CORINTHIA FINANCE Plc a Member of the Corinthia Group of Companies

Offering Memorandum dated 11 March 2002

CORINTHIA FINANCE plc A member of the Corinthia Group of Companies

CORINTHIA FINANCE p.l.c. (registered with limited liability in the Republic of Malta)

ISSUE OF LM4,000,000 6.75% BONDS 2012 OF A NOMINAL VALUE OF LM100 ISSUED AT PAR (SUBJECT TO AN OVER-ALLOTMENT OPTION AS DESCRIBED BELOW)

EURO 10,000,000 6.5% BONDS 2010 OF A NOMINAL VALUE OF €100 ISSUED AT €97 PER BOND (SUBJECT TO AN OVER-ALLOTMENT OPTION AS DESCRIBED BELOW)

GUARANTEED BY

CORINTHIA PALACE HOTEL COMPANY LIMITED (registered with limited liability in the Republic of Malta)

Corinthia Finance p.l.c. (the ‘Company’) is hereby offering to the public in Malta Lm4 million 6.75 per cent Bonds due 2012 having a nominal value of Lm100 each and issued at par (the ’ML Bond’) and €10 million 6.5 per cent Bonds due 2010 having a nominal value of €100 issued at €97 (the ’Euro Bond’) each, jointly referred to as the ‘Bonds’. The Bonds are guaranteed by Corinthia Palace Hotel Company Limited (the ‘Guarantor’ or ‘CPHCL’). The ML Bond will, unless previously purchased and cancelled, be redeemed by the Company on the 8 April 2012 and the Euro Bond will, unless previously purchased and cancelled, be redeemed by the Company on the 8 April 2010 (See ‘Terms and Conditions of the Bonds’). Interest on the Bonds will become due and payable in the case of the ML Bond semi-annually in arrears on the 8 April and on the 8 October in each year at the rate of 6.75 per cent per annum and annually in arrears on the 8 April in each year at the rate of 6.5 per cent per annum with respect of the Euro Bond. The ﬁ rst interest payment shall become due and payable on the 8 October 2002 with respect to the ML Bond and 8 April 2003 with respect to the Euro Bond. In the event that during the Offer Period the Company receives applications for Bonds in excess of the Original Bond Issues (as deﬁ ned below) the Company may increase the Bonds in issue by an aggregate of Lm4,000,000 (or their equivalent in Euro) in either or both of the ML Bond or the Euro Bond (the ‘Over-allotment Option’) (See ‘Allocation Policy’ below). The Company also reserves the right in the event of an over-subscription in the ML Bond and an under-subscription in the Euro Bond or vice-versa, subject to the consent of an Applicant, to re-allocate over-subscriptions received in one Issue to under-subscriptions received in another (the ‘Re-allocation Option’ and ‘Allocation Policy’ below). The proceeds from the Bonds will be advanced by the Company to the Guarantor for its general funding purposes (See ‘Purpose of the Issues’ below). The Bonds are fully underwritten by Bank of Valletta p.l.c. (the ‘Underwriter’) so that any amount of the Original Bond Issues not taken up by investors will be purchased by the Underwriter.

The Bonds constitute the general, direct, unconditional, unsecured and unsubordinated obligations of the Company and the Guarantor and will rank pari passu without any priority or preference with all other present and future unsecured and unsubordinated obligations of the Company and the Guarantor.

Application has been made to the Malta Stock Exchange (the ‘Malta Stock Exchange’ or ‘MSE’) for the Bonds to be admitted to its Ofﬁ cial List (the ‘MSE Ofﬁ cial List’) and for dealings to commence on the Malta Stock Exchange.

MANAGER & UNDERWRITER SPONSORING STOCKBROKER Wilfred Mallia

Bank of Valletta p.l.c.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 1 IMPORTANT INFORMATION

THIS DOCUMENT CONSTITUTES AN OFFERING MEMORANDUM AND CONTAINS INFORMATION ON AN ISSUE BY CORINTHIA FINANCE P.L.C. (THE ‘COMPANY’) OF TWO BONDS NAMELY LM4 MILLION 6.75 PER CENT BONDS 2012 OF A NOMINAL VALUE OF Lm100 ISSUED AT PAR AND €10 MILLION 6.5 PER CENT BONDS 2010 OF A NOMINAL VALUE OF €100 ISSUED AT €97, BOTH GUARANTEED BY CORINTHIA PALACE HOTEL COMPANY LIMITED (THE ‘GUARANTOR’). THIS DOCUMENT ALSO CONTAINS INFORMATION ABOUT THE COMPANY AND THE GUARANTOR IN COMPLIANCE WITH THE REQUIREMENTS OF THE MALTA STOCK EXCHANGE.

THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR UNDER THE HEADING ‘DIRECTORS’ (THE ‘DIRECTORS’), ARE THE PERSONS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM, SAVE FOR THE INFORMATION SPECIFICALLY RELATING TO THE GUARANTOR, FOR WHICH THE DIRECTORS OF THE GUARANTOR ARE RESPONSIBLE. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE DIRECTORS OF THE COMPANY AND THE GUARANTOR (WHO HAVE ALL TAKEN REASONABLE CARE TO ENSURE SUCH IS THE CASE), THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. THE DIRECTORS ACCEPT RESPONSIBILITY ACCORDINGLY.

NO BROKER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORISED BY THE COMPANY, THE GUARANTOR OR THEIR RESPECTIVE DIRECTORS, TO ISSUE ANY ADVERTISEMENT OR TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE SALE OF THE BONDS (AS DEFINED HEREIN) OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM AND IN THE DOCUMENTS REFERRED TO HEREIN, IN CONNECTION WITH THE ISSUES HEREBY MADE, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORISED BY THE COMPANY, THE GUARANTOR OR THEIR RESPECTIVE DIRECTORS.

THE MALTA STOCK EXCHANGE ACCEPTS NO RESPONSIBILITY FOR THE CONTENTS OF THIS OFFERING MEMORANDUM, MAKES NO REPRESENTATIONS AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWEVER ARISING FROM OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS OFFERING MEMORANDUM.

THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AND MAY NOT BE USED FOR PURPOSES OF AN OFFER OR INVITATION TO SUBSCRIBE FOR BONDS BY ANY PERSON IN ANY JURISDICTION (I) IN WHICH SUCH OFFER OR INVITATION IS NOT AUTHORISED OR (II) IN WHICH THE PERSON MAKING SUCH OFFER OR INVITATION IS NOT QUALIFIED TO DO SO OR (III) TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR INVITATION.

IT IS THE RESPONSIBILITY OF ANY PERSONS IN POSSESSION OF THIS OFFERING MEMORANDUM AND ANY PERSONS WISHING TO APPLY FOR BONDS TO INFORM THEMSELVES OF, AND TO OBSERVE AND COMPLY WITH, ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANT JURISDICTION. PROSPECTIVE APPLICANTS FOR BONDS SHOULD INFORM THEMSELVES AS TO THE LEGAL REQUIREMENTS OF SO APPLYING AND ANY APPLICABLE EXCHANGE CONTROL REQUIREMENTS AND TAXES IN THE COUNTRIES OF THEIR NATIONALITY, RESIDENCE OR DOMICILE.

THE BONDS HAVE NOT BEEN NOR WILL THEY BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ‘1933 ACT’) OR UNDER ANY STATE SECURITIES LAW AND, EXCEPT WITH THE SPECIFIC CONSENT OF THE DIRECTORS, MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS OR ANY AREA SUBJECT TO ITS JURISDICTION (THE ‘UNITED STATES’) OR TO ANY UNITED STATES PERSON (AS DEFINED IN REGULATIONS OF SUCH ACT, AS AMENDED FROM TIME TO TIME). IN ADDITION THE COMPANY WILL NOT BE REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940), AS AMENDED (THE ‘1940 ACT’) AND THE INVESTORS WILL NOT BE ENTITLED TO THE BENEFITS OF THE 1940 ACT. BASED ON INTERPRETATIONS OF THE 1940 ACT BY THE STAFF OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION RELATING TO FOREIGN INVESTMENT COMPANIES, IF THE COMPANY HAS MORE THAN 100 BENEFICIAL OWNERS OF ITS SECURITIES WHO ARE UNITED STATES PERSONS, IT MAY BECOME SUBJECT TO THE 1940 ACT. THE DIRECTORS WILL NOT KNOWINGLY PERMIT THE NUMBER OF HOLDERS WHO ARE UNITED STATES PERSONS TO EXCEED 70.

A COPY OF THIS OFFERING MEMORANDUM HAS BEEN REGISTERED WITH THE REGISTRAR OF COMPANIES, IN ACCORDANCE WITH THE ACT AND SUBMITTED WITH THE MALTA STOCK EXCHANGE IN SATISFACTION OF THE LISTING PARTICULARS FOR THE BONDS.

STATEMENTS MADE IN THIS OFFERING MEMORANDUM ARE, EXCEPT WHERE OTHERWISE STATED, BASED ON THE LAW AND PRACTICE CURRENTLY IN FORCE IN MALTA AND ARE SUBJECT TO CHANGES THEREIN.

2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES THE COMPANY HAS APPLIED TO THE MALTA STOCK EXCHANGE FOR THE BONDS BEING ISSUED PURSUANT TO THIS OFFERING MEMORANDUM TO BE QUOTED ON THE MSE OFFICIAL LIST.

THE BOND ISSUES HAVE BEEN UNDERWRITTEN BY BANK OF VALLETTA P.L.C.

THE VALUE OF INVESTMENTS CAN GO UP OR DOWN AND PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE NOMINAL VALUE OF THE BONDS ON OFFER WILL BE REPAYABLE IN FULL UPON REDEMPTION. IF YOU NEED ADVICE YOU SHOULD CONSULT A LICENSED STOCKBROKER OR AN INVESTMENT ADVISER LICENSED UNDER THE INVESTMENT SERVICES ACT, CAP. 370 OF THE LAWS OF MALTA.

PERMISSION FROM THE MALTA FINANCIAL SERVICES CENTRE FOR THE ISSUE OF THIS OFFERING MEMORANDUM IN TERMS OF SECTION 11 OF THE INVESTMENT SERVICES ACT, CAP. 370 OF THE LAWS OF MALTA IS NOT REQUIRED BY VIRTUE OF THE EXEMPTIONS CONTAINED IN LEGAL NOTICES 6 AND 95 OF 1995.

FORWARD-LOOKING STATEMENTS

This Offering Memorandum contains forward-looking statements that include, among others, statements concerning the Company’s and the Guarantor’s strategies and plans relating to the attainment of those objectives, its capital requirements and other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts and which may involve predictions of future circumstances. Investors can generally identify forward-looking statements by the use of terminology such as ‘may’, ‘will’, ‘expect’, ‘intend’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’ or similar phrases. These forward-looking statements are inherently subject to a number of risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the expectations of the Company’s or the Guarantor’s Directors include those risks identiﬁ ed under the headings ‘RISK FACTORS’, ‘TRADING PROSPECTS’ and elsewhere in this Offering Memorandum. The Company and the Guarantor caution the reader that these forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ from those expressed or implied by the statements and no assurance is given that the future results or expectations will be achieved.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 3 TABLE OF CONTENTS

IMPORTANT INFORMATION...... 2

FORWARD-LOOKING STATEMENTS...... 3

TABLE OF CONTENTS ...... 4

DEFINITIONS ...... 6

DIRECTORS AND ADVISERS OF THE COMPANY ...... 8

KEY FEATURES...... 9

RISK FACTORS ...... 11

PART I - THE BOND ISSUES ...... 12

Details of the Bond Issue ...... 12

Purpose of the Issue ...... 13

Placing Arrangements...... 13

Allocation Policy ...... 13

Offer Expenses...... 14

Directors...... 14

Authorisations ...... 14

Underwriting ...... 14

TAXATION...... 14

Tax on Interest ...... 14

Tax on discount...... 14

Tax on Capital Gains...... 15

PART II - THE COMPANY...... 16

BUSINESS ...... 16

DIRECTORS SERVICE CONTRACTS ...... 16

AGGREGATE EMOLUMENTS OF DIRECTORS ...... 16

LOANS TO DIRECTORS...... 16

PART III - THE GUARANTOR ...... 17

SHARE CAPITAL...... 17

STRATEGIES ...... 17

TRADING PROSPECTS...... 18

BUSINESS ...... 19

Malta Operations ...... 19

4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Libya Operations ...... 20

BUSINESS UNDERTAKEN THROUGH SUBSIDIARIES ...... 21

MALTESE SUBSIDIARIES ...... 24

FOREIGN SUBSIDIARIES AND ASSOCIATED COMPANIES ...... 25

OTHER COMPANIES ...... 29

MANAGEMENT ...... 30

WORKING CAPITAL...... 32

PART IV - THE GUARANTEE...... 33

PART V - GENERAL INFORMATION ...... 34

Incorporation...... 34

Share Capital...... 34

Appointment of Directors...... 34

Powers of Directors ...... 34

Commissions ...... 35

Exchange Control ...... 35

Directors’ Interests...... 35

Litigation...... 35

Accountants’ Report...... 36

Material Contracts...... 36

Loan Capital & Borrowings ...... 36

Documents for inspection...... 36

ANNEX A – TERMS AND CONDITIONS ...... 37

PART 1 – Terms and Conditions of the ML Bond and the Euro Bond ...... 37

PART 2 – Terms and Conditions of Application ...... 42

ANNEX B – FINANCIAL INFORMATION ABOUT THE CORINTHIA GROUP AND THE GUARANTOR ...... 45

PART 1 – Accountants’ Report ...... 45

PART 2 – Interim Financial Statements...... 104

PART 3 – Estimated Financial Statements ...... 114

PART 4 – Financial Information about the Issuer ...... 125

ANNEX C – LIST OF AUTHORISED SELLING AGENTS...... 136

ANNEX D – THE CORINTHIA GROUP OF COMPANIES ...... 137

ANNEX E – SPECIMEN APPLICATION FORMS...... 139

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 5 DEFINITIONS

In this document the following words and expressions shall bear the following meanings except where the context otherwise requires:

Act the Companies Act, Cap. 386 of the Laws of Malta;

Applicant a person or persons whose name or names (in the case of joint applicants) appear in the registration details of an Application Form;

Application the application to purchase made by an Applicant by completing an Application Form and posting it or delivering it to the Registrar or the Authorised Distributors;

Application Form the form of application for subscription of Bonds issued by the Company;

Authorised Distributors all the licensed stockbrokers and ﬁ nancial intermediaries listed in Annex C of this Offering Memorandum;

Bonds the ML Bond and the Euro Bond;

Bond Offer Price the price of Lm100 for each ML Bond and the price of €97 for each Euro Bond;

Company or Issuer Corinthia Finance p.l.c.;

Corinthia Group CPHCL and the companies in which CPHCL has a controlling interest and which are set out in Annex D of this Offering Memorandum;

CPHCL Corinthia Palace Hotel Company Limited;

Directors or Board the Directors of the Company whose names and addresses are set out under the heading ‘DIRECTORS AND ADVISERS’;

Euro the single currency recognised as legal tender by the member countries of the European Monetary Union;

Euro Bond the €10 million 6.5 per cent Bonds 2010 issued at the Bond Offer Price or, in the case of exercise of the Over-allotment Option, up to an aggregate amount of €20 million pursuant to this Offering Memorandum;

Group CPHCL and the companies in which CPHCL has a controlling interest and which are set out in Annex D of this Offering Memorandum;

Guarantor CPHCL;

Interest Payment Date means in the case of the ML Bond the 8 April and the 8 October of each year between and including each of the year 2002 and the year 2012 with the exception of the 8 April 2002; and in the case of the Euro Bond the 8 April of each year between and including each of the year 2003 and the year 2010;

Maltese Liri the lawful currency from time to time of the Republic of Malta;

Malta Stock Exchange, MSE the Malta Stock Exchange established by the Malta Stock Exchange Act, Cap. 345 or Exchange of the Laws of Malta;

ML Bond the Lm4 million 6.75 per cent Bonds 2012 or, in the case of exercise of the Over- allotment Option, up to an aggregate amount of Lm8 million issued pursuant to this Offering Memorandum;

Offer Period the period between the 14 March 2002 and the 28 March 2002 (or such earlier date as may be determined by the Issuer for each of the ML Bond and the Euro Bond) during which the Bonds are available for subscription;

6 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Original Bond Issues in the case of the ML Bond the Lm4 million 6.75 per cent Bonds 2012 issued at the Bond Offer Price; and in the case of the Euro Bond the €10 million 6.5 per cent Bonds 2010 issued at the Bond Offer Price;

Over-allotment Option the option of the Issuer to increase the Original Bond Issues by an aggregate maximum of an additional Lm4,000,000 in either (or partly in both) of the ML Bond or the Euro Bond as the Company may consider appropriate to be issued at the Bond Offer Price, in the event of over-subscription of the Original Bond Issues;

Offering Memorandum this document in its entirety;

Re-allocation Option the right of the Company, subject to the consent of an Applicant given in the Application Form, to allocate the over-subscriptions received in the ML Bond to any under-subscription in the Euro Bond and vice versa;

Redemption Date 8 April 2012 in the case of the ML Bond and 8 April 2010 in the case of the Euro Bond;

Redemption Value Lm100 for each ML Bond and €100 for each Euro Bond;

Registrar, Underwriter Bank of Valletta p.l.c. or Manager

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 7 DIRECTORS AND ADVISERS OF THE COMPANY

DIRECTORS

Name: Alfred Pisani MOM - Chairman & Chief Executive Ofﬁ cer Address: Fiorita, Triq Giorgio Locano, Iklin, NXR 09, Malta Nationality: Maltese

Name: Louis E. Galea MOM, F.C.I.B - Deputy Chairman Address: 8, Garden Crescent, Saint Julians, STJ 12, Malta Nationality: Maltese

Name: Joseph Fenech F.C.C.A., F.I.A., CPA – Managing Director Address: Zeus, Triq il-Harruba, Iklin, NXR 09, Malta Nationality: Maltese

Name: Joseph J. Vella LL.D Address: Dar tax-Xaghra, V. Boron Street, San Pawl tat-Targa, NXR 06, Malta Nationality: Maltese

Company Secretary

Name: Alfred Fabri B.A. (Hons) Econ., D.B.A. Address: 12, Valley View Court, Zaccheus Street, Msida, MSD 04, Malta Nationality Maltese

MANAGERS, REGISTRARS, UNDERWRITERS & PRINCIPAL BANKERS

Name: Bank of Valletta p.l.c. Address: BOV Centre, High Street, Sliema, SLM 16, Malta

LEGAL COUNSEL

Name: Camilleri Preziosi Address: Level 2, Valletta Buildings, South Street, Valletta, VLT 11, Malta

REPORTING ACCOUNTANTS

Name: Grant Thornton Certiﬁ ed Public Accountants & Auditors Address: Grant Thornton House, Princess Elizabeth Street, Ta’ Xbiex, MSD 11, Malta

SPONSORING STOCKBROKER

Name: Wilfred Mallia Charts Investment Management Service Ltd Address: 18a, 3rd Floor, Europa Centre, Floriana, VLT 15, Malta

8 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES KEY FEATURES

1. SHARE CAPITAL

Authorised: Lm1,000,000 Issued: Lm100,000 Nominal Value: Lm1

2. EXPECTED TIME-TABLE

Application Forms available 11 March 2002 Opening of Subscription lists 14 March 2002 Closing of Subscription lists 28 March 2002 Announcement of basis of acceptance 8 April 2002 Expected dispatch of allocation advice & Refunds of unallocated monies 15 April 2002 Commencement of Interest 8 April 2002

The Issuer reserves the right to close the Offer of ML Bonds or the Euro Bonds before the 28 March 2002 in the event of over-subscription.

3. KEY STRENGTHS OF THE CORINTHIA GROUP

The Corinthia Group’s key strengths are:

• strong and committed shareholders and executive directors with long experience in the hospitality industry who have delivered an excellent record of proﬁ t and asset growth;

• an experienced, proven and loyal local and foreign senior management team of international calibre with an average of over ten years’ service;

• a cadre of well-qualiﬁ ed and dynamic young professionals, fuelling the potential for future growth;

• an effective monitoring system assuring tight controls on standards and performance;

• properties planned and built to exacting standards with equally high standards demanded on maintenance resulting in high quality, well maintained assets;

• a fast expanding brand name – ‘Corinthia Hotels International’;

• an extensive marketing network in the feeder markets for the hotels;

• excellent geographical positioning with a strategically weighted portfolio in the emerging leisure and business destinations;

• a dynamic and selective acquisition strategy;

• diversiﬁ cation into industrial catering, construction, project management and other service ventures.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 9 4. OVERVIEW OF ADJUSTMENTS PASSED IN THE ACCOUNTANTS’ REPORT.

In compiling their report, the Accountants based their work on the Audited Financial Statements of the Corinthia Group for the three years ended 31 December 1998, 1999 and 2000. These Financial Statements were adjusted by them to restate the amounts and disclosures to:

• comply with the statutory requirements and accounting standards presently in force;

• eliminate the effects of certain inconsistencies between members of the Corinthia Group in the way the accounting policies were applied;

• eliminate the effects of certain items which had been recognised in the Audited Financial Statements in a period other than that during which they were incurred.

The most signiﬁ cant of these adjustments was that made to restate the value of certain land and buildings to their estimated market values. In late 1997 and early 1998, the Corinthia Group carried out an extensive property revaluation exercise. Since certain members of the Group already carried immovable properties at revalued amounts, in the Accountants’ view it was necessary to treat all immovable properties owned by the Group in the same manner and to bring all properties to market values. The post-tax effect of this adjustment totalled Lm35 million at 31 December 1998. The following is a summary of this adjustment by country:

Lm (millions)

Hotels in Malta 19.5 (Architects’ valuation) Hotels in Turkey 6.2 (Directors’ valuation) Hotels in Hungary 6.3 (Directors’ valuation) Hotels in Tunisia 1.7 (Directors’ valuation) Property in Libya 1.3 (Directors’ valuation)

During the year ended 31 December 2000, two hotels in Malta and one in Hungary were revalued in the books of the respective companies. In consequence, the Accountants’ adjustments were revised accordingly to exclude these properties. The post-tax effect of the revaluation after these revisions stood at Lm25 million as at 31 December 2000.

A second adjustment of some signiﬁ cance related to the issue of deferred taxation. One subsidiary company acquired in 1998 did not recognise the deferred taxation effect arising on the revaluation of its land and buildings. Since this revaluation took place immediately prior to the acquisition of this company by the Group, this omission also effected the amount of negative goodwill and its amortisation. Negative goodwill represents the excess of the fair values of the net assets acquired over the consideration paid, and constitutes the savings made by the Group on acquisition of the subsidiary company.

The net effect of the adjustments passed by the Accountants was to increase the value of the Group’s net assets at 31 December 2000 by Lm22.2 million, and that of CPHCL by Lm4.8 million.

Details of the adjustments passed, as well as reconciliations on a year by year basis of the Group’s and CPHCL’s proﬁ t and loss accounts and balance sheets, are set out in Annex B.

10 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES RISK FACTORS

Before investing in the Bonds, prospective investors should consider all the information contained in this Offering Memorandum, including the investment considerations set forth below. See also ‘Trading Prospects’ below.

CONSIDERATIONS RELATING TO THE COMPANY

The Company itself does not have any substantial assets and is essentially a special purpose vehicle set up for fi nancing transactions of the Corinthia Group and has already issued a bond under the guarantee of CPHCL in September 1999 which bond was admitted to the MSE Offi cal List. The Bonds are being guaranteed by CPHCL and the information in this Offering Memorandum is designed to provide the prospective investor with suffi cient information about CPHCL and the other companies comprising the Corinthia Group, to enable an investor to make an informed judgment as to the reliance on the guarantee.

CONSIDERATIONS RELATING TO THE BUSINESS OF CPHCL

The business of Corinthia Group is principally in the hotel and hospitality sector, which is partly a seasonal business. The operations of the Corinthia Group extend to the following countries: Hungary, the Czech Republic, the Russian Federation, Portugal, Turkey, Tunisia, Libya and Malta. This diversiﬁ cation is aimed at spreading the geographical risks and exposures usually associated with cyclical movements in the hospitality industry. Some of these operations are located in countries that are considered as emerging markets. Accordingly, there are certain risk factors which are particular to such operations and which may require consideration by prospective investors since they are not usually associated with business in the more developed markets of North America, Japan and Western Europe. Emerging markets present different economic and political conditions from those of the more developed markets and could possibly present less social, political or economic stability. Emerging economies may be susceptible to a higher degree of risk than investing in more developed markets. These risks may include changes in government policies, taxation, high inﬂ ation, interest rates and other restrictions on the repatriation of capital. Investors should be aware that any downturn in the economies of the countries where the Corinthia Group has invested, may adversely affect the business of the Corinthia Group.

Emerging markets however normally also provide a lower cost of entry in investments than that of the more developed markets like North America, Japan and Western Europe. Moreover, the operating cost structures are also signiﬁ cantly lower than those in the more developed markets. The combination of these two effects give rise to substantial returns on investments that are normally greater than those traditionally associated with the more developed markets.

In 1999, both Hungary and the Czech Republic were accepted by the European Union to commence the process for the eventual integration into the EU on its next enlargement. Similarly, Malta has also commenced a structured dialogue with the EU and it is also expected to shortly commence the process of integration. Each of them are expected, on the basis of current information, to be considered for full membership by January 2004. The entry of these countries in the European Union should contribute towards a more liberal and stable economic environment. Furthermore, Turkey has a Customs Union agreement with the European Union.

Most of the risks normally associated with the uncertainties in developing markets, such as taxation, high infl ation, interest rates, exchange controls and other restrictions on the repatriation of capital are normal business risks. The Corinthia Group has taken various measures to minimise the risks that may be associated with emerging markets. These include generating a substantial part of turnover in hard currency rather than in the local currency of the country to eliminate the risk associated with high infl ation, borrowing in hard currency to benefi t from lower interest rates and simultaneously creating a hedge against the income fl ow. Finally, in a number of these emerging markets, exchange control restrictions have either been removed completely or alternatively eased, thus rendering the repatriation of both capital and profi ts easier.

CPHCL also has substantial interest in industrial catering activities in Libya. Libya is a country generally associated with a closed economy and restrictions related to exchange controls and the repatriation of capital. CPHCL has over the last 25 years managed to conduct its business in Libya proﬁ tably and without undue material problems.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 11 PART I – THE BOND ISSUES

DETAILS OF THE BOND ISSUES

The Company is making an offering of Bonds for subscription to the general public of:

(i) 40,000 ML Bonds of a face value of Lm100 each Bond issued at par and redeemable on the Redemption Date at Lm100 each ML Bond; and

(ii) 100,000 Euro Bonds of a face value of €100 each and issued at €97 each and redeemable on the Redemption Date at €100 each Euro Bond.

In the event of an over-subscription, the Company may, at its option, issue further Bonds in either or both of the Original Bond Issues up to an aggregate maximum of either 40,000 ML Bonds or a maximum of 100,000 Euro Bonds or a combination of both, pursuant to the Over-allotment Option to meet applications for subscriptions. In addition, the Company may, subject to the consent of an Applicant to be given in the Application Form, re-allocate over-subscriptions in the ML Bond to any under-subscription in the Euro Bond and vice-versa pursuant to the Re-allocation Option. The Bonds are being issued with the joint and several guarantee of CPHCL (See ‘Guarantee’ below). The following is a brief description of the Bond Issues:

The ML Offering: The offering by the Company consists of a general offering of 40,000 Bonds of a nominal value of Lm100 each being offered at par.

The Euro Offering: The offering by the Company consists of a general offering of 100,000 Bonds of a nominal value of €100 each being offered at €97.

Interest: (i) In the case of the ML Bond 6.75 per cent per annum payable six-monthly in arrears on 8 April and 8 October in each year, the ﬁ rst interest payment to be effected on 8 October 2002; and

(ii) In the case of the Euro Bond 6.5 per cent per annum payable annually in arrears on 8 April in each year, the ﬁ rst interest payment to be effected on 8 April 2003.

Maturity & Redemption: The Bonds will be redeemed on the Redemption Date at the Redemption Value, subject to the right of the Company to purchase Bonds on the open market before the Redemption Date at the current market prices. Any Bonds so purchased shall be cancelled.

Guarantee: The Guarantor is, jointly and severally with the Company, guaranteeing the payment of the nominal value of the Bonds on the Redemption Date and of the interest on the Bonds on each Interest Payment Date.

Over-allotment Option: The Company, with the consent and under the guarantee of the Guarantor, reserves the right to issue further Bonds to meet applications for subscription up to, and not exceeding, the aggregate amount of Lm4,000,000 (or €10,000,000) which it can exercise by issuing further Bonds in either of the ML Bond or the Euro Bond or both in such proportions as the Company may deem appropriate depending on subscription levels.

Re-allocation Option: The Company reserves the right, subject to the consent of an Applicant in the Application Form, to re-allocate any over-subscription in the ML Bond to under- subscriptions in the Euro Bond and vice-versa.

12 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES PURPOSE OF THE ISSUES

The Company is a fully owned subsidiary of the Guarantor and has been set up as a ﬁ nance company for the Corinthia Group. The proceeds of the Bond Issues will be advanced by the Company to the Guarantor for general corporate funding purposes aimed at further consolidating and strengthening the Corinthia Group’s position in a number of business units. The funds will be employed to enable the Group to further develop business opportunities arising from its continued international expansion.

These include capital expenditure programmes for the refurbishment and upgrading of a number of existing hotel properties and hotel construction projects. Accordingly, part of the funds will support the enhancement of facilities of the Tripoli Hotel project currently underway and, in particular, upgrade the standard of the commercial centre component of this development which is being leased to third parties. Furthermore, part of the funds will enable the Corinthia Group to further consolidate and organise its construction unit in Libya, with a view to participating in the country’s ambitious infrastructure development programme. Finally, funds will also be utilised to enable the more efﬁ cient management of the Group’s cash resources and corporate treasury operations.

For this purpose, the Company is issuing the Bonds denominated partly in Maltese Lira and partly in Euro and will advance the proceeds thereof to the Guarantor in the same currency with the intention of matching its expected revenue and expenditure ﬂ ows whilst maintaining a level of hedging against possible currency movements in the Maltese Lira and the Euro.

In the event that the Company exercises the Over-allotment Option to meet subscription applications, any proceeds thus raised shall also constitute part of the advances to be made by the Company to the Guarantor for the purposes set out above.

Placing Arrangements

The Company has entered into conditional subscription agreements. In terms of these agreements, the investors have bound themselves to subscribe and purchase upon closing of subscription lists, and the Company has bound itself to allot to such investors an aggregate not exceeding 50 per cent of each of the Bond Issues. Subscriptions under these arrangements are subject to the same terms and conditions of the Bonds contained in the Offering Memorandum.

Allocation Policy

Upon closing of the subscription lists and within seven working days of the closing of the ML Bond or the Euro Bond whichever is the later, the Registrar shall announce the basis of acceptance of Applications for Bonds and the Allocation Policy to be adopted. It is expected that the Issuer will:

(a) ﬁ rst allocate Applications to the Original Bond Issues in each of the ML Bond and the Euro Bond.

(b) In the event that the Original Bond Issue in one Bond is over-subscribed and the other is under-subscribed, then the Issuer shall exercise the Over-Allotment Option by issuing further Bonds to meet subscriptions in the Bond that is over-subscribed.

(c) In the event that notwithstanding the exercise of the Over-allotment Option as provided in paragraph (b) above, there still remains Applications which are unsatisﬁ ed in the Bond that is over-subscribed, then the Issuer shall ﬁ rst scale down all Applications in that Bond pro rata and then re-allocate to the Bond Issue remaining under-subscribed that portion of Applications remaining unallocated and which have the consent of the Applicant to be re-allocated.

If after such re-allocation or in the case of Applicants who do not opt for the re-allocation of their application monies between Issues there remains unapplied application monies, then the Applicant shall receive a refund of the value of the Bonds applied for but not allocated, by cheque sent by mail, at the Applicant’s own risk, to the address speciﬁ ed in the Application Form within seven working days from the date of ﬁ nal allocation. No interest shall be due on refunds.

The Company shall be making preferred allocation of Bonds to all full-time employees and their spouses (in this section referred to as ‘employees’) of the Corinthia Group on the 28 February 2002. Upon Application, each employee shall be given a preference allocation up to the ﬁ rst Lm5,000 in ML Bonds and up to €10,000 in Euro Bonds applied for, for which an Application Form has been submitted by such employee (the ‘Preference Allocation’). Members of the Board of Directors of the Company, the Guarantor and other companies of the Corinthia Group and their spouses shall also be eligible for the Preference Allocation.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 13 Offer Expenses

Selling commission is payable to Authorised Distributors. Each Authorised Distributor shall be entitled to a selling commission on the value of Bonds allocated to Applicants applying through such Authorised Distributor at the following rates :

• 0.5 per cent on the ﬁ rst 10,000 ML Bonds or 25,000 Euro Bonds; and

• 0.6 per cent on any Bonds in excess of the ﬁ rst 10,000 ML Bonds or 25,000 Euro Bonds.

Professional fees, publicity, advertising, printing, listing, underwriting, management, registration and other miscellaneous costs, excluding selling commissions, are estimated not to exceed Lm150,000.

DIRECTORS

The Directors currently in ofﬁ ce are expected to remain in ofﬁ ce at least until the next Annual General Meeting.

Authorisations

The issue of the Bonds has been duly authorised by the Malta Stock Exchange. The Bonds are expected to be admitted to listing on the Malta Stock Exchange and for dealings in the Bonds to commence following admission. Permission from the Malta Financial Services Centre for the issue of this Offering Memorandum in terms of Section 11 of the Investment Services Act (Cap. 370 of the Laws of Malta) is not required by virtue of the exemptions contained in Legal Notices 6 and 95 of 1995

Underwriting

By an agreement dated 7 March 2002, between the Issuer, the Guarantor and the Underwriter, it was agreed that in the event that any Bonds remain outstanding after the end of the Offer Period, the Underwriter shall purchase all such outstanding ML Bonds at par and all outstanding Euro Bonds at the Bond Offer Price. The proceeds from any Bonds purchased by the Underwriter pursuant to its underwriting commitment shall be applied in reduction of the banking facilities made available by the Underwriter to the Guarantor or other Corinthia Group companies, without prejudice to any rights of security currently enjoyed by the Underwriter in connection with the facilities so reduced.

TAXATION

Tax on Interest

Unless the Issuer is otherwise advised by a Bond holder resident in Malta who is not a fund of a collective investment scheme, interest shall be paid by the Issuer to such Bond holder net of a deduction for tax at source at the rate of 15 per cent (15%) pursuant to section 33 of the Income Tax Act (Cap. 123 of the Laws of Malta). This withholding tax is considered as a ﬁ nal tax. Whilst corporate Bond holders are obliged to declare the interest so received in their income tax return, individual Bond holders are not required to declare the interest so received on their income tax return.

In the case of an election by a Bond holder resident in Malta who is not a fund of a collective investment scheme to receive the interest due without the deduction of withholding tax, then interest will be paid gross by the Issuer and such Bond holder will be under an obligation to declare interest so received on his/her income tax return.

Any such election by a Bond holder at the time of application may be changed by the Bond holder by giving written notice to the Issuer or the MSE, as the case may be.

Non-resident Bond holders are not taxable in Malta on the interest received and will receive interest gross.

Tax on discount

The rules relating to tax on interest similarly apply to the discount of €3 per €100 nominal receivable by the Bond holder upon maturity.

14 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Tax on Capital Gains

Any gain arising on disposal of the Bonds is not chargeable to Maltese income tax.

The information above does not constitute legal or tax advice, and is based on tax law and practice applicable at the date of this Offering Memorandum. Investors are reminded that tax law and practice may change from time to time.

INVESTORS AND PROSPECTIVE INVESTORS ARE URGED TO SEEK PROFESSIONAL ADVICE AS REGARDS BOTH MALTESE AND ANY FOREIGN TAX LEGISLATION APPLICABLE TO THE ACQUISITION, HOLDING AND DISPOSAL OF BONDS AS WELL AS INTEREST PAYMENTS MADE BY THE COMPANY. THE ABOVE IS A SUMMARY OF THE ANTICIPATED TAX TREATMENT APPLICABLE TO THE BONDS AND TO BOND HOLDERS. THIS INFORMATION, WHICH DOES NOT CONSTITUTE LEGAL OR TAX ADVICE, REFERS ONLY TO BOND HOLDERS WHO DO NOT DEAL IN SECURITIES IN THE COURSE OF THEIR NORMAL TRADING ACTIVITY.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 15 PART II - THE COMPANY

The Company is a public limited liability company, registered on 9 September 1999 with number C 25104 in terms of the Act, and has its registered ofﬁ ce at 22, Europa Centre, Floriana, VLT 15, Malta. The Company has an authorised share capital of Lm1 million and an issued and fully paid up share capital of Lm100,000 divided into 100,000 ordinary shares of a nominal value of Lm1 each share. The Company is a fully owned subsidiary of the Guarantor.

BUSINESS

The Company was set up and established to act as a ﬁ nance company for the Corinthia Group and is a fully owned subsidiary of CPHCL.

In September 1999, the Company issued Lm10 million 6.70 per cent Bonds redeemable in 2009. The proceeds of that bond issue were advanced to CPHCL pursuant to and under the terms of a loan agreement dated 10 September 1999. The Company receives interest on the loan to CPHCL at the rate of 6.80 per cent per annum on the 15 October of each year. The loan is repayable by not later than 15 October 2009. CPHCL has punctually effected all payments of interest on the loan.

The Company was set up with the object of developing its business acting as the ﬁ nance arm of the Corinthia Group. The Bond Issues fall within the objects of the Company that is expected to continue to play a central role in the further development of the Corinthia Group as a vehicle through which it will fund its expansion programme.

The Company has also entered into a loan agreement dated 7 March 2002 with the Guarantor (the ‘Loan Agreement’) pursuant to which the Company will advance to the Guarantor the proceeds from the Bonds under the terms and conditions set out therein. In terms of the Loan Agreement there will be two advances made to the Guarantor, namely an advance equal to the proceeds of the ML Bond (‘ML Loan’) and another advance equal to the proceeds of the Euro Bond (‘Euro Loan’). The ML Loan shall be drawn down by the Guarantor in Maltese Liri and shall bear interest at the rate of 6.85 per cent per annum with interest payable six-monthly in arrears on 25 March and 25 September of each year. The Euro Loan shall be drawn down by the Guarantor in Euros and shall bear interests at the rate of 6.6 per cent per annum, payable in 25 March of each year. The ﬁ rst interest payment on the ML Loan shall be paid on 25 September 2002 and with respect to the Euro Loan on 25 March 2003. In terms of the Loan Agreement the Guarantor bound itself to repay the ML Loan by not later than the 25 March 2012 and the Euro Loan by not later than 25 March 2010 All expenses incurred in the preparation and implementation of the Bond Issues shall be at the charge of CPHCL.

DIRECTORS SERVICE CONTRACTS

None of the Directors of the Company have a service contract with the Company. All Directors may be removed by the shareholder appointing them or by an ordinary resolution of the shareholders in general meeting.

AGGREGATE EMOLUMENTS OF DIRECTORS

For the current ﬁ nancial year ending on 31 December 2002 the Company proposes to pay an aggregate of Lm10,000 to its Directors.

LOANS TO DIRECTORS

There are no loans outstanding by the Company to any of its Directors nor any guarantees issued for their beneﬁ t by the Company.

16 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES PART III - THE GUARANTOR

CPHCL is a private limited liability company, registered on 21 June 1966 with the number C 257 in terms of the Commercial Partnerships Ordinance, (Cap.168 of the Laws of Malta) and having its registered ofﬁ ce at 22, Europa Centre, Floriana VLT 15, Malta. The Company is compliant with and regulated by the provisions of the Act.

SHARE CAPITAL

The authorised share capital of CPHCL is Lm2,831,200 divided into 16,200 ordinary ‘A’ shares of a nominal value of Lm1 each, 15,000 ordinary ‘B’ shares of a nominal value of Lm1 each, 1,400,000 non-voting 6 per cent ‘C’ preference shares and 1,400,000 non-voting, cumulative, redeemable 6 per cent ‘D’ preference shares. The share capital has been fully issued and subscribed as follows and is fully paid up:

Shareholder Ordinary Shares Preference Shares A & A Pisani & Company Limited 2,700 ‘A’ 233,335 ‘D’ J & H Pisani & Company Limited 2,700 ‘A’ 233,333 ‘D’ PAKA Limited 2,700 ‘A’ 233,333 ‘D’ VAC Company Limited 2,700 ‘A’ 233,333 ‘D’ Rosanne Fenech 2,700 ‘A’ 233,333 ‘D’ Intakur Limited 2,700 ‘A’ 233,333 ‘D’ Libyan Arab Foreign Investment Company (‘LAFICO’) 15,000 ‘B’ 1,400,000 ‘C’

Pursuant to the memorandum and articles of association of CPHCL, out of a maximum of ﬁ ve Directors, the holders of the Ordinary ‘A’ shares are entitled to appoint three Directors, including the chairman who is entitled to a casting vote. The holders of the ordinary ‘B’ shares are entitled to appoint the remaining two Directors.

STRATEGIES

The Corinthia Group’s development strategy is intrinsic to its core interests as investors, developers and operators of quality hotels in Europe, Africa and the Mediterranean rim, as well as operators of large scale industrial catering services in these geographical regions.

The Corinthia Group has thus continued to organise itself at a strategic level into four distinct business units, each of which plan and implement well-deﬁ ned strategies driven by the objective of continued growth, furtherance of their core interests and the ongoing optimisation of proﬁ tability of its operations.

These business units are organised within the following four core competencies:

(i) the investment and acquisition of hotel and related real estate; (ii) the management and operation of upscale hotels; (iii) construction and the provision of project management services; and (iv) industrial catering.

This strategy is imbued at all levels of internal management structures providing a focus and benchmark for:

(i) further investment; (ii) improving operating standards and efﬁ ciencies; (iii) the evolution of business development and marketing strategies to adapt to and proﬁ t from the ever-changing markets; and (iv) the fostering of human resources to support the Corinthia Group’s overall strategic objectives.

In the investment sector, the Corinthia Group continues to play an important role as an international investor in hotel real estate, to date having whole or part ownership interests in 29 properties world-wide. Since March 2000, this business has been conducted through a new subsidiary – International Hotel Investments p.l.c. (‘IHI’) – which, subsequent to its ﬂ otation on the MSE, has undertaken continued efforts to invest in Europe and the Mediterranean, particularly in areas that provide the right balance of political and economic stability and the opportunities for commercially viable direct investment with a potential for growth. IHI’s investment in the high-rise Alfa Hotel in Lisbon in August 2001 and the acquisition of the ﬁ ve-star Nevskij Palace Hotel in St. Petersburg in January 2002, are indicators of the Corinthia Group’s strategy for continued growth and development in the hotel investment sector through IHI.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 17 Simultaneously, the Corinthia Group has continued to consolidate and strengthen its hotel management business, through which it is intended to also develop further the goodwill and reputation of the Corinthia brand, ‘Corinthia Hotels International’, and to position it amongst the leading independent hotel operators represented in these regions. Since March 2000, this business has been organised into a fully autonomous subsidiary – C.H.I. Limited (‘CHI’) – which has entered into management agreements for the operation of the Corinthia Group’s four- and ﬁ ve-star hotels, as well as pre-operating and management agreements with independent hotel owners in various countries. It is planned that further growth will be achieved through the continued provision of such management services by CHI or franchise relationships with hotel owners and developers.

In the catering sector, further consolidation is expected in the Corinthia Group’s penetration of its current markets, supported by an aggressive plan to enter other markets that have so far remained untapped. This sector is non- capital intensive and the pursuits of these objectives will therefore be a measure of the Corinthia Group’s ability, perseverance and expertise without undue pressure on ﬁ nancial resources.

Finally, in line with its plans for further expansion in the project management and construction industry, the Corinthia Group has established a number of subsidiaries. Foremost amongst these is Quality Project Management Limited (‘QPM’), an autonomous company, which provides project and construction management services to the Corinthia Group itself as well as an increasing number of independent clients. The expertise and experience accumulated in the construction, development and refurbishment of Corinthia hotels over the past 35 years has thus assisted QPM in establishing itself as a leading international provider of project and construction management services. Furthermore, the Corinthia Group is also aiming to position itself among the leading construction companies in Libya, having already set up a fully-fl edged construction unit there to build the Corinthia Group’s own fi ve-star high-rise hotel and commercial centre. Acting on expert support and alliances with major multinational construction fi rms, the Corinthia Group’s fully-equipped construction unit in Libya today employs over 600 persons and is poised to initiate a major expansion program aimed at tapping into this country’s aggressive infrastructure development programme.

In conclusion, the strategy of the Corinthia Group remains, generally, to further diversify its operations and sources of revenue both geographically and by activity. This is designed to render it more ﬂ exible in meeting the challenges of the future and to adapt to the ever-changing needs of a more competitive environment.

TRADING PROSPECTS

The directors of CPHCL expect that the Corinthia Group will, in the absence of unforeseen circumstances, at least maintain the fi nancial and trading results which it has achieved in the past three fi nancial years. In other parts of this document, certain trade factors and risks which may have an impact on the trading and fi nancial prospects of the Corinthia Group, have already been set out. (See ‘Risk Factors’). The Corinthia Group has made a net profi t after tax but before exceptional items in 2001 of Lm9.8 million, as against Lm8.9 million in 2000 and Lm7.3 million in 1999. Following the devaluation of the Libyan Dinar in January 2002, the Corinthia Group booked an exceptional item in its 2001 profi t and loss account reducing profi ts for the year by Lm2.8 million. Additionally, following currency fl uctuations of the Euro in relation to the Czech Krone, the Group booked an exceptional gain in its 2001 results of Lm1.8 million.

Following the 11 September incidents, it has become more difﬁ cult to assess the future trading prospects of the Corinthia Group, particularly in view of its exposure to the tourism and leisure industry which is perceived as being vulnerable to a lack of international political stability and the uncertainty it brings about. The immediate reaction to the 11 September incidents has been a material decline in the tourism and hospitality industry world-wide.

However, inspite of these incidents, the profi t fi gures of the Corinthia Group for 2001, save for the adverse impact thereon of the devaluation of the Libyan Dinar, exceeded those for the year 2000. This is an indication of the Corinthia Group’s resilience to exceptional occurrences. The exact extent of decline in business following the 11 September incidents is still uncertain and their impact could well be felt on the business of the Corinthia Group in the fi rst months of the current fi nancial year. In the medium to longer term, however, it is expected that the situation stabilizes and that the current uncertainty surrounding the travel industry should subside. It is still too early, however, to determine with any reasonable level of certainty how international political events will evolve. Moreover, if the current uncertainty were to be protracted, the travel and hospitality sectors in which the Corinthia Group operates will come under severe pressure and could have an adverse effect on its revenues and profi tability. The directors, however, believe that in the context of the 11 September events, the jurisdictions where Corinthia hotels are located are of a lower political risk profi le then jurisdictions that are more actively involved in the aftermath of those events. In this context they believe that, save for the general uncertainty surrounding the travel industry generally, there are no jurisdiction-specifi c factors that should have an adverse effect on the operations in those jurisdictions.

18 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES The Corinthia Group also expects further liberalisation in the Libyan economy and believes that it is well positioned to leverage its experience and expertise in that market to identify appropriate opportunities that should emerge in this liberalisation process. The directors consider the devaluation of the Libyan Dinar, that has caused the Corinthia Group to book a material but exceptional one-time decrease in its profi ts for the year ended 31 December 2001, a part of this liberalisation process which the directors believe could well have longer-term benefi cial effects to the Corinthia Group’s operations in that jurisdiction. The Corinthia Group is also currently re-negotiating some of its contracts with its clients in Libya to refl ect the devaluation of the Libyan Dinar.

For the full year ended 31 December 2001, the Group will have proﬁ ts cover for bond interest on the Original Bond Issue of 19.8 times and for interest on its aggregated debt of 2.8 times. In the event that the Over-allotment Option is exercised, proﬁ t cover for bond interest will be 13.2 times and 2.7 times for interest on the Group’s aggregated debt.

Immediately after the Bond Issue, the Group will have net tangible assets cover:

(i) for the Original Bond of 27.5 times which will be reduced to 18.3 times in the event of the exercise of the Over-allotment Option; and (ii) for aggregated debt in the case of the Original Bond Issue of 2.4 times and in the event of the exercise of the Over-allotment Option, of 2.3 times.

BUSINESS

The Guarantor is the parent company of the Corinthia Group and is both an operating and an investment company with diversiﬁ ed interests in the hospitality, leisure and related sectors in Malta and overseas. The Corinthia Group operates some of its activities directly through CPHCL and a predominant part of its activities through subsidiary and associated companies, details of which are set out hereunder.

The business that CPHCL undertakes directly can be classiﬁ ed under two main headings, namely the ownership of hotels in Malta and industrial catering operations in Malta and Libya.

MALTA OPERATIONS

In Malta, CPHCL owns the Corinthia Palace Hotel in Attard and provides industrial catering services on a number of sites. CPHCL also provides certain administrative, business development and support services through its Corporate Ofﬁ ce to the Corinthia Group.

Corinthia Palace Hotel – Attard

The Corinthia Palace Hotel in Attard is a ﬁ ve-star establishment owned by CPHCL and managed by CHI. The Corinthia Palace Hotel has 155 rooms including eight suites, all air-conditioned and equipped with cable television, radio, direct dialling telephone facilities, mini-bar, personal safe and trouser press. Additional facilities include a business centre and sophisticated conference facilities that can accommodate more than 500 delegates. Apart from the large sun terraces and landscaped gardens with a swimming pool, the hotel also houses the Athenaeum, a spa complex for vitality and well-being, as well as sports and leisure facilities comprising tennis and squash courts and a ﬁ tness suite. The hotel also offers the services of three restaurants, including a Far Eastern restaurant, the Rickshaw, two bars and a lounge.

For the year ended 31 December 2001, the hotel achieved an average room occupancy of 57 per cent. The most signiﬁ cant contributor to the hotel’s occupancy for 2001 were tour operators with 67 per cent. The corporate segment contributed a material 21 per cent and the conference market 9 per cent.

Corinthia Jerma Palace Hotel – Marsascala

The Corinthia Jerma Palace Hotel, a four-star establishment in Marsascala, was leased by CPHCL from its owner by virtue of a lease agreement which was entered into on 23 December 1999 for a ten-year term which has been extended until 31 March 2011. The hotel is managed by CHI by virtue of a management agreement signed with CPHCL.

The hotel comprises 326 air-conditioned rooms, 28 executive suites, nine junior suites and one presidential suite. The conference hall and syndicate rooms have facilities which can cater for activities for up to 500 delegates. Additional facilities include the Panorama restaurant, the Oasis cocktail bar, the Nautico Bar and Grill, the Sea Waves foyer bar, pools, a gymnasium, a sauna, solarium and a tennis court.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 19 For the year ended 31 December 2001, the hotel achieved an average room occupancy of 50 per cent. The most signiﬁ cant contributors to the Hotel’s occupancy levels for 2001 were tour operators with 59 per cent whilst the groups leisure market contributed 15 per cent and the corporate segment 6 per cent.

Industrial Catering Operations

CPHCL offers outside catering services under the brand name ‘Corinthia Caterers’ to airlines and airports.

• Infl ight Services: Corinthia Caterers supplies all in-fl ight catering requirements for the Maltese national airline, Air Malta, as well as other airlines operating to and from Malta, including Lufthansa, Emirates and Aerofl ot. As from 1 January 2002, CPHCL transferred its business to Flight Catering Company Limited, a subsidiary of the Group.

• Airport Operations: Corinthia Caterers operates important catering outlets at the Malta International Airport, including the Runway Bistro adjacent to the viewing gallery, the bar at the departures lounge and the Gateway Diner, a casual theme bar and restaurant.

Corporate Ofﬁ ce

Corporate Ofﬁ ce fulﬁ ls a dual role for the Corinthia Group – primarily that of devising group strategy for the development of future group operations, and secondly the provision of centralised management and support services to the various members and operations of the Corinthia Group thus acting as the catalyst in the implementation and monitoring of strategic plans.

The centralised services provided at Corporate Offi ce include business development, fi nance, internal auditing and secretariat services. Corporate Offi ce is also responsible for the treasury function and acts as banker to the various units of the Corinthia Group.

Corporate Offi ce is also responsible for business development including the acquisition of existing operations like Thermal Aquincum Rt in Hungary or Top Spirit a.s. in the Czech Republic or green fi eld sites like the Corinthia Tripoli Hotel development or the Istanbul Hotel development. These responsibilities include site acquisitions, contract negotiations and the raising of fi nance.

Corporate Offi ce also provides its services to IHI mainly in business development. These services include identifying new opportunities, evaluating those investment opportunities, raising long term fi nance and negotiating the terms of acquisition of new hotels. As at the date of this document, this work has resulted in the acquisition of two new hotels, the Corinthia Alfa Hotel in Lisbon and the Corinthia Nevskij Palace Hotel in St. Petersburg, and the development of the Corinthia Grand Hotel Royal in Budapest. For these services Corporate Offi ce charges a management fee to IHI of Lm75,000 per annum, pursuant to a management agreement dated 24 April 2000.

LIBYA OPERATIONS

Corinthia Tripoli Hotel Development

CPHCL is currently constructing a fi ve-star development in Tripoli, Libya consisting of a hotel and a commercial centre. The hotel is to consist of 220 rooms, 80 executive suites and fi ve restaurants in two high-rise buildings of 28 storeys and 14 storeys respectively. Other facilities will include indoor and outdoor swimming pools, a fi tness centre, conference halls and syndicate rooms supported by a business centre. A commercial centre measuring approximately 7,000 square metres, with its own parking facilities, will complement the facilities of this hotel. The construction of the hotel and the commercial centre have now been completed and other works including mechanical and electrical works, fi ttings and fi nishing works are expected to be completed by October 2002.

Industrial Catering

CPHCL provides catering and related services to companies operating in Libya. Through this division, CPHCL provides thousands of meals a day, house-keeping and laundry services for employees of oil and construction companies in oil ﬁ elds in the desert and offshore drilling rigs. Catering services are also provided to universities and other institutions in Libya.

20 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Sites or camps fully equipped with complete kitchen, dining and accommodation facilities are provided by the clients whilst CPHCL is responsible for the provision of supplies and personnel to perform the catering and housekeeping services. To ensure that the highest level of service is provided, CPHCL regularly imports considerable volumes of dry goods and ﬁ sh consignments to complement the local availability of vegetables, fruit and other staple food items.

In order to ensure the regular supply of fresh produce, which is normally purchased from the main city centres of Tripoli and Benghazi, CPHCL operates an extensive fl eet of refrigerated vehicles to transport supplies to remote desert locations. Detailed planning is involved to ensure that suffi cient stocks are held in the central warehouses of CPHCL and that the fl eet is regularly maintained to ensure the uninterrupted delivery of supplies.

In this operation, CPHCL employs approximately 700 personnel of mixed nationalities and cultures to cater for the various religious and cultural needs of the clients’ personnel on site. In so doing, CPHCL has to regularly seek the provision of the relative work permits from the competent authorities and see to their regular renewal and obtaining entry and exit visas and desert passes for employees working in the oil sector.

BUSINESS UNDERTAKEN THROUGH SUBSIDIARIES

The Guarantor also operates its business through several subsidiaries both in Malta and overseas. The following is a summary of the principal subsidiaries of the Guarantor:

MALTESE SUBSIDIARIES

International Hotel Investments p.l.c.

International Hotel Investments p.l.c. (IHI) is a public limited liability company registered in Malta on 29 March 2000 with company number C 26136 in terms of the Act. The company has an authorised share capital of Lm100 million divided into 100 million shares of a nominal value of Lm1 each share. The company’s issued share capital is Lm46,582,793 which is fully paid up. The Corinthia Group owns 77.28 per cent of the share capital of IHI. IHI is a company listed on the Malta Stock Exchange and is accordingly regulated by its rules and bye-laws.

IHI today owns four hotels through four fully owned subsidiary companies, one in Malta through Five-star Hotels Limited, one in Budapest, Hungary through IHI Hungary Rt., one in Lisbon, Portugal through Alfa Investimentos Turisticos LDA and its latest acquisition in St. Petersburg, the Russian Federation, through its subsidiary IHI Benelux B.V.

Five Star Hotels Limited

Five Star Hotels Limited (FSH) is a private limited liability company registered in Malta on 1 February 1980 with company registration number C 4848. It is compliant with and regulated by the Act. The authorised and issued share capital of the company is Lm6,375,000.

FSH owns and operates the Corinthia San Gorg Hotel, a ﬁ ve-star hotel at St. George’s Bay in St. Julians which was opened in November 1995. The hotel’s location provides a serene and tranquil setting at the water’s edge. The hotel facilities include 250 fully air-conditioned rooms with uninterrupted sea views, luxury bathroom, cable television, mini-bar and personal safe. The top two ﬂ oors house the executive and junior suites with their own check-in facilities, lounge and breakfast room. The conference facilities and business centre at Corinthia San Gorg Hotel are of the highest standards and include the latest in technology and equipment. The hotel also includes an extensive leisure centre and a number of catering outlets, including the Fra Martino Restaurant and the Fregatina Fish Restaurant, as well as a casual diner Henry J. Bean’s.

For the year ended 31 December 2001, the hotel achieved an average room occupancy of 63 per cent. The tour operators’ segment was the highest single contributor to the levels of occupancy achieved in 2001 with 39 per cent, meetings and incentive travel generated 29 per cent of occupancy, with the corporate segment accounting for about 18 per cent.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 21 IHI Hungary Rt.

Through this 100 per cent subsidiary, IHI is currently in an advanced stage of the development of a new ﬁ ve-star hotel, the Corinthia Grand Hotel Royal in Budapest, Hungary. This project, which is estimated to cost €113 million, involves the retention of the distinguished old Royal Hotel architecture and its incorporation in a modern hotel with ﬁ ve-star facilities. The development works on this hotel are expected to be completed by September 2002. The hotel, which is on the Pest side of the River Danube, will have 415 deluxe rooms, including 33 suites, two restaurants, a brassiere, a patisserie and a number of bars. The original ballroom is being renovated to its original splendour and banqueting can be provided for up to 1,000 persons. The conference facilities will be able to cater for 500 delegates with syndicate rooms for up to 200 persons. Additional facilities include a health centre with an indoor spa and 26 apartments which will be leased out to long term visitors.

IHI Lisbon Ltd.

Through this 100 per cent owned Maltese subsidiary, IHI acquired the shares of Alfa Investimentos Turisticos Lda., a Portuguese registered company which is the owner of the Corinthia Hotel Alfa in Lisbon, Portugal. The deal occurred in August 2001 and is valued at €47 million. This is the largest ﬁ ve-star hotel in Lisbon located in the heart of the city’s ﬁ nancial district. It currently operates 414 rooms, a major congress centre seating up to 1,400 persons and 44 syndicate rooms. Other facilities include four restaurants, an outdoor pool and a health club.

A refurbishment programme of the property’s interiors is currently being executed, to the value of approximately €20 million to redecorate the public areas, bedrooms and fi nish the top fi ve fl oors which are at present unutilised. These fl oors are being converted into a number of executive rooms and suites which would increase the total number of rooms to 530. These will be serviced with an independent check-in, a business centre and lounge facilities. The refurbishment is being executed without interrupting the hotel’s operation.

IHI Benelux B.V.

In January 2002, IHI acquired the Nevskij Palace Hotel in St. Petersburg, the Russian Federation through this 100 per cent subsidiary. This ﬁ ve-star establishment is one of the main hotels in the City of St. Petersburg and is situated on the principal boulevard. The hotel has 285 guest rooms and suites, various restaurants and conference halls. The hotel has been leased to IHI St. Petersburg LLC, a fully owned subsidiary of IHI registered in the Russian Federation, which in turn has entered into a 10 year management agreement with CHI for the operation thereof. On 16 January 2002, operations began under the Corinthia name.

The acquisition, which is valued at approximately €50 million, also includes four additional properties adjacent to the hotel. One of the properties is an ofﬁ ce complex which is leased to third parties, whilst another is being developed into an entertainment and shopping complex and is in an advanced state of completion. The other two buildings, which are presently unutilised, offer great potential for commercial development given their extensive frontage on the main boulevard.

C.H.I. Limited

C.H.I. Limited (CHI) is a company forming part of the Corinthia Group providing hotel management services to the Group itself and to an increasing number of hotel owners and investors in various countries. CHI is a private limited liability company set up and registered in Malta in accordance with and is regulated by the Act. CHI was registered on the 21 March 2000 with registration number C 26086, and has its registered ofﬁ ce at 22, Europa Centre, Floriana VLT 15, Malta and has an authorised share capital of Lm200,000, of which Lm100,000 has been issued and fully paid up.

CHI developed out of a division within the Corinthia Group that was originally set up to manage the Group’s own hotels. At the date of this Offering Memorandum, CHI has international hotel management and pre-operating contracts with hotel owners, including the Group itself, to operate ﬁ ve properties in Malta, two in Tunisia, ﬁ ve in Turkey, three in the Czech Republic, two in Portugal and Hungary and one each in The Gambia, the Russian Federation and Libya. The company is aiming to further expand its client base, through the signing of management agreements for hotels to be acquired by the Corinthia Group and other independent hotel owners and investors.

In fulﬁ lling its hotel management obligations, CHI is fully licensed by the Corinthia Group to trade under the brand of Corinthia Hotels International and to employ the Group’s Hotel Management Trademarks and Brand Service Standards related to hotels in the four- and ﬁ ve-star categories.

22 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES The company employs over 50 hotel management professionals organised into four main divisions covering fi nance and administration, sales and marketing, human resource development and pre-operating and support services. Besides its headquarters in Malta, CHI operates through its own or affi liated regional sales and/or management offi ces in Italy, France, Germany, the Russian Federation, Spain, Denmark, Turkey, Tunisia, the Czech Republic, the United Kingdom and Hungary.

CHI recognises that working with hotel owners requires constant, clear and coherent communication. The company therefore draws up annual business plans for hotel owners, setting out objectives in terms of ﬁ nancial, human and capital resources. The company then provides all the support and manpower necessary to achieve these objectives. The attainment of these targets, including the maintenance of standards and the reaching of budgetary goals, are constantly under review and discussion, supported also by independent quality audits of properties under CHI’s management.

Quality Project Management Limited

Quality Project Management Limited (QPM) is a company forming part of the Corinthia Group providing project, cost and construction management services to the Group itself and to an increasing number of customers in Malta and overseas. QPM is a private limited liability company set up and registered in Malta in accordance with and is regulated by the Act. QPM was registered on 30 March 2000 with registration number C 26148, has its registered ofﬁ ce at 22, Europa Centre, Floriana VLT 15, Malta and has an authorised share capital of Lm200,000 of which Lm50,000 has been issued, subscribed and fully paid up.

QPM was established out of a division within the Corinthia Group that was originally set up in 1980 to ensure that the Group’s own hotel developments and refurbishment projects are completed within agreed budgets and time frames and up to the required speciﬁ cations. Other clients have since also included commercial enterprises, hotel investors, ﬁ nancial institutions, industrialists and property developers.

Given its track record, QPM with its team of professionals can be considered as the largest international project management organisation in Malta, having been entrusted with a number of projects valued at around €500 million. These projects have included both new construction, as well as refurbishment works in Malta, Turkey, Hungary, Czech Republic, Libya, the Republic of Sudan, the Russian Federation and Tunisia.

QPM’s continued growth and reputation is dependent on the company’s rigorous adherence to job and time programming, strict cost control, technical quality assurance, outstanding design and most importantly immediate responsiveness to the client’s needs throughout the whole project.

QPM employs 50 persons including fully qualiﬁ ed mechanical and electrical engineers, quantity surveyors, CAD operators, interior designers, architects, civil engineers, project managers, site supervisors and IT specialists.

Corinthia Construction (Overseas) Limited

Corinthia Construction (Overseas) Limited (CCOL) is a private limited liability company registered in Malta and a fully owned subsidiary of QPM.

CCOL is involved principally in project management, planning and other ancillary services in respect of construction works on sites outside Malta. Its principal areas of activity include project management in the hotel, catering and tourism ﬁ eld where the expertise of the Corinthia Group in hotel management and operation are an invaluable asset.

Marina San Gorg Limited

Marina San Gorg Limited (MSG) is a private limited liability company registered in Malta on 1 February 1980 with company registration number C 4852. It is compliant with and regulated by the Act. MSG is a fully owned subsidiary of CPHCL and has an authorised share capital of Lm3,500,000 of which Lm3,000,000 has been issued, subscribed and fully paid up.

MSG owns and operates, through CHI, the Corinthia Marina Hotel, a four-star hotel in St. Julians. The hotel, which was opened in November 1997, consists of 200 twin-bedded rooms, 50 of which are inter-connecting and 11 of which are suites all enjoying views of St. George’s Bay. The hotel also features two outdoor pools and sundeck areas and an extensive beach lido with water sports facilities. The hotel also boasts of a wide range of catering and entertainment outlets, including Tapa Tapa, Vinotheque, Dukes’ Night Club and Café 24.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 23 For the year ended 31 December 2001, the hotel achieved an average room occupancy of 69 per cent. Tour operators were the most signiﬁ cant contributor to the hotel’s occupancy levels for 2001 with 75 per cent of occupancy, with the meeting and incentive travel market contributing a material 14 per cent.

Mistra Village Limited

Mistra Village Limited (MVL) is a private limited liability company registered in Malta on 30 September 1968 with company registration number C 1245. It is compliant with and regulated by the Act. MVL is a fully owned subsidiary of CPHCL and has an authorised share capital of Lm220,000 of which Lm180,000 has been issued, subscribed and fully paid up.

MVL owns the Corinthia Mistra Village Clubhotel in Xemxija. MVL has granted the Corinthia Mistra Village Clubhotel on lease to CPHCL. The lease is automatically renewable for consecutive three year terms unless either party gives notice of termination at least three months prior to the term then current.

Corinthia Mistra Village Clubhotel is operated by CHI. The Mistra complex is located in the northern part of the island and is perched on the top of a hill commanding magniﬁ cent views of St. Paul’s Bay and was recently refurbished and expanded. The clubhouse serves as the focus of the 255 fully air-conditioned club suites equipped with kitchen, bathroom, dining area, lounge, TV with satellite and cable reception. It houses the main facilities of the hotel including reception, restaurants, bar, TV and video room as well as multi-purpose rooms used for guest entertainment. Other amenities in the complex include indoor and outdoor swimming pools, two squash courts, a gym, two saunas, a children’s pool and a playroom.

For the year ended 31 December 2001, the property achieved an average room occupancy of 61 per cent. Tour operators were the most signiﬁ cant contributors to the hotel’s occupancy levels for 2001 with almost 86 per cent of occupancy.

Garment Finishing Company Limited and Swan Laundry & Dry Cleaning Company Limited

Garment Finishing Company Limited (GFCL) is a private limited liability company registered in Malta on 23 December 1987 with company registration number C 9283. It is compliant with and regulated by the Act. GFCL is a fully owned subsidiary of CPHCL and has an authorised share capital of Lm220,000 of which Lm9,000 has been issued, subscribed and fully paid up. GFCL is in the business of laundry and dry cleaning services.

Swan Laundry & Dry Cleaning Company Limited (SLDC) is a private limited liability company registered in Malta on 5 June 1973 with company registration number C 2708. It is compliant with and regulated by the Act. CPHCL owns 99.49 per cent of the issued share capital of SLDC. SLDC has an authorised share capital of Lm195,000 which has been issued, subscribed and fully paid up. SLDC operates laundry and dry cleaning services.

Since January 1990, GFCL and SLDC have consolidated their operations and businesses into one functional business. The risks and beneﬁ ts of their joint operation are divided as to 4/7 for GFCL and 3/7 for SLDC. The daily requirements of the hotels operated by CPHCL and its subsidiaries for fresh towels and linen has created a high demand for the services of this joint operation which also provides its services to other major hotels in Malta. It is intended that the two companies be merged in the near future.

Flight Catering Company Limited

Flight Catering Company Limited (FCCL) is a private limited liability company registered in Malta on 17 June 1999 with company registration number C 24720 and is compliant and regulated under the Act. CPHCL owns 70 per cent of the issued share capital of FCCL and the remaining shareholding is owned by Air Malta p.l.c. The share capital of FCCL is Lm1,250,000 of which Lm125,000 has been issued, subscribed and fully paid up.

On 1 January 2002, CPHCL transferred its business to FCCL, which is now fully operational. FCCL has appointed CPHCL in an advisory capacity to run the present business, which is effectively the provision of ﬂ ight catering services for the airline business and in due course intends to build a new ﬂ ight catering unit from where it will execute its then current business.

24 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES FOREIGN SUBSIDIARIES AND ASSOCIATED COMPANIES

TUNISIA

Société de Promotion Hotelière Khamsa S.A.

The Corinthia Group is the owner of 100 per cent in the issued share capital of Société de Promotion Hotelière Khamsa S.A. CPHCL owns 63.33 per cent whilst 36.67 per cent is held by Corinthia Investments Limited (CIL) (see below). Société de Promotion Hotelière Khamsa S.A. owns Corinthia Khamsa Hotel in Tunis. CHI operates the hotel in terms of a fi ve year management agreement entered into on 1 April 2000. The hotel is located on the beach of Gammarth and consists of 326 rooms including junior suites. Other amenities include indoor and outdoor pools, tennis courts, a Turkish bath and sauna. Water-skiing, sailing and windsurfi ng facilities are also available. The hotel achieved an average room occupancy of 53 per cent for the year ended 31 December 2001. Tour operators were the highest contributors to occupancy levels with around 60 per cent. Meetings and incentive travel contributed 24 per cent, whilst corporate travel contributed a signifi cant 16 per cent of occupancy.

Corinthia Tunisie S.A.

Corinthia Tunisie S.A. is a newly incorporated company registered under Tunisian law and is a wholly owned subsidiary of CPHCL, which was incorporated in 2001 with the trade register number B133412001. Its registered ofﬁ ce is situated at Hôtel Khamsa Corinthia – Les Côtes de Carthage, Gammarth, Tunisia. The authorised share capital of the company is 50,000 Tunisian Dinars (equivalent to €40,000) which is issued and fully paid up.

Corinthia Tunisie S.A. was incorporated so as to receive the assignment of a lease agreement originally entered into by CIL with the owner of the Corinthia El Ksar Hotel. The lease agreement was entered into on 28 January 2000. It is due to expire on 31 December 2011, however, it gives both parties the right to terminate on 31 December 2006. The assignment of the lease agreement to Corinthia Tunisie S.A. has been duly effected.

The Corinthia El Ksar Hotel is managed by CHI by virtue of a management agreement entered into on 1 April 2000 for a period of 10 years. It is a four-star hotel located in Sousse, set in landscaped gardens on its own white sandy beach. It comprises 328 luxury air-conditioned rooms, 21 junior suites and one presidential suite. The conference centre can cater for up to 400 delegates. Additional facilities include a restaurant, pizzeria, beach bar, a coffee shop, an Arab coffee bar, a night club, indoor and outdoor pools, tennis courts, beach volley, a ﬁ tness centre and a Turkish Hammam.

The Corinthia El Ksar Hotel started operating in Augut 2001 and for the year ended 31 December 2001 achieved an average room occupancy of 59 per cent. Tour operators were the highest contributors to occupancy levels with around 91 per cent and the corporate segment contributing around 9 per cent of occupancy.

TURKEY

Tektur Turizm A.S.

CPHCL holds a 35 per cent equity interest in this company which is the owner of the Corinthia Art Hotel, a hotel leased to another subsidiary of CIL called Corinthia Turizm Yatimlari ve Ticaret a.s. (see below). Tektur Turizm a.s. is a private company incorporated in Turkey on the 14 June 1984 with registration number 203977/151520 and has its registered ofﬁ ce at Abdi Ipekci Cad. No. 59, Kizikaya Apt., Kat.3, Tesvikye, Istanbul. The authorised share capital of the company is TL 150,000,000,000 (equivalent to €1.2 million) which is issued, fully paid up of which 35 per cent is held by CPHCL and 65 per cent by Turkish nationals.

CZECH REPUBLIC

Top Spirit a.s.

Top Spirit a.s (Top Spirit) is a joint stock company registered, organised and operating in the Czech Republic with its registered ofﬁ ce at Prague 4, Meleska 7 and is registered under ICO number 49240137. On 23 February 1998, CPHCL acquired 100 per cent of the issued shares of the said company from Bankovni Holdings a.s. Its basic capital was increased and is today CzK 400,000,000, equivalent to circa €11.55 million with effect from 21 June 1999.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 25 Top Spirit is a fully owned and controlled subsidiary of CPHCL through which CPHCL holds equity interests in other Czech Republic companies. Top Spirit is an investment company owning substantial holdings in two major hotel companies in Prague and another in Hradec Kravlove. Additionally, it owns substantial equity holdings in companies which own smaller regional hotels spread across the Czech Republic. Top Spirit also operates each of these hotels through long-term lease agreements. In accordance with capital market regulations in the Czech Republic, Top Spirit, as a substantial shareholder in Hotel Forum a.s., Hotel Panorama a.s. and Hotel Cernigov a.s., completed a mandatory public offer to the minority shareholders for the acquisition of their shares in April 1998. This resulted in Top Spirit increasing its equity stake in each of those companies to the ﬁ gures set out below.

Company Equity Description of Hotel Property Interest %

Hotel Forum a.s 82.25 Owns the fi ve-star Corinthia Towers Hotel in Prague consisting of 531 air- conditioned rooms on 24 fl oors, with two executive fl oors dedicated to the business traveller and fi ve non-smoking fl oors. The hotel has 17 junior suites, 12 executive suites, nine standard suites and one presidential suite. All rooms have en suite bathroom facilities, satellite, cable TV, direct dial telephone, voice messaging and direct e-mail and fax connections. All the hotel bedrooms will be fully refurbished by April 2004. The hotel also offers an array of restaurants and bars together with meeting and banqueting facilities, a health and fi tness centre and a casino, which were all fully refurbished in 2000.

For the year ended 31 December 2001 this hotel had an average room occupancy of 67 per cent. Tour operators accounted for most of the room occupancy, with circa 58 per cent. Meetings and incentive travel contributed a signiﬁ cant 24 per cent whilst the corporate market contributed around 14 per cent to occupancy.

Hotel Panorama a.s. 88.24 Owns the four-star Corinthia Panorama Hotel in Prague consisting of 427 air-conditioned rooms on 24 fl oors, with non-smoking fl oors, ten suites and one presidential suite. Rooms are equipped with T.V., mini- bar, safe deposit box, direct dial telephone and en suite bathroom facilities. The hotel offers a wide variety of bars, a coffee shop, two restaurants, meeting and banqueting facilities, a health and fi tness centre with swimming pool, a sauna, gymnasium and fi tness bar, which were all recently refurbished in 2001.

For the year ended 31 December 2001, the Corinthia Panorama Hotel achieved an average annual room occupancy of 72 per cent. Tour operators were by far the most signiﬁ cant contributors to room occupancy levels with 84 per cent. The corporate market accounted for another 9 per cent and meeting and incentive travel 5 per cent of room occupancy.

Hotel Cernigov a.s. 79.97 Owns the three-star Amber Hotel Hradec Kralove in the eastern Bohemian region, about 100 kms east of Prague, consisting of 210 rooms including 10 suites, two bars, a ﬁ tness and beauty centre, as well as a casino and a nightclub.

This hotel was leased out to Legner Consulting S.R.O. by an agreement which came into effect in 1999 and which is due to expire on 31 December 2003.

Top Spirit a.s. also has other interests and operates other hotels in the Czech Republic amongst which there are Hotel Bavor a.s., Hotel Palcat a.s., and HSC Vimperk a.s., which own other smaller hotels in the Czech Republic. These properties were leased to Legner Consulting S.R.O. by virtue of an agreement which commenced in 1998 and has a term of ﬁ ve years.

26 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Corinthia Investments Limited

Corinthia Investments Limited (CIL) is a limited liability company registered and incorporated in England on 21 November 1985 under company number 1962947 and having its registered ofﬁ ce at Brentham House, 45C High Street, Hampton Wick, Kingston Upon Thames, KT1 4ER, England. The company has an authorised and issued share capital of Stg10,000,000 fully paid up (equivalent to €16,369,414). CIL is a fully owned subsidiary of CPHCL.

CIL is the holding company through which CPHCL holds its investments in Turkey, Hungary and Tunisia. CHI manages, on behalf of CIL, the following hotels:

TURKEY

Currently CIL owns the following investments in Turkey each conducting the operations hereunder described:

Company Equity Description of Hotel Property Interest %

Corinthia Turizm Yatirimlari ve Ticaret a.s. 99.99 Owns the Corinthia Gulluk Hotel, a small and elegant four-star hotel overlooking the ﬁ shing village of Gulluk consisting of 36 air-conditioned rooms with en suite bathroom facilities, TV and mini-bar. Other amenities include a beach club with water sports facilities, an international restaurant and tennis courts.

Leases Corinthia Art Hotel under a fi ve year lease agreement entered into in 1996 with an option to renew for a further fi ve year term thereafter. The agreement has been renewed and is due to expire in January 2006. Situated in Goynuk, 8 kms from Kemer in Antalya, this is a 334 unit fi ve- star property. Two types of accommodation are available – hotel rooms and bungalows. All hotel rooms and bungalows are equipped with air- conditioning, TV (with satellite reception), direct dial telephone, mini bar and safe. The hotel also offers extensive leisure facilities including tennis courts, a swimming pool, a Turkish Hammam and exercise room, two restaurants, three bars and a beer house.

For the year ended 31 December 2001, this hotel achieved an average occupancy rate of 89 per cent. Tour operators were the major contributors to these occupancy levels generating 93 per cent, whilst the corporate market and the meeting and incentive travel generated 3 per cent each.

Internasyonal Turizm ve. Otelcillak Ticaret a.s. 98.86 Owns Corinthia Labranda Hotel, overlooking Mandalya Bay. This four-star hotel on the Aegean coast features 138 bedrooms, fully air-conditioned with en suite bathroom facilities and direct dial telephones. Other facilities include a beach club with a wide range of water sports, two restaurants, bars, leisure facilities including tennis courts and an exercise room.

For the year ended 31 December 2001, this hotel achieved an average occupancy level of 41 per cent. Tour operators were the major contributors to these occupancy levels generating 70 per cent of occupancy, meeting and incentive travel generated 22 per cent, whilst corporate generated 8 per cent.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 27 Company Equity Description of Hotel Property Interest %

Tekirova Turizm Yatirimlari a.s 50 Holds a 49 year lease on the Corinthia Tekirova Clubhotel, a ﬁ ve-star property set in a lush pine forest on the sandy shores of Tekirova Beach near Kemer in Antalya. This clubhotel offers a choice of fully air- conditioned accommodation consisting of 101 twin bedded hotel rooms, 258 holiday village units, 12 club suites and 24 family apartments. All types of accommodation are equipped with television, mini bars, direct dial telephone and safety deposit boxes. The clubhotel facilities include a main restaurant, a fully equipped health club, swimming pools, tennis courts, a private beach and an organised kids’ club.

For the year ended 31 December 2001, the hotel achieved an average room occupancy of 72 per cent. The tour operator market was the strongest contributor to room occupancy levels with a 92 per cent contribution whilst the corporate segment was the next main contributor with 6 per cent.

Norm Turizm Yatirimlari Isletmecilik a.s. 40 Owns Corinthia Excelsior Hotel in Sorgun, Antalya, a four-star hotel set in extensive gardens. The hotel consists of 151 air-conditioned bedrooms all with en suite bathroom facilities and direct dial telephone. TV and satellite reception and mini-bars are available on request. Other facilities include a restaurant, snack bar, swimming pool, ﬁ tness centre, tennis court, a sauna, a Turkish bath and massage parlour. The hotel also provides conference facilities for about 150 delegates.

The hotel is operated by CIL under a ten year management agreement which came into effect in 1990. A three year extension to this agreement has already been negotiated and this is due to expire in April 2003.

During the year ending 31 December 2001, the hotel achieved 87 per cent average room occupancy. The hotel is mainly a tourist destination and tour operators accounted for nearly 92 per cent of room occupancy in 2001 with the corporate market accounting for a further 6 per cent of room occupancy.

CIL is currently undertaking further investment in Turkey and has acquired a 50 per cent equity interest in the proposed development of a new deluxe hotel in Istanbul.

HUNGARY

Thermal Hotel Aquincum Rt.

CIL’s Hungarian investments consist in the ownership of the Corinthia Aquincum Hotel in Budapest through its 88.72 per cent equity interest in Thermal Hotel Aquincum Rt. The acquisition of this company was concluded in January 1997. Situated on the banks on the Buda side of the Danube, this ﬁ ve-star hotel, which is operated by CHI, consists of 312 rooms including eight suites, a business centre, two restaurants and a discotheque, as well as conference facilities and a thermal spa.

For the year ended 31 December 2001, the hotel achieved an average room occupancy of 63 per cent. The corporate market and tour operators were the highest contributors to room occupancy each accounting for 45 per cent of room occupancy levels. The meeting and incentive market was also a signiﬁ cant contributor with 10 per cent.

28 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Corinthia Restaurants Kft

Corinthia Restaurants Kft is a subsidiary of CIL registered in Hungary on 24 March 1997 to provide services related to catering, confectionery, entertainment and hotel services. Currently it operates the Henry J. Bean’s restaurant complex in Budapest. The complex, which is leased by the company, comprises three theme franchise operations, also including a Chicago Rib Shack restaurant and a Blues Alley pub.

PORTUGAL

Scalotel Sociedade Escalabitana Hoteleira, S.A.

CIL holds a 42 per cent equity interest in this company which is the owner of the Corinthia Santarém Hotel in the town of Santarém in Portugal. A 20 year management agreement was entered into on 6 July 2000 with CHI. This hotel consists of 105 rooms, an executive ﬂ oor with a further six suites and four rooms, an international restaurant, pool bar, conference facilities and meeting rooms, banqueting facilities for up to 250 guests, an indoor pool, an outdoor pool and a health centre with a sauna and gym.

For the year ended 31 December 2001, the hotel achieved an average room occupancy of 36 per cent. The corporate segment was the strongest contributor to room occupancy levels with a 76 per cent contribution whilst tour operators accounted for 20 per cent.

UNITED KINGDOM

Atkins Travel Limited

CIL holds 43 per cent of this company which is registered in England under the number 2314542. The objects of the company include the carrying out of the business of travel agents and to organise, arrange and facilitate travel. The company operates its retail business under its own name and handles all tour operation business under the brand name of Prestige Holidays.

OTHER COMPANIES

CPHCL also has the following interests:

B.C.W. Limited

B.C.W. Limited (BCW) is a private limited liability company registered in Malta on 22 April 1998 with company registration number C 23950 and is compliant and regulated by the Act. CPHCL owns 33.33 per cent of the issued share capital of BCW. The remaining shareholding is owned by Island Hotels Limited and Peninsula Investments Limited as to 33.33 per cent each. BCW in turn owns a 50 per cent equity interest in Dragonara Casino Limited which operates the Dragonara Casino in St. Julians. The other 50 per cent of the issued share capital of Dragonara Casino Limited is held by a joint venture company between Air Malta p.l.c. and Accor S.A. of France. The Dragonara Casino is managed by Accor S.A., a world-renowned hotel operator with several casino operations in France.

The Modern Matches Manufacturing Company Limited

The Modern Matches Manufacturing Company Limited (MMMCL) is a private limited liability company registered in Malta on 27 July 1965 with company registration number C 100. It is compliant with and regulated as a private company by the Act. MMMCL is a wholly owned subsidiary of CPHCL. The authorised share capital of MMMCL is Lm58,800 which has been issued, subscribed and fully paid up.

MMMCL is a property owning company.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 29 The Village Bakery Limited

The Village Bakery Limited (VBL) is a private limited liability company registered in Malta on 26 February 1986 with company registration number C 7921. It is compliant with and regulated as a private company by the Act. CPHCL owns 65 per cent of the issued share capital of VBL, and the remaining 35 per cent shareholding is owned by Jesper’s Limited. Jesper’s Limited has no relation to CPHCL or its shareholders. The authorised share capital of VBL is Lm500,000 of which Lm450,000 has been issued and paid up.

VBL is in the business of producing bakery and confectionery items.

Euromark Trading Company Limited

Euromark Trading Company Limited is a private limited liability company, having a registration number of C 4850 and set up on 1 February 1980. Its registered address is 52, St Christopher Street, Valletta. The authorised issued share capital of the company is Lm5,000. The capital is fully subscribed and 20 per cent paid up. The company is a fully owned subsidiary of CPHCL.

The objects of the company are to act as importers and commission agents for the purpose of re-export and trading outside Malta in respect of food and other consumable goods.

Marin Aruba (Malta) Limited

Marin Aruba (Malta) Limited is a private limited liability company registered in Malta on 17 March 1987 bearing company registration number C 8654 and is compliant with and regulated by the Act. It is a fully owned subsidiary of CPHCL with its registered address at 52, St Christopher Street Valletta, Malta.

The authorised share capital of the company is Lm80,000 divided into 80,000 shares of Lm1 each. The issued share capital of the company is Lm80,000 divided into 68,000 ordinary ‘A’ shares of Lm1 each, twenty per cent paid up and 12,000 ordinary ‘B’ shares of Lm1 each fully paid up.

The company holds a 0.66% equity stake in IHI.

MANAGEMENT

The board of directors is responsible for the overall management of CPHCL and establishing policy guidelines for the management of the company, including responsibility for the appointment of all executive offi cers and other key members of management. The memorandum and articles of association of CPHCL provides that the board of directors shall be composed of fi ve directors, three of whom are to be nominated by the holders of ordinary ‘A’ shares and two by the holders of ordinary ‘B’ shares. The chairman was appointed at the fi rst meeting of the board of directors from amongst the directors nominated by the ordinary ‘A’ shareholders, and has an original and casting vote.

The following list sets out the current directors of CPHCL and the company secretary:

Alfred Pisani Chairman (1) Joseph Pisani Director (1) Victor Pisani Director (1) Ali Belgassem Edlew Director (2) Hamed Arabi El Houdieri Director (2) Alfred Fabri Company Secretary

(1) Appointed by the holders of ordinary ‘A’ shares (2) Appointed by the holders of ordinary ‘B’ shares

30 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Alfred Pisani: is the founder of the Corinthia Group and has been the Chairman and Chief Executive Offi cer since the inception of CPHCL in 1966. He was responsible for the construction of the Group’s fi rst hotel, the Corinthia Palace Hotel in Attard. He has led the Corinthia Group from a one hotel company to a diversifi ed group having signifi cant interests, as equity participant, manager or both, in fi ve hotels in Malta, fi ve hotels in Turkey, nine hotels in the Czech Republic, two hotels in Portugal, two hotels in Tunisia and one hotel in each of Hungary, the Russian Federation and The Gambia. Under his leadership, the Group is currently undertaking two development projects consisting of the development of a hotel in each of Budapest and Tripoli, and the refurbishment of a hotel in Lisbon. In 2001, he was awarded the Order of Merit of the Republic of Malta in recognition of his achievements in and contribution to the business sector in Malta.

Joseph Pisani: has been a director of CPHCL since 1966. He has ever since been intimately involved in the growth and evolution of the Corinthia Group. He is an executive director responsible for the marketing of the various services provided by the Corinthia Group. In this capacity, he is a member of various international hospitality sales and marketing organisations. He is also the Chairman of the Supervisory Board.

Victor Pisani: has been a director of CPHCL since 1966 and is an Executive Director of companies within the Corinthia Group. He is also the Chairman of Pisani Flour Mills Ltd. and a director of Federated Mills Ltd.

Ali Belgassem Edlew; was appointed a director of CPHCL in September 2001. He is a graduate in mechanical engineering and joined LAFICO in 1988 where he has served as General Manager of the Participation Department. In 1989, he was appointed Chairman of Universal Inspectorate and Services Company in Malta and in 1998 he became Chairman of the Libyan Arab Algerian Construction Company. He has also been appointed as a member of the Supervisory Board and a director of QPM.

Hamed Arabi El Houdieri: joined the board of directors of CPHCL in April 2001. He is an MBA graduate of Dayton. He was appointed General Manager (Finance) at LAFICO in 1988 and also served as General Manager for the Joint Arab International Investment Company in Egypt. In 1998, he was appointed as General Manager for Planning and since 1999 he has occupied the position of General Manager – Participations. He has also served on the committees of administration and budgetary questions and contributions of the United Nations and is the author of two publications on investment appraisal.

Directors’ Service Contracts

None of the directors have deﬁ nite service contracts with CPHCL. Their appointment is made directly by the shareholders as set out above.

Removal of Directors

A director may, unless he resigns, be removed by the shareholder appointing him or by an ordinary resolution of the shareholders as provided in section 139 of the Act.

Powers of Directors

The directors are by virtue of the Articles of Association of CPHCL empowered to transact all business that is not by the Articles expressly reserved for the shareholders in general meeting.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 31 The Supervisory Body

The Corinthia Group monitors the performance of each of its subsidiaries in the hotel sector through various members of a Supervisory Body comprising a mix of executive and non-executive members. This Supervisory Body has been set up to monitor the interests of the Group as hotel owner in its relations with other subsidiary companies, such as CHI, as well as third parties as operators. The members of the Supervisory Body are:

Joseph Pisani Chairman Ali Belgassem Edlew Member Joseph C. Caruana Member Lino Soler Member Alfred Fabri Secretary

Key Executives

Alfred Pisani acts as the Chairman and CEO of most of the Group companies and is a key executive of the Corinthia Group. Other key members of the executive team are the following:

Sighart R. Bergmann: is the Chairman of CHI. He has extensive experience in hotel management having been involved in this area since 1960. He joined Holiday Inn in 1971 and worked in various countries including the United Kingdom, South Africa and Germany. At Holiday Inn, he served as District Director Northern Germany in charge of ﬁ ve hotels and then moved on to Regional Director United Kingdom in 1978 and Regional Director United Kingdom, Benelux and France in 1979. In 1980, he was appointed Director of Operations Europe. Between 1981 and 1988, he was Managing Director and Senior Vice-president for Europe, Middle East & Africa for Holiday Inns (U.K.) Inc. In 1992 he joined the Corinthia Group.

Gerald E. Borg: is the Chairman and Managing Director of QPM. He is a graduate of the National University of Ireland with a Masters in Business Administration and a Bachelor of Applied Science from the University of Windsor, Ontario, Canada. He has been employed with multinational companies such as Ford Motor Company of Canada Limited, Blue Bell Inc., Bata Shoe Organisation and Lenco Holdings Limited. In 1996, he returned to Malta to occupy the post of Chief Executive Ofﬁ cer of Malta Government Investments Limited and Malta Investments Management Company Limited. He joined the Corinthia Group in 1997.

Joseph Fenech: is the Managing Director of the Corporate Offi ce of CPHCL and the Managing Director of IHI and the Company. He is a fellow of the Chartered Certifi ed Accountants of the United Kingdom and a fellow of the Malta Institute of Accountants. He is responsible for business development and corporate administration of the Corinthia Group. He joined the Corinthia Group in 1980 after having spent a few years as Senior Auditor with a local auditing fi rm. His fi rst appointment was as Group Accountant responsible for all fi nancial and accounting matters of the Corinthia Group operations.

Karmenu Vella: was appointed Deputy Chairman of CHI in March 2001. He is a graduate in architecture and civil engineering and a Member of Parliament, where he was ﬁ rst elected in 1976 and has retained his seat since. He also served as a Minister of the Government of Malta in 1981-1984 and then again in 1996-1998 as Minister of Tourism. He also served as Managing Director of the Libyan Arab Maltese Holding Company between 1975 and 1981.

David Woodward: was appointed Managing Director of CHI in May 2000. He has extensive experience in the hospitality sector having worked with Holiday Inn as General Manager of Holiday Inn Chelsea, and as Regional Director responsible for the United Kingdom, France, Belgium and Holland. In 1983, he was appointed Regional Vice-president of Operations responsible for Europe, Middle East and Africa. In 1993, he joined Le Meridien as General Manager of Le Meridien Piccadilly, London and Le Meridien Waldorf and later Le Meridien Watergate, Washington D.C. In 1998, he was appointed General Manager of Le Royal Meridien, Bahrain.

WORKING CAPITAL

The Directors of the Company and of CPHCL are of the opinion that the working capital available to the Company and CPHCL respectively is sufﬁ cient for the attainment of its objects and the carrying on of their respective business for the next 12 months of operations.

32 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES PART IV – THE GUARANTEE

CORINTHIA PALACE HOTEL COMPANY LIMITED

To All Bond holders:

We make reference to the issue of:

Lm4,000,000 6.75 per cent Bonds 2012; and €10,000,000 6.5 per cent Bonds 2010 by Corinthia Finance p.l.c. (the ‘Issuer’) pursuant to and subject to the terms and conditions contained in the Offering Memorandum dated 11 March 2002 (the ‘Bonds’).

Now therefore by virtue hereof, we, Corinthia Palace Hotel Company Limited, hereby stand surety jointly and severally with the Issuer and irrevocably and unconditionally guarantee the due and punctual performance of all the obligations undertaken by the Issuer under the Bonds and, without prejudice to the generality of the foregoing, undertake to pay all amounts of principal and interest which may become due and payable by the Issuer to Bondholders under the Bonds.

We understand that the aggregate principal amount of Bonds issued by the Issuer may be increased by a maximum aggregate amount of Lm4,000,000 or €10,000,000 in either or both of the ML Bonds and the Euro Bonds, in the event that the Issuer exercises its Over-allotment Option, in which event this guarantee shall extend to such increased amount which shall in no event exceed the aggregate amount of Lm12,000,000 or €30,000,000.

All terms used in this guarantee shall, unless the context otherwise requires, have the same meaning assigned to them in the Offering Memorandum.

This guarantee shall be governed by the Laws of Malta.

Signed and executed on this the 7th day of March 2002, after approval of the Board of Directors at its meeting of the same date.

Ali Belgassem Edlew Victor Pisani Director Director

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 33 PART V – GENERAL INFORMATION

Incorporation

The Company was incorporated on the 9 September 1999 as a public company with limited liability in terms of the Companies Act 1995, with company number C 25104.

Share Capital

1 (i) The authorised share capital of the Company is Lm1,000,000. (ii) The issued share capital of the Company is Lm100,000 fully paid up, divided into 100,000 Ordinary Shares of a nominal value of Lm1 each share.

2 There is more than 10 per cent of the Company’s authorised capital which is unissued. However, in terms of the Company’s memorandum and articles of association, none of such capital shall be issued in such a way as would effectively alter the control of the Company or nature of the business without the prior approval of the Company in general meeting.

3 The shares of the Company are not listed on the MSE. Application has not been ﬁ led for the shares of the Company to be quoted on the MSE Ofﬁ cial List.

4 There is no capital of the Company which has been issued to the public during the two years immediately preceding the publication of this Offering Memorandum nor is it expected that the Company issues during the next ﬁ nancial year any shares, whether fully or partly paid up, in consideration for cash or otherwise.

5 There is no capital of the Company which is currently under option, nor is there any agreement by virtue of which any part of the capital of the Company is to be put under option.

Appointment of Directors

The Directors are appointed in terms of the Company’s articles of association. However, by agreement with the MSE, one of the Directors is a person independent of the Corinthia Group.

Powers of Directors

1 The Directors are vested with the management of the Company and their powers of management and administration emanate directly from the Company’s memorandum and articles of association and the law. The Directors are empowered to act on behalf of the Company and in this respect have the authority to enter into contracts, sue and be sued in representation of the Company. In terms of the Company’s memorandum and articles of association they may do all such things as are not by the Company’s memorandum and articles of association reserved for the Company in general meeting.

2 Directors may not vote on any proposal, issue, arrangement or contract in which they have a personal material interest.

3 The maximum limit of aggregate emoluments of the Directors is in terms of the Company’s memorandum and articles of association, to be established by the shareholders in general meeting. Within that limit, the Directors shall have the power to vote remuneration to themselves or any number of their body. Any increases in the maximum limit of Directors’ aggregate emoluments have to be approved by the general meeting. The Directors may also vote pensions, gratuities or allowances on retirement to any Director who has held any other salaried ofﬁ ce with the Company or to his widow or dependents – however, any such proposal shall have to be approved by the shareholders in general meeting.

4 In terms of the Company’s memorandum and articles of association, the Board of Directors may exercise all the powers of the Company to borrow money and give security therefor, subject to the limit established in the Company’s articles of association and the over-riding authority of the shareholders in general meeting to change, amend, restrict and or otherwise modify such limit and the Directors’ borrowing powers.

5 There are no provisions in the Company’s memorandum and articles of association regulating the retirement or non-retirement of Directors over an age limit.

34 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES Commissions

There were no commissions, discounts, brokerages or other special terms granted during the two years immediately preceding the publication of this document in connection with the issue or sale of any capital of the Company or any of its subsidiaries.

Exchange Control

All Maltese residents wishing to invest in the Euro Bond, including those who apply for a re-allocation into the Euro Bond, should be aware that they should comply with exchange control regulations from time to time in force regulating investments by Maltese residents in instruments denominated in a foreign currency. It is each investor’s obligation, and not the Company’s or the Registrar’s, to ensure that the applicable exchange control requirements are duly complied with.

Maltese residents wishing to invest in the Euro Bond do not need exchange control clearance as long as their participation in the Euro Bond is ﬁ nanced from:-

1 funds held abroad and/or in foreign currency accounts with banks licensed to carry on the business of banking in Malta; and /or

2 purchases of foreign currency not exceeding the annual foreign investment allowance which is currently Lm50,000 per annum. This is a global limit and applies to all foreign currency investments made by Maltese residents. Strict penalties may be incurred if this overall limit is not complied with.

It is the responsibility of each investor to verify that such limit is not exceeded in any one year.

Each investor shall be expected to make a declaration on the Application Form conﬁ rming eligibility to invest in the Company and in the event that such eligibility is pursuant to investments made out of the annual foreign investment allowance, a declaration that the said allowance will not be exceeded by virtue of the investment.

A Maltese resident is deﬁ ned by the Exchange Control Act (Cap. 233) as:

(a) any natural person regardless of nationality, whose place of residence is Malta;

(b) any body corporate incorporated under any law of Malta;

(c) any person who in accordance with section 2(6) of the Exchange Control Act may be declared by the Minister to be treated as a resident for the purposes of exchange control; and

(d) the personal representative of a deceased person, independently of his residence, shall be treated as resident in the country of the deceased’s last residence for the purpose of matters in which the representative is concerned in his capacity as such.

No exchange control clearance is required for non-residents of Malta wishing to invest in the Euro Bond. For the purposes of compliance with exchange control requirements the Company and/or the Registrar may require a declaration of non-residence with each application from such investors.

Directors’ Interests

The Directors of the Company have no beneﬁ cial interests in the share capital of the Company as at the date of this Offering Memorandum. There are no assets which have been leased or otherwise transferred by or to the Company in which any of the Directors have any interest direct or indirect, nor are any such leases or transfers being proposed.

Litigation

The Company has no litigation or claims of material importance pending or threatened against it.

CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 35 Accountants’ Report for CPHCL and the Company

The Accountants’ report is being included in this Offering Memorandum with the consent of the Accountants preparing it, in the form and content in which it is included, which consent has not been withdrawn.

Material Contracts

The Company has not entered into any contracts of a material nature which were not in the ordinary course of its business, save as otherwise disclosed in this Offering Memorandum.

Loan Capital & Borrowings

The Directors are of the opinion that the ﬁ nancing agreements of the Guarantor and Group Companies have been entered into on standard market terms prevalent at the time of executing the relative agreements.

Before the issue of the Bonds, the Company had borrowings equivalent to Lm10,000,000 outstanding and due for repayment in 2009. Details of the loan capital and borrowings of the Guarantor are set out in notes 16 and 17 to the Accountants’ Report in Annex B of this Offering Memorandum.

From an estimate made by CPHCL as at 31 December 2001, the unencumbered assets of the Corinthia Group before the issue of the Bonds amounted to circa Lm190 million. The term unencumbered assets is deﬁ ned in the terms and conditions of the Bonds in Annex A Part 1 as assets which are not subject to a Security Interest.

Documents for inspection

The following documents or certiﬁ ed copies thereof will be made available for inspection at 22, Europa Centre, Floriana during the issue period:

(i) The Company’s memorandum and articles of association;

(ii) Certiﬁ ed copy of Accountants’ report;

(iii) Written consent of Accountants to reproduce their report in the Offering Memorandum;

(iv) Consolidated Audited Financial Statements of the Corinthia Group for the ﬁ nancial years – 1999 and 2000.

(v) Loan Agreement between CPHCL and the Company; and

(vi) Original Letter of Guarantee by CPHCL.

36 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES ANNEX A

Part 1 – Terms and Conditions of the ML Bond and the Euro Bond

The rights attaching to the Bonds are those set out in the Terms and Conditions of issue set out in this Annex.

1. General

(a) Each ML Bond forms part of a duly authorised issue of 6.75 per cent registered Bonds of a nominal value of Lm100 issued by the Company at the Bond Offer Price of Lm100 per Bond, to the aggregate principal amount of four million Maltese Liri (Lm4,000,000) (except as otherwise provided under Clause 9 ‘Further Issues’ below) subject to the exercise by the Company of the Over-allotment Option in the event of over-subscription in which case the Company may increase the ML Bonds in issue up to an aggregate of eight million Maltese Liri (Lm8,000,000).

(b) Each Euro Bond forms part of a duly authorised issue of 6.5 per cent registered Bonds of a nominal value of €100 each Bond issued by the Company at the Bond Offer Price of €97 per Bond, up to an aggregate principal amount of ten million Euro (€10,000,000) (except as otherwise provided under clause 9 ‘Further Issues’ below) subject to the exercise by the Company of the Over-allotment Option in the event of over-subscription in which case the Company may increase the Euro Bonds in issue up to an aggregate of Euro twenty million (€20,000,000).

(c) The Company may issue Bonds pursuant to the Over-allotment Option up to an aggregate principal amount of Lm4,000,000 or €10,000,000 so that in no event shall the aggregate value of ML Bonds and Euro Bonds outstanding at any time exceed Lm8,000,000 and €10,000,000 or Lm4,000,000 and €20,000,000 or any other proportion of allocation between the ML Bond and the Euro Bond which does not exceed either of the above.

(d) Unless previously purchased and cancelled, the Bonds, whether part of the Original Bond Issue or the Over- allotment Option shall be redeemable at the nominal value on 8 April 2012 in the case of the ML Bond and on 8 April 2010 in the case of the Euro Bond.

2. Form, Denomination and Title

The Bonds will be issued in fully registered form, without coupons, in denominations of any integral multiple of one hundred Maltese Liri (Lm100) in the case of the ML Bonds and one hundred Euro (€100) in the case of the Euro Bond provided that on subscription the Bonds will be issued for a minimum of ﬁ ve hundred Maltese Liri (Lm500) in the case of the ML Bond and a minimum of one thousand Euro (€1,000) in the case of the Euro Bond (on application in multiples of €200 after the ﬁ rst €1,000). The Bonds, and transfers thereof, shall be registered as provided under Clause 8 ‘Registration, Replacement, Transfer and Exchange’ below. A person in whose name a Bond shall be registered may (to the fullest extent permitted by law) be treated at all times and for all purposes as the absolute owner of such Bond regardless of any notice of ownership or trust.

3. Interest

(a) The Bonds shall bear interest as follows:

(I) In the case of the ML Bonds at the rate of 6.75 per cent (6.75%) per annum on the nominal value of the Bond, payable semi-annually in arrears, on the 8 April and 8 October of each year the ﬁ rst payment becoming due on 8 October 2002 (each such day, an “Interest Payment Date”). Each Bond will cease to bear interest from and including its due date of redemption unless, upon due presentation, payment of the principal in respect of the Bond is improperly withheld or refused or unless the Company defaults in which event interest shall continue to accrue at the rate speciﬁ ed above or at the rate of two per cent (2%) per annum above the Central Bank of Malta minimum discount rate whichever is the higher; and

(II) In the case of the Euro Bonds at the rate of 6.5 per cent (6.5%) per annum on the nominal value of the Bond, payable annually in arrears, on 8 April of each year, the ﬁ rst payment becoming due on 8 April 2003 (each such day, an ‘Interest Payment Date’). Each Bond will cease to bear interest from and including its due date of redemption unless, upon due presentation, payment of the principal in respect of the Bond is improperly withheld or refused or unless the Company defaults in which event interest shall continue to accrue at the rate speciﬁ ed above or at the rate of 2 per cent (2%) per annum above the Central Bank of Malta minimum discount rate whichever is the higher.

A1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 37 (b) When interest is required to be calculated in respect of a period of less than a full year, it shall be calculated on the basis of a three hundred and sixty (360) day year consisting of twelve (12) months of thirty (30) days each, and, in the case of an incomplete month, the number of days elapsed.

4. Status and Negative Pledge

(a) The Bonds constitute general, direct, unconditional, unsecured and unsubordinated obligations of the Company and the Guarantor and will rank pari passu, without any priority or preference, with all other present and future unsecured and unsubordinated obligations of the Company and the Guarantor.

(b) The Company and the Guarantor with respect to their respective assets, undertake for as long as any principal or interest under the Bonds or any of the Bonds remains outstanding, not to create or permit to subsist any Security Interest (as defi ned below), other than a Permitted Security Interest (as defi ned below), upon the whole or any part of its present or future assets or revenues to secure any Financial Indebtedness (as defi ned below) of the Company or the Guarantor unless at the same time or prior thereto the Company’s indebtedness under the Bonds, shares in and is secured equally and rateably therewith, and the instrument creating such Security Interest so provides.

For the purposes of this Clause and of Clause 7 ‘Events of Default’ below:

‘Financial Indebtedness’ means any indebtedness in respect of (A) monies borrowed; (B) any debenture, bond, note, loan stock or other security; (C) any acceptance credit; (D) the acquisition cost of any asset to the extent payable before or after the time of acquisition or possession by the party liable where the advance or deferred payment is arranged primarily as a method of raising fi nance for the acquisition of that asset; (E) leases entered into primarily as a method of raising fi nance for the acquisition of the asset leased; (F) amounts raised under any other transaction having the commercial effect of borrowing or raising of money; (G) any guarantee, indemnity or similar assurance against fi nancial loss of any person;

‘Security Interest’ means any privilege, hypothec, pledge, lien, charge or other encumbrance which grants rights of preference to a creditor over the assets of the Company or the Guarantor;

‘Permitted Security Interest’ means (A) any Security Interest arising by operation of law; (B) any Security Interest securing temporary bank loans or overdrafts in the ordinary course of business; (C) any other Security Interest (in addition to (A) and (B) above) securing Financial Indebtedness of the Company or the Guarantor, in an aggregate outstanding amount not exceeding 80 per cent of the difference between the value of the unencumbered assets of the Company and the Guarantor and the aggregate principal amount of Bonds outstanding at the time.

Provided that the aggregate Security Interests referred to in (B) and (C) above do not result in the unencumbered assets of the Company and the Guarantor being less than one hundred and six point seven ﬁ ve per cent (106.75%) of the aggregate principal amount of the Bonds still outstanding.

‘Unencumbered assets’ means assets which are not subject to a Security Interest.

5. Payments

(a) Payment of the principal amount of a Bond will be made in the currency in which that Bond is designated to the person in whose name such Bond is registered, with interest accrued to the date fi xed for redemption, against surrender of such Bond at the registered offi ce of the Company or at such other place in Malta as may be notifi ed by the Company by way of a cheque drawn on a bank in Malta.

(b) Payment of any instalment of interest on a Bond will be made in the currency in which the Bond is designated to the person in whose name such Bond is registered at the close of business 15 days prior to the Interest Payment Date by mailing a cheque drawn on a bank in Malta to the Bondholder at such Bondholder’s registered address within seven days of the Interest Payment Date. The Company shall not be responsible for any loss or delay in transmission. The payment of the cheque, if purporting to be duly endorsed, shall be a good discharge to the Company.

38 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES A1 (c) All payments are subject in all cases to any pledge (duly constituted) of the Bonds and to any applicable ﬁ scal or other laws and regulations. In particular, but without limitation, all payments by the Company in respect of the Bonds shall be made net of any amount which the Company is compelled by law to deduct or withhold for or on account of any present or future taxes, duties, assessments or other government charges of whatsoever nature imposed or levied by or on behalf of the Government of Malta or authority thereof or therein having power to tax.

(d) No commissions or expenses shall be charged to the Bondholders in respect of such payments.

6. Redemption and Purchase

(a) Unless previously purchased and cancelled, the Bonds will be redeemed at their nominal value (together with interest accrued to the date ﬁ xed for redemption) on 8 April 2012 in the case of the ML Bond and 8 April 2010 in the case of the Euro Bond.

(b) The Company may at any time purchase Bonds in the open market or otherwise at any price. Any purchase by tender shall be made available to all Bondholders alike.

7. Events of Default

The Bonds shall become immediately due and repayable at their principal amount together with accrued interest if any of the following events (‘Events of Default’) shall occur:-

(i) the Company shall fail to pay any interest on any Bond when due and such failure shall continue for thirty (30) days after written notice thereof shall have been given to the Company by any Bondholder; or

(ii) the Company shall fail duly to perform any other material obligation contained in the terms and conditions of the Bonds and such failure shall continue for sixty (60) days after written notice thereof shall have been given to the Company by any Bondholder; or

(iii) an order is made or resolution passed or other action taken for the dissolution, termination of existence, liquidation, winding-up or bankruptcy of the Company; or

(iv) the Company stops or suspends payments (whether of principal or interest) with respect to all or any class of its debts or announces an intention to do so or ceases or threatens to cease to carry on its business or a substantial part of its business; or

(v) the Company is unable, or admits in writing its inability, to pay its debts as they fall due or otherwise becomes insolvent; or

(vi) there shall have been entered against the Company a fi nal judgment by a court of competent jurisdiction from which no appeal may be or is taken for the payment of money in excess of fi ve hundred thousand Maltese Liri (Lm500,000) or its equivalent and ninety (90) days shall have passed since the date of entry of such judgment without its having been satisfi ed or stayed; or

(vii) any default occurs and continues for ninety (90) days under any contract or document relating to any Financial Indebtedness (as deﬁ ned above) of the Company in excess of ﬁ ve hundred thousand Maltese Liri (Lm500,000) or its equivalent at any time.

8. Registration, Replacement, Transfer and Exchange

(a) A register of the Bonds will be kept by the Company at the Central Securities Depository of the Exchange, wherein there will be entered the names and addresses of the Bondholders and particulars of the Bonds held by them respectively and a copy of such register will at all reasonable times during business hours be open for inspection at the registered ofﬁ ce of the Company.

A1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 39 (b) If any Bond certifi cate is lost, stolen, mutilated, defaced or destroyed, it shall be replaced by the Company, on application by the Bondholder, subject to all applicable laws, and on such terms as to evidence, security, indemnity or otherwise as the Company may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Bond certifi cates must be surrendered before replacements will be issued. In addition, prior to issuing any replacement, the Company may require the payment of a sum suffi cient to cover any tax, duty or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

(c) A Bond may be transferred in whole or in part (in multiples of one hundred Maltese Liri (Lm100) in the case of the ML Bond and Euro one hundred (€100) in the case of the Euro Bond)) by the Bond holder surrendering the Bond for registration of transfer at the registered ofﬁ ce of the Company accompanied by a written instrument in form satisfactory to the Company duly executed by the Bondholder and the transferee. The Company shall have the right to retain such written instrument of transfer.

(d) Any person becoming entitled to a Bond in consequence of the death or bankruptcy of a Bondholder may, upon such evidence being produced as may from time to time properly be required by the Company, elect either to be registered himself as holder of the Bond or to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall signify his election by executing to that person a transfer of the Bond. Provided that if a Bond is transmitted or transferred in part, a person will not be registered as a Bondholder unless such transmission or transfer is made in multiples of one hundred Maltese Liri (Lm100) in the case of the ML Bond and one hundred Euro (€100) in the case of the Euro Bond.

(e) All transfers and transmissions are subject in all cases to any pledge (duly constituted) of the Bonds and to any applicable laws and regulations.

(f) A Bond certifi cate may be exchanged for Bond certifi cates of equal aggregate principal amount in denominations of one hundred Maltese Liri (Lm100) in the case of the ML Bond and of one hundred Euro (€100) in the case of the Euro Bond or any integral multiple thereof by the Bondholder surrendering the Bond certifi cate for exchange at the registered offi ce of the Company accompanied by a written request signed by the Bondholder in form satisfactory to the Company.

(g) The cost and expenses of effecting any exchange or registration of transfer or transmission except for the expenses of delivery by other than regular mail (if any) and except, if the Company shall so require, the payment of a sum sufﬁ cient to cover any tax, duty or other governmental charge or insurance charges that may be imposed in relation thereto, will be borne by the Company.

(h) The Company will not register the transfer or transmission of Bonds for a period of ﬁ fteen (15) days preceding the due date for any payment of interest on the Bonds.

9. Further Issues

The Company is at liberty, from time to time, without the consent of the Bondholders, to create and issue further bonds, notes or debentures ranking pari passu in all respects with the Bonds (or in all respects save for the ﬁ rst payment of interest thereon). The Company shall not issue any other debt instrument for a period of six months following the date of this Offering Memorandum.

10. Bonds held Jointly

In respect of a Bond held jointly by several persons, the joint holders shall nominate one of their number as their representative and his/her name will be entered in the register with such designation. Such person shall, for all intents and purposes, be deemed to be the registered holder of the Bond so held. In the absence of such nomination and until such nomination is made, the person ﬁ rst named on the register in respect of such Bond shall, for all intents and purposes, be deemed to be the registered holder of the Bond so held.

40 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES A1 11. Bonds held Subject to Usufruct

In the respect of a Bond held subject to usufruct, the name of the bare owner and the usufructuary shall be entered in the register. The usufructuary shall, for all intents and purposes, be deemed vis-a-vis the Company to be the holder of the Bond so held and shall have the right to receive interests on the Bond but shall not, during the continuance of the bond, have the right to dispose of the Bond so held without the consent of the bare owner.

12. Governing Law and Jurisdiction

(a) The Bonds and these Terms and Conditions are governed by and shall be construed in accordance with the Laws of Malta.

(b) Any suit, action or proceeding against the Company with respect to a Bond shall exclusively be brought against it in the Maltese Courts.

13. Notices

Notices will be mailed to Bondholders at their registered addresses and shall be deemed to have been served at the expiration of twenty-four (24) hours after the letter containing the notice is posted, and in proving such service it shall be sufﬁ cient to prove that a prepaid letter containing such notice was properly addressed to such Bondholder at his registered address and posted.

14. Listing

In the event that the Bonds are admitted to the MSE Ofﬁ cial List, all the Conditions, in particular, but not limited to, Condition 8 “Registration, Replacement, Transfer and Exchange” shall be subject to, and shall apply only so far as they are not inconsistent with, all the laws, bye-laws, regulations and requirements relating to the MSE.

A1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 41 ANNEX A

Part 2 - Terms and Conditions of Application

1. The contract created by the acceptance of an Application shall be subject to the Terms and Conditions set out herein. If any Application is not accepted, or if any Application is accepted for fewer Bonds than those applied for, the Application monies or the balance of the amount paid on Application will be returned without interest by mail at the risk of the Applicant or in such other manner as may indicated in the Application Form.

2. Subject to all other Terms and Conditions set out in the Offering Memorandum the Company reserves the right to reject in whole or in part, or to scale down any Application, including multiple or suspected multiple Applications and to present any cheques and or drafts for payment upon receipt. The right is also reserved to refuse any Application, which in the opinion of the Company is not properly completed in all respects in accordance with the instructions or is not accompanied by the required documents. Only original Application forms will be accepted and photocopies/facsimile copies will not be accepted.

In the case of joint Applications, reference to the Applicant in these Terms and Conditions is a reference to each Applicant, and liability therefor is joint and several. Furthermore, joint applicants each warrant that he/she has only submitted one Application in his/her name.

The Company reserves the right to issue further Bonds, in any one of the ML Bond or Euro Bond or both to meet applications for subscription up to and not exceeding the aggregate amount of Lm4 million or €10 million, which is Lm4 million or €10 million in excess of the Original Bond Issue;

The Company reserves the right, subject to the consent of an Applicant in the Application Form, to re-allocate any over-subscription in the ML Bond to under-subscriptions in the Euro Bond and any over-subscriptions in the Euro Bond to under-subscriptions in the ML Bond.

In the event that an Applicant has not been allocated any Bonds or has been allocated a smaller number of Bonds than the number applied for in one Bond, then the Applicants who have granted their consent on the Application Form to have their application monies re-allocated to the other Issue pursuant to the Re-allocation Option, shall have their application monies or part thereof so re-allocated. If after such re-allocation or in the case of Applicants who do not opt for the re-allocation of their application monies between Bonds, there remains unapplied application monies, then the Applicant shall receive a refund of the price of the Bonds applied for but not allocated, by cheque sent by mail, at the Applicant’s own risk, to the address speciﬁ ed in the Application Form within seven working days from the date of ﬁ nal allocation. No interest shall be due on refunds.

3. Any person, whether natural or legal, shall be eligible to submit an Application, and any one person, whether directly or indirectly should not submit more than one Application Form for each of the ML Bond and the Euro Bond. In the case of corporate Applicants or Applicants having separate legal personality, the Application Form must be signed by a person authorised to sign and bind such Applicant. It shall not be incumbent on the Issuer or Registrar to verify whether the person or persons purporting to bind such an Applicant is or are in fact authorised.

Applications in the name and for the benefi t of minors shall be allowed provided that they are signed by both parents or the legal guardian and accompanied by a Public Registry birth certifi cate of the minor in whose name and for whose benefi t the Application Form is submitted. Any Bonds allocated pursuant to such an Application shall be registered in the name of the minor as Bondholder, with interest payable to the parents/ legal guardian signing the Application Form until such time as the minor attains the age of 18 years, after which all interests shall be payable directly to the registered holder, provided that the Company has been duly notifi ed in writing of the fact that the minor has attained the age of eighteen years.

42 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES A2 4. All applications for the subscription of Bonds must be submitted on Application Forms within the time limits established above. The minimum subscription of Bonds is Lm500 in value for ML Bonds and €1,000 in nominal value for Euro Bonds and Applications in excess of (i) Lm500 in the ML Bond must be in multiples of Lm100 and of (ii) €1,000 in the Euro Bond must be in multiples of €200. The completed Application Forms are to be lodged with any of the Authorised Selling Agents mentioned in this Offering Memorandum. Unless other arrangements are concluded with the Registrar or the Issuer, all Application Forms must be accompanied by the full price of the Bonds applied for in the currency of designation of the Bond applied for. Payment may be made either in cash or by cheque payable, to ‘The Registrar – Corinthia Finance p.l.c. – Bond Issue. In the event that cheques accompanying Application Forms are not honoured on their ﬁ rst presentation, the Issuer and the Registrar reserve the right to invalidate the relative Application. Multiple Applications are not allowed.

5. By completing and delivering an Application Form you (as the Applicant (s)):

a. irrevocably offer to purchase the number of Bonds speciﬁ ed in your Application Form (or any smaller number for which the Application is accepted) at the Bond Offer Price subject to the Offering Memorandum, these terms and conditions and the Memorandum and Articles of Association of the Company;

b. authorise the Registrar and the Directors to include your name or in the case of joint Applications, the ﬁ rst named applicant, in the register of Debentures of the Company in respect of the Bonds allocated to you;

c. warrant that your remittance will be honoured on ﬁ rst presentation and agree that, if such remittance is not so honoured, you will not be entitled to receive a registration advice, or to be registered in the register of Debentures or to enjoy or receive any rights in respect of such Bonds unless and until you make payment in cleared funds for such Bonds and such payment is accepted by the Company (which acceptance shall be made in its absolute discretion and may be on the basis that you indemnify it against all costs, damages, losses, expenses and liabilities arising out of or in connection with the failure of your remittance to be honoured on ﬁ rst presentation) and that, at any time prior to unconditional acceptance by the Company of such late payment in respect of such Bonds, the Company may (without prejudice to other rights) treat the agreement to allocate such Bonds as void and may allocate such Bonds to some other person, in which case you will not be entitled to any refund or payment in respect of such Bonds (other than return of such late payment);

d. agree that the registration advice and other documents and any monies returnable to you may be retained pending clearance of your remittance and any veriﬁ cation of identity as required by the Prevention of Money Laundering Act 1994 (and regulations made thereunder) and that such monies will not bear interest;

e. agree that all Applications, acceptances of Applications and contracts resulting therefrom will be governed by, and construed in accordance with Maltese law and that you submit to the jurisdiction of the Maltese Courts and agree that nothing shall limit the right of the Company to bring any action, suit or proceeding arising out of or in connection with any such Applications, acceptances of Applications and contracts in any other manner permitted by law in any court of competent jurisdiction;

f. warrant that, if you sign the Application Form on behalf of another party or on behalf of a corporation or corporate entity or association of persons, you have due authority to do so and such person, corporation, corporate entity, or association of persons will also be bound accordingly and will be deemed also to have given the conﬁ rmations, warranties and undertakings contained in these Terms and Conditions and undertake to submit your power of attorney or a copy thereof duly certiﬁ ed by a lawyer or notary public if so required by the Registrar;

g. agree that all documents in connection with the Issue of the Bonds and any returned monies including refund of all unapplied application monies will be sent at your risk and may be sent by post at your address (or, in the case of joint applications, the address of the ﬁ rst-named Applicant) as set out in the Application Form;

h agree that, having had the opportunity to read the Offering Memorandum you have and shall be deemed to have had, notice of all information and representations concerning the Company and the issue of the Bonds contained therein;

i. conﬁ rm that in making such Application you are not relying on any information or representation in relation to the Company or the issue of the Bonds other than those contained in the Offering Memorandum and you accordingly agree that no person responsible solely or jointly for the Offering Memorandum or any part thereof will have any liability for any such other information or representation;

A2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 43 j. conﬁ rm that you have reviewed and you will comply with the restriction contained in paragraph 6 and the warning in paragraph 7 below;

k. warrant, that you are not under the age of 18 years or if you are lodging an Application in the name and for the beneﬁ t of a minor, warrant that you are the parents or legal guardian/s of the minor;

l. agree that the Application Form is addressed to the Company and that in respect of those Bonds for which your Application has been accepted, you shall receive a registration advice conﬁ rming such acceptance;

m. conﬁ rm that in the case of a joint Application the ﬁ rst named Applicant shall be deemed the holder of the Bonds;

n. agree to provide the Registrar and/or Company as the case may be, with any information which it may request in connection with your Application(s);

o. agree that Wilfred Mallia and Charts Investment Management Service Limited will not, in their capacity of Sponsoring Stockbrokers, treat you as their customer by virtue of your making an application for Bonds or by virtue of your Application to subscribe for Bonds being accepted and that Wilfred Mallia and Charts Investment Management Service Limited will owe you no duties or responsibilities concerning the price of the Bonds or their suitability for you;

p. warrant that, in connection with your Application, you have observed all applicable laws, obtained any requisite governmental or other consents, complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with your Application in any territory and that you have not taken any action which will or may result in the Company or the Registrar acting in breach of the regulatory or legal requirements of any territory in connection with the Issue or your Application;

q. warrant that if you are a non-resident any funds accompanying your Application emanate from a foreign source or foreign currency account held in Malta and that all applicable exchange control permits and authorisations have been duly and fully complied with;

r. represent that you are not a U.S. person (as such term is deﬁ ned in Regulation S under the U.S. Securities Act of 1933, as amended (the ‘Securities Act’) and that you are not accepting the invitation comprised in the Offer from within the United States of America, its territories or its possessions, any State of the United States of America or the District of Columbia (the ‘United States’) or on behalf or for the account of anyone within the United States or anyone who is a U.S. person, unless you indicate otherwise on the Application Form in accordance with the instructions of the Application Form.

6. The Bonds have not been and will not be registered under the Securities Act and accordingly may not be offered or sold within the United States or to or for the account or beneﬁ t of a U.S. person.

7. No person receiving a copy of the Offering Memorandum or an Application Form in any territory other than Malta may treat the same as constituting an invitation or offer to him nor should he in any event use such Application Form, unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such Application Form could lawfully be used without contravention of any registration or other legal requirements. It is the responsibility of any person outside Malta wishing to make any Application to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities required to be observed in such territory and paying any issues, transfer or other taxes required to be paid in such territory.

8. Upon closing of the subscription lists, the Company either directly or through the Registrar shall announce the basis of acceptance of applications and allocation policy to be adopted, on or around 8 April 2002.

9. Save where the context requires otherwise, terms deﬁ ned in the Offering Memorandum bear the same meaning when used in these Terms and Conditions of Application, in the Application Form and in any other document issued pursuant to the Offering Memorandum.

10. The Application lists will open at 08.30 hours on 14 March 2002 and will close as soon thereafter as may be determined by the Company, as the case may be, but not later than 15.00 hours on 28 March 2002.

44 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES A2 ANNEX B – PART 1

FINANCIAL INFORMATION ABOUT THE CORINTHIA GROUP AND THE GUARANTOR Corinthia Palace Hotel Company Limited Accountants’ Report 1998-2000

CONTENTS Page

Accountants’ report ...... 46 - 48

Proﬁ t and loss accounts ...... 49

Balance sheets ...... 50

Statements of changes in equity...... 51 - 52

Cash ﬂ ow statements...... 53 - 54

Notes to the accountants’ report ...... 55 - 94

Statement of adjustments ...... 95 - 100

Notes to the statement of adjustments...... 101 - 103

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 45 Certified Public Accountants and Auditors Grant Thornton and Management Consultants

The Directors Corinthia Palace Hotel Company Limited 22, Europa Centre Floriana VLT 15 Malta

The Directors Charts Investment Management Service Limited 18A, Europa Centre Floriana VLT 15 Malta

8 March 2002

Dear Sirs

Accountants’ report on historical ﬁ nancial information of Corinthia Palace Hotel Company Limited

We report on the ﬁ nancial information set out on pages 49 to 103 of Corinthia Palace Hotel Company Limited (‘CPHCL’ or the ‘Company’) and its subsidiary and associated companies (collectively referred to as the ‘Group’). This information has been prepared for inclusion in the Offering Memorandum dated 11 March 2002 of Corinthia Finance p.l.c.

Basis of preparation

The ﬁ nancial information set out on pages 49 to 103 is based on the audited consolidated ﬁ nancial statements of Corinthia Palace Hotel Company Limited for the three years ended 31 December 1998, 1999 and 2000, and has been prepared on the basis set out in note 1 on pages 55 and 56.

The auditors’ report on the Group’s fi nancial statements for 1998 was modifi ed in respect of the failure of certain subsidiaries to adjust for the effects of reporting in a currency of a hyperinfl ationary economy, and the failure of the Group to determine fair values of net assets on the acquisition of certain subsidiary companies, both required by International Accounting Standards. The auditors’ reports for the years 1999 and 2000 were modifi ed in respect of the failure of the Group to determine fair values of net assets on the acquisition of certain subsidiary companies as required by International Accounting Standards.

The audited fi nancial statements have been restated by us to take into account the adjustments considered appropriate for the purposes of this report. The statement of adjustments on pages 95 to 103 sets out details of the adjustments carried out and reconciles the fi gures included in this report to the corresponding fi gures in the audited fi nancial statements. These adjustments have been subject to audit by us and in our opinion no further adjustments are necessary.

Grant Thornton House Partners 30, Princess Elizabeth Street Martin E Bonello Cole Ta’ Xbiex MSD 11, Malta Mark A Bugeja T (+356) 21344751, 21344685 Austin R Demajo 21344821/2, 21320134-6 Joseph A Pullcino F (+356) 21331161 Consultants Emanuel A Bonello Member of Grant Thornton International Mario Vella

46 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 Grant Thornton

The ﬁ nancial information set out in this report comprises:

• Proﬁ t and loss accounts of the Group and the Company for each of the three years ended 31 December 1998, 1999 and 2000.

• Statements of changes in equity of the Group and the Company for each of the three years ended 31 December 1998, 1999 and 2000.

• Balance sheets of the Group and the Company as at 31 December 1998, 1999 and 2000.

• Cash ﬂ ow statements of the Group and the Company for each of the three years ended 31 December 1998, 1999 and 2000.

• Notes to the accountants’ report for the three years ended 31 December 2000 in respect of the Group and the Company inclusive of the principal accounting policies.

• Statement of adjustments for each of the three years.

No audited ﬁ nancial statements have been prepared for the Group or the Company in respect of any period subsequent to 31 December 2000.

Responsibility

Such ﬁ nancial statements are the responsibility of the directors of Corinthia Palace Hotel Company Limited, who approved their issue. The directors of Corinthia Finance p.l.c. are responsible for the contents of the Offering Memorandum dated 11 March 2002 in which this report is included, save for the information speciﬁ cally relating to Corinthia Palace Hotel Company Limited, as guarantor, for which the directors of Corinthia Palace Hotel Company Limited are responsible.

It is our responsibility to compile the fi nancial information set out in our report from the fi nancial statements, to form an opinion on the fi nancial information and to report our opinion to you.

Basis of Opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards applicable in the United Kingdom and have complied with the requirements of the Malta Stock Exchange Bye-Laws in respect of the accountants’ report and the Companies Act, 1995. Our work included an assessment of evidence relevant to the amounts and disclosures in the fi nancial information. The evidence included that previously obtained by us and by other auditors when conducting the audits of the fi nancial statements underlying the fi nancial information. It also included an assessment of signifi cant estimates and judgements made by those responsible for the preparation of the fi nancial statements underlying the fi nancial information and whether the accounting policies are appropriate to the Group’s and the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufﬁ cient evidence to give reasonable assurance that the ﬁ nancial information is free from material misstatement whether caused by fraud or other irregularity or error.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 47 Grant Thornton

Opinion

In our opinion, the ﬁ nancial information gives, for the purposes of the Offering Memorandum dated 11 March 2002, a true and fair view of the state of affairs of the Group and the Company as at the dates stated and of their results, changes in equity and cash ﬂ ows for the years then ended.

Yours faithfully

Mark A. Bugeja For and on behalf of Grant Thornton Certiﬁ ed Public Accountants and Auditors

48 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

PROFIT AND LOSS ACCOUNTS

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

Revenue 60,559 56,793 59,660 31,792 32,531 35,518 Other operating income 4,976 4,494 5,176 3,794 2,412 4,313 Staff costs 4 (16,259) (15,860) (15,365) (7,988) (8,229) (8,193)

Depreciation and amortisation of in/tangibles (4,666) (4,880) (3,040) (812) (1,003) (1,022) Other operating charges (29,250) (27,310) (31,310) (14,662) (13,962) (15,239)

Operating proﬁ t 5 15,360 13,237 15,121 12,124 11,749 15,377 Investment income 883 490 1,521 1,226 1,133 1,566 Interest payable 6 (4,296) (3,924) (4,959) (2,007) (1,357) (2,397) Share of results of associated companies 110 301 (133) - - -

Proﬁ t before exceptional item 12,057 10,104 11,550 11,343 11,525 14,546 Exceptional item 7 - - - 5,349 - -

Proﬁ t before taxation 12,057 10,104 11,550 16,692 11,525 14,546 Taxation 8 (3,052) (2,691) (3,868) (2,987) (2,849) (4,071)

Proﬁ t after taxation 9,005 7,413 7,682 13,705 8,676 10,475 Minority interest (89) (132) 57 - - -

Proﬁ t attributable to the Group 8,916 7,281 7,739 13,705 8,676 10,475

Earnings per share 9 Basic earnings per share Lm 280 Lm 228 Lm 243 Lm 434 Lm 273 Lm 330

Diluted earnings per share Lm6.17 Lm5.03 Lm5.35 Lm9.52 Lm6.00 Lm7.26

The proﬁ t and loss accounts are to be read in conjunction with the notes to and forming part of the ﬁ nancial information set out on pages 55 to 94.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 49 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

BALANCE SHEETS

As at 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000 Fixed assets Intangible assets 10 1,016 532 555 12 33 76 Tangible assets 11 168,269 152,902 141,716 29,416 20,545 15,151 Financial assets 12 12,928 10,211 11,151 82,346 64,857 49,005

182,213 163,645 153,422 111,774 85,435 64,232

Current assets Stocks 13 2,721 2,741 3,048 1,661 1,778 2,130 Debtors 14 20,925 22,534 18,108 18,746 19,813 15,435 Investments 1,030 847 1,115 - - - Cash at bank and in hand 21,740 7,947 16,299 2,066 6,132 15,378

46,416 34,069 38,570 22,473 27,723 32,943 Creditors: amounts falling due within one year 15 36,432 30,142 32,222 22,989 21,992 19,371

Net current assets/(liabilities) 9,984 3,927 6,348 (516) 5,731 13,572

Total assets less current liabilities 192,197 167,572 159,770 111,258 91,166 77,804

Creditors: amounts falling due after more than one year 16 68,480 62,439 59,883 39,755 31,141 26,591

Provision for liabilities and charges Deferred taxation 18 16,462 16,935 16,615 2,232 2,172 2,092 Deferred income 19 453 690 904 - - -

106,802 87,508 82,368 69,271 57,853 49,121

Capital and reserves Called-up issued share capital 20 2,831 2,831 2,831 2,831 2,831 2,831 Revaluation reserve 21 26,367 35,484 38,021 4,910 4,714 4,452 Other reserves 22 13,909 523 3,443 2,609 4,058 924 Proﬁ t and loss account 45,858 40,150 29,310 57,476 45,304 39,914 Dividend payment reserve 1,445 946 1,000 1,445 946 1,000

90,410 79,934 74,605 69,271 57,853 49,121 Minority interest 16,392 7,574 7,763 - - -

106,802 87,508 82,368 69,271 57,853 49,121

The balance sheets are to be read in conjunction with the notes to and forming part of the ﬁ nancial information set out on pages 55 to 94.

50 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

STATEMENT OF CHANGES IN EQUITY

The Group Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserves account reserve Total Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 1997 2,831 515 2,390 27,642 - 33,378 Revaluation of tangible fi xed assets 21 - 37,506 - - - 37,506 Transfer from profi t and loss account 22 - - 1,053 (1,053) - - Profi t for the year - - - 7,739 - 7,739 Exchange translation difference 22 - - - (4,018) - (4,018) Dividends proposed - - - (1,000) 1,000 -

At 31 December 1998 2,831 38,021 3,443 29,310 1,000 74,605 Revaluation of tangible fi xed assets 21 - 927 - - - 927 Transfer to other reserve - (3,464) 3,464 - - - Transfer to profi t and loss account 22 - - (6,741) 6,741 - - Profi t for the year - - - 7,281 - 7,281 Exchange translation difference 22 - - 357 (2,236) - (1,879) Dividends proposed - - - (946) 946 - Dividends paid - - - - (1,000) (1,000)

At 31 December 1999 2,831 35,484 523 40,150 946 79,934 Revaluation of tangible fi xed assets 21 - (9,117) - - - (9,117) Revaluation adjustments 22 - - 14,082 - - 14,082 Transfer from profi t and loss account 22 - - 833 (833) - - Profi t for the year - - - 8,916 - 8,916 Exchange translation difference 22 - - (1,537) (930) - (2,467) Equity element of convertible bonds - - 338 - - 338 Equity issue costs - - (330) - - (330) Dividends proposed - - - (1,445) 1,445 - Dividends paid - - - - (946) (946)

At 31 December 2000 2,831 26,367 13,909 45,858 1,445 90,410

The statements of changes in equity are to be read in conjunction with the notes to and forming part of the ﬁ nancial information set out on pages 55 to 94.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 51 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

STATEMENT OF CHANGES IN EQUITY

CPHCL Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserves account reserve Total Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 1997 2,831 - 173 35,083 - 38,087 Revaluation of tangible fi xed assets 21 - 4,452 - - - 4,452 Transfer from profi t and loss account 22 - - 751 (751) - - Profi t for the year - - - 10,475 - 10,475 Exchange translation difference - - - (3,893) - (3,893) Dividends proposed - - - (1,000) 1,000 -

At 31 December 1998 2,831 4,452 924 39,914 1,000 49,121 Revaluation of tangible fi xed assets 21 - 262 - - - 262 Transfer from profi t and loss account 22 - - 213 (213) - - Profi t for the year - - - 8,676 - 8,676 Exchange translation difference 22 - - 794 - - 794 Transfer to other reserve 22 - - 2,127 (2,127) - - Dividends paid - - - - (1,000) (1,000) Dividends proposed - - - (946) 946 -

At 31 December 1999 2,831 4,714 4,058 45,304 946 57,853 Revaluation of tangible fi xed assets 21 - 196 - - - 196 Transfer to profi t and loss account 22 - - (26) 26 - - Profi t for the year - - - 13,705 - 13,705 Exchange translation difference 22 - - (1,537) - - (1,537) Transfer to other reserve 22 - - 114 (114) - - Dividends paid - - - - (946) (946) Dividends proposed - - - (1,445) 1,445 -

At 31 December 2000 2,831 4,910 2,609 57,476 1,445 69,271

The statements of changes in equity are to be read in conjunction with the notes to and forming part of the ﬁ nancial information set out on pages 55 to 94.

52 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

CASH FLOW STATEMENTS

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000 Cash fl ows from operating activities Profi t before taxation 12,057 10,104 11,550 16,692 11,525 14,546 Adjustments for: Profi t on disposal of investments - - - (5,349) - - Amortisation of negative goodwill (237) (214) (226) - - - Depreciation 4,184 4,526 2,540 792 960 989 Amortisation of intangible fi xed assets 482 354 220 20 43 33 (Profi t)/loss on disposal of tangible fi xed assets (15) (51) 44 82 (37) (13) Provision for exchange differences (402) 6,327 (2,745) (1,617) 1,031 (4,742) Interest receivable (883) (490) (1,521) (1,226) (1,133) (1,566) Interest payable 4,296 3,924 4,959 2,007 1,357 2,397

Operating proﬁ t before working capital changes 19,482 24,480 14,821 11,401 13,746 11,644 Stocks 39 391 476 117 352 305 Debtors 1,979 (3,385) (245) 3,883 (2,764) (690) Amounts owed by related parties (231) (456) (283) (3,763) (1,612) (201) Investments (183) 261 (254) - - - Creditors 6,443 (7,222) (4,299) 748 108 (311) Amounts owed to related parties (2,522) 365 2,630 1,331 4,338 182

Cash generated from operations 25,007 14,434 12,846 13,717 14,168 10,929 Interest paid (4,296) (3,924) (4,959) (1,887) (1,190) (2,490) Income tax paid (4,775) (3,227) (3,111) (4,063) (3,409) (1,992)

Net cash from operating activities 15,936 7,283 4,776 7,767 9,569 6,447

Cash fl ows from investing activities Payments to acquire intangible fi xed assets (159) (124) (196) - - - Payments to acquire tangible fi xed assets (7,978) (9,833) (11,317) (10,435) (6,780) (2,700) Proceeds from disposal of tangible fi xed assets 28 397 9 127 67 23 Payments to acquire shares in subsidiaries 12(e) (1,825) (5,854) (5,356) (3,279) (2,716) (5,687) Loans advanced to subsidiary companies - - - (1,018) (8,258) (10,899) Other loans repaid - - 2,473 - - - Decrease/(increase) in investment in associated companies (1,904) (223) 176 (6,683) (4,353) - Loans advanced to associated companies - - - (214) (525) - Interest received 883 490 1,521 1,226 1,133 1,566

Net cash used in investing activities (10,955) (15,147) (12,690) (20,276) (21,432) (17,697)

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 53 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT

CASH FLOW STATEMENTS (continued)

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Note Lm000 Lm000 Lm000 Lm000 Lm000 Lm000 Cash ﬂ ows from ﬁ nancing activities Net proceeds from/ (repayment of) long-term borrowings 9,492 3,653 (3,619) 9,078 6,274 305 Dividends paid (946) (1,000) (1,000) (946) (1,000) (1,000)

Net cash from/(used in) ﬁ nancing activities 8,546 2,653 (4,619) 8,132 5,274 (695)

Net increase/(decrease) in cash and cash equivalents 13,527 (5,211) (12,533) (4,377) (6,589) (11,945) Cash and cash equivalents at beginning of year 4,305 9,516 22,049 4,004 10,593 22,538

Cash and cash equivalents at end of year 23 17,832 4,305 9,516 (373) 4,004 10,593

The cash ﬂ ow statements are to be read in conjunction with the notes to and forming part of the ﬁ nancial information set out on pages 55 to 94.

54 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT

1 BASIS OF PREPARATION

This ﬁ nancial information has been prepared for the purposes of inclusion in an Offering Memorandum for the issue of Lm 4,000,000 6.75% bonds and €10,000,000 6.5% bonds (subject to an aggregate over-allotment option of Lm4,000,000).

It has been prepared under the historical cost convention, as modiﬁ ed by the revaluation of certain tangible ﬁ xed assets, and except as stated in note 27, in accordance with the requirements of International Accounting Standards, the Malta Stock Exchange Bye-Laws and the accounting provisions of the Companies Act, 1995.

The ﬁ nancial information has been prepared from the audited ﬁ nancial statements of the following companies comprising the Group throughout the period covered by this report.

Parent company Auditors Period

Malta Corinthia Palace Hotel Company Limited Grant Thornton and General Popular Control and Monitoring Committee 1998-2000

Subsidiary companies

Austria Haﬁ na Bau GmbH n/a 2000

Czech Republic Gastro a.s. Grant Thornton 1999-2000 HaSC Vimperk a.s. Grant Thornton 1998 Hotel Bavor a.s. Grant Thornton 1998-2000 Hotel Cernigov a.s. Grant Thornton 1998-2000 Hotel Forum Praha a.s. Grant Thornton 1998-2000 Hotel Palcat a.s. Grant Thornton 1998-2000 Hotel Panorama a.s. Grant Thornton 1998-2000 Top. Spirit a.s. Grant Thornton 1998-2000

Hungary Corinthia Investment Hungary Kft Mr Karoly Vajda 1998 KPMG 1999-2000 Corinthia Restaurants Kft Mr Karoly Vajda 1998-2000 Thermal Hotel Aquincum Kft Mr Karoly Vajda 1998-2000

Malta C.H.I. Limited PricewaterhouseCoopers 2000 Corinthia Construction (Overseas) Limited Grant Thornton 1998-2000 Corinthia Contract Caterers Limited Grant Thornton and General Popular Control and Monitoring Committee 1998-2000 Corinthia Finance plc KPMG 1999-2000 Euromark Trading Co. Limited Grant Thornton and General Popular Control and Monitoring Committee 1998-2000 Five Star Hotels Limited KPMG 1998-2000 Flight Catering Company Limited Grant Thornton 1999-2000 Garment Finishing Limited Grant Thornton and MSD & Co. 1998-1999 Grant Thornton 2000 General Diving Services Limited Grant Thornton 1998-2000 International Hotel Investments plc KPMG 2000 Luzzu Restaurant Limited Grant Thornton and General Popular Control and Monitoring Committee 1998-2000 Marin Aruba (Malta) Limited KPMG 1998-2000 Marina San Gorg Limited KPMG 1998-2000

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 55 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

1 BASIS OF PREPARATION (continued)

Subsidiary companies (continued) Auditors Period

Malta Mistra Village Limited Grant Thornton and General Popular Control and Monitoring Committee 1998-2000 Quality Project Management Limited PricewaterhouseCoopers 2000 The Modern Matches Manufacturing Co. Limited Falzon & Falzon 2000 The Village Bakery Limited Ernst & Young 1998-2000

Russia IHI St. Petersburg LLC KPMG 2000

Switzerland Haﬁ na Bau Ag n/a 2000

Tunisia Corinthia Services Limited Grant Thornton 1998-2000 Societe de Promotion Hoteliere Khamsa s.a. Grant Thornton 1998-2000

Turkey Corinthia Turizm Yatirimlari Ticaret a.s. Grant Thornton 1998-2000 Internasyonal Turizm ve Otelcilik a.s. Grant Thornton 1998-2000

United Kingdom Corinthia Investments Limited Garners 1998-2000

Associated Companies

Malta B.C.W. Limited Mr Stefan Bonello Ghio 1998-2000 Swan Laundry and Drycleaning Grant Thornton and MSD & Co. 1998-1999 Co. Limited Grant Thornton 2000

Portugal Scalotel-Sociedade Escalabitana Hoteleira s.a. Grant Thornton 2000

Turkey Norm Turizm Yatirimlari ve Isletmeclik a.s. Grant Thornton 1998-2000 Ulkar Corinthia Turizm Yatirimlari a.s. Grant Thornton 1998-2000 Tekirova Turizm Yatirimlari a.s. Grant Thornton 1998-2000 Tektur Turizm a.s. Grant Thornton 2000

United Kingdom Atkins Travel Limited Grant Thornton 1998-2000

A substantial proportion of the Group’s revenues is earned in North Africa. Certain exchange control requirements have to be satisﬁ ed for repatriation of funds. The Group has, however, never encountered any undue difﬁ culties in repatriating funds from that region.

The Group operates in diverse territories. It manages its foreign currency exchange risk mainly by selling its services in hard currencies, typically the United States Dollar and Euro.

56 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

2 SIGNIFICANT ACCOUNTING POLICIES

The signiﬁ cant accounting policies adopted in the preparation of these ﬁ nancial statements are set out below. These accounting policies have been consistently applied by entities comprising the Group.

(a) Basis of consolidation

These ﬁ nancial statements include all subsidiaries that are controlled by the parent company Corinthia Palace Hotel Company Limited.

Control is presumed to exist where more than one half of the subsidiary’s voting power is controlled by the parent company, or the parent company is able to govern the ﬁ nancial and operating policies of the subsidiary, or control the removal or appointment of a majority of the subsidiary’s board of directors.

The results of subsidiary companies acquired or sold during the year are included in the consolidated proﬁ t and loss account from or to the effective date of acquisition or disposal.

Investments in associated companies are accounted for in the consolidated fi nancial statements under the equity method. The investments in subsidiary and associated companies classifi ed as fi nancial fi xed assets are stated in the parent company’s balance sheet at cost, less any permanent diminution in the value of the investment.

The investment in the following subsidiary companies has not been eliminated since their effect on the results and state of affairs of the Group was not considered material.

1998 Corinthia Services Limited - Tunisia 1999 Gastro a.s. - Czech Republic 2000 Haﬁ na Bau Ag - Switzerland 2000 Haﬁ na Bau GmbH - Austria

The excess of the parent company’s interest in the fair values of the identiﬁ able assets and liabilities acquired over the cost of acquisition is accounted for as negative goodwill and treated as deferred income recognised as income over its estimated useful life.

The excess of the purchase consideration over the fair value of the net identiﬁ able assets of subsidiaries and associates is accounted for as goodwill. Goodwill is stated at cost less accumulated amortisation to date and is amortised on a straight line basis over a maximum period of twenty years. In respect of associates the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

Minority interest in the results and net assets of subsidiary companies is disclosed separately.

All intra-group balances and intra-group transactions and resulting unrealised proﬁ ts have been eliminated in full on consolidation.

(b) Tangible ﬁ xed assets

Tangible ﬁ xed assets are stated at cost or revalued amounts less accumulated depreciation. Depreciation is calculated to write off the cost or valuation of assets on a straight line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose, which are consistent with those of previous years, are: % Buildings 1 – 3 Plant and machinery 5 – 100 Motor vehicles 15 – 20

Certain land and buildings are stated at revalued amounts less depreciation. Revaluations are carried out on the basis of their existing use whenever their fair value differs materially from their carrying amount. The net surplus arising on revaluation is credited to the revaluation reserve.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 57 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Tangible ﬁ xed assets (continued)

At balance sheet date the carrying amounts of tangible ﬁ xed assets are reviewed for indications of impairment. Impairment losses are recognised as an expense in the proﬁ t and loss account, unless the assets were carried at revalued amount, in which case the impairment is treated as a revaluation decrease.

Expenditure on repairs or maintenance of tangible ﬁ xed assets made to restore or maintain future economic beneﬁ ts expected from the asset is recognised as an expense when incurred.

Current asset investments held on a short-term basis, which are those which are expected to be disposed of within the next twelve months, are stated at market value. Any increases or decreases in carrying amount are dealt with through the proﬁ t and loss account.

(d) Taxation

Tax expense is calculated on the net income adjusted for non temporary differences between taxable and accounting income. The tax effect of temporary differences, arising from items being brought to account in different periods for income tax and accounting purposes, is carried in the balance sheet as deferred tax debits or credits.

Deferred tax balances are accounted for on the liability method taking into account the estimated tax that will be paid or recovered when the temporary differences reverse. Deferred tax debits are only carried forward if there is reasonable expectation of realisation. Deferred tax debits arising from unrelieved tax losses or unabsorbed capital allowances yet to be recovered are only carried forward if there is reasonable assurance and to the extent that it is probable that future taxable income will be sufﬁ cient to allow the beneﬁ t of the loss to be realised, or to the extent of net credits in the deferred tax balance. Deferred tax liabilities associated with investment in subsidiary companies are not recognised to the extent that the Group is able to control timing of the reversal of the temporary differences and do not expect the temporary differences to reverse in the foreseeable future.

(e) Stocks

Stocks are stated at the lower of cost and estimated net realisable value. The cost of stock is ascertained on a weighted average basis.

(f) Amounts receivable

Provision is made for any amounts the recovery of which is considered to be doubtful.

(g) Foreign currencies

Transactions denominated in foreign currencies are translated at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities expressed in foreign currencies are translated at the rates of exchange prevailing at the balance sheet date. Translation differences are dealt with through the proﬁ t and loss account.

The profi t and loss accounts and cash fl ow statements of foreign subsidiary companies are translated at average rates ruling during the year. The balance sheets of such companies are translated at closing rates. Exchange differences on translating the opening net assets of these companies, together with the differences resulting from the restatement of profi ts and losses from average to closing rates, are included directly with equity by crediting an Exchange Translation Reserve.

58 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

2 SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits less overdrawn bank balances and bank overdrafts, and any short term liquid investments that are readily convertible to known amounts of cash and which are subject to an insigniﬁ cant risk of change in value.

(i) Revenue recognition

Revenue from services is recognised by reference to the stage of completion of the transaction at the balance sheet date. The method used is the completed transaction method. Revenue is recognised when no signiﬁ cant uncertainties remain concerning the derivation of consideration or associated costs.

In relation to the sale of goods, revenue is recognised when the signiﬁ cant risks and rewards of ownership have been transferred to the buyer, and no signiﬁ cant uncertainties remain regarding the derivation of consideration, associated costs or the possible return of goods.

Revenue is stated after deduction of sales rebates and taxes directly linked thereto.

Interests arising from the use by others of the company’s resources are recognised on the accruals basis.

Dividends are recognised when the right to receive the dividend is established.

(j) Borrowing costs

Borrowing costs incurred on speciﬁ c ﬁ xed asset projects prior to their commissioning are capitalised as part of the cost of the qualifying asset. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is based on the average rate of interest on bank borrowings. All other borrowing costs are recognised as an expense in the period in which they are incurred.

(k) Leases

Operating leases are expensed on the accruals basis in the year during which the costs are incurred.

(l) Retirement beneﬁ t cost

The Group companies contribute towards the state pension in accordance with local legislation and do not contribute to any retirement beneﬁ t plans. Related costs are recognised as an expense during the year in which they are incurred.

(m) Segment reporting

Segmental information is based on two segment formats. The primary format represents business segments reﬂ ecting the Group’s management structure. The secondary format represents the Group’s geographical markets.

Segment results include revenue and expenses directly attributable to a segment and the relevant portion of enterprise revenue and expense that can be allocated on a reasonable basis to a segment, whether from external transactions or from transactions with other segments of the Group. Inter-segment transfer pricing is based on cost plus an appropriate margin, as speciﬁ ed by Group policy. Segment results are determined before any adjustments for minority interest.

Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment assets are determined after deducting related allowances that are reported as direct offsets in the Group’s balance sheet. Segment assets and liabilities do not include income tax items.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 59 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

3 SEGMENTAL INFORMATION

The Group North Malta Africa Europe Other Total Lm000 Lm000 Lm000 Lm000 Lm000

Year ended 31 December 2000 Revenue: Food, beverage and retail 8,390 23,675 3,993 1,780 37,838 Letting income 7,527 814 9,028 661 18,030 Ancillary services 1,146 105 2,281 303 3,835 Construction services 270 586 - - 856

17,333 25,180 15,302 2,744 60,559

Gross operating proﬁ t 1,562 13,909 4,472 83 20,026 Depreciation and amortisation 2,118 946 1,463 139 4,666

Segment operating (loss)/proﬁ t (556) 12,963 3,009 (56) 15,360

Segment assets 97,635 37,724 71,285 8,453 215,097

Segment liabilities (13,424) (6,393) (4,056) (304) (24,177)

60 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

3 SEGMENTAL INFORMATION (continued)

The Group North Malta Africa Europe Other Total Lm000 Lm000 Lm000 Lm000 Lm000

Year ended 31 December 1999 Revenue: Food, beverage and retail 9,894 24,653 3,730 1,537 39,814 Letting income 5,043 761 5,013 692 11,509 Ancillary services 1,606 114 3,476 55 5,251 Construction services - 219 - - 219

16,543 25,747 12,219 2,284 56,793

Gross operating proﬁ t 1,937 13,045 2,391 744 18,117 Depreciation and amortisation 2,231 997 1,566 86 4,880

Segment operating (loss)/proﬁ t (294) 12,048 825 658 13,237

Segment assets 73,037 34,252 72,019 7,625 186,933

Segment liabilities (11,337) (3,395) (2,555) (237) (17,524)

Year ended 31 December 1998 Revenue: Food, beverage and retail 9,770 27,651 4,258 - 41,679 Letting income 4,457 - 5,621 2,058 12,136 Ancillary services 1,453 - 3,446 - 4,899 Construction services - 946 - - 946

15,680 28,597 13,325 2,058 59,660

Gross operating proﬁ t/(loss) 2,562 15,633 951 (985) 18,161 Depreciation and amortisation 2,063 222 697 58 3,040

Segment operating proﬁ t/(loss) 499 15,411 254 (1,043) 15,121

Segment assets 49,599 26,281 96,902 6,929 179,711

Segment liabilities (14,995) (2,087) (4,980) (3,107) (25,169)

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 61 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

3 SEGMENTAL INFORMATION (continued)

CPHCL North Malta Africa Total Lm000 Lm000 Lm000 Year ended 31 December 2000 Revenue: Food, beverage and retail 6,994 21,784 28,778 Letting income 2,434 - 2,434 Ancillary services 580 - 580

10,008 21,784 31,792

Gross operating (loss)/proﬁ t (608) 13,544 12,936 Depreciation and amortisation 587 225 812

Segment operating (loss)/proﬁ t (1,195) 13,319 12,124

Segment assets 21,323 30,662 51,985

Segment liabilities (15,248) (892) (16,140)

Year ended 31 December 1999 Revenue: Food, beverage and retail 6,532 23,274 29,806 Letting income 1,872 - 1,872 Ancillary services 853 - 853

9,257 23,274 32,531

Gross operating (loss)/proﬁ t (460) 13,212 12,752 Depreciation and amortisation 773 230 1,003

Segment operating (loss)/proﬁ t (1,233) 12,982 11,749

Segment assets 21,700 26,636 48,336

Segment liabilities (12,959) (998) (13,957)

62 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

3 SEGMENTAL INFORMATION (continued)

CPHCL North Malta Africa Total Lm000 Lm000 Lm000 Year ended 31 December 1998 Revenue: Food, beverage and retail 6,213 26,768 32,981 Letting income 1,761 - 1,761 Ancillary services 776 - 776

8,750 26,768 35,518

Gross operating proﬁ t 582 15,817 16,399 Depreciation and amortisation 800 222 1,022

Segment operating (loss)/proﬁ t (218) 15,595 15,377

Segment assets 22,396 25,761 48,157

Segment liabilities (12,133) (728) (12,861)

4 STAFF COSTS

The Group

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Wages and salaries 13,189 12,698 12,274 Social security costs 1,763 1,865 1,868 Other staff costs 1,307 1,297 1,223

16,259 15,860 15,365

No. No. No. Weekly average number of employees: Management and administration 498 554 717 Operating 2,908 2,630 2,535

3,406 3,184 3,252

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 63 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

4 STAFF COSTS (continued)

CPHCL

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Wages and salaries 6,578 6,653 6,489 Social security costs 506 635 631 Other staff costs 904 941 1,073

7,988 8,229 8,193

No. No. No. Weekly average number of employees: Management and administration 256 245 334 Operating 1,392 1,216 1,336

1,648 1,461 1,670

5 OPERATING PROFIT

Operating proﬁ t is stated after charging and crediting the following:

The Group

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Directors’ remuneration 275 266 292 Auditors’ remuneration 84 51 60 Operating lease costs 57 92 3 Exchange differences (402) 6,327 (2,745) (Proﬁ t)/loss on disposal of tangible ﬁ xed assets (15) (51) 44

CPHCL

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Directors’ remuneration 264 266 219 Auditors’ remuneration 36 27 34 Exchange differences (1,617) 1,031 (4,742) (Loss)/proﬁ t on disposal of tangible ﬁ xed assets 82 (37) (13)

64 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

6 INTEREST PAYABLE

The Group

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Bank loans and overdrafts 2,893 3,246 2,974 Hire purchase creditors 6 8 11 Other ﬁ nance charges 1,397 670 1,974

4,296 3,924 4,959

CPHCL

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Bank loans and overdrafts 1,004 1,062 1,165 Hire purchase creditors 5 6 10 Other ﬁ nance charges 998 289 1,222

2,007 1,357 2,397

7 EXCEPTIONAL ITEM

CPHCL

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Proﬁ t on disposal of investments 5,349 - -

8 TAXATION

(a) The charge for taxation comprises:

The Group

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Current taxation 3,211 2,995 3,619 Under provision in respect of previous years - - 526 Deferred taxation movement for the year (159) (304) (277)

3,052 2,691 3,868

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 65 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

8 TAXATION (continued)

CPHCL

Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Current taxation 2,987 2,849 3,566 Under provision in respect of previous years - - 505

2,987 2,849 4,071

The charge for income tax on profi ts derived from local operations has been calculated at the rate of 35% whereas income tax on the profi ts derived from overseas operations has been calculated in accordance with the applicable double taxation treaties. Provision has been made in the Group’s fi nancial statements for the effect of lower rates of income tax charged in certain overseas jurisdictions than would be applied in Malta.

(b) The reconciliation between the tax expense and the tax rate at 35% applied to proﬁ t before taxation is as follows:

The Group Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Proﬁ t before taxation 12,057 10,104 11,550

Tax expense at the applicable rate of 35% 4,220 3,536 4,043 Differences in foreign division tax rate relative to the local tax rate (1,830) (1,313) (1,695) Tax effect of expenses not deductible in determining taxable income 148 292 (1,015) Tax effect of deferred tax beneﬁ ts not recognised in these ﬁ nancial statements 544 225 1,882 Tax effect of over provision for income tax - - 141 Tax effect of under provision for income tax - - 526 Tax effect of other non-temporary differences (30) (49) (14)

Tax expense for the year 3,052 2,691 3,868

66 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

8 TAXATION (continued)

CPHCL Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Proﬁ t before taxation 16,692 11,525 14,546

Tax expense at the applicable rate of 35% 5,842 4,033 5,091 Differences in foreign division tax rate relative to the local tax rate (1,688) (1,332) (1,684) Tax effect of expenses not deductible in determining taxable income 26 47 141 Tax effect of exceptional item (1,331) - - Change in opening deferred tax asset resulting from change in tax rate (19) - 15 Tax effect of deferred tax beneﬁ ts not recognised in these ﬁ nancial statements 157 101 3 Tax effect of under provision for income tax - - 505

Tax expense for the year 2,987 2,849 4,071

9 EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of basic earnings per share is based on:

• Net proﬁ t for the year attributable to ordinary shareholders after deducting the dividend on preference shares of Lm 168,000 (1999 and 1998: Lm 168,000); and

• Weighted average number of ordinary shares outstanding during the year of 31,200.

The net proﬁ t attributable to ordinary shareholders can be speciﬁ ed as follows:

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Lm000 Lm000 Lm000 Lm000 Lm000 Lm000 Proﬁ t attributable to the Group 8,916 7,281 7,739 13,705 8,676 10,475 Dividend on preference shares (168) (168) (168) (168) (168) (168)

Net proﬁ t attributable to ordinary shareholders 8,748 7,113 7,571 13,537 8,508 10,307

The weighted average number of ordinary shares in issue amounted to 31,200.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 67 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

9 EARNINGS PER SHARE (continued)

(b) Diluted earnings per share

When calculating diluted earnings per share the weighted average number of shares is adjusted for the effects of all dilutive potential ordinary shares, while the net proﬁ t for the year is adjusted for the dividend on the non-redeemable preference shares.

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Lm000 Lm000 Lm000 Lm000 Lm000 Lm000 Proﬁ t attributable to the Group 8,916 7,281 7,739 13,705 8,676 10,475 Dividend on non-redeemable preference shares (84) (84) (84) (84) (84) (84)

Proﬁ t attributable to ordinary shareholders and holders of redeemable preference shares 8,832 7,197 7,655 13,621 8,592 10,391

Weighted average number of ordinary shares 31,200

Number of shares that could potentially be issued in relation to the cumulative redeemable preference shares 1,400,000

Weighted average number of ordinary shares (diluted) 1,431,200

The calculation of diluted earnings per share is based on the net proﬁ t for the year attributable to the Group divided by the adjusted weighted average number of ordinary shares.

68 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

10 INTANGIBLE FIXED ASSETS

Goodwill The Group CPHCL Lm000 Lm000 Cost At 1.1.98 1,578 742 Exchange differences 4 - Acquisition of subsidiaries 537 - Reclassiﬁ ed to ﬁ xed assets (400) - Additions 196 -

At 1.1.99 1,915 742 Exchange differences (293) - Acquisition of subsidiaries 444 - Additions 124 - Disposals (58) -

At 1.1.00 2,132 742 Exchange differences (44) - Acquisition of subsidiaries 172 - Additions 705 - Disposals (145) -

At 31.12.00 2,820 742

Amortisation At 1.1.98 808 633 Exchange differences 47 - Acquisition of subsidiaries 285 - Charge for year 220 33

At 1.1.99 1,360 666 Exchange differences (282) - Acquisition of subsidiaries 197 - Charge for year 354 43 Released on disposal (29) -

At 1.1.00 1,600 709 Exchange differences (33) - Acquisition of subsidiaries 228 - Charge for year 141 21 Released on disposal (132) -

At 31.12.00 1,804 730

Net book value At 31.12.00 1,016 12

At 31.12.99 532 33

At 31.12.98 555 76

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 69 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

11 TANGIBLE FIXED ASSETS

The Group Assets in the Land and Plant and Motor course of Total buildings machinery vehicles construction Lm000 Lm000 Lm000 Lm000 Lm000 Cost/Revalued amount At 1.1.98 55,853 32,500 21,091 2,262 - Exchange differences (727) (850) 429 (306) - Acquisition of subsidiaries 47,832 38,241 9,239 - 352 Reclassiﬁ ed from deferred expenditure 400 400 - - - Additions 13,282 6,745 2,504 227 3,806 Disposals (187) (24) (124) (39) - Revaluation adjustments 2,164 2,011 119 34 - Revaluation surplus 41,805 40,094 - - 1,711

At 1.1.99 160,422 119,117 33,258 2,178 5,869 Exchange differences (9,699) (7,182) (1,240) 58 (1,335) Acquisition of subsidiaries 12,304 12,276 9 19 - Reclassiﬁ cations 16 - (187) 203 - Additions 9,833 1,371 1,246 416 6,800 Disposals (730) (57) (313) (164) (196) Revaluation adjustment 412 383 29 - - Other adjustment 3,194 3,194 - - - Revaluation surplus 2,883 2,541 - - 342

At 1.1.00 178,635 131,643 32,802 2,710 11,480 Exchange differences (3,131) (2,109) (360) (194) (468) Acquisition of subsidiaries 36,716 26,689 8,617 160 1,250 Disposal of subsidiaries (14,769) (7,335) (7,388) (46) - Additions 55,011 19,229 4,163 315 31,304 Disposals (40,924) (15,933) (3,706) (182) (21,103) Revaluation adjustment 3,562 3,562 - - - Revaluation surplus (17,051) (17,307) - - 256

At 31.12.00 198,049 138,439 34,128 2,763 22,719

Depreciation At 1.1.98 10,002 887 7,919 1,196 - Exchange differences 503 104 463 (64) - Acquisition of subsidiaries 5,864 607 5,257 - - Charge for year 3,572 310 2,950 312 - Released on disposal (134) (1) (97) (36) - Revaluation adjustment 123 50 63 10 - Revaluation surplus (1,224) (1,224) - - -

At 1.1.99 18,706 733 16,555 1,418 - Exchange differences (1,147) (286) (903) 42 - Acquisition of subsidiaries 796 789 2 5 - Reclassiﬁ cations 16 - (98) 114 - Charge for year 4,197 1,252 2,621 324 - Released on disposal (413) (30) (242) (141) - Revaluation adjustment 55 55 - - - Other adjustment 3,194 3,194 - - - Revaluation surplus 329 329 - - -

At 1.1.00 25,733 6,036 17,935 1,762 - Exchange differences (574) (192) (252) (129) (1) Acquisition of subsidiaries 3,886 164 3,550 144 28 Disposal of subsidiaries (2,873) (264) (2,571) (38) - Charge for year 4,041 1,245 2,415 294 87 Released on disposal (643) (239) (294) (110) - Revaluation adjustment 67 50 17 - - Revaluation surplus 143 143 - - -

At 31.12.00 29,780 6,943 20,800 1,923 114

Net book value At 31.12.00 168,269 131,496 13,328 840 22,605

At 31.12.99 152,902 125,607 14,867 948 11,480

At 31.12.98 141,716 118,384 16,703 760 5,869

70 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

11 TANGIBLE FIXED ASSETS (continued)

CPHCL Assets in the Land and Plant and Motor course of Total buildings machinery vehicles construction Lm000 Lm000 Lm000 Lm000 Lm000 Cost/Revalued amount At 1.1.98 13,728 3,261 8,361 2,106 - Exchange differences (354) (35) (30) (289) - Additions 3,003 5 713 215 2,070 Disposals (26) - (9) (17) - Revaluation surplus 6,044 4,333 - - 1,711

At 1.1.99 22,395 7,564 9,035 2,015 3,781 Exchange differences 210 11 21 103 75 Additions 5,920 7 342 369 5,202 Disposals (174) (2) (19) (153) - Revaluation surplus 342 - - - 342

At 1.1.00 28,693 7,580 9,379 2,334 9,400 Exchange differences (493) (17) (32) (174) (270) Additions 10,008 343 164 265 9,236 Disposals (492) (54) (305) (133) - Revaluation surplus 256 - - - 256

At 31.12.00 37,972 7,852 9,206 2,292 18,622

Depreciation At 1.1.98 7,002 487 5,399 1,116 - Exchange differences (231) (14) (147) (70) - Charge for year 989 27 676 286 - Released on disposal (16) - (2) (14) - Revaluation surplus (500) (500) - - -

At 1.1.99 7,244 - 5,926 1,318 - Exchange differences 86 5 11 70 - Charge for year 912 24 615 273 - Released on disposal (142) - (8) (134) - Revaluation surplus 48 48 - - -

At 1.1.00 8,148 77 6,544 1,527 - Exchange differences (144) (8) (19) (117) - Charge for year 744 25 481 238 - Released on disposal (240) (21) (150) (69) - Revaluation surplus 48 48 - - -

At 31.12.00 8,556 121 6,856 1,579 -

Net book value At 31.12.00 29,416 7,731 2,350 713 18,622

At 31.12.99 20,545 7,503 2,835 807 9,400

At 31.12.98 15,151 7,564 3,109 697 3,781

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 71 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

11 TANGIBLE FIXED ASSETS (continued)

(a) Certain tangible ﬁ xed assets owned by the Group and the company are hypothecated in favour of the Group’s bankers as collateral for amounts borrowed as stated in note 17.

