)Unusual transactions;

(d)Accounting policies relating to significant financial statement items, including the presentation and timing of transactions and the period in which they were recorded.

2.Ensure that financial management and the independent auditor discuss with the Audit Committee their qualitative judgments about the appropriateness of accounting principles and financial disclosure practices used or proposed to be adopted by management, including compliance with applicable SEC staff accounting bulletins and other regulatory or accounting initiatives.

3.Inquire as to the independent auditors’ independent qualitative judgments about the appropriateness of the accounting principles, the consistency of the Company’s accounting policies, and the clarity and completeness of the Company’s financial statements and related disclosure practices (specifically with respect to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) used or proposed to be

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adopted by management in connection with the independent auditors’ review of financial statements prior to filing its appropriate SEC forms. Involve, as appropriate, members of management including the President, CFO and legal counsel in the discussions.

4.Determine, with regard to new transactions or events, the independent auditors’ reasoning for the appropriateness of the accounting principles and disclosure practices adopted by management.

5.In consultation with the independent auditors and the internal auditors, review the integrity of the Company’s financial reporting processes (both internal and external), and the internal control structure (including disclosure controls).  Meet with representatives of the Disclosure Committee on a periodic basis to discuss any matters of concern arising from the Disclosure Committee’s process to assist the CEO and CFO in their Sarbanes-Oxley Act of 2002 Section 302 and 906 certifications.

6.Review with management major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies.

7.Review analyses prepared by management (and the independent auditor as noted in Section V, Item 3 below) setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.

8.Review with management the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

9.Review and approve all significant related party transactions.

10.In conjunction with the Company’s Compliance Committee and Code of Business Conduct and Ethics, establish and maintain procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting, or auditing matters.

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11.In conjunction with the Company’s Compliance Committee and Code of Business Conduct and Ethics, establish and maintain procedures for the confidential, anonymous submission by Company employees regarding questionable accounting or auditing matters.

12.Review earnings press releases with management, including review of  “non-GAAP financial measures” as defined by Regulation G.

13.Review the regular internal reports (or summaries thereof) to management prepared by the internal auditing department and management’s response.

V.SCHEDULED ACTIVITIES

1.Appoint (subject to shareholder ratification, if applicable), compensate, and oversee the work performed by the independent auditor for the purpose of preparing or issuing an audit report or related work.  Review the performance of the independent auditors. The independent auditors shall report directly to the Audit Committee and the Audit Committee shall oversee the resolution of disagreements between management and the independent auditors in the event that they arise,and consider whether the auditors’ performance of permissible non-audit services is compatible with the auditors’ independence.

2.Review with the independent auditor any problems or difficulties and management’s response.

3.In connection with the annual and quarterly review by the independent auditors of the Company’s financial statements, review the independent auditors’ attestation and report on management’s internal control report and hold timely discussions with the independent auditors regarding the matters required to be discussed by Statement on Auditing Standards No. 61, including the following:

•critical accounting policies and practices.

•alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.

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•other material written communications between the independent auditor and management including, but not limited to, the management letter and schedule of unadjusted audit differences; and

•an analysis of the auditors’ judgment as to the quality of the Company’s accounting principles, setting forth significant reporting issues and judgments made in connection with the preparation of the financial statements.

4.Review and pre-approve both audit and non-audit services to be provided by the independent auditor (other than with respect to de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002).  This duty may be delegated to one or more designated members of the Audit Committee with any such pre-approval reported to the Audit Committee at its next regularly scheduled meeting.  Approval of non-audit services shall be disclosed to investors in periodic reports required by Section 13(a) of the Securities Exchange Act of 1934.

5.Set clear hiring policies, compliant with governing laws or regulations, for employees or former employees of the independent auditor.

6.Consider, in consultation with the independent auditor, the audit scope and plan of the independent auditor.

7.Review with management and the independent auditor the results of annual audits and related comments in consultation with other committees as deemed appropriate including:

(a)The Company’s audited annual financial statements and related footnotes;

(b)The independent auditors’ audit of, and report on the financial statements;

(c)Any significant changes required in the independent auditors’ audit plans;

(d)Any difficulties or disputes with management encountered during the course of the audit; and

(e)Other matters related to the conduct of the audit which are to be communicated to the Audit Committee under Generally Accepted Auditing Standards.

9

8.Review annual filings with the SEC and other published documents containing the Company’s financial statements and consider whether to recommend to the Board that the audited financial statements be included in the Company’s Annual Report on Form 20-F filing with the SEC. Review and discuss with management the Company’s annual and quarterly financial statements, and all internal controls reports (or summaries thereof). Review other relevant reports or financial information submitted by the Company to any governmental body, or the public, including management certifications as required by the Sarbanes-Oxley Act of 2002 (Sections 302 and 906) and relevant reports rendered by the independent auditors (or summaries thereof).

9.Review the interim financial reports with management and the independent auditor before those interim reports are released to the public or filed with the SEC or other regulators.

10.Arrange for the independent auditor to be available to the full Board at least annually to help provide a basis for the Board to recommend the appointment of the independent auditor.

11.Set guidelines for review of stock exchange certifications and SEC  disclosure requirements related to the Audit Committee.

12.Obtain from the Independent Auditor assurance that Section 10A(b) of the Exchange Act has not been implicated.

13.Review and update this Audit Committee Charter periodically.

14.Prepare the report that the SEC requires be included in the Company’s annual report.

VI.“WHEN NECESSARY” ACTIVITIES

1.Review periodically with Company counsel, legal and regulatory matters that may have a material impact on the Company’s financial statements, compliance policies and programs.

2.Conduct or authorize investigations into any matters within the Audit Committee’s scope of responsibilities.  The Audit Committee shall be

10

empowered to retain independent counsel and other professionals to assist in the conduct of any investigation or in discharging its responsibilities.

3.Perform any other activities consistent with this Charter, the Company’s Memorandum and Articles of Association, and governing law, as the Audit Committee or the Board deems necessary or appropriate.

4.Review with the independent auditors, the internal auditing department and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Audit Committee.)

5.Discuss policies with respect to risk assessment and risk management.  Such discussions should include the Company’s major financial and accounting risk exposures and the steps management has undertaken to control them.

6.Review, with the organization’s counsel, legal compliance matters including corporate securities trading policies.

7.Discuss with management financial information and earnings guidance provided to analysts and rating agencies.  Such discussions may be on general terms (i.e., discussion of the types of information to be disclosed and the type of presentation to be made).

11

EX-12.1

EXHIBIT 12.1

CERTIFICATION PURSUANT TO
RULE 13a—14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Howard B. Kerzner, certify that:

1.I have reviewed this annual report on Form 20-F of Kerzner International Limited;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely

affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 30, 2005

/s/Howard B. Kerzner

Howard B. Kerzner

Chief Executive Officer

EX-12.2

EXHIBIT 12.2

CERTIFICATION PURSUANT TO
RULE 13a—14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. Allison, certify that:

1.I have reviewed this annual report on Form 20-F of Kerzner International Limited;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely

affect the company’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 30, 2005

/s/John R. Allison

John R. Allison

Chief Financial Officer

EX-13.1

EXHIBIT 13.1

Certification Pursuant to

18 U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F of Kerzner International Limited, a corporation organized under the laws of The Bahamas (the “Company”) for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to such officer’s best knowledge that:

1.)the Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

The foregoing certification is provided solely for purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act of 2002 and is not intended to be used or relied upon for any other purpose.

Dated: March 30, 2005	/s/ Howard B. Kerzner
	Howard B. Kerzner
	Chief Executive Officer
Dated: March 30, 2005	/s/ John R. Allison
	John R. Allison
	Chief Financial Officer

EX-14.1

Exhibit 14.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-121164, 333-117110, 333-88854, 333-100522, 333-51446, 333-15409, 333-09368 and 333-1796 of Kerzner International Limited and subsidiaries (the “Company”) on Form S-8, F-3, F-3, S-8, S-8, F-4, S-8 and S-8, respectively, of our report dated March 30, 2005, relating to the consolidated financial statements of the Company, appearing in this Annual Report on Form 20-F of the Company for the year ended December 31, 2004.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida

March 30, 2005

EX-14.2

EXHIBIT 14.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form F-3 (No. 333-88854 and No. 333-117110) of Kerzner International Limited of our report dated March 15, 2005, which appears in this Form 20-F.

PricewaterhouseCoopers LLP
Hartford, CT
March 30, 2005

EX-14.3

EXHIBIT 14.3

TRADING COVE ASSOCIATES

Report of Independent Registered Public Accounting Firm

To the Partners of Trading Cove Associates

In our opinion, the accompanying balance sheets and the related statements of operations, changes in partners’ capital and of cash flows present fairly, in all material respects, the financial position of Trading Cove Associates (the “Partnership”) at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers, LLP

Hartford, CT

March 15, 2005

1

Trading Cove Associates

Balance Sheets

December 31, 2004 and 2003

	2004		2003
Assets
Current assets
Cash and cash equivalents	$	732,886	$	798,602
Relinquishment fee receivable	26,589,614		25,339,272
Other current assets	151		5,531
Total current assets	27,322,651		26,143,405
Deferred costs, net of accumulated amortization of $3,282,551 and $3,060,427 at December 31, 2004 and 2003, respectively	2,216,390		2,438,514
Property and equipment, net of accumulated depreciation of $14,951 and $14,651 at December 31, 2004 and 2003, respectively	384		684
Total assets	$	29,539,425	$	28,582,603
Liabilities and Partners’ Capital
Current liabilities
Accounts payable and accrued expenses	$	93,538	$	88,972
Subcontracted services payable	465,930		474,767
Estimated contract costs due related party	413,760		506,980
Total current liabilities	973,228		1,070,719
Commitments and contingent liabilities
Partners’ capital	28,566,197		27,511,884
Total liabilities and partners’ capital	$	29,539,425	$	28,582,603

The accompanying notes are an integral part of these financial statements.

2

Trading Cove Associates

Statements of Operations

For the Years Ended December 31, 2004, 2003 and 2002

	2004		2003		2002
Revenue
Relinquishment fee	$	69,101,491	$	65,099,553	$	58,508,703
Development services revenue	43,400		4,698,055		556,788
Total revenues	69,144,891		69,797,608		59,065,491
Expenses
Subcontract payments to partners and their affiliates	1,869,157		1,840,346		—
Cost of development services revenue	43,400		4,662,055		1,756,788
Amortization and depreciation	222,424		221,818		221,818
General and administrative	130,843		159,653		2,017,350
Total expenses	2,265,824		6,883,872		3,995,956
Interest and dividend income	8,252		6,041		13,280
Net income	$	66,887,319	$	62,919,777	$	55,082,815

The accompanying notes are an integral part of these financial statements.

3

Trading Cove Associates

Statements of Changes in Partners’ Capital For the Years

Ended December 31, 2004, 2003 and 2002

	Kerzner Investments Connecticut Inc.			Waterford Gaming, L.L.C.			Total
Partners’ capital, January 1, 2002	$	7,174,961		$	5,924,961		$	13,099,922
Net income	30,041,407			25,041,408			55,082,815
Contributions	1,000,000			1,000,000			2,000,000
Distributions	(29,268,604		)	(24,268,605		)	(53,537,209		)
Partners’ capital, December 31, 2002	8,947,764			7,697,764			16,645,528
Net income	33,959,889			28,959,888			62,919,777
Contributions	450,000			450,000			900,000
Distributions	(28,976,711		)	(23,976,710		)	(52,953,421		)
Partners’ capital, December 31, 2003	14,380,942			13,130,942			27,511,884
Net income	35,943,660			30,943,659			66,887,319
Distributions	(35,416,503		)	(30,416,503		)	(65,833,006		)
Partners’ capital, December 31, 2004	$	14,908,099		$	13,658,098		$	28,566,197

The accompanying notes are an integral part of these financial statements.

4

Trading Cove Associates

Statements of Cash Flows

For the Years Ended December 31, 2004, 2003 and 2002

	2004			2003			2002
Cash flows from operating activities
Net income	$	66,887,319		$	62,919,777		$	55,082,815
Adjustments to reconcile net income to net cash provided by operating activities
Amortization	222,124			221,518			221,518
Depreciation	300			3,303			7,641
Loss on disposal of property and equipment	—			743			—
Gain on sale of property and equipment	—			(1,750		)	—
Change in operating assets and liabilities
Relinquishment fee receivable	(1,250,342		)	(1,669,449		)	(4,983,247		)
Development fee receivable	—			84,000			1,176,000
Other current assets	5,380			(1,531		)	(4,000		)
Accounts payable and accrued expenses	4,566			(25,884		)	(64,237		)
Subcontracted services payable	(8,837		)	474,767			(430,791		)
Estimated contract costs due related party	(93,220		)	(9,899,359		)	593,578
Total adjustments	(1,120,029		)	(10,813,642		)	(3,483,538		)
Net cash provided by operating activities	65,767,290			52,106,135			51,599,277
Cash flows from investing activities
Proceeds from sale of property and equipment	—			1,750			—
Net cash provided by investing activities	—			1,750			—
Cash flows from financing activities
Distributions	(65,833,006		)	(52,953,421		)	(53,537,209		)
Partners’ contributions	—			900,000			2,000,000
Net cash used in financing activities	(65,833,006		)	(52,053,421		)	(51,537,209		)
Net change in cash and cash equivalents	(65,716		)	54,464			62,068
Cash and cash equivalents
Beginning of year	798,602			744,138			682,070
End of year	$	732,886		$	798,602		$	744,138

The accompanying notes are an integral part of these financial statements.

