http://www.oblible.com

OFFERING CIRCULAR

ALGARVE INTERNATIONAL B.V. (A private limited liability company (“beslotrii r~eririootsdicipmet bepcrkte cieins~~i.cilielijklici~”) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAincorporated in The NetherlandszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and having its corporatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA seat in Amsterdam) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Euro 126,500,000 6.4 per cent. Guaranteed Bonds due 2027

unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest pursuant to a financial guaranty issued by

XL CAPITAL ASSURANCE INC. (Incorporated with limited liability in New York)

Issue Price: 100 per cent.

The Euro 126,500,000 6.4 per cent. Guaranteed Bonds due 2027 (the “Bonds“) of International B.V. (the “Issuer”) were issued on 5 July. 2001, (the “Issue Date”) pursuant to the bond trust deed dated 2 July. 2001 (the -’Bond Trust Deed”)

between the Issuer, EUROSCUT ~ Sociedade Concessionaria d;i Scut do AlFarve. S.A. (“Euroscut” or the “Company”). XL Capital Assurance Inc. (“XLCA” or the “Guarantor”), Citibank. N.A. as security trustee (the “Security Trustee”) and Citibank, N.A. as bond trustee (the “Bond Trustee”. which expression includes the trustee or trustees for the time being of the Bond Trust Deed). The issue price of the Bonds was 100 per cent. The Bonds ;ire unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest in respect of the Bonds and as to certain additional amounts in respect of withholding taxes of The Netherlands in respect of the Bonds pursuant to a financial guaranty (the “Bond Financial Guaranty”) issued by XLCA and as set out in “Bond Financial Guaranty“ below.

Interest on the Bonds will be payable annually in arrear on 15 December in each year. The first payment will be made on 15 December, 2001 in respect of the period from and including the Issue Date (as defined below) to. but excluding. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 15 December. 2001. Payments in respect ofthe Bonds will be made free and clear of, and without withholding or deduction for or on account of, withholding taxes ofThe Netherlands as described in “Terms and Conditions of the Bonds-Taxation’’ below. Unless previously redeemed or purchased and cancelled, the Bonds will mature on IS June, 2027. The Bonds may bc redeemed by the Issuer in whole (but not in part). at their principal amount together withzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA accrued interest in the event of certain changes relating to taxation in The Netherlands or loan interest relief under the double-tax treaty between The Netherlands and as set out under “Terms and Conditions of the Bonds - