20-F

As filed with the Securities and Exchange Commission on March 31, 2006

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, 2005

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:  6¾% Senior Subordinated Notes due 2015.

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:  36,501,465

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ý  No o

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act.  Large Accelerated Filer ý     Accelerated Filero     Non-accelerated filer o

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

Item 17 o  Item 18 ý

If this is an annual report, indicate by check mark whether the registrant is a shell company under Exchange Act Rule 12b-2.

Yes o   No ý

KERZNER INTERNATIONAL LIMITED

FORM 20-F
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS

PRESENTATION OF FINANCIAL AND OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
PART I
Item 1.	Identity of Directors, Senior Management and Advisers
Item 2.	Offer Statistics and Expected Timetable
Item 3.	Key Information
Item 4.	Information on the Company
Item 4A.	Unresolved Staff Comments
Item 5.	Operating and Financial Review and Prospects
Item 6.	Directors, Senior Management and Employees
Item 7.	Major Shareholders and Related Party Transactions
Item 8.	Financial Information
Item 9.	The Offer and Listing
Item 10.	Additional Information
Item 11.	Quantitative and Qualitative Disclosures About Market Risk
Item 12.	Description of Securities Other Than Equity Securities
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15.	Controls and Procedures
Item 16A.	Audit Committee Financial Expert
Item 16B.	Code of Ethics
Item 16C.	Principal Accountant Fees and Services
Item 16D.	Exemptions from the Listing Standards for Audit Committees
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers
PART III
Item 17.	Financial Statements
Item 18.	Financial Statements
Item 19.	Exhibits

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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 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, 2005. The historical financial information as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, 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, 2005.

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

	For the Year Ended December 31,
	2005(a)		2004(b)		2003(c)		2002(d)			2001(e)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Gross revenue	$	745,763	$	644,119	$	582,092	$	564,472		$	614,209
Net revenue	721,524		621,085		558,513		542,262			573,436
Income from operations	32,181		50,347		63,206		64,619			66,960
Relinquishment fees - equity in earnings of TCA	37,882		35,909		33,960		30,041			24,263
Income from continuing operations	52,217		68,132		70,267		47,664			37,269
Net income	52,217		68,132		71,572		39,603			32,661
Basic earnings per share:
Income from continuing operations	$	1.46	$	2.09	$	2.46	$	1.71		$	1.39
Income (loss) from discontinued operations	—		—		0.04		(0.29		)	(0.18		)
Net income per share	$	1.46	$	2.09	$	2.50	$	1.42		$	1.21
Diluted earnings per share:
Income from continuing operations	$	1.39	$	2.01	$	2.39	$	1.67		$	1.34
Income (loss) from discontinued operations	—		—		0.05		(0.28		)	(0.17		)
Net income per share	$	1.39	$	2.01	$	2.44	$	1.39		$	1.17

	For the Year Ended December 31,
	2005		2004		2003		2002		2001
CONSOLIDATED BALANCE SHEET DATA:
Total assets	$	2,276,622	$	2,087,275	$	1,455,928	$	1,395,039	$	1,337,740
Long-term debt, net of current maturities	789,617		754,129		417,220		497,756		518,231
Shareholders’ equity	1,161,762		1,116,278		839,590		729,021		674,662
Number of shares outstanding, net of treasury shares	36,501		35,900		30,284		28,125		27,318

(a)We consolidated Reethi Rah Resort Pvt Ltd (“Reethi Rah”) effective May 1, 2005, and Residences at Atlantis Development Limited (“Residences at Atlantis”) effective August 30, 2005, in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities”, which increased revenue, costs and expenses, assets and liabilities. During 2005, we recognized an impairment of notes receivable of $27.8 million related to Reethi Rah and a $11.2 million write off of UK gaming costs. We also recognized a loss on early extinguishment of debt of $27.9 million, representing costs associated with the September 2005 tender for our 87/8% Senior Subordinated Notes and realized a tax benefit of $15.7 million related to this refinancing.

(b)We consolidated Palmilla JV, LLC effective January 1, 2004, in accordance with FIN 46R, which increased revenues, cost and expenses, assets and liabilities. During 2004, we recognized a $7.3 million impairment with respect to our Atlantic City land, $4.6 million of expenses related to Hurricane Frances as well as operating losses from Palmilla JV, LLC, which reflect $3.3 million of pre-opening expenses.

(c)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.

(d)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.

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

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(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, racinos, 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, results of operations or cash flows.

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. For example, a joint venture consisting of Baha Mar Resorts Ltd., Harrah’s Entertainment, Inc. and Starwood Hotels & Resorts Worldwide, Inc. announced plans to develop a $1.6 billion destination resort casino in Nassau, The Bahamas. The first phase of this project, which project is being developed in stages, is expected to be completed by 2010 and include six hotels, an expanded casino space managed under the Caesars brand, time share and condominium developments and a new golf course. In addition, The Ritz-Carlton Hotel Company, L.L.C. recently announced the proposed development of a Ritz-Carlton resort on Rose Island, which is four miles from New Providence Island and Paradise Island. The resort is scheduled to open in 2009 and include a hotel, condominiums, townhouses, estate homes and a shelter for yachts. According to recent press reports, the Stillman Organization, a New-York based real estate developer, plans to buy a resort on the south coast of New Providence Island, and invest approximately $500 million to build a 1,000 room hotel/casino, together with residential units, an expanded marina with restaurants and retail facilties, and a golf course. If completed, these developments would compete with our Paradise Island properties and could materially adversely affect our business and results of operations.

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 proposed development project in Morocco, the redevelopment of the Lincoln Park racino in Rhode Island (“Lincoln Park”), the project in Northampton and the proposed development of our project in 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:

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•the availability of financing and compliance with the terms and covenants in our Sixth 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, floods, fires or other casualty losses;

•failure to obtain required licenses, permits or approvals;

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

•rising energy prices, which can increase construction costs;

•regulatory or private litigation arising out of projects; and

•unanticipated cost increases and budget overruns.

For example, many of 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, results of operations or cash flows.

The anticipated costs and construction period 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, results of operations or cash flows.

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 development, expansion or renovation projects around the world, it could have a material adverse effect on our business, financial condition, results of operations or cash flows.

In addition, 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, results of operations or cash flows.

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 recession or economic slowdown could cause a reduction in bookings or the willingness or ability of tourists to book vacations at Atlantis, Paradise Island and our other properties, which could materially adversely affect our operating results. Additionally, a tightening of the labor market or a change in labor-related regulations in one or more geographic regions may result in fewer and/or less qualified applicants for job openings at our properties. Higher wages, related labor costs and the increasing cost trends in insurance markets may negatively impact our results.

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

The Bahamas, Mexico, Mauritius, the Maldives, Morocco and Dubai are subject to tropical weather and natural disasters, which, if severe, could adversely affect tourism and our operations. Similarly, inclement weather can adversely affect the relinquishment fees—equity in earnings of TCA that we earn from the Mohegan Sun casino (“Mohegan Sun”) and the equity earnings we receive indirectly from Lincoln Park, as the principal access to these properties is by road.

The 2005 hurricane season in the Atlantic Ocean, Caribbean Sea and Gulf of Mexico (collectively, the “Atlantic”) was the most active on record. The hurricane season had the most named storms (27 versus 21 in 1993, the previous record), the most hurricanes (14 versus 12 in 1969, the previous record) and the most category five storms (3). The Atlantic is in its eleventh year of heightened activity and is expected to remain active for the next decade or longer according to the National Oceanic and Atmospheric Administation’s National Weather Service (the “National Weather Service”).

In September 1999, Hurricane Floyd, a hurricane rated by the 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, 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 property damage and cleanup costs. Our losses resulting from Hurricane Floyd and Hurricane Michelle were predominantly 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 managed properties in the Maldives. An insurance claim in respect of these losses was settled, with One&Only Kanuhura receiving $5.0 million for business interruption losses. In addition, One&Only Kanuhura suffered property damages, and the related insurance claim was settled for $3.5 million. Reethi Rah, the entity that owns and operates One&Only Maldives at Reethi Rah, submitted a claim to its insurer for $15.5 million in property damages. The claim was denied, but Reethi Rah is contesting such denial. In 2005, equity earnings and management fees from One&Only Kanuhura were adversely affected by the tsunami. In June 2005, One&Only Kanuhura was closed for an extensive four-month renovation and planned refurbishment. One&Only Kanuhura reopened on October 15, 2005.

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

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

We may encounter difficulty in obtaining or renewing property or casualty insurance on certain of our properties that are subject to the potential negative impact of natural disasters. In addition, such insurance may be more limited and may not cover catastrophic risks or terrorist acts at current levels or at all. Even if we are able to renew our policies or 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. The tsunami in December 2004 in southeast Asia resulted in increases in local insurance rates. 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

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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 respect to our Paradise Island business (inclusive of per occurrence deductibles) in the 2005 policy year is $300.0 million per occurrence. The amount of such “all risk” property and business interruption insurance was $300.0 million per occurrence in the 2004 policy year and $175.0 million in the 2003 policy year. (“Policy Year” is defined as June 1st of that year through May 31st of the following year.)  “All risk” insurance includes coverage for the windstorm related effects (excluding those associated with landscaping) of hurricanes among other casualty losses.

In 2002, with regard to our Paradise Island property insurance, our “all risk” premiums increased from approximately $4.6 million in the 2001 Policy Year to a total of approximately $14.1 million in the 2002 Policy Year. 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. For the 2005 Policy Year, our premium for the Paradise Island property insurance decreased to $12.1 million, with the deductibles remaining the same as in the 2004 Policy Year. In light of the significant hurricane activity in the Atlantic, the tsunami in December 2004 and Hurricane Katrina in August 2005, our insurance premiums and deductibles are likely to significantly increase.

Loss of our gaming license or failure to comply with extensive governmental gaming regulations that govern our operations could 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, results of operations or cash flows. For example, any failure by us to comply with the terms and conditions of our Heads of Agreement with the Bahamian Government could result in the loss of certain tax incentives or have other adverse consequences.

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 our interests in gaming operations in Connecticut and Rhode Island 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 revenue and operating profits in The Bahamas and Mexico have been higher during the first quarter, the prime tourist season, than in successive quarters. Higher revenue and earnings are typically realized from the Mauritius and Maldives properties during the fourth quarter of the year and from Mohegan Sun and Lincoln Park 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 revenue and profits could be adversely affected.

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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 6¾% 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, results of operations or cash flows.

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

In The Bahamas, a union represents approximately 4,200 of our approximately 6,400 local employees. We participate in an employer association whose existing contract with the union will expire on January 7, 2008. In light of our Phase III expansion, we expect to hire approximately 3,000 additional employees, a substantial portion of which will be represented by such union. Labor 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 and adversely affect our future growth.

Most patrons of our properties arrive by air. Any interruption or reduction of air service to our properties in The Bahamas, Mexico, Mauritius, the Maldives and Dubai 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 do not own, manage or control Mohegan Sun and the revenue that we derive from Mohegan Sun is therefore outside of our control and are subordinated to certain existing and future obligations of Mohegan Sun.

In 2005, we earned approximately $38.8 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 revenue 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, results of operations and cash flows.

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, 2006, 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 8.3%, 5.9%, 15.8%, 13.4% and 12.3%, respectively, of our Ordinary Shares. As of February 28, 2006, 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 10.7% of our Ordinary Shares. See “Item 7. Major

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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 financing for development plans, renovations or expansions, which could materially adversely affect our ability to develop our business and pursue our strategies. In addition, Istithmar, Caledonia, CMS and WLG are parties to certain shareholder agreements that govern, among other things, their transfer of, and voting rights associated with, their shares. Substantially all of the provisions of such shareholder agreements terminate in June 2006 (excluding the agreement with Istithmar, which does not terminate until July 2009). See “Item 7. Major Shareholders and Related Party Transactions, (B) Related Party Transactions—Restructuring of Relationship with Majority Shareholder.”

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 introduced 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 receive any benefits from any new technology.

We also rely on the Internet and our website for a portion of our hotel reservations for Atlantis, Paradise Island and One&Only Ocean Club. In the third quarter of 2005, we integrated our web-based reservation system with our call center to allow online bookings of certain restaurants and activities on Paradise Island. The Internet and our website could experience material disruptions, slowdowns and security breaches, and upgrade and maintenance to our website could result in significant downtime. If we were to experience such a disruption, slowdown or security breach, it could harm our business and reputation. In late 2005, we determined that there had been a theft from a customer database of personal information relating to certain of our Paradise Island customers and thereafter notified approximately 55,000 customers whose personal information could have been compromised as a result of the theft. Similar incidents in the future could adversely affect the Atlantis brand and our business. See “Item 4. Recent Developments” for more information.

Joint ventures decrease our ability to manage risk.

We have 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, results of operations or cash flows could be materially adversely affected.

In addition, we often participate in the equity of joint ventures and/or managed properties and provide financing or guarantees to complete the development of a property. These fundings may become unrealizable or we may become obligated to perform under the guarantees, which could adversely affect our financial performance. For example, during 2005, we recognized a $27.8 million impairment of our notes receivable due from Reethi Rah as discussed in “Item 5. Operating and Financial Review and Prospects.”

We may have disputes with the owners and/or 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

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business, financial condition, results of operations or cash flows. For example, in February 2006 we received correspondence on behalf of Reethi Rah that raised concerns with respect to certain aspects of management activity and the amount of certain associated fees. We expect to discuss these matters with Reethi Rah, but we can make no assurances as to the outcome of such discussions.

We are subject to environmental regulations, and any cleanup liabilities or noncompliance with applicable laws or a significant regulatory change could adversely affect our business, financial condition or results of operations.

As the owner, operator and developer of real property we have to address, and may be liable for, hazardous materials or contamination on these sites. We have in the past, and may in the future, become liable for contamination on our properties that was caused by former owners or operators. For sites that we acquire for development, we conduct environmental assessments to identify adverse impacts from former activities, including the improper storage or disposal of hazardous substances and the existence of asbestos containing materials. We may not always identify environmental problems through this process and may become liable for historical contamination not previously discovered. For sites that we have sold, we retain all or a portion of any residual environmental liability. In order to receive governmental approvals prior to site development, we must conduct extensive assessments of the environmental impact of our proposed operations. Our ongoing operations are subject to stringent regulations relating to protection of the environment and waste handling, particularly with respect to the management of wastewater from our facilities. Any 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.

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 enforceable in certain foreign jurisdictions or in certain jurisdictions within the United States. A substantial percentage of the customers at Atlantis, Paradise Island reside in the United States. As a 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 and results of operations.

We regularly review 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 may not be able to carry forward and complete any proposed business plans.

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

Resorts use significant amounts of electricity, natural gas and other forms of energy. Although we have not experienced shortages of energy, there have been significant price increases over the past year, and further 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 revenue. This risk has been heightened by the substantial increase in oil and natural gas prices over the past year.

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

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, 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 that 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, results of operations or cash flows.

Additional risks may be associated with Atlantis, The Palm in Dubai.

In September 2003, we entered into agreements to form a joint venture with Nakheel Co. LLC (“Nakheel”), 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 assumed all obligations and rights of its affiliate, Nakheel. 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. The United Arab Emirates and Dubai are ruled by Sheikhs. Although the Sheikh-led government appears to be stable and not subject to any significant local challenges, the September 11^th 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 further attacks against Westerners and oil workers in the Persian 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.

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Atlantis, The Palm will be located at the apex of the crescent, which forms the external border of The Palm, Jumeirah, a major 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 Istithmar 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 a risk of liquefaction. While there has not been recent significant seismic activity in the immediate vicinity of Dubai, earthquakes have occurred in Iran, Egypt, Syria and southern Asia, off the coast of Indonesia. In addition, moderately strong storms accompanied by high winds can develop over the Gulf. These storms typically occur annually from December through the end of March. 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. We and Nakheel have agreed to regularly monitor the status of the breakwaters. 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 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. In addition, we are dependent on Nakheel to complete the infrastructure of The Palm, Jumeirah, including roads, the proposed monorail and the roadway tunnel, on a timely basis. Should any of these reclamation projects suffer from any of these events, Atlantis, The Palm and, as a result, we could be materially adversely affected.

In addition to the political and other risks noted above, there are risks associated with the very high level of development activity currently underway in Dubai. In particular, due to the very high demand for construction laborers, much of the construction work force consists of foreigners, principally from Southeast Asia, who have left their families to take temporary jobs in Dubai. There have recently been demonstrations and other incidents of labor unrest at constructions sites in Dubai,  in which foreign workers have protested allegedly unfairly low pay and substandard living conditions. If these incidents become more widespread, or if the contractors constructing Atlantis, The Palm, are not able to retain a sufficient number of construction workers for the project, the construction budget and schedule for Atlantis, The Palm, could be materially adversely affected.

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

In the second quarter of 2005, 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 a joint venture agreement for the development and operation 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. 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 historically 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 that 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, 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

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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.

The foregoing does not address any additional risks that may be associated with the proposed acquisition announced on March 20, 2006. See “Item 4. Recent Developments” for more information.

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 (the “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 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. On March 14, 2004, we sold undeveloped real estate adjacent to Resorts Atlantic City to a wholly-owned subsidiary of Colony for a sale price of $40.0 million. See “(B) Business Overview—Colony Note” below for more information on this sale.

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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 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, 2005, the balance of the debt financing we have provided to One&Only Kanuhura was $2.3 million, excluding accrued interest, and we also have a contingent guarantee obligation to provide up to approximately $10.7 million. 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 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 One&Only Kanuhura to Sun Resorts Limited and the transfer to One&Only Management (as defined below) of the One&Only Kanuhura management agreement. This agreement reduced our ownership interest in One&Only Kanuhura to 20%. Effective January 1, 2005, our ownership interest in 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 One&Only Maldives at Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives that we opened on May 1, 2005. This new five-star resort occupies 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 2030. 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. 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, One&Only Palmilla had a grand re-opening event. The expansion was financed by 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

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Kerzner. The total cost of the One&Only Palmilla renovation was approximately $102.0 million. On December 17, 2004, 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 One&Only Palmilla’s existing loans, including the completion loans provided by Kerzner, and fund One&Only Palmilla’s working capital requirements. In connection with the repayment of 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 solely 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 seven 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 One&Only Le Saint Géran, 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 Management”), a new management company, for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and 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 is increasing incrementally, subject to certain conditions, from 2005 through 2009, at which time it will own 50% of One&Only Management.

The table below shows the dates on which SRL’s ownership interest in One&Only Management increases and the corresponding decreases in our ownership interest in One&Only Management.

Effective Date	Kerzner Ownership Percentage		SRL Ownership Percentage
January 1, 2003	80.0	%	20.0	%
January 1, 2005	75.0	%	25.0	%
January 1, 2007	72.5	%	27.5	%
January 1, 2008	67.5	%	32.5	%
January 1, 2009	50.0	%	50.0	%

SRL’s ownership of the debt and equity interests in One&Only Kanuhura is also increasing incrementally, subject to certain conditions, from 2003 to 2009, in accordance with the ownership percentage in the above table, at which time it will own 12.5% of the debt and equity interests in One&Only Kanuhura (or 50% of our initial ownership of such debt and equity interests).

One&Only Management serves as a joint venture 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 One&Only Kanuhura. Effective January 1, 2005, our ownership interest in 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 One&Only Kanuhura and One&Only Maldives at Reethi Rah and receive a management fee. Pursuant to our agreement to transfer the management agreement for One&Only Maldives at Reethi Rah to One&Only Management, SRL acquired 25% of the subordinated debt interest in One&Only Maldives at Reethi Rah, which percentage was to increase to 50% as SRL’s interest in One&Only Management increased. It is anticipated that we will amend our agreement with SRL to waive the requirement that SRL purchase up to 50% of the subordinated debt and to provide that SRL will only be entitled to 25% of the management fees paid to One&Only Management under the One&Only Maldives at Reethi Rah management agreement. It is further anticipated that we will acquire a short-term option to purchase SRL’s existing subordinated debt (and corresponding management fees) in One&Only Maldives at Reethi Rah as consideration for granting such waiver.

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

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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 facility is expected to cost approximately £10.8 million (approximately $18.9 million in U.S. dollars as of February 28, 2006). The development of this facility has been approved by the local planning authorities. We have commenced construction on this project, and we expect the facility to be open by the first quarter of 2007. 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, a new condominium-hotel, an expansion of our convention facilities, expanded water attractions, an addition to Harborside at Atlantis and a new 18-hole golf course (the “Athol Golf Course”) on Athol Island, which lies just east of Paradise Island, in partnership with an agency to be nominated by the Bahamian Government. 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, 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 assumed all obligations and rights of its affiliate, Nakheel, 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 $1.5 billion (inclusive of land acquisition costs) and the project will include an approximately 1,500-room resort and extensive water park situated on 1.25 miles of beachfront property. The joint venture has decided to postpone development of a previously-announced condominium project. Atlantis, The Palm will be located on The Palm, Jumeirah, a multi-billion dollar land reclamation project in Dubai, United Arab Emirates. The joint venture’s capital structure includes an equity investment of $200.0 million by each partner. The remaining project financing is expected to consist of a $700.0 million senior first-lien term loan facility, which is subject to various conditions, and an additional $275.0 million of senior second-lien debt. Istithmar has committed to provide $75.0 million of the senior second-lien debt. The joint venture has received a commitment, subject to various conditions, from third party underwriters for the remaining $200.0 million. The joint venture expects to enter into binding definitive documentation for the senior first-lien term loan facility and the senior second-lien debt during the second quarter of 2006. In addition, we and Istithmar will each 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 services obligations. Further, Istithmar has agreed to provide an additional guarantee for cost overruns in excess of this amount and as necessary to achieve completion.

Nakheel has agreed to provide the joint venture with a right to reclaim and develop an additional 125 acres of land off the crescent of The Palm, Jumeirah, so as to expand the overall Atlantis, The Palm site and permit additional phases of development. The joint venture has also agreed with Nakheel to acquire all of the land on which Atlantis, The Palm is situated for a $125 million payment-in-kind note.

We commenced construction on Atlantis, The Palm in November 2005. We anticipate that the project will be completed in late 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 revenue generated by Atlantis, The Palm, and an incentive management fee based on operating income. The base management fee is likely to be subordinated to both the senior and subordinated debt facilities. 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 all requisite governmental consents and construction of supporting infrastructure by Nakheel. 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 22-story, 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 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 exercised our option and purchased the adjacent land lots at a price of $5.5 million.

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In November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited (“V&A Waterfront”) to develop a new luxury hotel, subject to various conditions, at the highest end of the market in Cape Town, South Africa. Under this agreement, we committed to enter into a land lease and relevant development agreements related to the property. Consequently, in 2004, we entered into a 50-year land lease with V&A Waterfront and formed a joint venture, in which our local partners own 80% and we own the remaining 20%, to develop hotel properties in southern Africa. In March 2006, we formed a project company under the joint venture to focus specifically on the Cape Town property. This project company entered into development and management agreements with wholly-owned subsidiaries of Kerzner. Kerzner assigned the land lease to the project company. Along with our equity investment, we will be providing financing assistance in the form of loans and guarantees in an aggregate amount of approximately $24.4 million. See “(B) Business Overview – One&Only Resorts – South Africa” for more information.

On March 10, 2004, we entered into a joint venture, BLB Investors, L.L.C. (“BLB”), with an affiliate of Starwood Capital Group Global, 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 owned gaming and track operations in the United States and race tracks in the United Kingdom. BLB acquired a 22.2% stake in Wembley in 2004. In July 2005, BLB completed its approximately $464.0 million acquisition of Wembley’s U.S. operations, which included the Lincoln Park racino in Rhode Island and three greyhound tracks and one horse racing track in Colorado. BLB exchanged its 22.2% interest in Wembley, valued at $116.0 million, as partial consideration for the acquisition. The balance of the acquisition price was financed on a non-recourse basis by a consortium of banks that underwrote a $495.0 million senior secured credit facility, which includes a $125.0 million revolving credit facility that will be used primarily to finance a portion of the proposed redevelopment of Lincoln Park.

Completion of the Lincoln Park redevelopment project is expected in early 2007. Based on the most recent cost estimates, which indicate a significant rise in the total development costs of this project, we expect to make an additional equity investment in BLB of $10.0 million to $15.0 million to finance our pro rata share of these additional costs. See “(B) Business Overview—Gaming—United Kingdom” for more information.

In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated related to our previously announced Scottish Exhibition + Conference Center, Sportcity and The O2 (“The O2”) (formerly the Millennium Dome) projects. Specifically, this legislation reduced the number of regional casinos from eight to one in order to secure opposition party support for the legislation. The new law does however contain a provision for the government to increase the number of regional casinos; however, this increase would require the approval of both houses of Parliament.

During 2005, we wrote off $11.2 million related to all previously capitalized and deferred costs incurred for the planning and development of the aforementioned projects. Although the future of gaming in the United Kingdom is unclear as a result of the passage of legislation in April 2005, we continue to pursue potential opportunities on a selective basis. Costs related to these opportunities, other than the Northampton project discussed above, are expensed as incurred. The Company is committed to making a contribution of not more than £10 million towards the construction of the raft and shell infrastructure to house our proposed regional casino at The O2. The Company expects to incur approximately £6.5 million (approximately $11.3 million in U.S. dollars as of February 28, 2006) in 2006 related to this construction. If a regional casino license is not awarded at The O2, the Company is eligible to recover 80% of its approximately £6.5 million investment from Anschutz Entertainment Group, Inc., its joint venture partner. The balance of the costs is expected to be expensed as incurred.

In connection with a planned destination resort casino in Morocco, we have entered into a joint venture agreement with two local Moroccan companies, SOMED and CDG, and related development and long-term management agreements. The joint venture has negotiated with the Government of the Kingdom of Morocco exclusive rights to conduct gaming operations within a territory that includes the cities of Casablanca and Rabat. The greenfield site is located near El Jaddida, which lies approximately 50 miles southwest of Casablanca. This site includes three miles of beachfront along Morocco’s Atlantic coast. The destination resort casino is expected to consist of a 500-room hotel, an 18-hole golf course, convention space, restaurants and a casino.

The agreements require each party to provide equity based on the initial estimate of total project cost of $230.0 million. Based on the current preliminary designs for the project, the budget is now anticipated to be approximately $300.0 million, although a more definitive budget figure will not be available until further detailed design work has been completed. As a result of the budget increase, the need to arrange additional debt and equity financing and the additional design work required for the project, we expect that there will be material amendments

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of the project agreements, and we do not intend to proceed with the development of this project unless such amendments are obtained. As a result of the previously announced budget increase, the parties have worked together for several months to arrange debt and equity financing to fund the project. Although no assurances can be given at this time, we expect to reach agreement with our Moroccan partners on amended project documents and proceed with the project, subject to obtaining third party debt financing. We expect to sell one-half of our 50% interest in the joint venture to an affiliate of Istithmar and are discussing the terms of the transaction with the other parties. Construction is anticipated to commence in 2007, with an expected completion date in 2009. The required debt financing is expected to be raised by a consortium of Moroccan banks.

No assurances can be given at this time that either the additional debt or equity financing will be obtained or the likely material amendments to project documents will be agreed, both of which will be necessary in order for this project to move forward to construction, as well as certain other conditions, including receipt of all applicable municipal, regional and other regulatory approvals. See below “(B)” Business Overview—the Properties—Destination Resorts—Morocco” for more information.

In January 2005, we announced that we and CapitaLand had entered into a memorandum of understanding relating to the creation of a joint venture to be owned 60% by us and 40% by CapitaLand for the purpose of submitting a joint concept proposal to the Singapore Government for the potential development of an integrated entertainment resort complex on Sentosa Island in Singapore.

Capital Structure

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, 2006, Istithmar held approximately 12.3% 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 are using 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.

Amended Credit Facility

On October 31, 2005, Kerzner, KINA and Kerzner International Bahamas Limited (“KIB”), as co-borrowers, entered into the Amended Credit Facility with a syndicate of banks. Under the Amended Credit Facility, the maximum amount of borrowings that may be outstanding is $650.0 million, subject to certain conditions. Should we obtain the requisite commitments from existing or new lenders, we have the right to increase the amount of our credit facility by up to $250.0 million. The Amended Credit Facility contains newly negotiated covenants.

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 0.00% to 1.00% based on a debt to EBITDA ratio during the period, as defined (the “Leverage Ratio”), (ii) the London Interbank Offered Rate (“LIBOR”) rate plus 0.750% to 2.00% based on the Leverage Ratio or (iii) the Federal Funds Rate plus 0.750% to 2.00% based on the Leverage Ratio. For loans based on the Alternate Base Rate (as defined therein), interest is payable quarterly. 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 December 2010. Commitment fees are calculated at per annum rates ranging from 0.25% to 0.60% based on the Leverage Ratio, applied to the unused 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, 2005, we believe that we were in compliance with all such covenants.

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As of December 31, 2005, we had no borrowings outstanding under the Amended Credit Facility. Our availability as of December 31, 2005 was $644.6 million after giving effect to the $5.4 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% Notes”) which, after related issuance costs, resulted in net proceeds of approximately $223.7 million. In connection with the issuance of the 2.375% 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% Notes are being used to fund future capital expenditures and for general corporate purposes.

The 2.375% 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% 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 6¾% Notes. Interest on the 2.375% 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% Notes as of December 31, 2005. All of our outstanding 2.375% Notes are subordinated to the borrowings under our Amended Credit Facility.

Issuances of 6¾% Senior Subordinated Notes

In September 2005, Kerzner issued $400.0 million principal amount of 6¾% senior subordinated notes due 2015, which after $7.3 million of debt issuance costs, resulted in net proceeds of $392.7 million.

The proceeds were used to repay the Company’s then-outstanding 87/8% senior subordinated notes (the “87/8% Notes”) pursuant to the tender offer and consent solicitation described below.

The 6¾% senior subordinated notes were issued without registration under the Securities Act,  in reliance on Rule 144A promulgated under the Securities Act. In connection with the sale of those notes, we entered into a registration rights agreement, under which we agreed to consummate an exchange offer for the 6¾% senior subordinated notes. We filed an exchange offer registration statement on November 23, 2005, which was declared effective by the SEC on December 2, 2005. On December 2, 2005, we commenced an exchange offer to exchange any and all of our outstanding 6¾% senior subordinated notes for identical notes registered under the Securities Act. On January 6, 2006, we closed the exchange offer and, together with KINA, issued $400.0 million of 6¾% senior subordinated notes (the “6¾% Notes”) in exchange for our outstanding 6¾% senior subordinated notes.

The 6¾% Notes, which are unsecured obligations, were co-issued by Kerzner and KINA and are unconditionally guaranteed by substantially all of the wholly-owned subsidiaries of Kerzner other than KINA. Interest on the 6¾% Notes is payable semi-annually on April 1 and October 1, commencing on April 1, 2006. The indenture governing the 6¾% Notes contains various restrictive covenants, including limitations on the ability of the co-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 that we were in compliance with all such covenants as of December 31, 2005. All of our outstanding 6¾% 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% 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% Notes as of December 31, 2004. In 2005, we terminated the remaining $150.0 million of our Swap Agreements, which resulted in an increase in fixed rate debt, in advance of planned variable rate borrowings for growth initiatives under our Amended Credit Facility. The termination of the $150.0 million of Swap Agreements resulted in the realization of a gain of $4.9 million, which reduced the loss on early extinguishment of our 87/8% Notes in the tender offer discussed below.

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In December 2004, 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 and Consent Solicitation for 87/8% Senior Subordinated Notes

On September 12, 2005, we commenced a cash tender offer to purchase any and all of our outstanding 87/8% Notes. In conjunction with the tender offer, we solicited consents to proposed amendments to the indenture governing the 87/8% Notes. The tender offer expired on October 8, 2005. At the expiration, approximately 99.6% of the 87/8% Notes were tendered and the requisite consents received. We used the net proceeds from the issuance of $400.0 million of our 6¾% Notes on September 22, 2005, together with cash on hand of $39.3 million, to retire the 87/8% Notes purchased pursuant to the tender offer.

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. 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.

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.

Recent Developments

AtlantisReports Theft of Certain Customer Information

On January 6, 2006, Kerzner announced that the management of Atlantis, Paradise Island had determined that there had been a theft from a customer database of personal information relating to certain Atlantis customers. The resort believes that approximately 55,000 customers may be affected. The resort notified affected customers in writing so customers could take steps to protect themselves from possible identity fraud and provided, at the customer’s option and at no cost, a credit monitoring service for one year. To date, the resort has not received any evidence that the information has been used to commit identity fraud or in any other manner adverse to its customers. The resort engaged outside counsel and a firm specializing in information security to assist it in responding to this incident. The resort notified Bahamian and U.S. law enforcement authorities and is cooperating with them. The personal information that was compromised includes names, addresses and credit card, Social Security, driver’s license and/or bank account numbers.

Kerzner Enters Into Agreement for Sale to Investor Group

On March 20, 2006, Kerzner announced that an investor group led by its Chairman, Mr. S. Kerzner, and Chief Executive Officer, Mr. H. B. Kerzner, had entered into a definitive agreement under which the Company will be acquired by the investor group for $76.00 in cash per outstanding ordinary share. The investor group also includes Istithmar, a significant shareholder of the Company, Whitehall Street Global Real Estate Limited Partnership 2005, Colony Capital LLC, Providence Equity Partners, Inc. and The Related Companies, L.P., which is affiliated with one of the Company’s Directors. The aggregate transaction value, including the assumption of $599 million of net debt as of December 31, 2005, is approximately $3.6 billion.

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The Board of Directors of the Company, upon the unanimous recommendation of a Special Committee of Directors formed to evaluate the terms of the transaction, approved the merger agreement. The Special Committee, which includes representatives of two significant shareholders that are not affiliated with the investor group, negotiated the price and other terms of the merger agreement with the assistance of its financial and legal advisors.

In accordance with the merger agreement, the Company and the Special Committee’s advisors, working under the supervision of the Special Committee will actively solicit superior proposals during the next 45 days. The Kerzners and Istithmar have agreed to cooperate in this solicitation process.

In the event the merger agreement is terminated, in order for the Company to enter into a superior transaction arising during the 45-day solicitation period, the investor group will receive a break-up fee of 1% of the equity value of the transaction (approximately $30 million). In addition, in the event of a superior transaction, Mr. S. Kerzner and Mr. H. B. Kerzner have agreed to provide certain transitional services to the acquiring party for a period of six months and, in the event of certain all-cash acquisitions, to vote in favor of the superior transaction. The Company noted that there can be no assurance that the solicitation of superior proposals will result in an alternative transaction. The Company does not intend to disclose developments with respect to the solicitation process unless and until its Board of Directors has made a decision.

The transaction is expected to close in mid-2006 and is subject to certain terms and conditions customary for transactions of this type, including the receipt of financing and regulatory approvals. Deutsche Bank Securities Inc. and Goldman Sachs Credit Partners have provided commitments to the investor group for the debt portion of the financing for the transaction.

The transaction also requires approval of the merger agreement by the Company’s shareholders. The Kerzners and Istithmar, which together own approximately 24% of the Company’s ordinary shares, have agreed to vote in favor of the transaction. Upon the completion of the transaction, Mr. S. Kerzner will remain Chairman and will continue to oversee the development and construction of the Company’s projects, and Mr. H. B. Kerzner will remain Chief Executive Officer. The Company will schedule a special meeting of its shareholders for the purpose of obtaining shareholder approval. Upon completion of the transaction, the Company will become a privately-held company and its common stock will no longer be traded on the NYSE.

J.P. Morgan Securities Inc. is serving as financial advisor and Cravath, Swaine & Moore LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are serving as legal advisors to the Special Committee of the Company’s Board of Directors. Deutsche Bank AG and Groton Partners LLC are serving as financial advisors and Simpson Thacher & Bartlett LLP is serving as legal advisor to the investor group.

Additional information is available on the Company’s Form 6-K, filed on March 20, 2006, File No. 001-04226.

(B)Business Overview

We are the developer, owner and operator of Atlantis, Paradise Island, a 2,317-room 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. We also own a 37.5% interest in BLB Investors, L.L.C. (“BLB”), which owns Lincoln Park in Rhode Island and pari-mutuel racing facilities in Colorado.

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.

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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.

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. Atlantis, Paradise Island features an unusual architectural design and décor, beaches, lagoons and a wide range of gaming, entertainment and other amenities. Since acquiring the property in 1994, we have invested over $1.0 billion to create a unique destination resort and casino 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 high-end 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 project 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 consisted of 82 two-bedroom

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units. We began selling the units in May 2000 and had sold approximately 97% of the units through December 31, 2005. 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 2002 and 2003, respectively. For 2003 and 2004, we recognized a total of $5.7 million of insurance recoveries related to Hurricane Michelle. The second phase of Harborside at Atlantis, which is part of our Phase III expansion, consisted of 116 two- and three-bedroom units and opened in August 2005.

In order to capitalize on the popularity of Atlantis, Paradise Island and One&Only Ocean Club, and to leverage our developable real estate and our investment in Paradise Island, 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 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 22-story, 600-room, luxury all-suite hotel;

•a 495-unit condominium-hotel, for which we had entered into binding contracts with customers for approximately 119 units as of February 28, 2006;

•the addition of three luxury villas to One&Only Ocean Club;

•the addition of the Marina Village at Atlantis, a development consisting of five restaurants and additional retail space comprising approximately 75,000 square feet on a seven-acre site adjacent to the Marina at Atlantis;

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

•an expansion of Atlantis, Paradise Island’s existing water-themed attractions (including facilities for a group of dolphins available for interactive experiences with visitors);

•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, the Athol Golf Course;

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

•an 88-unit ultra-luxury condominium and private marina project (“Ocean Club Residences & Marina”), for which we had received reservations on 59 of the 88 units as of February 28, 2006; and

•an expansion of Harborside at Atlantis by the addition of second and third phases along Nassau Harbour.

Construction of the Phase III expansion at Paradise Island is proceeding. Development of the 600-room, all-suite hotel, expanded water attractions and 100,000 square feet of additional group meeting space is well underway. Completion of these elements of Phase III is expected by April 2007. In July 2005, the Company completed the Marina Village at Atlantis, which includes five new restaurants and additional retail space. The second phase of Harborside at Atlantis, which consisted of 116 two- and three-bedroom units, was completed in August 2005. As of December 31, 2005, 37% of these units were sold. With this phase, the total number of units at Harborside at Atlantis increased to 198.

The development of the 22-story, 600-room, luxury all-suite hotel commenced in August 2005. Pursuant to the Heads of Agreement, we have committed to substantially complete the all-suite hotel by December 2006.

We commenced pre-sales of the 495-unit condominium-hotel in the second quarter of 2005, and have received approximately 119 unit sale reservations, representing roughly 24% of the units available for sale. We are joint venturing with Turnberry Associates, which is providing sales and marketing experience. Construction costs, which exclude land costs, are expected to be approximately $250.0 million. We expect to commence construction of the condominium-hotel if the joint venture receives a sufficient level of reservations and secures financing for the

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development. If we elect not to proceed with the development of the condominium-hotel, we would not expect to proceed with the development of the Athol Golf Course.

Exclusive of the Harborside at Atlantis timeshare projects, the condominium-hotel, the Athol Golf Course and Ocean Club Residences & Marina, we expect our investment in the Phase III expansion to be approximately $730.0 million.

A 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 566 acres on Paradise Island (or approximately 70% of Paradise Island), including approximately 175 acres of undeveloped land. The Phase III expansion will use approximately 73 acres (excluding Harborside at Atlantis, the Athol Golf Course and Ocean Club Residences & Marina).

We also own and operate 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 that serves, at stated charges, substantially all facilities on Paradise Island, including non-affiliated customers.

Construction of the 88-unit Ocean Club Residences & Marina project is proceeding well. The cost of this development, which is being financed primarily from pre-sales of units, is expected to be approximately $130.0 million. The project, which is comprised of four 22-unit buildings, is expected to be completed in stages between January and May of 2007. We have formed 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.

In the third quarter of 2005, we acquired Hurricane Hole Marina, which is in close proximity to the Marina Village at Atlantis and includes frontage on Nassau Harbour, and some additional buildings and facilities for approximately $28.0 million. We intend to utilize Hurricane Hole Marina to accommodate excess demand at the Atlantis Marina and anticipate significantly upgrading this marina and bringing it into Atlantis’ product offering. This acquisition includes additional real estate, which we plan to use for new development.

In November 2005, we agreed to acquire an additional seven and a half acres of beachfront property at the eastern edge of Cabbage Beach, adjoining Ocean Club Estates, for $15.7 million. This property is one of the few remaining undeveloped beachfront parcels left on Paradise Island. We contributed the right to use this land into the Ocean Club Residences & Marina joint venture and intend to develop the site through the joint venture.

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, 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, pursuant to which we formed Kerzner Istithmar and increased the scope of Atlantis, The Palm. Having carefully evaluated various aspects of the project, including cost, real estate usage and operating efficiencies, the joint venture revised the scope of Atlantis, The Palm. In lieu of developing an 800-room four-star hotel tower adjacent to the five-star Royal Towers, the joint venture has decided to increase the number of rooms at the five-star Royal Towers from 1,200 to approximately 1,500. This reconfiguration of the project program will better enable the resort to meet the growing demand for five-star accommodation in Dubai and sets aside further developable land for future expansion. Atlantis, The Palm will be located on The Palm, Jumeirah, a multi-billion land reclamation project in Dubai, United Arab Emirates.

In addition, Nakheel has agreed to provide the joint venture with a right to reclaim and develop an additional 125 acres of land off the crescent of The Palm, Jumeirah, so as to expand the overall Atlantis, The Palm site and permit additional phases of development. The joint venture has also agreed with Nakheel to acquire all of the land

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on which Atlantis, The Palm is situated, including the two parcels that are reserved for future development, for a $125.0 million payment-in-kind note.

The budget for this development was increased from $1.2 billion to approximately $1.5 billion (inclusive of land acquisition costs). The joint venture’s capital structure includes an equity investment of $200.0 million by each partner. The remaining project financing is expected to consist of a $700.0 million senior first-lien term loan facility, which is subject to various conditions, and an additional $275.0 million of senior second-lien debt. Istithmar has committed to provide $75.0 million of the senior second-lien debt. The joint venture has received a commitment, subject to various conditions, from third party underwriters for the remaining $200.0 million. The joint venture expects to enter into binding definitive documentation for the senior first-lien loan facility and the senior second-lien debt during the second quarter of 2006. In addition, we and Istithmar will each 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. Further, Istithmar has agreed to provide an additional guarantee for cost overruns in excess of this amount and as necessary to achieve completion.

We commenced construction on Atlantis, The Palm in November 2005, with completion scheduled for late 2008.

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 2005, we entered into a joint venture agreement with SOMED and CDG, and into related development and long-term management agreements for the development and operation of the destination resort casino. Based on the current preliminary designs for the project, the budget is anticipated to be approximately $300.0 million, although a more definitive amount will not be available until further detailed design work has been completed.

As a result of a previously announced budget increase, the parties have worked together for several months to arrange debt and equity financing to fund the project. Although no assurances can be given at this time, the Company expects to reach agreement with its Moroccan partners on amended project documents and proceed with the project, subject to obtaining third party debt financing.

The greenfield site for this project 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.

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 currently own 50% of the joint venture, requiring Kerzner to commit up to approximately $46.0 million. SOMED and CDG will provide the majority of the remaining equity requirement. We expect to sell one-half of our 50% interest in the joint venture to an affiliate of Istithmar. Construction is expected to commence in 2007, with an expected completion date in 2009. The required debt financing is expected to be raised by a consortium of Moroccan banks.

SOMED, an investor with interests in various industries, including the hospitality industry, 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.

No assurances can be given at this time that either the additional debt or equity financing will be obtained or the likely material amendments to project documents will be agreed, both of which will be necessary in order for this project to move forward to construction, as well as certain other conditions, including receipt of all applicable municipal, regional and other regulatory approvals.

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Gaming

Mohegan Sun

Our gaming business is focused on owning, developing and/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 a relinquishment 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 TCA receives payments of 5% of the gross revenues of Mohegan Sun for the 15-year period that commenced January 1, 2000. The relinquishment fees pursuant to the Relinquishment Agreement (“Relinquishment Fees”) are divided into senior and junior relinquishment payments, which together 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 revenues, 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. 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 6,200 slot machines, 305 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.

Through TCA, we oversaw the $1.0 billion “Project Sunburst” expansion of Mohegan Sun, 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

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have grown to $1.5 billion for the twelve months ended December 31, 2005, an 8.1% increase over the twelve month period ended December 31, 2004.

BLB

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 owned gaming and track operations in the United States and race tracks in the United Kingdom. Wembley’s U.S. operations included its flagship property, Lincoln Park in Rhode Island, where it owned a greyhound racetrack with approximately 3,602 video lottery terminals (“VLTs”). BLB is owned 37.5% by each of us and Starwood Capital, with Waterford owning the balance of 25%. As of December 31, 2005, we had invested $47.4 million in BLB.

In July 2005, BLB completed its approximately $464.0 million acquisition of Wembley’s U.S. operations, which included the Lincoln Park racino and three greyhound tracks and one horse racing track in Colorado. Lincoln Park generates approximately 85% of the U.S. operations’ revenue. BLB exchanged its 22.2% interest, acquired in 2004 and valued at $116.0 million, in Wembley as partial consideration for the acquisition. The balance of the acquisition price was financed on a non-recourse basis by a consortium of banks that underwrote a $495.0 million senior secured credit facility, which included a $125.0 million revolving credit facility that will be used primarily to finance a portion of the proposed redevelopment of Lincoln Park.

BLB operates Lincoln Park under a master video lottery contract with the state of Rhode Island that was authorized by legislation passed by the Rhode Island General Assembly. This contract allows an increase in the number of VLTs to 4,752. BLB completed Phase I-A of its planned redevelopment of Lincoln Park in November 2005, which increased the number of VLTs at the facility from 3,002 to 3,602. The contract provides for up to a 15-year term during which Lincoln Park will be entitled to 28.85% of the net terminal income on the first 3,002 VLTs and 26% on any additional VLTs. The balance of the expansion project includes the redevelopment of the existing grandstand area and the construction of a new facility that is expected to house at least 1,750 VLTs. The new facility will be located adjacent to the current facility and will contain new restaurant and entertainment areas and VLTs, some of which will be repositioned from the current facility. Upon completion of the redevelopment, Lincoln Park is expected to have 4,752 VLTs in operation.

BLB had previously announced that the anticipated redevelopment of Lincoln Park would have a total cost of approximately $125.0 million. Based on the most recent cost estimates, which indicate a significant rise in the total development costs of this project, we expect to make an additional equity investment in BLB of $10.0 to $15.0 million to finance our pro rata share of these additional costs.

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 with the Stockbridge Munsee band of Mohican Indians (the “Stockbridge-Munsee Tribe”) for the development of a casino (the “Catskills Project”) in the Catskills region of the State of New York. 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 the Stockbridge-Munsee Tribe 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 “New York Settlement Agreement”).

The New York Settlement Agreement provided that it would automatically terminate on September 1, 2005 in the event key approvals and authorizing legislation were not obtained, subject to extension by the mutual written consent of the parties. As of September 1, 2005, many of the key approvals and authorizing legislation had not been obtained, and the New York Settlement Agreement was not extended by the parties. Two recent court decisions have impacted the effectuation of the settlement and the State’s general strategy in dealing with Native American land claims, including the Stockbridge-Munsee Tribe’s land claim. We can make no representation as to 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 a deadlock, there are mutual buy-out provisions.

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The Company’s investment in TCNY is reflected within investments in associated companies in the accompanying consolidated balance sheets. As of December 31, 2005, we had invested $7.0 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.

Development of Resort Casinos in London, East Manchester and Glasgow

In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated related to our previously announced Scottish Exhibition + Conference Center, Sportcity and The O2 projects. In 2005, we wrote off $11.2 million related to all previously capitalized and deferred costs incurred for the planning and development of the aforementioned projects. Although the future of gaming in the United Kingdom is unclear as a result of the passage of legislation in April 2005, we continue to pursue potential opportunities on a selective basis. Costs related to these opportunities, other than the Northampton project and certain costs relating to The O2, are expensed as incurred.

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, which is expected to cost approximately £10.8 million (approximately $18.9 million in U.S. dollars as of February 28, 2006), on an approximately 30,000 square foot site. We have commenced construction on this project and we expect the facility to be open by the first quarter of 2007.

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 and now market seven of our ten properties under our One&Only brand. We do not currently plan on using the brand for 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-branded properties), One&Only Royal Mirage in Dubai, One&Only Kanuhura and One&Only Maldives at Reethi Rah in the Maldives (which opened during the second quarter of 2005), One&Only Ocean Club on Paradise Island, The Bahamas and One&Only Palmilla near Cabo San Lucas, Mexico. 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.

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As of December 31, 2005, we were managing 2,159 rooms. As part of our strategy of obtaining long-term management agreements, we leverage our existing management expertise and business infrastructure and often take ownership positions in the properties that we operate. As of December 31, 2005, 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	%	106
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	%	203
One&Only Kanuhura	Maldives	18.75	%	100
One&Only Maldives at Reethi Rah (3)	Maldives	—		130
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, 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 our 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.

(3)As of May 1, 2005, when the resort commenced operations, the Company became the primary beneficiary of Reethi Rah under FIN 46R, resulting in consolidation of Reethi Rah’s financial statements in the consolidated financial statements of the Company.

South Africa

We are currently developing a property in Cape Town, South Africa that we anticipate marketing under the One&Only brand. We expect to own a minority interest in the joint venture developing the 132-room property. We anticipate approximately ten of these rooms will be individually owned condominium units that may be used in the hotel’s guest room rental pool.

The Bahamas

We own and operate One&Only Ocean Club, a high-end luxury resort hotel with 106 rooms, suites and villas located on Paradise Island, The Bahamas. In October 2000, we completed an addition to 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. 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. One&Only Ocean Club was named to Condé Nast Traveler magazine’s2006 Gold List and to Travel + Leisure magazine’s 2006 “T+L 500,” an annual list of the world’s best hotels as chosen by the magazine’s readers. One&Only Ocean Club also received Condé Nast Traveler magazine’s 2005 Readers’ Choice Award for the best Atlantic Resort (the second year in a row in which One&Only Ocean Club was awarded this honor) and the spa at One&Only Ocean Club was named best resort spa in Condé Nast Traveler magazine’s 2005 Spa Poll, a reader poll that compares spas in North America, the Caribbean and at sea. One&Only Ocean Club achieved an average occupancy of 82% and an average daily room rate of $869 during 2005, compared to 79% and $762 in 2004.

As part of the Phase III expansion discussed above, we developed three high-end luxury rental villas adjacent to 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, 2005, we had closed on 114 of the 121 home sites available at Ocean Club Estates, a residential development adjacent to the Ocean Club Golf Course, and received approximately $122.0 million in

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gross proceeds from such sales. Of the seven remaining properties, four are being used by the Company and we have received deposits for the three remaining properties.

Mexico

In September 2002, we purchased a 50% ownership interest in One&Only Palmilla, a deluxe five-star property located near Cabo San Lucas in Baja, Mexico for approximately $40.8 million, including transaction costs. 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. 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. One&Only Palmilla re-opened in January 2004 following a refurbishment that expanded the room count to 172 and significantly upgraded the amenities and public areas offered by the resort. The expansion was financed by 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, 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 One&Only Palmilla’s existing loans, including the completion loans provided by Kerzner, and fund One&Only Palmilla’s working capital requirements. In connection with the repayment of 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. One&Only Palmilla was named to Condé Nast Traveler magazine’s 2006 Gold List, in which it also received the highest overall score and rooms score for resorts in Mexico, and was included in Travel + Leisure magazine’s 2006 “T+L 500.”  One&Only Palmilla also received Condé Nast Traveler magazine’s 2005 Readers’ Choice Award for the best Latin American Resort (the second year in a row in which One&Only Palmilla was awarded this honor) and was named by Travel + Leisure Golf magazine as Mexico and Latin America’s second best golf resort and most underrated resort in the magazine’s 2005 “World’s Best Golf Resorts” issue.

Mauritius

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

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

•the 203-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. One&Only Le Saint Géran and One&Only Le Touessrok offer deluxe five-star accommodations, and we believe that such properties are among the finest beach resorts in the world. In 2005, One&Only Le Touessrok was rated among the world’s best leisure hotels by Condé Nast Traveller magazine in the U.K. magazine’s Readers’ Travel Awards and was also named to the magazine’s 2005 Gold List. One&Only Le Saint Géran, which is classical in style, was also rated among the world’s best leisure hotels by Condé Nast Traveller magazine in the U.K. magazine’s Readers’ Travel Awards and was also named to the magazine’s 2005 Gold List. In December 2002, we completed a major redevelopment of One&Only Le Touessrok. The resort includes restaurants, a spa, a 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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Maldives

In the Maldives, located 600 miles southwest of the southern tip of India, we manage and own an interest in One&Only Kanuhura, a 100-room luxury resort located on Lhaviyani Atoll, and manage One&Only Maldives at Reethi Rah, a 130-room, all-villa luxury resort. In August 2001, we acquired 25% of the equity of 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, 2005, we had provided debt financing to One&Only Kanuhura of $2.3 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. See Note 17—Related Party Transactions to the consolidated financial statements.

One&Only Kanuhura temporarily closed in June 2005 to complete repairs necessitated by the December 2004 tsunami. The four-month renovation included the redevelopment of the resort’s 18 water villas and two grand water villas and enhancements to its existing beach villas, bars, restaurants, public areas and spa. One&Only Kanuhura reopened on October 15, 2005. One&Only Kanuhura was named one of the “101 Best Hotels” in Tatler magazine’s 2006 Travel Guide, the U.K. magazine’s annual listing of the world’s best hotels.

On May 1, 2005, One&Only Resorts opened a 130-key, all-villa resort, One&Only Maldives at Reethi Rah, in the Maldives. Reethi Rah, which means “beautiful island” (in the national language, Dhivehi), is located in the North Male Atoll and is easily accessible by a One&Only luxury yacht transfer or sea plane. Through land reclamation, the island on which One&Only Maldives at Reethi Rah is located was increased in size from approximately 20 acres to around 110 acres, incorporating 13 beaches and a few expansive bays. The result is that the spacious private villas and water villas all enjoy an unusual amount of privacy and exclusivity. One&Only Maldives at Reethi Rah was named one of the “101 Best Hotels” in Tatler magazine’s 2006 Travel Guide.

Although the Company does not have any equity ownership interest in the entity that owns and operates One&Only Maldives at Reethi Rah, the Company has determined that Reethi Rah is a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R. The Company has agreements with Reethi Rah that provide for construction financing and operating loans, as well as management and development agreements. As of May 1, 2005, when the resort commenced operations, the Company became the primary beneficiary of Reethi Rah under FIN 46R, resulting in the consolidation of Reethi Rah’s financial statements into the consolidated financial statements of the Company. See “Item 5. Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for more information on the financing arrangements. In February 2006, we received correspondence on behalf of Reethi Rah that raised concerns with respect to the level of management activity and certain fees associated with our management agreement. We expect to discuss the matters with Reethi Rah, but we can make no assurances as to the outcome of such discussions.

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 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 One&Only Kanuhura. Effective January 1, 2005, our ownership interest in 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 One&Only Kanuhura and One&Only Maldives at Reethi Rah 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, at which time it will own 50% of One&Only Management. See “Item 4. Information on the Company, (A) History and Development of the Company” for more information.

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 (SRL’s participation is currently 25%) with us in connection with One&Only Maldives at Reethi Rah. Pursuant to our agreement to transfer the management agreement for One&Only Maldives at Reethi Rah to One&Only Management, SRL

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acquired 25% of the subordinated debt interest in One&Only Maldives at Reethi Rah, which percentage was originally scheduled to increase to 50% as SRL’s interest in One&Only Management increased. It is anticipated that we will amend our agreement with SRL to waive the requirement that SRL purchase up to 50% of the subordinated debt and to provide that SRL will only be entitled to 25% of the management fees paid to One&Only Management under the One&Only Maldives at Reethi Rah management agreement. It is further anticipated that we will acquire a short-term option through December 31, 2006 to purchase SRL’s existing subordinated debt (and corresponding management fees) in One&Only Maldives at Reethi Rah as consideration for granting such waiver.

Middle East

In the Middle East, we manage 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 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. In 2005, One&Only Royal Mirage was rated among the world’s best leisure hotels by Condé Nast Traveler magazine in the U.K. magazine’s Readers’ Travel Awards.

South Africa

In November 2003, we entered into an agreement with V&A Waterfront to develop and manage a new luxury 132-room hotel, One&Only Cape Town, at the highest end of the market in Cape Town, South Africa. Under this agreement, we committed to enter into a land lease and relevant development agreements related to the property. Consequently, in 2004, we entered into a 50-year land lease with V&A Waterfront and formed a joint venture, in which our local partners own 80% and we own the remaining 20%, to develop hotel properties in southern Africa. In March 2006, we formed a project company under the joint venture to focus specifically on the Cape Town property. This project company entered into development and management agreements with wholly-owned subsidiaries of Kerzner. Kerzner assigned the land lease to the project company. Along with our equity investment, we are providing financing assistance in the form of loans and guarantees, which are in an aggregate amount of approximately $24.4 million. We are currently evaluating whether the joint venture should be consolidated in 2006 in accordance with the provisions of FIN 46R.

One&Only Cape Town will be located in the Victoria & Alfred Waterfront, a popular shopping and entertainment destination located on Cape Town’s harbor. In addition to guest rooms, the top two floors of the hotel will be residential in nature, with ten apartments selling on a sectional title basis. Owners will have the option to release their units into the hotel’s guest room rental pool.

One&Only Cape Town has been in the design stages for the past few years, as the project was delayed for a year by litigation involving V&A Waterfront relating to alleged zoning violations. In late 2005, V&A Waterfront received a favorable judgment, allowing us to proceed with the project. Architectural design work for the new hotel is now near complete, and subject to planning and environmental approval, construction is expected to start in January 2007, with completion scheduled for September 2008. As of December 31, 2005, we had approximately $7.0 million on our consolidated balance sheet with respect to this project and we expect our investment in this project to total approximately $18.0 million, exclusive of loans and guarantees. If this project does not proceed, we will be required to write off the amounts that have been incurred. Also during 2005, we expensed $0.9 million of non-capitalizable costs associated with the Cape Town project.

In October 2003, we advanced $1.7 million for the purchase of land related to the potential development of an additional One&Only property in South Africa. This land is currently being developed as a private game reserve. Once the conservancy has been established, we have the option to build a luxury lodge on an exclusive site of our choice. We expect to make a decision on the project by the end of 2007, and if we decide not to proceed, we will be refunded $1.5 million plus interest.

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

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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.

Colony Note

On March 18, 2004, we sold 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 price was paid in the form of a promissory note that matures on March 16, 2009 (the “Colony Note”). The Colony 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 Colony Note is due on March 16, 2009, which date may be accelerated by us in certain circumstances. The Colony 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 Colony 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 travel to the five resorts in Mauritius, One&Only Royal Mirage in Dubai and One&Only Kanuhura and One&Only Maldives at Reethi Rah 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 Relinquishment Fees that we derive from Mohegan Sun and our equity earnings attributable to Lincoln Park, as the principal access to these properties is by road. Higher revenue and earnings are typically realized from the Connecticut and Rhode Island 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 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 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.

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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, 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.”

The 2005 Atlantic hurricane season was the most active on record. The hurricane season had the most named storms (27 versus 21 in 1993, the previous record), the most hurricanes (14 versus 12 in 1969, the previous record) and the most category five storms (3). The Atlantic is in its eleventh year of heightened activity and is expected to remain active for the next decade or longer according to the National Weather Service.

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 One&Only Ocean Club. Harborside at Atlantis is covered under a Starwood insurance policy. 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 will continue to be 100% reinsured through the reinsurance market, thereby leaving Aberdeen with no 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 properties compete with other resorts, hotels and casinos, including land-based casinos, racinos, riverboat, dockside and cruise ship on-board casinos and other forms of gaming as well as with other forms of entertainment and 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,

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New Providence Island, Grand Bahama Island and the neighboring Caribbean islands. We estimate that there are approximately 7,000 hotel rooms on Paradise Island and New Providence Island combined, of which approximately 3,400 are located on Paradise Island, including 2,423 in hotels owned and operated by us. The Wyndham Nassau Resort & Crystal Palace Casino, our primary competitor in The Bahamas, is an 850-room resort and casino that is situated in Nassau along Cable Beach. During 2005, Baha Mar Resorts Ltd. acquired this property along with two adjacent hotel properties. Later in 2005, Baha Mar Resorts Ltd. announced that it had formed a joint venture with Harrah’s Entertainment, Inc. and Starwood Hotels & Resorts Worldwide, Inc. to redevelop the existing properties into a $1.6 billion destination resort casino. The first phase of this project, which project is being developed in stages, is expected to be completed by 2010 and include six hotels, an expanded casino space managed under the Caesars brand, time share and condominium developments and a new golf course. According to recent press reports, the Stillman Organization, a New-York based real estate developer, plans to buy a resort on the south coast of New Providence Island, and invest approximately $500 million to build a 1,000 room hotel/casino, together with residential units, an expanded marina with restaurants and retail facilties, and a golf course. If completed, these developments would compete with our Paradise Island properties and could materially adversely affect our business and results of operations.

Our Paradise Island properties also compete with Our Lucaya, located on Grand Bahama Island, approximately 40 minutes by air from New Providence 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.

One&Only Ocean Club currently competes with a Four Seasons property that opened on Great Exuma Island in The Bahamas in November 2003, as well as other five-star resorts in the Caribbean. In addition, The Ritz-Carlton Hotel Company, L.L.C. recently announced the proposed development of a Ritz-Carlton resort on Rose Island, which is four miles from New Providence Island and Paradise Island. The resort is scheduled to open in 2009 and include a hotel, condominiums, townhouses, estate homes and a shelter for yachts. If completed, this development would also compete with One&Only Ocean Club.

Mohegan Sun and Lincoln Park

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 7,400 slot machines and, for the twelve months ended December 31, 2005, reported slot win of approximately $815.0 million 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 and 45 table games. 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 that 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 October 2005, the U.S. Department of Interior, Bureau of Indian Affairs (“BIA”) issued determinations that the Historic Eastern Pequot Tribe (formerly the Eastern Pequot Tribe and the Paucatuck Eastern Pequot Tribe) and the Schaghticoke Tribal Nation did not qualify for federal recognition as Indian Tribes, which recognition would have allowed the two tribes to build casinos and conduct gaming operations. Both tribes had been granted federal recognition in previous years, but their recognition was rescinded in May 2005. The October 2005 ruling confirmed this rescission, with the BIA ultimately determining that the two tribes did not meet all of the qualifications necessary for federal recognition. The Historic Eastern Pequot Tribe filed an appeal with the Interior Board of Indian Appeals (“IBIA”), but the IBIA had no further jurisdiction. The Schaghticoke Tribal Nation has appealed the BIA decision to federal court, but it is unknown whether the Historic Eastern Pequot Tribe will do the same. The BIA also denied petitions for federal recognition of three other Indian groups in the Connecticut gaming market:  the Golden Hill Paugusett of Trumbull and two bands of Nipmuc Indians of Massachusetts—the Hassanamisco Band of Sutton and the Chaubunagungamaug Band of Dudley/Webster. The two Nipmuc bands have appealed the BIA’s

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decisions to the IBIA, and those appeals are pending.  Each of the aforementioned groups has expressed interest in obtaining trust lands for the purpose of conducting gaming in Connecticut.

Lincoln Park competes with a greyhound track and 1,070 VLT facility located in Newport, Rhode Island. This facility was recently granted the right to acquire 1,031 additional VLTs.

Legislation is pending in Massachusetts that would authorize the use of VLTs and slot machines at race tracks statewide. If enacted, this legislation would increase competition in the region, which could have a material adverse effect on the operations of Lincoln Park.

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 366 of the approximately 677 luxury rooms in Mauritius. Competition in the middle-market has increased following the introduction of 440 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

One&Only Kanuhura and One&Only Maldives at Reethi Rah, two five-star resorts, compete with other resorts in the Maldives as well as other locations offering vacations to tourists from Europe, southern Africa and parts of Asia. One&Only Kanuhura and One&Only Maldives at Reethi Rah primarily compete with the five other five-star resorts in the Maldives. In this high-end market, One&Only Kanuhura and One&Only Reethi Rah offer about 13% and 17%, respectively, of the approximately 750 available rooms. Two resorts from this competitive set, representing approximately 170 rooms, have been closed for renovation.

Dubai

In Dubai, we primarily compete with other resorts and hotels on the Jumeirah Beach “golden mile.”  We manage One&Only Royal Mirage, a luxury 466-room hotel with distinctive Arabian architecture. 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. Other competitors include The Madinat Jumeirah, an 867-room five-star hotel and the recently opened 400-room Grosvenor House, which is the first hotel to open in the Dubai Marina and is managed under the Meridien brand.

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. As of December 31, 2005, there were approximately 12,000 rooms in the five-star competitive set in Dubai.

When fully developed, The Palm, Jumeirah will support approximately 35 luxury hotels totaling approximately 13,625 rooms, up to 2,000 exclusive residential villas and townhouses, 2,400 shoreline apartments, 860 residential apartments, marinas, health spas, canals, shopping malls and restaurants.

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 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 3,000 rooms out of the total inventory of approximately 8,200 rooms. The market is mainly composed of incentive group travelers, golfers, family and high-end vacationers. Three resorts cater to the five-star market: One&Only Palmilla, Las Ventanas al Paraíso and Esperanza. One&Only Palmilla re-opened in

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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 of approximately 89% and an average daily room rate of approximately $970.

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, 2005, PIV generated tour operations revenue of approximately $35.0 million as compared to $26.6 million in 2004. 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 $25.5 million in 2005 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 60 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, 2005, approximately 4,200 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, Paradise Island, 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 a casino license, 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.

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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):

	Year Ended December 31,
	2005		2004		2003
Casino license fees and win taxes	$	10,398	$	9,644	$	11,295
Basic license fees	200		200		200
Total	$	10,598	$	9,844	$	11,495

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 that 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 condominium-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 a casino license, 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. The Heads of Agreement contemplates completion of the all-suite hotel by the end of 2006. We currently expect to complete this hotel in April 2007.

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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.

The Commonwealth of The Bahamas

The Commonwealth of The Bahamas had a population of approximately 300,000 in 2005. 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 Connecticut Operations

Regulation

The Mohegan Tribe is a federally-recognized Native American tribe whose federal 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.

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New Jersey Gaming Regulation

As a result of the Colony Note, 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. See “Item 4. Information on the Company, (B) Business Overview—Colony Note.”

U.K. Gaming Regulation

In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated related to our previously announced Scottish Exhibition + Conference Center, Sportcity and The O2 projects. Specifically, this legislation reduced the number of regional casinos from eight to one in order to secure opposition party support for the legislation. The new law does however contain a provision for the government to increase the number of regional casinos; however, this increase would require the approval of both houses of Parliament.

Environmental Matters

As the owner, operator and developer of real property we have to address, and may be liable for, hazardous materials or contamination on these sites. We have in the past, and may in the future, become liable for contamination on our properties that was caused by former owners or operators. For sites that we acquire for development, we conduct environmental assessments to identify adverse impacts from former activities, including the improper storage or disposal of hazardous substances and the existence of asbestos containing materials. We may not always identify environmental problems through this process and may become liable for historical contamination not previously discovered.

In order to receive governmental approvals prior to site development, we must conduct extensive assessments of the environmental impact of our proposed operations. Our ongoing operations are subject to stringent regulations relating to protection of the environment and waste handling, particularly with respect to the management of wastewater from our facilities.

We participated in the development of and, through an affiliate, previously managed the Mohegan Sun facility in Connecticut. Although we currently receive a portion of the Mohegan Sun’s gross revenues, we do not own, manage or control the facility. 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 in June 1994, when the Nuclear Regulatory Commission confirmed that nuclear material had been removed from the site and that any residual special nuclear material contamination was remediated in accordance with the Nuclear Regulatory Commission-approved decommissioning plan. In addition, with the oversight of the Connecticut Department of Environmental Protection, the site was subject to extensive testing and cleanup of volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater. Although the Mohegan Sun site currently meets applicable remediation requirements, there may be residual contamination that requires cleanup in the future if excavation and construction exposes contaminated soil which has otherwise been deemed isolated and not subject to cleanup requirements. At this point, however, following the completion of the expansion in 2002, the site is almost completely developed. If extensive further cleanup is required, the costs could adversely impact the financial condition and results of operations of Mohegan Sun and therefore our financial condition and results of operations.

In the early 1990’s, the Environmental Protection Agency 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 hundreds of others, allegedly sent waste in the past. CERCLA requires PRPs to pay for cleanup of sites at which there has been a release of hazardous substances. We have only limited information regarding this site and the wastes allegedly sent to it and have not received any communication from other PRPs or the EPA about this site for over ten years.

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(C)Organizational Structure

Set forth below is a table listing our significant subsidiaries:

Name of Company	Country of Incorporation	Ownership Interests
Kerzner International Bahamas Limited(1)	The Bahamas	100	%
Kerzner International North America, Inc.(2)	United States	100	%
One&Only (Indian Ocean) Management Limited(3)	British Virgin Islands	75	%
Kerzner International Management Limited(4)	British Virgin Islands	100	%

(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 One&Only Palmilla.

(3)Operator of the five Mauritius management agreements and One&Only Kanuhura and One&Only Maldives at Reethi Rah management agreements.

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

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

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(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, 2005:

Name and Location	Owned or Leased	Principal Use	Size	Capacity
Atlantis Paradise Island, The Bahamas(1)	Owned	Hotel/Casino	108 acres	2,317 Rooms
One&Only Ocean Club Paradise Island, The Bahamas(1)	Owned	Hotel	33 acres	106 Rooms
Ocean Club Golf Course and Clubhouse Paradise Island, The Bahamas	Owned	Golf Course	172 acres	N/A
Roads and Utility Sites Paradise Island, The Bahamas(1)	Owned	Infrastructure	73 acres	N/A
Phase III Expansion Paradise Island, The Bahamas	Owned	Current Development	73 acres	N/A
Undeveloped Land Paradise Island, The Bahamas(1)	Owned	Future Development	107 acres	N/A
Land Holding Northampton, UK	Owned	Current Development	0.32 acres	N/A
Kerzner International North America, Inc. Plantation, Florida	Leased	Administrative and Marketing Office	72,742 square feet	460 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.

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. We also lease two offices in South Africa, one of which is leased by WLH.

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

Item 4A.Unresolved Staff Comments

None.

Item 5.Operating and Financial Review and Prospects

(A) Overview

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. We expect that our future growth will further define and reinforce these segments.

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Our Destination Resorts segment is comprised of our larger destination resorts, including our flagship property, Atlantis, Paradise Island, which includes Harborside at Atlantis and four active projects in the development stage: Atlantis, The Palm, the Phase III expansion on Paradise Island, The Residences at Atlantis and Ocean Club Residences & Marina. During 2005, Atlantis, Paradise Island generated approximately 77% of our net revenue. Revenue from Atlantis, Paradise Island primarily consists of room, food and beverage, gaming, other resort and tour operations.

We expect that the Phase III expansion will allow us to capitalize on the demand for the property and leverage our investment in The Bahamas. In July 2005, we opened the Marina Village at Atlantis, a restaurant and entertainment complex surrounding the Marina at Atlantis. In August 2005, we entered into an agreement with Turnberry Associates, one of the premier real estate development and property management companies in the United States, for the purpose of developing The Residences at Atlantis, a 495-unit condominium-hotel. Construction is now underway on our 22-story, 600-room, luxury all-suite hotel, with an expected opening in April 2007. In August 2005, we completed the second phase of timeshare development at Harborside at Atlantis. During the first quarter of 2005, we commenced pre-sales of our ultra-luxury condominium units at Ocean Club Residences & Marina, which is a 50-50 joint venture with a local partner, and commenced development in the second half of 2005, with completion scheduled in stages between January and May 2007.

In November 2005, construction commenced in Dubai on Atlantis, The Palm, an approximately 1,500-room destination resort, with completion scheduled for late 2008. During the construction period, we expect to receive a $20.0 million development fee and reimbursement of certain expenses, and upon commencement of operations, we expect to receive management fees and equity earnings from this property.

Our Gaming segment is comprised primarily of our interests in casino properties. We receive fees pursuant to our relinquishment agreement with the Mohegan Tribe through our investment in TCA. The Gaming segment also includes equity in earnings and losses from our 37.5% ownership interest in BLB and our 50% investment in TCNY. BLB acquired the U.S. operations of Wembley in July 2005 for approximately $464.0 million. The U.S. operations of BLB consist of the Lincoln Park racino in Rhode Island and three greyhound tracks and one horse racing track in Colorado. Our Gaming segment also includes our Northampton project costs associated with gaming opportunities in the United Kingdom. In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated, resulting in a write off of $11.2 million of all previously capitalized and deferred costs incurred for the planning and development of our potential gaming projects in the United Kingdom (excluding Northampton).

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. Each One&Only resort has a different design consistent with its natural environment and values genuine hospitality, offering guests a distinctive experience. We currently operate ten resort properties in Mauritius, the Maldives, Dubai, Mexico and The Bahamas, seven of which are operated under the One&Only brand. In 2006, we entered into agreements to develop, manage and own an equity interest in One&Only Cape Town on the Victoria & Alfred Waterfront in Cape Town, South Africa. 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. We expect to pursue opportunities selectively, particularly assets that allow us to leverage our brand, management team and development expertise.

We believe that the results of operations in the Destination Resorts and 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 night. RevPAR represents room revenue divided by the total number of room nights available. One of our key objectives is to enhance RevPAR at all of our properties by offering a combination of unique property designs, theme and location. Gaming is another major component of our Destination Resorts operating results at Atlantis, Paradise Island. The volume of casino activity is measured by “drop,” which refers to amounts wagered by our customers. The amount of drop that we keep and recognize as casino revenue is referred to as our “win” or “hold.”  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 resort and casino industries. The demand for accommodations may also be

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affected by seasonal factors. For example, at Atlantis, Paradise Island and 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, properties in the Los Cabos market typically experience 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.

•As we are 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 flows and borrowings, our expansion and development efforts could be jeopardized. As discussed in “Liquidity and Capital 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, results of operations and cash flows.

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

•The Bahamas, Mexico, the Maldives, Mauritius, Morocco and Dubai are subject to tropical weather and storms, which, if severe, could adversely affect tourism and our operations. During the past seven years, Paradise Island has been affected by several major hurricanes that 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 One&Only Kanuhura and One&Only Maldives at 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 revenue. The terrorist attacks on September 11th 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 (“Contribution to Net Income”), which is their respective revenue 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 currently allocated to the segments but are separately evaluated.

The following tables include analyses of net revenue and Contribution to Net Income by segment. The following tables are in thousands of U.S. dollars (except for share data), unless otherwise noted:

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Net Revenue

	For The Year Ended December 31,
	2005			2004			2003
Destination Resorts:
Atlantis, Paradise Island (1)
Gaming	$	146,010		$	130,879		$	138,587
Rooms	185,268			174,093			167,989
Food and beverage	141,890			127,633			118,414
Other resort	68,669			65,040			61,865
	541,837			497,645			486,855
Less: promotional allowances	(24,239		)	(23,034		)	(23,579		)
	517,598			474,611			463,276
Tour operations	35,025			26,564			28,875
Harborside at Atlantis fees	3,655			2,826			1,847
	556,278			504,001			493,998
Atlantis, The Palm development fees	496			380			—
	556,774			504,381			493,998
Gaming:
Connecticut fees (2)	926			935			1,755
One&Only Resorts:
One&Only Ocean Club	43,237			37,731			34,186
One&Only Palmilla (3)	63,565			37,875			1,481
One&Only Maldives at Reethi Rah (4)	18,185			1,270			394
Other resorts (5)	14,278			14,483			9,700
Tour operations	19,499			20,551			11,915
	158,764			111,910			57,676
Other (6)	5,060			3,859			5,084
Net revenue	$	721,524		$	621,085		$	558,513

(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 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 years ended December 31, 2005 and 2004 as a result of FIN 46R. Revenue for the year ended December 31, 2003 represents management and development fees related to Palmilla.

(4)Consists of revenue from One&Only Maldives at Reethi Rah in connection with the consolidation of Reethi Rah for the year ended December 31, 2005. Revenue for the years ended December 31, 2004 and 2003 represents development fees.

(5)  Includes management, marketing and development fees from One&Only Resorts properties located in Mauritius, Dubai and the Maldives, excluding One&Only Maldives at Reethi Rah.

(6)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,
	2005			2004			2003
Destination Resorts:
Atlantis, Paradise Island	$	95,532		$	86,951		$	83,523
Tour operations	7,064			5,885			5,089
Harborside at Atlantis (1)	19,761			9,477			5,176
Ocean Club Residences & Marina (2)	1,817			—			—
Residences at Atlantis (3)	(1,693		)	—			—
	122,481			102,313			93,788
Atlantis, The Palm (4)	(224		)	346			—
	122,257			102,659			93,788
Gaming:
Connecticut (5)	38,808			36,843			35,715
United Kingdom	(15,339		)	(2,182		)	(329		)
BLB (6)	2,099			(2,970		)	—
Other (7)	(983		)	(1,387		)	(1,086		)
	24,585			30,304			34,300
One&Only Resorts:
One&Only Ocean Club	6,392			3,644			4,720
One&Only Palmilla (8)	9,032			(1,831		)	(3,013		)
One&Only Maldives at Reethi Rah (9)	(3,225		)	1,270			394
Other resorts (10)	15,975			17,703			10,346
Tour operations	1,196			1,155			160
Direct expenses (11)	(14,009		)	(17,074		)	(12,347		)
	15,361			4,867			260
Impairment of notes receivable	(27,812		)	—			—
	(12,451		)	4,867			260
Corporate and other expenses	(43,825		)	(34,489		)	(32,842		)
Gain on sale (impairment) of Atlantic City land	1,433			(7,303		)	—
Interest income	9,130			4,722			3,394
Interest expense, net of capitalization	(44,087		)	(36,814		)	(29,264		)
Gain on settlement of territorial and other disputes	—			—			1,479
Loss on early extinguishment of debt	(27,912		)	(1,655		)	—
Other, net	13			1,358			(686		)
Benefit (provision) for income taxes	16,104			(424		)	(162		)
Minority and noncontrolling interest (12)	6,970			4,907			—
Income from discontinued operations, net of income tax	—			—			1,305
Net income	$	52,217		$	68,132		$	71,572

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

(2)Consists of equity earnings from Ocean Club Residences & Marina.

(3)Consists of losses before interest and taxes, net of minority interest related to The Residences at Atlantis.

(4)Consists of equity in losses and development fees related to Atlantis, The Palm.

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

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(6)Consists of equity in earnings (losses) related to BLB.

(7)Consists of equity losses related to TCNY and other expenses related to the Gaming segment.

(8)Consists of earnings before interest and taxes, net of minority interest related to Palmilla for the years ended December 31, 2005 and 2004. Results for the year ended December 31, 2003 includes management, development and other fees and the Company’s share of net loss from One&Only Palmilla prior to the Company’s adoption of FIN 46R.

(9)Consists of losses before interest and taxes, net of minority interest related to One&Only Maldives at Reethi Rah for the period from May 1, 2005 to December 31, 2005. Results for the years ended December 31, 2004 and 2003 represent development fees related to One&Only Maldives at Reethi Rah prior to consolidation in accordance with FIN 46R.

(10)Consists of equity in earnings (losses) of SRL and One&Only Kanuhura and management, marketing, development and other fees, net of minority interests.

(11)Consists of direct expenses associated with the One&Only Resorts segment.

(12)Consists of minority and noncontrolling interest related to Reethi Rah interest expense and our portion of Palmilla’s loss on early extinguishment of debt, interest expense and taxes, none of which is allocated to the One&Only Resorts segment.

During the years ended 2005, 2004 and 2003, 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 the year ended December 31, 2005, impairment of notes receivable of $27.8 million related to our One&Only Resorts segment is excluded from the table below. For a reconciliation of the segment contribution to U.S. GAAP net income, see the table above.

	2005				2004				2003
	$		%		$		%		$		%
Destination Resorts	$	122.3	75	%	$	102.7	75	%	$	93.8	73	%
Gaming	$	24.6	15	%	$	30.3	22	%	$	34.3	27	%
One&Only Resorts	$	15.4	10	%	$	4.9	3	%	$	0.3	—

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. Amounts included in parentheses below refer to the effect on our diluted earnings per share.

(B)  Operating Results

Consolidated Results

2005 vs. 2004. Our focus during 2005 was to move forward with our major development projects on Paradise Island and in Dubai while improving the financial performance of Atlantis, Paradise Island and our One&Only Resorts segment. Net income and diluted earnings per share during 2005 were $52.2 million and $1.39, respectively, as compared to $68.1 million and $2.01, respectively, in 2004. In 2005, we recognized a $27.8 million ($0.74) impairment of notes receivable, loss on early extinguishment of debt of $27.9 million ($0.74), a $15.7 million ($0.42) income tax benefit related to debt refinancing and a $11.2 million ($0.30) write off of U.K. gaming costs. In 2004, we recognized a $7.3 million ($0.22) impairment of Atlantic City land.

For the fourth straight year, Atlantis, Paradise Island achieved record gross revenue. In 2005, gross revenue totaled $580.5 million and achieved a Contribution to Net Income of $122.5 million versus $102.3 million in 2004. Equity earnings and management and other fees from our investment in Harborside at Atlantis contributed $10.3 million ($0.27) more to net income than last year as a result of strong sales trends of the second phase of Harborside at Atlantis. Equity earnings and fees from Mohegan Sun of $38.8 million represented the fifth consecutive year of growth. (See “Other Factors Affecting Earnings and Earnings Per Share” for a comparison and explanation of certain items affecting results for the years ended December 31, 2005 and 2004.)

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2004 vs. 2003.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 ($0.22) 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 gross revenue of $527.0 million, representing its third consecutive year of growth, and a contribution to income of $102.3 million versus $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 continued to increase its share of the growing Connecticut slots market.

Destination Resorts

Atlantis, Paradise Island

2005 vs. 2004.

Overview. Strong leisure demand combined with improved hotel and casino margins for Atlantis, Paradise Island increased its Contribution to Net Income by 20% from its prior 2004 record of $102.3 million to $122.5 million in 2005. Contributing to the $20.2 million increase were increases in the gross operating profits of rooms, gaming and food and beverage of $11.6 million, $10.5 million and $5.4 million, respectively, over 2004 results. Additionally, equity earnings and management and other fees from Harborside at Atlantis more than doubled (increasing by $10.3 million over 2004) due to strong sales in the second phase. These increases were offset by $7.7 million of pre-opening expenses related to the Marina Village at Atlantis and the Phase III expansion, an $8.8 million increase in utility costs and a $4.8 million increase in depreciation and amortization.

Atlantis, Paradise Island offers a variety of amenities resulting in a diverse stream of revenue that limits our dependence on any particular operation and helps maximize revenue per occupied room night. The amenities that Atlantis, Paradise Island offers, including the largest casino in the Caribbean, the world’s largest open-air marine habitat and many restaurants, also attract day-visitors from other hotels and cruise ships visiting New Providence Island. Gross revenue for Atlantis, Paradise Island of $580.5 million during 2005 exceeded gross revenue in 2004 by $53.5 million, or 10.1%. Of the total gross revenue, 32% was derived from rooms, 25% from gaming, 24% from food and beverage and 19% from other sources.

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The following table presents details of certain revenue, direct expenses (which excludes depreciation and amortization, selling, general and administrative expenses, corporate expenses and certain other expenses) and gross operating profits of Atlantis, Paradise Island:

	For The Year Ended December 31,
	2005			2004			Change			%
	(In millions)
Gaming, net of promotional allowances:
Revenue	$	121.8		$	107.8		$	14.0		13	%
Expenses	63.0			59.5			3.5			6	%
Gross operating profit	$	58.8		$	48.3		$	10.5		22	%
Rooms:
Revenue	$	185.3		$	174.1		$	11.2		6	%
Expenses	27.5			27.9			(0.4		)	-1	%
Gross operating profit	$	157.8		$	146.2		$	11.6		8	%
Food and Beverage:
Revenue	$	141.9		$	127.6		$	14.3		11	%
Expenses	92.5			83.6			8.9			11	%
Gross operating profit	$	49.4		$	44.0		$	5.4		12	%
Other Resort:
Revenue	$	68.7		$	65.0		$	3.7		6	%
Expenses	93.8			80.2			13.6			17	%
Gross operating profit	$	(25.1	)	$	(15.2	)	$	(9.9	)	65	%
Tour Operations:
Revenue	$	35.0		$	26.6		$	8.4		32	%
Expenses	27.8			20.6			7.2			35	%
Gross operating profit	$	7.2		$	6.0		$	1.2		20	%

Gaming. The $10.5 million increase in gross profit (which is calculated net of promotional allowances) from the Atlantis Casino resulted primarily from increases in slot and table win of 19.3% and 7.5%, respectively. The reopening of Hotel RIU Paradise Island, which is located next to Atlantis, Paradise Island, and does not have a casino, contributed to the improved results in 2005. Slot coin in was $798.5 million and $662.0 million during 2005 and 2004, respectively. Slot win during 2005 was $64.6 million, as compared to $54.1 million during 2004. The 19.3% increase in slot win was the result of changes to the casino floor that included the entire floor being converted to ticket-in-ticket-out machines combined with the purchase of new, lower-denomination video slot machines, which provide an improved entertainment value to the slot patron and encourage longer play, along with the addition of multi-denomination machines that allow patrons to trade up at the machine. In addition, E-bonus (a software program allowing for predefined bonuses or promotional incentives), installed towards the end of the second quarter, was marketed during the third quarter and created additional visits from our customers. Although table drop decreased from $519.0 million in 2004 to $509.0 million in 2005, the table hold percentage increased from 14.5% in 2004 to 15.9% in 2005. This resulted in a 7.5% increase in table win from $75.2 million in 2004 to $80.9 million in 2005.

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Rooms. Room revenue and gross profit increases were primarily due to a 6.8% increase in RevPAR from $207 to $221. This increase was mainly driven by the leisure segment, which was negatively impacted in 2004 by the four major hurricanes that impacted either South Florida or Paradise Island. Gross operating profit was also positively impacted by decreased group commission expense of $0.9 million primarily resulting from a decrease in group revenue due to stronger demand from the leisure segment during 2005 as compared to 2004. Travel demand from individual travelers resulted in a $9.8 million, or 8.6%, increase in room revenue in 2005 over 2004. The improved room pricing environment yielded overall ADR at Atlantis, Paradise Island of $272 and $257 in 2005 and 2004, respectively, while occupancy remained constant at 81% in 2005 and 2004.

Food and Beverage. The 11% increase in food and beverage revenue was driven by $12.2 million of revenue from restaurants at the Marina Village at Atlantis, which was completed in July 2005, combined with lower than anticipated displacement of revenue from existing food and beverage outlets. Also driving this increase was the opening of the second phase of Harborside at Atlantis, which added 116 units, and the fact that the Marina Village at Atlantis attracts a significant amount of non-Atlantis, Paradise Island guest business. Banquet revenue increased $1.3 million (5.8%) as compared to 2004 in spite of a decrease of 2.2% in group room nights. This is mainly due to the implementation of a new menu with increased pricing, along with increases in both local catering events and wedding business. Food and beverage spend per occupied room night increased from $189 in 2004 to $208 in 2005. In addition, the Marina Village at Atlantis contributed a $3.9 million increase in food and beverage gross operating profit.

Other Resort. Other resort revenue primarily represents incidental revenue generated from hotel and golf operations, including retail shops, guest activities, telephone, the Marina at Atlantis, Hurricane Hole, rental income from retail establishments located at the properties, utilities and cancellations. The $3.7 million increase in other resort revenue at Atlantis, Paradise Island is primarily due to a $1.7 million increase in rental income from the new retail establishments located in the Marina Village at Atlantis and $2.0 million related to marina and fuel dock revenue from Hurricane Hole Marina, which was acquired in July 2005 (see “Liquidity and Capital Resources – Investing Activities” for further discussion on the Hurricane Hole Acquisition).

Other resort expenses represent direct costs associated with other resort revenue and non-departmental expenses, such as utilities and property operations and maintenance. The $13.6 million increase in other expenses is due primarily to an $8.8 million increase in utility costs with $5.9 million resulting from increased fuel surcharges applied to electricity rates and $3.3 million related to the settlement of vendor dispute related to prior year billings, along with $1.8 million associated with Hurricane Hole and with various other miscellaneous increases.

Tour Operations. Revenue and gross operating profit increased by $8.4 million and $1.2 million, respectively, primarily due to an increase in the number of packages sold. In addition, 2004 package revenue was negatively impacted by the four major storms that impacted either Paradise Island or South Florida. Also contributing to the increases were the launch of the web-based reservation system and better conversion rates resulting from the implementation and training related to our new reservation system.

Selling, General and Administrative. Selling, general and administrative expenses were $85.0 million and $84.3 million during 2005 and 2004, respectively, representing a 1% increase.

Depreciation and Amortization. Depreciation and amortization for Atlantis, Paradise Island was $53.0 million and $48.2 million during 2005 and 2004, respectively. The $4.8 million increase in depreciation and amortization primarily relates to the Marina Village at Atlantis and the new reservation system placed in service during 2005.

Harborside at Atlantis. Through our 50%-owned timeshare joint venture on Paradise Island, we recognized $16.1 million in equity earnings and $3.7 million in marketing and development fees during 2005, as compared to $6.7 million and $2.8 million, respectively, during the same period in 2004. The increased equity earnings recognized during 2005 are primarily the result of strong sales trends and the completion of construction of the first two phases of Harborside at Atlantis. As of December 31, 2005, Harborside at Atlantis had sold 97% of its original units and 37% of the units developed in its second phase. Included within equity earnings for 2004 is $4.0 million of our share of an insurance recovery realized by Harborside at Atlantis related to the final settlement of the remediation claim resulting from damages incurred during Hurricane Michelle, which recovery was recorded net of remediation costs incurred.

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Ocean Club Residences & Marina. In September 2005, the Company entered into a 50-50 joint venture with a Bahamian partner to form Paradise Island Condominiums Joint Venture Limited for the purpose of developing Ocean Club Residences & Marina. Construction commenced during 2005 and the project was approximately 20% complete as of December 31, 2005. The cost of this development, which is being financed primarily from pre-sales of units, is expected to be $130.0 million. Demand for the units has been strong. As of February 28, 2006, deposits on 59 of the 88 units had been received by the joint venture. The units went on the market in May 2005. The project is expected to be completed in stages between January and May 2007. During 2005, we recognized $1.8 million in equity earnings related to Ocean Club Residences & Marina.

The Residences at Atlantis. In August 2005, we entered into a joint venture with Turnberry to develop The Residences at Atlantis, a condominium-hotel located adjacent to Atlantis, Paradise Island. Construction is expected to commence if the joint venture receives a sufficient level of reservations and financing for the development has been secured by the joint venture. If we elect not to proceed with the development of the condominium-hotel, we would not expect to proceed with the development of the Athol Golf Course. Effective August 30, 2005, we have consolidated the Residences at Atlantis in our financial statements pursuant to FIN 46R. See “Other Matters, Consolidation of Variable Interest Entities” for further explanation. During the period from August 30, 2005 to December 31, 2005, we recognized a net loss, net of minority interest of $1.7 million, which is attributable to our share of sales and marketing expenses.

2004 vs. 2003.

Overview. During 2004, strong business trends and continued margin improvement led Atlantis, Paradise Island to achieve its then strongest results. 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, Paradise Island hotel despite the lost business and $4.6 million of costs related to 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 $4.7 million went to gross profit. Strong food and beverage results were realized by price increases and improved margins (1.4% over 2003), which led to a $4.8 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 2003’s strong results.

Gross revenue for Atlantis, Paradise Island of $527.0 million in 2004 exceeded 2003 gross revenue by $9.5 million (1.8%). Of the total gross revenue, 33% was derived from rooms, 24.8% from gaming, 24.2% from food and beverage and 18.0% from other sources.

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The following table presents details of certain revenue, direct expenses (which excludes depreciation, amortization, selling, general and administrative expenses, corporate expenses and certain other expenses) and gross operating profits of Atlantis, Paradise Island:

	For the Year Ended December 31,
	2004			2003			Change			%
	(In millions)
Gaming, net of promotional allowances:
Revenue	$	107.8		$	115.0		$	(7.2	)	-6	%
Expenses	59.5			63.3			(3.8		)	-6	%
Gross operating profit	$	48.3		$	51.7		$	(3.4	)	-7	%
Rooms:
Revenue	$	174.1		$	168.0		$	6.1		4	%
Expenses	27.9			26.5			1.4			5	%
Gross operating profit	$	146.2		$	141.5		$	4.7		3	%
Food and Beverage:
Revenue	$	127.6		$	118.4		$	9.2		8	%
Expenses	83.6			79.2			4.4			6	%
Gross operating profit	$	44.0		$	39.2		$	4.8		12	%
Other Resort:
Revenue	$	65.0		$	61.9		$	3.1		5	%
Expenses	80.2			80.8			(0.6		)	-1	%
Gross operating profit	$	(15.2	)	$	(18.9	)	$	3.7		-20	%
Tour Operations:
Revenue	$	26.6		$	28.9		$	(2.3	)	-8	%
Expenses	20.6			23.7			(3.1		)	-13	%
Gross operating profit	$	6.0		$	5.2		$	0.8		15	%

Gaming. Gross profit from the Atlantis Casino was $48.3 million in 2004 as compared to $51.7 million in 2003. The $3.4 million (6.6%) decrease in gross profit from gaming resulted primarily from a decrease in table win of 11.4% as compared to 2003, partially offset by a 6.0% reduction in casino expenses. The decrease in table win resulted from a lower table hold percentage and lower table drop. During 2004, there was a slight decrease in table drop from $521.7 million to $519.0 million and a decrease in the table hold percentage from a high hold percentage in 2003 of 16.3% to 14.5%, resulting in table 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 (now Hotel RIU Paradise Island), which is located next to Atlantis, Paradise Island, and does not have a casino, was closed for a significant part of the year were among the factors that led to the lower table drop since guests of that hotel are frequently customers of the Atlantis Casino. 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.

Rooms. The increases in room revenue and gross profit over 2003 were due to a 3.0% increase in RevPAR from $201 to $207 and improved margins from containment of costs, respectively. Group revenue increased by $3.2 million (8.3%) in 2004 over 2003, as group room nights occupied increased by 3.1% in 2004. The ADR at Atlantis,

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Paradise Island in 2004 and 2003 was $257 and $251, respectively, and occupancy was 81% and 80% for 2004 and 2003, respectively.

Food and Beverage. 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 spend per occupied room night increased from $178 in 2003 to $189 in 2004 due to increases in beverage prices and meal plan rates. Also contributing to the increase in food and beverage revenue was a $4.4 million increase in banquet revenue that corresponded with the increase in group room revenue.

Other Resort. Other resort revenue increased by $3.1 million due primarily to a $1.3 million increase in revenue from cancellations, and a $0.9 million increase in revenue from retail shops, combined with various other increases, none of which are individually significant.

Tour Operations. Revenue decreased by $2.3 million as package revenue in 2004 was negatively impacted by the four major storms that affected either Paradise Island or South Florida. However, gross operating profit increased by $0.8 million as a result of reductions in direct expenses related to decreased travel agent commissions and credit card fees resulting from the deceased revenue.

Selling, General and Administrative. Selling, general and administrative expenses decreased slightly from $84.5 million in 2003 to $84.3 million in 2004.

Depreciation and Amortization. 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. Through our 50%-owned timeshare joint venture on Paradise Island, we 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 recovery 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 net expense related to the remediation, as there were $1.8 million of remediation costs that were offset by the insurance recovery of $1.5 million.

Other Factors. Hurricane Frances, as well as the effects of the subsequent major hurricanes and tropical storms that impacted the State of Florida in 2004, 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.

Atlantis, The Palm

We have 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. As we own a 50% voting interest in Kerzner Istithmar, we expect to recognize $10.0 million in development fees over the development period. During 2005 and 2004, we recognized $0.5 million and $0.4 million, respectively, of development fees and $2.1 million of our share of equity loss from pre-opening expenses associated with Atlantis, The Palm incurred during the year ended December 31, 2005.  In addition, during 2005, we recorded $1.4 million of our share of unrealized gains resulting from interest rate swaps entered into by Kerzner Istithmar.

Gaming

Mohegan Sun

2005 vs. 2004. We recognized $38.8 million of relinquishment and other fees in 2005, as compared to $36.8 million in 2004, from TCA. Mohegan Sun achieved an 8.1% increase in gross revenue, which was $1.5 billion during calendar year 2005 as compared to $1.4 billion in calendar year 2004. Mohegan Sun’s share of the Connecticut slots market was 52% and 51% during 2005 and 2004, respectively.

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2004 vs. 2003. We recognized $36.8 million of relinquishment and other fees in 2004, as compared to $35.7 million in 2003, from TCA. Mohegan Sun achieved a 6.0% increase in gross revenue, which was approximately $1.4 billion during calendar year 2004 as compared to approximately $1.3 billion during calendar year 2003. Mohegan Sun’s share of the Connecticut slots market was 51% and 50% during 2004 and 2003, respectively.

United Kingdom

2005 vs. 2004. In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated related to our Scottish Exhibition + Conference Centre, Sportcity and The O2 projects, which resulted in a write off of $11.2 million related to all previously capitalized and deferred costs incurred for the planning and development of these projects. In addition, during the years ended December 31, 2005 and 2004, we incurred $4.8 million and $2.2 million, respectively, in expenses related to gaming projects (other than Northampton) in the United Kingdom. These expenses primarily related to overhead expenses and legal and professional fees incurred in connection with the pursuit of development opportunities.

Although the future of gaming in the United Kingdom is unclear as a result of the passage of legislation in April 2005, we continue to pursue potential opportunities on a selective basis. Costs related to these opportunities, other than Northampton, were expensed as incurred.

2004 vs. 2003. 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

In 2005, we recognized $2.1 million in equity earnings from our investment in BLB which includes our $0.9 million share of BLB’s gain associated with Wembley’s repurchase of BLB’s share ownership in Wembley effective on the date of acquisition.

For the year ended December 31, 2004, we recorded $3.0 million in equity losses from our investment in BLB, which losses 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.

TCNY

We recognized $1.0 million, $0.9 million and $1.1 million in equity losses related to our 50% investment in TCNY during the years ended December 31, 2005, 2004 and 2003, respectively. As it has been our policy to expense certain costs that TCNY capitalizes due to the uncertainty of the recoverability of such costs, our investment as of December 31, 2005 was $1.8 million, which consisted almost entirely of our indirect interest in the land acquired for the potential project. As such, we believe the book value of the land included in our investment is approximately equal to its fair value and, should TCNY not proceed with the Catskills Project, we would not anticipate a significant write off.

One&Only Resorts

2005 vs. 2004.

Overview. In 2005, our focus was to improve the results of One&Only Palmilla and to commence operations at One&Only Maldives at Reethi Rah, as well as to sustain the 2004 levels of earnings at our other properties. One&Only Palmilla recorded significantly higher results during 2005 as compared to 2004 and we opened One&Only Maldives at Reethi Rah on May 1, 2005. We also are in the planning phase of an additional One&Only property in Cape Town, South Africa. We expect to pursue opportunities selectively, particularly assets that allow us to leverage our brand, management team and development expertise.

The One&Only Resorts segment recorded a loss of $12.5 million in 2005, which included a $27.8 million impairment charge related to subordinated notes receivable from One&Only Maldives at Reethi Rah. (See “Other

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Factors Affecting Earnings and Earnings Per Share” for further explanation.) Excluding the $27.8 million impairment charge, One&Only Resorts segment contributed income of $15.4 million in 2005 as compared to $4.9 million in 2004. This increase was driven primarily by the strong results of One&Only Palmilla, where its contribution to the One&Only segment improved by $10.9 million as a result of a 72.0% increase in RevPAR over the same period last year.

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. One&Only Kanuhura sustained approximately $5.0 million in business interruption losses. An insurance claim in respect of these losses has recently been settled. During 2005, One&Only Kanuhura received $3.5 million related to the business interruption claim and expects to receive the final $1.5 million payment by the end of the first quarter of 2006, which will be recorded by One&Only Kanuhura as income when received. In addition, One&Only Kanuhura suffered property damages, and the related insurance claim was settled for $3.5 million.

One&Only Ocean Club. The resort contributed $6.4 million to income in 2005, as compared to $3.6 million in 2004. Revenue at One&Only Ocean Club was $43.2 million and $37.7 million in 2005 and 2004, respectively. The $5.5 million increase in revenue is primarily the result of a full year of revenue associated with the three new luxury villas added in June 2004 combined with the strong demand for the property. Occupancy was 82% and 79% in 2005 and 2004, respectively. ADR and RevPAR were up in 2005 as compared to the same period in 2004, $869 versus $762, respectively, and $712 versus $600, respectively.

One&Only Palmilla. In 2005, One&Only Palmilla’s Contribution to Net Income, net of minority interest was $9.0 million as compared to a loss reducing net income of $1.8 million, net of minority interest in 2004. The increase can be attributed to the fact that since One&Only Palmilla opened in February 2004, the property’s first full year of operations was 2005, combined with positive reactions from the travel market and media due to our advertising and marketing campaigns. Occupancy was 86% and 61% in 2005 and 2004, respectively. ADR and RevPAR were up in 2005 as compared to the same period in 2004, $606 versus $500, respectively, and $523 versus $304, respectively.

One&Only Maldives at Reethi Rah. The resort commenced operations on May 1, 2005 and is our newest One&Only-managed property and our second property located in the Maldives. Effective May 1, 2005, we consolidated Reethi Rah, the entity that owns and operates One&Only Maldives at Reethi Rah, into our consolidated financial statements in accordance with FIN 46R. See “Other Factors Affecting Earnings and Earnings Per Share” for further discussion. The all-villa resort is located on an island in the Maldives. Unfortunately, due to the effects of the tsunami in December 2004, construction was delayed and the property opened during the low season. One&Only Maldives at Reethi Rah’s Contribution to Net Income (prior to interest expense) in 2005 was a loss of $3.2 million, net of noncontrolling interest. The net loss reflects $7.3 million of depreciation expense for the period from May 1, 2005 to December 31, 2005. One&Only Maldives at Reethi Rah achieved occupancy, ADR and RevPAR for the period from May 1, 2005 to December 31, 2005 of 72%, $436 and $313, respectively.

Mauritius Properties. In Mauritius, we earned management fees, net of minority interest and equity earnings of $5.9 million and $3.8 million, respectively, in 2005, compared to $6.7 million and $4.3 million, respectively, in 2004 with respect to our five properties.

One&Only Kanuhura. We earned management fees, net of minority interest and equity earnings of $0.6 million and $0, respectively, in 2005 and $0.9 million and $0.4 million, respectively, in 2004. In June 2005, One&Only Kanuhura was closed for an extensive, four-month renovation, which included the redevelopment of the resort’s water villas and enhancements to its existing beach villas, restaurants, public areas and spa. The resort re-opened in mid-October 2005. In 2005, we received insurance payments of $3.5 million for business interruption and $3.5 million for property damage.

One&Only Royal Mirage. In 2005, we earned management fees from One&Only Royal Mirage of $4.1 million, compared to $3.4 million in 2004.

Direct Expenses. There was a  $3.1 million decrease in direct expenses due primarily to a $1.8 million write off of affiliated receivables in 2004 and cost reductions effected in 2005 associated with the management of the business.

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2004 vs. 2003.

Overview. During 2004, we continued to build the management team and sales and marketing structure for our One&Only Resorts business, which 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 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 One&Only Royal Mirage (a $2.1 million increase in management fees). In addition, net revenue 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 exchange rate movements related to the Euro and Sterling.

One&Only Ocean Club. The resort 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. Revenue was $37.7 million and $34.2 million in 2004 and 2003, respectively. This 10.2% increase in revenue is partially attributed to the fact that One&Only Ocean Club opened three new luxury villas in June 2004. The increase in revenue was offset by a $3.5 million increase in 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 One&Only Ocean Club due to Hurricane Frances.

One&Only Palmilla. In February 2004, we held the grand re-opening of One&Only Palmilla. During 2004, One&Only Palmilla contributed a loss before interest and taxes, net of minority interest of $1.8 million, which included $1.4 million of our share of re-opening expenses. During 2003, One&Only Palmilla contributed an equity loss of $4.8 million and 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 One&Only Palmilla were 61% and $304, respectively.

Mauritius Properties. In Mauritius, we earned management fees, net of minority interest and equity earnings of $6.7 million and $4.3 million, respectively, in 2004, compared to $5.9 million and $2.3 million, respectively, in 2003, with respect to our five properties.

One&Only Kanuhura. We earned management fees, net of minority interest and equity earnings (losses) of $0.9 million and $0.4 million, respectively, in 2004 and $0.6 million and ($0.1) million, respectively, in 2003.

One&Only Royal Mirage. In 2004, we earned management fees from One&Only Royal Mirage of $3.4 million, compared to $1.3 million in 2003, as business at One&Only Royal Mirage recovered following the war in Iraq in 2003.

One&Only Maldives at Reethi Rah. Additionally, we earned $1.3 million and $0.4 million in development fees in 2004 and 2003, respectively, related to the development of One&Only Maldives at Reethi Rah.

Direct Expenses. There was a $4.7 million increase in direct expenses due primarily to a $1.8 million write off of affiliated receivables in 2004 and higher costs incurred in connection with the pursuit of new One&Only projects and direct costs incurred by management in the launch of One&Only Palmilla.

Corporate and Other Expenses

2005 vs.2004. Corporate and other expenses increased by $9.3 million in 2005 over 2004 (from $34.5 million to $43.8 million) due primarily to an increase of $5.8 million in expenses related to new business development projects in Singapore and non-capitalizable costs related to our projects in Morocco and Cape Town, a $2.2 million write-down of homes held for sale at Ocean Club Estates and a $1.7 million write-down of the net book value of assets of the former restaurant where Nobu is now located. We do not allocate losses on sales of fixed assets to any segment.

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2004 vs. 2003. Corporate and other expenses increased by $1.7 million in 2004 over 2003 (from $32.8 million to $34.5 million) due primarily to an increase of $1.8 million 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.

Interest Income

2005 vs. 2004. Interest income in 2005 and 2004 was $9.1 million and $4.7 million, respectively. The $4.4 million increase is primarily the result of interest earned on our higher average short-term investment and cash balances at higher interest rates as compared to 2004. The short-term investments were purchased during the latter part of the second quarter of 2004 with proceeds received from the issuance of the 2.375% Notes. Also contributing to the higher average cash balance during 2005 were the proceeds received from the sale of 3.0 million Ordinary Shares to Istithmar in August 2004.

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% 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.

Interest Expense

The following table presents details of interest expense, net of capitalization, for the years ended December 31, 2005, 2004 and 2003. (Amounts in table are in thousands of U.S. dollars).

	2005			2004			2003
8 7/8% Senior Subordinated Notes	$	23,080		$	28,495		$	25,923
6 3/4 % Senior Subordinated Notes	7,425			—			—
2.375% Convertible Senior Subordinated Notes	5,462			3,995			—
Other interest expense	1,477			1,424			2,082
One&Only Palmilla(1)	10,948			6,271			—
One&Only Maldives at Reethi Rah	3,930			—			—
Amortization of debt issuance costs	3,579			2,435			1,692
Capitalized interest	(11,814		)	(5,806		)	(433		)
Interest expense, net of capitalization	$	44,087		$	36,814		$	29,264

(1)   Includes amortization of debt issuance costs related to One&Only Palmilla.

2005 vs. 2004. Interest expense, net of capitalization was $44.1 million and $36.8 million in 2005 and 2004, respectively. The $7.3 million increase in interest expense is primarily attributable to higher variable interest rates, which resulted in a $4.3 million increase in interest expense on the portion of our 87/8% Notes that had been swapped to variable rate under our interest rate swap agreements. These agreements were terminated in September 2005 in connection with the tender for our 87/8% Notes (See “Liquidity and Capital Resources – Financing Activities” for further discussion). Additionally, we experienced a $4.7 million increase in interest expense related to the Palmilla Notes, which incur interest expense on a variable rate basis. Also contributing to the increase in 2005 interest expense was the inclusion of $3.9 million of interest expense on Reethi Rah’s third party debt. In accordance with the provisions of FIN 46R, we began consolidating Reethi Rah on May 1, 2005, thus necessitating that we include the entity’s financial results in ours. These increases in interest expense were partially offset by a $6.0 million increase in capitalized interest associated with the Phase III expansion and our investment in Atlantis, The Palm.

At December 31, 2005 and 2004, our variable rate debt, including the effect of interest rate swaps, and fixed rate debt were 21% and 79% (0% and 100% excluding One&Only Palmilla and Reethi Rah) and 35% and 65% (24% and 76% excluding One&Only Palmilla), respectively. The average cost of debt, including the effect of interest rate swaps, during 2005 and 2004 was 7.1% and 6.4%, respectively.

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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. Our portion of minority interest income related to One&Only Palmilla’s interest expense is $3.2 million. Also included in interest expense is $4.4 million related to the 2.375% Notes issued in April 2004, along with a decreased benefit to interest expense attributable to our interest rate swaps on our 87/8% 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 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 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%.

Other Factors Affecting Earnings and Earnings Per Share

2005 vs. 2004.

Consolidation of Reethi Rah

As of May 1, 2005, the Company became the primary beneficiary of Reethi Rah under FIN 46R, resulting in the consolidation of Reethi Rah into the consolidated financial statements of the Company as of that date. Reethi Rah incurred net losses totaling $12.3 million after intercompany eliminations for the period from May 1, 2005 to December 31, 2005. Of this amount, approximately $6.7 million exhausted the fair value owners’ equity capital (the fair value of which was estimated by the Company as of May 1, 2005) and is included in minority and noncontrolling interests in the accompanying consolidated statements of operations for the year ended December 31, 2005. The balance of $5.6 million is reflected as a reduction to the Company’s consolidated net income for this period. Should Reethi Rah incur additional net losses, in the absence of any increase to the owners’ equity capital in future periods, such losses will be reflected in the Company’s consolidated results of operations. If Reethi Rah realizes net income in the future, the Company will be credited through an increase to the Company’s consolidated net income only to the extent of the losses previously absorbed by the Company on behalf of Reethi Rah.

Impairment of Notes Receivable

During the year ended December 31, 2005, we recorded a $27.8 million impairment of our subordinated notes receivable due from Reethi Rah. During 2005, we obtained an appraisal of the resort that led us to perform an impairment analysis, the results of which indicated that the carrying amount of our subordinated notes receivable due from Reethi Rah was not fully recoverable.

Gain on Sale of Atlantic City Land

During the year ended December 31, 2005, we completed the sale of a portion of our Atlantic City land, for which we had previously recorded an impairment charge, as well as two additional ancillary pieces of land, all of which resulted in a total gain of $1.4 million.

Loss on Early Extinguishment of Debt and Tax Benefit Related to Refinancing

During the year ended December 31, 2005, we recognized a $27.9 million loss on early extinguishment of debt and a tax benefit of $15.7 million related to the refinancing of our 87/8% Notes (see “Liquidity and Capital Resources - Financing Activities” for further discussion regarding the refinancing of our 87/8% Notes). This loss consisted of $33.0 million of consent solicitation and prepayment penalties and the write off of $5.8 million of debt issuance costs. These costs were offset by the write off of a $4.3 million unamortized premium on the 87/8% Notes and net proceeds of $4.9 million received from the termination of our related interest rate swap agreement and related write off of the $1.7 million interest rate swap contra asset.

Higher Diluted Weighted Average Number of Shares Outstanding

The number of diluted weighted average shares outstanding during 2005 was 37.7 million, representing an 11% increase over 2004, reflecting the dilutive effect of a 31% increase in the average stock price during the year, along

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with the dilutive effect of a full year of the 3.0 million Ordinary Shares issued to Istithmar in August 2004 and the exercise of 0.7 million share options.

2004 vs. 2003.

Impairment of Atlantic City Land

In July 2004, we obtained an appraisal on undeveloped real estate that we owned in Atlantic City, which indicated that the carrying amount of this real estate was not fully recoverable. We commissioned the appraisal after we received an unsolicited offer to acquire some of the undeveloped land for a price substantially less than our book value and certain other information related to third party sales of nearby comparable properties at prices substantially less than our book value for the 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.

Higher Diluted Weighted Average Number of Shares Outstanding

As of December 31, 2004, the number of fully diluted weighted average shares outstanding was 33.9 million, representing a 15% increase over 2003, reflecting the dilutive effect of a 56% increase in the average stock price during the year, along with the issuance of 3.0 million and 0.4 million Ordinary Shares related to the Istithmar share purchase and BDR offering, respectively, and the exercise of 1.9 million of stock options.

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 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 do not believe that we have material market risk exposures in these jurisdictions relative to changes in foreign exchange rates.

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, 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, with the remaining 50% interest reflected as minority interest and included in minority and noncontrolling interests in the accompanying condensed consolidated statements of operations and consolidated balance sheets.

Although we do not have an equity ownership interest in Reethi Rah, we have determined that Reethi Rah is a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R. We have agreements with Reethi Rah that provide for construction financing and operating loans, as well as management and

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development agreements. As of May 1, 2005, when the resort commenced operations, we became the primary beneficiary of Reethi Rah under FIN 46R, resulting in consolidation of Reethi Rah’s financial statements in our consolidated financial statements as of that date, with the owners’ equity interest reflected as noncontrolling interest and included in minority and noncontrolling interests in our consolidated financial statements.

On August 30, 2005, we entered into an agreement with Turnberry to form Residences at Atlantis Development Limited, a joint venture established for the purpose of developing and selling units in The Residences at Atlantis, a 495-unit condominium-hotel adjacent to Atlantis, Paradise Island. Based on the terms of the agreement, we have determined that Residences at Atlantis Development Limited is a variable interest entity that is subject to consolidation, and we are the primary beneficiary. Turnberry’s interest is reflected as a component of minority interest and is included in minority and noncontrolling interests in the consolidated statements of operations and is offset against due to affiliates in the consolidated balance sheets.

(C)  Liquidity and Capital Resources

We believe we are well positioned to fund our commitments related to our announced development projects. In 2005, we commenced construction of the 22-story, 600-room, all-suite hotel component of the Phase III expansion and the development of the Ocean Club Residences & Marina project, which is financed by pre-sales and project level financing. In August 2005, we completed the second phase of the Harborside at Atlantis development, which was preceded by the completion of the Marina Village at Atlantis in July 2005. We commenced construction of the 1,500-room Atlantis, The Palm in November 2005 and will commence construction of The Residences at Atlantis if the entity receives a sufficient level of reservations and financing has been secured by the venture. In 2005, we financed these development projects with our current cash on hand and cash flow from operations and anticipate to use these sources along with borrowings under our Amended Credit Facility to finance the development going forward. We usually invest our excess cash in U.S. Treasury bills (“T-Bills”) and prime-rated money market funds.

Beginning in 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% Notes due 2024. In July 2004, we also completed an equity offering in The Bahamas of approximately 4.3 million Bahamian Depository Receipts, the equivalent of approximately 0.4 million Ordinary Shares, that resulted in net proceeds of approximately $19.1 million. In August 2004, we issued 3.0 million Ordinary Shares to Istithmar at a price of $51.25 per share, resulting in net proceeds of $153.4 million. In September 2005, we commenced a tender offer and consent solicitation of our 87/8% Notes and used the proceeds from the issuance of the $400.0 million 6¾%  Notes to purchase 99.60% of the 87/8% Notes. In October 2005, we amended our revolving credit facility to increase the maximum amount of borrowings outstanding from $500.0 million to $650.0 million. These transactions, along with operating cash flows, allowed us to accumulate $20.0 million and $203.9 million of short-term investments and $116.0 million and $180.3 million in cash and cash equivalents as of December 31, 2005 and 2004, respectively. These amounts do not include restricted cash of $4.3 million and $2.8 million as of December 31, 2005 and 2004, respectively. The Amended Credit Facility was undrawn at December 31, 2005, and we had $644.6 million available after giving effect to $5.4 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 “Tabular Disclosure of Contractual Obligations” below for more information.

We believe our operating cash flows, as a percentage of operating income, were higher than that of many of our competitors due primarily to the income from Mohegan Sun, management fees, the lack of corporate income tax in The Bahamas and net operating loss carryforwards that offset our U.S.-sourced federal taxable 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 we identify any significant new opportunities. Accordingly, from time to time, we evaluate our need of capital for major development projects and the various options available to us in the capital markets. With respect to our investment initiatives such as BLB and Kerzner Istithmar, along with certain other equity investments, a majority of the financing has and will be raised at the project level, on a non-recourse or limited recourse basis to Kerzner.

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Operating Activities

During 2005, we generated $175.2 million of cash flow from operating activities compared to $136.5 million in 2004. The cash flow from operating activities during 2005 was primarily due to the Contribution to Net Income from our Atlantis, Paradise Island operations of $122.5 million, which is net of $53.0 million of non-cash depreciation and amortization. In addition, we earned $38.8 million of relinquishment and other fees from TCA, of which we received $37.1 million in cash receipts during 2005. There are no significant related expenses associated with our relinquishment fees from TCA, other than $2.9 million of taxes paid to the State of Connecticut. Other sources of cash flow from operating activities include the Contribution to Net Income of $15.1 million from our One&Only Resorts segment, which is net of $19.3 million of non-cash depreciation and excludes the $27.8 million impairment of subordinated notes receivable. These cash flows were offset by cash outflows from operations, which included $40.9 million of cash interest payments (excluding $11.8 million of capitalized interest) and approximately $43.8 million of cash payments related to corporate expenses.

Investing Activities

In 2005, net cash outflows used in investing activities were $182.4 million compared to $467.5 million during 2004.

In 2005, approximately $205.0 million principal amount of our T-Bills matured, and we purchased approximately $20.0 million principal amount of additional T-Bills. At December 31, 2005, the adjusted carrying value and fair value of these securities was $20.0 million, and the remaining T-Bill matured in January 2006.

Our business requires capital to fund our joint ventures, develop new properties and maintain our existing properties, which maintenance consists of items such as information technology upgrades, new slot machines and improvements to the resorts, including renovations, carpeting and banquet and restaurant equipment upgrades. During 2005, we used $198.2 million for capital expenditures, which included $122.6 million of capital expenditures incurred primarily for the development on Paradise Island related to the Phase III expansion, including $28.4 million incurred related to the Marina Village at Atlantis, $14.0 million of payments of capital creditors at One&Only Maldives at Reethi Rah during the period from May 1, 2005 to December 31, 2005, $7.9 million associated with room renovations in the Coral and Beach Towers at Atlantis, Paradise Island, $3.7 million related to the build-out of Nobu in the Atlantis Casino, capital additions of $3.4 million related to the development of the casino facility in Northampton and $2.5 million of capital expenditures for The Residences at Atlantis. We also spent $4.9 million and $1.0 million of design and development costs related to our potential projects in Morocco and Cape Town, respectively. The remaining balance of $38.4 million was primarily used for ongoing projects on Paradise Island and at One&Only Palmilla. During 2005, capital expenditures were primarily funded by our available cash on hand and cash flow from operations. We also paid $28.0 million, net of related costs, for the acquisition of Hurricane Hole Marina, which is in close proximity to the Marina Village at Atlantis and includes frontage on Nassau Harbour. In the future, we anticipate redeveloping Hurricane Hole Marina, developing additional retail/restaurants and possibly adding timeshare units.

During 2006, we anticipate our ongoing capital expenditures will range from approximately $60.0 million to $65.0 million, primarily for projects on Paradise Island relating to renovations of the Royal and Beach Towers at Atlantis, Paradise Island. By 2009, we plan to have renovated, refinished and updated the interior of each tower within the property.

In connection with the Phase III expansion, we expect our total investment (exclusive of the One&Only Ocean Club luxury villas, Harborside at Atlantis, The Residences at Atlantis, the Athol Golf Course and Ocean Club Residences & Marina) to be approximately $730.0 million, which consists of capital expenditures and pre-opening expenses. From late 2003 to December 31, 2005, in connection with the Phase III expansion, we spent $189.2 million, and we expect to spend between $400.0 million and $450.0 million in 2006 and $75.0 to $125.0 million in 2007. 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 Residences at Atlantis and Ocean Club Residences & Marina to cost approximately $250.0 million and $130.0 million, respectively. These projects are joint ventures and they will be primarily financed from proceeds received from pre-sales of units and limited-recourse financing secured by the joint ventures.

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During 2004, we funded $47.4 million in connection with BLB’s acquisition of a 22.2% ownership interest in Wembley during 2004. We did not fund any amounts to BLB during 2005. 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 owned Wembley’s U.S. operations, which included the Lincoln Park racino in Rhode Island and three greyhound tracks and one horse racing track in Colorado, in exchange for BLB’s then-existing stake in Wembley plus additional cash provided in the form of debt financing from a consortium of banks. In July 2005, BLB completed the approximately $464.0 million acquisition of Wembley’s U.S. operations. BLB exchanged its 22.2% interest, acquired in 2004 and valued at $116.0 million, in Wembley as partial consideration for the acquisition. The balance of the acquisition price was financed on a non-recourse basis by a consortium of banks that underwrote a $495.0 million senior secured credit facility, which included a $125.0 million revolving credit facility that will be used primarily to finance the redevelopment of Lincoln Park that commenced in the third quarter of 2005. The redevelopment is expected to be completed in early 2007. Based on the most recent costs estimates, which indicate a significant rise in the total development costs of this project, we expect to make an additional equity investment of $10.0 million to $15.0 million to finance our pro rata share of these additional costs.

Through December 31, 2005, we had funded $129.6 million (including $37.0 million funded in 2005 prior to consolidation of Reethi Rah on May 1, 2005) in subordinated completion and operating loans for the development and operation of One&Only Maldives at Reethi Rah, resulting in outstanding balances as of December 31, 2005 of $94.7 million and $6.8 million respectively, which have been eliminated in consolidation. (See “Other Matters—Consolidation of Variable Interest Entities” for further discussion). The $94.7 million balance does not reflect the $27.8 million impairment charge recorded during the year ended December 31, 2005 as a result of an appraisal of the resort by a third party valuation firm, which indicated that the carrying amount of our subordinated notes receivable due from Reethi Rah was not fully recoverable.

During 2005, we advanced $2.3 million to Harborside at Atlantis in connection with the second phase of timeshare development. During the year, they repaid $13.8 million of promissory notes outstanding. The remaining balance as of December 31, 2005 was $5.0 million.

In January 2005, we announced that we and CapitaLand had entered into a memorandum of understanding relating to the creation of a joint venture to be owned 60% by us and 40% by CapitaLand for the purpose of submitting a joint concept proposal to the Singapore Government for the potential development of an integrated entertainment resort complex on Sentosa Island in Singapore. In connection with this project, included within corporate expenses in the consolidated statements of operations is $4.2 million of costs incurred, which represent our 60% share of the costs associated with this project. As of December 31, 2005, we had a receivable due from CapitaLand of $1.5 million, related to their 40% share of the costs incurred. During 2006, we expect to continue to expense our 60% share of costs associated with the creation of a joint proposal and its submission to the Singaporean authorities.

During 2005, we invested $52.8 million in Kerzner Istithmar and capitalized $2.4 million of interest on our capital contributions. As of December 31, 2005, we had invested $74.1 million in Kerzner Istithmar since inception related to the development of Atlantis, The Palm. In August 2005, under the provisions of Kerzner Istithmar’s senior credit facilities, we were required to place into escrow the difference between our previous equity commitment to the project of $125.0 million and any amounts previously funded. The Company’s restricted cash—non-current as of December 31, 2005 included $57.2 million of escrowed funds for the sole purpose of funding our equity investment in Kerzner Istithmar and $0.7 million of accrued interest.

In the fourth quarter of 2005, we announced an increase in the Atlantis, The Palm project budget and consequently increased our equity commitment to the joint venture to $200.0 million. Kerzner Istithmar’s capital structure is expected to consist of an equity investment of $200.0 million by each partner and the $700.0 million term loan facility. The remaining project financing will comprise an additional $275.0 million of second lien debt, of which Istithmar has committed to provide $75.0 million. As currently contemplated by the commitments for both the first lien and second lien loan facilities, no additional restricted cash will be required, since the equity from the project sponsors will be invested before the drawdown of any debt from the facilities rather than on a pro rata basis with the debt, as previously contemplated. Kerzner Istithmar has received a commitment, subject to various conditions, from third party underwriters for the remaining $200.0 million commitment and expects to enter into binding definitive documentation for this financing by the end of the April 2006. 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

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cost overruns and post-completion debt service obligations. Further, Istithmar has agreed to provide an additional guarantee for cost overruns in excess of this amount. Construction of Atlantis, The Palm commenced in November 2005, with completion scheduled for late 2008. As of December 31, 2005, Kerzner Istithmar had incurred approximately $117.7 million of development and design related costs for Atlantis, The Palm.

During 2006 we expect to fund $125.9 million related to our remaining total commitment. Based on our current budget, the development costs of the project are estimated at $1.5 billion, which includes the cost of purchasing the site on which the property will be located from the developer of The Palm, Jumeirah in exchange for a $125.0 million payment-in-kind note that will be subordinated to the first and second lien debt.

With respect to the destination resort casino project in Morocco,  we have entered into a joint venture agreement and related development and long-term management agreements with two local Moroccan companies. The joint venture agreement requires each party to provide equity based on the initially estimated project cost of $230.0 million. Our component of the equity contribution as stated in the joint venture agreement is $46.0 million. Based on the current preliminary designs for the project, the budget is now anticipated to be approximately $300.0 million, although a more definitive amount will not be available until further detailed design work has been completed. As a result of the previously announced budget increase, both parties are working together to arrange debt and equity financing to fund the project. Although no assurances can be given at this time, we expect to reach agreement with our Moroccan partners on amended project documents and proceed with the project, subject to obtaining third party debt financing. During 2005, we expensed $2.0 million of non-capitalizable costs associated with the Morocco project. In addition, during 2005, we incurred $4.9 million of design and development costs which are included in construction in progress in the consolidated balance sheets. As of December 31, 2005, we had approximately $6.5 million capitalized with respect to design and development costs. If this project does not proceed, we will be required to write off these costs that have been capitalized.

In connection with the development of a casino facility in Northampton, we incurred $4.3 million in construction costs as of December 31, 2005. We expect the build of the core and shell infrastructure of the facility to be completed in April 2006, after which fit-out will commence and we expect the facility to be open by the first quarter of 2007. The Northampton project is expected to cost approximately £10.8 million (approximately $18.9 million in U.S. dollars as of February 28, 2006).

We are committed to making a contribution towards the construction of the raft and shell infrastructure to house the proposed regional casino at The O2. The Company expects to incur approximately £6.5 million (approximately $11.3 million U.S. dollars as of February 28, 2006) in 2006. If a regional casino license is not awarded at The O2, the Company is eligible to recover 80% of its investment, and the balance of the costs is expected to be expensed as incurred.

In November 2003, we entered into an agreement with V&A Waterfront to develop and manage a new luxury 132-room hotel, One&Only Cape Town, at the highest end of the market in Cape Town, South Africa. Under this agreement, we committed to enter into a land lease and relevant development agreements related to the property. Consequently, in 2004, we entered into a 50-year land lease with V&A Waterfront and formed a joint venture, in which our local partners own 80% and we own the remaining 20%, to develop hotel properties in southern Africa. In March 2006, we formed a project company under the joint venture to focus specifically on the Cape Town property. This project company entered into development and management agreements (as contemplated in the original agreement) with wholly-owned subsidiaries of Kerzner. Kerzner assigned the land lease to the project company. Along with our equity investment, we are providing financing assistance in the form of loans and guarantees, which are in an aggregate amount of approximately $24.4 million.

One&Only Cape Town will be located in the Victoria & Alfred Waterfront, a popular shopping and entertainment destination located on Cape Town’s harbor. In addition to guest rooms, the top two floors of the hotel will be residential in nature, with ten apartments selling on a sectional title basis. Owners will have the option to release their units into the hotel’s guest room rental pool.

One&Only Cape Town has been in the design stages for the past few years, as the project was delayed for a year by litigation involving V&A Waterfront relating to alleged zoning violations. In late 2005, V&A Waterfront received a favorable judgment, allowing us to proceed with the project. Architectural design work for the new hotel is now near complete, and subject to planning and environmental approval, construction is expected to start in

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January 2007, with completion scheduled for 2009. As of December 31, 2005, we had approximately $7.0 million capitalized with respect to this project and we expect our equity investment in this project to total approximately $18.0 million. If this project does not proceed, we will be required to write off the amounts that have been incurred. Also during 2005, we expensed $0.9 million of non-capitalizable costs associated with the Cape Town project.

In October 2003, we funded $1.7 million in the form of a loan for the purchase of land related to the potential development of an additional One&Only property in South Africa. This land is currently being developed as a private game reserve. Once the conservancy has been established, we have the option to build a luxury lodge on an exclusive site of our choice. We expect to make a decision on the project by the end of 2007, and if we decide not to proceed, we expect to be refunded $1.5 million plus interest.

In September 2005, we formed a 50-50 joint venture with a local Bahamian partner for the purpose of developing Ocean Club Residences & Marina. Our initial equity contribution was the site rights for the land on which the condominium will be developed. Our cost basis of the land rights and certain direct costs related to the construction and development of the project was $4.3 million. During the fourth quarter of 2005, we acquired additional beachfront property on Paradise Island adjoining Ocean Club Estates for $15.7 million. We contributed the right to use this land into the Ocean Club Residences & Marina joint venture for future development and received a $7.9 million distribution, representing our partner’s 50% share.

In July 2005, we completed the sale of a portion of our Atlantic City land, as well as an additional ancillary piece of land, both of which resulted in total cash received and a total gain of $7.0 million and $1.4 million, respectively.

In October 2005, we entered into an agreement to purchase land adjacent to Club Med for $12.0 million and made a $1.2 million deposit. We expect the sale to close in the second quarter of 2006 and expect to pay approximately $12.0 million.

In connection with the operating agreement related to 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 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 specified in the purchase agreement. The option period began on September 12, 2005 and expires on September 12, 2007.

Financing Activities

Net cash used in financing activities was $57.2 million in 2005, as compared to net cash provided by financing activities of $451.1 million in 2004. Cash received during 2004 consisted of net proceeds received of $223.7 million related to the issuance of the 2.375% 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. Cash provided by financing activities in 2005 consisted of net proceeds received of $392.7 million related to the issuance of the 6¾% Notes, which was used to repurchase our 87/8% Notes (see below), and $17.8 million received from the exercise of stock options.

Included in early redemption and repayment of debt of $432.1 million is $426.5 million of early redemption of debt related to the tender of our 87/8% Notes. On September 12, 2005, we commenced a cash tender offer to purchase any and all of our outstanding 87/8% Notes. We used the net proceeds from the issuance of $400.0 million of our 6¾% Notes on September 22, 2005, together with cash on hand of approximately $39.3 million, to retire $398.4 million of the 87/8% Notes. In connection with this refinancing, the Company incurred $33.1 million of consent solicitation and prepayment penalties. Additionally, our interest rate swap agreements were terminated in connection with this refinancing, resulting in net proceeds received of $5.1 million. Repayment of debt of $5.7 million represents $3.9 million and $1.8 million of repayments on Reethi Rah debt and capital lease obligations, respectively.

In August 2005, our Board of Directors approved a share repurchase program authorizing the Company to purchase up to two million of our Ordinary Shares. The share repurchases will be made at management’s discretion from time to time in the open market through block trades or otherwise. Depending upon market conditions and other factors, share repurchases may be commenced or suspended at any time or from time to time without prior

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written notice. As of December 31, 2005, 612,500 shares have been repurchased for a total of $35.7 million at an average price of $58.21.

As shown in Tabular Disclosure of Contractual Obligations, as of December 31, 2005, we did not have any significant scheduled debt repayments due until 2007, when the principal of the $110.0 million 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 repayments 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 consider taking on additional financing in the future, our ability to meet our existing debt covenants would be a factor in determining whether we would 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 the year ended December 31, 2005, our average cost of debt was approximately 7.1%.

Working Capital

Working capital, which equals current assets less current liabilities, was $15.8 million at December 31, 2005, reflecting a current ratio, which equals current assets divided by current liabilities, of 1.06:1. Working capital decreased by $290.7 million from December 31, 2004, due to a decrease in short-term investments of $184.0 million, as a majority of the T-Bills matured during the year and we utilized the cash to fund ongoing development projects, a $64.4 million decrease in cash primarily due to $57.9 million of non-current restricted cash placed into an escrow account related to Atlantis, The Palm, a $30.0 million increase in capital creditors due to the fact that the Phase III expansion is further along as compared to 2004, a $27.2 million increase in accounts payable and accrued expenses primarily as a result of the consolidation of Reethi Rah and The Residences at Atlantis in accordance with the provisions of FIN 46R and a $12.3 million decrease in assets held for sale as we completed the sales of the Atlantic City land and real estate at the Ocean Club Estates. These amounts were offset by a $21.5 million increase in due from affiliates primarily due to an $11.4 million receivable due from Turnberry for customer deposits related to The Residences at Atlantis which deposits are being held in escrow by Turnberry on behalf of the joint venture, along with additional amounts due from SRL, Harborside at Atlantis and Ocean Club Residences & Marina.

Interest Rate Swap and Cap Agreements

Historically, we have limited our exposure to interest rate risk by managing the mix of fixed and variable rate debt, and by entering into interest rate swap agreements to hedge a portion of our debt. These interest rate swap agreements were entered into with 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% Notes. Through September 22, 2005, the aggregate notional amount of the swap agreements was $150.0 million. Under the terms of the swap agreements, we made payments based on specific spreads over six-month LIBOR and received payments equal to the interest payments due on the notes. The spreads in excess of six-month LIBOR were 3.02% for $100.0 million, 2.95% for $25.0 million and 2.91% for the remaining $25.0 million. In connection with the refinancing of our 87/8% Notes in September 2005, we received $5.1 million from the cancellation of $150.0 million notional amount of interest rate swaps on our 87/8% Notes. During the year ended December 31, 2005 and 2004, the weighted average variable rate on the swap agreements was 5.0% and 4.9%, respectively.

The Palmilla Notes bear interest at a floating rate of one-month LIBOR plus 3.75%; however, 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 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 “Note 2 - Summary of Significant Accounting Policies” to the consolidated financial statements are important to an understanding of such consolidated 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.

Equity-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, 2005, 2004 and 2003 or for the restricted shares issued to our Chief Executive Officer in August 2005.

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, 2005, 2004 and 2003 would have been reduced by $12.2 million, $7.4 million and $3.7 million, respectively, or 24%, 11% and 5%, 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 began applying SFAS 123(R) for its first quarter beginning January 1, 2006, which we expect to result in compensation expense of approximately $13.6 million (not including tax effects) for 2006, based on option grants outstanding at December 31, 2005, and restricted shares issued to our Chief Executive Officer in August 2005. The foregoing amount does not include compensation expense for any stock options or other instruments that may be granted after December 31, 2005. See “Recent Accounting Pronouncements—Share-Based Payment.” The effect of applying the fair value method of accounting for stock options on reported net income for the years ended December 31, 2005, 2004 and 2003 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.

Income Taxes. We are subject to corporate income taxes in various 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, 2005, we had deferred tax assets, net of valuation allowance, totaling $29.8 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, 2005, a valuation allowance of $81.6 million was necessary to offset our deferred tax assets. This represents a reduction of $66.8 million from our valuation allowance of $148.4 million at December 31, 2004; $21.5 million represents amounts released during 2005 as income tax benefit and the remaining amount relates primarily to tax effected expiration of net operating loss carryforwards. Our ability to utilize the net amount of deferred tax assets that we believe we are more likely than not to utilize is primarily dependent on our ability to generate future taxable income. Should our future taxable income results differ from our current estimates,

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this could cause a material adjustment to our valuation allowance. 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.

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 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 that, 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 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, 2005, we reduced our tax accruals by $1.7 million as a result of the expiration of certain statutes of limitation, which resulted in an income tax benefit.

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. During 2005, we determined that none of our long-lived assets were impaired, except for certain real estate at Ocean Club Estates for which we recorded a write-down of $2.2 million

Allowance for Doubtful Accounts Receivable and Amounts Due from Affiliates. We maintain allowances for doubtful accounts receivable 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, 2005, our accounts receivable, net of a $6.2 million allowance, totaled $49.9 million. The allowance includes $4.1 million related to doubtful gaming receivables. Bad debt expense related to gaming receivables was a reversal of $0.9 million and an expense of $0.9 million in 2005 and 2004, respectively. Contributing to the difference is $1.4 million of lower bad debt expense as a result of improved collection efforts, combined with a $0.4 million increase in bad debt recoveries. The allowance for doubtful accounts related to gaming was 25% and 29% of total gaming receivables as of December 31, 2005 and 2004, respectively. During the year ended December 31, 2004, we 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 accounts receivable, 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 might be required. Also, should actual collections of accounts receivable 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 became known. If conditions change in future periods, additional allowances or reversals may be required. Such additional allowances could be significant.

Loan Impairment. We apply SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan-Recognition and Disclosures, an amendment of SFAS No. 114,” when determining if a loan is impaired. Under the provisions of these standards, we record a loan impairment when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. For collateralized loans, impairment is measured based on the fair value of the underlying collateral. (See Other Factors Affecting Earnings and Earnings Per Share—Impairment of Notes Receivable, for a discussion of our $27.8 million impairment of notes receivable recorded during the year ended December 31, 2005.)

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Costs Associated with Potential Resort Projects. We selectively pursue opportunities related to each of our three segments to expand our business. In connection with these potential projects we often are required to fund or elect to incur project costs associated with the acquisition, development, and construction of a project prior to the acquisition of the property or the formation of a joint venture. These costs principally include architectural, design, engineering and other related costs directly related to the proposed project. We capitalize such direct costs when we believe it is probable that we will proceed with such proposed projects, and we believe we have the ability to finance or obtain financing for the proposed project. As of December 31, 2005, we have approximately $7.0 million and $6.5 million capitalized (principally comprised of architectural, design and engineering costs) relating to our proposed development of a luxury resort property in Cape Town, South Africa and destination resort casino in the Kingdom of Morocco, respectively. Should we subsequently conclude that it is no longer probable that we will proceed with such proposed projects, we would be required to expense such capitalized costs.

Recent Accounting Pronouncements

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, compensation expense for liability awards (those usually settled in cash rather than stock) will be remeasured to fair value each reporting period until the award is settled. 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 for its first quarter beginning January 1, 2006.

SFAS 123(R) allows for two transition alternatives for public companies: (a) modified-prospective transition or (b) modified-retrospective transition. The Company intends to apply the modified-prospective transition method. Under this method, companies are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. Measurement and attribution of compensation cost for awards that were granted prior to, but not vested, as of the date SFAS 123(R) became effective would generally be based on the same estimate of the grant-date fair value and the same attribution method used previously under SFAS 123 (either for financial statement recognition or pro forma disclosure purposes). Prior periods are not restated. For periods prior to adoption, the financial statements are unchanged (and the pro forma disclosures previously required by SFAS 123 continue to be required under the new standard to the extent those amounts differ from those in the income statement). For periods subsequent to adoption, the impact of this transition method generally is the same as if the modified-retrospective method were applied. Accordingly, pro forma disclosure will not be necessary for periods after the adoption of the new standard.

SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash flow, rather than as operating cash flow as previously required.

We expect that the application of SFAS 123(R) beginning January 1, 2006, will result in compensation expense of approximately $13.6 million (not including tax effects) for the year ended December 31, 2006, based on option grants outstanding at December 31, 2005, and giving effect to amortization expense related to the restricted shares issued to the Company’s Chief Executive Officer in August 2005.

Accounting Changes and Error Correction

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”), which requires retrospective application to prior periods’ financial statements for changes in accounting principle. SFAS 154 is effective for accounting changes made in its fiscal years beginning after December 15, 2005. The Company does not expect that the adoption of SFAS 154 will have a material impact on its consolidated financial statements.

(D)  Research, Development, Patents and Licenses

Not applicable.

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(E)  Trend Information

During the first two months of 2006, Atlantis, Paradise Island achieved an average occupancy of 81% and an ADR of $294, which compares to an average occupancy of 83% and an ADR of $284 during the same period in 2005. Atlantis, Paradise Island’s RevPAR of approximately $239 was $5 higher than the same period last year.

In the Atlantis Casino slot win was 7.6% for the first two months of 2006 as compared to 8.5% for the same period in 2005. Slot win decreased by 7.3% below the same period in 2005. Slot coin in was 3.7% higher while slot win decreased by $0.9 million. Table win for the first two months of 2006 increased by $1.0 million despite a decrease in table hold of 0.3%. Due to the normal volatility patterns experienced in the Atlantis Casino, particularly with table games, these results may not necessarily be indicative of continuing trends.

In addition, selling, general and administrative expenses for the first two months were higher than 2005 by $1.2 million primarily due to additional compensation costs related to the adoption of SFAS 123(R). Sales and marketing expense also exceeded the prior year by $1.4 million due to the timing of advertising and special events.

Future results will be driven by the Phase III expansion, which is on schedule for completion in April 2007.

Relinquishment fees and other fees earned by us from TCA were $38.8 million for the year ended December 31, 2005. We anticipate that relinquishment fees will be slightly higher for the year ending December 31, 2006 due to increases in Mohegan Sun revenues.

Corporate expenses were $43.8 million for the year ended December 31, 2005. We anticipate that these expenses will be higher in 2006 due to additional compensation costs and expense related to the adoption of SFAS 123(R).

(F)  Off-Balance Sheet Arrangements

At December 31, 2005, our off-balance sheet arrangements and other commitments were as follows:

(a)Reethi Rah Commitment

At December 31, 2005, Reethi Rah had outstanding indebtedness that included $94.7 million and $6.8 million principal amount of subordinated development and operating loans, respectively, advanced by Kerzner. The total $101.5 million balance does not reflect the $27.8 million impairment charge recorded during the year ended December 31, 2005 as a result of an appraisal of the resort that indicated that the carrying amount of our subordinated notes receivable due from Reethi Rah was not fully recoverable. These loans were eliminated upon the consolidation of Reethi Rah as of May 1, 2005 in accordance with FIN 46R. In addition, the Company entered into a guarantee agreement with a third party financial institution (the “Lender”) that provides for the Company to guarantee certain amounts due to the Lender, such amounts not to exceed the lesser of (i) $6.0 million or (ii) the amount of principal and interest due but not paid to the Lender pursuant to a loan facility that Reethi Rah entered into in December 2004 for an aggregate amount equal to $50.0 million to be used towards the development of One&Only Maldives at Reethi Rah (“Reethi Rah Term Loan Facility”). The guarantee is effective for four years beginning May 1, 2005, the date at which One&Only Maldives at Reethi Rah commenced operations.

In addition, the Company entered into a credit arrangement with Reethi Rah that provides for operating loans over a four-year period with each annual loan amount equal to the difference between $6.0 million and Reethi Rah’s net operating income, as defined.

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

In connection with our purchase of a 25% initial equity interest in One&Only Kanuhura, we were required to guarantee certain obligations totaling $10.7 million to its other shareholders. We are 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 One&Only Kanuhura repays certain senior debt owed. As of December 31, 2005, the amount of senior debt owed was

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$2.3 million, excluding accrued interest. Our obligations under these guarantees expire when the underlying obligations are repaid. Upon having to satisfy these guarantees, we would be deemed to have made a loan to One&Only Kanuhura on the same terms of the underlying note that was satisfied.

(c)Atlantis, The Palm Commitment ($55.0 million)

In connection with the financing for Atlantis, The Palm, we and Istithmar 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. See “Liquidity and Capital Resources—Investing Activities” for further discussion on Atlantis, The Palm.

(d)Morocco Commitment ($46.0 million)

With respect to the destination casino project in Morocco, we have entered into a joint venture agreement and related development and long-term management agreements with two local Moroccan companies. The joint venture agreement requires each party to provide equity based on the initially-estimated project cost of $230.0 million. Our component of the equity contribution as stated in the joint venture agreement is $46.0 million. Based on the current preliminary designs for the project, the budget is now anticipated to be approximately $300.0 million, although a more definitive amount will not be available until further detailed design work has been completed. As a result of the previously announced budget increase, both parties are working together to arrange debt and equity financing to fund the project. Although no assurances can be given at this time, we expect to reach agreement with our Moroccan partners on amended project documents and proceed with the project, subject to obtaining third party debt financing. During 2005, we expensed $2.0 million of non-capitalizable costs associated with the Morocco project. In addition, during 2005, we incurred $4.9 million of design and development costs that are included in construction in progress in the consolidated balance sheets. As of December 31, 2005, we had approximately $6.5 million capitalized with respect to design and development costs. If this project does not proceed, we will be required to write off these costs that have been capitalized. See “Item 4. The Properties—Destination Resorts—Morocco.”

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(G)  Tabular Disclosure of Contractual Obligations

At December 31, 2005, we believe our contractual obligations, other than the guarantees and commitments described above, were as follows (in thousands):

Contractual Cash Obligations	2006		2007		2008		2009		2010		Thereafter		Total
6 ¾% Notes (a)	$	27,000	$	27,000	$	27,000	$	27,000	$	27,000	$	530,500	$	665,500
2.375% Notes (b)	5,463		5,463		5,463		5,463		5,463		301,217		328,532
8 7/8% Notes (c)	143		143		143		143		143		1,758		2,473
Palmilla Notes*(d)	—		110,000		—		—		—		—		110,000
Amended Credit Facility (e)	—		—		—		—		—		—		—
Reethi Rah Term Loan Facility*(f)	5,000		5,000		5,000		5,000		5,000		22,200		47,200
Reethi Rah Loan (g)	1,439		1,649		944		—		—		—		4,032
Operating leases (h)	2,625		2,146		1,863		1,941		2,004		14,678		25,257
Reethi Rah land lease (i)	633		668		704		739		775		27,861		31,380
Capital leases (j)	1,287		1,071		1,000		1,084		—		—		4,442
Purchase obligations (k)	9,328		—		—		—		—		—		9,328
Atlantis, The Palm (l)	125,941		—		—		—		—		—		125,941
Paradise Island land purchase (l)	12,000		—		—		—		—		—		12,000
Phase III construction commitments (m)	186,224		32,863		—		—		—		—		219,087
Total contractual cash obligations	$	377,083	$	186,003	$	42,117	$	41,370	$	40,385	$	898,214	$	1,585,172

* Obligations presented exclude interest commitment as amounts are subject to variable interest rates.

(a)Balance represents amounts outstanding under our 6¾% Notes.

(b)The 2.375% 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% 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 aggregate principal amount of the 2.375% Notes is $230 million. The closing price of our Ordinary Shares was $68.75 on December 31, 2005 and $67.29 on February 28, 2006.

The 2.375% 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 our Ordinary Shares issuable upon conversion of $1,000 principal amount of the notes; or

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•Upon the occurrence of specified corporate transactions.

(c)Balance represents the remaining amounts outstanding under our 87/8% Senior Subordinated Notes.

(d)In December 2004, 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, One&Only Palmilla entered into an interest rate cap agreement, which caps LIBOR at 5%. The maximum contractual interest rate on the Palmilla Notes is 8.75%. The indenture governing the promissory notes provides recourse to Kerzner in the event certain representations and warranties are violated.

(e)As of December 31, 2005, we had $644.6 million available under the Amended Credit Facility, after giving effect to the $5.4 million in letters of credit outstanding. There were no amounts outstanding under the Amended Credit Facility as of December 31, 2005. See “Item 4 Capital Structure, Amended Credit Facility” for discussion on terms of the Amended Credit Facility, including interest provisions.

(f)On December 29, 2004, Reethi Rah entered into a facility agreement (the “Reethi Rah Term Loan Facility”) with a third party financial institution (the “Lender”). Under the Reethi Rah Term Loan Facility, the Lender agreed to make available to Reethi Rah a term loan facility in an aggregate amount equal to $50.0 million, which was used towards the development of One&Only Maldives at Reethi Rah. Loans under the Reethi Rah Term Loan Facility bear interest at (a) LIBOR plus 3.25% for the period up to and including May 1, 2005, (b) LIBOR plus 2.00% on the first $6.0 million of loans and LIBOR plus 3.25% on any other outstanding amounts above $6.0 million for the period from May 2, 2005 through May 1, 2009, and (c) LIBOR plus 3.25% from May 2, 2009 thereafter. Interest on outstanding loans is paid semi-annually on March 31 and September 30. Principal payments of $2.5 million are due semi-annually on June 30 and December 31 beginning December 31, 2005 through June 30, 2015. As of December 31, 2005, Reethi Rah had $47.2 million of loans outstanding under the Reethi Rah Term Loan Facility.

(g)On December 1, 2002 Reethi Rah entered into a loan facility agreement (“Reethi Rah Loan”) with a syndicate of banks for a principal aggregate amount of up to $5.0 million. Amounts under the Reethi Rah Loan bear interest at 12% per annum. Principal and interest payments are due in monthly installments through January 31, 2008. As of December 31, 2005, Reethi Rah had $4.0 million outstanding under the Reethi Rah Loan.

(h)As of December 31, 2005, operating leases were primarily office leases, in particular the lease related to the Company’s office in Plantation, Florida.

(i)Reethi Rah has entered into a long-term land lease through 2030 with the Government of the Maldives for the land on which One&Only Maldives at Reethi Rah was constructed.

(j)As of December 31, 2005, capital leases represented $4.0 million of machinery and equipment at One&Only Maldives at Reethi Rah and $0.4 million of leased equipment consisting primarily of golf carts at Atlantis, Paradise Island.

(k)As of December 31, 2005, 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.

(l)For further discussion of the funding requirements for Atlantis, The Palm and the Paradise Island land purchase, see “Liquidity and Capital Resources—Investing Activities.”

(m)The Company has construction commitments of $219.1 million arising from the Phase III expansion.

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., our joint venture partner, provides for a put right available to such subsidiary 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 cash payment of $36.3 million

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subject to increase based on certain adjustments to acquire our joint venture partner’s 50% interest in One&Only Palmilla.

It is anticipated that the Phase III expansion investment in The Bahamas will exceed $1.0 billion. Exclusive of the One&Only Ocean Club luxury villas, Harborside at Atlantis, The Residences at Atlantis, the Athol Golf Course and Ocean Club Residences & Marina, we expect our investment to be approximately $730.0 million, of which we have funded approximately $189.2 million through December 31, 2005.

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
Stephen M. Ross	United States	2005

The current officers of the Company are:

Name	Title	Age	Officer Since
Solomon Kerzner	Chairman of the Board of Directors	70	1993
Howard B. Kerzner	Chief Executive Officer and Director	42	1995
John R. Allison	Executive Vice President—Chief Financial Officer	59	1994
Richard M. Levine	Executive Vice President—General Counsel	44	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 February 28, 2006, owned approximately 10.7% 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, 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. Howard 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. Solomon 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

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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 Executive Vice President and 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.

Peter N. Buckley, Director:  Mr. Buckley has been a Director since April 1994. Mr. Buckley is also the Chairman of Caledonia (appointed 1994) and was the Chief Executive Officer of Caledonia from 1987 to 2002.  As of February 28, 2006, Caledonia beneficially owned approximately 8.3% of our Ordinary Shares.  He is also a non-executive Director of Close Brothers Group plc and Bristow Group 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. During 1999 and 2000, Mr. Kazim was seconded to Dubai Internet City as Chief Executive Officer to start the project. Mr. Kazim has also acted as an advisor to some of the largest groups in Dubai on various organizational and business issues.

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 $30.0 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 February 28, 2006 beneficially owned approximately 5.9% 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.

Stephen M. Ross, Director. Mr. Ross has been a director since June 2005. Mr. Ross is Chairman, Chief Executive Officer and founder of The Related Companies, L.P., a developer, manager and financier of premier real estate properties, including the Time Warner Center in New York City. Mr. Ross is a founder and Chairman of CharterMac (a NYSE-listed company) and a Director of the Real Estate Board of New York and the Juvenile Diabetes Foundation. Mr. Ross is also Chairman of Equinox Holdings, Inc., which was acquired by The Related Companies, L.P., in December 2005.

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, Butch 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, 2005 was $6.7 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.

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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 earnings per share, 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 2005. Bonuses ranging from 45.3% to 75.5% were granted in 2005.

We 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. In connection with the acquisition in December 1996 of Sun International North America, Inc. (formerly Griffin Gaming & Entertainment, Inc.), we assumed the Griffin Gaming & Entertainment, Inc. 1994 Stock Option Plan (the “Griffin Plan”) and the options that were outstanding under the Griffin Plan at the time the acquisition was consummated. In addition, in 2003, we adopted a stock incentive plan (the “2003 Plan”) that provides for the issuance of an aggregate of 3,000,000 Ordinary Shares in connection with awards of stock options, restricted stock and other stock-based awards. On December 13, 2005, we adopted a new stock incentive plan (the “2005 Plan”) that provides for the issuance of an aggregate of 2,000,000 Ordinary Shares in connection with awards of stock appreciation rights (“SARs”), stock options, restricted stock and other stock-based awards. As of the adoption of the 2005 Plan, awards with respect to 213,374 Ordinary Shares remained available to grant under the 2003 Plan.

All options issued under the 1995 Plan, the 1997 Plan and the Griffin Plan had already vested and become exercisable as of February 28, 2006. The 2000 Plan provides for the vesting period to begin one year after the grant date in respect of one third of the options, and thereafter in installments of one third per year over a two-year period. The 2003 Plan and the 2005 Plan provide 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 anniversaries of the date of grant. Options granted under the Plans generally have a term of ten years from the date of grant (except that options granted under the 2003 Plan and the 2005 Plan generally have a term of seven years from the date of grant) and, unless otherwise specifically provided by the compensation committee, the option prices are equal to the fair market value per Ordinary Share on the date of grant. SARs granted under the 2005 Plan generally have a term of seven years from the date of grant and generally become vested in installments of 25% per year on each of the first four anniversaries of the date of grant and, unless otherwise specifically provided by the compensation committee, are granted at an exercise price equal to the fair market value per Ordinary Share on the date of grant. Consultants may also be granted awards under the 2003 Plan and the 2005 Plan. Nonqualified stock options may be transferred to trusts with respect to which any such participants are beneficiaries and to corporations or to other entities controlled by such participants.

In August 2005, the Company entered into a Restricted Stock Agreement (the “Restricted Stock Agreement”) with Butch Kerzner, pursuant to which the Company granted Butch Kerzner 500,000 restricted Ordinary Shares under the 2003 Plan (the “Restricted Shares”). This long-term arrangement does not provide for vesting of any of the granted shares until 2009 at the earliest and postpones the vesting of the final tranche of granted shares until not earlier than 2011, except in limited circumstances that relate to a termination of Butch Kerzner’s employment or the occurrence of a change of control of the Company. In addition, in all cases, the vesting of the granted shares is subject to achievement of specified target stock prices (other than in the event of a change of control, in which case the vesting is based upon a deal price above a threshold rather than the more customary automatic vesting of granted shares irrespective of price). In addition, prior to vesting, the Restricted Shares must be voted by Butch Kerzner in accordance with the recommendations of the Company’s Board of Directors or, in the event that the Board of Directors does not make a recommendation, in the same proportion as all other Ordinary Shares of the Company. This summary is qualified in its entirety by reference to the particular provisions of the Restricted Stock Agreement, which was filed with the SEC as Exhibit 4.1 to our Form 6-K filed August 5, 2005.

During 2005, we did not grant any stock options and granted 500,000 restricted Ordinary Shares to our directors and officers pursuant to the 2003 Plan (as described in the preceding paragraph) and no stock options, SARs or restricted Ordinary Shares were granted under the 2005 Plan to our directors and officers.

As of February 28, 2006, total options to acquire 2,533,382 Ordinary Shares were outstanding, of which 742,382 were exercisable as of that date. As of February 28, 2006, 105,500 total SARs were outstanding, of which zero were vested as of that date. As of February 28, 2006, a total of 1,082,930 restricted shares had been granted under our Plans, of which 41,484 had vested as of that date and 1,041,446 remained subject to vesting conditions. As of February 28, 2006, our officers and directors, as a group, held options to acquire approximately 111,667

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Ordinary Shares (excluding options held by The Kerzner Family Trust and Butch Kerzner), of which options to acquire approximately 63,667 Ordinary Shares are currently exercisable. Our officers and directors also held approximately 16,000 SARs, of which zero are currently vested, and 30,667 restricted Ordinary Shares (excluding restricted Ordinary Shares held by The Kerzner Family Trust and Butch Kerzner). The options outstanding held by the officers and directors as of February 28, 2006 (excluding options held by The Kerzner Family Trust and Butch 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. The outstanding SARs held by the officers and directors as of February 28, 2006, (excluding SARs held by The Kerzner Family Trust and Butch Kerzner) were granted at the exercise price of $66.70 and have an expiration date of January 27, 2013. For a description of options and restricted shares held by The Kerzner Family Trust and Butch Kerzner, see “Share Ownership”.

(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. Butch Kerzner, our Chief Executive Officer, simultaneously joined our Board of Directors. Following the decision by our Board of Directors on May 12, 2005 to increase the number of directors from seven to eight, Mr. Ross was added to our Board of Directors. At our July 19, 2005 annual general meeting, our directors, consisting of Mr. S. Kerzner, Butch Kerzner, Mr. Buckley, Mr.  Kazim, Mr. Marks, Mr. Ross, 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 of Directors consisting of Mr. Siegel, Mr. Buckley, Mr. Marks and Mr. von Rantzau, and Mr. Siegel is the Chairman of the audit committee. Deloitte & Touche LLP, the Company’s independent registered public accounting firm, 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 registered public accounting firm 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) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 30, 2005.

We also have a compensation committee consisting of Mr. Siegel, Mr. Buckley, Mr. Marks and Mr. von Rantzau, and Mr. Siegel is the Chairman of the compensation committee. 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.

Corporate Governance Standards

Pursuant to home country practices exemptions granted to us by the NYSE, 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 NYSE’s listing standards. The NYSE rules and our current practices relating to corporate governance have the following significant differences:

Independent Directors. The NYSE 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 NYSE listing standards and we do not have regularly-scheduled meetings of non-management directors.

Audit Committee. The NYSE 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

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auditor of the Company. None of our audit committee members is qualified as a financial expert pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and Regulation S-K Item 401(h)(2); however, we believe that our audit committee has the aggregate experience and sophistication to provide financial expertise as a group.

Nominating/Corporate Governance and Compensation Committees. The NYSE 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 NYSE 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 NYSE listing standards.

Certifications. The NYSE 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 NYSE 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 NYSE 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 NYSE 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 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 NYSE issued a report recommending that the Exchange adopt significant changes to its corporate governance listing standards. On August 16, 2002, the NYSE 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 NYSE 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 generally continue to grant home country practices exemptions to foreign private issuers listed on the NYSE, including us, but, pursuant to the requirements of Rule 10A-3, those provisions of the amended corporate

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governance standards that implement the requirements of Rule 10A-3 are applicable to listed foreign private issuers. Among such requirements, a foreign private issuer listed on the NYSE is now 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 NYSE became applicable to foreign private issuers listed on the NYSE on July 31, 2005. The Company has taken appropriate steps with respect to its corporate governance system so that its audit committee satisfies the requirements set forth in Rule 10A-3.

Certain Takeover Considerations. Under Bahamian law and as permitted by our Restated Articles of Association (the “Articles”), our Board of Directors may amend the Articles without shareholder approval. As a result, the Board of Directors has the power to adopt charter provisions that would prevent or impede a change in control of the Company, such as a restriction on transfers of shares that would result in the ownership of any shareholder or group of shareholders exceeding a specified threshold. In addition, our Articles currently provide that a person is eligible for election to our Board of Directors only if nominated by the Board of Directors. As a result, under our Articles as they currently are in effect it would not be possible for a stockholder to conduct a proxy fight to replace incumbent directors.

Our shareholders may, however, by a majority vote of the shareholders at any meeting where a quorum (holders of more than 50% of the outstanding Ordinary Shares) is present, amend the Articles without the need for prior Board of Director approval. Accordingly, the existing need for Board of Directors approval of nominees for director or any anti-takeover provisions added by the Board of Directors to our Articles could be deleted over the objection of the Board of Directors if the requisite vote of shareholders could be obtained. Our Articles currently provide that a special shareholders meeting can be called by the holders of 10% or more of our Ordinary Shares. The Board of Directors could amend this provision, subject to the requirements of Bahamian corporate law that holders of 50% or more of the Ordinary Shares of a Bahamian company can convene a special meeting regardless of any charter provision to the contrary. Finally, our Articles provide that any special business can be addressed at our Annual General Meeting only if the general nature of such business is included in the notice of the meeting. Special business is defined as any business other than approving a dividend or our accounts and election of directors and officers. Under our existing Articles, shareholders are not able to compel any particular business to be included in the notice of our Annual General Meeting over the objection of the Board of Directors. The need for such notice is not a requirement of Bahamian law, and this provision could be modified or eliminated by the requisite vote of holders of our Ordinary Shares at a special shareholders meeting called for that purpose or an Annual General Meeting where consideration of such an amendment was included in the notice of the meeting.

In addition, we believe the under Bahamian law the Board of Directors has the authority to adopt a shareholder rights plan comparable to those in place in many United States companies. It is not clear whether or not Bahamian courts would follow United States precedents regarding the administration of a shareholder rights plan.

The foregoing is provided as a general summary of certain provisions of Bahamian law and our Articles that could be relevant in the context of a contested takeover. It does not purport to address all the significant issues that could arise under Bahamian law or our Articles in such an event.

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(D)Employees

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

	At December 31,
	2005	2004	2003
The Bahamas	6,456	5,803	5,785
United States	455	420	425
Other	1,663	147	75
Total:	8,574	6,370	6,285

In addition to the above, as of December 31, 2005, we had approximately 4,800 employees under management at our One&Only and other managed properties in Mauritius, Dubai, the Maldives and the Bahamas. We do not employ a significant number of temporary workers.

Union Contract Arrangements

In The Bahamas, as of December 31, 2005, approximately 4,200 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, Paradise Island, 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.”

At One&Only Palmilla in Mexico, as of December 31, 2005, approximately 537 of our employees were represented by the Sindicato De Trabajadores de la Industria Hotelera, Gastronomica y Conexos de la Republica Mexicana - Seccion 70. Approximately 477 of these employees are hotel employees and approximately 60 of these employees are golf employees. Under the contracts, salary levels are renewed each year and all other contract terms are renewed every other year. The Company expects to renew the salary levels relating to the hotel employees by July 1, 2006 and those relating to the golf employees by September 1, 2006. The Company expects to renew all other contract terms for hotel and golf employees by July 1, 2007 and September 1, 2007, respectively. The Company believes that its relations with these employees are good.

(E)Share Ownership

As of February 28, 2006, the Kerzner Family Trust, which is a trust controlled by Mr. S. Kerzner, held 750,000 options, all of which were transferred to the trust by Mr. S. Kerzner. Such options consist of (i) zero vested and exercisable options 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, 2006, Butch Kerzner holds 500,000 Restricted Shares, as described above, and 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, 2006, WLG, an entity controlled by the Kerzner Family Trust, had the right to vote approximately 10.7% of our Ordinary Shares (which includes 3,795,794 Ordinary Shares held by WLG and 116,225 Ordinary Shares over which WLG has the right to vote through certain proxy arrangements with Kersaf). 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 Mr. von Rantzau, is the sole shareholder of CMS which beneficially owns 2,159,193 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.

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Item 7.Major Shareholders and Related Party Transactions

(A)Major Shareholders

As of February 28, 2006, we had 36,726,911 Ordinary Shares outstanding. The following table sets forth certain information as of February 28, 2006 (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”)	3,038,518	(1)	8.3
Istithmar PJSC (“Istithmar”)	4,500,000	(2)	12.3
World Leisure Group Limited (“WLG”)	3,912,019	(3)	10.7
Royale Resorts International Limited (“Kersaf”)	317,134	(4), (6)	0.9
Baron Capital Group, Inc. (“Baron”)	5,813,945	(5)	15.8
Cement Merchants SA (“CMS”)	2,159,193	(6), (7)	5.9
FMR Corp.	4,919,384	(8)	13.4
Emminence Capital, LLC (“Emminence”)	2,240,000	(9)	6.1
Directors and officers as a group (excluding shares beneficially owned by the Kerzner Family Trust (10))	*		*

* Less than 5% of outstanding voting securities.

(1)Consists of:  (i) 2,922,293 Ordinary Shares held by Caledonia (based upon information contained in the Schedule 13D/A filed by Caledonia on June 24, 2005) and (ii) 116,225 Ordinary Shares over which Caledonia has a proxy (see Note 4 below).

(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) 3,795,794 Ordinary Shares held for the account of WLG (based upon information contained in the Schedule 13D/A filed by Mr. S. Kerzner on June 20, 2005 and Form 144s filed by Mr. S. Kerzner and Butch Kerzner) and (ii) 116,225 Ordinary Shares over which WLG has a proxy (see Note 4 below). The Kerzner Family Trust is controlled by Mr. S. Kerzner.

(4)Consists of 317,134 Ordinary Shares held by Royale Resorts International Limited (“RRIL”) and Royale Resorts Holdings Limited (“RRHL”), a wholly-owned subsidiary of RRIL, each of which companies are jointly owned by Kersaf and CMS (73.3% by Kersaf and 26.7% by CMS).

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 116,225 of the Kersaf Proxy Shares. The amounts presented in this table for CMS include the remaining 84,684 of Kersaf Proxy Shares.

(5)Based upon information contained in the Schedule 13G/A filed by Baron on February 14, 2006.

(6)Amounts presented in this table reflect the beneficial ownership by each of Kersaf and CMS of the 317,134 Ordinary Shares held by RRIL and RRHL; Kersaf and CMS share dispositive power over the 317,134 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 84,684 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.

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(7)Consists of:  (i) 1,842,059 Ordinary Shares held by CMS and (ii) 317,134 Ordinary Shares held by RRHL and RRIL over which CMS and Kersaf share dispositive power as discussed in Note 6 above, which shares include 84,684 Kersaf Proxy Shares as defined and discussed in Note 4 above. Based upon information contained in the Schedule 13D/A filed by CMS on February 23, 2006.

(8)Based upon information contained in the Schedule 13G/A filed by FMR Corp. and certain affiliates on February 14, 2006.

(9)Based upon information contained in the Schedule 13D filed by Eminence on February 6, 2006.

(10)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, 2006 (excluding shares beneficially owned by the Kerzner Family Trust).

As of February 28, 2006, we had approximately 705 holders of record of approximately 36.7 million Ordinary Shares, excluding 7.1 million Ordinary Shares held as treasury stock. As of February 28, 2006, there were an estimated 646 U.S. holders of record holding approximately 90% of our Ordinary Shares. Certain of these Ordinary Shares are beneficially owned by holders located outside of the United States.

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, FMR Corp. and Eminence and other sources.

In April 2004, the Company issued $230.0 million principal amount of 2.375% Notes due 2024 which, after related issuance costs, resulted in net proceeds of approximately $223.7 million. The 2.375% Notes are unsecured senior subordinated obligations and mature on April 5, 2024, unless they are converted, redeemed or repurchased before the maturity date. The 2.375% 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 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, Mr. 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

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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 sale of 2.3 million Ordinary Shares of Kerzner (the “Kersaf Offering”) in a registered public offering, using securities registered under the Universal Shelf 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 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

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•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 holdings of our 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 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 $5.0 million at December 31, 2005. 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 an average weighted rate equal to one-month

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LIBOR plus 250 basis points, which was 5.9% at December 31, 2005. 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.

We provide marketing, administrative and development services to Harborside at Atlantis from which we earned fees of $3.7 million, $2.8 million and $1.8 million for the years ended December 31, 2005, 2004 and 2003, 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, 2006. 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 One&Only Kanuhura and One&Only Maldives at Reethi Rah, each a Maldives company, in which we initially owned a 25% equity interest and a 0% interest, respectively. As of January 1, 2005, our ownership interest in 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 One&Only Kanuhura and One&Only Maldives at Reethi Rah. The terms of the management agreement run concurrent with the terms of a lease between One&Only Kanuhura and the government of the Maldives to lease 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 One&Only Kanuhura.

We provide management services to One&Only Palmilla, a deluxe, five-star property located near Cabo San Lucas. In connection with the purchase of our 50% ownership interest in 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 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 One&Only Maldives at Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives that opened on May 1, 2005. The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2030. SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (SRL’s participation is 25%) with us in connection with One&Only Maldives at Reethi Rah. We have transferred the management agreement for One&Only Maldives at Reethi Rah to One&Only Management. See “Item 5. Operating and Financial Review and Prospects, (F) Off-Balance Sheet Arrangements” for further information.

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 Atlantis, The Palm (see “Item 4. Information on the Company, (B) Business Overview—The Properties—Destination Resorts—Atlantis, The Palm”). As of December 31, 2005, we had not recognized any management, development or marketing fees associated with this project, other than $0.9 million in development fees.

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 was the equivalent of approximately $353,000 at December 31, 2005) 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, $11.2 million (which represents the future payments that were to be received over

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the term of the underlying agreements from 2006 to 2008) was classified as deferred revenue as of December 31, 2005. 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.  Management does not believe, based on currently available information, that these matters will have a material adverse effect on the accompanying consolidated financial statements.

Trademark Litigation

On January 27, 2006, we filed a complaint in the United States District Court, District of Nevada, against Monarch Casino & Resort, Inc. and Golden Road Motor Inn, Inc. (collectively, “Monarch”) alleging, inter alia, that Monarch has no right to use the mark “Atlantis” in connection with casino services in Las Vegas, Nevada and that its assertions that it has trademark rights for the “Atlantis” mark throughout the State of Nevada infringes on certain of our United States registered “Atlantis” trademark rights. The complaint seeks both injunctive relief and damages. In the action, we seek a declaratory judgment pursuant to Sections 32(1), 43(A) and 43(C) of the Trademark Act of 1946 (the “Lanham Act”) that Monarch’s use of the “Atlantis” mark in Las Vegas would constitute infringement of our registered trademark and result in consumer confusion and a dilution of our “Atlantis” trademark. In addition to the Lanham Act claims, our complaint alleges common law trademark infringement and dilution under Nevada law.

On February 14, 2006, we filed an amended complaint alleging further that Monarch’s conduct constituted deceptive trade practices in violation of Sections 41.600 and 598.0915 of the Nevada Revised Statutes.

On February 16, 2006, Monarch filed a motion to transfer venue from Las Vegas, Nevada to Reno, Nevada, which we have opposed. On February 24, 2006, Monarch filed an answer and counterclaim. In its counterclaim, Monarch brings claims for (1) cancellation of our United States “Atlantis” trademark registration for casino services; (2) breach of a 1996 license agreement that was entered into by Monarch with Atlantis Lodge, Inc. (“Lodge”), and later assigned from Lodge to us; (3) a declaration that we have infringed upon Monarch’s trademark rights; and (4) a declaration that we have engaged in deceptive trade practices in violation of Nevada law. We believe the counterclaims to be without merit and intend to vigorously defend them.

Class Action Complaint

On March 23, 2006, a complaint was filed in Los Angeles Superior Court seeking to enjoin the sale of the Company to an investor group as described under “Item 4. Information on the Company—Recent Developments”. The complaint purports to be a class action on behalf of the Company’s public shareholders. It names us and all our directors as defendants, and alleges that the defendants have breached their fiduciary duties to the Company’s public shareholders and are pursuing an unlawful plan to cash them out for grossly inadequate compensation. We believe the complaint is completely without merit and intend to contest vigorously all its allegations of improper conduct.

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

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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.

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, 2005.

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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 New York Stock Exchange (“NYSE”) since March 1, 1996. On February 28, 2006, the closing price of our Ordinary Shares on the NYSE was $67.29.

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
2005	$	69.81	$	53.04
2004	62.75		38.47
2003	39.02		19.37
2002	31.20		18.80
2001	28.50		17.13

For the quarter:

		High		Low
2005:	4th quarter	$	69.81	$	53.04
	3rd quarter	61.26		53.59
	2nd quarter	61.95		54.32
	1st quarter	66.90		56.05
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

For the month:

	High		Low
2006 February	$	68.20	$	64.38
2006 January	70.00		65.24
2005 December	69.81		65.80
2005 November	65.01		58.74
2005 October	58.35		53.04
2005 September	58.55		53.59

(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.

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.

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(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 was filed as Exhibit 1.1(b) to our Form 20-F for the year ended December 31, 2004, filed on March 31, 2005 in file number 1-04226.

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.”

2.375% Convertible Senior Subordinated Notes Indenture

In April 2004, Kerzner issued $230.0 million principal amount of 2.375% 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% Notes will be used to fund future capital expenditures and for general corporate purposes.

The 2.375% 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.

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The 2.375% 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% Notes is payable semi-annually and commenced on October 15, 2004.

6¾% Senior Subordinated Notes Indenture

On September 22, 2005, Kerzner issued $400.0 million principal amount of 6¾% senior subordinated notes due 2015, which, after debt issuance costs, resulted in net proceeds of approximately $392.7 million. The proceeds received from the issuance of the 6¾% Senior Subordinated Notes were used to repurchase our outstanding 87/8% Senior Subordinated Notes pursuant to the Tender Offer and Consent Solicitation for such notes described in “Item 4. Capital Structure—Tender Offer and Consent Solicitation for 87/8% Senior Subordinated Notes”.

The 6¾% senior subordinated notes were issued without registration under the Securities Act, in reliance on Rule 144A promulgated under the Securities Act. In connection with the sale of those notes, we entered into a registration rights agreement, under which we agreed to use our reasonable efforts to consummate an exchange offer for the 6¾% senior subordinated notes. We filed an exchange offer registration statement on November 23, 2005, which was declared effective by the SEC on December 2, 2005. On December 2, 2005 we commenced an exchange offer to exchange any and all of our outstanding 6¾% senior subordinated notes for identical notes registered under the Securities Act. On January 6, 2006, we closed the exchange offer and, together with KINA, issued $400.0 million of 6¾% Senior Subordinated Notes in exchange for our outstanding 6¾% senior subordinated notes.

The 6¾% Notes, which are unsecured obligations, were co-issued by Kerzner and KINA and are unconditionally guaranteed by substantially all of the wholly-owned subsidiaries of Kerzner other than KINA. Interest on the 6¾% Senior Subordinated Notes is payable semi-annually on April 1 and October 1, commencing on April 1, 2006. The indenture for the 6¾% Notes contains certain covenants, including limitations on the ability of the co-issuers to, among other things:  (i) incur additional indebtedness, (ii) incur certain liens and (iii) make certain other restricted payments.

Amended Credit Facility

On October 31, 2005, 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, 2005 under the Amended Credit Facility. Our availability as of December 31, 2005 was $644.6 million, due to the $5.4 million in outstanding letters of credit.

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 assumed all obligations and rights of its affiliate, Nakheel LLC. The budget for this development has been increased from $1.2 billion to approximately $1.5 billion (inclusive of land acquisition costs). The joint venture’s capital structure includes an equity investment of $200.0 million by each partner. The remaining project financing is expected to consist of a $700.0 million senior first-lien term loan facility, which is subject to various conditions, and an additional $275.0 million of second-lien debt. Istithmar has committed to provide $75.0 million of the senior second-lien debt. The joint venture has received a commitment, subject to various conditions, from third party underwriters for the remaining $200.0 million. The joint venture expects to enter into binding definitive documentation for the senior first-lien term loan facility and the second-lien debt during the second quarter of 2006. In addition, we and Istithmar will each 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 services obligations. Further, Istithmar has agreed to provide an additional guarantee for cost overruns in excess of this amount and as necessary to achieve completion. The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents and

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construction of supporting infrastructure by Nakheel. 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 V&A Waterfront to develop 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 132-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.”  We have 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, as defined. The base management fee is likely to be subordinated to senior and subordinated debt facilities discussed above. We also have a development agreement with the joint venture that entitles us to receive $20.0 million and reimbursement of certain expenses over the development period.

In September 2002, we purchased a 50% ownership interest in the 115-room 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 One&Only Palmilla obtained from third parties. In 2004, we also provided One&Only Palmilla with approximately $14.5 million of completion loans. On December 17, 2004, One&Only Palmilla entered into two promissory notes pursuant to which it borrowed $110.0 million and all of 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 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 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 One&Only Maldives at Reethi Rah, a 130-room luxury resort on North Male Atoll in the Maldives, that opened on May 1, 2005. The management and development agreements related to this property are co-terminus with the owner’s lease, which expires in 2030. SRL’s board of directors has approved the exercise of its right to participate on a proportionate basis (currently 25%) with us in connection with One&Only Maldives at Reethi Rah. We have transferred the management agreement for One&Only Maldives at 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:  One&Only Le Saint Géran, 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 One&Only Kanuhura and One&Only Maldives at Reethi Rah in the Maldives. As of January 1, 2006, 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, at which time it will own 50% of One&Only Management. See “Item 4. Information on the Company, (A) History and Development of the Company” for more information. In connection with the formation of One&Only Management, we subcontracted to it all of our Mauritius management agreements and assigned to it the One&Only Kanuhura and One&Only Maldives at Reethi Rah management agreements, and SRL purchased 20% of our debt and equity interests in One&Only Kanuhura. As of January 1, 2005, our ownership interest in 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. See “Item 4. Information on the Company, (A) History and Development of the Company” for more information.

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

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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 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 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, 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.

Colony Agreement

In February 2004, we and Colony entered into an 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 “Colony Note”). The Colony 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 Colony Note is due on March 10, 2009, which date may be accelerated by us upon certain events. The Colony 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 Colony 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.

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

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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 of approximately 30,000 square feet. See “Item 4. Information on the Company, (B) Business Overview—Gaming—United Kingdom” for more information.

Development of Resort Casinos in the United Kingdom

In April 2005, the United Kingdom passed gaming reform legislation that was less favorable than we had previously anticipated related to our previously announced Scottish Exhibition + Conference Center, Sportcity and The O2 projects. During the six months ended June 30, 2005, we wrote off $11.2 million related to all previously capitalized and deferred costs incurred for the planning and development of the aforementioned projects. Although the future of gaming in the United Kingdom is unclear as a result of the passage of legislation in April 2005, we continue to pursue potential opportunities on a selective basis. Costs related to these opportunities, other than the Northampton project and certain costs relating to The O2, are expensed as incurred. 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 2005, the Company entered into a joint venture agreement with SOMED and CDG, and into related development and long-term management agreements. See “Item 4. Information on the Company, (B) Business Overview—Destination Resorts—Morocco” for more information on this project.

Union Contract Arrangements

In The Bahamas, as of December 31, 2005, approximately 4,200 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.

At One&Only Palmilla in Mexico, as of December 31, 2005, approximately 537 of our employees were represented by the Sindicato De Trabajadores de la Industria Hotelera, Gastronomica y Conexos de la Republica Mexicana - Seccion 70. Approximately 477 of these employees are hotel employees and approximately 60 of these employees are golf employees. Under the contracts, salary levels are renewed each year and all other contract terms are renewed every other year. The Company expects to renew the salary levels relating to the hotel employees by July 1, 2006 and those relating to the golf employees by September 1, 2006. The Company expects to renew all other contract terms for hotel and golf employees by July 1, 2007 and September 1, 2007, respectively.

Compensation Arrangements

On August 4, 2005, the Company entered into a Restricted Stock Agreement with Butch Kerzner, pursuant to which the Company granted Butch Kerzner 500,000 restricted Ordinary Shares under the 2003 Stock Incentive Plan. See “Item 5. (B) Compensation” for more information.

On December 13, 2005, our Board of Directors adopted the 2005 Stock Incentive Plan, which provides for the issuance of an aggregate of 2,000,000 Ordinary Shares in connection with awards of stock appreciation rights, stock options, restricted stock and other stock-based awards. See “Item 5. (B) Compensation” for more information.

(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

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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.

IRS Circular 230 Disclosure

To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that:  (i) any U.S. federal tax advice contained in this document (including any attachment) is not intended or written by us to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties under the Internal Revenue Code; (ii) such advice was written in connection with the promotion or marketing of the transactions or matters addressed herein; and (iii) taxpayers should seek advice based on their particular circumstances from an independent tax advisor.

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”) 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. 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 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 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

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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 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.

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. 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.

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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.

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 effective 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, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 16A.Audit Committee Financial Expert

Our audit committee consists of Messrs. Buckley, Marks, Siegel and von Rantzau. None of our audit committee members is qualified as a financial expert pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and Regulation S-K, Item 401(h)(2); however, we believe that our audit committee has the aggregate experience and qualifications to provide financial expertise as a group. 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.

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:

	2005		2004
	(in thousands)
Audit fees	$	1,182	$	1,533
Audit-related fees (1)	787		499
Tax fees (2)	252		780
Other fees (3)	300		—
Total fees	$	2,521	$	2,812

(1)Audit-related fees primarily consist of fees related to the performance of audits and attest services not required by statute or regulations, audits of the Company’s benefit plan, consents, comfort letters, registration statements, 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.

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(3)Other fees consist of permitted consulting services to perform a construction cost assessment related to one of the Company’s development projects.

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 2005.

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

Not applicable.

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

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet to Be Purchased Under the Plans or Programs
January 2005	—	—		—	—
February 2005	—	—		—	—
March 2005	—	—		—	—
April 2005	—	—		—	—
May 2005	—	—		—	—
June 2005	—	—		—	—
July 2005	—	—		—	—
August 2005	323,700	$	58.19	323,700	1,676,300
September 2005	288,800	$	58.23	288,800	1,387,500
October 2005	—	—		—	—
November 2005	—	—		—	—
December 2005	—	—		—	—
Total	612,500	$	58.21	612,500	1,387,500

On August 12, 2005, the Company announced that its Board of Directors approved a share repurchase program authorizing the Company to repurchase up to two million of the Company’s Ordinary Shares. As of December 31, 2005, the Company had purchased 612,500 Ordinary Shares at a weighted average price of $58.21 per share and had 1,387,500 shares remaining under this program.

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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

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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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	Exhibit 1.1(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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

103

Exhibit Numbers	Description	Incorporation by Reference to
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
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	Exhibit 2.2(h) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
2.2(i)	Sixth Supplemental Indenture dated as of March 24, 2005 to Indenture dated as of August 14, 2001	Exhibit 2.2(i) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
2.2(j)	Seventh Supplemental Indenture dated as of September 9, 2005 to Indenture dated as of August 14, 2001	Exhibit 4.2(j) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945
2.2(k)	Eighth Supplemental Indenture dated as of September 21, 2005 to Indenture dated as of August 14, 2001	Exhibit 4.2(k) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945
2.2(l)	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(m)	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(n)	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(o)	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
2.4(a)	Purchase Agreement dated as of September 22, 2005, among Kerzner, the subsidiary guarantors party thereto, and Deutsche Bank Securities Inc., JPMorgan Securities Inc., Bear, Stearns & Co., Merrill Lynch Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as Initial Purchasers	Exhibit 4.4(a) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945

104

Exhibit Numbers	Description	Incorporation by Reference to
2.4(b)	Indenture dated as of September 22, 2005, among Kerzner, the guarantors named therein and The Bank of New York Trust Company, N.A., as Trustee	Exhibit 4.4(b) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945
2.4(c)	Registration Rights Agreement dated as of September 22, 2005, among Kerzner, the subsidiary guarantors party thereto and Deutsche Bank Securities Inc. and JPMorgan Securities Inc., as Representatives of the Initial Purchasers	Exhibit 4.4(d) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945
2.4(d)	First Supplemental Indenture dated as of September 22, 2005 to Indenture dated as of September 22, 2005	Exhibit 4.4(c) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945
2.5	Agreement and Plan of Merger dated as of March 20, 2006, among Kerzner, K-Two Holdco Limited and K-Two Subco Limited	Exhibit 2.1 to Form 6-K of Kerzner, filed on March 20, 2006, File No. 001-04226
2.6	Cooperation Agreement dated as of March 20, 2006, among Kerzner, Solomon Kerzner and Howard B. Kerzner	Exhibit 10.1 to Form 6-K of Kerzner, filed on March 20, 2006, File No. 001-04226
2.7	Voting Agreement dated as of March 20, 2006, among Kerzner, Solomon Kerzner, Howard B. Kerzner and World Leisure Group Limited	Exhibit 10.2 to Form 6-K of Kerzner, filed on March 20, 2006, File No. 001-04226
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
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

105

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	Exhibit 4.3(i) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
4.3(j)	Sixth Amended and Restated Credit Agreement dated as of October 31, 2005, 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	Exhibit 10.3(j) to Registration Statement on Form F-4, filed on November 23, 2005, File No. 333-129945

106

Exhibit Numbers	Description	Incorporation by Reference to
	Lenders, JPMorgan Chase Bank, N.A., as the Administrative Agent, Deutsche Bank Securities Inc., as the Syndication Agent and JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc., Goldman Sachs Credit Partners L.P. and Merrill Lynch Capital Corporation, as the Co-Documentation Agents
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	Exhibit 4.5(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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	Exhibit 4.5(c) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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
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	Exhibit 4.8(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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	Exhibit 4.8(c) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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	Exhibit 10.9 to Registration Statement on Form F-4, filed on September 21, 2001, File

107

Exhibit Numbers	Description	Incorporation by Reference to
	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	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
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	Exhibit 4.19(a) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
4.19(b)	Amended and Restated KINA Retirement Savings Plan, dated January 1, 2002.	Filed herewith as Exhibit 4.19(b)
4.19(c)	Amendment 2003-1, dated December 15, 2003 to the KINA Retirement Savings Plan dated January 1, 2002	Exhibit 4.19(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
4.19(d)	Amendment 2004-1, dated June 4, 2004 to the KINA Retirement Savings Plan dated January 1, 2002.	Filed herewith as Exhibit 4.19(d)
4.19(e)	Amendment 2005-1, dated December 31, 2005 to the KINA Retirement Savings Plan dated January 1, 2002.	Filed herewith as Exhibit 4.19(e)
4.19(f)	Restricted Stock Agreement, dated as of August 4, 2005, between Kerzner International Limited and Howard B. Kerzner	Exhibit 4.1 to Form 6-K of Kerzner, filed on August 5, 2005
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,

108

Exhibit Numbers	Description	Incorporation by Reference to
		2003, filed on March 30, 2004, File No. 001-04226
4.22	Kerzner International Limited 2005 Stock Incentive Plan	Filed herewith as Exhibit 4.22
4.23	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
4.24	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	Exhibit 4.24(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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	Listing of Significant Subsidiaries of Kerzner International Limited	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	Exhibit 11.1(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2004, filed on March 31, 2005, File No. 001-04226
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
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, 2005, 2004 and 2003	Filed herewith as Exhibit 14.3
14.4	Consent of Ernst & Young LLP	Filed herewith as Exhibit 14.4

109

Exhibit Numbers	Description	Incorporation by Reference to
14.5	Harborside at Atlantis Joint Venture Limited Financial Statements December 31, 2005, 2004 and 2003	Filed herewith as Exhibit 14.5
14.6	Consent of Deloitte & Touche LLP (with respect to Harborside at Atlantis Joint Venture Limited Financial Statements December 31, 2004 and 2003)	Filed herewith as Exhibit 14.6

110

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 31, 2006	By:	/s/ John R. Allison
	Name:	John R. Allison
	Title:	Executive Vice President and Chief Financial Officer

111

KERZNER INTERNATIONAL LIMITED

Consolidated Financial Statements as of December 31, 2005 and 2004 and for each of the
Three Years in the Period Ended December 31, 2005

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, 2005 and 2004, and the related consolidated statements of operations, changes in shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2005. 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 consolidated financial statements for the year ended December 31, 2005 of Harborside at Atlantis Joint Venture Limited (“Harborside”), the Company’s investment in which is accounted for by use of the equity method. The Company’s equity of $24.8 million in Harborside’s net assets at December 31, 2005 and of $16.1 million in Harborside’s net income for the year ended December 31, 2005, are included in the accompanying consolidated financial statements. The financial statements of Harborside 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, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

March 31, 2006

F-2

KERZNER INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS

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

	December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	115,951		$	180,341
Restricted cash	4,281			2,768
Short-term investments	19,969			203,940
Accounts receivable, net	50,167			41,743
Due from affiliates	37,164			15,682
Inventories	19,260			13,453
Assets held for sale	—			12,289
Prepaid expenses and other assets	22,932			21,685
Total current assets	269,724			491,901
Property and equipment, net	1,647,335			1,347,640
Intangible asset, net	14,695			—
Due from affiliates – non-current	9,718			81,737
Deferred tax asset, net	29,756			11,181
Deferred charges and other assets, net	39,882			40,678
Restricted cash – non-current	57,935			—
Investments in associated companies	207,577			114,138
Total assets	$	2,276,622		$	2,087,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	7,689		$	659
Accounts payable and accrued liabilities	195,395			168,225
Due to affiliates	4,790			500
Capital creditors	46,065			16,032
Total current liabilities	253,939			185,416
Deferred revenue	21,812			20,419
Other long-term liabilities	10,845			7,099
Due to affiliates – non-current	34,884			—
Long-term debt, net of current maturities	789,617			754,129
Total liabilities	1,111,097			967,063
Minority and noncontrolling interest	3,763			3,934
Commitments and contingencies (Note 23)
Shareholders’ equity:
Preference shares, $.001 par value, 100,000,000 authorized at December 31, 2005 and 2004; zero issued and outstanding at December 31, 2005 and 2004	—			—
Ordinary Shares, $.001 par value, 250,000,000 authorized at December 31, 2005 and 2004; 43,573,494 and 42,971,878 issued and outstanding at December 31, 2005 and 2004, respectively	44			43
Capital in excess of par	956,185			971,952
Retained earnings	388,760			336,543
Accumulated other comprehensive loss	(7,557		)	(13,898		)
Deferred compensation	(12,901		)	(15,593		)
	1,324,531			1,279,047
Treasury shares, 7,072,029 shares at December 31, 2005 and 2004	(162,769		)	(162,769		)
Total shareholders’ equity	1,161,762			1,116,278
Total liabilities and shareholders’ equity	$	2,276,622		$	2,087,275

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,
	2005			2004			2003
Revenue:
Gaming	$	146,010		$	130,879		$	138,587
Rooms	255,647			215,868			188,235
Food and beverage	179,490			151,827			130,879
Tour operations	54,524			47,115			40,790
Management, development and other fees	19,355			19,894			15,177
Other revenue	90,737			78,536			68,424
Gross revenue	745,763			644,119			582,092
Less: promotional allowances	(24,239		)	(23,034		)	(23,579		)
Net revenue	721,524			621,085			558,513
Costs and expenses:
Gaming	63,289			59,504			63,283
Rooms	42,379			39,949			33,395
Food and beverage	119,513			104,078			89,502
Tour operations	46,003			39,994			35,406
Other operating expenses	119,957			96,149			85,257
Selling, general and administrative	136,808			118,334			101,584
Corporate expenses	42,569			38,601			36,431
Depreciation and amortization	73,292			58,948			55,782
Hurricane related expenses	—			3,426			—
Insurance recovery	—			—			(2,819		)
Pre-opening expenses	7,975			3,258			—
UK gaming write off	11,179			—			—
Loss (gain) on damaged assets	—			1,194			(2,514		)
(Gain on sale) impairment of Atlantic City land	(1,433		)	7,303			—
Impairment of notes receivable	27,812			—			—
Costs and expenses	689,343			570,738			495,307
Income from operations	32,181			50,347			63,206
Relinquishment fees – equity in earnings of TCA	37,882			35,909			33,960
Other income (expense):
Interest income	9,130			4,722			3,394
Interest expense, net of capitalization	(44,087		)	(36,814		)	(29,264		)
Equity in earnings (losses) of associated companies	22,092			7,455			(320		)
Gain on settlement of territorial and other disputes	—			—			1,479
Loss on early extinguishment of debt	(27,912		)	(1,655		)	—
Other, net	13			1,358			(686		)
Other expense, net	(40,764		)	(24,934		)	(25,397		)
Income from continuing operations before income taxes and minority and noncontrolling interests	29,299			61,322			71,769
Benefit (provision) for income taxes	16,104			(424		)	(162		)
Minority and noncontrolling interests	6,814			7,234			(1,340		)
Income from continuing operations	52,217			68,132			70,267
Income from discontinued operations, net of income tax effect	—			—			1,305
Net income	$	52,217		$	68,132		$	71,572

F-4

	For the Year Ended December 31,
	2005		2004		2003
Basic earnings per share:
Income from continuing operations	$	1.46	$	2.09	$	2.46
Income from discontinued operations, net of income tax effect	—		—		0.04
Earnings per share-basic	$	1.46	$	2.09	$	2.50
Weighted average number of shares outstanding-basic	35,794		32,550		28,575
Diluted earnings per share:
Income from continuing operations	$	1.39	$	2.01	$	2.39
Income from discontinued operations, net of income tax effect	—		—		0.05
Earnings per share-diluted	$	1.39	$	2.01	$	2.44
Weighted average number of shares outstanding-diluted	37,667		33,884		29,377

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

F-5

KERZNER INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

For the Years Ended December 31, 2005, 2004 and 2003
(In thousands)

											Accumulated Other									Total			Comprehensive
	Ordinary Shares					Capital in			Retained		Comprehensive			Deferred			Treasury			Shareholders’			Income (Loss)
	Shares		Amount			Excess of Par			Earnings		Income (Loss)			Compensation			Shares			Equity			for the Period
Balance at January 1, 2003	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		)	(2,599		)	(162,769		)	839,590			71,970
Translation reserves	—		—			—			—		606			—			—			606			606
Unrealized losses on available-for-sale securities	—		—			—			—		(639		)	—			—			(639		)	(639		)
Unrealized losses on investment 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		)	(15,593		)	(162,769		)	1,116,278			61,970
Translation reserves and other	—		—			—			—		(419		)	—			—			(419		)	(419		)
Unrealized gains on available-for-sale securities	—		—			—			—		631			—			—			631			631
Unrealized gains on investment in associated companies	—		—			—			—		7,283			—			—			7,283			7,283
Reversal of unrealized gains on investment in associated companies	—		—			—			—		(1,154		)	—			—			(1,154		)	(1,154		)
Exercise of share options	679		1			17,831			—		—			—			—			17,832			—
Repurchase of Ordinary Shares	(618	)	(1		)	(35,942		)	—		—			—			—			(35,943		)	—
Issuance of restricted share awards	546		1			2,678			—		—			(2,678		)	—			1			—
Cancellation of restricted share awards	(6	)	—			(334		)	—		—			334			—			—			—
Amortization of deferred compensation expense	—		—			—			—		—			5,036			—			5,036			—
Net income	—		—			—			52,217		—			—			—			52,217			52,217
Balance at December 31, 2005	43,573		$	44		$	956,185		$	388,760	$	(7,557	)	$	(12,901	)	$	(162,769	)	$	1,161,762		$	58,558

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,
	2005			2004			2003
Cash flows from operating activities:
Net income	$	52,217		$	68,132		$	71,572
Depreciation and amortization	73,292			58,948			55,782
Amortization of debt issuance costs, premiums and discounts	5,144			2,904			1,217
Impairment of notes receivable	27,812			—			—
Impairment (gain on sale) of Atlantic City land	(1,433		)	7,303			—
Loss on early extinguishment of debt	27,912			1,655			—
UK gaming write off	11,179			—			—
Recognition of equity-based compensation	5,036			1,796			—
Loss on disposition of property and equipment	1,752			544			451
Equity in earnings from associated companies, net of dividends received	(20,574		)	(6,163		)	(3,646		)
Minority and noncontrolling interests	(7,341		)	(7,750		)	—
Income from discontinued operations, net of income tax effect	—			—			(1,305		)
Provision for doubtful accounts	224			3,017			1,326
Deferred income tax benefit	(21,479		)	(3,499		)	(11,732		)
Net change in working capital accounts:
Interest income related to restricted cash	(709		)	(1,323		)	75
Trade receivables	(1,821		)	(1,977		)	(619		)
Due from affiliates	10,081			(3,461		)	7,362
Inventories and prepaid expenses and other assets	(4,672		)	(5,537		)	(2,506		)
Accounts payable and accrued liabilities	11,091			12,454			16,996
Due to affiliates	1,096			500			—
Net change in other balance sheet accounts:
Due from affiliates – non-current	(253		)	(57		)	(598		)
Deferred charges and other assets	(4,406		)	741			785
Deferred revenue	2,240			6,451			(3,376		)
Other long-term liabilities	3,826			980			1,674
Due to affiliates – non-current	3,566			—			—
Loss (gain) on damaged assets	—			1,194			(2,514		)
Other, net	1,460			(338		)	1,199
Net cash provided by continuing operations	175,240			136,514			132,143
Cash provided by discontinued operations	—			—			523
Net cash provided by operating activities	175,240			136,514			132,666
Cash flows from investing activities:
Payments for property and equipment	(198,206		)	(119,398		)	(50,849		)
Acquisition of land and other assets	(43,671		)	(30,877		)	(20,049		)
Redemption (purchase) of short-term investments, net	185,236			(204,309		)	—
Advances/loans to affiliates	(40,325		)	(78,626		)	(17,003		)
Repayments from affiliates	13,750			29,200			4,950
Acquisition of equity interest in associated companies	(55,170		)	(69,191		)	—
Capital distribution from associated companies	7,849			—			—
Cash resulting from the initial consolidation of variable interest entities	1,519			7,047			—
Deferred contract acquisition costs	(813		)	(1,631		)	(2,115		)
Deposit and purchase of land and casino license	—			—			(6,147		)
Proceeds from the sale of land, property and equipment	7,009			238			1,099
Acquisition of tour operator, net of cash acquired	—			—			1,384
Repayment of notes receivable	—			—			13,409
Change in restricted cash	(58,739		)	—			—
Deposits and other	(1,205		)	—			1,250
Sale of debt and equity interest in One&Only Kanuhura	340			—			1,464
Net cash used in investing activities	(182,426		)	(467,547		)	(72,607		)

F-7

	For the Year Ended December 31,
	2005			2004			2003
Cash flows from financing activities:
Proceeds from issuance of debt	400,000			230,000			—
Borrowings	1,227			117,068			29,600
Early redemption and repayment of debt	(432,102		)	(94,079		)	(101,898		)
Debt issuance and modification costs	(8,218		)	(14,769		)	(140		)
Proceeds from exercise of share options	17,832			40,503			39,007
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	(35,943		)	—			(408		)
Net cash provided by (used in) financing activities	(57,204		)	451,142			(33,839		)
Increase (decrease) in cash and cash equivalents	(64,390		)	120,109			26,220
Cash and cash equivalents at beginning of period	180,341			60,232			34,012
Cash and cash equivalents at end of period	$	115,951		$	180,341		$	60,232
Supplemental disclosure of cash flow and non-cash investing and financing activities:
Interest paid, net of capitalized interest of $11.8 million, $5.8 million and $0.4 million	$	40,907		$	31,887		$	27,914
Income taxes paid	3,754			4,776			4,166
Change in fair value of interest rate swap agreements	8,693			3,557			7,735
Equipment acquired under capital lease obligations	—			1,395			—
Note payable and taxes related to asset acquisition	—			—			18,500
Assets acquired and liabilities assumed, net, excluding cash, in connection with initial consolidation of Palmilla JV, LLC	—			62,029			—
Assets acquired and liabilities assumed, net, excluding cash, in connection with initial consolidation of Reethi Rah	4,908			—			—
Assets acquired and liabilities assumed, net, excluding cash, in connection with initial consolidation of Residences at Atlantis	(615		)	—			—
Capital creditors accrued for the purchase of property and equipment	11,237			6,530			3,101
Contribution of the right to use land to equity investment in Ocean Club Residences & Marina	19,998			—			—

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 developing Atlantis, The Palm, Dubai, United Arab Emirates (“Atlantis, The Palm”), and we have entered into a joint venture agreement with two partners and related development and long-term management agreements for the development and operation of a destination resort casino in Morocco. 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 development of a casino in Northampton, England, costs associated with other gaming opportunities 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 ten beach resorts at locations in The Bahamas, Mauritius, Dubai, the Maldives and Mexico and have another resort that is under development in South Africa (collectively “One&Only Resorts”).

During the year ended December 31, 2005, the Company consolidated Reethi Rah Resort Pvt Ltd (“Reethi Rah”) and Residences at Atlantis Development Limited (“Residences at Atlantis”) into its consolidated financial statements as the Company has determined that it is the primary beneficiary of these variable interest entities in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R) (“FIN 46R”), “Consolidation of Variable Interest Entities”. See Note 3—Consolidation of Variable Interest Entities for further discussion.

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 an 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 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 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, expanded water attractions and a condominium-hotel. Certain

F-9

elements of the Phase III expansion commenced in 2003, including construction of five new restaurants and additional retail space (“Marina Village”) and the completion of three luxury villas (“Ocean Club Villas”) at One&Only Ocean Club (“Ocean Club”). The Ocean Club Villas were completed in June 2004 and the Marina Village was completed in July 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 Residences at Atlantis condominium-hotel project 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 (“Ocean Club Residences”), an ultra-luxury condominium project at the Ocean Club Estates, a residential development adjacent to the Ocean Club Golf Course. We have formed a joint venture with a Bahamian partner for this project and anticipate completion in 2007. The Company commenced pre-sales and development of the Ocean Club Residences & Marina in the second quarter of 2005. The Company’s share of earnings from Ocean Club Residences are included in equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations.

On August 30, 2005, the Company entered into a joint venture, Residences at Atlantis, with Turnberry Associates L.P. (“Turnberry”) to develop The Residences at Atlantis, a condominium-hotel located adjacent to Atlantis, Paradise Island. As of this date, the Company determined that it was the primary beneficiary of the joint venture in accordance with the provisions of FIN 46R and consolidated Residences at Atlantis into its consolidated financial statements. See Note 3—Consolidation of Variable Interest Entities for further discussion.

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 Company has agreed to invest $200.0 million in the form of common stock in Kerzner Istithmar.

Construction of Atlantis, The Palm commenced in 2005 and the Company anticipates that the project will be completed in late 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 revenue 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, or 50%, 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 own 50%. In the second quarter of 2005 we, SOMED and CDG entered into a joint venture agreement and related development and long-term management agreements for the development and operation of this resort. We expect to commence construction of the project in 2007 and to complete the project in 2009.

F-10

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, 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. 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 Mohegan Sun 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 year ended December 31, 2003.

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.

Investment in BLB

In March 2004, we announced that we entered into a joint venture, BLB, with an affiliate of Starwood Capital Group Global, 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 owned gaming and track operations in the United States and owns race tracks in the United Kingdom. As of December 31, 2004, BLB had a 22.2% ownership interest in Wembley. The Company and Starwood each have a 37.5% ownership interest in BLB and Waterford owns the remaining 25%.

In July 2005, BLB acquired the U.S. operations of Wembley in Rhode Island and Colorado for approximately $464.0 million. These operations included Wembley’s flagship property, Lincoln Park in Rhode Island, a

F-11

greyhound racetrack with video lottery terminals. See Note 4—Business Acquisitions and Dispositions for further discussion.

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 New York Settlement Agreement provided that it would automatically terminate on September 1, 2005 in the event key approvals and authorizing legislation were not obtained, subject to extension by the mutual written consent of the parties. As of September 1, 2005, many of the key approvals and authorizing legislation had not been obtained, and the New York Settlement Agreement was not extended by the parties. Two recent court decisions have impacted the effectuation of the settlement and the State’s general strategy in dealing with Native American land claims, including the Stockbridge-Munsee Tribe’s land claim. The Company can make no representation as to 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.

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, the Maldives, Dubai and Mexico. We are also planning a proposed property, One&Only Cape Town (“Cape Town”), located in the Victoria & Alfred Waterfront in Cape Town, South Africa.

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 revenue and

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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 One&Only Kanuhura in 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 One&Only Le Saint Géran Hotel, One&Only Le Touessrok Hotel, La Pirogue Hotel, Le Coco Beach Hotel and Sugar Beach Resort. As of December 31, 2005, 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 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 One&Only Maldives at Reethi Rah (“One & Only Maldives at Reethi Rah”), a luxury resort on North Male Atoll, which opened on May 1, 2005. Although the Company does not have any equity ownership interest in Reethi Rah, the entity that owns and operates the resort, we have determined that Reethi Rah is a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R. See Note 3—Consolidation of Variable Interest Entities for further discussion.

See Note 17—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 Dubai, we manage One&Only Royal Mirage (“Royal Mirage”). Under the terms of the management agreement, we receive management fees based on a percentage of the revenue and gross operating profits of the Royal Mirage.

Mexico

We own a 50% interest in Palmilla JV, LLC (“Palmilla”), which operates One&Only Palmilla, a deluxe five-star One&Only property located near Cabo San Lucas in Baja, Mexico. As of January 1, 2004, pursuant to our adoption of FIN 46R, we determined that Palmilla, a previously unconsolidated 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. We entered into long-term management and development agreements related to the property that will expire in 2022. In January 2004, Palmilla completed an expansion project that increased the room count and significantly upgraded the amenities and public areas offered by the resort.

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Cape Town

In South Africa, we have a luxury resort under development, Cape Town, which we intend to manage as a One&Only property located at the Victoria & Alfred Waterfront in Cape Town, South Africa. In the first quarter of 2006, we acquired an equity ownership interest and entered into management and development agreements in connection with Cape Town. We are currently evaluating whether the joint venture should be consolidated in 2006 in accordance with the provisions of FIN 46R.

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 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 consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenue 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 long-lived assets and 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 the 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, 2005, restricted cash—non-current primarily relates to restricted cash held in accordance with Atlantis, The Palm’s financing agreements and current restricted cash primarily represents amounts held in relation to Palmilla’s debt. As of December 31, 2004, restricted cash primarily related to restricted cash held in relation to Palmilla’s debt and letters of credit for one of our tour operators.

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.

Accounts Receivable, Due from Affiliates 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, 2005, 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

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these countries could affect the collectibility of these receivables. Due from affiliates consist of amounts due from related parties that primarily arise from construction funding made by the Company to assist in the financing of development projects.

Accounts receivable, 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 consisted of $5.4 million of undeveloped real estate which we owned in Atlantic City and had recorded an impairment of $7.3 million during 2004 and $6.9 million of real estate at the Ocean Club Estates. During the year ended December 31, 2005, the Company completed the sale of its real estate in Atlantic City, resulting in a gain of $1.4 million.

During the year ended December 31, 2005, the Company sold $2.4 million of the real estate held for sale at the Ocean Club Estates, resulting in a loss of $0.1 million and also recorded a write-down on real estate of $2.2 million. These amounts are included within other operating expenses in the accompanying consolidated statement of operations. The remaining $2.3 million of Ocean Club real estate has been reclassified to property and equipment, net as of December 31, 2005.

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. Buildings at One&Only Maldives at Reethi Rah are depreciated over 25 years, which represents the term of the land lease for the island on which the property is located. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements.

Buildings	25-40 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 dispositions of property and equipment are included in other operating 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.

For redevelopment of existing operating properties, the net book value of the existing property under redevelopment plus the cost for the construction and improvements incurred in connection with the redevelopment are capitalized to the extent the capitalized costs of the property do not exceed the estimated fair value of the redeveloped property when complete.  If the total cost of the redeveloped property, including the undepreciated net

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book value of the property carried forward, exceeds the estimated fair value of redeveloped property, the excess is charged to expense.  For the year ended December 31, 2005, the total amount of undepreciated book value carried forward on redeveloped properties was $3.5 million.

Intangible Asset

Reethi Rah has entered into a long-term land lease with the government of the Republic of the Maldives for the land on which One&Only Maldives at Reethi Rah is constructed. This land lease was valued using the business combination principles under Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS 141”) and was consolidated at fair value in accordance with FIN 46R on May 1, 2005. The fair value of the land lease was estimated to be $15.1 million and its net book value is $14.7 million at December 31, 2005, after the effect of accumulated amortization of $0.4 million. The land lease is being amortized over the term of the lease of 25 years and the Company expects to record $0.6 million of amortization expense each year from 2006 through 2029. Amortization expense of this intangible asset was $0.4 million for the year ended December 31, 2005.

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, 2005, 2004 and 2003 were $11.8 million, $5.8 million and $0.4 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, 2005, $2.7 million of these costs were capitalized and primarily related to upgrades to our customer database. As of December 31, 2004, $8.3 million of these costs were capitalized and primarily related to upgrades to our Bahamian tour operator’s reservation system which was placed in service in 2005.

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 an asset is still under development, the analysis includes the remaining construction costs. 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. For the year ended December 31, 2005, the Company has determined that none of its long-lived assets were impaired, except for certain real estate at the Ocean Club Estates, as discussed above in “Assets Held for Sale”. The Company 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 9—Property and Equipment, net.

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Loan Impairment

The Company applies SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” (“SFAS 114”) and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan-Recognition and Disclosures, an amendment of SFAS No. 114”, when determining if a loan is impaired. Under the provisions of these standards, the Company records a loan impairment when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. For collateralized loans, impairment is measured based on the fair value of the underlying collateral. See Note 17—Related Party Transactions, for a discussion of the Company’s $27.8 million impairment of notes receivable recorded during the year ended December 31, 2005.

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/or has significant influence over the investee. These investments are accounted for in accordance with the equity method of accounting, under which each investment is reported at cost and the carrying amount of the investment is adjusted by the Company’s proportionate share of the income or loss, including other comprehensive income or loss, less dividends received, of the investee since its acquisition. In certain instances, the Company’s investment balance also includes interest capitalized during construction, as appropriate. Differences, if any, between the Company’s carrying value and the underlying equity in the net assets of the investee are accounted for as if the investee were a consolidated subsidiary.

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, 2005 and 2004. The Company assesses its equity method goodwill for impairment whenever events or changes in circumstances may indicate that the carrying amount of the related equity investment amount may not be recoverable. We have determined that there was no impairment as of December 31, 2005 and 2004.

Capital Creditors

Capital creditors represent 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 Company’s disclosures regarding the fair value of guarantees.

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 revenue and expenses. Net gains or losses resulting from the translation of foreign financial statements are charged or credited to the translation reserves component of accumulated other

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comprehensive income (loss). Other comprehensive income (loss) has no tax impact as it relates to translation reserves on investments owned by foreign entities that are not subject to taxation. Other comprehensive income (loss) also includes unrealized holding gains or losses, net of income taxes, relating to the Company’s investments in available for sale securities and unrealized gains and losses (and the reversal of such gains and losses upon sale) relating to the change in the fair value of available for sale securities held by BLB including foreign currency effects. Translation reserves and other also includes the change in fair value of interest rate swaps relating to BLB.

As of December 31, 2005 and 2004, accumulated other comprehensive loss consisted of the following:

	December 31,
	2005			2004
Translation reserves and other	$	(7,549	)	$	(7,130	)
Unrealized losses on available-for-sale securities	(8		)	(639		)
Unrealized gains (losses) on investment in associated companies	1,154			(6,129		)
Reversal of unrealized gains on investment in associated companies	(1,154		)	—
	$	(7,557	)	$	(13,898	)

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 revenue with liabilities recognized for funds deposited by patrons before gaming play occurs and for chips in the patrons’ possession, both of which are included in gaming-related deposits and liabilities.

Rooms, food and beverage, and other operating revenue are recognized as services are performed. Advance deposits on rooms are deferred and included in hotel advanced deposits and other 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 a straight-line basis over their average estimated membership. The retail value of accommodations, food and beverage, and other services furnished to hotel and casino guests without charge is included in gross revenue and then deducted as promotional allowances. (See “Promotional Allowances” below for further discussion.)

Revenue and expenses from tour operations include the sale of travel and leisure packages and are recognized on the day the travel package begins. 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.

Revenue generated from construction services performed pursuant to the terms of development agreements 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. The Company accounts for revisions in estimated project costs by recording a cumulative catch-up of recognized revenue. The impact of such revisions was not material during the year ended December 31, 2005. Development fees earned are included in management, development and other fees in the accompanying consolidated statements of operations.

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

Other revenue primarily represents incidental revenues generated from hotel and golf operations at our consolidated properties, including retail shops, guest activities, telephone, the Marina at Atlantis, utilities and cancellations. Rental revenue associated with operating leases from retail establishments is included in other revenue and is recognized on a straight-line basis commencing on the date that the lessor is granted access to the space with rental holiday periods being recorded as a deferred rent asset in deferred charges and other assets, net and amortized over the lease term as a reduction to rental revenue. Rental revenue associated with leases that contain contingent rental provisions based on a percentage of sales are recognized in the period in which specific levels have been achieved. Other revenue also includes the revenue recognized from a settlement payment from a significant shareholder. For additional information, see Note 20—Gain on Settlement of Territorial and Other Disputes. The detail of other revenue is as follows:

	For the Year Ended December 31,
	2005		2004		2003
Retail shops	$	16,208	$	14,997	$	12,347
Golf revenue	14,147		11,806		7,608
Guest activities	11,068		8,726		8,701
Telephone	9,262		10,464		10,543
Marina at Atlantis	7,777		4,805		4,549
Rental	7,750		6,341		6,946
Utilities	7,441		6,933		6,689
Revenue recognized from settlement payment	3,487		3,375		3,268
Cancellations	3,053		4,744		3,257
Other hotel revenue	10,544		6,345		4,516
	$	90,737	$	78,536	$	68,424

Promotional Allowances

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

	For the Year Ended December 31,
	2005		2004		2003
Rooms	$	2,291	$	2,285	$	2,363
Food and beverage	6,673		6,340		6,727
Other	326		367		441
	$	9,290	$	8,992	$	9,531

Rental Expense

The Company has various lease agreements for office space as well as a land lease in connection with the One&Only Maldives at Reethi Rah. Rental expense associated with operating leases is recognized on a straight-line basis over the lease term. For tenant improvement allowance and other lease incentives, the Company records the current portion of the deferred rent liability in

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accounts payable, the remaining portion in other long-term liabilities and amortizes the deferred rent over the term of the lease as a reduction to rent expense.

Advertising Expense

We expense advertising costs as incurred. Advertising expense was $18.5 million, $15.1 million, and $16.1 million for the years ended December 31, 2005, 2004 and 2003, 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, 2005, 2004 and 2003.

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. Costs classified as pre-opening expenses include payroll, outside services, advertising and other expenses incurred prior to the commencement of new operations. Pre-opening expenses of $8.0 million in the accompanying consolidated statement of operations for the year ended December 31, 2005 primarily represent costs incurred relating to the Marina Village at Atlantis and the Phase III expansion.

Pre-opening expenses for the year ended December 31, 2004 represent costs incurred prior to the June 2004 opening of the One&Only Ocean Club expansion and Palmilla’s grand re-opening event in February 2004. During the year ended December 31, 2003, 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

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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 terms 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 various jurisdictions in which we conduct business. Accordingly, the accompanying consolidated statements of operations include a benefit (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 and Noncontrolling Interest

Components of minority and noncontrolling interests were as follows:

	For the Year Ended December 31,
	2005			2004			2003
Reethi Rah	$	6,677		$	—		$	—
Residences at Atlantis	1,692			—			—
Palmilla	155			8,751			—
One&Only Management	(1,710		)	(1,517		)	(1,340		)
	$	6,814		$	7,234		$	(1,340	)

As of May 1, 2005, the Company became the primary beneficiary of Reethi Rah under FIN 46R, resulting in the consolidation of Reethi Rah into the consolidated financial statements of the Company as of that date. Reethi Rah incurred net losses totaling $12.3 million after intercompany eliminations for the period from May 1, 2005 to December 31, 2005. Of this amount, approximately $6.7 million exhausted the fair value of the owners’ equity capital (the fair value of which was estimated by the Company as of May 1, 2005) and is included in minority and noncontrolling interests in the accompanying condensed consolidated statements of operations for the year ended December 31, 2005. The balance of $5.6 million is reflected as a reduction to the Company’s consolidated net income for these periods. Should Reethi Rah incur additional net losses, in the absence of any increase to the owners’ equity capital in future periods, such losses will be reflected in the Company’s results of operations. If Reethi Rah realizes net income in the future, the Company will be credited through an increase to the Company’s consolidated net income only to the extent of the losses previously absorbed by the Company on behalf of Reethi Rah.

As of August 30, 2005, the Company determined that Residences at Atlantis must be consolidated into its consolidated financial statements. As of and for the year ended December 31, 2005, we have consolidated Residences at Atlantis, with the remaining 50% interest reflected as minority interest in the accompanying consolidated statement of operations for the year ended December 31, 2005, and a minority interest liability reflected within the accompanying consolidated balance sheet as of December 31, 2005.

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 years ended December 31, 2005 and 2004, we have consolidated Palmilla, with the remaining 50% interest reflected as minority interest in the accompanying

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consolidated statements of operations for the years ended December 31, 2005 and 2004, and a minority interest liability reflected within the accompanying consolidated balance sheets as of December 31, 2005 and 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, 2005, SRL owned 25% of One&Only Management and we owned the remaining 75%. Subject to certain conditions, SRL’s ownership interest will increase incrementally through 2009, at which time SRL will own 50% of One&Only Management. As of and for the years ended December 31, 2005 and 2004, we have consolidated One&Only Management, with SRL’s 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. See Note 17—Related Party Transactions for further discussion.

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,
	2005	2004	2003
Weighted average shares used in basic computations	35,794	32,550	28,575
Dilutive stock options and restricted shares outstanding	1,737	1,334	802
Dilutive effect of convertible notes	136	—	—
Weighted average shares used in diluted computations	37,667	33,884	29,377

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. All options were included in the computation of diluted earnings per share in 2005. The Company did not include 0.1 million and 2.2 million options in the computation of diluted earnings per share in 2004 and 2003, respectively, because their effect would have been anti-dilutive.

In accordance with EITF Issue No. 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share” (“EITF 04-08”), the Company includes 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 April 2004, the Company issued contingent convertible notes. In accordance with EITF 04-08, the impact on the diluted earnings per share related to these notes occurs 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. For the year ended December 31, 2005, the Company has reflected 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 for the year ended December 31, 2004, as the average stock price for the year did not exceed $58.24.

Equity-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 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

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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 2005, 2004 and 2003 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 compensation relating to stock options granted during 2004 and 2003 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 per option granted in 2004 and 2003 was $15.40 and $12.44, respectively. There were no options granted during the year ended December 31, 2005. See discussion below for the assumptions used in estimating the fair value of the 2005 restricted shares granted to our Chief Executive Officer.

	For the Year Ended December 31,
	2005	2004		2003
Risk-free interest rate	—	3.2	%	3.2	%
Expected volatility	—	32.9	%	37.2	%
Expected life of equity-based compensation in years	—	4		4-5
Expected dividend yield	—	—		—

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 equity-based employee compensation.

	For the Year Ended December 31,
	2005		2004		2003
Net income, as reported	$	52,217	$	68,132	$	71,572
Deduct: pro forma adjustments(1)	12,205		7,357		3,699
Pro forma net income	$	40,012	$	60,775	$	67,873
Earnings per share:
Basic – as reported	$	1.46	$	2.09	$	2.50
Basic – pro forma	$	1.12	$	1.87	$	2.38
Diluted – as reported	$	1.39	$	2.01	$	2.44
Diluted – pro forma	$	1.06	$	1.79	$	2.31

(1) Amount represents total equity-based compensation for all stock option awards and the 2005 restricted stock granted to our Chief Executive Officer as discussed below.

During the years ended December 31, 2005 and 2004, the Company issued 45,600 and 0.3 millionrestricted shares, respectively, with weighted average grant date fair values of $58.75 and $49.27, respectively, under the 2003 stock option plan to certain officers, directors and employees. 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 $2.7 million and $14.8 million, respectively, has been recorded as deferred compensation, as a separate component of shareholders’ equity, and is being amortized to compensation expense over the applicable vesting period.

In August 2005, the Company entered into a restricted stock agreement with its Chief Executive Officer. This long-term arrangement does not provide for vesting of any of the granted shares until 2009 at the earliest and postpones the vesting of the final tranche of granted shares until not earlier than 2011, except in limited

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circumstances that relate to a termination of Mr. Kerzner’s employment or the occurrence of a change of control of the Company. Pursuant to the agreement, 500,000 restricted Ordinary Shares were granted under the Company’s 2003 stock incentive plan. These restricted shares are divided into five tranches, each of 100,000 restricted shares that vest, subject to conditions in the agreement, upon the price of our Ordinary Shares reaching target prices ranging from $75 to $95. The Chief Executive Officer’s rights with respect to such Ordinary Shares may become fully vested and non-forfeitable subject to the terms and the conditions of the agreement. The estimated aggregate fair value of these restricted shares was $24.4 million as of the date of grant. The fair value of compensation relating to these restricted shares granted was estimated at the date of grant using a lattice valuation model with the following assumptions: risk-free interest rate of 4.5%, expected volatility of 31.2%, expected life of 4.5 years and an expected dividend yield of 0%. The weighted average fair value per share for these restricted shares was $48.85.

Also during the year ended December 31, 2005, the Company cancelled 6,200 restricted shares due to the termination of certain employees. Compensation costs recognized for restricted shares were $5.0 million, $1.8 million, and $0 for the years ended December 31, 2005, 2004 and 2003, respectively.

Derivative Financial Instruments

Through September 2005, the Company’s derivatives included interest rate swap agreements which were used to manage the impact of interest rate changes on our long-term debt obligations and were accounted for as fair value hedges in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). In September 2005, our interest rate swap agreements were terminated in connection with a refinancing of our 87/8% senior subordinated notes, which resulted in proceeds received of $5.1 million.

Palmilla has an interest rate cap agreement that is accounted for as a cash flow hedge in accordance with SFAS 133. See Note 14—Long-Term Debt for further discussion.

Recent Accounting Pronouncements

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, compensation expense for liability awards (those usually settled in cash rather than stock) will be remeasured to fair value each reporting period until the award is settled. 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 January 1, 2006.

The Company adopted SFAS 123(R) as of January 1, 2006. SFAS 123(R) allows for two transition alternatives for public companies: (a) modified-prospective transition or (b) modified-retrospective transition. The Company applied the modified-prospective transition method. Under this method, companies are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. Measurement and attribution of compensation cost for awards that were granted prior to, but not vested, as of the date SFAS 123(R) became effective would generally be based on the same estimate of the grant-date fair value and the same attribution method used previously under SFAS 123 (either for financial statement recognition or pro forma disclosure purposes). Prior periods are not restated. Historically, the Company has recorded forfeitures based on actual amounts. SFAS 123(R) requires forfeiture amounts to be estimated. However, this required change is not expected to have a material effect on the Company’s consolidated statement of operations.

SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as financing cash flow, rather than as operating cash flow as previously required.

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The application of SFAS 123(R) beginning January 1, 2006, will result in additional compensation expense of approximately $13.6 million (not including tax effects) for the year ended December 31, 2006, based on option grants outstanding at December 31, 2005 and restricted shares issued to our Chief Executive Officer in August 2005. The foregoing amount does not include compensation expense for any stock options or other equity instruments that may be granted after December 31, 2005.

Accounting Changes and Error Correction

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”), which requires retrospective application to prior periods’ financial statements for changes in accounting principle and redefines “restatement” as the revising of previously issued financial statements to reflect the correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company will adopt SFAS 154 beginning January 1, 2006.

Note 3—Consolidation of Variable Interest Entities

Reethi Rah

Reethi Rah is the entity that owns and operates One&Only Maldives at Reethi Rah, a luxury resort located on the North Male Atoll in the Maldives. Although the Company does not have any equity ownership interest in Reethi Rah, we have determined that Reethi Rah is a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R.

On May 1, 2005, when the resort commenced operations and the Company finalized a senior subordinated credit agreement with Reethi Rah, the Company became the primary beneficiary of Reethi Rah under FIN 46R, resulting in the Company consolidating Reethi Rah into its consolidated financial statements as of this date. There is no pro-forma disclosure as the resort commenced operations on May 1, 2005. Upon consolidation, the total consideration was allocated based on the fair value of the assets acquired, liabilities assumed and noncontrolling interest as shown below:

Current assets	$	8,187
Property and equipment	145,865
Intangible asset (a)	15,100
	$	169,152
Current maturities of long-term debt	$	4,896
Other current liabilities	26,265
Due to affiliates—non-current (b)	77,800
Long term debt, net of current maturities	53,764
Owner’s equity (c)	6,427
	$	169,152

(a)A favorable land lease was identified as an intangible asset. See Note 2—Summary of Significant Accounting Policies, Intangible Asset for further discussion.

(b)Due to affiliates included $84.5 million of notes payable and related interest to the Company, net of a $27.8 million allowance which was recorded to reflect the fair value of the notes recorded prior to consolidation. Subsequent to May 1, 2005, the net balance of $56.7 million is eliminated in consolidation. See Note 17—Related Party Transactions, Reethi Rah, for further discussion. The remaining $21.1 million represents notes payable due to SRL.

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(c)Owner’s equity is reclassified to minority interest upon consolidation. Any losses incurred by Reethi Rah are first allocated to the owner’s equity and once exhausted, the excess losses are absorbed by the Company in its consolidated statement of operations. See Note 2—Summary of Significant Accounting Policies, Minority and Noncontrolling Interest for further discussion.

The Company has agreements with Reethi Rah that provide for construction financing and operating loans (see Note 17—Related Party Transactions), as well as management and development agreements that are considered variable interests. Reethi Rah’s creditors have no recourse to the Company, except for certain amounts due under a term loan facility agreement with a third party financial institution. In addition, certain of Reethi Rah’s assets collateralize its debt obligations. See Note 14—Long-Term Debt for further discussion.

Residences at Atlantis

In August 2005, the Company entered into a joint venture with Turnberry, Residences at Atlantis, to develop a condominium-hotel located adjacent to Atlantis, Paradise Island. The Company has determined that Residences at Atlantis is a variable interest entity and it is the primary beneficiary of the joint venture and accordingly is subject to consolidation in accordance with the provisions of FIN 46R. Effective August 30, 2005, the Company has consolidated Residences at Atlantis into its consolidated financial statements. As of December 31, 2005, the Company has consolidated $15.3 million of assets related to Residences at Atlantis.

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 began 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.

Note 4—Business Acquisitions and Dispositions

Wembley

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 2004 for its proportionate share of BLB’s interest in Wembley.

In July 2005, BLB acquired the U.S. operations of Wembley in Rhode Island and Colorado for approximately $464.0 million. The acquired operations include Lincoln Park in Rhode Island, which include a greyhound racetrack with video lottery terminals. In connection with this transaction, Wembley repurchased BLB’s 22.2% shareholding in Wembley for approximately $116.0 million. The balance of the purchase price was financed on a non-recourse basis by a consortium of banks that underwrote a $495.0 million senior secured credit facility, which includes a $125.0 million revolving credit facility that is being used primarily to finance the redevelopment of Lincoln Park which commenced in the third quarter of 2005.

Hurricane Hole Marina

During 2005, the Company acquired certain assets of Hurricane Hole Marina, which is in close proximity to the Marina Village and includes frontage on Nassau Harbour, and some additional buildings and facilities for $28.0 million. The Company intends to utilize the Hurricane Hole Marina to accommodate excess demand at the Atlantis

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Marina and anticipates upgrading this marina and bringing it into Atlantis’s product offering. This acquisition includes additional real estate, which the Company plans to use for new development. The purchase price was allocated to property and equipment, including $27.5 million to land, resulting in no recognition of goodwill. There were no contingent payments, options or commitments and there were no purchased research and development assets associated with this acquisition. The pro-forma effect of this acquisition to the Company’s consolidated results of operations for the year ended December 31, 2005 was insignificant.

U.K. Development Projects and Acquisition of Casino License

During the year ended December 31, 2005, the Company wrote off $11.2 million of previously capitalized costs included in construction in progress as of December 31, 2004. These costs related to the planning and development of all of the Company’s proposed gaming projects in the United Kingdom (excluding costs associated with the Company’s casino project in Northampton) and were expensed due to the passage of gaming reform legislation in April 2005 that was less favorable than the Company had previously anticipated. Included in this write off was a $2.9 million payment made in July 2004 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 and a $4.0 million initial payment made in April 2003 as consideration for the development of a casino and hotel at The O2 (formerly the Millenium Dome) in London.

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.

Kanuhura

On January 1, 2005 and 2003, we sold 5% and 20%, respectively, of our equity interest in Kanuhura to SRL at our net book value of $0.1 million and $1.5 million, respectively, resulting in no gain or loss on either transaction. As a result, our ownership interest in Kanuhura was 18.75% in 2005 and was 20% in 2004 and 2003. See Note 17—Related Party Transactions—Sun Resorts Limited for further discussion.

Kerzner Interactive

Through a wholly-owned subsidiary, the Company previously owned and operated Kerzner Interactive Limited (“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. The operating results of Kerzner Interactive for the year ended December 31, 2003 are presented as income from discontinued operations, net of income tax effect in the accompanying consolidated statements of operations.

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 year ended December 31, 2003 were as follows and are presented as income from discontinued operations, net of income tax effect in the accompanying consolidated statements of operations:

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Revenue	$	—
Expenses	(3,195		)
Other income	4,500
Net income	$	1,305

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.

Atlantic City Land

In July 2004, the Company obtained an appraisal on undeveloped real estate which we own in Atlantic City, that indicated 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.

In July 2005, the Company completed the sale of a portion of its Atlantic City land, as well as an additional ancillary piece of land, which together resulted in a gain of $1.4 million.

Note 5—Cash Equivalents and Restricted Cash

As of December 31, 2005 and 2004, the Company held $3.5 million and $117.0 million, respectively, of money market funds. Based on the maturity dates of such funds, these amounts are included in cash and cash equivalents in the accompanying consolidated balance sheets. Cash equivalents as of December 31, 2005 and 2004 also 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. As of December 31, 2005 and 2004, we held reverse repurchase agreements of $47.8 million and $33.4 million, respectively, all of which matured in the first week of the following month.

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As of December 31, 2005, restricted cash—non-current included $57.9 million of escrowed funds, which have been set aside to fund a portion of the Company’s equity investment in the joint venture that owns Atlantis, The Palm. Under the joint venture’s original senior credit facilities, the Company was required to place into escrow the difference between the Company’s equity commitment to the project and any amounts previously funded. As of December 31, 2005 and 2004, current restricted cash included $4.0 million and $2.3 million, respectively, held as a result of certain provisions related to Palmilla’s debt primarily to service current interest payments and other related items.

Note 6—Short-Term Investments

During the year ended December 31, 2005, the Company purchased $20.0 million principal amount of T-Bills and $205.0 million principal amount of the Company’s T-Bills matured or were redeemed. As of December 31, 2005, the adjusted carrying value and fair value of these securities held by the Company was $20.0 million, which matured in January 2006. During the year ended December 31, 2005 and 2004, the Company recognized $2.7 million and $1.5 million, respectively, of interest income from its short-term investments.

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 year ended December 31, 2005 and 2004, the Company recorded $0.6 million and $(0.6) million of unrealized holding gains (losses), respectively, in connection with its T-Bills.

Note 7—Accounts Receivable, 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.

Components of accounts receivable, net were as follows:

	December 31,
	2005			2004
Gaming	$	16,189		$	16,740
Less: allowance for doubtful accounts	(4,059		)	(4,853		)
	12,130			11,887
Hotel and related	23,376			22,088
Other	17,158			9,389
	40,534			31,477
Less: allowance for doubtful accounts	(2,497		)	(1,621		)
	38,037			29,856
	$	50,167		$	41,743

Other receivables as of December 31, 2005 includes a $4.3 million receivable for Reethi Rah relating to customs duty amounts paid which we expect to recover from the government of the Maldives.

Bad debt expense related to trade receivables was a reversal of $0.6 million for the year ended December 31, 2005 and was $1.2 million and $1.3 million for the years ended December 31, 2004 and 2003, respectively, and is included in selling, general and administrative expenses in the accompanying statements of operations.

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Note 8—Prepaid Expenses and Other Current Assets

Components of prepaid expenses and other current assets were as follows:

	December 31,
	2005		2004
Prepaid windstorm, construction and other insurance	$	13,045	$	12,253
Prepaid tour operator-related costs	2,950		1,804
Prepaid rent-current	—		1,422
Prepaid taxes	—		823
Other	6,937		5,383
	$	22,932	$	21,685

Windstorm, construction and other insurance as of December 31, 2005 included $5.0 million for all risk insurance related to the Company’s Paradise Island properties and $2.9 million of prepaid construction insurance in connection with the Company’s Phase III expansion on Paradise Island. The policy year for the windstorm insurance began on June 1, 2005 and expires May 31, 2006. As of December 31, 2005, other prepaid expenses consisted primarily of vendor and supplier prepayments made during the normal course of business.

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.

Note 9—Property and Equipment, net

Components of property and equipment, net were as follows:

	December 31,
	2005			2004
Land	$	314,815		$	289,125
Land improvements and utilities	277,213			239,153
Buildings and leasehold improvements	871,107			764,828
Furniture, machinery and equipment	378,965			284,754
Construction in progress	210,198			106,566
	2,052,298			1,684,426
Less: accumulated depreciation	(404,963		)	(336,786		)
	$	1,647,335		$	1,347,640

Included in property and equipment, net as of December 31, 2005, is $139.1 million related to Reethi Rah, which was consolidated as of May 1, 2005, and $4.9 million related to Residences at Atlantis, which was consolidated as of August 30, 2005.

Construction in progress as of December 31, 2005 consisted of $200.2 million of costs associated with development projects and $10.0 million related to other capital projects including $2.7 million of software related costs. Development project costs as of December 31, 2005 primarily included $179.2 million of costs related to the Phase III expansion and $4.7 million of costs related to the Residences at Atlantis condominium-hotel project. Also included in construction in progress as of December 31, 2005 was $6.1 million related to the development of Cape Town, $5.9 million of costs related to the development of a destination resort casino in Morocco and $4.3 million of costs associated with the development of a casino in Northampton, England as these projects are considered probable.

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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 were costs related to the planning and development of the Company’s proposed gaming projects in the United Kingdom. During the year ended December 31, 2005, the Company wrote off $11.2 million of these costs, which related to the planning and development of all of the Company’s proposed gaming projects in the United Kingdom (excluding costs associated with the Company’s casino project in Northampton) and were expensed due to the passage of gaming reform legislation in April 2005 that was less favorable than the Company had previously anticipated.

Depreciation expense was $73.3 million, $58.9 million and $55.8 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Note 10—Deferred Charges and Other Assets, net

Components of deferred charges and other assets, net were as follows:

	December 31,
	2005		2004
Debt issuance costs, net	$	18,408	$	21,419
Deferred compensation plan investments	7,004		3,981
Deposits for property and equipment	4,682		—
Deferred contract acquisition costs	2,285		2,906
Deposit and casino license for UK development projects	1,405		1,306
Employee notes receivable	1,176		1,225
Interest rate cap asset	77		114
Interest rate swap asset, net	—		6,833
Other	4,845		2,894
	$	39,882	$	40,678

Debt issuance costs, net of amortization, relates to costs incurred in connection with the issuance of our debt and our Amended Credit Facility. The amortization of debt issuance costs included in interest expense was $5.6 million, $3.4 million and $1.2 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Deferred compensation plan investments relate to assets held in a rabbi trust for our deferred compensation plan. See Note 18—Employee Benefit Plans for further discussion.

Deposits for property and equipment primarily relate to deposits made in connection with the Phase III expansion and The Residences at Atlantis condominium-hotel project.

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.

See Note 17—Related Party Transactions for discussion of the Company’s employee notes receivable.

Interest rate swap asset is the fair value of $150.0 million notional amount of swap agreements on our 87/8% senior subordinated notes as of December 31, 2004, which represents the amount that would have been received had the swap agreements been terminated on that date. In September 2005, our interest rate swap agreements were terminated in connection with a refinancing of our 87/8% senior subordinated notes, which resulted in proceeds received of $5.1 million.

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The interest rate swap asset was $8.7 million as of December 31, 2004. 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 was accreted to interest expense over the term of the underlying debt. The balance of the contra asset as of December 31, 2004 was $1.9 million. The balance of this contra asset at the date of the refinancing of our 87/8% senior subordinated notes was $1.7 million and was included as a reduction of loss on early extinguishment of debt of $27.9 million during the year ended December 31, 2005.

Note 11—Accounts Payable and Accrued Liabilities

Components of accounts payable and accrued liabilities were as follows:

	December 31,
	2005		2004
Hotel advance deposits	$	32,279	$	22,270
Payroll and related benefits	31,816		30,511
Other deposits and unearned revenue	23,438		18,044
Trade payables	18,873		15,869
Hotel-related costs and expenses	17,655		16,651
Gaming-related deposits and liabilities	11,146		12,212
Tour operator advanced deposits	10,879		6,642
Accrued interest	10,262		13,330
Accrued tour operator-related costs and expenses	4,366		6,882
Majority shareholder settlement – deferred revenue – current	3,602		3,487
Accrued taxes	3,416		5,310
Other	27,663		17,017
	$	195,395	$	168,225

Note 12—Deferred Revenue

Components of deferred revenue were as follows:

	December 31,
	2005		2004
Kerzner Istithmar development fee	$	8,538	$	5,215
Majority shareholder settlement	7,564		11,166
Lessee prepayment	2,271		2,521
Deferred revenue from Atlantic City land sale	2,168		412
Other	1,271		1,105
	$	21,812	$	20,419

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 17—Related Party Transactions.

Majority shareholder settlement represents the non-current portion of a settlement payment as further discussed in Note 20—Gain on Settlement of Territorial and Other Disputes.

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, and is amortized to other revenue over the term of the underlying lease. The

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current portion of the lessee prepayment is included in the other deposits and unearned revenue component of accounts payable and accrued liabilities.

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 to an affiliate of Colony Capital LLC (“Colony”). In connection with this transaction, we sold certain undeveloped real estate to Colony for $40.0 million, which was paid in the form of a promissory note that 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”. The $40.0 million balance of the note is not expected to be received until March 2009.

During the year ended December 31, 2005, the Company received a $0.2 million payment towards the purchase price and has also received $1.6 million and $0.4 million of related interest payments during the years ended December 31, 2005 and 2004, respectively. These amounts have been recorded as deferred revenue in the accompanying consolidated balance sheets. As sufficient cumulative payments toward the purchase price were not received as of December 31, 2005, collectibility of the sales price cannot be reasonably assured. As such, the sale has not been recognized as of December 31, 2005. 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.

Note 13—Other Long-Term Liabilities

Components of other long-term liabilities were as follows:

	December 31,
	2005		2004
Deferred compensation obligation	$	7,013	$	3,973
Deferred rent credit	2,175		2,437
Other	1,657		689
	$	10,845	$	7,099

For more information on the deferred compensation obligation, see Note 18—Employee Benefit Plans. The deferred rent credit relates to a building lease entered into during 2002 for our office in Plantation, Florida.

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Note 14—Long-Term Debt

Long-term debt consisted of the following:

	December 31,
	2005			2004
Amended Credit Facility (a)	$	—		$	—
$400 million 6¾% Senior Subordinated Notes due 2015 (b)	400,000			—
$400 million 87/8% Senior Subordinated Notes due 2011 (c)	1,632			413,427
$230 million 2.375% Convertible Senior Subordinated Notes due 2024 (d)	230,000			230,000
Palmilla Notes (e)	110,000			110,000
Reethi Rah Term Loan Facility (f)	47,200			—
Reethi Rah Loan (g)	4,032
Other (h)	4,442			1,361
	797,306			754,788
Less: amounts due within one year	(7,689		)	(659		)
	$	789,617		$	754,129

(a)Amended Credit Facility

On October 31, 2005, Kerzner entered into an amendment to our credit facility (the “Amended Credit Facility”) with a syndicate of banks. Under the Amended Credit Facility, the maximum amount of borrowings that may be outstanding is $650.0 million (the “Commitment Amount”). In addition, should we obtain the requisite commitment from existing or new lenders, we have the right to increase the Commitment Amount of our credit facility by up to $250.0 million, for a total of $900.0 million. The Commitment Amount under the 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. The Amended Credit Facility allows for investments not to exceed $400.0 million plus the sum of (i) 100% of net equity proceeds received by the Company from and after July 7, 2004, plus (ii) 50% of net income (without deductions for losses) of the Company for each of the full fiscal quarters occurring from and after January 1, 2004  In addition, the Company is permitted to make investments in Atlantis, The Palm and a destination resort casino in Morocco of $125.0 million and $55.0 million, respectively.

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 up to an additional 1.00% based on a debt to EBITDA ratio during the period, as defined (the “Leverage Ratio”), (ii) the London Interbank Offered Rate (“LIBOR”) rate plus 0.75% to 2.00% based on the Leverage Ratio or (iii) the Federal Funds Rate plus 0.75% to 2.00% based on the Leverage Ratio. For loans based on the Alternate Base Rate (as defined), interest is payable quarterly. 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 on December 31, 2010. 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 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, 2005, management believes the Company was in compliance with all such covenants.

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The Amended Credit Facility is secured by a pledge of substantially all of our assets.

As of December 31, 2005, the Company had $644.6 million of borrowings available on the Amended Credit Facility after giving effect to $5.4 million in letters of credit outstanding. In connection with this facility, the Company incurred $0.9 million of debt issuance costs during the year ended December 31, 2005. 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, 2005. In connection with the amendment of our credit facility during the year ended December 31, 2005, we wrote off $0.9 million of debt issuance costs associated with the previous facility to interest expense, net of capitalization in the accompanying consolidated statement of operations.

(b)6¾% Senior Subordinated Notes

In September 2005, we issued $400.0 million principal amount of 6¾% senior subordinated notes due 2015 (the “6¾% Senior Subordinated Notes”) which, after debt issuance costs of $7.3 million, resulted in net proceeds of approximately $392.7 million. All of the proceeds received from the issuance of the 6¾% Senior Subordinated Notes were used to repay approximately 99.6% of the Company’s tendered $400.0 million principal amount of 87/8% senior subordinated notes due 2011 (the “87/8% Senior Subordinated Notes”).

The 6¾% Senior Subordinated Notes are unconditionally guaranteed by substantially all of our wholly-owned subsidiaries. Interest on these notes is paid semi-annually on April 1 and October 1 beginning April 1, 2006. The indenture for the 6¾% 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, 2005.

All of our outstanding 6¾% Senior Subordinated Notes rank pari passu with each other and are all subordinated to the Amended Credit Facility.

(c)87/8% Senior Subordinated Notes

In August 2001, the Company issued $200.0 million principal amount of 87/8% Senior Subordinated Notes, which, after debt issuance 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 debt issuance costs of $4.5 million, to repay our $200.0 million principal amount of 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.

In September 2005, the Company commenced an offer (the “Tender Offer”) and consent solicitation (the “Consent Solicitation” and, together with the Tender Offer, the “Offer and Solicitation”) relating to the 87/8% Senior Subordinated Notes. The Company offered to purchase the 87/8% Senior Subordinated Notes pursuant to the Tender Offer at $1,082.83 per $1,000 principal amount of the 87/8% Senior Subordinated Notes to each seller in cash (the “Total Consideration”). The Total Consideration included a consent payment of $22.25 per $1,000 principal amount of the 87/8% Senior Subordinated Notes (the “Consent Payment”) payable only to holders who tendered their 87/8% Senior Subordinated Notes and validly delivered their consents (and did not withdraw them) on or prior to September 21, 2005. Holders who tendered their 87/8% Senior Subordinated Notes after September 21, 2005 and on or prior to October 8, 2005 (the “Expiration Date”) received the Total Consideration less the Consent Payment. As

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of the Expiration Date, approximately 99.6% of the $400.0 million aggregate principal amount outstanding of the 87/8% Senior Subordinated Notes were received and accepted for payment by the Company and one of its wholly-owned subsidiaries, Kerzner International North America, Inc. (“KINA”). As of December 31, 2005, $1.6 million aggregate principal amount of the 87/8% Senior Subordinated Notes remained outstanding.

See Note 21—Loss on Early Extinguishment of Debt for disclosure of the related loss incurred in connection with the redemption of our 87/8% Senior Subordinated Notes.

(d)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 are being 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 investment in Kerzner Istithmar and general corporate purposes. During the years ended December 31, 2005 and 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 to us ten years from the issuance date. These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the accompanying consolidated balance sheet as of December 31, 2005 and 2004. During the year ended December 31, 2005 and 2004, the Company recorded $0.6 million and $0.4 million, respectively, of amortization of these debt issuance costs.

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 Amended Credit Facility and rank pari passu with our 6¾% 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.

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(e)Palmilla Notes

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”).

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 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 LIBOR plus 3.75%. The average interest rate for the period that the notes were outstanding during 2005 was 7.15%. 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. In addition, the Palmilla Note Indenture provides recourse to Kerzner solely in the event certain representations and warranties are violated. We believe we are in compliance with all such covenants as of December 31, 2005.

(f)Reethi Rah Term Loan Facility

On December 29, 2004, Reethi Rah entered into a facility agreement (the “Reethi Rah Term Loan Facility”) with a third party financial institution (the “Lender”). Under the Reethi Rah Term Loan Facility, the Lender agreed to make available to Reethi Rah a term loan facility in an aggregate amount equal to $50.0 million to be used towards the development of One&Only Maldives at Reethi Rah. Loans under the Reethi Rah Term Loan Facility bear interest at (a) LIBOR plus 3.25% for the period up to and including May 1, 2005, (b) LIBOR plus 2.00% on the first $6.0 million of loans and LIBOR plus 3.25% on any other outstanding amounts above $6.0 million for the period from May 2, 2005 through May 1, 2009, and (c) LIBOR plus 3.25% from May 2, 2009 thereafter. Interest on outstanding loans is paid semi-annually on March 31 and September 30. The average interest rate for the eight months ended December 31, 2005 was 6.79%. Principal payments of $2.5 million are due semi-annually on June 30 and December 31 beginning December 31, 2005 through June 30, 2015. As of December 31, 2005, Reethi Rah had $47.2 million of loans outstanding under the Reethi Rah Term Loan Facility.

The Reethi Rah Term Loan Facility contains affirmative and restrictive covenants which, among other things: (a) require periodic financial reporting, (b) require meeting certain financial amounts, (c) limit the incurrence of indebtedness and (d) limit asset expenditures and dispositions outside the ordinary course of business. As of December 31, 2005, management believes that Reethi Rah was in compliance with all such covenants. In addition, the Reethi Rah Term Loan Facility is secured by substantially all assets of Reethi Rah, including property and equipment and certain other assets, which have been pledged as collateral.

The Reethi Rah Term Loan Facility is guaranteed, in part, by the Company. The Company and SRL entered into a guarantee agreement with the Lender which provides for the Company to make certain operating loans to Reethi Rah in an amount not to exceed the lesser of its proportionate share of (i) $6.0 million or (ii) the amount of principal and interest due but not paid to the Lender pursuant to the Reethi Rah Term Loan Facility. The guarantee is effective for four years on a non-cumulative basis beginning May 1, 2005, the date at which One&Only Maldives at Reethi Rah commenced operations. Upon the Company’s performance of this guarantee, the Company would be deemed to have made a loan on the same terms of its senior subordinated credit agreement with Reethi Rah as discussed in Note 17—Related Party Transactions. Also see Note 17—Related Party Transactions, for discussion of operating loans funded to Reethi Rah.

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(g)Reethi Rah Loan

On December 1, 2002, Reethi Rah entered into a loan facility agreement (“Reethi Rah Loan”) with a syndicate of banks for a principal aggregate amount of up to $5.0 million. Amounts under the Reethi Rah Loan bear interest at 12% per annum. Principal and interest payments are due in monthly installments through January 31, 2008. As of December 31, 2005, Reethi Rah had $4.0 million outstanding under the Reethi Rah Loan, of which $1.4 million is to be repaid within one year. The Reethi Rah Loan is secured by a first priority mortgage of the underlying Reethi Rah property and equipment.

(h)Other

Other long-term debt consists of capital leases for machinery and equipment. As of December 31, 2005, this amount includes Reethi Rah’s obligation under $4.1 million of capital leases for property and equipment at One&Only Maldives at Reethi Rah.

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 was 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 was accreted to reduce interest expense over the term of the underlying debt.

In connection with the refinancing of our 87/8% Senior Subordinated Notes in September 2005, we cancelled the remaining $150.0 million notional amount of interest rate swaps on our 87/8% Senior Subordinated Notes and received $5.1 million from this cancellation. See Note 21—Loss on Early Extinguishment of Debt for further discussion.

Included in deferred charges and other assets, net in the Company’s balance sheets at December 31, 2004 is $8.7 million, 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, the aggregate notional principal amount of the Swap Agreements was $150.0 million. For the years ended December 31, 2005, 2004 and 2003, the weighted average variable rate on the Swap Agreements was 4.97%,  4.93% and 4.18%, respectively.

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As of December 31, 2005 and 2004, after giving effect to the Swap Agreements during their outstanding portion of the year, our fixed rate borrowings represented approximately 79% and 65% and our variable rate borrowings represented 21% and 35%, respectively, of total borrowings.

Interest Rate Cap Agreement

On December 17, 2004, Palmilla entered into an interest rate cap agreement for $0.2 million 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. The Company records the effective portion of changes in the fair value of the Interest Rate Cap Agreement in accumulated other comprehensive income (loss).

As of December 31, 2005 and 2004, the fair value of the Interest Rate Cap Agreement was $0.1 million, which is included in deferred charges and other assets in the accompanying consolidated balance sheet. No hedge ineffectiveness on the Interest Rate Cap Agreement was recognized during the years ended December 31, 2005 and 2004.

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 Amended Credit Facility.

Debt Maturity

Aggregate annual maturities of long-term debt as of December 31, 2005, for each of the next five years and thereafter are as follows:

Year Ending December 31,
2006	$	7,689
2007	117,757
2008	6,944
2009	6,084
2010	5,000
Thereafter	653,815
	797,289
Debt premium	17
	$	797,306

Note 15—Shareholders’ Equity

In August 2005, the Company announced that its Board of Directors approved a share repurchase program authorizing the Company to purchase up to two million of the Company’s Ordinary Shares. The share repurchases will be made at management’s discretion from time to time in the open market through block trades or otherwise. Depending upon market conditions and other factors, share repurchases may be commenced or suspended at any time. During the year ended December 31, 2005, the Company repurchased 0.6 million of its Ordinary Shares for

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$35.7 million. Also during the year ended December 31, 2005, the Company repurchased and subsequently cancelled 4,346 shares from employees for $0.3 million.

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 Ordinary Shares from the Company. In connection with this transaction, we added a designee of Istithmar to our Board of Directors.

Note 16—Equity-Based Compensation

Our shareholders approved stock option plans in 1995 (the “1995 Plan”), 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. In connection with the acquisition in December 1996 of Sun International North America, Inc. (formerly Griffin Gaming & Entertainment, Inc.), we assumed the Griffin Gaming & Entertainment, Inc. 1994 Stock Option Plan (the “Griffin Plan” and, together with the 1995 Plan, the 1997 Plan and the 2000 Plan, the “Plans”) and the options that were outstanding under the Griffin Plan at the time the acquisition was consummated. 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. All options issued under the 1995 Plan, the 1997 Plan and the Griffin Plan had already vested and become exercisable as of February 28, 2006. The 2000 Plan provides for the vesting period to begin one year after the grant date in respect of one third of the 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, restricted share awards and other stock-based awards to acquire an aggregate of 3,000,000 Ordinary Shares. Pursuant to the 2003 Plan, the prices are equal to the fair market value per Ordinary Share on the date of grant, unless otherwise specifically provided by the compensation committee. Unless otherwise specified by the compensation committee, options granted under the 2003 Plan shall become vested and exercisable in installments of 25% on each of the first four anniversaries of the grant date. Options granted under the 2003 Plan have a term of seven years from the date of grant. Restricted shares granted under the 2003 Plan generally become vested in three equal installments on each of the second, third and fourth anniversaries of the date of grant. The 2003 Plan provides for awards with respect to Ordinary Shares to be granted to directors, officers, employees and consultants of the Company.

During the years ended December 31, 2005 and 2004, the Company issued 45,600 and 0.3 million, respectively, of restricted shares under the 2003 Plan to certain officers, directors and employees. In addition, in August 2005, the Company granted 500,000 restricted shares with an estimated aggregate fair value of $24.4 million to the Company’s Chief Executive Officer.

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A summary of our stock option activity for 2005, 2004 and 2003 is as follows (in thousands, except exercise price per share data):

	December 31,
	2005				2004				2003
	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	3,333		$	32.70	5,059		$	27.91	5,347		$	21.54
Granted	—		—		255		49.56		1,796		36.40
Exercised	(679	)	26.26		(1,858	)	21.78		(2,074	)	18.81
Forfeited and expired	(42	)	29.31		(123	)	25.57		(10	)	—
Outstanding at end of year	2,612		34.89		3,333		32.70		5,059		27.91
Exercisable at end of year	804		28.01		935		25.58		2,266		22.95
Available for grant	215				713				1,179

The weighted average exercise price and weighted average contractual life of stock options outstanding and exercisable at December 31, 2005 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	33	$	19.15	6.1	23	$	18.86	5.6
$20.00 - $24.99	226	20.67		6.8	226	20.67		6.8
$25.00 - $29.99	348	25.90		5.6	348	25.90		5.6
$30.00 - $34.99	42	32.82		2.7	39	32.95		2.5
$35.00 - $39.99	1,699	36.74		4.9	87	35.86		4.7
$40.00 - $49.99	142	42.39		5.1	43	42.27		4.7
$50.00 - $57.31	122	57.31		5.9	38	57.31		5.9
	2,612	$	34.89	5.2	804	$	28.01	5.7

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Note 17—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
	December 31,						Ended December 31,
	2005			2004			2005		2004		2003
Reethi Rah	$	—		$	56,543		$	—	$	1,270	$	394
Turnberry	11,396			—			—		—		—
SRL	9,172			6,707			9,016		9,614		7,619
Harborside at Atlantis	9,050			18,414			3,655		2,826		1,847
Kanuhura	4,614			4,022			1,104		1,466		787
Kerzner Istithmar	4,712			2,520			496		380		—
Ocean Club Residences & Marina	2,956			—			—		—		—
Royal Mirage	1,292			1,378			4,135		3,403		1,293
South Africa	1,557			1,743			—		—		—
Singapore	1,451			—			—		—		—
Trading Cove Associates	459			233			927		935		1,755
Cape Town	—			5,790			—		—		—
Palmilla	—			—			—		—		1,482
Other	223			69			22		—		—
	46,882			97,419			$	19,355	$	19,894	$	15,177
Less: Amounts due within one year	(37,164		)	(15,682		)
	$	9,718		$	81,737

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 credit arrangement with Reethi Rah and various other financial institutions for the purpose of providing subordinated financing for the building and developing of One&Only Maldives at Reethi Rah. In connection with this financing arrangement, the Company had entered into a series of completion loans in the principal amount of $101.5 million and $54.4 million as of December 31, 2005 and 2004, respectively. During the year ended December 31, 2005, the Company obtained an appraisal of the resort which indicated that the carrying amount of the Company’s subordinated notes receivable due from Reethi Rah was not fully recoverable. As a result, the Company recorded a $27.8 million impairment of its subordinated notes receivable for the year ended December 31, 2005.

In May 2005, the Company entered into a senior subordinated credit agreement with Reethi Rah (the “Reethi Rah Credit Agreement”), which superseded any and all credit arrangements among Reethi Rah, the Company and SRL, an equity method investee, and provides for the Company and SRL to provide up to $130.0 million in construction financing to Reethi Rah. In addition, the Reethi Rah Credit Agreement provides for operating loans over a four-year period with each annual loan amount equal to the difference between $6.0 million and Reethi Rah’s Net Operating Income, as defined. Pursuant to the Reethi Rah Credit Agreement, during the year ended December 31, 2005, the Company loaned to Reethi Rah $47.1 million, net of repayments, for construction and operating loans. As of December 31, 2005, the Company had outstanding completion and operating loans with principal amounts of

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$94.7 million and $6.8 million, respectively, net of an allowance of $27.8 million. No asset relating to these loans is presented in the accompanying condensed consolidated balance sheet as of December 31, 2005 since the Company consolidated Reethi Rah as of
May 1, 2005.

Prior to our consolidation of Reethi Rah, as of December 31, 2004, the Company had outstanding completion loans 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. As of December 31, 2004, other amounts incurred in connection with Reethi Rah of $1.6 million primarily represent development costs that Kerzner has incurred on behalf of the resort, which are reimbursable to the Company. These amounts have been eliminated upon the consolidation of Reethi Rah.

During the year ended December 31, 2005, Reethi Rah purchased $1.7 million of goods and services in the normal course of business from certain affiliated companies of one of the owners of the resort. As of December 31, 2005, $0.1 million was outstanding to these companies and this amount is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheet. In addition, as of December 31, 2005, Reethi Rah had amounts receivable from one of the owners of the resort of $0.2 million related to expenses reimbursable to the Company.

Turnberry

As of December 31, 2005, $11.4 million was due from Turnberry to Residences at Atlantis, a consolidated variable interest entity, for customer deposits related to the condominium-hotel, which are being held in escrow by Turnberry on behalf of the joint venture.

SRL

The Company has long-term management contracts through 2023 with each of the five hotels in Mauritius that are owned by SRL: One&Only Le Saint Géran, 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. The Company and SRL have subsequently entered into an agreement to assign to One&Only Management the management responsibilities for One&Only Maldives at Reethi Rah effective on the resort opening date of May 1, 2005.

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, 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, One&Only Maldives at Reethi Rah and the Mauritius Resorts and receives a management fee, which is calculated as a percentage of revenue and adjusted EBITDA, as defined. One&Only Management is also entitled to a marketing fee as calculated as a percentage of revenue, although it has subcontracted to the Company all marketing services and benefits thereof with respect to Kanuhura, One&Only Maldives at Reethi Rah and the Mauritius Resorts. Amounts relating to One&Only Maldives at Reethi Rah are eliminated upon consolidation. For the years ended December 31, 2005, 2004 and 2003, the Company has recognized $7.9 million, $8.4 million and $7.4 million, respectively, related to these management agreements in Mauritius. Additionally, during 2002, the Company completed a major redevelopment of One&Only Le Touessrok for which it earned project fees of $0.2 million for the year ended December 31, 2003.

As of and for the years ended December 31, 2005 and 2004, the Company has consolidated One&Only Management, with SRL’s 25% and 20% interest, respectively, 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 provided for, among other things, the sale of 20% of its debt and equity interests in Kanuhura to SRL for which it

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received $1.5 million. Following this sale, which was effective January 1, 2003, as of December 31, 2004, 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 original debt and equity interests in Kanuhura to SRL. Accordingly, the Company’s equity interest in Kanuhura is now 18.75%.

Included in amounts due from SRL as of December 31, 2005 is $2.3 million relating to SRL’s proportionate share of completion loans to Reethi Rah which were made by the Company on behalf of SRL. This amount has been received by the Company in February 2006.

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. During the year ended December 31, 2005, the Company loaned an additional $2.3 million and Harborside at Atlantis repaid $13.8 million of the notes. The balance of these notes was $5.0 million and $16.5 million as of December 31, 2005 and 2004, respectively. In November 2005, the Company and Harborside at Atlantis extended the maturity date of the notes to December 31, 2006, however, such notes are classified as non-current in the accompanying consolidated balance sheet as of December 31, 2005 as the Company does not anticipate payment by December 31, 2006 and expects to further 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, 2005 was 5.9%. Interest income earned on these advances was $0.9 million, $0.6 million and $0.7 million for the years ended December 31, 2005, 2004 and 2003, respectively. Interest due from Harborside at Atlantis on these notes was $0.1 million as of December 31, 2005 and 2004. 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 $3.3 million, $2.5 million and $1.8 million for the years ended December 31, 2005, 2004 and 2003, respectively. Development fees earned during the years ended December 31, 2005 and 2004 amounted to $0.4 million and $0.3 million, respectively. 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 and other reimbursable costs was $4.0 million and $1.9 million as of December 31, 2005 and 2004, respectively.

Kanuhura

As described above, we assigned to One&Only Management the management agreement of Kanuhura, in which we own an 18.75% interest as of December 31, 2005. 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. Effective January 1, 2005, $0.1 million principal amount of the Kanuhura advances were transferred to SRL in connection with the Company’s sale of 5% of its debt and equity interest. These loans accrue interest at a rate of LIBOR plus 600 basis points. The average interest rate for the year ended December 31, 2005 was 8.87%. Interest income earned on these advances was $0.3 million, $0.2 million and $0.3 million for the years ended December 31, 2005, 2004 and 2003, respectively. As of December 31, 2005, the balance of the Kanuhura advances was $2.3 million, excluding accrued interest.

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Fees for management and marketing services during the years ended December 31, 2005, 2004 and 2003 were $1.1 million, $1.5 million and $0.8 million, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

Kerzner Istithmar

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 years ended December 31, 2005 and 2004, we recognized $0.5 million and $0.4 million, respectively, of development fees related to Atlantis, The Palm. These amounts are included within management, development and other fees in the accompanying consolidated statements of operations for the years ended December 31, 2005 and 2004. The $4.7 million and $2.5 million due from Kerzner Istithmar as of December 31, 2005 and 2004, respectively, primarily consists of development related costs that have been advanced by the Company which are reimbursable under the terms of the development agreement.

Ocean Club Residences & Marina

As of December 31, 2005, amounts due from affiliates included $3.0 million of costs paid by the Company on behalf of the joint venture related to the development of the Ocean Club Residences & Marina.

Royal Mirage

Fees for management services to the Royal Mirage during the year ended December 31, 2005, 2004 and 2003 were $4.1 million, $3.4 million and $1.3 million, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

South Africa

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

Singapore

Due from affiliates as of December 31, 2005 includes $1.5 million due from CapitaLand Commercial and Integrated Development (“CapitaLand”). On January 10, 2005, the Company entered into a memorandum of understanding relating to the creation of a joint venture to be owned 60% by the Company and 40% by CapitaLand for the purpose of submitting a joint concept proposal to the Singapore government for the development of an integrated entertainment resort complex on Sentosa Island in Singapore. The $1.5 million amount represents CapitaLand’s share of costs incurred by the Company in the development of the proposal which is expected to be reimbursed by CapitaLand.

Cape Town

In November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop a new luxury hotel on the waterfront in Cape Town, South Africa, subject to various conditions. In the first quarter of 2006, we formed a joint venture in which we own a minority interest to develop and operate Cape Town. As of December 31, 2005, the Company had advanced $6.1 million and $5.8 million, respectively, related to the development of this luxury hotel. These amounts are included in construction in progress within property and equipment, net in the accompanying consolidated balance sheet as of December 31, 2005.

Palmilla

Prior to our consolidation of Palmilla JV, LLC on January 1, 2004, fees for management services from Palmilla for the year ended December 31, 2003 were $0.1 million and are included in management, development and other fees in the accompanying consolidated statements of operations.

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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.

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, 2005) 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.

Employee Receivables

Employee notes receivable as of December 31, 2005 and 2004 includes $0.8 million related to a secured housing loan which was issued in December 2002. Additionally, $0.3 million and $0.4 million of employee notes receivable as of December 31, 2005 and 2004, respectively, relates to funds advanced to an employee for a secured housing loan, which is being amortized through July 2012. Also, as of December 31, 2005, the Company had amounts due from its Chairman and Chief Executive Officer of $0.2 million and $0.1 million, respectively, relating to expenses reimbursable to the Company.

Note 18—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, $0.4 million and $0.3 million for the years ended December 31, 2005, 2004 and 2003, 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 $7.7 million, $7.3 million and $7.0 million for the years ended December 31, 2005, 2004 and 2003, 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 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 sheets. 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, 2005 and 2004, the balance of the liability and the corresponding asset totaled $7.0 million and $4.0 million, respectively. During the years ended December 31, 2005 2004, and 2003, the net change in the fair value of plan assets resulted in a charge to corporate expense of $0.2 million, $0.1million and $0.2 million, respectively.

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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:

	Investments in				Equity in Earnings (Losses) of
	Associated				Associated Companies
	Companies				For the Year
	December 31,				Ended December 31,
Associated Company (Ownership Interest)	2005		2004		2005			2004			2003
Kerzner Istithmar (50%)	$	75,435	$	21,440	$	(676	)	$	—		$	—
BLB (37.5%)	47,290		38,273		2,099			(2,970		)	—
SRL (20.4%)	26,367		26,323		3,810			4,297			2,292
Harborside at Atlantis (50%)	24,799		9,044		16,106			6,651			3,329
Ocean Club Residences & Marina (50%)	13,968		—		1,817			—			—
Kanuhura (18.75%)	2,160		2,303		2			439			(51		)
Trading Cove New York (50%)	1,826		1,809		(983		)	(947		)	(1,086		)
Palmilla (50%)	—		—		—			—			(4,805		)
Other (50%)	30		38		(83		)	(15		)	1
	191,875		99,230		$	22,092		$	7,455		$	(320	)
Trading Cove Associates (50%)	15,702		14,908		$	37,882		$	35,909		$	33,960
	$	207,577	$	114,138

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.

In the normal course of business, the Company undertakes transactions with a number of unconsolidated affiliated companies. See Note 17—Related Party Transactions for further discussion.

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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,
	2005		2004		2003
Revenue	$	373,600	$	260,092	$	240,198
Income from operations	156,506		117,789		89,485
Income from continuing operations before income taxes	136,458		104,737		78,464
Net income	128,620		101,254		71,590

	As of December 31,
	2005		2004
Current assets	$	229,223	$	81,625
Non-current assets	1,202,576		568,917
Total assets	1,431,799		650,542
Current liabilities	206,653		78,007
Non-current liabilities	688,681		188,520
Shareholders’ equity	536,465		384,015

Kerzner Istithmar

As of December 31, 2005 and 2004, the Company had invested $77.0 million and $21.8 million, respectively, in Kerzner Istithmar. As these funds were utilized by Kerzner Istithmar during the construction of Atlantis, The Palm, $2.9 million and $0.5 million, respectively, of related capitalized interest is included in the investment as of December 31, 2005 and 2004. As of December 31, 2005 and 2004, the investment has been reduced by $0.9 million and $0.4 million, respectively, representing the portion of the development fee pertaining to our 50% ownership interest in Kerzner Istithmar. As of December 31, 2005, the Company’s investment has been reduced by our share of pre-opening expenses incurred at Atlantis, The Palm during 2005 of $2.1 million and our investment has been increased by our share of unrealized gains during 2005 of $1.4 million resulting from interest rate swaps entered into by Kerzner Istithmar. 

BLB

Kerzner invested $47.4 million in BLB during 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. During 2004, 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 as of December 31, 2004 was $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.

During the year ended December 31, 2005, the Company recognized $2.1 million of equity earnings from its investment in BLB. During 2005, the Company recognized through accumulated other comprehensive income (loss) $11.4 million in unrealized gain related to an increase in the fair value of Wembley’s shares and $4.1 million in foreign currency translation loss. On the acquisition date, the Company recorded a reversal of its cumulative unrealized gain of $1.2 million on its investment as presented in the accompanying consolidated statements of changes in the shareholders’ equity and comprehensive income.

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SRL

The Company recognized $3.8 million, $4.3 million and $2.3 million of equity earnings from SRL during the years ended December 31, 2005, 2004 and 2003, respectively. During the years ended December 31, 2005, 2004 and 2003, the Company received dividends from SRL of $2.3 million, $1.8 million and $1.5 million, respectively.

SRL’s shares are traded on the Stock Exchange of Mauritius and our equity ownership interest had a fair market value of $42.3 million and $32.2 million, as of December 31, 2005 and 2004, respectively. During the years ended December 31, 2005, 2004 and 2003, the Company recorded unrealized foreign currency (losses) gains of $(1.5) million, $0.2 million and $0 related to its investment in SRL. These amounts are included within translation reserves as components of accumulated other comprehensive income (loss) in the accompanying consolidated statements of changes in the shareholders’ equity and comprehensive income.

Harborside at Atlantis

Harborside at Atlantis constructs, sells, finances 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, 2005, substantially all 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, 2005 and 2004, 37% and 13%, respectively, of the second phase of timeshare units were sold.

For the years ended December 31, 2005, 2004 and 2003, the Company recognized $16.1 million, $6.7 million and $3.3 million, respectively in equity earnings from Harborside at Atlantis. Amounts recognized in 2005 included $0.3 million representing our portion of the total $0.7 million of development fee which pertains to our 50% ownership interest. Included in these amounts for the years ended December 31, 2004 and 2003, are $0.2 million and $1.8 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 for the years ended December 31, 2004 and 2003, 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, respectively. The Company initially contributed land to Harborside at Atlantis at its cost, resulting in a $4.5 million difference between the Company’s investment and the amount of underlying equity in Harborside at Atlantis’ net assets.

Ocean Club Residences & Marina

The Company’s investment in the Ocean Club Residences & Marina includes $4.3 million of the Company’s cost basis of land and certain direct costs related to the construction and development of the project, which were contributed to the joint venture in exchange for its 50% equity ownership interest.

During the fourth quarter of 2005, the Company acquired additional beachfront property on Paradise Island adjoining Ocean Club Estates for $15.7 million. The Company has contributed the right to use this land into the Ocean Club Residences & Marina for future development and received a $7.9 million distribution, representing our partner’s 50% share. During the year ended December 31, 2005, the Company recognized $1.8 million in equity earnings from the joint venture.

Kanuhura

Effective January 1, 2005, the Company sold 1.25% of its equity ownership in Kanuhura for its book value of $0.1 million to SRL, resulting in our direct ownership decreasing from 20% to 18.75%. Despite this change in ownership percentage, the Company continues to have the ability to exercise significant influence over the operating and financial policies of Kanuhura through its direct ownership and, indirect ownership through SRL, and its representation on Kanuhura’s board of directors. As a result, the Company accounts for its investment in Kanuhura pursuant to the equity method of accounting.

For the years ended December 31, 2005, 2004 and 2003, the Company recognized $0, $0.4 million and ($0.1) million, respectively, in equity earnings (losses) from Kanuhura.

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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, 2005, 2004 and 2003, the Company recognized $1.0 million, $0.9 million and $1.1 million, respectively, of equity losses in TCNY.

As it has been the Company’s policy to expense certain costs that TCNY capitalized due to the uncertainty of the recoverability of such costs, the Company’s investment as of December 31, 2005 was $1.8 million, which consisted almost entirely of underlying land acquired for the potential project. As such, the Company believes the book value of land included in the Company’s investment is at least equal to its fair value and should TCNY not proceed with the Catskills Project, the Company would not anticipate a significant write off.

Trading Cove Associates

The Company’s equity in earnings from TCA totaled $37.9 million, $35.9 million and $34.0 million for the years ended December 31, 2005, 2004 and 2003, 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 $37.1 million, $35.4 million and $29.0 million for the years ended December 31, 2005, 2004, and 2003, respectively.

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

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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, $11.2 million and $14.7 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, 2005 and 2004, respectively. The long-term portion of $7.6 million and $11.2 million as of December 31, 2005 and 2004, respectively, is included within deferred revenue and the current portion of $3.6 million and $3.5 million is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. These amounts are being recognized as other revenue 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, 2005, in connection with the refinancing of our 87/8% Senior Subordinated Notes, the Company recognized a $27.9 million loss on early extinguishment of debt. This loss consisted of $33.0 million of consent solicitation payments and the write off of $5.8 million of debt issuance costs. These costs were offset by the write off of a $4.3 million unamortized premium and net proceeds of $4.9 million from the termination of our related interest rate swap agreement plus accrued interest and related write off of the $1.7 million interest rate swap contra asset.

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 Palmilla’s previous senior credit facility.

Note 22—Income Taxes

A significant portion of our operations are located in The Bahamas where there are no income taxes. In 2005, 2004 and 2003, the income tax (benefit) provision relating to U.S. and other non-Bahamian operations were as follows:

	For the Year Ended December 31,
	2005			2004			2003
Current:
Federal	$	1,124		$	(854	)	$	7,917
State	2,948			3,424			3,393
Foreign	1,303			1,353			584
	5,375			3,923			11,894
Deferred:
Federal	(21,479		)	(3,499		)	(11,732		)
	$	(16,104	)	$	424		$	162

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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,
	2005		2004		2003
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
Non-U.S.-source income	(24.2	)	(28.4	)	(25.4	)
State tax cost	8.1		5.0		4.7
Benefit of capital loss carryforward	(4.6	)	—		—
Reduction of valuation allowance relating to prior years’ operating loss utilized	(59.5	)	(5.1	)	(16.4	)
Release of accruals for tax uncertainties	(4.8	)	(5.4	)	—
Foreign tax cost	3.6		2.0		0.8
Other	1.8		(2.5	)	1.7
	(44.6	)%	0.6	%	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,
	2005			2004
Non-current deferred tax liabilities:
Basis difference-land	$	12		$	960
Equity earnings	80			—
Basis differences on property and equipment	—			153
Total deferred tax liabilities	92			1,113
Non-current deferred tax assets:
NOL carryforwards	97,928			140,694
Basis differences on property and equipment	1,489			—
Basis differences on land held for investment, development or resale	—			8,169
Book accruals not yet deductible for tax return purposes	4,770			3,041
Tax credit carryforwards	2,844			3,240
Other	4,436			5,591
Total deferred tax assets	111,467			160,735
Valuation allowance for deferred tax assets	(81,619		)	(148,441		)
Deferred tax assets, net of valuation allowance	29,848			12,294
Non-current net deferred tax assets:	$	29,756		$	11,181

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 $66.8 million, $40.4 million and $40.6 million during 2005, 2004 and 2003, respectively. Of this reduction, $21.5 million, $3.5 million and $11.7 million represent amounts released as income tax benefit, and accordingly, reduced our provision for income taxes for the years ended December 31, 2005, 2004 and 2003, respectively. The remaining reduction to the valuation allowance resulted primarily from the

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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 $279.8 million at December 31, 2005, of which $279.3 million are unrestricted as to use. NOL carryforwards of $112.0 million expired in 2005. A portion of these expired NOLs accelerated the free-up of limitations on some of our remaining NOLs.

Our NOL carryforwards expire as follows: $23.5 million in 2006, $30.6 million in 2007, $56.9 million in 2008, $8.0 million in 2011, $57.0 million in 2012, $32.3 million in 2019, $17.7 million in 2020, $49.0 million in 2021 and $4.8 million in 2024.

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 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 years ended December 31, 2005 and 2004, we reduced our tax accruals by $1.7 million and $3.7 million, respectively, as a result of the expiration of certain statutes of limitation or a change in our judgment with respect to various potential tax uncertainties. This resulted in a reduction to our provision for income taxes by the same amount. As of December 31, 2005, we have an income tax accrual of $3.0 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. We also have obligations under certain operating leases related to equipment acquired for our operations. In addition, Reethi Rah has entered into to a long-term land lease with the government of the Maldives for the land on which One&Only Maldives at Reethi Rah is constructed.

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Future minimum lease obligations under various non-cancelable operating leases with terms in excess of one year at December 31, 2005 are as follows:

Year Ending December 31,
2006	$	3,258
2007	2,814
2008	2,567
2009	2,681
2010	2,779
Thereafter	42,538
	$	56,637

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 that 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 condominium-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.

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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. As of December 31, 2005, we have contributed $1.0 million, with the balance of $4.0 million included in capital creditors in the accompanying consolidated balance sheet.

Guarantees

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, 2005, the amount of senior debt owed was $2.3 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 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

The Company has entered into a guarantee agreement in connection with the Reethi Rah Term Loan Facility as discussed in Note 14—Long-Term Debt.

Atlantis, The Palm Commitment

In September 2003, the Company entered into agreements to form a joint venture with Nakheel, an entity owned by the Royal Family of 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.  In November 2005, the Company and its joint venture partner, Istithmar, agreed to a revised construction budget for Atlantis, The Palm, totaling approximately $1.5 billion (inclusive of land acquisition costs of $125 million).

In October 2005 the joint venture announced a revised financing structure for the project in which the Company and Istithmar have each agreed to provide an equity investment of $200.0 million in the joint venture.  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.

UK Gaming Commitment

The Company is committed to making a contribution towards the construction of the raft and shell works to house a proposed regional casino at The O2 in the United Kingdom. The Company expects to incur £6.5 million (approximately $11.2 million U.S. dollars as of December 31, 2005) in 2006. If a regional casino license is not awarded at the Dome, the Company is eligible to recover 80% of its investment from Anschutz Entertainment Group, Inc., its joint venture partner, and 20% is expected to be expensed as incurred.

Phase III Construction Commitment

The Company has construction commitments of $219.1 million arising from the Phase III expansion.

Morocco Commitment

With respect to the destination resort casino project in Morocco, we have entered into a joint venture agreement and related development and long-term management agreements with two local Moroccan companies. The joint venture agreement requires each party to provide equity based on the initially estimated project cost of $230.0 million. Our component of the equity contribution as stated in the joint venture agreement is $46.0 million. Based on the current preliminary designs for the project, the budget is now anticipated to be approximately $300.0 million,

F-55

although a more definitive amount will not be available until further detailed design work has been completed. As a result of the previously announced budget increase, both parties are working together to arrange debt and equity financing to fund the project. Although no assurances can be given at this time, we expect to reach agreement with our Moroccan partners on amended project documents and proceed with the project, subject to obtaining third party debt financing. During 2005, we expensed $2.0 million of non-capitalizable costs associated with the Morocco project. In addition, during 2005, we incurred $4.9 million of design and development costs which are included in construction in progress in the consolidated balance sheets. As of December 31, 2005, we had approximately $6.5 million capitalized with respect to design and development costs. If this project does not proceed, we will be required to write off these costs that have been capitalized.

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 45.3% to 75.5% were granted in 2005 to our officers and employees. The compensation expense related to this bonus plan amounted to $13.8 million, $13.5 million and $13.8 million for the years ended December 31, 2005, 2004 and 2003, respectively.

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. See Note 27—Subsequent Events for additional discussion of claims affecting the Company.

Trademark Litigation

On January 27, 2006, we filed a Complaint in the United States District Court, District of Nevada, against Monarch Casino & Resort, Inc. and Golden Road Motor Inn, Inc. (collectively, “Monarch”) alleging, inter alia, that Monarch has no right to use the mark “Atlantis” in connection with casino services in Las Vegas, Nevada and that its assertions that it has trademark rights for the “Atlantis” mark throughout the State of Nevada infringes on certain of our United States registered “Atlantis” trademark rights. The complaint seeks both injunctive relief and damages. In the action, we seek a declaratory judgment pursuant to Sections 32(1), 43(A) and 43(C) of the Trademark Act of 1946 (the “Lanham Act”) that Monarch’s use of the “Atlantis” mark in Las Vegas would constitute infringement of our registered trademark and result in consumer confusion and a dilution of our “Atlantis” trademark. In addition to the Lanham Act claims, our Complaint alleges common law trademark infringement and dilution under Nevada law.

On February 14, 2006, we filed an Amended Complaint alleging further that Monarch’s conduct constituted deceptive trade practices in violation of Sections 41.600 and 598.0915 of the Nevada Revised Statutes.

On February 16, 2006, Monarch filed a Motion to Transfer Venue from Las Vegas, Nevada to Reno, Nevada, which we have opposed. On February 24, 2006, Monarch filed an answer and counterclaim. In its counterclaim, Monarch brings claims for (1) cancellation of our United States “Atlantis” trademark registration for casino services; (2) breach of a 1996 license agreement that was entered into by Monarch with Atlantis Lodge, Inc. (“Lodge”), and later assigned from Lodge to us; (3) a declaration that we have infringed upon Monarch’s trademark rights; and (4) a declaration that we have engaged in deceptive trade practices in violation of Nevada law. We believe the counterclaims to be without merit and intend to vigorously defend them.

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.

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,

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Paradise Island, PIV, Inc., and its 50% investment in Harborside at Atlantis. The Destination Resorts segment also includes Atlantis, The Palm, Residences at Atlantis and costs associated with the development of a destination resort casino located in Morocco. The Gaming segment consists primarily of the relinquishment and development fee income from Mohegan Sun in Uncasville, Connecticut, costs associated with the potential development of a casino in Northampton, United Kingdom, our equity investment in BLB 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 an agreement to develop and manage a property on the Victoria & Alfred Waterfront in Cape Town, South Africa, 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 (“Contribution to Net Income”), which is their respective revenue 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 revenue, Contribution to Net Income and total assets, depreciation and amortization and capital additions by segment:

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Net Revenue

	For The Year Ended December 31,
	2005		2004		2003
Destination Resorts:
Atlantis, Paradise Island (1)	$	517,598	$	474,611	$	463,276
Tour operations	35,025		26,564		28,875
Harborside at Atlantis fees	3,655		2,826		1,847
	556,278		504,001		493,998
Atlantis, The Palm development fees	496		380		—
	556,774		504,381		493,998
Gaming:
Connecticut fees (2)	926		935		1,755
One&Only Resorts:
Ocean Club	43,237		37,731		34,186
Palmilla (3)	63,565		37,875		1,481
Reethi Rah (4)	18,185		1,270		394
Other resorts (5)	14,278		14,483		9,700
Tour operations	19,499		20,551		11,915
	158,764		111,910		57,676
Other (6)	5,060		3,859		5,084
Net revenue	$	721,524	$	621,085	$	558,513

(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 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 years ended December 31, 2005 and 2004 as a result of FIN 46R. Revenue for the year ended December 31, 2003 represents management and development fees related to Palmilla.

(4)Consists of revenue from Reethi Rah in connection with the consolidation of Reethi Rah for the year ended December 31, 2005. Revenue for the years ended December 31, 2004 and 2003 represent development fees.

(5)Includes management, marketing and development fees from One&Only Resorts properties located in Mauritius, Dubai and the Maldives, excluding One&Only Maldives at Reethi Rah.

(6)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,
	2005			2004			2003
Destination Resorts:
Atlantis, Paradise Island	$	95,532		$	86,951		$	83,523
Tour operations	7,064			5,885			5,089
Harborside at Atlantis (1)	19,761			9,477			5,176
Ocean Club Residences & Marina  (2)	1,817			—			—
Residences at Atlantis (3)	(1,693		)	—			—
	122,481			102,313			93,788
Atlantis, The Palm (4)	(224		)	346			—
	122,257			102,659			93,788
Gaming:
Connecticut (5)	38,808			36,843			35,715
United Kingdom	(15,339		)	(2,182		)	(329		)
BLB (6)	2,099			(2,970		)	—
Other (7)	(983		)	(1,387		)	(1,086		)
	24,585			30,304			34,300
One&Only Resorts:
Ocean Club	6,392			3,644			4,720
Palmilla (8)	9,032			(1,831		)	(3,013		)
Reethi Rah (9)	(3,225		)	1,270			394
Other resorts (10)	15,975			17,703			10,346
Tour operations	1,196			1,155			160
Direct expenses (11)	(14,009		)	(17,074		)	(12,347		)
	15,361			4,867			260
Impairment of notes receivable	(27,812		)	—			—
	(12,451		)	4,867			260
Corporate expense and other	(43,825		)	(34,489		)	(32,842		)
Gain on sale (impairment) of Atlantic City land	1,433			(7,303		)	—
Interest income	9,130			4,722			3,394
Interest expense, net of capitalization	(44,087		)	(36,814		)	(29,264		)
Gain on settlement of territorial and other disputes	—			—			1,479
Loss on early extinguishment of debt	(27,912		)	(1,655		)	—
Other, net	13			1,358			(686		)
Benefit (provision) for income taxes	16,104			(424		)	(162		)
Minority and noncontrolling interest (12)	6,970			4,907			—
Income from discontinued operations, net of income tax	—			—			1,305
Net income	$	52,217		$	68,132		$	71,572

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

(2)Consists of equity earnings from Ocean Club Residences & Marina.

(3)Consists of losses before interest and taxes, net of minority interest related to Residences at Atlantis for the year ended December 31, 2005.

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(4)Consists of equity in losses and development fees related to Atlantis, The Palm.

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

(6)Consists of equity in earnings (losses)  related to BLB.

(7)Consists of equity losses related to TCNY and other expenses related to the Gaming segment.

(8)Consists of earnings (losses) before interest and taxes, net of minority interest related to Palmilla for the years ended December 31, 2005 and 2004. Results for the year ended December 31, 2003 includes management, development and other fees and the Company’s share of net loss from Palmilla prior to the Company’s adoption of FIN 46R.

(9)Consists of losses before interest and taxes, net of minority interest related to Reethi Rah for the period from May 1, 2005 to December 31, 2005. Results for the years ended December 31, 2004 and 2003 represent development fees related to Reethi Rah prior to consolidation in accordance with FIN 46R.

(10) Consists of equity in earnings (losses) of associated companies and management, marketing, development and other fees, net of minority interest from SRL and Kanuhura.

(11) Consists of direct expenses associated with the One&Only Resorts segment.

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

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Total Assets, Depreciation and Amortization and Capital Additions

	As of December 31, 2005		Year Ended December 31, 2005
	Total		Depreciation and		Capital
	Assets		Amortization		Additions(5)
Destination Resorts:
Atlantis, Paradise Island(1)	$	1,411,331	$	53,031	$	213,886
Atlantis, The Palm	75,435		—		—
Other (2)	6,520		—		4,881
	1,493,286		53,031		218,767
Gaming:
Connecticut(3)	16,160		—		—
United Kingdom	8,998		3		3,488
Other(3)	49,146		—		—
	74,304		3		3,488
One&Only
Ocean Club	84,848		5,949		1,139
Palmilla	160,014		5,669		2,906
Reethi Rah	169,477		7,270		13,645
Other Resorts(4)	57,713		435		1,768
	472,052		19,323		19,458
General corporate	236,980		935		164
	$	2,276,622	$	73,292	$	241,877

(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)Includes construction in progress related to the Company’s planned destination resort casino in Morocco.

(3)Connecticut includes our investment in TCA and other amounts due from TCA. Other includes our investments in BLB and TCNY.

(4)Includes the Company’s investments in SRL and Kanuhura and construction in progress related to Cape Town.

(5)Capital additions for the year ended December 31, 2005 include payments for property and equipment of $198.2 million, the acquisition of Hurricane Hole Marina in The Bahamas of $28.0 million and the acquisition of beachfront property on Paradise Island adjoining the Ocean Club Estates for $15.7 million.

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	As of December 31, 2004		Year Ended December 31, 2004
	Total		Depreciation and		Capital
	Assets		Amortization		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 amounts due from TCA. 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.

F-62

	Year Ended December 31, 2003
	Depreciation and Amortization		Capital Additions (3)
Destination Resorts:
Atlantis, Paradise Island (1)	$	50,996	$	66,756
Gaming:
United Kingdom	1		2,276
	1		2,276
One&Only Resorts
One&Only Ocean Club	3,678		802
One&Only Other Resorts (3)	247		476
	3,925		1,278
General Corporate	860		588
	$	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)Includes the Company’s investments in associated companies related to the One&Only Resort businesses located in Mexico, Mauritius and the Maldives.

(3)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.

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, 2005 was approximately $695.1 million as compared to its carrying value of $631.6 million and the fair value of our fixed rate debt at December 31, 2004 was approximately $738.1 million as compared to its carrying value of $643.4 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 equaled their carrying value of $8.7 million, and the fair value of Palmilla’s cap agreement was $0.1 million as of December 31, 2005 and 2004. These amounts are included in deferred charges and other assets in the accompanying consolidated balance sheets.

F-63

Note 26—Supplemental Condensed Consolidating Financial Information

As discussed in Note 14—Long-Term Debt, in September 2005, the Company commenced a tender offer and consent solicitation relating to its $400.0 million aggregate principal amount outstanding of its 87/8% Senior Subordinated Notes. As of December 31, 2005, approximately 99.6% of the $400.0 million aggregate principal amount outstanding of the 87/8% Senior Subordinated Notes were received and accepted for payment by the Company and one of its wholly-owned subsidiaries, KINA. The Company used the proceeds from a new offering of $400.0 million 6¾% Senior Subordinated Notes that closed on September 22, 2005, together with the cash on hand, to repay the tendered 87/8% Senior Subordinated Notes. The 6¾% Senior Subordinated Notes were co-issued by the Company and KINA. The 6¾% Senior Subordinated Notes are guaranteed by substantially all of the Company’s 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 6¾% Senior Subordinated Notes, Kerzner and KINA, and, on a combined basis, for the Subsidiary Guarantors and non-guarantor subsidiaries. For purposes of these statements the investment in subsidiaries amounts have been accounted for pursuant to the equity method of accounting.

F-64

Condensed Consolidating Balance Sheet as of December 31, 2005

	Kerzner		KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	4,070	$	3,260		$	96,447		$	12,174		$	—		$	115,951
Restricted cash	—		—			370			3,911			—			4,281
Short-term investments	—		—			19,969			—			—			19,969
Accounts receivable, net	35		909			38,638			10,913			(328		)	50,167
Due from affiliates	551,407		1,173			(516,287		)	18,645			(17,774		)	37,164
Inventories	—		—			13,937			5,323			—			19,260
Prepaid expenses and other assets	173		95			23,451			3,898			(4,685		)	22,932
Total current assets	555,685		5,437			(323,475		)	54,864			(22,787		)	269,724
Property and equipment, net	—		40,053			1,303,134			283,187			20,961			1,647,335
Intangible asset, net	—		—			—			14,695			—			14,695
Due from affiliates - non-current	82,925		200,000			(191,895		)	—			(81,312		)	9,718
Deferred tax asset, net	—		29,756			—			—			—			29,756
Deferred charges and other assets, net	5,782		14,142			14,844			3,126			1,988			39,882
Restricted cash - non-current	—		—			57,935			—			—			57,935
Investment in subsidiaries	757,343		44,413			—			—			(801,756		)	—
Investments in associated companies	2,160		—			203,786			—			1,631			207,577
Total assets	$	1,403,895	$	333,801		$	1,064,329		$	355,872		$	(881,275	)	$	2,276,622
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	—	$	—		$	250		$	7,439		$	—		$	7,689
Accounts payable and accrued liabilities	8,370		12,060			151,456			32,709			(9,200		)	195,395
Due to affiliates	—		11,575			(5,943		)	16,729			(17,571		)	4,790
Capital creditors	—		—			39,272			6,793			—			46,065
Total current liabilities	8,370		23,635			185,035			63,670			(26,771		)	253,939
Deferred revenue	—		2,168			16,437			3,207			—			21,812
Other long-term liabilities	—		7,013			3,175			761			(104		)	10,845
Due to affiliates – non-current	—		—			(2,538		)	150,253			(112,831		)	34,884
Long-term debt, net of current maturities	230,000		401,632			107			156,947			931			789,617
Total liabilities	238,370		434,448			202,216			374,838			(138,775		)	1,111,097
Minority and noncontrolling interest	3,763		—			—			—			—			3,763
Shareholders’ equity	1,161,762		(100,647		)	862,113			(18,966		)	(742,500		)	1,161,762
Total liabilities and shareholders’ equity	$	1,403,895	$	333,801		$	1,064,329		$	355,872		$	(881,275	)	$	2,276,622

F-65

Condensed Consolidating Balance Sheet as of 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
Accounts receivable, 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			139,204			12,795		(11,547		)	168,225
Due to affiliates	—		—			2,752			1,021		(3,273		)	500
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 and noncontrolling 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-66

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2005

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Casino and resort revenue	$	—		$	—		$	590,569		$	81,749		$	(5,494	)	$	666,824
Less: promotional allowances	—			—			(24,239		)	—			—			(24,239		)
	—			—			566,330			81,749			(5,494		)	642,585
Tour operations	—			—			54,524			—			—			54,524
Management, development and other fees	—			14,436			14,496			8,823			(18,400		)	19,355
Other revenue	—			—			4,810			250			—			5,060
Affiliated sales	—			—			11,394			—			(11,394		)	—
	—			14,436			651,554			90,822			(35,288		)	721,524
Equity in subsidiaries’ earnings	70,725			—			—			—			(70,725		)	—
Cost and Expenses:
Casino and resort expenses	—			—			320,378			39,645			(14,885		)	345,138
Tour operations	—			—			46,024			—			(21		)	46,003
Selling, general and administrative	—			94			111,846			31,038			(6,170		)	136,808
Management fee	2,980			—			9,597			1,859			(14,436		)	—
Corporate expenses	10,109			10,635			20,961			626			238			42,569
Depreciation and amortization	—			17			60,329			12,946			—			73,292
Pre-opening expenses	—			—			7,674			314			(13		)	7,975
UK gaming write off	—			—			3,750			7,429			—			11,179
Gain on sale of Atlantic City land	—			(1,433		)	—			—			—			(1,433		)
Impairment of notes receivable	27,812			—			—			—			—			27,812
	40,901			9,313			580,559			93,857			(35,287		)	689,343
Income (loss) from operations	29,824			5,123			70,995			(3,035		)	(70,726		)	32,181
Relinquishment fees – equity in earnings of TCA	—			—			37,882			—			—			37,882
Other income (expense):
Interest income	6,261			197			8,186			422			(5,936		)	9,130
Affiliated interest income	3,859			17,035			—			—			(20,894		)	—
Affiliated interest expense	—			—			(20,893		)	(5,937		)	26,830			—
Interest expense, net of capitalization	(3,747		)	(33,614		)	8,152			(14,879		)	1			(44,087		)
Equity in earnings of associated companies	2			—			22,090			—			—			22,092
Loss on early extinguishment of debt	6,543			(14,857		)	(19,598		)	—			—			(27,912		)
Other, net	—			—			13			—			—			13
Other expense, net	12,918			(31,239		)	(2,050		)	(20,394		)	1			(40,764		)
Income (loss) from continuing operations before income taxes and minority interest	42,742			(26,116		)	106,827			(23,429		)	(70,725		)	29,299
Benefit (provision) for income taxes	951			18,608			(2,834		)	(621		)	—			16,104
Minority and noncontrolling interests	8,524			—			—			(1,710		)	—			6,814
Net income (loss)	$	52,217		$	(7,508	)	$	103,993		$	(25,760	)	$	(70,725	)	$	52,217

F-67

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2004

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Casino and resort revenue	$	—		$	—		$	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 revenue	—			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 and noncontrolling interests	8,751			—			—			(1,517		)	—			7,234
Net income (loss)	$	68,132		$	(17,704	)	$	93,427		$	(10,681	)	$	(65,042	)	$	68,132

F-68

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2003

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Casino and resort revenue	$	—		$	—		$	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 revenue	—			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 and noncontrolling interests	—			—			—			(1,340		)	—			(1,340		)
Income (loss) from continuing operations	67,282			(6,607		)	75,595			5,359			(71,362		)	70,267
Income 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-69

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2005

	Kerzner			KINA			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	(42,757	)	$	323		$	228,887		$	(11,213	)	$	—	$	175,240
Cash flows from investing activities:
Payments for property and equipment	—			(13		)	(179,117		)	(19,076		)	—		(198,206		)
Acquisition of land and other assets	—			—			(43,671		)	—			—		(43,671		)
Redemption of short-term investments, net	—			—			185,236			—			—		185,236
Repayments (advances/loans) to affiliates, net	55,761			30,869			(169,568		)	42,613			—		(40,325		)
Repayments from affiliates	3,150			—			10,600			—			—		13,750
Acquisition of equity interest in associated companies	—			—			(55,170		)	—			—		(55,170		)
Capital distribution from associated companies	—			—			7,849			—			—		7,849
Cash resulting from the initial consolidation of variable interest entities	—			—			—			1,519			—		1,519
Deferred contract acquisition costs	—			—			(813		)	—			—		(813		)
Proceeds from the sale of land, property and equipment	—			6,884			125			—			—		7,009
Change in restricted cash	—			—			(58,739		)	—			—		(58,739		)
Deposits and other	—			—			(1,205		)	—			—		(1,205		)
Sale of debt and equity interest in One&Only Kanuhura	340			—			—			—			—		340
Net cash provided by (used in) investing activities	59,251			37,740			(304,473		)	25,056			—		(182,426		)
Cash flows from financing activities:
Proceeds from issuance of debt	—			400,000			—			—			—		400,000
Borrowings	—			—			27			1,200			—		1,227
Early redemption and repayment of debt	4,847			(431,383		)	413			(5,979		)	—		(432,102		)
Debt issuance and modification costs	—			(7,256		)	(962		)	—			—		(8,218		)
Proceeds from exercise of share options	17,832			—			—			—			—		17,832
Repurchase of Ordinary Shares	(35,943		)	—			—			—			—		(35,943		)
Net cash used in financing activities	(13,264		)	(38,639		)	(522		)	(4,779		)	—		(57,204		)
Increase (decrease) in cash and cash equivalents	3,230			(576		)	(76,108		)	9,064			—		(64,390		)
Cash and cash equivalents at beginning of period	840			3,836			172,555			3,110			—		180,341
Cash and cash equivalents at end of period	$	4,070		$	3,260		$	96,447		$	12,174		$	—	$	115,951

F-70

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	—			(16		)	(101,465		)	(17,917		)	—			(119,398		)
Purchase of short-term investments, net	—			—			(204,309		)	—			—			(204,309		)
Advances/loans to affiliates	(67,000		)	—			(11,626		)	—			—			(78,626		)
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 variable interest entities	—			—			—			7,047			—			7,047
Deferred contract acquisition costs	—			—			(1,631		)	—			—			(1,631		)
Acquisition of land and other assets	—			—			(30,877		)	—			—			(30,877		)
Proceeds from the sale of land, property and equipment	—			—			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
Early redemption and 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-71

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	—			(14		)	(50,835		)	—		(50,849		)
(Advances/loans) repayments to affiliates, net	(36,783		)	21,991			(2,211		)	—		(17,003		)
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 land and other assets	—			—			(20,049		)	—		(20,049		)
Proceeds from the sale of land, property and equipment	—			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 and other	—			—			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-72

Note 27—Subsequent Events

On March 20, 2006, the Company and an investor group which is being led by our Chairman, Solomon Kerzner, and our Chief Executive Officer, Howard B. Kerzner, announced that they have entered into a definitive agreement under which the Company would be acquired by the investor group for $76.00 in cash per outstanding Ordinary Share. The investor group also includes Istithmar, which is a significant shareholder of the Company, Whitehall Street Global Real Estate Limited Partnership 2005, Colony Capital LLC, Providence Equity Partners, Inc. and The Related Companies, L.P., which is affiliated with one of the Company’s Directors.

On March 23, 2006, a complaint was filed in Los Angeles Superior Court seeking to enjoin the sale of the Company to the investor group. The complaint purports to be a class action on behalf of the Company’s public shareholders. The complaint also names the Company and all our directors as defendants, and alleges that the defendants have breached their fiduciary duties to the Company’s public shareholders and are pursuing an unlawful plan to cash them out for grossly inadequate compensation. We intend to contest vigorously all of the claim’s allegations of improper conduct.

F-73

EX-4.19(B)

EXHIBIT 4.19(b)

KERZNER INTERNATIONAL NORTH AMERICA, INC. RETIREMENT SAVINGS PLAN

(Amended and restated effective January 1, 2002)

TABLE OF CONTENTS

		Page
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

i

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

2

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 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

3

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—

4

(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.

6

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.

8

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)).

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Section 5.5Correction of Excess Contributions.

(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.

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Section 9.4Forfeitures.

(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.

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(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.

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(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.

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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.

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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.

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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.

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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.

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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 17^th day of December, 2002.

ATTEST:		KERZNER INTERNATIONAL NORTH AMERICA, INC.
/s/ Anne Robertson		/s/ William C. Murtha
	Name:	William C. Murtha
	Title:	Senior Vice President & Corporate Counsel

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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

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EX-4.19(D)

EXHIBIT 4.19(d)

AMENDMENT 2004-1

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, 2004, Section 2.1 of the Plan is hereby amended to read, in its entirety, as follows:

“Section 2.1 Participation.  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 Eligible Employee hired on or after January 1, 2002 shall become a Participant at the beginning of the next available payroll period following the latest of the date that he has attained age 21 or the date that he has completed at least one-quarter (1/4) of a Year of Service, if he is then an Eligible Employee.  Except as otherwise provided, each Employee who is not hired as an Eligible Employee shall become a Participant at the beginning of the next available payroll period following the date he becomes an Eligible Employee; provided that he has satisfied the age and service requirements specified in this Section 2.1.”

2.             Effective June 4, 2004, Article XV of the Plan is hereby amended by adding new Section 15.7 to the end thereof to read, in its entirety, as follows:

“Section 15.7 Lost Payees. A benefit shall be deemed forfeited, and used, at the discretion of the Employer to (a) pay any administrative expenses of the Plan, (b) fund benefits required to be restored under Section 9.4 or (c) reduce the Employer’s obligation to make Matching Contributions allocated pursuant to Section 3.4 or any Discretionary Profit Sharing Contributions allocated pursuant to Section 3.3, if the Committee is unable to locate a Participant, a Beneficiary or an alternate payee under a Qualified Domestic Relations Order, as defined in section 414(p) of the Code, to whom payment is due; provided, however, that such benefit shall be reinstated if a claim is made by the party to whom properly payable, without any credit for earnings or losses since the date of the deemed forfeiture.”

3.             Effective May 1, 2004, Appendix A of the Plan is hereby amended to read, in its entirety, as follows:

“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

Kerzner International Employment Services Limited — effective May 1, 2004”

To record the adoption of this Amendment 2004-1, the Employer has caused its authorized officer to affix its corporate name and seal hereto this 4th day of June, 2004.

Attest:	KERZNER INTERNATIONAL NORTH AMERICA, INC.
John Allison	/s/John Allison

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EX-4.19(E)

EXHIBIT 4.19(e)

AMENDMENT 2005-1

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 January 1, 2006, Section 2.1 of the Plan is hereby amended to read, in its entirety, as follows:

“Section 2.1  Participation. 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 Eligible Employee shall become a Participant at the beginning of the next available payroll period following the latest of the date that he has attained age 21 (age 18 effective January 1, 2006) or the date that he has completed at least one-quarter (1/4) of a Year of Service, if he is then an Eligible Employee. Except as otherwise provided, each Employee who is not hired as an Eligible Employee shall become a Participant at the beginning of the next available payroll period following the date he becomes an Eligible Employee; provided that he has satisfied the age and service requirements specified in this Section 2.1.”

2.Effective January 1, 2006, Section 3.1 shall be revised to read, in its entirety, as follows:

“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. A Participant who wishes to have  deferred amounts transferred as provided under Section 3.2(d) of the Plan must make an irrevocable election to defer such compensation no later than December 31 of the calendar year preceding the Plan Year to which the election to defer applies. 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.”

3.Effective January 1, 2006, Section 3.2(d) is added to read, in its entirety, as follows:

“(d)Notwithstanding the foregoing, a Participant who is also a participant in the Kerzner International Limited Deferred Compensation Plan (the “Deferred Compensation Plan”) may, in lieu of a deferral directly to the Plan, make an election to transfer from the Deferred Compensation Plan an amount equal to the lesser of:  1) the amount of the Participant’s election under Section 3.2(a) of the Deferred Compensation Plan plus matching contributions, or 2) the maximum amount of pre-tax deferrals under Section 3.2(a) of the Plan finally determined to be permitted under the terms of the Plan or applicable law reduced by the amount of the Participant’s contributions to the Plan plus Matching Contributions.”

4.Effective January 1, 2006, a new Section 3.5 is added to read, in its entirety, as follows:

“3.5Nondiscretionary Contributions. If a Participant elects to make contributions under Section 3.2(d) of the Plan, the Company will contribute the amount determined under Section 3.2(d) to the Plan no later than the March 15 following the calendar year of such deferral.”

5.The prior Section 3.5 and subsequent Sections are hereby renumbered.

6.Effective as of November 18, 2005, Section 10.3(o) is hereby amended to read, in its entirety, as follows:

“(o)A loan shall be considered in default if the Participant:

(i)breaks a promise under the Promissory Note;

(ii)effective as of November 18, 2005, fails to make up a missed loan repayment by the end of the calendar quarter following the calendar quarter in which the loan repayment was originally due;

(iii)makes a false or misleading statement in obtaining the loan;

(iv)dies, becomes insolvent, makes assignment for the benefit of creditors, has an entry of judgment 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; or

2

(v)applies for a distribution of the balance of his Accounts pursuant to subsection (k) above.”

7.Effective as of March 28, 2005, Section 11.1 of the Plan is hereby amended to read, in its entirety, as follows:

“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. 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.

Notwithstanding the foregoing, for distributions made on or after March 28, 2005, if the total nonforfeitable amount credited to the Accounts of the terminated Participant does not exceed $1,000 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. Commencing no later than December 31, 2005, any eligible rollover distribution in excess of $1,000 but not in excess of $5,000 distributable on or after March 28, 2005 shall be transferred directly to the individual retirement plan of an individual retirement plan provider, unless the Participant elects to receive such distribution or roll such distribution over to an eligible retirement plan.”

8.Effective as of March 28, 2005, Section 11.4 of the Plan is hereby amended to read, in its entirety, as follows:

“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

3

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.

Notwithstanding the foregoing, for distributions made on or after March 28, 2005, if the total nonforfeitable amount credited to the Accounts of a surviving Spouse does not exceed $1,000 at the time the distribution is to commence, the Committee shall distribute such amount in a lump sum without the surviving Spouse’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. Commencing no later than December 31, 2005, any eligible rollover distribution in excess of $1,000 but not in excess of $5,000 distributable on or after March 28, 2005 to a surviving Spouse shall be transferred directly to the individual retirement plan of an individual retirement plan provider, unless the surviving Spouse elects to receive such distribution or roll such distribution over to an eligible retirement plan. Nonspouse Beneficiaries are not eligible to roll over any distribution.”

9.Effective as of March 28, 2005, Section 11.9(b)(i) of the Plan is hereby amended to read, in its entirety, as follows:

“(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 $1,000, ($5,000 for benefits paid prior to March 28, 2005) 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. Commencing no later than December 31, 2005, any eligible rollover distribution in excess of $1,000 but not in excess of $5,000 distributable on or after March 28, 2005 shall be transferred directly to the individual retirement plan of an individual retirement plan provider, unless the Alternate Payee elects to receive such distribution or roll such distribution over to an eligible retirement plan.”

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To record the adoption of this Amendment 2005-1, the Employer has caused its authorized officer to affix its corporate name and seal hereto this 31^st day of December, 2005.

Attest:	KERZNER INTERNATIONAL
	NORTH AMERICA, INC.
/s/ William C. Murtha	/s/ Monica Digilio

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EX-4.22

EXHIBIT 4.22

KERZNER INTERNATIONAL LIMITED
2005 STOCK INCENTIVE PLAN

SECTION 1.  Adoption and Purpose.  The Company hereby adopts this Plan providing for the granting of Incentive Stock Options, Nonqualified Stock Options, Restricted Shares and Other Stock-Based Awards to directors, officers, employees and consultants of the Company and its Subsidiaries (including prospective directors, officers, employees and consultants). The general purpose of the Plan is to promote the interests of the Company and its Subsidiaries by providing to their directors, officers, employees and consultants incentives to continue and increase their efforts with respect to, and remain in the employ of, the Company and its Subsidiaries.

SECTION 2.  Administration.  (a)  The Plan will be administered by the Committee, which shall be composed of two or more persons. The Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of the members of the Committee or acts approved in writing by the unanimous consent of the members of the Committee shall be the valid acts of the Committee. To the extent required for any transactions under the Plan to qualify for any available exemptions under Rule 16b-3 promulgated under the Exchange Act, all actions relating to Awards to persons subject to Section 16 of the Exchange Act may be taken by the Board or a committee or subcommittee of the Board composed of two or more persons, each of whom shall qualify as a “non-employee director” within the meaning of Rule 16b-3.

(b)  Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to administer the Plan and to exercise all powers and authority either specifically granted to it under the Plan or necessary and advisable in the administration of the Plan, including, without limitation, the authority to (i) interpret, and reconcile any inconsistency and/or correct any default and/or supply any omission in, the Plan, (ii) prescribe, amend, suspend, waive and rescind rules and regulations relating to the Plan, (iii) appoint such agents as it shall deem desirable for the proper administration of the Plan, (iv) determine the terms and conditions of all Awards granted under the Plan (which need not be identical), the purchase price (if applicable) of the shares covered by each Award, the individuals to whom and the time or times at which Awards shall be granted, when an Award can be exercised and whether in whole or in installments, (v) determine the number of shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, each Award, (vi) determine whether, to what extent and under what circumstances each Award may be settled or exercised in cash, shares, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended, (vii) determine whether, to what extent and under what circumstances cash, shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or the Committee,

(viii) amend an outstanding Award or grant a replacement Award for an Award previously granted under the Plan if, in its sole discretion, the Committee determines that (A) the tax consequences of such Award to the Company or the participant differ from those consequences that were expected to occur on the date the Award was granted or (B) clarifications or interpretations of, or changes to, tax law or regulations permit Awards to be granted that have more favorable tax consequences than initially anticipated and (ix) make all other determinations and take all other actions that the Committee deems necessary or desirable with respect to the Plan.

(c)  Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be in the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any of its Affiliates, any participant, any holder or beneficiary of any Award and any shareholder.

(d)  The Committee may delegate, on such terms and conditions as it determines in its sole discretion, to one or more senior officers of the Company the authority to make grants of Awards to officers, employees and consultants of the Company and its Subsidiaries (including any prospective officer, employee or consultant).

(e)  Determinations under the Plan made by the Board or the Committee, including, without limitation, determinations as to the persons to receive Awards, the terms and provisions of such Awards and the agreements evidencing the same, need not be uniform and may be made selectively among persons who receive or are eligible to receive Awards under the Plan, whether or not such persons are similarly situated.

SECTION 3.  Participants.  The Committee shall from time to time select the directors, officers, employees and consultants of the Company and its Subsidiaries (including any prospective director, officer, employee or consultant) to whom Awards are to be granted, and who will, upon such grant, become participants in the Plan. The term “participant” as used in this Plan shall refer to those directors, officers, employees and consultants granted Awards by the Committee and to any person or entity to which such Awards are transferred or assigned pursuant to Section 16 hereof.

SECTION 4.  Shares Subject to Plan.  Subject to adjustment as provided in Section 14, the aggregate number of Ordinary Shares that may be delivered pursuant to Awards granted under the Plan is 2,000,000, all of which may be delivered pursuant to Incentive Stock Options granted under the Plan. Ordinary Shares to be awarded may be made available from either authorized but unissued Ordinary Shares or Ordinary Shares held by the Company in its treasury. If any Award is forfeited or otherwise terminated or is canceled without the delivery of Ordinary Shares, Ordinary Shares are surrendered or withheld from any Award to satisfy a participant’s income tax or other withholding obligations, or Ordinary Shares owned by a participant are tendered to pay the exercise price of any Award granted under the Plan, then the Ordinary Shares covered by such forfeited, terminated or canceled Award or which are equal to the number of Ordinary

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Shares surrendered, withheld or tendered shall again become available for issuance or delivery pursuant to Awards granted or to be granted under the Plan; provided, however, that in no event shall such Ordinary Shares increase the number of Ordinary Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan.

SECTION 5.  Grant of Options.  All Options under the Plan shall be granted by the Committee. The Committee shall determine the number of Ordinary Shares to be offered from time to time by grant of Options to participants of the Plan. More than one Option may be granted to the same participant. The grant of an Option to a participant shall not be deemed either to entitle the participant to, or to disqualify the participant from, participation in any other grant of Options or other Awards under the Plan. The grant of Options shall be evidenced by stock option agreements as may be prescribed by the Committee from time to time, containing such terms, provisions and rules, including, without limitation, the number of Ordinary Shares underlying such Options and the exercise price thereof, as are approved by the Board, but not inconsistent with the Plan. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code and any regulations related thereto, as may be amended from time to time. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable stock option agreement expressly states that the Option is intended to be an Incentive Stock Option. If an Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such failure to so qualify, such Option (or portion thereof) shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to Nonqualified Stock Options. The Company shall execute stock option agreements upon instructions from the Committee.

SECTION 6.  Option Price.  The exercise price per Ordinary Share under each Option shall be equal to 100% of the Fair Market Value per Ordinary Share on the date the Option is granted; provided, however, that no more than five percent of the Ordinary Shares that may be delivered pursuant to Awards granted under the Plan may be delivered pursuant to Nonqualified Stock Options that have an exercise price per Ordinary Share equal to less than 100% of the Fair Market Value per Ordinary Share on the date the Nonqualified Stock Option is granted; provided further, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the exercise price per Ordinary Share shall be no less than 110% of the Fair Market Value per Ordinary Share on the date of the grant.

SECTION 7.  Exercisability of Options.  Unless otherwise specifically provided by the Committee in the applicable stock option agreement, an Option may not be exercised later than the earlier of (a) the day prior to the seventh anniversary of the date the Option is granted or, in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the day

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prior to the fifth anniversary of the date the Option is granted, and (b) the expiration of the time period set forth in Section 11 with respect to a participant that ceases to be a director, officer, employee or consultant of the Company and its Subsidiaries. Each Option shall be vested and exercisable at such times, in such manner and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable stock option agreement or thereafter. Except as otherwise specified by the Committee in the applicable stock option agreement, an Option may only be exercised to the extent that it has already vested at the time of exercise. Notwithstanding any provision of the Plan to the contrary and except as specifically provided in Section 11(b) or Section 12, an Option shall not become vested and exercisable with respect to all Ordinary Shares covered thereby over a period that is shorter than three years; provided that an Option that is subject to performance-based vesting criteria may become vested and exercisable with respect to all Ordinary Shares covered thereby over a period that is not shorter than one year. Unless otherwise provided in the applicable stock option agreement, Options shall become vested and exercisable in accordance with the following schedule:

Vesting Dates (Anniversaries of Grant Date)	Aggregate Percentage of Ordinary Shares Vested and Exercisable
First	25	%
Second	50	%
Third	75	%
Fourth	100	%

SECTION 8.  Payment; Method of Exercise; Disposition.  (a)  Payment upon the exercise of Options shall be made in cash or by such other method as the Committee may from time to time prescribe, including without limitation by payment of Ordinary Shares already owned for a period of at least six months and one day by the holder of the Option or a note issued to the Company by such participant or pursuant to a “cashless exercise”, in each case if permitted by the Committee and applicable law. No Ordinary Shares may be issued upon exercise of an Option until payment of the exercise price therefor has been made, and a participant will have none of the rights of a shareholder of the Company until such Ordinary Shares are issued to such participant. Except as otherwise provided in the Plan or in a stock option agreement, no Option may be exercised at any time unless the holder thereof is then a director, officer, employee or consultant of the Company or a Subsidiary.

(b)  An Option shall be exercised by written notice to the Company. Such notice shall state that the holder of the Option elects to exercise the Option, the number of Ordinary Shares in respect of which it is being exercised, the per share exercise price thereof and the manner of payment for such Ordinary Shares and shall either (i) be accompanied by payment of the full purchase price of such Ordinary Shares or (ii) in the

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case of any individual who is not subject to Section 402 of the Sarbanes-Oxley Act of 2002, fix a date (not more than ten business days from the date of exercise) for the payment of the full purchase price of such Ordinary Shares. Cash payments shall be made by cash or check payable to the order of the Company. Ordinary Share payments (valued at Fair Market Value on the date of exercise) shall be made by delivery of stock certificates in negotiable form, free from all liens, claims and encumbrances. Any Ordinary Share payments shall be made using Ordinary Shares that have been held by the holder of the Option for a period of at least six months and one day. If certificates representing Ordinary Shares are used to pay all or part of the exercise price of an Option, a separate certificate shall be delivered by the Company representing the same number of Ordinary Shares as each certificate so used, and an additional certificate shall be delivered representing the additional Ordinary Shares to which the holder of the Option is entitled as a result of the exercise of the Option. Ordinary Share certificates shall be issued as soon as practicable following the date of exercise of an Option.

(c)  If any participant shall make any disposition of Ordinary Shares delivered pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions) or any successor provision of the Code, such participant shall notify the Company of such disposition within ten days of such disposition.

SECTION 9.  Restricted Shares.  (a)  The Committee shall determine any restrictions, terms and conditions applicable to the Restricted Shares, including, without limitation, the applicable vesting schedule and the price, if any, to be paid by the participant for the Restricted Shares; provided that the issuance of Restricted Shares shall be made for at least the minimum consideration necessary to permit such Restricted Shares to be deemed fully paid and nonassessable. Each Award shall be evidenced by a restricted stock agreement which may contain such terms as the Committee from time to time shall approve provided that such terms are not inconsistent with the provisions of the Plan. All determinations made by the Committee pursuant to this Section 9 shall be specified in the restricted stock agreement. Each grantee of Restricted Shares shall be notified promptly of such grant and a written restricted stock agreement shall be promptly executed and delivered by the Company and the grantee; provided that such grant of Restricted Shares shall terminate if such written restricted stock agreement is not signed by such grantee (or his or her attorney or representative) and delivered to the Company within 60 days after the effective date of such grant.

(b)  Restricted Shares subject to Awards shall be issued at the beginning of the period during which the restrictions are in effect (the “Restriction Period”). Restricted Shares shall constitute issued and outstanding Ordinary Shares for all corporate purposes. Unless otherwise specifically provided in the Plan and the applicable restricted stock agreement, the participant will have the right to exercise all rights, powers and privileges of a holder of Ordinary Shares with respect to such Restricted Shares, except that, unless otherwise provided by the Committee, (i) the participant will not be entitled to delivery of the certificate or certificates representing such Restricted Shares until the end of the Restriction Period and unless all other vesting requirements with respect

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thereto shall have been fulfilled or waived; (ii) other than regular cash dividends and such other distributions as the Board may in its sole discretion designate, the Company will retain custody of all distributions (“Retained Distributions”) made or declared with respect to the Restricted Shares, if any (and such Retained Distributions will be subject to the same restrictions, terms and vesting and other conditions as are applicable to the Restricted Shares), until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in a separate account; (iii) subject to Section 16, the participant may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any Retained Distributions or his or her interest in any of them during the Restriction Period; and (iv) a breach of any restrictions, terms or conditions provided in the Plan or established by the Committee with respect to any Restricted Shares or Retained Distributions will cause a forfeiture to the Company of such Restricted Shares and Retained Distributions.

(c)  The certificate or certificates representing such Restricted Shares shall be registered in the name of the participant to whom such Restricted Shares shall have been awarded. During the Restriction Period, certificates representing the Restricted Shares and any securities constituting Retained Distributions shall bear a restrictive legend to the effect that ownership of the Restricted Shares (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the applicable restricted stock agreement. Such certificates shall remain in the custody of the Company and the participant shall, as a condition to receiving an Award of Restricted Shares, deposit with the Company stock powers or other instruments of assignment, endorsed in blank, so as to permit retransfer to the Company of all or any portion of such Restricted Shares and any Retained Distributions that shall not become vested in accordance with the Plan and the applicable restricted stock agreement.

(d)  Subject to Section 11, at the end of the Restriction Period, (i) the Restricted Shares shall become vested and (ii) any Retained Distributions with respect to such Restricted Shares shall become vested to the extent that the Restricted Shares related thereto shall have become vested, each in accordance with the terms and conditions of the Plan and the applicable restricted stock agreement. Any such Restricted Shares and Retained Distributions that do not become vested shall be forfeited to the Company and the participant shall not thereafter have any rights with respect to such Restricted Shares and Retained Distributions that shall have been so forfeited.

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(e)  Notwithstanding any provision of the Plan to the contrary and except as provided in Section 11(i) or Section 12, no grant of Restricted Shares shall become vested with respect to all Restricted Shares subject to such grant over a period that is shorter than three years; provided that Restricted Shares that are subject to performance-based vesting criteria, may become vested with respect to all Restricted Shares covered by a particular grant over a period that is not shorter than one year. Unless otherwise provided in the applicable restricted stock agreement, a grant of Restricted Shares shall become vested in accordance with the following schedule:

Vesting Dates (Anniversaries of Grant Date)	Aggregate Percentage of Restricted Shares Vested
Second	33	%
Third	66	%
Fourth	100	%

(f)  No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code) or under a similar provision of law may be made with respect to a Restricted Share unless expressly permitted by the terms of the applicable restricted stock agreement or by action of the Committee in writing prior to the making of such election. If a participant, in connection with the acquisition of Restricted Shares under the Plan or otherwise, is expressly permitted under the terms of the applicable restricted stock agreement or by such Committee action to make such an election and the participant makes the election, the participant shall notify the Company of such election in accordance with Section 25 within ten days of filing notice of the election with the United States Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or any other applicable provision.

SECTION 10.  Other Stock-Based Awards.  (a)  The Committee may grant other types of equity-based or equity-related Awards (including, without limitation, the grant or offer for sale of unrestricted Ordinary Shares and the grant of restricted stock units and stock appreciation rights) as deemed by the Committee to be consistent with the purposes of the Plan. Each Other Stock-Based Award shall be evidenced by a written Award agreement which may contain such terms as the Committee from time to time shall approve provided that such terms are not inconsistent with the provisions of the Plan. Such Awards may include, without limitation, the transfer of actual Ordinary Shares to participants or payment in cash or otherwise of amounts based on the value of Ordinary Shares, and Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

(b)  If and to the extent that Ordinary Shares are to be issued to a participant upon the vesting of an Other Stock-Based Award, then, upon vesting of such

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Other Stock-Based Award, unless otherwise determined by the Committee, the participant shall be entitled to receive an amount in cash equal to the value of the cash dividends and such other distributions as the Board may in its sole discretion designate (“Dividend Equivalents”) with respect to the Ordinary Shares covered thereby during the period beginning on the date the Other Stock-Based Award is awarded and ending on the date that it vests; provided, however, that unless otherwise provided in the applicable Award agreement, the foregoing provisions shall not apply to any Exercisable Other Stock-Based Awards.

SECTION 11.  Termination of Employment or Service.  (a)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates prior to the complete exercise of an Option, then the vested portion of such Option shall thereafter be exercisable solely to the extent provided herein, and any unvested portion of the Option (to the extent the vesting is not accelerated under Section 11(b) or Section 12) shall immediately terminate.

(b)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates by reason of death, all Options held by the participant shall become immediately vested and exercisable and shall remain exercisable for a period of one year following such termination, but in no event later than the originally scheduled expiration of such Options.

(c)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates by reason of Disability, the vested portion of any Options held by the participant shall remain exercisable for a period of one year following such termination, but in no event later than the originally scheduled expiration of such Options.

(d)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates (other than by reason of death, Disability or Cause) (i) at or after age 60 or (ii) at or after age 55 with ten years of service with the Company (“Retirement”), the vested portion of any Options held by the participant shall remain exercisable for a period of two years following such termination, but in no event later than the originally scheduled expiration of such Options; provided, however, that the vested portion of the Options shall remain exercisable for a period of only 90 days following termination of employment (or, if such 90-day period has expired, shall be deemed retroactively to have ceased to be exercisable at the end of such 90-day period) if, during the two-year period following the participant’s Retirement, the participant, directly or indirectly:  (A) engages in or has any interest in any sole proprietorship, partnership, corporation or business or any other Person or entity (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Company; provided, however, that such provision shall not apply to the acquisition by the participant, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Exchange Act, and that are listed or admitted for trading on any United States national securities exchange or that are quoted

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on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the participant does not control, acquire a controlling interest in or become a member of a group that exercises direct or indirect control of, more than five percent of any class of capital stock of such corporation; or (B) for himself or herself or for any other person, firm, corporation, partnership, association or other entity:  (1) hires or attempts to hire, whether as an employee, consultant or otherwise, any employee or former employee of the Company or any of its Subsidiaries, unless such employee or former employee has not been employed by the Company or any of its Subsidiaries for a period in excess of six months; (2) calls on or solicits any of the actual or targeted prospective clients of the Company on behalf of any Person or entity in connection with any business competitive with the business of the Company; or (3) makes known the names and addresses of such clients or any information relating in any manner to the Company’s trade or business relationships with such clients. For the avoidance of doubt, if, pursuant to the foregoing provision, a vested portion of any Option is deemed retroactively to have ceased to be exercisable, and the participant had exercised such Option subsequent to the 90-day period, the participant shall pay to the Company, in cash, promptly upon demand by the Company, an amount equal to the excess of the Fair Market Value of the Shares over the exercise price on the date of such exercise.

(e)  If the participant’s employment or service as a director or consultant is terminated by the Company for Cause, then all Options held by such participant shall immediately terminate.

(f)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates for any reason other than death, Disability, Retirement or Cause, the vested portion of any Options held by the participant shall remain exercisable for a period of 90 days following such termination, but in no event later than the originally scheduled expiration of such Options.

(g)  Unless otherwise provided by the Committee, if any participant whose employment or service as a director or consultant has terminated for a reason other than death shall die within the period during which any Options held by the participant remain exercisable but prior to the complete exercise of such Options, such Options may be exercised at any time within the greater of one year after such date of death or the remainder of the period in which the participant could have exercised such Options had he or she not died, but in no event later than the originally scheduled expiration of such Options.

(h)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant is terminated for any reason other than death during the Restriction Period with respect to any Restricted Shares, such participant’s rights to all Restricted Shares and Retained Distributions shall be forfeited immediately.

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(i)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates by reason of death, all Restricted Shares held by the participant and any Retained Distributions that relate to those Restricted Shares shall become immediately vested and nonforfeitable.

(j)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant is terminated for any reason other than death, any outstanding Other Stock-Based Awards held by the participant (other than any outstanding Exercisable Other Stock-Based Awards) and any Dividend Equivalents that relate to those Other Stock-Based Awards shall immediately terminate.

(k)  Unless otherwise provided by the Committee, if the participant’s employment or service as a director or consultant terminates by reason of death, all Other Stock-Based Awards held by the participant (other than any outstanding Exercisable Other Stock-Based Awards) and any Dividend Equivalents that relate to those Other Stock-Based Awards shall become immediately vested and nonforfeitable.

(l)  Unless otherwise provided by the Committee, the provisions of Sections 11(a) through (g) rather than Sections 11(j) and (k) shall apply,mutatis mutandis (substituting Exercisable Other Stock-Based Award for Option), to any Other Stock-Based Award that provides for the delivery of cash, shares or other securities upon exercise of such Award, rather than immediately upon vesting (each, an “Exercisable Other Stock-Based Award”).

(m)  The Committee may determine whether any given leave of absence constitutes a termination of employment or service. Unless otherwise provided by the Committee, Awards made under the Plan shall not be affected by any change of employment so long as the participant continues to be a director, employee or consultant of the Company or a Subsidiary.

SECTION 12.  Acceleration of an Award.  Notwithstanding any provision contained herein, the Committee shall have the discretion at any time to accelerate the vesting and exercisability of an Award granted to a participant pursuant to the Plan. Unless otherwise determined by the Committee or as set forth in an Award agreement, with respect to all outstanding Awards held by any participant, such Awards shall become fully vested (and, in the case of Options and Exercisable Other Stock-Based Awards, immediately exercisable), all restrictions on such Awards shall lapse and all performance criteria applicable to such Awards shall be deemed satisfied at the maximum level, (a) in the case of a participant who is an employee of the Company or its Subsidiaries on the date of a Change of Control, upon the earlier to occur of (i) the expiration of the 18-month period immediately following such Change of Control and (ii) a Qualifying Termination, provided that such Awards are still outstanding at (and have not terminated prior to) the relevant time, (b) in the case of a participant who is a non-employee director of the Company or its Subsidiaries on the date of a Change of Control, upon the consummation of such Change of Control and (c) in the case of a participant who is a consultant of the Company or its Subsidiaries on the date of a Change of Control, upon

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the earlier to occur of (i) the expiration of the 18-month period immediately following such Change of Control or (ii) the termination of the participant’s service with the Company, its Subsidiaries or the Surviving Entity without Cause, provided that such Awards are still outstanding at (and have not terminated prior to) the relevant time.

SECTION 13.  Withholding Taxes.  In connection with the transfer of Ordinary Shares as a result of the vesting of an Award or upon any other event that would subject the holder of an Award to taxation, the Company shall have the right to require the holder to pay an amount in cash or to retain or sell without notice, or to demand surrender of, Ordinary Shares that have a value sufficient to cover any tax, including, without limitation, any United States Federal, state or local income tax, required by any governmental entity to be withheld or otherwise deducted and paid with respect to such transfer (“Withholding Tax”), and to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to such holder. The holder of an Award shall be entitled to satisfy the obligation to pay any Withholding Tax, in whole or in part, by providing the Company with funds sufficient to enable the Company to pay such Withholding Tax or by having the Company retain Ordinary Shares otherwise deliverable in respect of such Award, or accept upon delivery thereof Ordinary Shares (other than unvested Restricted Shares) held by the holder for at least six months and one day, that have a value sufficient to cover the amount of such Withholding Tax. Each election by such holder to have Ordinary Shares retained or to deliver Ordinary Shares for this purpose shall be subject to the following restrictions:  (a) the election must be in writing and made on or prior to the date that the amount of the Withholding Tax is to be determined; and (b) the election shall be subject to the disapproval of the Committee. The obligations of the Company under the Plan shall be conditional on such payment or arrangements being made to the satisfaction of the Committee.

SECTION 14.  Effect of Certain Changes.  (a)  In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Ordinary Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Ordinary Shares or other securities of the Company, issuance of warrants or other rights to purchase Ordinary Shares or other securities of the Company, other similar corporate transaction or event (including, without limitation, a Change of Control), change in applicable rule, ruling, regulation or other requirement of any governmental body or securities exchange, accounting principles or law, or other unusual or nonrecurring event affects the Company, any of its Subsidiaries, the financial statements of the Company or any of its Subsidiaries, or Ordinary Shares such that an adjustment is determined by the Committee in its discretion to be appropriate or desirable, then the Committee may make any such adjustment, which may include, without limitation, (i) adjusting any or all of (A) the aggregate number of Ordinary Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan, as provided in Section 4, (B) the number of Ordinary Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards and (C) the exercise

11

price or base price with respect to any Option or Exercisable Other Stock-Based Award; provided, however, that any fractional shares resulting from any such adjustment may be eliminated, and/or (ii) canceling outstanding Awards in exchange for a cash payment in an amount equal to the excess, if any, of the Fair Market Value of the number of Ordinary Shares subject to or underlying such Awards over the aggregate exercise price (or applicable base price), if any, of such Awards (it being understood that, if there is no such excess, then such Awards may be canceled without any payment or consideration therefor).

(b)  Awards may, in the discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or its Subsidiaries or a company acquired by the Company or with which the Company combines (or a Subsidiary or parent corporation of such company) in connection with a corporate merger, consolidation, acquisition of assets or stock, reorganization, liquidation or otherwise (“Substitute Awards”). The number of Ordinary Shares underlying any Substitute Awards shall be counted against the aggregate number of Ordinary Shares available for Awards under the Plan; provided, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding awards previously granted by an entity that is acquired by the Company or any of its Affiliates through a corporate merger or acquisition of assets or stock shall not be counted against the aggregate number of Ordinary Shares available for Awards under the Plan; provided further, however, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding stock options intended to qualify for special tax treatment under Sections 421 and 422 of the Code that were previously granted by an entity that is acquired by the Company or any of its Affiliates through a corporate merger or acquisition of assets or stock shall be counted against the aggregate number of Ordinary Shares available for Incentive Stock Options under the Plan. In the event that a written agreement pursuant to which such a corporate transaction is completed is approved by the Board and such agreement sets forth the terms and conditions of the substitution for or assumption of outstanding equity or equity-based awards of the acquired corporation, such terms and conditions shall be deemed to be the action of the Committee hereunder without any further action by the Committee and the Persons holding such awards shall be deemed to be participants in the Plan; provided, however, that the Committee may, to the extent applicable, take any further action with respect to such awards as may be necessary in connection with Rule 16b-3 under the Exchange Act to qualify such Substitute Awards for the favorable treatment intended to be afforded by Rule 16b-3 under the Exchange Act.

(c)  Nothing in the Plan or any Award agreement shall be construed as limiting or preventing the Company or any of its Affiliates from taking any action with respect to the operation and conduct of their business that they deem appropriate or in their best interests, including, without limitation, any or all adjustments, recapitalizations, reorganizations, exchanges or other changes in the capital structure of the Company or any of its Affiliates, any merger or consolidation of the Company or any of its Affiliates, any issuance of Ordinary Shares or other securities or subscription rights thereto, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting

12

the Ordinary Shares or other securities or the rights thereof, any dissolution or liquidation of the Company or any of its Affiliates, any sale or transfer of all or any part of the assets or business of the Company or any of its Affiliates, or any other corporate act or proceeding, whether of a similar character or otherwise.

(d)  In the event of a change in the Ordinary Shares of the Company as presently constituted, the shares resulting from any such change shall be deemed to be the Ordinary Shares within the meaning of the Plan.

(e)  To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive.

SECTION 15. Nonexclusive Plan.  Neither the adoption of the Plan by the Board nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

SECTION 16.  Restrictions on Transfers.  Awards may not be transferred other than by will or by the laws of descent and distribution; provided, however, that, subject to the approval of the Committee, Nonqualified Stock Options and Restricted Shares may be transferred or assigned by a participant to (a) a trust with respect to which such participant or a member of his or her family is a beneficiary or (b) a corporation or other entity with respect to which the participant holds directly or indirectly more than 50% of the outstanding common stock or other equity interests. All vesting and forfeiture provisions shall continue to apply with respect to any Nonqualified Stock Options and Restricted Shares that are transferred in accordance with this Section 16 to the same extent that such provisions would have been applicable in the absence of any transfer. During a participant’s lifetime, Options granted to a participant may be exercised only by the participant, by his or her guardian or legal representative or by a transferee specified in this Section 16. Any purported transfer or assignment of an Award inconsistent with the foregoing restrictions shall cause the Award to terminate.

SECTION 17.  Securities Laws; Other Laws.  The obligation of the Company to offer, sell and deliver shares with respect to Awards granted hereunder and the exercisability of Awards shall be subject to all applicable laws, rules and regulations, including, without limitation, all applicable United States Federal and state securities laws, the availability of exemptions from the registration requirements of such United States Federal and state securities laws, and the obtaining of all approvals by governmental authorities as may be deemed necessary or appropriate by the Committee. In no event shall the Company be obligated to register shares under United States Federal or state securities laws, to comply with the requirements of any exemption from registration requirements or to take any other action that may be required in order to permit, or to remove any prohibition or limitation on, the issuance of shares pursuant to

13

Awards granted hereunder which may be imposed by any applicable law, rule or regulation. Notwithstanding anything to the contrary in the Plan or any Award agreement, the Committee may revoke any Award if it is contrary to law or modify any Award to bring it into compliance with any applicable laws or regulations. The Committee may impose such other terms, conditions, and restrictions upon any Award, including any Award theretofore granted, that the Committee concludes, in its absolute discretion, are necessary or desirable to ensure compliance with any applicable law, regulation or rule. Certificates for Ordinary Shares issued under the Plan may be legended as the Committee shall deem appropriate.

SECTION 18.  No Employment Rights.  The adoption of this Plan and the grant of Awards shall not confer upon any participant any right to continued employment in any capacity with the Company or any of its Subsidiaries.

SECTION 19.  No Impact on Benefits.  Awards granted under the Plan shall not be treated as compensation for purposes of calculating an employee’s rights under any employee benefit plan, except to the extent expressly provided in any such plan.

SECTION 20.  Severability.  If any provision of the Plan or any Award granted hereunder is, becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law, rule, ruling, regulation or other requirement deemed applicable by the Committee, (a) in the case of a provision that is held to be void or to constitute an unreasonable restriction against the participant, such provision shall not be rendered void but shall be deemed to be modified to the minimum extent necessary to make such provision enforceable for the longest duration and the greatest scope as such court may determine constitutes a reasonable restriction under the circumstances and (b) in the case of any other provision, such provision shall be construed or deemed amended to conform to the applicable law, rule, ruling, regulation or other requirement or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and, in any event, the remainder of the Plan and any such Award shall remain in full force and effect.

SECTION 21.  Indemnification.  No member of the Board, the Committee or any employee of the Company or its Subsidiaries (each such person, a “Covered Person”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder. Each Covered Person shall be indemnified and held harmless by the Company from and against (a) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with, based upon or arising or resulting from any claim, action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under or in connection with the Plan or any Award and (b) any and all amounts paid by such Covered Person, with the Company’s approval, in settlement

14

thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person; provided that the Company shall have the right, at its own expense, to assume and defend against any such claim, action, suit or proceeding, and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Amended and Restated Articles of Association or Memorandum of Association. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Amended and Restated Articles of Association or Memorandum of Association, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.

SECTION 22.  Income Taxes and Deferred Compensation.  Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including any taxes arising under Section 409A of the Code), and the Company shall not have any obligation to indemnify or otherwise hold any participant harmless from any or all of such taxes. The Committee shall have the discretion to organize any deferral program, to require deferral election forms, and to grant or to unilaterally modify any Award in a manner that (a) conforms with the requirements of Section 409A of the Code, (b) voids any participant election to the extent it would violate Section 409A of the Code and (c) for any distribution event or election that could be expected to violate Section 409A of the Code, make the distribution only upon the earliest of the first to occur of a “permissible distribution event” within the meaning of Section 409A of the Code, or a distribution event that the participant elects in accordance with Section 409A of the Code. The Committee shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and all Awards.

SECTION 23.  GOVERNING LAW.  THE PLAN AND ANY AWARDS GRANTED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF THE BAHAMAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

SECTION 24.  Amendment or Discontinuance.  Subject to any government regulation and to any applicable rules of the New York Stock Exchange or any successor exchange on which the Ordinary Shares may be listed, the Plan may be amended, modified or terminated by the Board without the approval of the shareholders of the Company except that shareholder approval shall be required for any amendment that would (a) increase the maximum number of Ordinary Shares for which Awards may be granted under the Plan or increase the maximum number of Ordinary Shares that may

15

be delivered pursuant to Incentive Stock Options granted under the Plan; provided, however, that any adjustment under Section 14(a) shall not be an increase for purposes of this Section 24 or (b) change the class of employees or other individuals eligible to participate in the Plan. No modification, amendment or termination of the Plan may, without the consent of the participant to whom any Award shall theretofore have been granted, adversely affect the rights of such participant (or his or her transferee) under such Award, unless otherwise provided by the Committee in the applicable Award agreement.

SECTION 25.  Notices.  All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally recognized overnight courier, by telecopy or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:

(a)if to the Company:

Kerzner International Limited
Stock Award Administration
1000 South Pine Island Road
Plantation, FL 33024
Telecopy:   (954) 809-2310
Attention:  Human Resources

(b)if to the participant, to such participant’s address as most recently supplied to the Company and set forth in the Company’s records;

or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery (or if such date is not a business day, on the next business day after the date sent), (ii) in the case of nationally-recognized overnight courier, on the next business day after the date sent, (iii) in the case of telecopy transmission, when received (or if not sent on a business day, on the next business day after the date sent), and (iv) in the case of mailing, on the third business day following the date on which the piece of mail containing such communication is posted.

SECTION 26.  Headings.  The headings contained in this Plan are for reference purposes only and shall not affect the meaning or interpretation of this Plan.

SECTION 27.  Successors and Assigns.  This Plan shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon a participant, and all rights granted to the Company hereunder, shall be binding upon the participant’s heirs, legal representatives and successors.

SECTION 28.  Effect of Plan.  Neither the adoption of the Plan nor any action of the Board or Committee shall be deemed to give any director, officer, employee

16

or consultant any right to be granted any Awards hereunder except as may be evidenced by an Award agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein.

SECTION 29.  Term.  Unless sooner terminated by action of the Board, the right to grant Awards under this Plan shall terminate ten years from the date of adoption of the Plan. The Committee may not grant Awards under the Plan after that date, but Awards granted before that date will continue to be effective in accordance with their terms and the terms of the Plan.

SECTION 30.  Effectiveness.  The Plan shall take effect upon its adoption by the Board; provided, however, that no Incentive Stock Options may be granted under the Plan unless the Plan is approved by the Company’s shareholders within twelve (12) months before or after the date it is adopted by the Board.

SECTION 31.  Definitions.  For the purposes of this Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

“Affiliate” of a Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any plan).

“Award” means, collectively, Options, Restricted Shares and Other Stock-Based Awards granted under the Plan.

“Board” means the board of directors of the Company.

“Cause” shall have the meaning provided in the applicable Award agreement.

“Change of Control” means the occurrence of any one of the following events:

(a) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act, and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (a) shall not be deemed to be a Change of Control if such event results from any of the following:  (i) the acquisition of Company Voting Securities by the Company or any of its Subsidiaries, (ii) the acquisition of Company Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries, (iii) the acquisition of Company Voting Securities by

17

any underwriter temporarily holding securities pursuant to an offering of such securities or (iv) the acquisition of Company Voting Securities pursuant to a Non-Qualifying Transaction (as defined in paragraph (c) below); provided further, however, that a Change of Control shall be deemed not to have occurred solely as a result of (x) two or more persons who as of the date hereof are beneficial owners of Company Voting Securities or (y) one or more persons who as of the date hereof are beneficial owners of Company Voting Securities together with one or more persons who as of the date hereof are not beneficial owners of Company Voting Securities, being treated as a single person (under Section 3(a)(9), 13(d)(3) or 14(d)(2) of the Exchange Act) for purposes of this paragraph (a) unless, in either such case, (A) such persons consummate a “going private” transaction (as determined by the Incumbent Directors (as defined in paragraph (b) below) in their sole discretion) or (B) an event described in paragraph (b) or (c) below otherwise occurs;

(b) individuals who, as of the date on which the Plan is adopted by the Board, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board without the approval of the Incumbent Directors; provided, however, that any individual becoming a director subsequent to the date on which the Plan is adopted by the Board, whose election or nomination for election was approved (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director, without written objection to such nomination) by a vote of at least a majority of the directors who were, as of the date of such approval, Incumbent Directors, shall be an Incumbent Director; provided further, however, that no individual initially appointed, elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be an Incumbent Director;

(c) the consummation of a Reorganization or a Sale, unless, immediately following such Reorganization or Sale:  (i) more than 50% of the total voting power (in respect of the election of directors, or similar officials in the case of an entity other than a corporation) of (A) the entity resulting from such Reorganization, or the entity which has acquired all or substantially all the Company’s assets (in either case, the “Surviving Entity”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of more than 50% of the total voting power (in respect of the election of directors, or similar officials in the case of an entity other than a corporation) of the Surviving Entity (the “Parent Entity”), is represented by Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Reorganization or Sale), (ii) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the Parent Entity) is or becomes the beneficial owner, directly

18

or indirectly, of 50% or more of the total voting power in respect of the election of directors (or similar officials in the case of an entity other than a corporation) of the outstanding voting securities of the Parent Entity (or, if there is no Parent Entity, the Surviving Entity) and (iii) at least a majority of the members of the board of directors (or similar officials in the case of an entity other than a corporation) of the Parent Entity (or, if there is no Parent Entity, the Surviving Entity) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the approval by the Board of the execution of the initial agreement providing for such Reorganization or Sale or, in the absence of such an agreement, at the time at which approval of the Board was obtained for such Reorganization or Sale (any Reorganization or Sale that satisfies all the criteria specified in the foregoing clauses (i), (ii) and (iii) shall be deemed to be a “Non-Qualifying Transaction”); or

(d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, if any person becomes the beneficial owner of 50% or more of the combined voting power of Company Voting Securities solely as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding, such increased percentage of beneficial ownership shall be deemed not to result in a Change of Control; provided, however, that if such person subsequently becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change of Control shall then be deemed to occur.

“Code” means the United States Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder.

“Committee” means the committee of two or more directors designated by the Board to operate and administer the Plan (or, in the absence of any such designation, means the Board). To the extent the Committee has delegated authority pursuant to Section 2(d) of the Plan, references to the Committee shall be deemed to refer to the person to whom such authority has been delegated, as the context may require.

“Company” means Kerzner International Limited, a corporation organized under the laws of the Commonwealth of the Bahamas.

“Disability” means a mental or physical illness that entitles the participant to receive benefits under the long-term disability plan of the Company or an Affiliate provided the participant remains totally disabled for six (6) consecutive months. If the participant is not covered by such a plan, Disability shall be defined by reference to the Company’s long-term disability plan as if such plan applied to the participant.

“Dividend Equivalent” has the meaning given such term in Section 10(b) of the Plan.

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“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder.

“Exercisable Other Stock-Based Award” has the meaning given such term in Section 11(l) of the Plan.

“Fair Market Value” means, as of any date, the closing price per Ordinary Share on the New York Stock Exchange on such date (or, if such date is not a trading day on the New York Stock Exchange, on the next preceding trading day) or, if the Ordinary Shares are not listed on the New York Stock Exchange, the closing price per Ordinary Share on the principal national securities exchange on which the Ordinary Shares are listed (or, if such date is not a trading day on such exchange, on the next preceding trading day) or, in all other cases, such value as determined by the Committee in good faith.

“Incentive Stock Option” means an option to acquire Ordinary Shares granted pursuant to the Plan, which option is intended to qualify as an “incentive stock option” within the meaning of Section 422(b) of the Code and which is so designated in the applicable Award agreement.

“Nonqualified Stock Option” means any option to acquire Ordinary Shares granted pursuant to the Plan, other than an Incentive Stock Option.

“Option” means an Incentive Stock Option, a Nonqualified Stock Option or both, as the context requires.

“Ordinary Shares” means the ordinary shares, par value U.S.$ 0.001 per share, of the Company which the Company is currently authorized to issue or may in the future be authorized to issue, provided that any such future authorized ordinary shares of the Company either do not vary from the currently authorized ordinary shares of the Company or vary only in amount of par value.

“Other Stock-Based Award” means an award granted under Section 10 of the Plan.

“Plan” means this Kerzner International Limited 2005 Stock Incentive Plan, as amended from time to time.

“Person” means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

“Qualifying Termination” means:

(a) the termination by the Company of the participant’s employment other than for Cause and other than due to the participant’s death or Disability; or

20

(b) the termination by the participant of the participant’s employment following the occurrence, without the participant’s express written consent, of any of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (iii) below, such act or failure to act is corrected within ten days following the notice of termination given by the participant in respect thereof:

(i) a material reduction by the Company in the participant’s annual base salary and/or the level of the participant’s entitlement under the Company’s annual bonus plan;

(ii) the Company’s requiring the participant to be based at any location beyond 50 miles of the location of such participant’s then current principal place of employment, except for required travel on the Company’s business to an extent substantially consistent with the participant’s duties and responsibilities;

(iii) (A) the failure by the Company to continue to provide the participant with benefits not materially less favorable in the aggregate than those then currently enjoyed by the participant under any of the Company’s compensation, pension, savings, life insurance, medical, health and accident, or disability plans, (B) the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the participant of any material fringe benefit then currently enjoyed by the participant (without otherwise providing the participant with a substantially equivalent replacement benefit or cash equivalent), or (C) the failure by the Company to provide the participant with the number of paid vacation days to which the participant is entitled on the basis of years of service with the Company in accordance with the Company’s vacation policy.

The participant’s right to terminate the participant’s employment under the preceding clause (b) shall not be affected by the participant’s incapacity due to physical or mental illness. The participant will be deemed to have waived his or her rights to claim a Qualifying Termination relating to circumstances described in the preceding clause (b) if he or she has not provided to the Company a written notice of termination within ninety (90) days following his or her knowledge of such circumstances.

“Reorganization” means a merger, consolidation, statutory share exchange or similar form of corporate transaction involving (a) the Company or (b) any of its wholly owned Subsidiaries, but in the case of this clause (b), only if Company Voting Securities are issued or issuable, unless, in the case of either clause (a) or clause (b), the Committee determines, in its sole discretion, that, immediately prior to the consummation of such transaction, the primary party thereto, other than the Company and any of its Subsidiaries, directly or indirectly, controlled, was controlled by or was under common control with the Company.

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“Restricted Share” means an Ordinary Share subject to such restrictions as the Committee may determine from time to time.

“Restriction Period” has the meaning given such term in Section 9(b) of the Plan.

“Retained Distribution” has the meaning given such term in Section 9(b) of the Plan.

“Retirement” has the meaning given such term in Section 11(d) of the Plan.

“Sale” means the sale or disposition of all or substantially all the assets of the Company, unless the Committee determines, in its sole discretion, that, immediately prior to such acquisition, the entity acquiring such assets, directly or indirectly, controlled, was controlled by or was under common control with the Company.

“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person or by another Subsidiary of such first Person. The term “Subsidiaries” means more than one of any such Persons.

“Substitute Awards” has the meaning given such term in Section 14(b) of the Plan.

“Withholding Tax” has the meaning given such term in Section 13 of the Plan.

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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

	Page
ARTICLE 1 – DEFINITIONS; INTERPRETATION
Section 1.01 Definitions	1
Section 1.02 Accounting Terms	26
Section 1.03 General	26
ARTICLE 2 – ISSUE OF NOTES
Section 2.01 No Limit on Issue	26
Section 2.02 Notes Deemed to be Outstanding	26
Section 2.03 Conditions Precedent to the Issue of Notes	26
Section 2.04 Issue of Notes	27
Section 2.05 Form of Notes	28
Section 2.06 Registration	29
Section 2.07 Transfers of Notes	29
Section 2.08 Inspection of Registers	29
Section 2.09 Title to Registered Notes	30
Section 2.10 Mutilation, Loss, Theft or Destruction	30
Section 2.11 Cancellation of Notes	30
ARTICLE 3 – PAYMENT MECHANICS
Section 3.01 Requirements of Payment	30
Section 3.02 Additional Provisions	30
Section 3.03 Priority of Payments	31
ARTICLE 4 – SECURITY AND ASSET DEALING
Section 4.01 Charges and Security Interest	31
Section 4.02 Holders of Security	32
Section 4.03 Further Assurances	32
Section 4.04 Power of Attorney	32
Section 4.05 Dealings with the Security Trust Agreement and the Pledge	32
Section 4.06 No Obligation to Advance Funds	33
ARTICLE 5 – CANCELLATION AND DISCHARGE
Section 5.01 Cancellation and Destruction	33
Section 5.02 Non-Presentation of Notes	33
Section 5.03 Unclaimed Moneys	33
Section 5.04 Discharge	33

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ARTICLE 6 – REPRESENTATIONS AND WARRANTIES
Section 6.01 Issuer Representations	34
Section 6.02 Survival of Representations	47
ARTICLE 7 – ISSUER COVENANTS
Section 7.01 Affirmative Covenants	47
Section 7.02 Negative Covenants	61
ARTICLE 8 – INSURANCE; CASUALTY; CONDEMNATION
Section 8.01 Insurance	69
Section 8.02 Casualty	73
Section 8.03 Condemnation	73
Section 8.04 Restoration	74
Section 8.05 Casualty/Condemnation Generally	78
ARTICLE 9 – DEFAULTS
Section 9.01 Event of Default	78
Section 9.02 Remedies	81
Section 9.03 Exculpation	82
Section 9.04 Manager Termination	84
ARTICLE 10 – RESERVE FUNDS
Section 10.01 Required Repair Funds	84
Section 10.02 Tax and Insurance Escrow Fund	85
Section 10.03 Replacements and Replacement Reserve	86
Section 10.04 Interest Reserve Interest	87
Section 10.05 Reserve LC	87
Section 10.06 Reserve Funds, Generally	88
ARTICLE 11 – MATTERS CONCERNING THE TRUSTEE
Section 11.01 Duties of the Trustee	90
Section 11.02 Rights of Trustee	96
Section 11.03 Individual Rights of Trustee	97
Section 11.04 Trustee’s Disclaimer	97
Section 11.05 Notice of Defaults	97
Section 11.06 Compensation and Indemnity	98
Section 11.07 Replacement of Trustee	98
Section 11.08 Resignation or Removal of Trustee; Conflict of Interest	99
Section 11.09 Successor Trustee	100
Section 11.10 Authorization and Duties of Trustee	100
Section 11.11 Trustee Not Required to Give Security	100
Section 11.12 Trustee May Deal In Notes	100

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Section 11.13 Administration of the Trust and Protection of the Trustee			101
Section 11.14 Service Providers			103
ARTICLE 12 – SUPPLEMENTAL INDENTURES
Section 12.01 Supplemental Trust Indentures			103
Section 12.02 Further Assurances			103
Section 12.03 Amendment or Modification			104
ARTICLE 13 – NOTEHOLDER MEETINGS AND APPROVALS
Section 13.01 Conduct of Meetings			104
Section 13.02 Extraordinary Resolution			105
Section 13.03 Signed Instruments			106
Section 13.04 Binding Effect of Resolutions			106
ARTICLE 14 – MISCELLANEOUS
Section 14.01 Survival			106
Section 14.02 Trustee’s Discretion			106
Section 14.03 Notices			107
Section 14.04 Governing Law			108
Section 14.05 Modification, Waiver in Writing			109
Section 14.06 Delay Not a Waiver			110
Section 14.07 Trial by Jury			110
Section 14.08 Headings			110
Section 14.09 Severability			110
Section 14.10 Preferences			111
Section 14.11 Waiver of Notice			111
Section 14.12 Expenses; Indemnity			111
Section 14.13 Offsets, Counterclaims and Defenses			112
Section 14.14 No Joint Venture or Partnership; No Third Party Beneficiaries			112
Section 14.15 Publicity			113
Section 14.16 Waiver of Marshalling of Assets			113
Section 14.17 Waiver of Counterclaim			114
Section 14.18 Conflict; Construction of Documents; Reliance			114
Section 14.19 Brokers and Financial Advisors			114
Section 14.20 Prior Agreements			114
Section 14.21 Duplicate Originals, Counterparts			115
Section 14.22 Joint and Several Liability			115
ARTICLE 15 – EXECUTION
Section 15.01 Effective Upon Execution			115
EXHIBIT A	-	Form of Note
SCHEDULE 6.01A	-	Organizational Chart
SCHEDULE 6.01E	-	Agreements

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SCHEDULE 6.01Q	-	Assessments
SCHEDULE 6.01T	-	Insurance Claims
SCHEDULE 6.01Z	-	Leases
SCHEDULE 10.01	-	Required Repairs

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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.

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“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.

“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, SMBC Derivative Products Limited, 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.

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“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 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.

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“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.

“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,

6

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 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.

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“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, 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

8

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.

“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

9

to the Trustee at least five (5) Business Days 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.

“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.

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“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.

“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.

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“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.

“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).

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“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 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

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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; (I) 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 with the financing of such equipment or other personalty permitted by the Loan Documents, (e) access and utility easements

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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

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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, 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.

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“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.

“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.

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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.

“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, Division Fiduciaria, as trustee under the Security Trust Agreement.

“Service Company Issuer” shall mean Kerzner Compañia 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

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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).

“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,

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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 (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

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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;

(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

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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;

(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

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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 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;

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(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.

“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.

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“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 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:

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(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; and

(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.

(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:

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(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

(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

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(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 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

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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.

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.

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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 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

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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 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.

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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 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

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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.

(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

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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 personally (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 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

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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 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

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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

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set forth 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-l 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

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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 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

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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 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

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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.

(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

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“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 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

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(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)  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 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);

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(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 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;

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(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 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;

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(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;

(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,

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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.

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

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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 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

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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.

(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.

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(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 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

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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 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

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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 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

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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 fluctuate with occupancy levels. Servicer on behalf of Trustee shall use good faith

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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

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or modification thereto, in electronic form and prepared using a Microsoft Word for Windows or WordPerfect 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.

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(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 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’

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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 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 reputation and (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

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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). 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

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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 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.

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(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 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.

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(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 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.

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(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.

(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

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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 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

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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 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

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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:

(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;

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(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 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

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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);

(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;

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(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.

(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.

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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;

(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

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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);

(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;

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(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.

(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

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“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

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later than five (5) 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 conditions 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

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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 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.

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(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 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

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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 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

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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 2.05  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 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

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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 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

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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 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

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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 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

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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.

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

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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;

(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

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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; 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 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

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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 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

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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 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

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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.  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 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

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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.

(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

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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

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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 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,

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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.

(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

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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.

(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 for any act or omission of the Servicer and Servicer shall not be responsible for any act or omission of the Trustee.

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(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 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,

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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 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.

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(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 by 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.

(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.

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(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 therefor.

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 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.

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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.  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.

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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 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.

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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.

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.

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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 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

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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 and the failure of the Trustee to discharge this duty and responsibility will not in any way

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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 effect 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

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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 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)  Ouorum.  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

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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.

(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

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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

(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.

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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):

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. (312) 904-2084
	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

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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 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

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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 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

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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.

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.

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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 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

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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 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

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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 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

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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 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.

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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
	Title: Vice President
KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER COMPANIA de SERVICIOS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President

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TRUSTEE:
LASALLE BANK NATIONAL ASSOCIATION
By:	/s/ Alyssa C. Stahl
	Name: Alyssa C. Stahl
	Title: FVP

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EXHIBIT A

Form of 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.

PROMISSORY NOTE

$	New York, New York
	December      , 2004

FOR VALUE RECEIVED 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 (collectively the “Issuers”), hereby unconditionally jointly and severally promise to pay to the order of CREDIT SUISSE FIRST BOSTON LLC, a Delaware limited liability company, as a holder of this Note, having an address at 11 Madison Avenue, New York, New York 10010 (together with its successors and assigns, collectively, “Noteholder”), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of                      Million and No/100 Dollars ($                        ), in lawful money of the United States of America with interest thereon to be computed from the date of this Note at the Applicable Interest Rate, and to be paid in accordance with the terms of this Note and that certain Note Indenture, dated as of December 17, 2004, between Issuers and LaSalle Bank National Association (the “Trustee”) (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Indenture”). All capitalized terms not defined herein shall have the respective meanings set forth in the Indenture.

ARTICLE 1:  TERMS AND DEFINITIONS

For purposes of this Note, unless there is something in the subject matter or content inconsistent therewith, the following terms shall have the following meanings:

“Applicable Interest Rate” shall mean the rate or rates at which the outstanding principal amount of the Note bears interest from time to time in accordance with the provisions of Section 2.1(c) hereof.

“Breakage Costs” shall have the meaning set forth in Section 2.1(c)(viii) hereof.

“Cash Management Account” shall have the meaning set forth in Section 2.4(b) hereof.

“Default Rate” shall mean a rate per annum (adjusted monthly on each Determination Date) equal to the lesser of (a) the Maximum Legal Rate and (b) two percent (2%) above the Applicable Interest Rate.

“Determination Date” shall mean, with respect to any Interest Period, the date that is two (2) London Business Days prior to the fifteenth (15^th) day of the calendar month in which such Interest Period commences.

“Extended Maturity Date” shall have the meaning set forth in Section 2.5(a) hereof.

“Extension Option” shall have the meaning set forth in Section 2.5(a) hereof.

“Initial Maturity Date” shall mean January 9, 2007.

“Interest Period” shall mean, with respect to any Payment Date, the period commencing on the ninth (9^th) day of the preceding calendar month and terminating on the eighth (8^th) day of the calendar month in which such Payment Date occurs; provided, however, that no Interest Period shall end later than the Maturity Date (other than for purposes of calculating interest at the Default Rate), and the initial Interest Period shall begin on the Note Issuance Date and shall end on the eighth (8^th) day of the same calendar month in which the Note Issuance Date occurs (in the event the Note Issuance Date shall occur during the first eight (8) days of such calendar month) or the eighth (8^th) day of the calendar month immediately following the calendar month in which the Note Issuance Date occurs (in the event the Note Issuance Date shall occur on or after the ninth (9^th) day of the calendar month in which the Note Issuance Date occurs).

“Interest Rate Cap Agreement” shall mean, as applicable, an Interest Rate Cap Agreement (together with the confirmation and schedules relating thereto) in form and substance reasonably satisfactory to Trustee between Issuers and an Acceptable Counterparty or a Replacement Interest Rate Cap Agreement.

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“Libor” shall mean, with respect to each Interest Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/8 of 1%) for deposits in U.S. dollars, for a one-month period, that appears on Telerate Page 3750 (or the successor thereto) as of 11:00 a.m., London time, on the related Determination Date. If such rate does not appear on Telerate Page 3750 as of 11:00 a.m., London time, on such Determination Date, LIBOR shall be the arithmetic mean of the offered rates (expressed as a percentage per annum) for deposits in U.S. dollars for a one-month period that appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, if at least two such offered rates so appear. If fewer than two such offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, Trustee shall request the principal London office of any four major reference banks in the London interbank market selected by Trustee to provide such bank’s offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such Determination Date for the amounts of not less than U.S. $1,000,000. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Trustee shall request any three major banks in New York City selected by Trustee to provide such bank’s rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one-month period as of approximately 11:00 a.m., New York City time on the applicable Determination Date for amounts of not less than U.S. $1,000,000. If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined conclusively by Trustee or its agent.

“Libor Indebtedness” shall mean the Note Indebtedness at such time as interest thereon accrues at a rate of interest based upon LIBOR.

“Lockbox Account” shall have the meaning set forth in Section 2.4(a) hereof.

“Lockbox Bank” shall mean any of Banco Nacional de Mexico, S.A., Bancomer, S.A. and Wells Fargo Bank, N.A.

“Lockout Release Date” shall mean January 9, 2006.

“Maturity Date” shall mean the Initial Maturity Date or, if applicable, the Extended Maturity, or such other date on which the final payment of principal of this Note becomes due and payable as herein provided or as provided in the Indenture, whether at such stated maturity date, by declaration of acceleration, or otherwise.

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Note Indebtedness and as provided for herein or in the other Financing Documents, under the laws of such country or state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of this Note.

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“Monthly Debt Service Payment” shall mean (a) a payment of interest only on the outstanding principal balance of Note for each Interest Period through the Maturity Date and (b) during the term of any Extension Option, a payment of principal based on a 25-year amortization schedule in the amounts set forth on Schedule I hereto; provided, however, such payment of principal shall be waived and not required to be paid by Issuers if the Net Operating Income for the Property during the twelve (12) month period immediately preceding the first day of such Extension Option term equals or exceeds the following amounts: (i) with respect to the Extension Option term commencing on January 9, 2007, $7.5 million, (ii) with respect to the Extension Option term commencing on January 9, 2008, $9.0 million, and (iii) with respect to the Extension Option term commencing on January 9, 2009, $11.5 million; provided, further, that if the Net Operating Income for the trailing twelve (12) month period for the Property does not equal or exceed the applicable required amount on the first day of any Extension Option term, but thereafter exceeds such amount as of the first day of (1) April and July of the same calendar year or (2) July and October of the same calendar year, then principal amortization shall be waived and not required for the remainder of the applicable Extension Option term.

“Non-Excluded Taxes” shall have the meaning set forth in Section 2.1(c)(v)(A) hereof.

“Note A” shall mean that certain Promissory Note A in the original principal amount of                      Million and No/100 Dollars ($                      ), 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                          Million and No/100 Dollars ($                        ), 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 Indebtedness” shall mean the indebtedness of Issuers evidenced by the Notes.

“Other Taxes” shall have the meaning set forth in Section 2.1(c)(v)(C) hereof.

“Payment Date” shall mean the ninth (9^th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day.

“Prepayment Premium” shall mean an amount equal to the following: (i) one and one-half percent (1.5%) of the outstanding principal balance of the Note being prepaid if the prepayment occurs on or after the Lockout Release Date through, and including, July 9, 2006; (ii) one percent (1%) of the outstanding principal balance of the Note being prepaid if the prepayment occurs after July 9, 2006 through, and including, December 9, 2006; and (iii) zero if the prepayment occurs after December 9, 2006.

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“Prime Rate” shall mean the annual rate of interest publicly announced by Citibank, N.A. in New York, New York, as its base rate, as such rate shall change from time to time. If Citibank, N.A. ceases to announce a base rate, Prime Rate shall mean the rate of interest published in The Wall Street Journal from time to time as the “Prime Rate.” If more than one “Prime Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest one-eighth of one percent (0.125%). If The Wall Street Journal ceases to publish the “Prime Rate,” the Lender shall select an equivalent publication that publishes such “Prime Rate,” and if such “Prime Rates” are no longer generally published or are limited, regulated or administered by a governmental or quasigovermnental body, then Lender shall select a comparable interest rate index.

“Prime Rate Indebtedness” shall mean the Note Indebtedness at such time as interest thereon accrues at a rate of interest based upon the Prime Rate.

“Prime Rate Spread” shall mean the difference (expressed as the number of basis points) between (a) LIBOR plus the Spread on the date LIBOR was last applicable to the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to the Note Indebtedness; provided, however, in no event shall such difference be a negative number.

“Spread” shall mean three and three-quarters percent (3.75%).

“Spread Maintenance Premium” shall mean, with respect to any prepayment of the Notes prior to the Lockout Release Date, an amount equal to the product of (a) the principal amount of such prepayment, (b) the Spread and (c) a fraction, the numerator of which shall equal the actual number of days from the date of such payment through the Lockout Release Date and the denominator of which is 360.

“Strike Price” shall mean five percent (5.00%).

“Taxes” shall have the meaning set forth in Section 2.1(c)(v)(A) hereof.

ARTICLE 2:  INTEREST RATE AND PAYMENT TERMS

Section 2.1  Interest Rate.

(a)  Interest Generally. Interest on the outstanding principal balance of this Note shall accrue from the Note Issuance Date to but excluding the Maturity Date at the Applicable Interest Rate. Issuers shall pay to Noteholder on each Payment Date the interest accrued on this Note for the preceding Interest Period.

(b)  Interest Calculation. Interest on the outstanding principal balance of this Note shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year by (c) the outstanding principal balance.

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(c)  Determination of Interest Rate. (i)  The Applicable Interest Rate with respect to this Note shall be: (i) LIBOR plus the Spread with respect to the applicable Interest Period for a Libor Indebtedness or (ii) the Prime Rate plus the Prime Rate Spread for a Prime Rate Indebtedness if the Note Indebtedness is converted to a Prime Rate Indebtedness pursuant to the provisions of Section 2.1(c)(iii) or (vi).

(ii)  Subject to the terms and conditions of this Section 2.1, the Note Indebtedness shall be a Libor Indebtedness and Issuers shall pay interest on the outstanding principal amount of this Note at LIBOR plus the Spread for the applicable Interest Period. Any change in the rate of interest hereunder due to a change in the Applicable Interest Rate shall become effective as of the opening of business on the first day on which such change in the Applicable Interest Rate shall become effective. Each determination by Trustee of the Applicable Interest Rate shall be conclusive and binding for all purposes, absent manifest error.

(iii)  In the event that Trustee shall have determined (which determination shall be conclusive and binding upon Issuers absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining LIBOR, then Trustee shall forthwith give notice by telephone of such determination, confirmed in writing, to Issuers at least one (1) Business Day prior to the last day of the related Interest Period. If such notice is given, the related outstanding Libor Indebtedness shall be converted, on the last day of the then current Interest Period, to a Prime Rate Indebtedness.

(iv)  If, pursuant to the terms of this Note, any portion of the outstanding principal balance of this Note has been converted to a Prime Rate Indebtedness and Trustee shall determine (which determination shall be conclusive and binding upon Issuers absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Trustee shall give notice by telephone of such determination, confirmed in writing, to Issuers at least one (1) Business Day prior to the last day of the related Interest Period. If such notice is given, the related outstanding Prime Rate Indebtedness shall be converted to a Libor Indebtedness on the last day of the then current Interest Period.

(v)  Taxes; Non-Excluded Taxes and Other Taxes.

(A)Any and all payments by the Issuers, the Guarantor or any other Person under or in respect of this Note or any other Financing Documents shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, “Taxes”). If the Issuers, the Guarantor and/or any other Person shall be required under any applicable law to deduct or withhold any Taxes from or in respect

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of any sum payable under or in respect of this Note or any of the other Financing Documents to the Noteholder, (i) the Issuers, the Guarantor and/or any other such Person, as applicable, shall make all such deductions and withholdings in respect of Taxes, (ii) the Issuers, the Guarantor and/or any other such Person, as applicable, shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable law, (iii) the sum payable by the Issuers, the Guarantor and/or any other such Person, as applicable, shall be increased as may be necessary so that after the Issuers, the Guarantor and/or any other such Person, as applicable, has made all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 2.1(c)(v)) the Noteholder receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes, and (iv) the Issuers shall promptly forward to the Noteholder and the Trustee an original official receipt or a copy thereof or other documentation issued by such Governmental Authority or other taxing authority evidencing payment of such Taxes upon Issuers’ receipt thereof. For purposes of this Note the term “Non-Excluded Taxes” are Taxes other than Taxes that are imposed on the Noteholder’s overall net income (and branch profits taxes or franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which such Noteholder is organized or in which its principal office is located or in which such Noteholder’s applicable lending office is located, or any political subdivision thereof, unless such Taxes are imposed solely as a result of the Noteholder or the Trustee, on behalf of the Noteholder, having executed, delivered or performed its obligations or received payments under or enforced, this Note or any of the other Financing Documents (in which case such Taxes will be treated as Non-Excluded Taxes).

(B)If, on the date of the assignment or participation pursuant to which a Noteholder assignee or participant becomes subject to this Note, the assigning Noteholder was entitled to payments under this Section 2.1(c)(v), then, to such extent, the term “Non-Excluded Taxes” shall include (in addition to Taxes that may be imposed in the future or other amounts otherwise includable in Taxes) such Taxes, if any, applicable with respect to such Noteholder assignee or participant on such date.

(C)In addition, Issuers agree to pay to the relevant Governmental Authority or other taxing authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, recording taxes and similar fees) that arise from

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any payment made under this Note or any other Financing Document, or from the execution, delivery, registration, or enforcement, of this Note or any other Financing Document (“Other Taxes”).

(D)Issuers hereby agree to indemnify the Noteholder for, and to hold the Noteholder harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.1(c)(v), imposed on or paid by the Noteholder, and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. The indemnity by Issuers provided for in this Section 2.1(c)(v) shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by Issuers under the indemnity set forth in this Section 2.1(c)(v) shall be paid within 10 days from the date on which Noteholder makes written demand therefor.

(E)Issuers shall (i) comply at all times with the information requirements imposed by the Mexican Resolución Miscelánea Fiscal or any equivalent administrative general rules in effect (including, without limitation, in respect of Article 195 of the Mexican Income Tax Law), (ii) promptly provide to the Trustee copies of forms, certificates, documents, information, applications, declarations or returns prescribed by any law, rule or regulation enacted by Mexico or any political subdivision thereof or taxing authority therein, that Issuers provided to the tax authorities in compliance with clause (i) above of this subsection (E).

(F)By the acceptance of this Note, Noteholder agrees to cooperate with all reasonable requests of Issuers to achieve the lowest rate of withholding on payments of interest under the Note then imposed by the United Mexican States; provided, however, that Noteholder will not be required to take any action that would be, in the reasonable judgment of Noteholder, legally inadvisable or commercially disadvantageous to Noteholder in any respect, and in no event shall Noteholder be required to disclose any information that, in the sole judgment of Noteholder, is confidential.

(G)Notwithstanding anything to the contrary contained in this Note or the other Financing Documents, all Persons may disclose to any and all Persons, without limitations of any kind, the purported or claimed U.S. federal, state and local income tax treatment of this Note, any fact that may be relevant to understanding the purported or claimed U.S. federal, state and local income tax treatment of this Note, and all materials of any kind (including opinions or other tax

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analyses) relating to such U.S. federal, state and local income tax treatment or fact, other than the name of the parties or any other Person named herein, or information that would permit identification of the parties or such other Persons, and any pricing terms or other nonpublic business or financial information that is unrelated to the purported or claimed federal income tax treatment of this Note to the taxpayer and is not relevant to understanding the purported or claimed federal income tax treatment of this Note to the taxpayer.

(H)If as a result of any change in or amendment to the laws of Mexico, or any change in an official written interpretation of such laws, which change is announced after the date hereof (a “Change in Law”), and the Issuers have or will be obligated for reasons outside their control to pay additional amounts pursuant to Section (v)(A) hereof in excess of those attributable to the Mexican withholding tax imposed at a rate of ten percent (10%) on payments of interest under any Note, (i) the Issuers shall notify the Noteholder and the Trustee of any Change in Law (“Notice of a Change in Law”) and (ii) unless, within sixty (60) days of the Notice of a Change in Law, a holder of a Note has agreed to treat any such withholding in excess of 10% as Taxes that are not Non-Excluded Taxes, the Issuers shall be entitled to redeem such Note on the next Payment Date following sixty (60) days after such Notice of a Change in Law in whole, but not in part, without any prepayment premium or penalty, at 100% of its principal amount, plus accrued and unpaid interest to the date of such redemption and all other amounts due and unpaid under the Indenture and the other Financing Documents. Prior to any such redemption by the Issuers the Issuers shall deliver to Trustee: (A) an Officer’s Certificate stating that the Issuers are entitled to redeem this Note pursuant to this subsection and (B) an opinion from counsel acceptable to Trustee that such change in Law occurred and would impose a withholding in excess of ten percent (10%).

(vi)  If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for the Note Indebtedness to be maintained as a Libor Indebtedness as contemplated hereunder (i) the obligation of Trustee or Noteholder hereunder or under the other Financing Documents to administer, extend, make or maintain a Libor Indebtedness or to convert a Prime Rate Indebtedness to a Libor Indebtedness shall be canceled forthwith and (ii) any outstanding Libor Indebtedness shall be converted automatically to a Prime Rate Indebtedness on the next succeeding Payment Date or within such earlier period as required by law. Issuers hereby agree promptly to pay to Noteholder, upon demand, any additional amounts necessary to compensate Noteholder for any costs incurred by, or on behalf of, Noteholder in making any conversion in accordance with this Note, including, without limitation, any interest or fees payable by, or on behalf of, Noteholder to lenders of funds

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obtained by it in order to extend, make or maintain the Libor Indebtedness hereunder. Trustee’s notice of such costs, as certified to Issuers, shall be conclusive absent manifest error.

(vii)  In the event that any change in any requirement of law or in the interpretation or application thereof; or compliance by Trustee or Noteholder with any request or directive (whether or not having the force of law) issued from any central bank or other Governmental Authority:

(A)shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by (or on behalf of), or deposits or other liabilities in or for the account of, advances or loans by (or on behalf of), or other credit extended by (or on behalf of), or any other acquisition of funds by (or on behalf of), any office of Noteholder which is not otherwise included in the determination of LIBOR or Spread hereunder;

(B)shall hereafter have the effect of reducing the rate of return on Noteholder’s capital as a consequence of Trustee’s or Noteholder’s obligations hereunder or under the other Financing Documents to a level below that which Noteholder could have achieved but for such adoption, change or compliance (taking into consideration Noteholder’s policies with respect to capital adequacy) by any amount deemed by Trustee to be material; or

(C)shall hereafter impose on Trustee or Noteholder any other condition and the result of any of the foregoing is to increase the cost to Noteholder of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder

then, in any such case, Issuers shall promptly pay Noteholder, upon demand, any additional amounts necessary to compensate Noteholder for such additional cost or reduced amount receivable which Trustee deems to be material as determined by Trustee in its reasonable discretion. If Trustee, on behalf of Noteholder, becomes entitled to claim any additional amounts pursuant to this Section 2.1(c)(vii), Trustee shall provide Issuers with not less than ninety (90) days notice specifying in reasonable detail the event by reason of which Noteholder has become so entitled and the additional amount required to fully compensate Noteholder for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Trustee or Noteholder to Issuers shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Issuers under this Note and the other Financing Documents.

(viii)  Issuers agree to indemnify Trustee and Noteholder and to hold Trustee and Noteholder harmless from any loss or expense which Trustee or Noteholder sustains or incurs as a consequence of (i) any default by Issuers in payment of the principal of or

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interest on a Libor Indebtedness, including, without limitation, any such loss or expense arising from interest or fees payable by, or on behalf of, Noteholder to lenders of funds obtained by, or on behalf of, Noteholder in order to maintain a Libor Indebtedness hereunder, (ii) any prepayment (whether voluntary or mandatory) of the Libor Indebtedness on a day that (A) is not the Payment Date immediately following the last day of an Interest Period with respect thereto or (B) is the Payment Date immediately following the last day of an Interest Period with respect thereto if Issuers did not give the prior notice of such prepayment required pursuant to the terms of this Note, including, without limitation, such loss or expense arising from interest or fees payable by, or on behalf of, Noteholder to lenders of funds obtained by it in order to maintain the Libor Indebtedness hereunder and (iii) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate from LIBOR plus the Spread to the Prime Rate plus the Prime Rate Spread with respect to any portion of the outstanding principal amount of the Loan then bearing interest at LIBOR plus the Spread on a date other than the Payment Date immediately following the last day of an Interest Period, including, without limitation, such loss or expenses arising from interest or fees payable by, or on behalf of, Noteholder to lenders of funds obtained by, or on behalf of, Noteholder in order to maintain a Libor Indebtedness hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred to collectively as the “Breakage Costs”); provided, however, Issuers shall not indemnify Trustee or Noteholder from any loss or expense arising from Trustee’s or Noteholder’s willful misconduct or gross negligence. This provision shall survive payment of the Note in full and the satisfaction of all other obligations of Issuers under this Note and the other Financing Documents.

(ix)  Noteholder shall not be entitled to claim compensation pursuant to this Section 2.1 for any increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of return, which was incurred or which accrued more than ninety (90) days before the date Trustee notified Issuers of the change in law or other circumstance on which such claim of compensation is based and delivered to Issuers a written statement setting forth in reasonable detail the basis for calculating the additional amounts owed to Noteholder under this Section 2.1, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

(d)  Additional Costs. Trustee will use commercially reasonable efforts (consistent with legal and regulatory restrictions) to maintain the availability of the Libor Indebtedness and to avoid or reduce any increased or additional costs payable by Issuers under Section 2.1(c).

(e)  Default Rate. In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of this Note and, to the extent permitted by law, all accrued and unpaid interest in respect of this Note and any other amounts due pursuant to the Financing Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein.

(f)  Usury Savings. This Note, the Indenture and the other Financing Documents are subject to the express condition that at no time shall Issuers be obligated

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or required to pay interest on the principal balance of this Note at a rate which could subject Trustee or Noteholder to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Note or the other Financing Documents, Issuers are at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Noteholder for the use, forbearance, or detention of the sums due under this Note, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Note until payment in full so that the rate or amount of interest on account of this Note does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to this Note for so long as the Note Indebtedness is outstanding.

(g)  Interest Rate Cap Agreement. (i)  Prior to or contemporaneously with the Note Issuance Date, Issuers shall enter into an Interest Rate Cap Agreement with a LIBOR strike price equal to the Strike Price. The Interest Rate Cap Agreement (i) shall be in a form and substance reasonably acceptable to Initial Noteholder, (ii) shall be with an Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to deposit directly into the Cash Management Account any amounts due Issuers under such Interest Rate Cap Agreement so long as any portion of the Debt exists, provided that the Debt shall be deemed to exist if the Property is transferred pursuant to the terms and provisions of the Security Trust Agreement or by judicial or non judicial foreclosure or deed-in-lieu thereof, (iv) shall be for a period equal to the term of this Note and (v) shall have an initial notional amount equal to the principal balance of this Note. Issuers shall collaterally assign to Trustee for the benefit of Noteholders pursuant to the Collateral Assignment of Interest Rate Cap Agreement, all of their right, title and interest to receive any and all payments under the Interest Rate Cap Agreement, and shall deliver to Trustee an executed counterpart of such Interest Rate Cap Agreement (which shall, by its terms, authorize the assignment to Trustee for the benefit of Noteholders and require that payments be deposited directly into the Cash Management Account).

(ii)  Issuers shall comply with all of their obligations under the terms and provisions of the Interest Rate Cap Agreement. All amounts paid by the Counterparty under the Interest Rate Cap Agreement to Issuers or Trustee for the benefit of Noteholders shall be deposited immediately into the Cash Management Account or if the Cash Management Account is not then required to be in effect, into such account as specified by Trustee. Issuers shall take all actions reasonably requested by Trustee to enforce Trustee’s rights, on behalf of Noteholders, under the Interest Rate Cap Agreement in the event of a default by the Counterparty and shall not waive, amend or otherwise modify any of their rights thereunder.

(iii)  In the event of any downgrade, withdrawal or qualification of the rating of the Counterparty by S&P or Moody’s, Issuers shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement not later than fifteen (15)

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Business Days following receipt of notice from Trustee of such downgrade, withdrawal or qualification.

(iv)  In the event that Issuers fail to purchase and deliver to Trustee the Interest Rate Cap Agreement or fail to maintain the Interest Rate Cap Agreement in accordance with the terms and provisions of this Note, Trustee, on behalf of Noteholders, may purchase the Interest Rate Cap Agreement and the cost incurred by Trustee in purchasing such Interest Rate Cap Agreement shall be paid by Issuers to Trustee with interest thereon at the Default Rate from the date such cost was incurred by Trustee until such cost is reimbursed by Issuers to Trustee.

(v)  In connection with the Interest Rate Cap Agreement, Issuers shall obtain and deliver to Trustee an opinion from counsel (which counsel may be in-house counsel for the Counterparty) for the Counterparty (upon which Trustee and its successors and assigns may rely) which shall provide, in relevant part, that:

(A)the Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Interest Rate Cap Agreement;

(B)the execution and delivery of the Interest Rate Cap Agreement by the Counterparty, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by-laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property;

(C)all consents, authorizations and approvals required for the execution and delivery by the Counterparty of the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and

(D)the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Counterparty and constitutes the legal, valid and binding obligation of the Counterparty, enforceable against the Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to

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enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

Section 2.2  Loan Payment.

(a)  Payments Generally. Issuers shall make a payment to Noteholder of interest only on the Note Issuance Date for the period from the Note Issuance Date up to and including January 8, 2005 (unless the Note Issuance Date is the ninth (9^th) day of a calendar month, in which case no such separate payment of interest shall be due). Issuers shall make a payment to Noteholder in the amount of the Monthly Debt Service Payment on the Monthly Payment Date occurring on February 9, 2005 and on each Monthly Payment Date thereafter to and including the Maturity Date. Each payment shall be applied in accordance with the priority of payments set forth in Section 3.03 of the Indenture.

(b)  Payment on Maturity Date. Issuers shall pay to Noteholder on the Maturity Date the outstanding principal balance of this Note, all accrued and unpaid interest and all other amounts due hereunder and shall pay to Trustee, for the benefit of Noteholders, all other amounts due under the Indenture and the other Financing Documents.

(c)  Late Payment Charge. If any principal, interest or any other sums due under the Financing Documents (other than the outstanding principal balance due on the Maturity Date) is not paid by Issuers by the date on which it is due, Issuers shall pay to Noteholder upon demand an amount equal to the lesser of two percent (2%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by, or on behalf of, Noteholder in handling and processing such delinquent payment and to compensate Noteholder for the loss of the use of such delinquent payment. Any such amount shall be secured by the Security Trust Agreement, the Pledge and the other Financing Documents to the extent permitted by applicable law.

(d)  Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this Note shall be made to Noteholder not later than 1:00 P.M., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Noteholder’s office or as otherwise directed by Noteholder, and any funds received by Noteholder after such time shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day.

(e)  Interest Accrual Period. The first interest accrual period hereunder shall commence on and include the Note Issuance Date and end on (i) the eighth (8^th) day of the calendar month in which the Note Issuance Date occurs (if the Note Issuance Date shall occur during the first eight (8) days of such calendar month) or (ii) on the eighth (8^th) day of the calendar month immediately following the calendar month in which the Note Issuance Date occurs (if the Note Issuance Date shall occur on or after the ninth (9^th) day of the calendar month in which the Note Issuance Date occurs). Each interest accrual period thereafter shall commence on the ninth (9^th) day of each calendar month

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during the term of this Note and shall end on and include the eighth (8^th) day of the next occurring calendar month. For purposes of making payments hereunder, but not for purposes of calculating interest accrual periods, if the day on which such payment is due is not a Business Day, then amounts due on such date shall be due on the immediately preceding Business Day and with respect to payments of principal due on the Maturity Date, interest shall be payable at the Applicable Interest Rate or the Default Rate, as the case may be, through and including the day immediately preceding such Maturity Date. All amounts due pursuant to this Note and the other Financing Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever.

Section 2.3  Prepayments.

(a)  Voluntary Prepayments. Prior to the Lockout Release Date, the outstanding principal amount of this Note may not be prepaid in whole or in part. On any Payment Date occurring on, or after, the Lockout Release Date, Issuers may, at their option and upon fifteen (15) days prior written notice to Trustee, prepay the Debt in whole or in part; provided that such prepayment is accompanied by the Prepayment Premium, if any. Except for any prepayment pursuant to Section 2.3(b) hereof (provided that no Event of Default has occurred and is continuing at the time of such prepayment), neither Trustee nor Noteholder shall be obligated to accept any prepayment unless it is accompanied by the Prepayment Premium due in connection therewith. All prepayments under this Section 2.3(a) shall be applied in accordance with the priority of payments set forth in Section 3.03 of the Indenture.

(b)  Mandatory Prepayments. On the next occurring Payment Date following the date on which Trustee, on behalf of Noteholders, actually receives any Net Proceeds, if Trustee is not obligated to make such Net Proceeds available to Issuers for Restoration, Issuers shall prepay, or authorize Trustee to apply Net Proceeds as a prepayment of, the outstanding principal balance of the Notes in an amount equal to one hundred percent (100%) of such Net Proceeds. Other than following an Event of Default, no Prepayment Premium shall be due in connection with any prepayment made pursuant to this Section 2.3(b). Any partial prepayment under this Section 2.3(b) shall be applied in accordance with the priority of payments set forth in Section 3.03 of the Indenture.

Prepayments After Default. If following an Event of Default and prior to the Lockout Release Date, payment of all or any part of the Debt is tendered by Issuers or otherwise recovered by Trustee for the benefit of Noteholders (including through application of any Reserve Funds), such tender or recovery shall be (a) made on the next occurring Payment Date together with the Monthly Debt Service Payment and (b) deemed a voluntary prepayment by Issuers in violation of the prohibition against prepayment set forth in Section 2.3(a) and Issuers shall pay, in addition to the Debt, an amount equal to the sum of (i) the Spread Maintenance Premium and (ii) the Prepayment Premium.

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Section 2.4  Cash Management.

(a)  Lockbox Accounts. Issuers shall establish and maintain a segregated Eligible Account (a “Lockbox Account”) with each Lockbox Bank in trust in favor of Trustee for the benefit of Noteholders, which Lockbox Account shall be under the sole dominion and control of Trustee. Each Lockbox Account shall be entitled “LaSalle Bank National Association, as Trustee, pursuant to Note Indenture dated as of December 17, 2004 – Lockbox Account.”  Issuers hereby grant to Trustee for the benefit of Noteholders a first priority security interest in each Lockbox Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Trustee for the benefit of Noteholders a perfected first priority security interest in each Lockbox Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof, if applicable. Trustee and Servicer shall have the sole right to make withdrawals from any Lockbox Account and all costs and expenses for establishing and maintaining any Lockbox Account shall be paid by Issuers. Issuers shall, or shall cause Manager to, deliver written instructions to all tenants under Leases to deliver all Rents payable thereunder directly to a Lockbox Account. Issuers shall, and shall cause Manager to, deposit all amounts received by Issuers or Manager constituting Rents into a Lockbox Account within one (1) Business Day after receipt. Issuers shall obtain from each Lockbox Bank its agreement to transfer to the Cash Management Account in immediately available funds by wire transfer all amounts on deposit in the applicable Lockbox Account once every Business Day throughout the term of the Note (with the exception of the amounts on deposit in the Pesos Account (as defined in the Cash Management Agreement), which amounts shall be transferred to the Cash Management Account at such times as set forth the Cash Management Agreement).

(b)  Cash Management Account. Issuers shall establish and maintain a segregated Eligible Account (the “Cash Management Account”) to be held in trust in favor of Trustee for the benefit of Noteholders, which Cash Management Account shall be under the sole dominion and control of Trustee. The Cash Management Account shall be entitled “LaSalle Bank National Association, as Trustee, pursuant to Note Indenture. dated as of December 17, 2004 - Cash Management Account.” Issuers hereby grant to Trustee for the benefit of Noteholders a first priority security interest in the Cash Management Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Trustee for the benefit of Noteholders a perfected first priority security interest in the Cash Management Account, including, without limitation, executing and filing UCC-l Financing Statements and continuations thereof. Issuers will not in any way alter or modify the Cash Management Account and will notify Trustee of the account number thereof. Trustee and Servicer shall have the sole right to make withdrawals from the Cash Management Account and all costs and expenses for establishing and maintaining the Cash Management Account shall be paid by Issuers. All funds on deposit in the Cash Management Account shall be applied in accordance with the terms of the Cash Management Agreement. The insufficiency of funds on deposit in the Cash Management Account shall not relieve Issuers from the obligation to make any payments, as and when due pursuant to the Notes and the other Financing Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance

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whatsoever. All funds on deposit in the Cash Management Account following the occurrence of an Event of Default may be applied by Trustee in such order and priority as Trustee shall determine.

(c)  Payments Received Under Cash Management Agreement. Notwithstanding anything to the contrary contained in this Note and the other Financing Documents, and provided no Event of Default has occurred and is continuing, Issuers’ obligations with respect to the monthly payment of Debt Service and amounts due for the Tax and Insurance Escrow Fund, Required Repair Fund, Replacement Escrow Fund, Interest Reserve Escrow Fund and any other payment reserves established pursuant to this Note or any other Financing Document shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account established pursuant to the Cash Management Agreement to satisfy such obligations on the dates each such payment is required, regardless of whether any of such amounts are so applied by Trustee.

(d)  Interest Reserve. Issuers acknowledge and agree that Excess Cash Flow (as defined in the Cash Management Agreement) shall be deposited and held in the Interest Reserve Fund in accordance with the terms and provisions of the Cash Management Agreement.

Section 2.5  Extension of the Initial Maturity Date. (a)  Issuers shall have the option to extend the term of the Notes beyond the Initial Maturity Date for three successive terms (each, an “Extension Option”) of one (1) year each (the Initial Maturity Date following the exercise of each such option is hereinafter the “Extended Maturity Date”) upon satisfaction of the following terms and conditions:

(i)  no Event of Default shall have occurred and be continuing at the time the applicable Extension Option is exercised and on the date that the applicable extension term is commenced;

(ii)  Issuers shall notify Trustee of their irrevocable election to extend the Maturity Date as aforesaid not earlier than six (6) months, and no later than sixty (60) days, prior to (i) with respect to the first Extension Option, the Initial Maturity Date, (ii) with respect to the second Extension Option, the end of the first Extension Option term and (iii) with respect to the third Extension Option, the end of the second Extension Option term. The term of each then outstanding Note must be extended pursuant to the applicable provision and no extension of less than all of the then outstanding Notes shall be permitted;

(iii)  if the Interest Rate Cap Agreement is scheduled to mature prior to the applicable Extended Maturity Date, Issuers shall obtain and deliver to Trustee for the benefit of Noteholders not later than ten (10) Business Days prior to the first day of each Extension Option, one or more Replacement Interest Rate Cap Agreements from an Acceptable Counterparty which Replacement Interest Rate Cap Agreement shall be effective commencing on the first date of such Extension

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Option and shall have a maturity date not earlier than the applicable Extended Maturity Date;

(iv)  In connection with each Extension Option Issuers shall have delivered to Trustee together with their notice pursuant to subsection (a)(ii) of this Section 2.5 and as of the commencement of the applicable Extension Option, an Officer’s Certificate in form acceptable to the Trustee certifying that each of the representations and warranties of Issuers contained in the Financing Documents is true, complete and correct in all material respects as of the date of such Officer’s Certificate to the extent such representation and warranties are not matters which by their nature can no longer be true and correct as a result of the passage of time.

(v)  Issuers shall pay to Trustee for the benefit of Noteholders in connection with the exercise of the second and third Extension Option an extension fee equal to twenty-five hundredths of one percent (.25%) of the outstanding principal amount of the Notes simultaneously with delivery of the extension notice pursuant to subsection (a)(ii) above, which extension fee shall be deemed earned by Noteholders as of the first day of the applicable Extension Option term and non-refundable thereafter; and

(vi)  Issuers shall provide evidence reasonably satisfactory to Trustee that there is sufficient capital available to pay for necessary capital expenditures, tenant improvements and leasing commissions (it being understood that an Officer’s Certificate certifying the same shall constitute reasonably satisfactory evidence for purposes of this Section 2.5(a)(vi)).

(b)  Issuers shall pay all reasonable costs and expenses of Trustee and Noteholders in connection with any Extension Option.

ARTICLE 3:  FINANCING DOCUMENTS

This Note is issued pursuant to the Indenture and secured by the Security Trust Agreement, the Pledge and the other Financing Documents. All of the terms, covenants and conditions contained in the Indenture, the Security Trust Agreement, the Pledge and the other Financing Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein.

ARTICLE 4:  NO ORAL CHANGE

This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Issuers or Trustee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

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ARTICLE 5:  WAIVERS

Issuers and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, notice of intention to accelerate, notice of acceleration, protest and notice of protest and non-payment and, except as otherwise expressly provided in the Financing Documents, all other notices of any kind in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Indenture or the other Financing Documents made by agreement between Trustee on behalf of Noteholders or any other Person shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Issuers, and any other Person who may become liable for the payment of all or any part of the Debt under this Note, the Indenture or the other Financing Documents. No notice to or demand on Issuers shall be deemed to be a waiver of the obligation of Issuers or of the right of Trustee on behalf of Noteholders to take further action without further notice or demand as provided for in this Note, the Indenture or the other Financing Documents. If any Issuer is a partnership, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the individuals or entities comprising the partnership, and the term “Issuer,” as used herein, shall include any alternate or successor partnership, but any predecessor partnership and their partners shall not thereby be released from any liability. If any Issuer is a corporation, the agreements contained herein shall remain in full force and be applicable notwithstanding any changes in the shareholders comprising, or the officers and directors relating to, the corporation, and the term “Issuer” as used herein, shall include any alternative or successor corporation, but any predecessor corporation shall not be relieved of liability hereunder. If any Issuer is a limited liability company, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the members comprising the limited liability company, and the term “Issuer” as used herein, shall include any alternate or successor limited liability company, but any predecessor limited liability company and their members shall not thereby be released from any liability. Nothing in the foregoing three sentences shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in such partnership, corporation or limited liability company, as applicable, which may be set forth in the Indenture or any other Financing Document.

ARTICLE 6:  TRANSFER

Upon the transfer of this Note, Issuers hereby waiving notice of any such transfer, Noteholder may deliver, or cause to be delivered, all the collateral mortgaged, granted, pledged or assigned pursuant to the Financing Documents, or any part thereof, to, or for the benefit of, the transferee who shall thereupon become vested with all the rights and obligations herein or under applicable law given to Noteholder with respect thereto, and Noteholder shall thereafter forever be relieved and fully discharged from any liability or responsibility in any matter first arising after such transfer; but Noteholder shall retain all rights hereby given to it with respect to any liabilities and the collateral not so transferred.

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ARTICLE 7:  NUMBER AND GENDER/JOINT AND SEVERAL LIABILITY

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons referred to may require. Without limiting the effect of specific references in any provision of this Agreement, the term “Issuers” shall be deemed to refer to each and every Person comprising an Issuer from time to time, as the sense of a particular provision may require, and to include the heirs, executors, administrators, legal representatives, successors and assigns of each Issuer, all of whom shall be bound by the provisions of this Agreement, provided that no obligation of Issuers may be assigned except with the written consent of Trustee. Each reference herein to Trustee or Noteholder shall be deemed to include their respective successors and assigns.

If Issuers are comprised of more than one Person, all representations, warranties, covenants (both affirmative and negative) and all other obligations of Issuers hereunder shall be the joint and several obligation of each entity making up Issuers and a Default or Event of Default by any such Person shall be deemed a Default or Event of Default by all such entities and Issuers. The representations, covenants and warranties contained herein shall be read to apply to the individual entities comprising Issuers when the context so requires but a breach of any such representation, covenant or warranty or a breach of any obligation under this Note shall be deemed a breach by all such entities and Issuers, entitling Trustee, on behalf of Noteholders, to exercise all of its rights and remedies under this Note and the other Financing Documents and under applicable law.

ARTICLE 8:  EXCULPATION

The provisions of Section 9.03 of the Indenture are hereby incorporated by reference into this Note to the same extent and with the same force as if fully set forth herein.

ARTICLE 9:  GOVERNING LAW

This Note shall be governed in accordance with the terms and provisions of Section 14.04 of the Indenture.

ARTICLE 10:  NOTICES

All notices or other written communications hereunder shall be delivered in accordance with Section 14.03 of the Indenture.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, Issuers have duly executed this Note as of the day and year first above written.

ISSUERS:
KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V.
By:	/s/ John Allison
	Name:  John Allison
	Title:  Vice President
KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.
By:	/s/ John Allison
	Name:  John Allison
	Title:  Vice President
KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.
By:	/s/ John Allison
	Name:  John Allison
	Title:  Vice President
KERZNER COMPANIA de SERVICIOS, S. de R.L. de C.V.
By:	/s/ John Allison
	Name:  John Allison
	Title:  Vice President
KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.
By:	/s/ John Allison
	Name:  John Allison
	Title:    Vice President

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SCHEDULE 6.01A

Organizational Chart

SCHEDULE 6.01E

Agreements

None

SCHEDULE 6.01Q

Assessments

None

SCHEDULE 6.01T

Insurance Claims

None

SCHEDULE 6.01Z

Leases

1.             A lease for storage space in the town of San Jose. This lease expired on November 30, 2004 but was automatically renewed for another 6 months.

2.             A lease for the rental of a plot of land from the Palmilla Condominium Association (this is common land of the members) for a nominal amount of US$1.00 per year. This agreement is in the final stages of completion but has not yet been executed.

SCHEDULE 10.01

Required Repairs

We have prepared a column for the estimated costs of each item. Required expenditures indicate deficiencies, which are in violation of codes, which pose a danger to public safety, or which if left uncorrected, will lead to further deterioration of the property.

A Capital Expenditure Analysis Chart, based on industry-accepted life spans of major building components, is included for all major components which will exceed or reach their published service lives within 7 years.

Maintenance type deficiencies that in-house personnel and/or current Service Contractors should address appear without estimates. There are no ADA related costs at this property, since the project is outside the jurisdiction of the U.S. Department of Justice.

All estimated cost are engineering estimates and not bid prices. Costs are in year-2004 U.S. dollars and assume use of union labor unless otherwise noted.

One&Only Palmilla Resort

		REQUIRED
1.	Site Provide a drainage swale behind the South Chiller yard to prevent erosion. Storm water flows down the slope against the back wall of the chiller fence. The swale would direct storm water away from the wall towards the asphalt-paved parking lot and to the storm drainage system. Not having a swale will most likely erode the slope. It appeared that drainage control in this area was mitigated by the use of sandbags.
	Estimated Cost	$	2,500
2.	Roof The engineering staff should inspect the existing roof tiles at the 1992-constructed guestroom buildings. Casa Cristina and the Chapel to ensure that they are tied/anchored so that in the event of high winds, they remain in place. Cost is to inspect the roofs.
	Estimated Cost	$	1,500
3.	Structural The Butlers’ pantry building and the mechanical enclosure located near the guest parking, are built into a hillside. The building walls are retaining over 6 feet of earth. It is not clear from the structural drawings that this height of earth pressure was taken into account. The design engineer should review this condition. Cost is to inspect the above-described condition.
	Estimated Cost	$	2,500

		REQUIRED
4.	The walls of the Wastewater Treatment Plant are seeping moisture. Moisture within the walls can cause reinforcing steel to rust and fail. The contractor and design engineer should be notified to inspect and repair the seepage. The cost for the remediation of this issue is estimated at $75,000. This item should be covered under the contractor’s warranty, with no cost to the resort.
	Warranty Item
5.	Electrical The electrical switchgear at Charlie Trotter’s is exposed to rain water. At a minimum, the existing roof cover should be extended to better protect the cabinet.
	Estimated Cost	$	2,500
6.	Change/provide weatherproof outlets in all mechanical/service areas that are exposed to the weather. Also, panel boxes were observed either with missing covers or not provided with a weather protective enclosure. This item should be remediated.
	Estimated Cost	$	4,000

		REQUIRED
7.	Anchorage The seismic anchorage of building service equipment is recommended to prevent fire hazards from broken natural gas lines, to maintain building functions following an earthquake, and to prevent heavy equipment from causing structural damage or creating a safety hazard by being thrown about in an earthquake. Most of the ‘smaller’ mechanical equipment observed were unrestrained. The unrestrained equipment should be anchored.
	Estimated Cost	$	12,000
	Total Estimated One&Only Palmilla Costs	$	25,000

	Troon Golf at Palmilla
		REQUIRED
1.	Site The pipe for the septic tank, located in the yard behind the Clubhouse building does not have a cover. The exposed pipe is being covered with a tray. A proper cover should be provided.
	Estimated Cost	$	250
2.	Erosion was observed around the patio of the irrigation pump house (near Arroyo Hole #4). The erosion should be repaired and a concrete swale should be provided to direct storm water around the patio and Pump Room walls.
	Estimated Cost	$	2500
3.	The generators at the irrigation pump room are poorly maintained, with evidence of oil spillage and corrosion, which compounded with the continuous refueling, could diminish the service life of the equipment. The generators should be inspected and serviced/cleaned and placed on a preventative maintenance program.
	Estimated Cost	$	10,000
4.	The single-walled fuel tanks at the irrigation pump yard should be removed and replaced with a double-walled tank to prevent spillage. Build concrete curbs around the tanks to assist with containment of fuel.
	Estimated Cost	$	10,000
5.	The seismic anchorage of building service equipment is recommended to prevent fire hazards from broken natural gas lines, to maintain building functions following an earthquake, and to prevent heavy equipment from causing structural damage or creating a safety hazard by being thrown about in an earthquake. Most of the mechanical equipment observed was unrestrained. The unrestrained equipment should be anchored.
	Estimated Cost	$	2,000
	Total Estimated Troon Golf at Palmilla Costs	$	24,750

ONE AND ONLY PALMILLA

Issue	Cost to Remediate
Potential presence of gasoline and diesel in soil	$8,000
Potential presence of gasoline and diesel in soil in the unpaved area surrounding the secondary containment of the tanks	$12,000
Potential presence of hydrocarbons in soil	$14,000
Floors must be impervious and antiskid because of potential for hazardous materials on concrete floor	$11,000
Floors must be impervious and antiskid because of potential for hazardous materials on concrete floor (at Palmilla Golf Club)	$5,000 plus management time
Floors must be impervious and antiskid because of potential for hazardous materials on concrete floor in the Temporary Hazardous Waste Storage Area	$4,000 plus management time
Verify in the equipment specifications document or plate if the dielectric oil used in the transformers is free of PCBs	$1,000 plus management time
Verify in the equipment specifications document or plate if the dielectric oil used in the transformers is free of PCBs (at Palmilla Golf Club)	$200 plus management time
Testing water for lead	$2,500 plus management time
If Municipality of San Jose del Cabo does not remove lead from water, filters must be purchased	$28,000 plus management time
Designation of a specific location at the Hotel for storing all hazardous materials, and this storage area should be provided with good ventilation, proper signs, and secondary containments for collecting potential spills	$4,000 plus management time
Storing hazardous materials (from Cardboard and Plastics storage room) in a specific location for such purpose, to avoid contamination of non-hazardous wastes with hazardous materials	$4,000 plus management time
Provide hazardous materials (from Trailers A, B, & C and in the Chemicals Storage Area) with secondary containments for collecting potential spills, to avoid staining the floor and a potential infiltration to the soil	$2,500 plus management time
Provide eight 10-L plastic containers storing a mixture of gasoline and diesel utilized in the grass cutting machines were placed on the concrete floor with no secondary containment with secondary containments for collecting potential spills, to avoid staining the floor and a potential infiltration to the soil	$1,000 plus management time
Provide six 200-L metal drums containing gasoline observed next to the gasoline and/or diesel spill area with secondary containments for collecting potential spills, to avoid staining the floor and a potential infiltration to the soil	$1,000 plus management time
Provide sodium hypochlorite containers that are placed on the cement floor and not provided with secondary containment in the WWTP Equipment Room with secondary containments for collecting potential spills, to avoid staining the cement floor and a potential infiltration to the soil	$1,000 plus management time

Issue	Cost to Remediate
Provide 2,000-L diesel AST and a 10,000-L diesel AST in the Golf Course Equipment Area placed on the ground with secondary containments and other devices for collecting potential spills, to a potential infiltration to the soil	$4,000 plus management time
Provide two plastic 3,600-L ASTs containing pH adjusting substance and liquid fertilizer in the Golf Course Equipment Room that are placed directly on the ground and not provided with secondary containment with secondary containments	$4,000 plus management time
Designation of a specific location at the Hotel for storing all hazardous wastes generated	$5,000 plus management time
To store the three 200-L metal drums containing used oil that were observed placed on the concrete floor of the Golf Course Equipment Room, and with no secondary containment in the Temporary Hazardous Waste Storage, located in the Golf Club Maintenance Area	Management Time
Replacing the use of the R-22 at the site for a non Ozone Depleting Substance	$4,000 plus management time
Dispose of equipment out of operation placed directly on the ground in several parts of the Golf Club Maintenance Area that could be leaking oil and other hazardous materials	$4,000 plus management time
Provide scrap metal that is placed directly on the ground in the unpaved Scrap Metal Storage Area with concrete floor and protect it from the environment to avoid the early oxidation of metal parts	$5,000 plus management time
Provide Caterpillar 500-KVA generator, in the Golf Course Equipment Room with a secondary containment for collecting potential oil and diesel spills to avoid potential infiltration to the soil	$1,000 plus management time

FIRST AMENDMENT TO NOTE INDENTURE

Dated as of March        , 2005

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.

(collectively, Issuers)

and

LASALLE BANK NATIONAL ASSOCIATION

(Trustee)

FIRST AMENDMENT TO NOTE INDENTURE

THIS FIRST AMENDMENT TO NOTE INDENTURE (this “Amendment”), dated as of March ___, 2005, 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 Noteholders (as hereinafter defined) (hereinafter, the “Trustee”).

W I T N E S S E T H:

WHEREAS, pursuant to certain promissory notes, dated December 17, 2004 (collectively, the “Initial Notes”), executed and delivered by Issuers pursuant to that certain Note Indenture, dated as of December 17, 2004, between Issuers and Trustee (as amended by this Amendment and as the same may be further 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 December 17, 2004 (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 Initial Notes (together with the Initial Notes, the Indenture and the Security Trust Agreement, collectively, the “Financing Documents”).

WHEREAS, there is presently outstanding on the Initial Notes a principal balance of $110,000,000.

WHEREAS, in connection with the proposed Securitization (as defined in the Indenture) of a portion of the Note Indebtedness, the Trustee, on behalf of the Noteholders, have requested, and the Issuers have agreed, to re-size the Initial Notes in accordance with the terms and provisions of the Indenture and the Securitization Cooperation Agreement.

WHEREAS, the Trustee, on behalf of the Noteholders, now wishes to amend the Indenture pursuant to the terms and provisions of the Indenture and the Securitization Cooperation Agreement, and the Issuers consent to such amendment, in accordance with the terms set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto hereby covenant, agree, represent and warrant as follows:

I.DEFINITIONS

1.1Replacement Definitions. From and after the date hereof, the following terms set forth in the Indenture are hereby deleted in their entirety and shall be redefined as follows:

“Note A” shall mean that certain Promissory Note A in the original principal amount of Seventy Five Million and No/100 Dollars ($75,000,000), dated December 17, 2004 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 Thirty Five Million and No/100 Dollars ($35,000,000), dated December 17, 2004 and made by Issuers, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time as provided herein.

II.AMENDED PROVISIONS

2.1Revised General Terms. From and after the date hereof,

(a) Section 8.01(a) of the Indenture is amended as follows:

(i)By amending and restating clause (i) thereof in its entirety to provide as follows:

(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. Notwithstanding anything to the contrary contained in this Section 8.01, (1) earthquake insurance required hereunder may provide for co-insurance in an amount up to ten percent (10%) of the applicable insurance coverage and a deductible in an amount up to Two Million and No/100 Dollars ($2,000,000) and (2) coastal windstorm insurance required hereunder may provide for a deductible in an amount up to Two Million and No/100 Dollars ($2,000,000);

(ii)By amending and restating clause (vi) thereof in its entirety to provide as follows:

(vi)intentionally omitted;

(iii)By deleting the term “and” at the end of Clause (x) thereof;

(iv)By amending and restating clause (xi) thereof in its entirety to provide as follows:

(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, provided that Trustee hereby agrees that, notwithstanding the foregoing, Issuers shall not be required to obtain boiler and machinery insurance; and

(v)By adding the following at the end thereof:

(xii) political risk insurance in an amount not less than One Hundred Ten Million and No/100 Dollars ($110,000,000) covering losses arising from or associated with (A) the nationalization, confiscation, or expropriation of funds or assets (including expropriation pursuant to unlawful government action depriving the applicable Person of fundamental rights in its funds or assets), and (B) the deterioration in a Person’s ability to convert profits, debt service, and other investment returns from Mexican pesos into Dollars and to transfer Dollars out of Mexico (including new currency restrictions or controls preventing the conversion from Mexican pesos to Dollars and/or transfer and repatriation of monetary returns of an investment in Mexico).

(b)Section 8.01(d) of the Indenture is amended and restated in its entirety to provide as follows:

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, 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.

(c)Section 10.02 of the Indenture is amended and restated in its entirety to provide as follows:

Tax and Insurance Escrow Fund. Issuers shall pay to Trustee (a) on each Payment Date (i) 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 and Condominium charges and assessments thirty (30) days prior to their respective due dates and (ii) one twelfth of the Insurance Premiums that Trustee estimates will be payable for the renewal of the coverage afforded by the Policies (other than the political risk insurance Policy required under Section 8.01(a)(xii) hereof) 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 such Policies and (b) on each Payment Date, commencing with the Payment Date occurring in April 2005, an amount that Trustee estimates will be necessary to accumulate with Trustee (in equal installments and after taking into account the then remaining balance of any amounts deposited with Initial Purchaser on the Note Issuance Date for the purchase of political risk insurance coverage) funds sufficient to pay the Insurance Premium relating to political risk insurance Policy required under Section 8.01(a)(xii) hereof thirty (30) days prior to the expiration of such Policy (or thirty (30) days prior to the date the next installment of such Insurance Premium is due and payable, as applicable) (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, thirty (30) days prior to expiration of the Policies (other than the political risk insurance Policy required under Section 8.01(a)(xii) hereof) and/or thirty (30) days prior to the expiration of the political risk insurance Policy required under Section 8.01(a)(xii) hereof (or, if applicable, thirty (30) days prior to the date the next installment of the Insurance Premium therefor is due and payable), as the case may be. Notwithstanding anything to the contrary contained herein or in the other Financing Documents, it shall be a condition precedent to the exercise of any Extension Option that (x) Issuers shall have obtained a political risk insurance Policy satisfying the terms of Section 8.01(a)(xii) hereof and having an expiration date that is not earlier than the related Extended Maturity Date and (y) Issuers shall have delivered to Trustee evidence of such political risk insurance Policy reasonably satisfactory to Trustee not later than ten (10) Business Days prior to the first day of the applicable Extension Option term.

(d)Section 10.03(a) of the Indenture amended and restated in its entirety to provide as follows:

Replacement Reserve Fund. Issuers shall pay to Trustee (i) on each Payment Date commencing with the Payment Date occurring in February 2005, 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, 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 (commencing with the Payment Date occurring in January 2007), 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 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.”

III.MISCELLANEOUS

3.1Except as specifically modified and amended herein, all other terms, conditions and covenants contained in the Indenture shall remain in full force and effect.

3.2The terms and provisions of Section 9.03 of the Indenture are incorporated herein by this express reference.

3.3All references in the Financing Documents to the Indenture shall mean the Indenture as hereby modified and as it may be further amended, restated, replaced, supplemented or otherwise modified from time to time.

3.4Unless otherwise defined in this Amendment, terms defined in the Indenture or in any of the other Financing Documents shall have their defined meanings when used herein.

3.5All of the representations, warranties, covenants and other terms and provisions of the Notes and the other Financing Documents, as modified hereby, including, without limitation, all defined terms and granting clauses, shall be applicable from and after the date hereof with the same force and effect as if the same had originally been included in the Notes and the other Financing Documents. The Financing Documents, except as specifically modified by this Amendment, remain unmodified and, as so modified, are in full force and effect.

3.6This Amendment may be executed in any number of counterparts with the same effect as if all patties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

3.7This Amendment shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns.

3.8This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflict laws, and any applicable law of the United States of America.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized representatives, all as of the day and year first above written.

ISSUERS:
KERZNER PALMILLA BEACH PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER PALMILLA HOTEL PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER SERVICIOS HOTELEROS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER COMPANIA de SERVICIOS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President
KERZNER PALMILLA GOLF PARTNERS, S. de R.L. de C.V.
By:	/s/ John R. Allison
	Name: John R. Allison
	Title: Vice President

TRUSTEE:
LASALLE BANK NATIONAL ASSOCIATION
By:
	Name:
	Title:

APPROVED as of this          day of March, 2005
NOTEHOLDERS:
CREDIT SUISSE FIRST BOSTON LLC
By:
	Name:
	Title:

EX-8

EXHIBIT 8

Listing of Significant Subsidiaries of Kerzner International Limited

as of December 31, 2005

Name of Company	Country of  Incorporation	Ownership Interests
Kerzner International Bahamas Limited(1)	The Bahamas	100	%
Kerzner International North America, Inc.(2)	United States	100	%
One&Only (Indian Ocean) Management Limited(3)	British Virgin Islands	75	%
Kerzner International Management Limited(4)	British Virgin Islands	100	%

(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 One&Only Palmilla.

(3)Operator of the five Mauritius management agreements and One&Only Kanuhura and One&Only Maldives at Reethi Rah management agreements.

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

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 31, 2006

/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 31, 2006

/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, 2005 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 31, 2006		/s/ Howard B. Kerzner
	Howard B. Kerzner
	Chief Executive Officer
Dated: March 31, 2006		/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. 333-129945, 333-121164, 333-88854, 333-100522,
333-51446, 333-09368, and 333-1796 on Form F-4, S-8, F-3, S-8, S-8, S-8, and S-8, respectively, and in Post-Effective Amendment No.7 to Registration Statement No. 333-117110 on Form F-3, and in Post-Effective Amendment No. 2 on Form S-8 to Form F-4 to Registration Statement No. 333-15409, of Kerzner International Limited and subsidiaries (the “Company”) of our report dated March 21, 2006, 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, 2005.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida

March 31, 2006

EX-14.2

EXHIBIT 14.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement No. 333-129945, 333-121164, 333-88854, 333-100522, 333-51446, 333-09368, and 333-1796 on Form F-4, S-8, F-3, S-8, S-8, S-8, and S-8, respectively, and in Post-Effective Amendment No. 7 to Registration Statement No. 333-117110 on Form F-3, in Post Effective Amendment No. 1 to Registration Statement No. 333-09368 on Form S-8, and in Post-Effective Amendment No. 2 on Form S-8 to Form F-4 to Registration Statement No. 333-15409, of Kerzner International Limited of our report dated February 28, 2006 relating to the financial statements of Trading Cove Associates, which appears in this annual report on Form 20-F of Kerzner International Limited for the year ended December 31, 2005.

/s/ PricewaterhouseCoopers LLP

Hartford, CT

March 28, 2006

EX-14.3

EXHIBIT 14.3

Trading Cove Associates

Financial Statements

December 31, 2005, 2004 and 2003

Trading Cove Associates

Index

December 31, 2005, 2004 and 2003

	Page
Report of Independent Registered Public Accounting Firm	1
Financial Statements
Balance Sheets	2
Statements of Operations	3
Statements of Changes in Partners’ Capital	4
Statements of Cash Flows	5
Notes to Financial Statements	6-14

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, of 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, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, 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.

/s/ PricewaterhouseCoopers LLP

Hartford, CT

February 28, 2006

1

Trading Cove Associates

Balance Sheets

December 31, 2005, and 2004

	2005		2004
Assets
Current assets
Cash and cash equivalents	$	1,031,290	$	732,886
Relinquishment fee receivable	28,510,862		26,589,614
Other current assets	1,736		151
Total current assets	29,543,888		27,322,651
Deferred costs, net of accumulated amortization of $3,504,069 and $3,282,551 at December 31, 2005 and 2004, respectively	1,994,872		2,216,390
Property and equipment, net of accumulated depreciation of $2,750 and $14,951 at December 31, 2005 and 2004, respectively	84		384
Total assets	$	31,538,844	$	29,539,425
Liabilities and Partners’ Capital
Current liabilities
Accounts payable and accrued expenses	$	83,134	$	93,538
Subcontracted services payable	918,425		465,930
Estimated contract costs due related party	384,032		413,760
Total current liabilities	1,385,591		973,228
Commitments and contingent liabilities
Partners’ capital	30,153,253		28,566,197
Total liabilities and partners’ capital	$	31,538,844	$	29,539,425

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

2

Trading Cove Associates

Statements of Operations

For the Years Ended December 31, 2005, 2004 and 2003

	2005		2004		2003
Revenue
Relinquishment fee	$	72,964,466	$	69,101,491	$	65,099,553
Development services revenue	14,000		43,400		4,698,055
Total revenue	72,978,466		69,144,891		69,797,608
Expenses
Subcontract payments to partners and their affiliates	1,851,397		1,869,157		1,840,346
Cost of development services revenue	14,000		43,400		4,662,055
Amortization and depreciation	221,818		222,424		221,818
General and administrative	148,603		130,843		159,653
Total expenses	2,235,818		2,265,824		6,883,872
Interest and dividend income	21,244		8,252		6,041
Net income	$	70,763,892	$	66,887,319	$	62,919,777

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, 2005, 2004 and 2003

	Kerzner Investments Connecticut, Inc.			Waterford Gaming, L.L.C.			Total
Partners’ capital, January 1, 2003	$	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
Net income	37,881,946			32,881,946			70,763,892
Distributions	(37,088,418		)	(32,088,418		)	(69,176,836		)
Partners’ capital, December 31, 2005	$	15,701,627		$	14,451,626		$	30,153,253

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, 2005, 2004 and 2003

	2005			2004			2003
Cash flows from operating activities
Net income	$	70,763,892		$	66,887,319		$	62,919,777
Adjustments to reconcile net income to net cash provided by operating activities
Amortization	221,518			222,124			221,518
Depreciation	300			300			3,303
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	(1,921,248		)	(1,250,342		)	(1,669,449		)
Development fee receivable	—			—			84,000
Other current assets	(1,585		)	5,380			(1,531		)
Accounts payable and accrued expenses	(10,404		)	4,566			(25,884		)
Subcontracted services payable	452,495			(8,837		)	474,767
Estimated contract costs due related party	(29,728		)	(93,220		)	(9,899,359		)
Net cash provided by operating activities	69,475,240			65,767,290			52,106,135
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	(69,176,836		)	(65,833,006		)	(52,953,421		)
Partners’ contributions	—			—			900,000
Net cash used in financing activities	(69,176,836		)	(65,833,006		)	(52,053,421		)
Net change in cash and cash equivalents	298,404			(65,716		)	54,464
Cash and cash equivalents
Beginning of year	732,886			798,602			744,138
End of year	$	1,031,290		$	732,886		$	798,602

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

5

Trading Cove Associates

Notes to Financial Statements

December 31, 2005, 2004 and 2003

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; instead Waterford Gaming is entitled to such fees and cash.  On March 18, 1999, Waterford Gaming

6

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.  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:

Partner	Percentage Interest
Kerzner Investments Connecticut, Inc.	50	%
Waterford Gaming, L.L.C.	50	%

(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.

7

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 spa opened. The balance of the approximately 1,200-hotel rooms opened during June 2002. The Project Sunburst expansion is complete in terms of the Development Agreement.

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.  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, 2005 and 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.  This cost overrun has previously been recorded by the Partnership in its statement of operations.

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.  Kerzner Investments assumed the obligations of KIML under the Local Construction Services Agreement.  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

8

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 to 14.30% 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.

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, 2005, 2004 and 2003, $1,851,397, $1,869,157, and $1,840,346, 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.  As of December 31, 2005, 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, 2005.  The accrued liability to Kerzner Investments with respect to such fee at December 31, 2005 was approximately $384,000;

(v)Fifth, to pay Kerzner Investments an annual fee (in the form of a priority distribution) of $5.0 million payable in equal quarterly installments of $1.25 million beginning March 31, 2000 and ending December 31, 2006;

9

(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; and

(viii)Eighth, to distribute all excess cash.

On January 26, 2006, the Partnership made distributions of $1,250,000 pursuant to the fifth priority, $14,262,503 ($7,131,252 to Kerzner Investments and $7,131,251 to Waterford Gaming) pursuant to the seventh priority and $12,064,928 ($6,032,464 to each of Kerzner Investments and Waterford Gaming) pursuant to the eighth priority.  Such distributions will be recorded in the fiscal 2006 financial statements.

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.

2.Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly liquid investments with maturities of three months or less at the date of purchase.

Relinquishment Fees

Revenue is generated in accordance with the terms of the Relinquishment Agreement and recognized quarterly based upon the Revenues of the Authority, as reported by the Authority to the Partnership.

10

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 is being amortized over 189 months beginning March 4, 1999.

Property and Equipment

Office equipment, computer equipment and furniture and fixtures are stated at cost.  Depreciation expense is recognized 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, 2005, 2004 and 2003 amounted to $300, $300 and $3,303 of which $-0-, $-0- and $3,003 were included in 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.

11

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, which is being recorded over 189 months on a straight line basis, for the years ended December 31, 2005, 2004 and 2003 was $221,518, $222,124, and $221,518, respectively.

The Partnership’s estimate of amortization expense for each of the succeeding five years and thereafter is as follows:

Year ended December 31,
2006	$	221,518
2007	221,518
2008	222,124
2009	221,518
2010	221,518
Thereafter	886,676
	$	1,994,872

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, 2005, 2004 and 2003, Relinquishment Fees earned were $72,964,466, $69,101,491 and $65,099,553, respectively. The amount 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 25, 2005	$	8,330,592
July 25, 2005	26,539,416
October 25, 2005	9,583,596
January 25, 2006	28,510,862
Relinquishment Fees earned 2005	$	72,964,466
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

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5.Reconciliation of Financial Statements and Tax Information

	2005			2004			2003
Financial statement net income	$	70,763,892		$	66,887,319		$	62,919,777
Guaranteed payments to partners	(41,482,232		)	(39,550,748		)	(39,941,567		)
Financial statement depreciation and amortization (greater than) less than tax basis depreciation and amortization	(141		)	305			(3,028		)
Percentage of completion accounting difference	(15,783		)	(49,505		)	(9,236,479		)
Other	885			572			(4,865		)
Federal income tax basis net income	$	29,266,621		$	27,287,943		$	13,733,838

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.

13

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 plaintiff’s compliant.  The plaintiff has appealed this decision.  On May 9, 2005, the Supreme Court of Connecticut, without issuing any ruling on the substantive issues raised by plaintiff’s appeals, transferred the appeal to itself.  Oral argument was heard on September 21, 2005.  On January 23, 2006, the Supreme Court affirmed the trial court’s decision granting summary judgment in favor of the Defendants on all of plaintiff’s claims.  Defendant’s counterclaims against plaintiff remain pending.

14

EX-14.4

EXHIBIT 14.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Nos. 333-129945, 333-121164, 333-88854,
333-100522, 333-51446, 333-09368, and 333-1796 on Form F-4, S-8, F-3, S-8, S-8, S-8, and S-8, respectively, and in Post-Effective Amendment No. 7 to Registration Statement No. 333-117110 on Form F-3, and in Post-Effective Amendment No. 2 on Form S-8 to Form F-4 to Registration Statement No. 333-15409) of our report dated February 1, 2006, with respect to the financial statements of Harborside at Atlantis Joint Venture Limited, included in the Annual Report (Form 20-F) of Kerzner International Limited for the year ended December 31, 2005 filed with the Securities and Exchange Commission.

/s/ ERNST & YOUNG LLP

Certified Public Accountants

Orlando, Florida

March 27, 2006

EX-14.5

EXHIBIT 14.5

CONSOLIDATED FINANCIAL STATEMENTS

Harborside at Atlantis Joint Venture Limited

Years Ended December 31, 2005, 2004 and 2003

Harborside at Atlantis Joint Venture Limited

Consolidated Financial Statements

Years Ended December 31, 2005, 2004 and 2003

Table of Contents

Report of Independent Registered Public Accounting Firms	1
Consolidated Financial Statements
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Shareholders’ Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7

REPORT OF INDEPENDENT REGISTERD PUBLIC ACCOUNTING FIRM

The Shareholders of Harborside Joint Venture Limited

We have audited the accompanying consolidated balance sheet of Harborside Joint Venture Limited (the Company) as of December 31, 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit 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. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit 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, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harborside at Atlantis Joint Venture Limited at December 31, 2005, and the consolidated results of its operations and its cash flows for the year in the period ended December 31, 2005, in conformity with U.S. generally accepted principles.

/s/ ERNST & YOUNG LLP

February 1, 2006

Orlando, Florida

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of

Harborside at Atlantis Joint Venture Limited:

We have audited the accompanying consolidated balance sheets of Harborside at Atlantis Joint Venture Limited (a Bahamas Corporation) (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

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 provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Orlando, Florida

July 29, 2005

2

Harborside at Atlantis Joint Venture Limited

Consolidated Balance Sheets

	December 31
	2005		2004
Assets
Cash and cash equivalents	$	10,865,012	$	3,386,771
Restricted cash	1,354,410		1,421,005
Customer mortgage loans receivable, less allowance for loan losses of $2,187,688 and $3,036,551, respectively	37,215,012		27,502,143
Inventory of vacation ownership interests	47,483,019		47,272,942
Property and equipment, net	3,142,036		3,376,224
Prepaid expenses and other assets	5,648,319		7,468,587
Total assets	$	105,707,808	$	90,427,672
Liabilities and shareholders’ equity
Accounts payable and accrued liabilities	$	10,112,566	$	13,445,044
Due to affiliates	5,998,273		1,443,718
Other liabilities	600,926		13,830,667
Notes payable	19,562,095		737,174
Notes payable to related parties	9,906,420		32,906,420
Total liabilities	46,180,280		62,363,023
Shareholders’ equity:
Common stock, $1 par value; 5,000 shares authorized, issued, and outstanding	5,000		5,000
Additional paid-in capital	15,739,000		15,739,000
Retained earnings	43,783,528		12,320,649
Total shareholders’ equity	59,527,528		28,064,649
Total liabilities and shareholders’ equity	$	105,707,808	$	90,427,672

See accompanying notes.

3

Harborside at Atlantis Joint Venture Limited

Consolidated Statements of Income

	Year Ended December 31
	2005			2004			2003
Revenues:
Vacation ownership interest sales	$	78,813,278		$	37,412,560		$	37,571,639
Resort and other income	7,681,571			1,360,083			2,939,280
Interest income	4,757,799			3,819,314			3,594,068
Total revenues	91,252,648			42,591,957			44,104,987
Costs and operating expenses:
Cost of vacation ownership interests sold	21,838,501			11,225,078			11,390,954
Sales and marketing	24,333,780			15,389,362			14,565,378
General, administrative, and operating expenses	11,013,366			7,146,711			7,542,801
Depreciation	829,617			774,882			804,894
Provision for loan losses	(466,631		)	1,022,307			1,106,991
Interest expense, net	1,718,761			1,082,761			1,913,279
Gain on casualty damage remediation, net	—			(7,692,824		)	(465,165		)
Other	522,375			136,562			1,265,152
Total costs and operating expenses	59,789,769			29,084,839			38,124,284
Net income	$	31,462,879		$	13,507,118		$	5,980,703

See accompanying notes.

4

Harborside at Atlantis Joint Venture Limited

Consolidated Statements of Shareholders’ Equity

Year Ended December 31, 2005, 2004 and 2003

	Common Stock			Additional  Paid-in Capital		Retained  Earnings  (Accumulated Deficit)			Total  Shareholders’ Equity
	Shares	Amount
Balance, December 31, 2002	5,000	$	5,000	$	15,739,000	$	(7,167,172	)	$	8,576,828
Net income	—	—		—		5,980,703			5,980,703
Balance, December 31, 2003	5,000	$	5,000	15,739,000		(1,186,469		)	14,557,531
Net income	—	—		—		13,507,118			13,507,118
Balance, December 31, 2004	5,000	$	5,000	15,739,000		12,320,649			28,064,649
Net income	—	—		—		31,462,879			31,462,879
Balance, December 31, 2005	5,000	$	5,000	$	15,739,000	$	43,783,528		$	59,527,528

See accompanying notes.

5

Harborside at Atlantis Joint Venture Limited

Consolidated Statements of Cash Flows

	Year Ended December 31
	2005			2004			2003
Operating activities
Net income	$	31,462,879		$	13,507,118		$	5,980,703
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	829,617			774,882			804,894
Amortization of deferred financing costs	221,659			197,494			145,818
Provision for loan losses	(466,631		)	1,022,307			1,106,991
Changes in operating assets and liabilities:
Customer mortgage loans receivable	(9,246,238		)	(6,666,404		)	(4,844,986		)
Inventory of vacation ownership interests	(210,077		)	(22,989,164		)	10,941,477
Prepaid expenses and other assets	1,598,609			(4,999,247		)	790,519
Accounts payable and accrued liabilities	(3,332,478		)	6,225,073			(4,333,792		)
Due to affiliates	4,554,555			(728,792		)	(5,334,974		)
Other liabilities	(13,229,741		)	12,372,068			(3,004,519		)
Net cash provided by (used in) operating activities	12,182,154			(1,284,665		)	2,252,131
Investing activities
Decrease in restricted cash	66,595			82,243			591,191
Cash paid for property and equipment	(595,429		)	(144,542		)	(642,867		)
Net cash used in investing activities	(528,834		)	(62,299		)	(51,676		)
Financing activities
Payments on notes payable	(7,242,177		)	(4,722,159		)	(973,107		)
Proceeds from notes payable	26,067,098			—			—
Payments on notes payable to related parties	(31,000,000		)	—			(9,000,000		)
Proceeds from notes payable to related parties	8,000,000			3,000,000			—
Net cash used in financing activities	(4,175,079		)	(1,722,159		)	(9,973,107		)
Net increase (decrease) in cash and cash equivalents	7,478,241			(3,069,123		)	(7,772,652		)
Cash and cash equivalents, beginning of year	3,386,771			6,455,894			14,228,546
Cash and cash equivalents, end of year	$	10,865,012		$	3,386,771		$	6,455,894
Supplemental cash flow disclosures
Cash paid for interest	$	2,313,914		$	1,443,393		$	3,004,819

See accompanying notes.

6

Harborside at Atlantis Joint Venture Limited

Notes to Consolidated Financial Statements

December 31, 2005

1. Nature of Business

Harborside at Atlantis Joint Venture Limited (HAJV) is the holding company of Harborside at Atlantis Development Limited (HAD) and Harborside at Atlantis Management Limited (HAM) (collectively, the Company). HAD was established to construct, furnish, market, sell, and finance vacation ownership interests (VOIs) at the Harborside at Atlantis Resort (the Resort) located in the Commonwealth of the Bahamas. HAM was established to manage the Resort. The shareholders of HAJV are Vistana Bahamas Holdings, Ltd. (Vistana Holdings) and Kerzner International Timeshare Limited (Kerzner) (formerly Sun International Timeshare Limited), each owning a 50% interest in the Company.

The Company generates revenues from the sale and financing of VOIs at the Resort, which typically entitle the buyer to ownership of a fully furnished unit for a one-week period on an annual or an alternate-year basis. The Company’s operations also consist of managing the operations of the Resort and related amenities. The Company sells VOIs to both domestic and foreign purchasers. All contracts relating to the sale of VOIs are denominated in U.S. dollars. In addition, the Company generates revenues from the rental of unoccupied units at the Resort.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of HAJV, HAD, and HAM. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments purchased with an original maturity of three months or less. The Company minimizes its credit risk associated with cash and cash equivalents by utilizing high credit quality financial institutions. However, a significant portion of the Company’s cash is maintained with a single bank and, accordingly, the Company is subject to credit risk. Periodic evaluations of the relative credit standing of the financial institutions maintaining the Company’s deposits are performed to evaluate and mitigate, if necessary, credit risk.

7

Restricted Cash

Restricted cash consists of deposits received on sales of VOIs that are held in escrow until the applicable statutory rescission period has expired.

Customer Mortgage Loans Receivable and Allowance for Loan Losses

Customer mortgage loans receivable are recorded at the lower of amortized cost or market less the related allowance for loan losses.

The Company provides for estimated customer mortgage loans receivable cancellations and defaults at the time the VOI sales are recorded by a charge to operations and a credit to an allowance for loan losses. The Company performs an analysis of factors such as economic conditions and industry trends, defaults, past due agings, and historical write-offs of customer mortgage loans receivable to evaluate the adequacy of the allowance. Recoveries on defaulted customer mortgage loans receivable are recorded in inventory of VOIs and as a reduction of loan charge-offs at the historical cost of VOIs. All collection and foreclosure costs are expensed as incurred. Interest income is suspended on all notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due.

Inventory of Vacation Ownership Interests

Inventory of VOIs is valued at the lower of cost or net realizable value. Development costs include real estate and construction costs, including capitalized interest, and are allocated to VOIs. Interest and other carrying costs incurred during the construction period are capitalized, and such costs incurred on completed VOI inventory are expensed. Costs are allocated to units sold on the relative sales value method. During the years ended December 31, 2005, 2004 and 2003, $979,272, $432,875 and $0, respectively, of interest was capitalized into inventory. In early 2004, the Company started the construction of its second phase (Phase 1B) of VOIs, which consisted of 228 villas. As of December 31, 2005 and 2004, the construction of Phase 1B was 100% and 57% complete, respectively. The Company periodically evaluates the recovery of the carrying amount of its properties under the guidelines of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company believes that none of its long-lived assets have been impaired as of December 31, 2005.

8

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is computed over the applicable estimated useful lives of the assets (between three and ten years), or in the case of leasehold improvements, over the term of the related lease, if shorter, using the straight-line method. Depreciation expense on property and equipment for the years ended December 31, 2005, 2004 and 2003 was $829,617, $774,882 and $804,894, respectively.

In connection with the development of the Resort, the Company constructed guest registration facilities and on-site sales and marketing facilities (Resort and Sales Facilities). The Company will retain ownership and control over these facilities until the project is sold-out, at which time the Resort and Sales Facilities will revert to the owners. Resort and Sales Facilities are included in property and equipment. The building is depreciated based on current sales to total project sales.

Deferred Financing Costs

The Company capitalizes direct and incremental costs incurred in connection with its long-term financing arrangements. These costs are amortized to interest expense over the life of the related debt instrument using the straight-line method, which materially approximates the effective interest method. Amortization of deferred financing costs totaled $221,659, $197,494 and $145,818 for the years ended December 31, 2005, 2004, and 2003, respectively.

Customer Deposits

Until a VOI contract qualifies as a sale, all payments received are accounted for as deposits, which are included in other liabilities in the accompanying consolidated balance sheets. If a contract is canceled after the applicable statutory period, deposits forfeited are recorded as income.

9

Revenue Recognition

The Company recognizes sales of VOIs when a minimum of 10% of the sales price has been received in cash, the rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and the Company has completed substantially all of its obligations with respect to any development related to the real estate sold. If all the criteria are met except that construction is not substantially complete, then revenues are recognized on the percentage-of-completion method using the cost-to-cost basis of measurement.

For sales that do not qualify for either accrual or percentage-of-completion recognition, all revenue is deferred using the deposit method. Under the deposit method, cash received from customers is classified as a refundable deposit in the liability section of the consolidated balance sheets and profit recognition is deferred until the revenue recognition criteria have been met.

The Company rents unsold VOIs on a short-term basis. Such resort rental income is accrued as earned. Property management fee revenues are accrued as earned in accordance with the management contracts and are included in resort and other income in the accompanying statements of income.

Customer mortgage loans receivable interest is accrued as earned based on the contractual provisions of the notes and contracts.

Sales and Marketing Costs

Sales and marketing costs are expensed as incurred, except for costs directly related to sales associated with VOI contracts not eligible for revenue recognition as described above. Such deferred costs principally consist of sales commissions and are charged to operations as the related revenue is recognized. Deferred sales and marketing costs are classified as prepaid expenses in the accompanying consolidated balance sheets and at December 31, 2005 and 2004 amounted to $667,152 and $3,181,601, respectively.

10

Income Taxes

The accompanying consolidated statements of income do not include a provision for income taxes as no income tax or capital gains tax is imposed on Bahamian corporations.

Concentrations of Credit Risk

The Company offers financing to the buyers of VOIs. The customer mortgage loans received by the Company bear interest at a fixed rate, are payable over terms of up to 10 years, and are secured by a first mortgage on the VOI. Any adverse change in economic conditions or significant price increases or adverse events related to the travel and tourism industry could have a material adverse effect on the Company’s business. Such conditions may also adversely affect the future availability and cost of financing for the Company or its customers and result in a material adverse effect on the Company’s business. In addition, changes in general economic conditions may adversely affect the Company’s ability to collect on its outstanding customer mortgage loans receivable.

The Company has historically derived net interest income from its financing activities because the interest rates it charges its customers who finance the purchase of their VOIs exceed the interest rates the Company pays to its lenders. Because the Company’s indebtedness bears interest at variable rates and the Company’s customer mortgage loans receivable bear interest at fixed rates, increases in interest rates will erode the spread in interest rates that the Company has historically obtained and could cause the rate on the Company’s borrowings to exceed the rate at which the Company provides financing to its customers. The Company has not engaged in interest rate hedging transactions. Therefore, any increase in interest rates, particularly over a sustained period, could have a material adverse effect on the Company’s results of operations, cash flows, and financial position.

New Accounting Pronouncement

In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions. SFAS No. 152 amends SFAS No. 66, Accounting for the Sales of Real Estate, and SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, in association with the issuance of AICPA SOP 04-2, Accounting for Real Estate Time-Sharing Transactions. These statements were issued to address the diversity in practice caused by lack of

11

guidance specific to real estate time-sharing transactions. Under SFAS No. 152, the majority of the costs incurred to sell timeshares will be charged to expense when incurred. In regards to notes receivable issued in conjunction with a sale, an estimate of uncollectibility that is expected to occur must be recorded as a reduction of revenue at the time that profit is recognized on a timeshare sale. Rental and other operations during holding periods must be accounted for as incidental operations, which require that any incidental revenue in excess of incidental costs be recorded as a reduction of inventory costs. SFAS No. 152 is effective for financial statements for fiscal years beginning after June 15, 2005, and therefore will be implemented by the Company in the year ending December 31, 2006. The Company expects the adoption of this standard to result in a one-time pre-tax charge of approximately $3 million to $4 million in 2006.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Accordingly, actual results could differ from those estimates.

Reclassification

Certain amounts in the 2003 and 2004 consolidated financial statements were reclassified to conform to the 2005 presentation.

3. Customer Mortgage Loans Receivable

The Company provides financing to the purchasers of VOIs collateralized by their VOI interests. The customer mortgage loans receivable bear interest, at the time of issuance, ranging from 7.9% to 17.9%, which remains fixed over the term of the loan and typically averages six years. The customer mortgage loans receivable may be prepaid at any time without penalty. The weighted-average per annum rate of interest on outstanding customer mortgage loans receivable was 15.7% and 15.2% as of December 31, 2005 and 2004, respectively.

As of December 31, 2005, net customer mortgage loans receivable from buyers residing outside of the United States of America aggregated $1,374,034, with buyers within no individual country other than the United States of America aggregating more than 0.86% of gross outstanding customer mortgage loans receivable.

12

The following schedule presents the scheduled contractual principal maturities of customer mortgage loans receivable:

Year Ending December 31	Amount
2006	$	3,976,186
2007	4,522,403
2008	4,313,067
2009	4,190,577
2010	4,113,284
Thereafter	18,287,183
Total principal maturities of customer mortgage loans receivable	39,402,700
Less allowance for loan losses	(2,187,688		)
Net principal maturities of customer mortgage loans receivable	$	37,215,012

The activity in the allowance for loan losses on customer mortgage loans receivable during the year ended December 31, 2005 and 2004 is summarized as follows:

	2005			2004
Balance, beginning of year	$	3,036,551		$	2,556,409
Charge-offs	(382,232		)	(542,165		)
Provision for loan losses	(466,631		)	1,022,307
Balance, end of year	$	2,187,688		$	3,036,551

13

4. Property and Equipment

Property and equipment consisted of the following as of December 31, 2005 and 2004:

	2005			2004
Buildings and improvements	$	3,323,473		$	3,320,154
Furniture and fixtures	2,919,671			2,425,042
Vehicles	373,885			308,890
	6,617,029			6,054,086
Less accumulated depreciation	(3,474,993		)	(2,677,862		)
	$	3,142,036		$	3,376,224

5. Notes Payable

2001 Receivables Loan

During 2001, the Company entered into a receivables loan agreement (the 2001 Receivables Loan) with a maximum credit line of $35 million. The 2001 Receivables Loan required that the Company deliver to the lender customer mortgage loans receivable meeting certain criteria in order to receive advances on the 2001 Receivables Loan. Advances on the 2001 Receivables Loan bore interest at the 90-day LIBOR rate plus 3.25%. As of December 31, 2004, $737,174 was outstanding under the 2001 Receivables Loan. The 2001 Receivables Loan was paid off during 2005. The Company incurred approximately $4,000, $140,000 and $310,000 in interest expense for the years ended December 31, 2005, 2004 and 2003, respectively, in association with the 2001 Receivables Loan. These amounts are included in net interest expense in the accompanying consolidated statements of income.

14

2005 Receivables Loan

During 2005, the Company entered into a receivables loan agreement (the 2005 Receivables Loan) with a maximum credit line of $40 million. The proceeds were used to pay off the 2001 Receivables Loan. The 2005 Receivables Loan requires that the Company deliver to the lender customer mortgage loans receivable, meeting certain criteria in order to receive advances on the 2005 Receivables Loan. Advances on the 2005 Receivables Loan bear interest at 30-day LIBOR rate plus 3.25% (7.64% at December 31, 2005). As of December 31, 2005, $19,562,095 was outstanding under the 2005 Receivables Loan. Monthly customer payments of principal and interest with respect to the collateralized customer mortgage loans receivable are deposited directly with the lender. The principal and interest payments are applied against the 2005 Receivables Loan in the following order: first, to the payment of costs or expenses incurred by the lender in collecting any amounts due in connection with the Receivables Loan; second, to the payment of accrued and unpaid interest; and, thereafter, to the reduction of the principal balance. The 2005 Receivables Loan matures on March 31, 2010. The Company incurred approximately $675,000 in interest expense for the year ended December 31, 2005 in association with the 2005 Receivables Loan. This amount is included in net interest expense in the accompanying consolidated statements of income.

The 2005 Receivables Loan requires, among other things, that the Company maintain certain minimum financial ratios. At December 31, 2005, the Company was in compliance with all covenants.

15

6. Commitments and Contingencies

The Company leases office space from unrelated parties under operating leases which expire in 2010. Annual rent expense under such operating leases for the years ended December 31, 2005, 2004 and 2003 totaled approximately $659,000, $530,000 and $561,000, respectively, and is included in sales and marketing expenses. Future minimum lease payments, by year and in the aggregate, under noncancelable operating leases are as follows: 

Year Ending December 31	Amount
2006	$	295,714
2007	307,911
2008	320,646
2009	333,923
2010	245,839
Total future minimum lease payments	$	1,504,033

7. Related Party Transactions

The Company has entered into management agreements with Kerzner International Bahamas Limited (formerly Sun International Bahamas Limited) and Starwood Vacation Ownership, Inc. (SVO), the owners of Kerzner and Vistana Holdings, respectively, to provide management, marketing, customer mortgage loans receivable processing, and administrative assistance to the Company. The management fee is calculated based on a percentage of net VOI sales or customer mortgage loans receivable, depending on the type of service provided.

For the years ended December 31, 2005, 2004 and 2003, SVO charged the Company $3,635,943, $2,766,205 and $1,289,800, respectively, for general and administrative expenses and $327,490, $323,050 and $167,700 respectively, for customer mortgage loans servicing fees. These amounts are classified as general, administrative and operating expenses in the accompanying consolidated statements of income. Kerzner charged the Company $3,305,403, $2,514,732 and $1,847,459 for the years ended December 31, 2005, 2004 and 2003, respectively, for marketing fees, which are included in sales and marketing expenses in the accompanying consolidated statements of income. In addition, Kerzner charged the Company $849,522, $465,922 and $0 for the years ended December 31, 2005, 2004 and 2003, respectively, for development fees, which were capitalized into inventory in the accompanying consolidated balance sheets.

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As of December 31, 2005 and 2004, the Company had recorded $5,998,273 and $1,443,718, respectively, as due to affiliates in the accompanying consolidated balance sheets. As described above, this amount includes general and administrative expenses, customer mortgage loans receivable servicing fees, and marketing fees payable to the shareholders, as well as other payroll costs. The payroll costs, general and administrative expenses, and marketing fees are payable quarterly based on net cash flow available, as defined in the shareholders’ agreement. The customer mortgage loans receivable servicing fees are payable monthly.

The Company entered into notes payable agreements with Kerzner and Vistana Holdings (collectively, the Lenders) during 2000, which bear interest at the 30-day LIBOR rate plus 2.5% (6.89% at December 31, 2005). The notes payable agreements are non-revolving and are pari passu with respect to payments of principal and accrued interest. As of December 31, 2005 and 2004, $9,906,420 and $32,906,420, respectively, were outstanding under the notes payable agreements. On a monthly basis, the Company must pay to the Lenders an amount equal to the number of VOI registrations completed in the previous month multiplied by an amount per VOI. Repayment terms in excess of the monthly payment are based on net cash available for distribution to the shareholders, as defined. The monthly payment amount is first applied to accrued and unpaid interest and then to principal. The notes payable mature on December 31, 2006.

During the years ended December 31, 2005, 2004 and 2003, the Company incurred approximately $1,797,000, $1,193,000 and $1,458,000 in interest charges associated with the notes payable, respectively. Interest charges, net of capitalized amounts, are included in net interest expense in the accompanying consolidated statements of income.

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8. Gain on Casualty Damage Remediation - Net

During November 2001, Hurricane Michelle (the Hurricane) hit the island on which the Resort is located. During 2002, the Company became aware of excessive water intrusion and moisture levels within a portion of the vacation ownership units at the Resort, which management attributed to the Hurricane. The Resort was closed from September 2002 to the beginning of December 2002, due to the severity of the mold and odor condition. During 2002, the Company was able to estimate the costs to be incurred in relation to the damage incurred by the Hurricane and recognized approximately $13.9 million of related expenses to cover the construction remediation expenses, guest relocation expenses, and legal and professional expenses. During 2003, the Company received approximately $3.0 million from the insurers and expensed an additional $2.6 million. During 2004, the Company received approximately $8.4 million from insurers and expensed an additional $0.7 million. The claim was completely settled as of December 31, 2004.

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EX-14.6

EXHIBIT 14.6

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-129945, 333-121164, 333-88854, 333-100522,
333-51446, 333-09368, and 333-1796 on Form F-4, S-8, F-3, S-8, S-8, S-8, and S-8, respectively, and in Post-Effective Amendment No. 7 to Registration Statement No. 333-117110 on Form F-3, and in Post-Effective Amendment No. 2 on Form S-8 to Form F-4 to Registration Statement No. 333-15409, of Kerzner International Limited and subsidiaries of our report of Harborside at Atlantis Joint Venture Limited dated July 29, 2005, appearing in the Annual Report on Form 20-F of Kerzner International Limited and subsidiaries for the year ended December 31, 2005.

/s/ DELOITTE & TOUCHE LLP

Orlando, Florida

March 28, 2006