5

TRADING COVE ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

1. Organization, Partnership Agreement and Other Material Agreements

(a)Organization and Partnership Agreement

Trading Cove Associates (the “Partnership”), a Connecticut general partnership, was organized on July 23, 1993. The primary purpose of the Partnership has been:

(i)to assist the Mohegan Tribe of Indians of Connecticut (the “Tribe”) and the Mohegan Tribal Gaming Authority (the “Authority”) in obtaining federal recognition;

(ii)to negotiate the tribal-state compact with the State of Connecticut on behalf of the Tribe;

(iii)to obtain financing for the initial development of the Mohegan Sun Casino (the “Mohegan Sun”);

(iv)to negotiate the Amended and Restated Gaming Facility Management Agreement, (the “Management Agreement”);

(v)to oversee all operations of the Mohegan Sun pursuant to the terms of the Management Agreement until midnight December 31, 1999, and

(vi)to participate in the design and development of the Mohegan Sun.

The Mohegan Sun commenced operations on October 12, 1996. From the opening of the Mohegan Sun, and until January 1, 2000, the Partnership oversaw the Mohegan Sun’s day-to-day operations.

The Partnership will terminate on December 31, 2040, or earlier, in accordance with the terms of the partnership agreement (the “Partnership Agreement”).

The original partners of the Partnership were RJH Development Corp. (“RJH”), a New York corporation, Leisure Resort Technology, Inc. (“Leisure”), a Connecticut corporation, Slavik Suites, Inc. (“Slavik”), a Michigan corporation, and LMW Investments, Inc. (“LMW”), a Connecticut corporation. On September 21, 1994, the Partnership Agreement was amended and restated to admit Kerzner Investments Connecticut, Inc. (“Kerzner Investments”), a Connecticut corporation, formerly Sun Cove Limited, as a partner.

On February 3, 1995, Leisure entered into an acknowledgement and release agreement to withdraw as a partner of the Partnership and hold its interest in the Partnership as a beneficial interest. On August 6, 1997, Leisure filed a lawsuit against the Partnership, Kerzner Investments, RJH and Waterford Gaming L.L.C. (“Waterford Gaming”) and its owners, claiming breach of contract, breach of fiduciary duties and other matters in connection with the development of the Mohegan Sun. On January 6, 1998, pursuant to the settlement and release agreement described in Note 6 below, Waterford Gaming paid $5,000,000 to Leisure and, among other things, Leisure gave up, (a) its beneficial interest of 5% of certain fees and excess cash flows, as defined, of the Partnership and (b) any other claims it may have had against the Partnership, Kerzner Investments, RJH, Waterford Gaming and its owners. In connection with the settlement of all matters related to such suit, pursuant to the settlement and release agreement, Waterford Gaming agreed to acquire Leisure’s interests in the Partnership. As a result of this acquisition, Leisure no longer has the right to 5% of the Organizational and Administrative fee, as defined in the Organizational and Administrative Services Agreement, and 5% of the Partnership’s Excess Cash as defined in the Partnership Agreement, and Waterford Gaming is now entitled to such fees and cash. During March 1999, Waterford Gaming’s $65,000,000 senior notes were retired and, on March 18, 1999, Waterford Gaming paid an additional $2,000,000 to Leisure pursuant to the settlement and release agreement. On January 7, 2000, Leisure filed a complaint against the Partnership and certain other defendants.

6

For a description of the complaint, see Note 6 to these financial statements.

On November 8, 1996, Slavik, LMW and RJH withdrew from the Partnership and, concurrently, consented to the admission of Waterford Gaming to the Partnership. Waterford Gaming, simultaneously, purchased RJH’s interest in the Partnership. Waterford Gaming is owned by Waterford Group, LLC. Waterford Group, LLC is owned by Slavik and LMW.

The partners’ percentage interest in the Partnership as of November 8, 1996 was as follows:

	Percentage
Partner	Interest
Kerzner Investments Connecticut, Inc.	50.0%
Waterford Gaming, L.L.C.	50.0%

(b)Other Material Agreements

Relinquishment Agreement

On February 7, 1998, the Partnership and the Authority entered into the Relinquishment Agreement (the “Relinquishment Agreement”). Under the terms of the Relinquishment Agreement the Partnership continued to manage the Mohegan Sun under the Management Agreement until midnight December 31, 1999, and on January 1, 2000, the Management Agreement terminated and the Tribe assumed day-to-day management of the Mohegan Sun.