(b) The carrying amount of the land and buildings that would have been included in these ﬁ nancial statements had these assets been carried at cost less depreciation thereon would be as follows:

The Group CPHCL Lm000 Lm000

31 December 2000 109,942 19,306

31 December 1999 91,504 10,066

31 December 1998 81,224 3,763

12 FINANCIAL FIXED ASSETS

(a) The amounts stated in the balance sheet are analysed as follows:

The Group Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Shares in subsidiary company - 6 5 Shares in associated companies 10,647 7,943 9,163 Loans to associated companies 2,273 2,254 1,970 Other investments 8 8 13

12,928 10,211 11,151

CPHCL Years ended 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Shares in subsidiary companies 25,568 22,167 16,931 Loans to subsidiary companies 35,897 37,630 31,893 Shares in associated companies 20,453 4,470 112 Loans to associated companies 420 582 56 Other investments 8 8 13

82,346 64,857 49,005

72 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

(b) Movements in ﬁ nancial assets during the periods were:

The Group CPHCL Equity Equity Equity Equity held in held in Other held in held in Other subsidiaries associates investments subsidiaries associates investments Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 1.1.98 5 4,094 13 11,244 112 13 Additions - 5,462 - 5,687 - - Disposals - (393) - - - -

At 1.1.99 5 9,163 13 16,931 112 13 Additions 6 1,165 - 5,236 4,358 - Transfer to consolidated subsidiaries (1,177) - - - - Disposals (5) (1,208) (5) - - (5)

At 1.1.00 6 7,943 8 22,167 4,470 8 Additions - 3,190 - 3,254 20,380 - Transfer to consolidated subsidiaries - - - 4,397 (4,397) - Disposals (6) (486) - (4,250) - -

At 31.12.00 - 10,647 8 25,568 20,453 8

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 73 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

Percentage Percentage Percentage holding in holding in holding in ordinary ordinary ordinary shares shares shares 31.12.00 31.12.99 31.12.98

Registered The The The ofﬁ ce Group CPHCL Group CPHCL Group CPHCL Subsidiary companies % % % % % %

C.H.I. Limited 22, Europa Centre, Floriana 95 80 - - - -

Corinthia 22, Europa Centre, Construction Floriana (Overseas) Limited 100 100 100 100 100 100

Corinthia Contract 22, Europa Centre, Caterers Limited Floriana 100 100 100 100 100 100

Corinthia Finance 22, Europa Centre, plc Floriana 100 100 100 100 - -

Corinthia 1072 Budapest Investments Klauzal ter.3 Hungary Kft Hungary 75 - 100 - 100 -

Corinthia 1, Brentham House Investments 43c High Street Limited Hampton Wick, Kingston-Upon-Thames, Surrey, England 100 100 100 100 100 100

Corinthia 3527 Miskolc Bajcsy Restaurants Kft Zsilinszky U.17 Budapest, Hungary 100 - 100 - 100 -

Corinthia Services 34, Place de 7 Limited Novembre 1987 Tunis, Tunisia 99 - 99 - 99 -

Corinthia Turizm Tayyareci Ethem Yatirimlari Ticaret Sokak No.24 Kat4 a.s. Daire 13, 80090 Gumussuyu Istanbul, Turkey 100 - 100 - 100 -

Euromark Trading 52, St.Christopher Co. Limited Street, Valletta 100 100 100 100 100 100

Five Star 22, Europa Centre, Hotels Limited Floriana 75 - 99 94 99 94

74 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

Percentage Percentage Percentage holding in holding in holding in ordinary ordinary ordinary shares shares shares 31.12.00 31.12.99 31.12.98

Registered The The The ofﬁ ce Group CPHCL Group CPHCL Group CPHCL Subsidiary companies % % % % % % (continued)

Flight Catering 22, Europa Centre, Company Limited Floriana 70 70 70 70 - -

Garment Finishing 22, Europa Centre, Limited Floriana 100 100 100 100 100 100

Gastro a.s. Milevska 7 14063 Prague Box 141, Czech Republic 100 - 100 - - -

General Diving 22, Europa Centre, Services Limited Floriana 66 66 33 33 33 33

Haﬁ na Bau Ag CH-4336 Kaisten Eigematt 15 Switzerland 100 - - - - -

Haﬁ na Bau GmbH A-1061, Wien, Schmalzhofgasse 6, Austria 100 - - - - -

Hotel Bavor a.s. Milevska 7, Prague 4 Czech Republic 66 - 61 - 61 -

Hotel Cernigov a.s. Milevska 7, Prague 4, Czech Republic 80 - 80 - 80 -

Hotel Forum Milevska 7, Prague 4, Praha a.s. Czech Republic 81 - 81 - 81 -

Hotel Palcat a.s. Milevska 7, Prague 4, Czech Republic 100 - 78 - 78 -

Hotel Panorama a.s. Milevska 7, Prague 4, Czech Republic 88 - 88 - 87 -

HaSC Vimperk a.s. Milevska 7, Prague 4, Czech Republic - - - - 100 -

International Hotel 22, Europa Centre, Investments plc Floriana 75 47 - - - -

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 75 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

Percentage Percentage Percentage holding in holding in holding in ordinary ordinary ordinary shares shares shares 31.12.00 31.12.99 31.12.98

Registered The The The ofﬁ ce Group CPHCL Group CPHCL Group CPHCL Subsidiary companies % % % % % % (continued)

IHI St Petersburg 1/36 Volynsky per., LLC St. Petersburg, Russian Federation 75 - - - - -

Internasyonal Osmanli Sokok No.24 Turizm ve Kat 4 Daire 13 80090 Otelcilik a.s. Gumussuyu Istanbul, Turkey 100 - 100 - 100 -

Luzzu Restaurant 22, Europa Centre, Limited Floriana 100 60 100 60 100 60

Marin Aruba 22, Europa Centre, (Malta) Limited Floriana 90 90 90 90 90 90

Marina San Gorg 22, Europa Centre, Limited Floriana 100 100 100 100 100 100

Mistra Village 22, Europa Centre, Limited Floriana 100 100 100 100 100 60

Quality Project 22, Europa Centre, Management Floriana Limited 95 80 - - - -

Societe de Promotion Les Cotes de Carthage, Hoteliere Khamsa s.a. Gammarth, Tunisia 100 63 74 38 37 -

The Modern Matches Cross Road, Manufacturing Co. Marsa Limited 100 100 - - - -

Thermal Hotel Arpad Fejedelem Utja Aquincum Kft 94, H-1036 Budapest Hungary 100 - 89 - 89 -

The Village Bakery Factory 22, Bulebel Limited Industrial Estate, Zejtun 100 100 30 30 30 30

Top. Spirit a.s. Milevska 7, 14063 Prague P.O. Box 41 Czech Republic 100 100 100 100 100 100

76 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

Percentage Percentage Percentage holding in holding in holding in ordinary ordinary ordinary shares shares shares 31.12.00 31.12.99 31.12.98

Registered The The The ofﬁ ce Group CPHCL Group CPHCL Group CPHCL Associated companies % % % % % %

Atkins Travel Ltd Towngate House, 2, Parkstone Road, Poole, Dorset BH15 2PJ United Kingdom 43 - 43 - 43 -

B.C.W. Limited 3, Princess Elizabeth Terrace, Ta’ Xbiex 33 33 33 33 33 33

Norm Turizm Mobucan Yokusu, Yatirimlari ve 17/2 Findikli, Isletmecilik a.s. Istanbul, Turkey 40 - 40 - 40 -

Scalotel-Sociedade Delegacao Escalabitana R. Conde Sarugosa Hoteleira s.a. No. 14-6-A-1700 Lisboa, Portugal 42 - - - - -

Swan Laundry 22, Europa Centre, and Drycleaning Floriana Co. Limited 44 44 44 44 44 44

Tekirova Turizm Cunhuriyet Cuddesi Yatirimlari a.s. 47/1 80090 Taksim Istanbul, Turkey 49 - 49 - 49 -

Tektur Turizm a.s. Abdi Ipekci Cad No. 59 Kizilkaya Apt Kat 3 Tesvikiye Istanbul Turkey 35 35 - - - -

Ulkar Corinthia Facaret A.S. Turizm Barbaros Bulvari Yatirimlari a.s. No.76/78 80692 Besiktas Istanbul, Turkey 50 - 50 - 50 -

Other investments

Fish Market Company Limited 5 5 5 5 5 5

Private Sector Investments Limited - - - - 2.5 2.5

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 77 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

(d) The loans to associated companies and other loans are unsecured, interest free and have no ﬁ xed repayment date.

(e) The following were the assets and liabilities assumed (net of cash).

Years ended 31 December The Group CPHCL 2000 1999 1998 2000 1999 1998 Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

Intangible ﬁ xed assets 705 247 161 705 - 153 Tangible ﬁ xed assets 1,374 11,508 21,632 1,374 - 19,601 Stocks 19 84 439 19 - 411 Debtors 145 553 703 145 - 499 Current asset investment - - 230 - - 230 Short term creditors (151) (2,342) (6,326) (151) - (6,323) Long term creditors (261) (4,198) (11,483) (261) - (8,894)

1,831 5,852 5,356 1,831 - 5,677 Equity shares in non-consolidated subsidiaries (6) 6 - - - - Equity shares in subsidiary not previously consolidated - (4) - - - -

Cash ﬂ ow on acquisition net of cash acquired 1,825 5,854 5,356 1,831 - 5,677

Equity acquired in: C.H.I. Limited - - - 80 - - Corinthia Construction (Overseas) Limited - - - - - 10 Quality Project Management Limited - - - 40 - - S.P.H. Khamsa s.a. - - - 1,328 - - Corinthia Finance plc - - - - 100 - Corinthia Investments Limited - - - - 2,528 - Flight Catering Company Limited - - - - 88 -

1,825 5,854 5,356 3,279 2,716 5,687

78 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL FIXED ASSETS (continued)

(f) Investment in associated companies is made up as follows: As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

At 1 January 7,943 9,163 4,094 Exchange adjustment on Group’s share in overseas associated companies (106) 864 (180) Acquisitions 2,080 - - Amortisation of goodwill (113) - - Group’s share of dividend paid by associated companies (267) (36) (80) Group’s share of results 110 301 (133) Group’s share of revaluation surplus 1,000 (1,172) 5,462 Transfer to consolidated subsidiaries - (1,177) -

At 31 December 10,647 7,943 9,163

13 STOCKS

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Food and beverages 1,271 1,301 1,655 Consumables 643 961 879 Goods held for resale 295 257 309 Loose tools 134 152 167 Work in progress 21 2 3 Other 357 68 35

2,721 2,741 3,048

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Food and beverages 1,189 1,090 1,494 Consumables 248 474 410 Goods held for resale 82 54 63 Loose tools 134 152 155 Work in progress 3 2 3 Other 5 6 5

1,661 1,778 2,130

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 79 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

14 DEBTORS

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Trade debtors 13,419 17,342 14,111 Amounts owed by related companies 1,757 1,526 1,070 Taxation 45 51 15 Other debtors 3,760 3,045 2,691 Prepayments and accrued income 1,944 570 221

20,925 22,534 18,108

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Trade debtors 9,689 13,701 11,121 Amounts owed by related companies 6,075 3,257 1,645 Taxation 13 13 13 Other debtors 2,713 2,526 2,556 Prepayments and accrued income 256 316 100

18,746 19,813 15,435

15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Short term borrowings (refer to note 17) 13,295 11,700 12,632 Trade creditors 10,533 9,021 9,848 Amounts owed to related companies 720 929 564 Taxation 2,998 4,721 4,052 Other creditors 6,467 2,103 2,824 Accruals 2,419 1,668 2,302

36,432 30,142 32,222

80 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (continued)

CPHCL 2000 1999 1998 Lm000 Lm000 Lm000

Short term borrowings (refer to note 17) 6,475 5,549 7,346 Trade creditors 4,077 4,799 5,029 Amounts owed to related companies 6,965 5,634 1,296 Taxation 2,813 4,614 3,949 Other creditors 1,281 511 978 Accruals 1,378 885 773

22,989 21,992 19,371

16 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Long term borrowings (refer to note 17) 66,546 60,626 54,518 Taxation 1,804 1,652 2,517 Other creditors 130 161 2,848

68,480 62,439 59,883

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Long term borrowings (refer to note 17) 37,951 29,489 24,074 Taxation 1,804 1,652 2,517

39,755 31,141 26,591

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 81 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS

The Group 2000 1999 1998 Lm000 Lm000 Lm000 Amounts falling due within one year: Bank overdrafts 3,908 3,642 6,783 Bank loans 8,387 7,058 5,471 Related party loans 1,000 1,000 378

Short term borrowings (note 15) 13,295 11,700 12,632

Amounts falling due after one year: Bank loans 49,737 45,847 42,547 Convertible bonds 4,343 - - Related party loans 2,466 4,779 11,971 6.7% redeemable bonds 10,000 10,000 -

Long term borrowings (note 16) 66,546 60,626 54,518

Total borrowings 79,841 72,326 67,150

Maturity of long-term borrowings: Between two and ﬁ ve years 37,408 36,689 28,191 Over ﬁ ve years 29,138 23,937 26,327

66,546 60,626 54,518

82 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

CPHCL 2000 1999 1998 Lm000 Lm000 Lm000 Amounts falling due within one year: Bank overdrafts 2,439 2,128 4,785 Bank loans 3,036 2,421 2,183 Related party loans 1,000 1,000 378

Short term borrowings (note 15) 6,475 5,549 7,346

Amounts falling due after one year: Bank loans 25,485 17,160 14,582 Related party loans 12,466 12,329 9,492

Long term borrowings (note 16) 37,951 29,489 24,074

Total borrowings 44,426 35,038 31,420

Maturity of long-term borrowings: Between two and ﬁ ve years 15,824 13,020 18,366 Over ﬁ ve years 22,127 16,469 13,054

37,951 29,489 31,420

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 83 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

Notes -

(a) Bank borrowings

(i) Bank loans and overdrafts pertaining to the following group companies, which were secured by general and special hypothecs over tangible ﬁ xed assets and by guarantees given by other group companies, had the following terms :

Total amount of bank loans, overdrafts and Group company borrowings Interest rate Repayable

C.H.I. Limited 2000-Lm21,000 7.25% per annum 2001 - Lm21,000 1999- – 1998- –

Corinthia 2000-Lm130,000 1.25% over 1999 - Lm90,000 Construction 1999-Lm 94,000 6 months Libor 2000 - Lm94,000 (Overseas) Limited 1998-Lm 90,000 (1998-1% over 1 2001 - Lm130,000 month Euribor)

Corinthia Finance p.l.c. 2000-Lm10,000,000 6.7% per annum Redeemable on 1999-Lm10,000,000 30 October 2009 1998- -

Corinthia 2000-Lm760,000 2% above 6 month 1998 - Lm2,923,317 Investments Limited 1999-Lm374,000 DM Libor 1999 - Lm211,942 1998-Lm552,000 2000 - Lm374,000 2001 - Lm253,000 2002 - Lm507,000

Five Star Hotels Limited 2000-Lm4,280,000 6.5% to 6.625% Monthly instalments 1999-Lm5,027,000 per annum (inclusive of interest) of 1998-Lm5,900,000 (1998 – 7.5% to 1998 - Lm83,655 7.575% per annum) 1999 – Lm65,285 2000 - Lm62,215

Garment Finishing 2000-Lm 42,000 8% per annum 1998 - Lm – Company Limited 1999-Lm 35,000 1999 - Lm100,000 1998-Lm100,000 2000 - Lm35,000 2001 - Lm42,000

International Hotel 2000-Lm4,343,000 5% per annum Redeemable on Investments p.l.c. 1999-Lm – 29 May 2010 1998-Lm –

Marina San Gorg 2000-Lm3,349,000 6.5% to 6.625% Monthly instalments of Limited 1999-Lm3,772,000 per annum 1999/2000 Lm44,135 1998-Lm4,400,000 (1998-7.5%to inclusive of interest; 7.575% per annum) 1998 Lm48,916

84 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

Total amount of bank loans, overdrafts and Group company borrowings Interest rate Repayable

Mistra Village 2000- – 7.5% per annum 1998 - monthly instalments Limited 1999- – of Lm20,340 1998- Lm483,000

S. P.H.Khamsa s.a. 2000-Lm4,018,000 8.375% per annum 2000 - Tud 1,056,000 1999-Lm4,645,000 2001 - Tud 1,320,000 1998- – 2002 - Tud 1,584,000 2003 - Tud 1,848,000 2004 - Tud 2,112,000 2005 - Tud 2,376,000 2006 - Tud 2,904,000

Thermal Hotel 2000-Lm4,244,000 0.75% above Euribor 1998 - Ats 22,000,000 Aquincum Kft 1999-Lm4,964,000 (1998/99-1.5% above 1999 - Ats 20,000,000 1998-Lm5,900,000 3 months Euribor) 2000 - Ats 21,000,000 2001 - Ats 22,000,000 2002 - Ats 23,000,000 2003 - Ats 23,000,000 2004 - Ats 23,000,000 2005 - Ats 24,000,000 2006 - Ats 28,000,000

Top. Spirit a.s. 2000-Lm11,678,000 2% above 6 month 1998 - DM6,700,077 (Group) 1999-Lm14,130,000 DM Libor 1999 - DM4,202,921 1998-Lm13,900,000 2000 - DM860,904 2001 - DM10,694,460 2002 - DM10,694,460 2003 - DM10,694,460 2004 - DM24,062,515

2000-Lm1,733,000 2.5% above 6 month Repayable within the 1999-Lm1,793,000 DM Libor longer of one year from the 1998-Lm1,900,000 sale of non-core properties, or six years as follows: 1999 DM623,643 2000 DM127,743 2001 DM1,586,870 2002 DM1,586,870 2003 DM1,586,870 2004 DM3,570,504

2000 - – 1.5% commission 1998 - CHF 1,777,407 1999-Guarantee 1999 - CHF 4,500,000 facility Lm 3,444,554 2000 - CHF 7,900,396 1998- Lm 3,938,279

The Village Bakery 2000-Lm175,000 8.25% per annum 2001 - Lm 162,000 Limited 1999- – 2002 - Lm 13,000 1998- –

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 85 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

(ii) Bank loans and overdrafts amounting to Lm30,960,000 (1999: Lm21,709,000; 1998: Lm16,700,000) pertaining to the parent company were secured by general and special hypothecs over its tangible ﬁ xed assets and by guarantees given by other group companies.

The repayment terms of these borrowings are set out below:

Years ended 31 December

2000 1999 1998

Denominated Quarterly instalments Quarterly instalments – in € ranging from €172,414 to ranging from €172,414 to €881,720 and yearly €881,720 and yearly instalments of instalments of €1,603,140. €1,603,140.

Denominated Quarterly instalments of Quarterly instalments of Monthly instalments in Lm Lm137,800 Lm7,875 ranging from Lm2,050 to Lm28,120

Denominated - - Monthly instalments of in DM DM48,248 and half yearly instalments ranging from DM1,172,991 to DM1,364,730

Denominated - - Monthly instalments of in US$ US$117,822 and yearly instalments of US$1,700,000

Interest rates on these borrowings ranged as follows:

Years ended 31 December

2000 1999 1998

Denominated 4.3% for next 4 years and 4.3% for next 5 years and - in € thereafter at 0.75% over thereafter at 0.75% over the 6 month Libor for Euro. the 6 month Libor for Euro. 0.75% to 1% over 0.75% to 1% over 6 month Euribor. 6 month Euribor. 5.107% up to 20.04.02 5.107% up to 20.04.02 and thereafter at and thereafter at 2% over Euribor. 2% over Euribor. 1.5% over 3 month Euribor. 1.5% over 3 month Euribor.

Denominated 1.7% and 2% over CBM 2% over Bank Base Rate. 1.75% over CBM in Lm discount rate. discount rate

Denominated - - 1% above 6 month in DM Libor

Denominated - - 1% above 3 month Libor in US$ and 2% above 1 year Libor

86 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

During 1999 and 1998 bank loans amounting to Lm 7,000 and Lm 37,000 respectively were unsecured. These loans were repayable by quarterly instalments of Lm 2,625 inclusive of interest. They were subject to interest at 2% per annum over the bank base rate.

During 2000, 1999 and 1998 shareholders’ loans were unsecured and had no ﬁ xed date of repayment. An amount of Lm1,400,000 was subject to interest at 6% per annum and the balance bore interest at 8% per annum. These loans are repayable by instalments of Lm1,000,000 per annum exclusive of interest.

(b) Convertible bonds

Proceeds from issue of 50,000 convertible bonds 5,000,000 Transaction costs (164,938)

Net proceeds 4,835,062 Amount classiﬁ ed as equity (521,376) Imputed interest capitalised 29,322

Carrying amount of liability at 31 December 2000 4,343,008

(i) During the year ended 31 December 2000 International Hotel Investments p.l.c. (the issuing company) issued 50,000 bonds with a face value of Lm100 each, which, unless previously purchased and cancelled or converted in accordance with the terms of issue, shall be redeemable at par on the 29 May 2010. Any bonds purchased by the company on the open market shall be cancelled. The issuing company reserves the right to purchase bonds on the open market without notice. The bonds carry an interest rate of 5% per annum payable annually in arrears on the 29 May in each year, the ﬁ rst interest payment to be effected on the 29 May 2001.

The amount of the convertible bond recognised in equity is net of attributable transaction costs amounting to Lm17,786.

The bonds constitute the general, direct, unconditional and unsubordinated obligations of the issuing company and will rank pari passu, without any priority or preference, with all other present and future unsecured and unsubordinated obligations of the issuing company. Bondholders shall be entitled to exercise their conversion option on a conversion date during the conversion period by converting their bonds or part thereof into fully paid ordinary shares of the issuing company at the conversion price determined as set out below. Upon conversion, the right of the converting bondholder to repayment of the bond to be converted and any interest for the period between the applicable conversion date and redemption date shall be extinguished and released, and in consideration and in exchange thereof, the issuing company shall issue fully paid up ordinary shares as provided in the terms and conditions of issue. A conversion of part of a bond shall not be allowed.

The bonds, upon issue, shall entitle the holders thereof to an original entitlement of 100 shares for every bond. In the event that upon conversion the conversion price is higher than the share issue price, and a bondholder wishes to retain such original entitlement, such bondholder shall pay the cash difference as determined in accordance with the terms of the issue of the bonds. A bondholder may elect not to pay such cash difference and in lieu thereof shall accept the issue of a lower number of shares than his original entitlement. Shares shall not be issued at below their nominal value.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 87 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

17 BORROWINGS (continued)

(ii) Conversion dates and conversion prices

A bondholder may exercise the conversion option during the conversion period, which commences on the 29 November 2005 and ends 2009. In the case of bonds converted on any of the following conversion dates during any conversion term, the conversion price shall be determined in accordance with the arithmetic average of the daily trade weighted average price (TWAP) quoted by the Malta Stock Exchange during the three months immediately preceding the reference date less a percentage, as follows:

Conversion Term Conversion Dates %

First 29 November 2005; 29 May 2006 and 29 November 2006 10 Second 29 May 2007; 29 November 2007 and 28 May 2008 15 Third 29 November 2008; 29 May 2009 and 29 November 2009 20

100,000 redeemable bonds with a nominal value of Lm 100 each were issued by Corinthia Finance plc (the issuing company). These bonds bear interest at a rate of 6.7% per annum payable annually in arrears on the 30 October of each year. The bonds will be redeemed on the 30 October 2009, subject to the right of the issuing company to purchase bonds on the open market before redemption date. Any bonds so purchased shall be cancelled.

Pursuant to, and subject to the terms and conditions contained in the Offering Memorandum dated 14 September 1999, the payment of the bonds and interest thereon is guaranteed by CHPCL which has bound itself jointly and severally liable for the payment of the bonds and interest thereon.

18 DEFERRED TAXATION

The Group 2000 1999 1998 Lm000 Lm000 Lm000 Tax effect of temporary differences relating to: Excess of tax base over carrying amount of tangible ﬁ xed assets 1,072 1,114 1,199 Provision for doubtful debts (58) (28) (11) Unrelieved tax losses and unabsorbed capital allowances (2,927) (2,725) (2,508) Tax effect on revaluation surplus 18,162 18,543 17,904 Lower tax rate applied to undistributed proﬁ ts of certain subsidiaries 31 31 31 Convertible bonds component recognised in equity 182 - -

16,462 16,935 16,615

88 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

18 DEFERRED TAXATION (continued)

CPHCL 2000 1999 1998 Lm000 Lm000 Lm000 Tax effect of temporary differences relating to: Excess of tax base over carrying amount of tangible ﬁ xed assets 112 73 63 Provision for doubtful debts 29 29 22 Provision for exchange differences (272) (222) (172) Amortisation of intangible ﬁ xed asset - (2) (9) Unrelieved tax losses and unabsorbed capital allowances 597 430 304

Deferred tax asset not recognised in ﬁ nancial statements 466 308 208

Tax effect on revaluation surplus 2,232 2,172 2,092

19 DEFERRED INCOME

Deferred income carried in the Group’s balance sheet represents the excess of net assets acquired over the consideration paid on acquisition of a majority interest in Top. Spirit a.s. and, in accordance with the company’s accounting policy, is being amortised on the straight line method over a period of ﬁ ve years.

Lm000

At 1 January 1998 1,130 Amount written off (226)

At 31 December 1998 904 Amount written off (214)

At 31 December 1999 690 Amount written off (237)

At 31 December 2000 453

20 CALLED-UP ISSUED SHARE CAPITAL

(a) The Group and CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Authorised, issued and fully paid up 1,400,000 6% ‘C’ preference shares of Lm1 each 1,400 1,400 1,400 1,400,000 6% ‘D’ cumulative redeemable preference shares of Lm1 each 1,400 1,400 1,400 16,200 ‘A’ ordinary shares of Lm1 each 16 16 16 15,000 ‘B’ ordinary shares of Lm1 each 15 15 15

2,831 2,831 2,831

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 89 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

20 SHARE CAPITAL (continued)

(b) The 6% cumulative redeemable preference shares are redeemable at par.

(c) Preference shares which provide for mandatory redemption meet the defi nition of a fi nancial liability as laid down in International Accounting Standard 32. Accordingly, this standard requires the issued value of such shares to be included within liabilities and any related dividend payments to be classifi ed as interest expenses. Section 115 of the Companies Act, 1995, states that preference shares shall only be redeemed out of profi ts of the company which would otherwise be available for distribution as dividends or out of the proceeds of a fresh issue made for the purpose of the redemption. Furthermore, where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profi ts which would otherwise have been available for distribution as dividends, be transferred to a capital redemption reserve, a sum equal to the nominal amount of the shares redeemed. The provisions relating to the reduction of the issued share capital of the company shall apply as if this reserve were paid up share capital of the company. In view of the provisions of the Companies Act, 1995 as described above, the preference shares are included as part of the company’s called up issued share capital as this treatment better refl ects the truth and fairness of the company’s state of affairs.

21 REVALUATION RESERVE

This reserve is not available for distribution except upon realisation of assets on which the revaluation surplus has been created. The reserve may be capitalised at any time and is composed as follows:

The Group CPHCL Lm000 Lm000

At 1 January 1998 515 - Excess of revalued amounts over net book value of immovable property 55,410 6,544 Deferred tax thereon (note 18) (17,904) (2,092)

At 31 December 1998 38,021 4,452 Transfer to other reserves (3,464) - Excess of revalued amounts over net book value of immovable property 2,883 342 Deferred tax thereon (639) (80) Minority interest (145) - Share of associated companies (1,172) -

At 31 December 1999 35,484 4,714 Excess of revalued amounts over net book value of immovable property 4,468 256 Deferred tax thereon (1,327) (60) Minority interest (3) - Share of associated companies 429 - Decrease following actual revaluation (12,684) -

At 31 December 2000 26,367 4,910

90 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

22 OTHER RESERVES

Included in other reserves is an amount of Lm173,000 representing a Government grant obtained in 1968 on condition that the Company operates the Corinthia Palace Hotel as a fi ve star hotel for a period of fi fteen years. During 2000 the balance was transferred to profi t and loss reserve.

The balance on other reserves, which is not available for distribution, represents proﬁ ts not realised at balance sheet date including those arising from foreign exchange translations and revaluations on intra-group share exchanges.

23 CASH AND CASH EQUIVALENTS

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Cash at bank and in hand 21,740 7,947 16,299 Bank overdrafts (note 17) (3,908) (3,642) (6,783)

17,832 4,305 9,516

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Cash at bank and in hand 2,066 6,132 15,378 Bank overdrafts (note 17) (2,439) (2,128) (4,785)

(373) 4,004 10,593

24 FINANCIAL INSTRUMENTS

Financial assets include equity and other securities, debtors and cash held at bank and in hand. Financial liabilities include creditors, bank overdrafts, bank loans and other borrowings. At 31 December 2000, 1999 and 1998, the Company and the Group had no unrecognised ﬁ nancial instruments.

Risk management policies

(a) Credit risk on amounts receivable is limited through the systematic monitoring of outstanding balances and the presentation of debtors net of allowances for doubtful debts, where applicable. Cash is placed with reputable banks.

(b) Liquidity risk is limited as the Company and the Group have suffi cient funding resources and the ability to raise fi nance to meet their fi nancial obligations as these arise.

Fair values

At 31 December 2000,1999 and 1998 the fair values of ﬁ nancial assets and liabilities were not materially different from their carrying amounts.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 91 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

25 COMMITMENTS

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Capital expenditure commitments: Tangible ﬁ xed assets authorised but not yet contracted for 7,537 1,906 -

Contracted for but not provided for in ﬁ nancial statements 5,336 - -

Commitments under operating leases: On land and buildings (note): - expiring within one year 377 134 52 - expiring between two and ﬁ ve years 2,015 595 213 - expiring after more than ﬁ ve years 7,390 6,307 6,362

9,782 7,036 6,627

On other assets: - expiring within one year - - 2 - expiring between two and ﬁ ve years 5 5 1

5 5 3

22,660 8,947 6,630

Note -

Included in the total of Lm9,782,000 (1999-Lm7,036,000, 1998-Lm6,627,000) are amounts of Lm6,511,000 (1999-Lm6,563,000; 1998-Lm6,616,000) payable in respect of non-cancellable operating lease rentals relating to leasehold land and buildings. These land and buildings are held under title of temporary emphyteusis for a term of ninety-nine years reckoned from 1 September 1992.

92 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

25 COMMITMENTS (continued)

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Capital expenditure commitments: Tangible ﬁ xed assets authorised but not yet contracted for 3,444 - -

Contracted for but not provided for in ﬁ nancial statements - - -

Commitments under operating leases: On land and buildings: - expiring within one year 250 - - - expiring between two and ﬁ ve years 1,587 - - - expiring after more than ﬁ ve years 1,138 - -

2,975 - -

On other assets: - expiring between two and ﬁ ve years - - -

6,419 - -

26 CONTINGENT LIABILITIES

The Group As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Guarantees given in the ordinary course of business 1,126 1,026 866 Tax in dispute 876 98 98

2,002 1,124 964

CPHCL As at 31 December 2000 1999 1998 Lm000 Lm000 Lm000

Guarantees given in the ordinary course of business 12,617 12,589 2,310 Tax in dispute 861 88 88

13,478 12,677 2,398

Most of the guarantees during 1998, 1999 and 2000 had been given in connection with Group companies.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 93 CORINTHIA PALACE HOTEL COMPANY LIMITED NOTES TO THE ACCOUNTANTS’ REPORT (continued)

27 ACCOUNTING FOR OPERATIONS IN HYPERINFLATIONARY ECONOMIES

Certain members of the Group operate in Turkey and report in Turkish Lira. The economy of this country is considered to be hyperinfl ationary. International Accounting Standard 29 “Financial Reporting in Hyperinfl ationary Economies” requires the restatement of the historical cost fi nancial statements. Up until the year ended 31 December 1998 the fi nancial statements of these companies were not restated in accordance with the Standard.

Had these subsidiary companies’ ﬁ nancial statements been restated, the Group’s net assets at 31 December 1998 and proﬁ t for the year then ended would have been stated as follows:

Effect of hyperinﬂ ation Restated As stated adjustment amount Lm000 Lm000 Lm000

Proﬁ t attributable to the Group: Year ended 31 December 1998 7,739 44 7,783

Net assets as at 31 December 1998 74,050 170 74,220

As from the year ended 31 December 1999 Group companies in Turkey complied with the requirements of the International Accounting Standard.

94 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

PROFIT AND LOSS ACCOUNTS For the year ended 31 December 2000

The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000 Revenue 60,559 60,559 31,792 31,792 Other operating income 4,976 908 (iv) 5,884 3,794 3,794 Staff costs (16,259) (16,259) (7,988) (7,988) Depreciation and amortisation of in/tangibles (4,666) 143 (iii) (4,523) (812) 48 (iii) (764) Other operating charges (29,250) (29,250) (14,662) (14,662)

Operating proﬁ t 15,360 16,411 12,124 12,172 Investment income 883 883 1,226 1,226 Interest payable (4,296) (4,296) (2,007) (2,007) Share of results of associated companies 110 110 - -

Proﬁ t before exceptional item 12,057 13,108 11,343 11,391 Exceptional item - - 5,349 5,349

Proﬁ t before taxation 12,057 13,108 16,692 16,740 Taxation (3,052) (505) (i) (3,557) (2,987) (505) (i) (3,492)

Proﬁ t after taxation 9,005 9,551 13,705 13,248 Minority interest (89) (89) - -

Proﬁ t attributable to Group 8,916 9,462 13,705 13,248 Retained proﬁ t at beginning of year 40,150 42,831 45,304 45,857

49,066 52,293 59,009 59,105 Transfer to other reserves (833) (833) 26 26 Exchange translation difference (930) (930) (114) (114) Dividends (1,445) (1,445) (1,445) (1,445)

Retained proﬁ ts at end of year 45,858 49,085 57,476 57,572

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 95 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

BALANCE SHEETS As at 31 December 2000 The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000 Fixed assets Intangible assets 1,016 1,016 12 12 Tangible ﬁ xed assets 168,269 28,861 (ii) 139,880 29,416 7,142 (ii) 22,370 (143) (iii) (48) (iii) (329) (iii) (48) (iii) Financial ﬁ xed assets 12,928 4,718 (ii) 8,210 82,346 82,346

182,213 149,106 111,774 104,728 Other long term asset Deferred taxation - (103)* 103 - -

182,213 149,209 111,774 104,728

Current assets Stocks 2,721 2,721 1,661 1,661 Debtors 20,925 20,925 18,746 18,746 Investments 1,030 1,030 - - Cash at bank and in hand 21,740 21,740 2,066 2,066

46,416 46,416 22,473 22,473 Creditors: amounts falling due within one year 36,432 36,432 22,989 22,989

Net current assets/(liabilities) 9,984 9,984 (516) (516)

Total assets less current liabilities 192,197 159,193 111,258 104,212

Creditors: amounts falling due after more than one year 68,480 68,480 39,755 39,755

Provision for liabilities and charges Deferred taxation 16,462 (103)* 3,839 2,232 2,232 (ii) - 8,157 (ii) 4,538 (iv) 31 (vi) Deferred income 453 (4,538) (iv) 2,267 - - 2,724 (iv)

106,802 84,607 69,271 64,457

Share capital and reserves Called-up issued share capital 2,831 2,831 2,831 2,831 Revaluation reserve 26,367 24,707 (ii) 1,660 4,910 4,910 (ii) - Other reserves 13,909 13,909 2,609 2,609 Proﬁ t and loss account 45,858 49,085 57,476 57,572 Dividend payment reserve 1,445 1,445 1,445 1,445

90,410 68,930 69,271 64,457 Minority interest 16,392 715 (ii) 15,677 - -

106,802 84,607 69,271 64,457

*Reclassiﬁ cation

96 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

PROFIT AND LOSS ACCOUNTS For the year ended 31 December 1999

The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000

Revenue 56,793 56,793 32,531 32,531 Other operating income 4,494 908 (iv) 5,402 2,412 2,412 Staff costs (15,860) (15,860) (8,229) (8,229) Depreciation and amortisation of in/tangible (4,880) 329 (iii) (4,551) (1,003) 48 (iii) (955) Other operating charges (27,310) (27,310) (13,962) (13,962)

Operating proﬁ t 13,237 14,474 11,749 11,797 Investment income 490 490 1,133 1,133 Interest payable (3,924) (3,924) (1,357) (1,357) Share of results of associated companies 301 301 - -

Proﬁ t before taxation 10,104 11,341 11,525 11,573 Taxation (2,691) (21) (i) (2,712) (2,849) (2,849)

Proﬁ t after taxation 7,413 8,629 8,676 8,724 Minority interest (132) (132) - -

Proﬁ t attributable to Group 7,281 8,497 8,676 8,724 Retained proﬁ t at beginning of year 29,310 30,775 39,914 40,419

36,591 39,272 48,590 49,143 Transfer from/(to) other reserve 6,741 6,741 (213) (213) Exchange translation difference (2,236) (2,236) (2,127) (2,127) Dividends (946) (946) (946) (946)

Retained proﬁ ts at end of year 40,150 42,831 45,304 45,857

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 97 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

BALANCE SHEETS As at 31 December 1999 The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000 Fixed assets Intangible assets 532 532 33 33 Tangible ﬁ xed assets 152,902 45,912 (ii) 107,319 20,545 6,886 (ii) 13,707 (329) (iii) (48) (iii) Financial ﬁ xed assets 10,211 4,289 (ii) 5,922 64,857 64,857

163,645 113,773 85,435 78,597 Other long term assets Deferred taxation - (1,639)* 1,639 - -

163,645 115,412 85,435 78,597

Current assets Stocks 2,741 2,741 1,778 1,778 Debtors 22,534 22,534 19,813 19,813 Investments 847 847 - - Cash at bank and in hand 7,947 7,947 6,132 6,132

34,069 34,069 27,723 27,723 Creditors: amounts falling due within one year 30,142 505 (i) 29,637 21,992 505 (i) 21,487

Net current assets 3,927 4,432 5,731 6,236

Total assets less current liabilities 167,572 119,844 91,166 84,833

Creditors: amounts falling due after more than one year 62,439 62,439 31,141 31,141

Provision for liabilities and charges Deferred taxation 16,935 (1,639)* - 2,172 2,172 (ii) - 14,005 (ii) 4,538 (iv) 31 (vi)

Deferred income 690 (4,538) (iv) 3,412 - - 1,816 (iv) 87,508 53,993 57,853 53,692

Share capital and reserves Called-up issued share capital 2,831 2,831 2,831 2,831 Revaluation reserve 35,484 (35,484) (ii) - 4,714 4,714 (ii) - Other reserves 523 523 4,058 4,058 Proﬁ t and loss account 40,150 42,831 45,304 45,857 Dividend payment reserve 946 946 946 946

79,934 47,131 57,853 53,692 Minority interest 7,574 712 (ii) 6,862 - -

87,508 53,993 57,853 53,692

*Reclassiﬁ cation

98 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

PROFIT AND LOSS ACCOUNTS For the year ended 31 December 1998

The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000

Revenue 59,660 59,660 35,518 35,518 Other operating income 5,176 908 (iv) 6,084 4,313 4,313 Staff costs (15,365) (15,365) (8,193) (8,193) Depreciation and amortisation of in/tangibles (3,040) (3,040) (1,022) (1,022) Other operating charges (31,310) (31,310) (15,239) (15,239)

Operating proﬁ t 15,121 16,029 15,377 15,377 Investment income 1,521 1,521 1,566 1,566 Interest payable (4,959) (4,959) (2,397) (2,397) Share of results of associated companies (133) (133) - -

Proﬁ t before taxation 11,550 12,458 14,546 14,546 Taxation (3,868) 141 (i) (3,176) (4,071) 141 (i) (3,425) 526 (i) 505 (i) 25 (vi)

Proﬁ t after taxation 7,682 9,282 10,475 11,121 Minority interest 57 57 - -

Proﬁ t attributable to Group 7,739 9,339 10,475 11,121 Retained proﬁ t at beginning of year 27,642 26,530 35,083 34,942 Prior year adjustment - 977 - -

35,381 36,846 45,558 46,063 Transfer to other reserve (1,053) (1,053) (751) (751) Exchange translation difference (4,018) (4,018) (3,893) (3,893) Dividends (1,000) (1,000) (1,000) (1,000)

Retained proﬁ ts at end of year 29,310 30,775 39,914 40,419

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 99 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT STATEMENT OF ADJUSTMENTS

BALANCE SHEETS As at 31 December 1998 The Group CPHCL As per As per As per As per accountants’ audited accountants’ audited report Adjustments accounts report Adjustments accounts Lm000 Lm000 Ref. Lm000 Lm000 Lm000 Ref. Lm000 Fixed assets Intangible assets 555 555 76 76 Tangible ﬁ xed assets 141,716 43,029 (ii) 98,687 15,151 6,544 (ii) 8,607 Financial ﬁ xed assets 11,151 5,461 (ii) 5,690 49,005 49,005

153,422 104,932 64,232 57,688 Other long term assets Deferred taxation - (1,320)* 1,320 - -

153,422 106,252 64,232 57,688

Current assets Stocks 3,048 3,048 2,130 2,130 Debtors 18,108 18,108 15,435 15,435 Investments 1,115 1,115 - - Cash at bank and in hand 16,299 16,299 15,378 15,378

38,570 38,570 32,943 32,943 Creditors: amounts falling due within one year 32,222 526 (i) 33,608 19,371 505 (i) 20,778 (1,912) (v) (1,912) (v) Net current assets 6,348 4,962 13,572 12,165

Total assets less current liabilities 159,770 111,214 77,804 69,853

Creditors: amounts falling due after more than one year 59,883 1,912 (v) 57,971 26,591 (1,912) (v) 24,679

Provision for liabilities and charges Deferred taxation 16,615 (1,320)* - 2,092 2,092 (ii) - 13,366 (ii) 4,538 (iv) 31 (vi) Deferred income 904 (4,538) (iv) 4,534 - - 908 (iv) 82,368 48,709 49,121 45,174

Share capital and reserves Called-up issued share capital 2,831 2,831 2,831 2,831 Revaluation reserve 38,021 34,557 (ii) 3,464 4,452 (4,452) (ii) - Other reserves 3,443 3,443 924 924 Proﬁ t and loss account 29,310 30,775 39,914 40,419 Dividend payment reserve 1,000 1,000 1,000 1,000

74,605 41,513 49,121 45,174 Minority interest 7,763 567 (ii) 7,196 - -

82,368 48,709 49,121 45,174

*Reclassiﬁ cation

100 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT NOTES TO THE STATEMENT OF ADJUSTMENTS

(i) The tax expense for the year ended 31 December 1998, 1999 and 2000 and taxation liability as at those dates included over/under provisions in taxation which related to previous years. The charge to taxation for each year and the relevant liability at each date has been restated in this report to reﬂ ect the actual tax charge for each year rather than to reﬂ ect the year of recovery of the under/over provision in taxation.