Under the Relinquishment Agreement, to compensate the Partnership for terminating its rights under the Management Agreement and the Hotel/Resort Management Agreement, the Authority agreed to pay to the Partnership a fee (the “Relinquishment Fees”) equal to 5% of Revenues, as defined in the Relinquishment Agreement, generated by the Mohegan Sun during the 15-year period commencing on January 1, 2000, including revenue generated by the Project Sunburst expansion (the “Project Sunburst expansion”).

The Relinquishment Fees are divided into senior relinquishment payments and junior relinquishment payments, each of which equals 2.5% of “Revenues”. Revenues are defined as gross gaming revenues (other than Class II gaming revenue) and all other facility revenues. Such revenue includes hotel revenues, food and beverage sales, parking revenues, ticket revenues and other fees or receipts from the convention/events center in the Project Sunburst expansion and all rental or other receipts from lessees, licensees and concessionaires operating in the facility, but not the gross receipts of such lessees, licensees and concessionaires. Such revenues exclude revenues generated by any other expansion of the Mohegan Sun. Senior relinquishment payments are payable quarterly in arrears commencing on April 25, 2000, for the quarter ended March 31, 2000 and the junior relinquishment payments are payable semi-annually in arrears commencing on July 25, 2000, for the six months ended June 30, 2000, assuming sufficient funds are available after satisfaction of the Authority’s senior obligations, as defined in the Relinquishment Agreement.

Development Agreement

On February 7, 1998 the Partnership and the Authority entered into the Development Services Agreement (the “Development Agreement”), which made the Partnership the exclusive developer of the Project Sunburst expansion. Pursuant to the Development Agreement, the Partnership agreed to oversee the planning, design, construction, furnishing, equipping and staffing of the Project Sunburst expansion for a $14.0 million development fee (the “Development Fee”).

The first phase of the Project Sunburst expansion, including the Casino of the Sky, The Shops at Mohegan Sun, and the 10,000-seat Mohegan Sun Arena opened in September 2001. In April 2002, 734 of the approximately 1,200-hotel rooms in the 34-story luxury hotel as well as the meeting and convention space and spapened. The balance of the approximately 1,200-hotel rooms opened during June 2002. As of December 31, 2004, the Project Sunburst expansion was complete in terms of the Development Agreement.

7

Management Agreement

The Partnership entered into the Management Agreement with the Tribe pursuant to which the Tribe granted to the Partnership the exclusive right and obligation to develop, manage, operate and maintain the Mohegan Sun. The Management Agreement was amended and restated effective September 29, 1995 (the “Effective Management Agreement Date”). The Partnership’s obligations under this agreement began five days after the Effective Management Agreement Date and were originally intended to end on October 11, 2003, seven years from the opening of the Mohegan Sun. Pursuant to the Management Agreement the Partnership received a management fee that was calculated in three tiers based upon the Net Revenues, as defined in the Management Agreement, of the Mohegan Sun. The Management Agreement terminated at midnight on December 31, 1999. The final management fee was received by the Partnership from the Authority on January 25, 2000.

Agreements with Partners and/or their Affiliates

Agreement Relating to Development Services

On February 9, 1998, the Partnership and Kerzner International Management Limited (“KIML”), entered into the Agreement Relating to Development Services (the “Development Services Agreement Phase II”). Pursuant to the Development Services Agreement Phase II, the Partnership subcontracted with KIML who agreed to perform those services assigned to KIML by the Partnership in order to facilitate the Partnership’s fulfillment of its duties and obligations to the Authority under the Development Agreement. KIML subsequently assigned the Development Services Agreement Phase II to Kerzner Investments.

Pursuant to the Development Services Agreement Phase II, the Partnership pays to Kerzner Investments a fee, as subcontractor (the “Development Services Fee Phase II”), equal to 3% of the development costs of the Project Sunburst expansion, excluding capitalized interest, less all costs incurred by the Partnership in connection with the Project Sunburst expansion. At December 31, 2004, all of the Partnership’s costs associated with the Project Sunburst expansion had not been paid, however reasonable estimates of those costs have been provided for in these financial statements. The Development Services Fee Phase II shall be paid in installments due on December 31, 1999 and 2000 and on the Completion Date, as defined in the Development Agreement, with a final payment being made when the actual development costs of the Project Sunburst expansion are known. The Partnership pays the Development Services Fee Phase II, from available cash flow, if any, in accordance with the Amended and Restated Omnibus Termination Agreement. At December 31, 2004, the total of the Development Services Fee Phase II and the Partnership’s costs related to the development of the Project Sunburst expansion exceeded the development services revenue from the Authority by approximately $15,964,000.

Before KIML assigned the Development Services Agreement Phase II to Kerzner Investments, it entered into the Local Construction Services Agreement (the “Local Construction Services Agreement”) with Wolman Construction, LLC(“Construction”) pursuant to which Construction agreed to provide certain of those services assigned to KIML by the Partnership pursuant to the Development Services Agreement Phase II. KIML assigned the Local Construction Services Agreement to Kerzner Investments. Pursuant to the Local Construction Services Agreement, Kerzner Investments agreed to pay to Construction a fee equal to 20.83% of the Development Services Fee Phase II as and when Kerzner Investments receives payment from the Partnership in accordance with the Development Services Agreement Phase II.

Construction has subcontracted with The Slavik Company to provide certain services under the Local Construction Services Agreement. In connection with this, Construction agreed that The Slavik Company would be paid a fee equal to14.30% of its fee under the Local Construction Services Agreement.

Amended and Restated Omnibus Termination Agreement

Effective March 18, 1999, the Amended and Restated Omnibus Termination Agreement (the “Amended and Restated Omnibus Termination Agreement”) was entered into by the Partnership, Kerzner International Limited (“Kerzner International”),Waterford Gaming, KIML, LMW, Kerzner Investments, Slavik and Construction. The Amended and Restated Omnibus Termination Agreement (i) terminated the memorandum of understanding dated February 7, 1998; and (ii) effective January 1, 2000, terminated a) the Amended and Restated Omnibus Financing Agreement; b) the Completion Guarantee and Investment Banking and Financing Arrangement Fee Agreement (the “Financing Arrangement Agreement”); c) the Management Services Agreement; d) the Organizational and Administrative Services Agreement; e) the Marketing Services Agreement; and f) a Letter Agreement relating to expenses dated October 19, 1996.

8

In consideration for the termination of such agreements, the Partnership will use its cash to pay the following obligations in the priority set forth below:

(i)First, to pay all unpaid amounts which may be due under the terminated Letter Agreement and to pay to certain affiliates of Waterford Gaming and to Kerzner Investments a percentage of an annual fee of $2.0 million less the actual expenses incurred by the Partnership during such year. Such annual fee shall be payable in equal quarterly installments beginning March 31, 2000 and ending December 31, 2014. For the years ended December 31, 2004, 2003 and 2002, $1,869,157, $1,840,346 and $0, respectively, had been incurred by the Partnership in terms of the first priority;

(ii)Second, to return all capital contributions made by the partners of the Partnership after September 29, 1995. The Partnership does not anticipate making further capital calls to fund expenses related to the development of the Project Sunburst expansion. From January 1, 2000 to December 31, 2004 these contributions aggregated $8,000,000.

From January 1, 2000 to December 31, 2004 $8,000,000 had been repaid to the partners of the Partnership;

As of December 31, 2004, no capital contributions remained outstanding;

(iii)Third, to pay any accrued amounts for obligations performed prior to January 1, 2000 under the Financing Arrangement Agreement. All such required payments were made during 2000;

(iv)Fourth, to make the payments set forth in the agreements relating to the Development Services Agreement Phase II and the Local Construction Services Agreement as detailed under the Agreement Relating to Development Services above. No such payments are required or due at December 31, 2004. The accrued liability to Kerzner Investments with respect to such fee at December 31, 2004 was approximately $414,000;

(v)Fifth, to pay Kerzner Investments an annual fee (in the form of a priority distribution) of $5 million payable in equal quarterly installments of $1.25 million beginning March 31, 2000 and ending December 31, 2006. On January 26, 2005 and on January 27, 2004, $1.25 million was distributed in terms of the fifth priority;

(vi)Sixth, to pay any accrued amounts for obligations performed with respect to periods prior to January 1, 2000 under the Management Services Agreement, the Organizational and Administrative Services Agreement and the Marketing Services Agreement. The final required payments under this priority were made during 2001;

(vii)Seventh, for the period beginning March 31, 2000 and ending December 31, 2014, to pay each of Kerzner Investments and Waterford Gaming twenty-five percent (25%) of the relinquishment payments as distributions. On January 26, 2005 and January 27, 2004, $13,294,808 ($6,647,404 to each of Kerzner Investments and Waterford Gaming) and $12,669,636 ($6,334,818 to each of Kerzner Investments and Waterford Gaming), respectively, was distributed by the Partnership in terms of the seventh priority; and

(viii)Eighth, to distribute all excess cash. On January 26, 2005 and January 27, 2004, $11,600,000 ($5,800,000 to each of Kerzner Investments and Waterford Gaming) and $10,926,597 ($5,463,298 to Kerzner Investments and $5,463,299 to Waterford Gaming), respectively, was distributed as excess cash.

In addition, the Partnership shall not make any distributions pursuant to the Amended and Restated Omnibus Termination Agreement until it has annually distributed to its partners, pro rata, the amounts related to the partners tax obligations as described in Section 3.03a(1) of the Partnership Agreement less twice the amount of all other funds paid or distributed to Waterford Gaming during such year pursuant to the Amended and Restated Omnibus Termination Agreement.

To the extent the Partnership does not have adequate cash to make the payments pursuant to the Amended and Restated Omnibus Termination Agreement, such amounts due shall be deferred without the accrual of interest until the Partnership has sufficient cash to pay them.

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Amended and Restated Omnibus Financing Agreement

Until January 1, 2000, the Partnership’s primary source of revenue and cash flow was management fees. Those fees were utilized by the Partnership to make subcontract payments to partners and affiliates pursuant to the Amended and Restated Omnibus Financing Agreement, which was terminated effective January 1, 2000.

2. Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less.

Relinquishment Fees

Revenue is generated in accordance with the terms of the Relinquishment Agreement and recognized quarterly based upon the Revenues of the Authority.

Development Services Revenue and Cost Recognition

Revenue generated from services performed in accordance with the terms of the Development Agreement are recognized on the percentage-of-completion basis, determined by the percentage of costs incurred to date to estimated total costs for the contract. This method is used because management considers cost incurred to be the best available measure of progress on the contract.

Costs of development services revenue performed include all direct labor costs and those indirect costs related to services such as subcontractors, consultants, supplies, depreciation and other costs. Changes in performance, requirements and estimated profitability may result in revisions to costs and income and will be recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Deferred Costs

Costs associated with acquiring the Management Agreement were amortized on a straight-line basis over the 84-month period of the Management Agreement through March 3, 1999. As a result of the Relinquishment Agreement becoming effective, the remaining balance will be amortized over 189 months beginning March 4, 1999.

Property and Equipment

Office equipment, computer equipment and furniture and fixtures are stated at cost. Depreciation is charged against income over a 3-year estimated life of the office and computer equipment and over a 5-year estimated life of furniture and fixtures. Depreciation expense for the years ended December 31, 2004, 2003 and 2002 amounted to $300, $3,303 and $7,641, respectively, of which $0, $3,003 and $7,341 were included in the cost of development services revenue, respectively.

Income Taxes

No income tax provision or benefit is recorded on the books of the Partnership, as the respective share of taxable income or loss is reportable by the partners on their individual tax returns.

Concentration of Credit Risk

The Partnership’s principal source of revenues and cash flows are the payments received and to be received pursuant to the Relinquishment Agreement. The Partnership anticipates regular payments of the Relinquishment Fees from the Authority based upon the operating results of the Authority.

Financial instruments, which potentially subject the Partnership to a concentration of credit risk, principally consist of cash in excess of the financial institutions’ insurance limits. The Partnership invests available cash with high credit quality institutions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Payments to Partners and their Affiliates

Payments are made to the partners and/or their affiliates in accordance with the terms of the Amended and Restated Omnibus Termination Agreement for certain subcontracted services rendered and are accounted for as expenses of the Partnership.

Reclassification

Certain 2002 and 2003 balances have been reclassified to conform with the 2004 presentation.

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3. Deferred Costs

Certain costs borne by the Partnership in connection with obtaining the Management Agreement and the opening of the Mohegan Sun totaling $5,498,941 were capitalized. Amortization commenced upon the opening of the Mohegan Sun. Amortization expense for the years ended December 31, 2004, 2003 and 2002 was $222,124, $221,518 and $221,518, respectively.

The Partnership’s estimate of amortization expense for each of the succeeding five years and thereafter is as follows:

Year Ending December 31,
2005	$	221,518
2006	221,518
2007	221,518
2008	222,124
2009	221,518
Thereafter	1,108,194
	$	2,216,390

4. Relinquishment Fees

The Partnership entered into a Relinquishment Agreement with the Authority, which entitles the Partnership to receive a relinquishment fee of 5% of the Revenues generated by the Mohegan Sun including revenue generated by the Project

Sunburst Expansion.