The following sets out the relevant over/underprovision for each year before restatement.

The Group CPHCL 2000 1999 1998 2000 1999 1998 Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

Overprovision - - 141 - - 141 Underprovision 505 21 - 505 - -

(ii) Certain companies within the Group carry immovable properties at revalued amounts. Furthermore, certain other companies within the Group own immovable properties, the book values of which are materially lower than their market values as estimated on the basis of existing use. The remaining companies do not carry immovable properties at revalued amounts since their book value is not signiﬁ cantly different from their estimated market values.

The amounts stated in both the Group’s and the Company’s audited ﬁ nancial statements for the three years ended 31 December 2000 have been adjusted to reﬂ ect the latest available independent valuations.

The following table shows the excess of market values over book values at 31 December 1998 for those companies which carry immovable property at amounts which are materially lower than the book values and therefore have been adjusted:

The Group CPHCL Lm 000 Lm 000

Market value of immovable properties 81,310 11,345

Book value of said immovable properties at 31 December 1998 38,281 4,801

Excess of market values over book values at 31 December 1998 43,029 6,544

Since some of the property is valued in United States dollars, adjustment is required every year to establish the Lm equivalent of all components of the revaluation.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 101 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT NOTES TO THE STATEMENT OF ADJUSTMENTS (continued)

(ii) (continued)

The following summarises the movements on this reserve, deferred taxation liability, minority interests and share of revaluation surplus in associated companies taking into consideration changes in Group composition and market values recorded in certain companies’ ﬁ nancial statements.

The Group

Share of Minority associated Surplus Deferred tax interest companies Total Lm000 Lm000 Lm000 Lm000 Lm000

Revaluation 31.12.98 43,029 (13,366) (567) 5,461 34,557 Increase 2,883 (639) (145) 573 2,672 Released on revaluation - - - (1,745) (1,745)

At 31.12.99 45,912 (14,005) (712) 4,289 35,484 Increase 1,914 (433) (3) 429 1,907 Released on revaluation (18,965) 6,281 - - (12,684)

At 31.12.00 28,861 (8,157) (715) 4,718 24,707

CPHCL

Revaluation 31.12.98 6,544 (2,092) - - 4,452 Increase 342 (80) - - 262

At 31.12.99 6,886 (2,172) - - 4,714 Increase 256 (60) - - 196

At 31.12.00 7,142 (2,232) - - 4,910

This adjustment has been allocated to tangible fi xed assets in so far as it relates to the revaluation of immovable properties owned by the Company and its subsidiary companies, and to fi nancial fi xed assets in so far as it relates to immovable properties owned by associated companies, which are recognised on the equity method of accounting.

(iii) Following the revaluation of certain properties, as described in (ii) above, a revaluation adjustment is required to reﬂ ect the notional depreciation on the revaluation surplus in the case of those companies which depreciate immovable properties.

(iv) One member of the Group did not recognise a deferred taxation liability, arising on the revaluation of certain immovable properties immediately prior to the acquisition of this subsidiary by the parent company early during 1998. We have therefore restated the audited ﬁ nancial statements to take into account the effect of this provision for taxation. The negative goodwill arising on acquisition and the related amortisation for each of the years ended 31 December 1998, 1999 and 2000 and related balance sheets have consequently also been adjusted.

102 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B1 CORINTHIA PALACE HOTEL COMPANY LIMITED ACCOUNTANTS’ REPORT NOTES TO THE STATEMENT OF ADJUSTMENTS (continued)

(v) Adjustment has been made in this report to refl ect the Company’s intention to apply a portion of the funds raised from the issue of the bonds issued by Corinthia Finance plc in 1999 to the early repayment of a loan facility made available to it by a shareholder. Consequently, the balance to be repaid that had been partly analysed as falling due within one year in the audited fi nancial statements for the year ended 31 December 1998, has been reclassifi ed to amounts falling due after more than one year in this report to refl ect the long term nature of the debt.

(vi) Certain subsidiary companies are liable to taxation on their profi ts at rates lower than those applied to the parent company on eventual distribution of profi ts by way of dividend. The excess taxation that would be due to this event, has been recognised in the fi nancial statements for each of the three years ended 31 December 2000 in this report.

B1 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 103 ANNEX B - PART 2

INTERIM FINANCIAL STATEMENTS OF THE CORINTHIA GROUP AND THE GUARANTOR Corinthia Palace Hotel Company Limited

CONTENTS Page

Review report...... 105

Proﬁ t and loss accounts ...... 106

Balance sheets ...... 107

Statements of changes in equity...... 108 - 109

Cash ﬂ ow statements...... 110

Explanatory notes ...... 111 - 113

104 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B2 Certified Public Accountants and Auditors Grant Thornton and Management Consultants

The Directors Corinthia Palace Hotel Company Limited 22, Europa Centre Floriana VLT 15 Malta

The Directors Charts Investment Management Service Limited 18A, Europa Centre Floriana VLT 15 Malta

8 March 2002

Dear Sirs,

Review report on the interim ﬁ nancial statements of Corinthia Palace Hotel Company Limited

We have reviewed the interim fi nancial statements of Corinthia Palace Hotel Company Limited (‘CPHCL’ or the ‘Company’) and its subsidiary and associated companies (collectively referred to as the ‘Group’) for the period 1 January to 30 June 2001 shown on pages 106 to 113. These fi nancial statements are the responsibility of the directors. Our responsibility is to issue a report on these fi nancial statements based on our review.

We conducted our review in accordance with International Standard on Auditing 910 – Engagements to Review Financial Statements. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the ﬁ nancial statements are free from material misstatement. A review is limited primarily to inquiries of Group and Company personnel and analytical procedures applied to ﬁ nancial data, and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that these interim ﬁ nancial statements do not give a true and fair view and that they have not been properly prepared in accordance with the requirements of the Malta Stock Exchange Bye-Laws and the requirements of International Accounting Standard 34 – Interim Financial Reporting.

Yours faithfully,

Mark A. Bugeja For and on behalf of Grant Thornton Certiﬁ ed Public Accountants and Auditors

B2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 105 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

PROFIT AND LOSS ACCOUNTS (Unaudited)

Six months ended 30 June The Group CPHCL 2001 2000 2001 2000

Notes Lm000 Lm000 Lm000 Lm000

Revenue 28,591 27,128 14,429 15,497 Other operating income 2,649 3,112 1,680 1,988 Operating expenses (24,115) (22,556) (10,877) (11,127)

Operating proﬁ t 7,125 7,684 5,232 6,358 Investment income 937 317 638 568 Interest payable (2,304) (2,001) (1,090) (976) Share of results of associated companies (173) (43) - -

Proﬁ t after interest and investment income 5,585 5,957 4,780 5,950 Loss on exchange 3 (2,703) - (2,703) - Gain on exchange 4 695 - - - Revaluation to fair value of investment 5 1,042 - - -

Proﬁ t before exceptional item 4,619 5,957 2,077 5,950 Exceptional item 6 - - - 5,349

Proﬁ t before taxation 4,619 5,957 2,077 11,299 Taxation (721) (1,813) (525) (1,543)

Proﬁ t after taxation 3,898 4,144 1,552 9,756 Minority interest (246) (34) - -

Proﬁ t attributable to the Group 3,652 4,110 1,552 9,756

Earnings per share Basic earnings per share Lm 114 Lm 129 Lm 47 Lm 310

Diluted earnings per share Lm 2.52 Lm 2.84 Lm 1.06 Lm 6.79

106 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B2 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

BALANCE SHEETS

The Group CPHCL Accountants’ Accountants’ Unaudited report Unaudited report 30.06.01 31.12.00 30.06.01 31.12.00 Lm000 Lm000 Lm000 Lm000

Fixed assets Intangible assets 1,084 1,016 - 12 Tangible assets 170,601 168,269 30,385 29,416 Financial assets 13,040 12,928 83,822 82,346

184,725 182,213 114,207 111,774

Current assets Stocks 2,258 2,721 1,060 1,661 Debtors 22,723 20,925 15,821 18,746 Investments 1,727 1,030 - - Cash at bank and in hand 18,863 21,740 1,613 2,066

45,571 46,416 18,494 22,473 Creditors: amounts falling due within one year 35,832 36,432 22,248 22,989

Net current assets/(liabilities) 9,739 9,984 (3,754) (516)

Total assets less current liabilities 194,464 192,197 110,453 111,258

Creditors: amounts falling due after more than one year 71,577 68,480 42,448 39,755

Provision for liabilities and charges Deferred taxation 16,014 16,462 2,214 2,232 Deferred income 340 453 - -

106,533 106,802 65,791 69,271

Capital and reserves Called-up issued share capital 2,831 2,831 2,831 2,831 Revaluation reserve 25,811 26,367 4,853 4,910 Other reserves 9,975 13,909 - 2,609 Proﬁ t and loss account 50,476 45,858 57,384 57,476 Dividend payment reserve 723 1,445 723 1,445

89,816 90,410 65,791 69,271 Minority interest 16,717 16,392 - -

106,533 106,802 65,791 69,271

B2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 107 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY (Unaudited)

The Group

Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserve account reserve Total Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 2000 2,831 26,367 13,909 45,858 1,445 90,410 Revaluation of tangible fi xed assets - (556) - - - (556) Profi t for the period - - - 3,652 - 3,652 Transfer from profi t and loss account - - (966) 966 - - Exchange translation difference - - (2,968) - - (2,968) Dividends paid - - - - (722) (722)

At 30 June 2001 2,831 25,811 9,975 50,476 723 89,816

At 31 December 1999 2,831 35,484 523 40,150 946 79,934 Revaluation of tangible ﬁ xed assets - 1,045 - - - 1,045 Proﬁ t for the period - - - 4,110 - 4,110 Exchange translation difference - - (801) - - (801) Dividends paid - - - - (473) (473)

At 30 June 2000 2,831 36,529 (278) 44,260 473 83,815

108 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B2 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY (Unaudited)

CPHCL

Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserve account reserve Total Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 2000 2,831 4,910 2,609 57,476 1,445 69,271 Revaluation of tangible fi xed assets - (57) - - - (57) Transfer to profi t and loss account - - 1,644 (1,644) - - Profi t for the period - - - 1,552 - 1,552 Exchange translation difference - - (4,253) - - (4,253) Dividends paid - - - - (722) (722)

At 30 June 2001 2,831 4,853 - 57,384 723 65,791

At 31 December 1999 2,831 4,714 4,058 45,304 946 57,853 Revaluation of tangible ﬁ xed assets - 138 - - - 138 Proﬁ t for the period - - - 9,756 - 9,756 Exchange translation difference - - (607) - - (607) Dividends paid - - - - (473) (473)

At 30 June 2000 2,831 4,852 3,451 55,060 473 66,667

B2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 109 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

CASH FLOW STATEMENTS (Unaudited)

Six months ended 30 June The Group CPHCL 2001 2000 2001 2000 Note Lm000 Lm000 Lm000 Lm000

Net cash from operating activities 4,041 9,217 1,606 4,637

Net cash used in investing activities (7,483) (6,624) (4,497) (10,796)

Net cash from ﬁ nancing activities 407 10,804 2,788 5,129

Net (decrease)/increase in cash and cash equivalents (3,035) 13,397 (103) (1,030) Cash and cash equivalents at beginning of period 17,832 4,305 (373) 4,004

Cash and cash equivalents at end of period 11 14,797 17,702 (476) 2,974

110 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B2 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

EXPLANATORY NOTES

1 BASIS OF PREPARATION

The interim ﬁ nancial statements, which comply with the requirements of International Accounting Standard 34 ‘Interim Financial Reporting’, have been extracted from the unaudited management accounts of the Group and the Company for the six months ended 30 June 2001.

The comparative amounts shown in the profi t and loss accounts, statements of changes in equity and cash fl ow statements have been taken from the unaudited management accounts of the Group and the Company for the six months ended 30 June 2000. Comparative amounts shown in the balance sheets were extracted from the audited fi nancial statements of the Group and the Company for the year ended 31 December 2000.

These interim ﬁ nancial statements have been prepared using the same accounting policies and methods of computation adopted in the preparation of the audited ﬁ nancial statements of the Group and the Company for the year ended 31 December 2000.

2 RESULTS

The Group is involved primarily in the tourist industry which, being seasonal, gives rise to substantial and recurring variation between the levels of proﬁ t in the interim period and the remainder of the year.

3 LOSS ON EXCHANGE

During the period under review, the Group and the Company made a proﬁ t after interest and investment income of Lm5,585,000 and Lm4,780,000 respectively. The proﬁ ts arising from the Group’s overseas operations have been arrived at using the average rate of exchange applicable to the Maltese Lira.

As a result of a devaluation of 46% in the Libyan Dinar which came into effect on 2 January 2002, a provision of Lm2,702,668 representing the difference between the reported profi ts for the six months ended 30 June 2001 and the profi ts converted at the new Libyan Dinar/Maltese Lira rate, has been made in these fi nancial statements. The income tax charge for the period has been reduced by Lm 700,745 to refl ect the potential tax saving resulting from the loss on devaluation.

The directors are making representations to the Libyan Authorities to repatriate the proﬁ ts made by the Company to Malta at the applicable rate for 2001. In the event that the Company is successful in its endeavours then the provision net of the related tax charge will be written back to proﬁ ts in 2002.

Moreover the Company is currently renegotiating its existing contracts with clients to compensate for the diminution in value of the Libyan Dinar.

4 GAIN ON EXCHANGE

One of the subsidiaries of the Group has substantial bank borrowings denominated in Euros. The gain on exchange arose as a result of a weakening in the value of the Euro and a strengthening of the value of the reporting currency of the subsidiary company during the year.

5 REVALUATION TO FAIR VALUE OF INVESTMENT

The gain of Lm1,041,912 on the revaluation to market value of the Group’s minority shareholding in a foreign company has been accounted for consequent to the decision taken by the Board of Directors to accept the mandatory offer that the acquirer of the majority shareholding was required to make by virtue of a legal provision in force in the country of investment.

6 EXCEPTIONAL ITEM

In April 2000, CPHCL exchanged shares in two of its subsidiaries for those in a newly formed subsidiary. The gain arising from the share exchange has been treated as an exceptional item.

B2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 111 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

7 SEGMENTAL INFORMATION The Group Six months ended 30 June 2001 Malta North Africa Europe Other Total Lm000 Lm000 Lm000 Lm000 Lm000 Revenue: Food, retail and beverage 4,542 10,674 2,245 864 18,325 Letting income 2,598 367 4,531 319 7,815 Ancillary services 790 - 716 77 1,583 Construction services 126 742 - - 868

8,056 11,783 7,492 1,260 28,591

Segment operating (loss)/proﬁ t (1,041) 5,853 2,433 (120) 7,125

Six months ended 30 June 2000 Malta North Africa Europe Other Total Lm000 Lm000 Lm000 Lm000 Lm000 Revenue: Food, retail and beverage 3,871 12,523 1,782 470 18,646 Letting income 2,796 - 2,889 179 5,864 Ancillary services 801 - 1,573 13 2,387 Construction services 73 158 - - 231

7,541 12,681 6,244 662 27,128

Segment operating (loss)/proﬁ t (549) 6,433 1,765 35 7,684

CPHCL Six months ended 30 June 2001 Malta North Africa Total Lm000 Lm000 Lm000 Revenue: Food, beverage and retail 2,910 10,066 12,976 Letting income 1,191 - 1,191 Ancillary services 262 - 262

4,363 10,066 14,429

Segment operating (loss)/proﬁ t (523) 5,755 5,232

Six months ended 30 June 2000 Malta North Africa Total Lm000 Lm000 Lm000 Revenue: Food, beverage and retail 2,988 11,052 14,040 Letting income 947 - 947 Ancillary services 510 - 510

4,445 11,052 15,497

Segment operating (loss)/proﬁ t (375) 6,733 6,358

112 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B2 CORINTHIA PALACE HOTEL COMPANY LIMITED INTERIM FINANCIAL STATEMENTS

8 SUBSEQUENT EVENTS

The Group acquired the entire shareholding in Alfa Limitada, the owner of the Alfa Lisboa Hotel and Congress Centre, the largest ﬁ ve-star hotel in Lisbon, Portugal.

The Group signed a syndicated loan agreement for Euros 49 million with a consortium made up of two Hungarian banks, for the ﬁ nancing of the reconstruction project of the Corinthia Grand Hotel Royal in Budapest, Hungary.

In December 2001, International Hotel Investments p.l.c., one of the subsidiaries of the Group, made a rights issue of Lm8,000,000. Of this, an amount of Lm6,582,793 was taken up.

9 CHANGES IN THE COMPOSITION OF THE GROUP

During the six months ended 30 June 2001, the Group formed a new company, Corinthia Tunisie sarl to take over the lease of the Corinthia El Ksar Hotel in Tunisia. The Group started operating this hotel on 1 August 2001.

The Group also acquired further shares in Swan Laundry & Drycleaning Co. Limited as a result of which this company became a subsidiary.

These changes in the Group did not have a material effect on the Group’s results for the six months ended 30 June 2001 and the net assets as at that date.

10 TANGIBLE FIXED ASSETS

Tangible ﬁ xed assets acquired during the period amounted to Lm10.1 million.

11 CASH AND CASH EQUIVALENTS

Six months ended 30 June The Group CPHCL 2001 2000 2001 2000 Lm000 Lm000 Lm000 Lm000 Cash at bank and in hand 18,863 21,767 1,613 5,799 Bank overdrafts (4,066) (4,065) (2,089) (2,825)

14,797 17,702 (476) 2,974

12 CONTINGENT LIABILITIES

Since the date of the last audited ﬁ nancial statements, there have been no signiﬁ cant changes in the Group’s contingent liabilities.

B2 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 113 ANNEX B - PART 3

ESTIMATED FINANCIAL STATEMENTS OF THE CORINTHIA GROUP AND THE GUARANTOR Corinthia Palace Hotel Company Limited

CONTENTS Page

Review report...... 115 - 116

Proﬁ t and loss accounts ...... 117 - 118

Balance sheets ...... 119

Statements of changes in equity...... 120 - 121

Cash ﬂ ow statements...... 122

Explanatory notes ...... 123 - 124

114 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 Certified Public Accountants and Auditors Grant Thornton and Management Consultants

The Directors Corinthia Palace Hotel Company Limited 22, Europa Centre Floriana VLT 15 , Malta

The Directors Charts Investment Management Service Limited 18A, Europa Centre Floriana VLT 15, Malta

8 March 2002

Dear Sirs,

Review report on the estimated ﬁ nancial statements of Corinthia Palace Hotel Company Limited

We have reviewed the accounting policies and calculations for the estimated ﬁ nancial statements of Corinthia Palace Hotel Company Limited (‘CPHCL’ or the ‘Company’) and its subsidiary and associated companies (collectively referred to as the ‘Group’) for the year ended 31 December 2001. The estimated ﬁ nancial statements, including the notes and accounting policies related thereto, are set out on pages 117 to 124.

Basis of preparation

The estimated ﬁ nancial statements have been prepared under the historical cost convention and are based on the unaudited interim ﬁ nancial statements for the period 1 January to 30 June 2001 and the unaudited management accounts for the period 1 July to 31 December 2001 of the Group and the Company.

Responsibility

The estimated ﬁ nancial statements are the sole responsibility of the directors of the Company.

It is our responsibility to form an opinion as to whether the estimated ﬁ nancial statements, so far as the accounting policies and calculations are concerned, have been properly compiled on the basis adopted by the directors of the Company.

Basis of opinion

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with reasonable assurance that the estimated ﬁ nancial statements, so far as the accounting policies and calculations are concerned, have been properly compiled on the basis stated. We conducted our work in accordance with the requirements of the Malta Stock Exchange Bye-Laws.

B3 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 115 Grant Thornton

Opinion

In our opinion the estimated ﬁ nancial statements, so far as the accounting policies and calculations are concerned, have been properly compiled on the basis stated by the directors of the Company set out in note 1 on page 123, and have been prepared on a basis consistent with the accounting policies normally adopted by the Group and the Company.

This opinion is solely intended to be relied upon for the purposes of this Offering Memorandum. Readers are cautioned that the estimated ﬁ nancial statements may not be appropriate for any other purpose. Further, there will usually be differences between the estimated ﬁ nancial statements and the actual ones and these differences may be material.

Yours faithfully,

Mark A. Bugeja For and on behalf of Grant Thornton Certiﬁ ed Public Accountants and Auditors

116 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

PROFIT AND LOSS ACCOUNTS

The Group Accountants’ Unaudited Estimate Estimate report Jan-Jun’01 Jul-Dec’01 31 Dec’01 31 Dec’00 Notes Lm000 Lm000 Lm000 Lm000

Revenue 28,591 31,311 59,902 60,559 Other operating income 2,649 3,972 6,621 4,976 Operating expenses (24,115) (27,301) (51,416) (50,175)

Operating proﬁ t 7,125 7,982 15,107 15,360 Investment income 937 721 1,658 883 Interest payable (2,304) (2,558) (4,862) (4,296) Share of results of associated companies (173) (62) (235) 110

Proﬁ t after interest and investment income 5,585 6,083 11,668 12,057 Loss on exchange 3 (2,703) (1,341) (4,044) - Gain on exchange 4 695 1,121 1,816 - Revaluation to fair value of investment 5 1,042 (1,042) - - Proﬁ t on sale of investment 5 - 1,030 1,030 -

Proﬁ t before taxation 4,619 5,851 10,470 12,057 Taxation (721) (841) (1,562) (3,052)

Proﬁ t after taxation 3,898 5,010 8,908 9,005 Minority interest (246) 148 (98) (89)

Proﬁ t attributable to the Group 3,652 5,158 8,810 8,916

Earnings per share Basic earnings per share Lm 114 Lm 163 Lm 277 Lm 280

Diluted earnings per share Lm 2.52 Lm 3.57 Lm 6.09 Lm 6.17

B3 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 117 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

PROFIT AND LOSS ACCOUNTS

CPHCL Accountants’ Unaudited Estimate Estimate report Jan-Jun’01 Jul-Dec’01 31 Dec’01 31 Dec’00 Notes Lm000 Lm000 Lm000 Lm000

Revenue 14,429 12,813 27,242 31,792 Other operating income 1,680 2,704 4,384 3,794 Operating expenses (10,877) (10,174) (21,051) (23,462)

Operating proﬁ t 5,232 5,343 10,575 12,124 Investment income 638 608 1,246 1,226 Interest payable (1,090) (1,167) (2,257) (2,007)

Proﬁ t after interest and investment income 4,780 4,784 9,564 11,343 Loss on exchange 3 (2,703) (1,341) (4,044) -

Proﬁ t before exceptional item 2,077 3,443 5,520 11,343 Exceptional item 6 - - - 5,349

Proﬁ t before taxation 2,077 3,443 5,520 16,692 Taxation (525) (536) (1,061) (2,987)

Proﬁ t after taxation 1,552 2,907 4,459 13,705

Earnings per share Basic earnings per share Lm 47 Lm 91 Lm 138 Lm 434

Diluted earnings per share Lm 1.06 Lm 2.00 Lm 3.06 Lm 9.52

118 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET At 31 December 2001 GROUP CPHCL 2001 2000 2001 2000 Accountants’ Accountants’ Estimate report Estimate report Lm 000 Lm 000 Lm 000 Lm 000 Fixed assets Intangible assets 1,216 1,016 - 12 Tangible assets 219,878 168,269 41,453 29,416 Financial assets 13,374 12,928 84,137 82,346

234,468 182,213 125,590 111,774

Current assets Stocks 2,263 2,721 993 1,661 Debtors 21,772 20,925 22,145 18,746 Investments 118 1,030 - - Cash at bank and in hand 14,181 21,740 1,638 2,066

38,334 46,416 24,776 22,473 Creditors: amounts falling due within one year 38,847 36,432 25,835 22,989

Net current (liabilities)/assets (513) 9,984 (1,059) (516)

Total assets less current liabilities 233,955 192,197 124,531 111,258

Creditors: amounts falling due after more than one year 89,046 68,480 51,652 39,755

Provision for liabilities and charges Deferred taxation 21,888 16,462 2,313 2,232

Deferred income 4,763 453 - -

Net assets 118,258 106,802 70,566 69,271

Capital and reserves Called-up issued share capital 2,831 2,831 2,831 2,831 Revaluation reserve 28,766 26,367 5,153 4,910 Other reserves 12,482 13,909 - 2,609 Proﬁ t and loss account 56,896 45,858 62,582 57,476 Dividend payment reserve - 1,445 - 1,445

100,975 90,410 70,566 69,271 Minority interest 17,283 16,392 - -

118,258 106,802 70,566 69,271

B3 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 119 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

The Group

Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserve account reserve Total Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 1999 2,831 35,484 523 40,150 946 79,934 Revaluation of tangible fi xed assets - (9,117) - - - (9,117) Revaluation adjustments - - 14,082 - - 14,082 Transfer from profi t and loss account - - 833 (833) - - Profi t for the year - - - 8,916 - 8,916 Exchange translation difference - - (1,537) (930) - (2,467) Equity element of convertible bonds - - 338 - - 338 Equity issue costs - - (330) - - (330) Dividends proposed - - - (1,445) 1,445 - Dividends paid - - - - (946) (946)

At 30 June 2001 2,831 25,811 9,975 50,476 723 89,816 Revaluation of tangible fi xed assets - 2,955 - - - 2,955 Profi t for the period - - - 5,158 - 5,158 Transfer from profi t and loss account - - (1,262) 1,262 - - Exchange translation difference - - 3,769 - - 3,769 Dividends paid - - - - (723) (723)

At 31 December 2001 2,831 28,766 12,482 56,896 - 100,975

120 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

CPHCL

Called-up issued Proﬁ t Dividend share Revaluation Other and loss payment capital reserve reserve account reserve Total Lm000 Lm000 Lm000 Lm000 Lm000 Lm000

At 31 December 1999 2,831 4,714 4,058 45,304 946 57,853 Revaluation of tangible fi xed assets - 196 - - - 196 Transfer from profi t and loss account - - (26) 26 - - Profi t for the year - - - 13,705 - 13,705 Exchange translation difference - - (1,537) - - (1,537) Transfer to other reserve - - 114 (114) - - Dividends paid - - - - (946) (946) Dividends proposed - - - (1,445) 1,445 -

At 31 December 2000 2,831 4,910 2,609 57,476 1,445 69,271 Revaluation of tangible fi xed assets - (57) - - - (57) Transfer from profi t and loss account - - (2,703) 2,703 - - Profi t for the period - - - 1,552 - 1,552 Exchange translation difference - - (4,253) - - (4,253) Dividends paid - - - - (722) (722)

At 30 June 2001 2,831 4,853 (4,347) 61,731 723 65,791 Revaluation of tangible fi xed assets - 300 - - - 300 Transfer from profi t and loss account - - (1,341) 1,341 - - Transfer to profi t and loss account - - 3,397 (3,397) - - Profi t for the period - - - 2,907 - 2,907 Exchange translation difference - - 2,291 - - 2,291 Dividends paid - - - - (723) (723)

At 31 December 2001 2,831 5,153 - 62,582 - 70,566

B3 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 121 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

CASH FLOW STATEMENTS

The Group Accountants’ Unaudited Estimate Estimate report Jan-Jun’01 Jul-Dec’01 31 Dec’01 31 Dec’00 Note Lm000 Lm000 Lm000 Lm000

Net cash from operating activities 4,041 9,518 13,559 15,936

Net cash used in investing activities (7,483) (44,784) (52,267) (10,955)

Net cash from ﬁ nancing activities 407 28,092 28,499 8,546

Net (decrease)/increase in cash and cash equivalents (3,035) (7,174) (10,209) 13,527 Cash and cash equivalents at beginning of period 17,832 14,797 17,832 4,305

Cash and cash equivalents at end of period 7 14,797 7,623 7,623 17,832

CPHCL Accountants’ Unaudited Estimate Estimate report Jan-Jun’01 Jul-Dec’01 31 Dec’01 31 Dec’00 Lm000 Lm000 Lm000 Lm000

Net cash from operating activities 1,606 5,279 6,885 7,767

Net cash used in investing activities (4,497) (16,255) (20,752) (20,276)

Net cash from ﬁ nancing activities 2,788 9,916 12,704 8,132

Net decrease in cash and cash equivalents (103) (1,060) (1,163) (4,377) Cash and cash equivalents at beginning of period (373) (476) (373) 4,004

Cash and cash equivalents at end of period 7 (476) (1,536) (1,536) (373)

122 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

EXPLANATORY NOTES

1 BASIS OF PREPARATION

The estimated ﬁ nancial statements of Corinthia Palace Hotel Company Limited (‘CPHCL’ or the ‘Company’) and its subsidiary and associated companies (collectively referred to as the ‘Group’) for the year ended 31 December 2001 are set out on pages 117 to 124. These estimated ﬁ nancial statements are the sole responsibility of the directors of CPHCL.

The last audited fi nancial statements of the Group and the Company are in respect of the fi nancial year ended 31 December 2000. The Group and the Company have subsequently prepared interim fi nancial statements covering the period 1 January to 30 June 2001 and management accounts covering the period 1 July to 31 December 2001. These two accounting periods, which are both unaudited, have been amalgamated together to produce the estimated fi nancial statements for the fi nancial year ended 31 December 2001.

The estimated fi nancial statements which in the directors’ opinion refl ect an estimate of the outcome of the fi nancial results for the year ended 31 December 2001 and of the state of affairs at that date, have been prepared on the basis of the accounting policies normally adopted by the Group and the Company as shown on pages 57 to 59 in Annex B Part 1.

2 REVIEW OF BUSINESS DEVELOPMENT

During the year ended 31 December 2001, the Group and the Company registered a proﬁ t after interest and investment income of Lm11.7 million and Lm9.6 million respectively, compared to Lm12.0 million and Lm11.3 million for the preceding year. Thus the Group’s performance for 2001 was only marginally lower than that of 2000 in spite of stiffer competition, a drop in demand for hotel accommodation following the 11 September 2001 events and a gradual deterioration in the Libyan Dinar/Maltese Lira exchange rate.

The results registered by certain subsidiaries demonstrate that these are now approaching the maturity stage of their development and have countered the Company’s weaker performance in 2001. Moreover, the results achieved show the Group’s resilience to adverse events thanks to a geographically diversiﬁ ed portfolio of top class hotels and other diversiﬁ ed interests.

The proﬁ t attributable to the Group of Lm8.8 million for 2001 was Lm0.1 lower than that registered for the previous year despite the devaluation of the Libyan Dinar on 2 January 2002 which negatively affected proﬁ ts after tax by Lm2.8 million. Full details of the effect of this devaluation are given in note 3 below.

During the year under review the Group continued with its expansion programme. Through International Hotel Investments p.l.c., one of the subsidiary companies, the Group acquired the entire shareholding in Alfa Limitada, the owner of the Alfa Hotel and Congress Centre which is the largest ﬁ ve-star hotel in Lisbon, Portugal. The Group also started operating the Corinthia El Ksar hotel, this being its second hotel in Tunisia. The reconstruction of the Corinthia Grand Hotel Royal in Budapest, Hungary and the construction of the Group’s new hotel in Tripoli, Libya were also continued during the year under review.

These activities absorbed a substantial part of the Group’s cash resources and contributed to the net current liabilities of Lm0.5 million shown in the balance sheet at 31 December 2001. In order to eliminate this deﬁ ciency and to enable it to continue with its expansion programme, the Group is currently renegotiating some of its existing facilities so as to obtain better interest rates and longer repayment terms. The proceeds raised from this bond issue will be used for general funding purposes aimed at further consolidating and strengthening the Group’s position in a number of business units. The funds will be employed to enable the Group to further develop business opportunities arising from its continued international expansion.

3 LOSS ON EXCHANGE

During the year under review, the Group and the Company made a proﬁ t after interest and investment income of Lm11,668,000 and Lm9,564,000 respectively. The proﬁ ts arising from the Group’s overseas operations have been arrived at using the average rate of exchange applicable to the Maltese Lira.

B3 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 123 CORINTHIA PALACE HOTEL COMPANY LIMITED ESTIMATED FINANCIAL STATEMENTS

EXPLANATORY NOTES (continued)

3 LOSS ON EXCHANGE (continued)

As a result of a devaluation of 46% in the Libyan Dinar which came into effect on 2 January 2002, a provision of Lm4,044,255 representing the difference between the reported profi ts for the year ended 31 December 2001 and the profi ts converted at the new Libyan Dinar/Maltese Lira rate, has been made in these fi nancial statements. The income tax charge for the year has been reduced by Lm1,176,566 to refl ect the potential tax saving resulting from the loss on devaluation.

Moreover the Company is currently renegotiating its existing contracts with clients to compensate for the diminution in value of the Libyan Dinar.

4 GAIN ON EXCHANGE

5 REVALUATION AND SALE OF INVESTMENT

The investment was disposed of and realised a gain of Lm1,030,206 in the latter part of the year.

6 EXCEPTIONAL ITEM

In April 2000, CPHCL exchanged shares in two of its subsidiaries for those in a newly formed subsidiary. The gain arising from the share exchange has been treated as an exceptional item.

7 CASH AND CASH EQUIVALENTS

Accountants’ Unaudited Estimate report 30 June’01 31 Dec’01 31 Dec’00 Lm000 Lm000 Lm000 The Group Cash at bank and in hand 18,863 14,181 21,740 Bank overdrafts (4,066) (6,558) (3,908)

14,797 7,623 17,832

CPHCL Cash at bank and in hand 1,613 1,638 2,066 Bank overdrafts (2,089) (3,174) (2,439)

(476) (1,536) (373)

124 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B3 ANNEX B - PART 4

FINANCIAL INFORMATION ABOUT THE ISSUER Corinthia Finance p.l.c. Accountants’ Report for the period 9 September 1999 to 31 December 2000 and for the year ended 31 December 2001

CONTENTS Page

Accountants’ report...... 126 - 127

Proﬁ t and loss accounts...... 128

Balance sheets...... 129

Statements of changes in equity ...... 130

Cash ﬂ ow statements ...... 131

Notes to the accountants’ report ...... 132 - 135

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 125 Certified Public Accountants and Auditors Grant Thornton and Management Consultants

The Directors Corinthia Finance p.l.c. 22, Europa Centre Floriana VLT 15 , Malta

The Directors Charts Investment Management Service Limited 18A, Europa Centre Floriana VLT 15, Malta

8 March 2002

Dear Sirs

Accountants’ report on historical ﬁ nancial information of Corinthia Finance p.l.c.

We report on the ﬁ nancial information set out on pages 128 to 135 of Corinthia Finance p.l.c. (the ‘Company’). This information has been prepared for inclusion in the Offering Memorandum dated 11 March 2002 of the Company.

Basis of preparation

The fi nancial information set out on pages 128 to 135 is based on the audited fi nancial statements of Corinthia Finance p.l.c. for the period 9 September 1999 to 31 December 2000 and for the year ended 31 December 2001, audited by KPMG, and has been prepared on the basis set out in note 1 on page 132. No adjustments to the audited fi nancial statements were considered necessary for the purposes of the preparation of the fi nancial information.

The ﬁ nancial information set out in this report comprises:

• Proﬁ t and loss accounts of the Company for the period 9 September 1999 to 31 December 2000 and the year ended 31 December 2001.

• Statements of changes in equity of the Company for the period 9 September 1999 to 31 December 2000 and the year ended 31 December 2001.

• Balance sheets of the Company as at 31 December 2000 and 2001.

• Cash ﬂ ow statements of the Company for the period 9 September 1999 to 31 December 2000 and the year ended 31 December 2001.

• Notes to the accountants’ report for the period 9 September 1999 to 31 December 2000 and the year ended 31 December 2001 in respect of the Company inclusive of the principal accounting policies.

No audited ﬁ nancial statements have been prepared for the Company in respect of any period subsequent to 31 December 2001.

126 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B4 Grant Thornton

Responsibility

Such ﬁ nancial statements are the responsibility of the directors of Corinthia Finance p.l.c. Company Limited, who approved their issue. The directors of Corinthia Finance p.l.c. are responsible for the contents of the Offering Memorandum dated 11 March 2002 in which this report is included.

Basis of Opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards applicable in the United Kingdom and have complied with the requirements of the Malta Stock Exchange Bye-Laws in respect of the Accountants’ Report and the Companies Act, 1995. Our work included an assessment of evidence relevant to the amounts and disclosures in the fi nancial information. The evidence included that previously obtained by other auditors when conducting the audits of the fi nancial statements underlying the fi nancial information. It also included an assessment of signifi cant estimates and judgements made by those responsible for the preparation of the fi nancial statements underlying the fi nancial information and whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

Opinion

In our opinion, the ﬁ nancial information gives, for the purposes of the Offering Memorandum dated 11 March 2002, a true and fair view of the state of affairs of the Company as at the dates stated and of their results, changes in equity and cash ﬂ ows for the years then ended.

Yours faithfully

Mark A. Bugeja For and on behalf of Grant Thornton Certiﬁ ed Public Accountants and Auditors

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 127 CORINTHIA FINANCE P.L.C. ACCOUNTANTS’ REPORT

PROFIT AND LOSS ACCOUNT

Year/period ended 31 December

2001 2000 (16 months) Note Lm Lm

Interest receivable 3 684,500 847,958

Interest payable 4 (670,000) (802,139)

Net interest earned 14,500 45,819

Administrative expenses (11,911) (13,113)

Proﬁ t before taxation 5 2,589 32,706

Taxation 6 (906) (11,447)

Proﬁ t for the year/period 1,683 21,259

Earnings per share Basic earnings per share Lm 0.02 Lm 0.21

128 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B4 CORINTHIA FINANCE P.L.C. ACCOUNTANTS’ REPORT

BALANCE SHEETS

As at 31 December

2001 2000 Note Lm Lm Fixed assets Financial asset 7 10,000,000 10,000,000

Current assets Debtors 8 135,333 132,680 Taxation recoverable 1,383 - Cash at bank and in hand 106,037 120,701

242,753 253,381

Creditors: amounts falling due within one year Trade and other creditors 9 119,811 120,675 Current taxation - 11,447

119,811 132,122

Net current assets 122,942 121,259

Total assets less current liabilities 10,122,942 10,121,259

Creditors: amounts falling due after more than one year Interest-bearing borrowings 10 10,000,000 10,000,000

122,942 121,259

Capital and reserves Called-up issued share capital 11 100,000 100,000 Proﬁ t and loss account 22,942 21,259

122,942 121,259

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 129 CORINTHIA FINANCE P.L.C. ACCOUNTANTS’ REPORT

STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2001

Called-up Proﬁ t issued share and loss capital account Total Lm Lm Lm

Issue of ordinary shares 100,000 - 100,000 Proﬁ t for the period - 21,259 21,259

At 31 December 2000 100,000 21,259 121,259 Proﬁ t for the year - 1,683 1,683

At 31 December 2001 100,000 22,942 122,942

130 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B4 CORINTHIA FINANCE P.L.C. ACCOUNTANTS’ REPORT

CASH FLOW STATEMENTS

Year/period ended 31 December

2001 2000 (16 months) Lm Lm

Cash ﬂ ows from operating activities Proﬁ t before taxation 2,589 32,706

Operating proﬁ t before working capital changes 2,589 32,706 Working capital changes: Debtors (2,653) (32,680) Creditors (864) 120,675

Net cash (absorbed by)/generated from operating activities (928) 120,701 Taxation paid (13,736) -

Net cash (used in)/from operating activities (14,664) 120,701

Cash ﬂ ows from investing activities Loans advanced to parent company - (10,100,000)

Cash ﬂ ows from ﬁ nancing activities Proceeds from the issue of shares - 100,000 Proceeds from the issue of interest-bearing borrowings - 10,000,000

Net cash from ﬁ nancing activities - 10,100,000

Net (decrease)/increase in cash and cash equivalents (14,664) 120,701 Cash at bank and in hand at beginning of year/period 120,701 -

Cash at bank and in hand at end of year/period 106,037 120,701

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 131 CORINTHIA FINANCE P.L.C.

NOTES TO THE ACCOUNTANTS’ REPORT

1 BASIS OF PREPARATION

Corinthia Finance p.l.c. is a fully owned subsidiary of Corinthia Palace Hotel Company Limited (the ‘parent company’).

This ﬁ nancial information has been prepared for the purposes of inclusion in an Offering Memorandum for the issue of Lm4,000,000 6.75% bonds and €10,000,000 6.5% bonds (subject to an aggregate over-allotment option of Lm4,000,000).

It has been prepared under the historical cost convention, in accordance with the requirements of International Accounting Standards, the Malta Stock Exchange Bye-Laws and the accounting provisions of the Companies Act, 1995.

2 SIGNIFICANT ACCOUNTING POLICIES

The signiﬁ cant accounting policies adopted in the preparation of these ﬁ nancial statements are set out below.

(a) Financial ﬁ xed assets

Loans and receivables originated by the company having a fi xed maturity are measured at amortised cost using the effective interest rate method, whereas those that do not have a fi xed maturity are measured at cost. All fi nancial fi xed assets are subject to review for impairment as set out in accounting policy (c).

(b) Trade and other receivables

Trade and other receivables, excluding loans and receivables originated by the company (refer to accounting policy (a)) are stated at their cost less impairment losses (refer accounting policy (c)).

The carrying amounts of the company’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the proﬁ t and loss account.

(d) Trade and other payables

Trade and other payables are stated at cost.

(e) Revenue recognition

Interest arising from the use by others of the company’s resources are recognised on the accruals basis.

(f) Borrowing costs

Borrowing costs are recognised as an expense during the period in which they are incurred.

(g) Taxation

Tax on the proﬁ t comprises current tax calculated on the basis of the taxable income for the year, using the tax rates applicable at the balance sheet date.

132 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B4 CORINTHIA FINANCE P.L.C.

NOTES TO THE ACCOUNTANTS’ REPORT (continued)

3 INTEREST RECEIVABLE 2001 2000 Lm Lm

Interest receivable on loans advanced to parent company 684,500 830,594 Bank interest receivable - 17,364

684,500 847,958

4 INTEREST PAYABLE

This amount represents interest payable on the interest-bearing borrowings (refer to note 10).

5 PROFIT BEFORE TAXATION

Proﬁ t before taxation is stated after auditors’ remuneration amounting to Lm288 (2000: Lm288) and directors’ remuneration amounting to Lm8,000 (2000: Lm10,000).

6 TAXATION

Income tax has been provided for at the rate of 35% on the taxable income for the year.

7 FINANCIAL ASSET

The funds raised by the bond issue have been loaned to the parent company at an annual interest rate of 6.8% per annum. The loan will be repaid in full on the 15 October 2009. Interest is receivable annually in arrears on the 15 October of each year.

8 DEBTORS

2001 2000 Lm Lm

Loan to parent company 100,000 100,000 Amount owed by parent company 35,333 32,680

135,333 132,680

a) The loan to the parent company is unsecured, bears interest at the rate of 4.5% per annum and is repayable on demand.

b) The amount owed by the parent company is unsecured, interest free and payable on demand. The balance represents interest accrued to balance sheet date on the loans advanced by the company.

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 133 CORINTHIA FINANCE P.L.C.

NOTES TO THE ACCOUNTANTS’ REPORT (continued)

9 TRADE AND OTHER CREDITORS

2001 2000 Lm Lm

Trade creditors 1,574 2,725 Accruals 118,237 117,950

119,811 120,675

10 INTEREST-BEARING BORROWINGS

This amount represents 100,000 redeemable bonds with a nominal value of Lm100 each. These bonds bear interest at a rate of 6.7% per annum payable annually in arrears on the 30 October of each year. The bonds will be redeemed on the 30 October 2009, subject to the right of the company to purchase bonds on the open market before redemption date. Any bonds so purchased shall be cancelled.

Pursuant to, and subject to the terms and conditions contained in the Offering Memorandum dated 14 September 1999, the payment of the bonds and interest thereon is guaranteed by the company which has bound itself jointly and severally reliable for the payments of the bonds and interest thereon.

11 CALLED-UP ISSUED SHARE CAPITAL

2001 2000 Lm Lm

Authorised share capital 1,000,000 ordinary shares of Lm1 each 1,000,000 1,000,000

Issued and fully paid up 100,000 ordinary shares of Lm1 each 100,000 100,000

12 FINANCIAL INSTRUMENTS

a) Financial assets of the company comprise ﬁ nancial assets, debtors and cash at bank and in hand, whereas ﬁ nancial liabilities comprise trade and other creditors and the interest-bearing borrowings.

b) Exposure to credit and interest rate risk in the normal course of the company’s business.

Credit risk

Financial assets that potentially subject the company to concentrations of credit risk comprise amounts receivable and deposits held with fi nancial institutions. Credit risk with respect to receivables is limited due to the fact that the amounts are due from the parent company which has a sound fi nancial position. Cash is deposited with a local fi nancial institution which has a high credit rating. On the basis of the foregoing, management does not expect any counter party to fail to meet its obligations.

134 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES B4 CORINTHIA FINANCE P.L.C.

NOTES TO THE ACCOUNTANTS’ REPORT (continued)

12 FINANCIAL INSTRUMENTS (continued)

Interest rate risk

The interest rates and terms of repayment on ﬁ nancial assets and interest-bearing borrowings are as set out in notes 7, 8 and 10 respectively.

c) The fair values of the ﬁ nancial assets and liabilities are not materially different from their carrying amounts.

B4 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 135 ANNEX C

AUTHORISED SELLING AGENTS

Stockbroking Firms

Atlas Stockbroking Ltd...... Tel: 21 322590 ...... Fax: 21 322591

Azzopardi Stockbrokers Ltd ...... Tel: 21 337403 ...... Fax: 21 318897

BOV Stockbrokers Ltd ...... Tel: 21 227370 ...... Fax: 21 227375

Calamatta Stockbrokers Ltd ...... Tel: 21 237858 ...... Fax: 21 220509

Charts Investment Management Service Limited...... Tel: 21 241121 ...... Fax: 21 241101

Curmi & Partners Ltd...... Tel: 21 347331 ...... Fax: 21 347333

Epic Stockbroking Ltd ...... Tel: 21 345859 ...... Fax: 21 345853

Financial Planning Stockbrokers Ltd...... Tel: 21 344255 ...... Fax: 21 341202

Globe Financial (Stockbrokers) Ltd ...... Tel: 21 388595 ...... Fax: 21 388593

Hogg Capital Stockbroking Ltd...... Tel: 21 322872 ...... Fax: 21 342760

Ivan Burridge Stockbroking Ltd ...... Tel: 21 231492 ...... Fax: 21 239279

Lombard Stockbrokers Ltd...... Tel: 21 220002 ...... Fax: 21 243280

Rizzo, Farrugia & Co (Stockbrokers) Ltd ...... Tel: 21 333125 ...... Fax: 21 310671

Financial Intermediaries

APS Bank Ltd ...... Tel: 21 226644 ...... Fax: 21 226202

Bank of Valletta p.l.c...... Tel: 21 346140 ...... Fax: 21 346171

Growth Investments Ltd ...... Tel: 21 226414 ...... Fax: 21 249811

Island Financial Services Ltd...... Tel: 21 223355 ...... Fax: 21 243801

Joseph Scicluna Investments Services Ltd ...... Tel: 21 565707 ...... Fax: 21 565706

Michael Grech Financial Investment Services Ltd...... Tel: 21 554492 ...... Fax: 21 559199

MZ Investment Services Ltd ...... Tel: 21 453739 ...... Fax: 21 453407

136 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES C ANNEX D

THE CORINTHIA GROUP OF COMPANIES

COMPANIES REGISTERED IN MALTA

Corinthia Palace Hotel Company Limited

Corinthia Finance p.l.c.

International Hotel Investments p.l.c.

IHI Lisbon Limited

C.H.I. Limited

Quality Project Management Ltd

Corinthia Construction (Overseas) Limited

Mistra Village Limited

Five Star Hotels Limited

Marina San Gorg Limited

Garment Finishing Company Limited

Swan Laundry & Dry Cleaning Company Limited

Flight Catering Company Limited

B.C.W. Limited

Marina Aruba (Malta) Limited

Euromark Trading Company Limited

Modern Matches Manufacturing Company Limited

The Village Bakery Limited

COMPANIES REGISTERED IN THE CZECH REPUBLIC

Top Spirit a.s.

Hotel Bavor a.s.

Hotel Cernigov a.s

Hotel Forum a.s.

Hotel Palcat a.s.

Hotel Panorama a.s.

Gastro a.s.

D CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 137 COMPANIES REGISTERED IN THE UNITED KINGDOM

Corinthia Investments Limited

Atkins Travel Limited

COMPANIES REGISTERED IN HUNGARY

Thermal Hotel Aquincum Rt

IHI Hungary Rt

Corinthia Restaurants Kft

COMPANIES REGISTERED IN THE NETHERLANDS

IHI Benelux BV

COMPANIES REGISTERED IN THE RUSSIAN FEDERATION

IHI St. Petersburg LLC

COMPANIES REGISTERED IN PORTUGAL

Alfa Invetimentos Turisticos Lda

Scalotel – Sociedade Escalabitana Hoteliera S.A.

COMPANIES REGISTERED IN TUNISIA

Société de Promotion Hotelière Khamsa s.a.

Corinthia Tunisie s.a.

COMPANIES REGISTERED IN TURKEY

Corinthia Turizm Yatirimlari ve Ticaret a.s.

Internasyonal Turizm ve Otelcilik Ticaret a.s.

Tekirova Turizm Yatirimlari a.s.

Norm Turizm Yatirimlari ve Isletmecilik a.s.

Tektur Turizm a.s.

Ulkar Corinthia Turizm Yatirimlari ve Ticaret a.s.

138 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES D ANNEX E

SPECIMEN APPLICATION FORMS THE ML BOND APPLICATION FORM

Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm

Lm4,000,000 Corinthia Finance p.l.c. 6á75% BONDS 2012 APPLICATION FORM CORINTHIA FINANCE plc Application A member of the Corinthia Group of Companies Number Please read the notes overleaf before completing this Application Form. Mark 'X' if applicable. APPLICANT (see notes 2 to 6) A Non- Corinthia Group Minor Body Corporate/ CIS - Resident Employee (under 18) Body of Persons Prescribed Fund B TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME / REGISTERED NAME

ADDRESS

POSTCODE

MSE A/C NO. (if applicable) I.D. CARD / PASSPORT / CO. REG. NO. TEL. NO.

C ADDITIONAL (JOINT) APPLICANTS (see note 2) (please use additional forms if space is not sufficient) TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

D MINOR’S PARENTS / LEGAL GUARDIAN/S (see note 4) (to be completed ONLY if the Applicant is a minor) I.D. CARD / PASSPORT NO. I TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME

II TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

E I/WE APPLY TO PURCHASE AND ACQUIRE (see notes 7 & 8) :

AMOUNT IN FIGURES AMOUNT IN WORDS Lm Corinthia Finance p.l.c. 6á75% Bonds 2012 (minimum Lm500 and in multiples of Lm100 thereafter) or any smaller number of Bonds for which this Application may be accepted at the Bond Offer Price as defined in the Offering Memorandum dated 11 March 2002 payable in full upon application under the terms and conditions as defined in the said Offering Memorandum.

F WITHHOLDING TAX ON INTEREST (see note 9) (to be completed ONLY if the Applicant is a Resident) I/We elect to have Final Withholding Tax deducted from my/our interest. I/We elect to receive interest GROSS (i.e. without deduction of withholding tax).

G INTEREST MANDATE (see note 9) (to be completed ONLY if the Applicant wishes to have interest paid directly to a bank account) BANK BRANCH ACCOUNT NUMBER

H RE-ALLOCATION OPTION (see note 10)

I/We hereby consent that any amounts applied for above but not allotted may be re-allocated to the Euro Bond Issue.

I I/We have fully understood the instructions for completing this Application Form, and am/are making this Application solely on the basis of the Offering Memorandum dated 11 March 2002. Furthermore, I/we confirm that this is the only Application Form I/we am/are submitting on my/our behalf or on behalf of the company or other entity I/we represent.

Signature/s of Applicant/s Date (Both parents or legal guardian are/is to sign if Applicant is a minor) (All parties are to sign in the case of a joint Application)

AUTHORISED SELLING AGENT’S RUBBER STAMP AUTHORISED SELLING AGENT’S CODE

E CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 139 SPECIMEN APPLICATION FORMS (continued) THE ML BOND APPLICATION FORM (continued)

Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm Lm

CORINTHIA FINANCE plc A member of the Corinthia Group of Companies

Notes on how to complete this Application Form and other information

The following notes are to be read in conjunction with the Offering Memorandum dated 11 March 2002.

1. The Application Form is to be completed in BLOCK CHARACTERS.

2. Applicants are to insert full personal details in Panel ‘B’. In the case of an application by more than one person (including husband and wife) full details of all individuals – including I.D. Card Numbers – must be given in Panels ‘B’ and ‘C’ but the person whose name appears in Panel ‘B’ shall, for all intents and purposes, be deemed to be the registered holder of the Bond. Interest, redemption proceeds and any refund cheques will be issued in the name of such Bondholder.

3. Non-Resident applicants must indicate their passport number in Panel ‘B’. Applications must be accompanied by the corresponding amount in Maltese Liri of the Bonds applied for. Proof that such funds originate from a foreign source or from a foreign currency account held locally should be retained by the Applicant to enable eventual re-conversion to foreign currency of any refund in Maltese Liri of unallocated application monies.

4. In the case of an Applicant who is a minor, the word 'minor' must be indicated in Panel B next to the Applicant’s name and the relative box in Panel A must also be marked. A Public Registry birth certificate must be attached to the Application Form. (The birth certificate is not required if the minor already holds securities which are listed on the Malta Stock Exchange (MSE)). The Application Form must be signed by both parents or by the legal guardian/s. (Interest, redemption proceeds and any refund cheques will be made payable to the parent / legal guardian named in Panel ‘D’ until such time as the Company is notified that the minor named in Panel ‘B’ has attained the age of 18). The address to be inserted in Panel ‘B’ is to be that of the parents / legal guardian/s.

5. In the case of a body corporate, the name of the entity, exactly as registered, and the registration number are to be inserted in Panel ‘B’. Applications must be signed by duly authorised representatives indicating the capacity in which they are signing.

6. Applicants who hold securities on the Malta Stock Exchange are to indicate their MSE account number. If details shown on this Application Form differ from the existing account details at the MSE, a new MSE account may be opened for this Application.

7. Applications must be for a minimum of Lm500 and thereafter in multiples of Lm100.

8. Payment may be made by cheque payable to 'The Registrar Ð Corinthia Finance p.l.c. - Bond Issue'. In the event that cheques accompanying Application Forms are not honoured on their first presentation, the Issuer and the Registrar reserve the right to invalidate the relative Application.

9. The Applicant may elect to have Final Withholding Tax, currently 15%, deducted from interest payments in which case such interest need not be declared in the Applicant’s income tax return. The Applicant may elect to receive the interest gross, i.e. without deduction of Final Withholding Tax but he/she will be obliged to declare interest so received on his/her return. Interest received by non-resident Applicants is not taxable in Malta and non-residents will receive interest gross. Authorised entities applying in the name of a Prescribed Fund (having indicated their status in the appropriate box in Panel ‘A’) will have Final Withholding Tax, currently 10%, deducted from interest payments. Applicants may choose to receive their interest directly in a bank account held locally in Maltese Liri and such choice is to be indicated in Panel ‘G’.

10. In terms of the Offering Memorandum dated 11 March 2002, Applicant/s may opt for any amounts applied for through this Application Form but not allotted, to be re-allocated to the Euro Bond Issue as described in the said Offering Memorandum. Applicants are to signify their consent to such re-allocation by marking ‘X’ in Panel ‘H’. Applicants opting for this re-allocation option are to ensure that they comply with exchange control regulations.

11. Subscription lists will open at 8.30am on 14 March 2002 and will close as soon thereafter as the Issuer may determine but not later than 3.00pm on 28 March 2002. Any Applications received by the Registrar after the subscription lists close will be rejected.

12. Completed Application Forms are to be sent by post or delivered to the offices of the Issuer, the Registrar or any Authorised Selling Agent listed in the Offering Memorandum, during normal office hours. Remittances by post are made at the risk of the Applicant and the Company disclaims all responsibility for any such remittances not received by the closing of the subscription lists.

13. The Company reserves the right to refuse any Application which appears to be in breach of the terms and conditions of the Bond as contained in the Offering Memorandum dated 11 March 2002.

14. The terms used in this Application Form have the same meaning as that assigned to them in the Offering Memorandum dated 11 March 2002.

The value of investments can go up or down and past performance is not necessarily indicative of future performance. The nominal value of the Bonds on offer will be repayable in full upon redemption. An investor should consult a stockbroker licensed under the Malta Stock Exchange Act (Cap. 345 of the Laws of Malta) or an investment adviser licensed under the Investment Services Act (Cap. 370 of the Laws of Malta), for advice.

140 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES E SPECIMEN APPLICATION FORMS (continued) THE EURO BOND APPLICATION FORM

10,000,000 Corinthia Finance p.l.c. 6á5% Euro BONDS 2010 APPLICATION FORM CORINTHIA FINANCE plc Application A member of the Corinthia Group of Companies Number Please read the notes overleaf before completing this Application Form. Mark 'X' if applicable. APPLICANT (see notes 2 to 7) A Non- Corinthia Group Minor Body Corporate/ CIS - Resident Employee (under 18) Body of Persons Prescribed Fund B TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME / REGISTERED NAME

ADDRESS

POSTCODE

MSE A/C NO. (if applicable) I.D. CARD / PASSPORT / CO. REG. NO. TEL. NO.

C ADDITIONAL (JOINT) APPLICANTS (see note 2) (please use additional forms if space is not sufficient) TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

D MINOR’S PARENTS / LEGAL GUARDIAN/S (see note 5) (to be completed ONLY if the Applicant is a minor) I.D. CARD / PASSPORT NO. I TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME

II TITLE (Mr/Mrs/Ms/ ...... ) FULL NAME & SURNAME I.D. CARD / PASSPORT NO.

E I/WE APPLY TO PURCHASE AND ACQUIRE (see notes 8 to 10) :

NOMINAL VALUE IN FIGURES NOMINAL VALUE APPLIED FOR IN WORDS AMOUNT PAYABLE IN FIGURES

Corinthia Finance p.l.c. 6á5% Euro Bonds 2010 (minimum 1,000 in nominal value and in multiples of 200 in nominal value thereafter) or any smaller number of Bonds for which this Application may be accepted at the Bond Offer Price ( 97 per 100 Bond) as defined in the Offering Memorandum dated 11 March 2002 payable in full upon application under the terms and conditions as defined in the said Offering Memorandum.

F WITHHOLDING TAX ON INTEREST (see note 11) (to be completed ONLY if the Applicant is a Resident) I/We elect to have Final Withholding Tax deducted from my/our interest. I/We elect to receive interest GROSS (i.e. without deduction of withholding tax).

G RE-ALLOCATION OPTION (see note 12)

I/We hereby consent that any amounts applied for but not allotted may be re-allocated to the ML Bond Issue.

H I/We have fully understood the instructions for completing this Application Form, and am/are making this Application solely on the basis of the Offering Memorandum dated 11 March 2002. Furthermore, I/we confirm that this is the only Application Form I/we am/are submitting on my/our behalf or on behalf of the company or other entity I/we represent.

Signature/s of Applicant/s Date (Both parents or legal guardian are/is to sign if Applicant is a minor) (All parties are to sign in the case of a joint Application)

AUTHORISED SELLING AGENT’S RUBBER STAMP AUTHORISED SELLING AGENT’S CODE

E CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 141 SPECIMEN APPLICATION FORMS (continued) THE EURO BOND APPLICATION FORM (continued)

CORINTHIA FINANCE plc A member of the Corinthia Group of Companies

Notes on how to complete this Application Form and other information

The following notes are to be read in conjunction with the Offering Memorandum dated 11 March 2002.

1. The Application Form is to be completed in BLOCK CHARACTERS.

3. Non-Resident applicants must indicate their passport number in Panel ‘B’.

4. Maltese residents wishing to invest in the Bonds should be aware that they should comply with exchange control regulations.

5. In the case of an Applicant who is a minor, the word 'minor' must be indicated in Panel ‘B‘ next to the Applicant’s name and the relative box in Panel ‘A’ must also be marked. A Public Registry birth certificate must be attached to the Application Form. (The birth certificate is not required if the minor already holds securities which are listed on the Malta Stock Exchange (MSE)). The Application Form must be signed by both parents or by the legal guardian/s. (Interest, redemption proceeds and any refund cheques will be made payable to the parent / legal guardian named in Panel ‘DI’ until such time as the Company is notified that the minor named in Panel ‘B’ has attained the age of 18). The address to be inserted in Panel ‘B’ is to be that of the parents / legal guardian/s.

6. In the case of a body corporate, the name of the entity, exactly as registered, and the registration number are to be inserted in Panel ‘B’. Applications must be signed by duly authorised representatives indicating the capacity in which they are signing.

7. Applicants who hold securities on the Malta Stock Exchange are to indicate their MSE account number. If details shown on this Application Form differ from the existing account details at the MSE, a new MSE account may be opened for this Application.

8. Applications must be for a minimum of 1,000 and thereafter in multiples of 200.

9. Applications must be accompanied by the corresponding amount in Euro of Bonds applied for.

10. Payment in Euro may be made by cheque drawn on a Maltese bank or by a banker’s draft drawn on a first class foreign bank, payable to 'The Registrar Ð Corinthia Finance p.l.c. - Bond Issue'. In the event that cheques accompanying Application Forms are not honoured on their first presentation, the Issuer and the Registrar reserve the right to invalidate the relative Application.

11. The Applicant may elect to have Final Withholding Tax, currently 15%, deducted from interest payments, in which case such interest need not be declared in the Applicant’s income tax return. The Applicant may elect to receive the interest gross, i.e. without deduction of Final Withholding Tax but he/she will be obliged to declare interest so received on his/her return. Interest received by non-resident Applicants is not taxable in Malta and non-residents will receive interest gross. Authorised entities applying in the name of a Prescribed Fund (having indicated their status in the appropriate box in Panel A) will have Final Withholding Tax, currently 10%, deducted from interest payments.

12. In terms of the Offering Memorandum dated 11 March 2002, Applicant/s may opt for any amounts applied for through this Application Form but not allotted, to be re-allocated to the ML Bond Issue as described in the said Offering Memorandum. Applicants are to signify their consent to such re-allocation by marking ‘X’ in Panel ‘G’.

13. Subscription lists will open at 8.30am on 14 March 2002 and will close as soon thereafter as the Issuer may determine but not later than 3.00pm on 28 March 2002. Any Applications received by the Registrar after the subscription lists close will be rejected.

14. Completed Application Forms are to be sent by post or delivered to the offices of the Issuer, the Registrar or any Authorised Selling Agent listed in the Offering Memorandum, during normal office hours. Remittances by post are made at the risk of the Applicant and the Company disclaims all responsibility for any such remittances not received by the closing of the subscription lists.

15. The Company reserves the right to refuse any Application which appears to be in breach of the terms and conditions of the Bond as contained in the Offering Memorandum dated 11 March 2002.

16. The terms used in this Application Form have the same meaning as that assigned to them in the Offering Memorandum dated 11 March 2002.

The value of investments can go up or down and past performance is not necessarily indicative of future performance. The nominal value of the Bonds on offer will be repayable in full upon redemption. The Bonds are denominated in a foreign currency and the value of the currency may go down as well as up. An investor should consult a stockbroker licensed under the Malta Stock Exchange Act (Cap. 345 of the Laws of Malta) or an investment adviser licensed under the Investment Services Act (Cap. 370 of the Laws of Malta), for advice.

142 CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES E This page has been left intentionally blank.

E CORINTHIA FINANCE P.L.C. – A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 143 CORINTHIA FINANCE plc A member of the Corinthia Group of Companies

22 EUROPA CENTRE FLORIANA VLT 15 – MALTA

TEL (+356) 21 233141 – FAX (+356) 21 234219 [email protected] – www.corinthia.com