For the years ended December 31, 2004, 2003 and 2002, Relinquishment Fees earned were $69,101,491, $65,099,553 and $58,508,703, respectively. The amounts of Relinquishment Fees reported in these financial statements are based upon Revenues reported to the Partnership by the Authority. These amounts were paid by the Authority as follows:

Date received by the Partnership	Amount
April 26, 2004	$	8,196,363
July 26, 2004	25,150,422
October 25, 2004	9,165,092
January 25, 2005	26,589,614
Relinquishment Fees earned 2004	$	69,101,491
April 25, 2003	$	7,433,160
July 25, 2003	23,635,310
October 27, 2003	8,691,811
January 26, 2004	25,339,272
Relinquishment Fees earned 2003	$	65,099,553
April 25, 2002	$	6,228,559
July 25, 2002	20,438,439
October 25, 2002	8,171,882
January 27, 2003	23,669,823
Relinquishment Fees earned 2002	$	58,508,703

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5. Reconciliation of Financial Statements and Tax Information

	2004			2003			2002
Financial statement net income	$	66,887,319		$	62,919,777		$	55,082,815
Guaranteed payments to partners	(39,550,748		)	(39,941,567		)	(55,765,000		)
Financial statement depreciation and amortization (greater than) less than tax basis depreciation and amortization	305			(3,028		)	1,560
Percentage of completion accounting difference	(49,505		)	(9,236,479		)	991,712
Other	572			(4,865		)	50,093
Federal income tax basis net income	$	27,287,943		$	13,733,838		$	361,180

6. Commitments and Contingent Liabilities

Litigation

On January 6, 1998, Leisure Resort Technology, Inc. and defendants Waterford Gaming, the Partnership, LMW Investments, Inc. and Slavik Suites, Inc. settled a prior lawsuit brought by Leisure. In connection with this settlement, Leisure, the Partnership, Waterford Gaming, LMW Investments, Inc. and Slavik Suites, Inc. entered into a settlement and release agreement. Pursuant to this settlement and release agreement, Waterford Gaming bought out Leisure’s beneficial interest in the Partnership.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a four count complaint naming as defendants Waterford Gaming, the Partnership, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, LLC, Len Wolman and Mark Wolman (collectively, the “Defendants”). The matter has been transferred to the complex litigation docket and is pending in Waterbury, Connecticut. The complaint alleged breach of fiduciary duties, fraudulent non-disclosure, violation of Connecticut Statutes Section 42-110a, et seq. and unjust enrichment in connection with the negotiation by certain of the Defendants of the settlement and release agreement. The complaint also brought a claim for an accounting. The complaint seeks unspecified legal and equitable damages. On February 29, 2000, Defendants filed a Motion to Strike and a Motion for Summary Judgement, each with respect to all claims. The Court granted Defendants’ Motion to Strike in part and denied Defendants’ Motion for Summary Judgement, on October 13, 2000. The Court’s order dismissed the claim for an accounting and the claim under Connecticut Statutes Section 42-110a, et seq. The Court also struck the alter ego allegations in the complaint against LMW Investments, Inc., Slavik Suites, Inc., Len Wolman and Mark Wolman. In a decision dated August 6, 2001, the Court dismissed all claims against LMW, Slavik, Len Wolman and Mark Wolman.

On November 15, 2000, the Partnership and its co-defendants answered the complaint. In addition, the Partnership and Waterford Gaming asserted counterclaims for breach of the settlement and release agreement and breach of the implied covenant of good faith against Leisure and its president, Lee Tyrol. In a decision dated June 6, 2001, the Court dismissed the counterclaims against Lee Tyrol. Leisure moved for summary judgment seeking dismissal of the counterclaims in full. This motion for the summary judgment was denied on April 14, 2003.

Fact discovery is completed. On April 15, 2004, the Partnership and its co-defendants filed a motion for summary judgment as to all of Leisure’s claims. The Court heard argument on this Motion on June 23, 2004. In an August 4, 2004, Memorandum of Decision, the Court granted summary judgment for the Defendants as to each of the remaining three counts of the plaintiffs compliant. The plaintiff has appealed this decision. Defendant’s counterclaims are stayed pending this appeal.

The Partnership believes that it has meritorious defenses and, if necessary, intends to vigorously contest the claims in this action and to assert all available defenses. At the present time, the Partnership is unable to express an opinion on the likelihood of an unfavorable outcome or to give an estimate of the amount or range of possible loss to the Partnership as a result of this litigation due to the pendency of the appeal and the disputed issues of law and/or facts on which the outcome of this litigation depends.

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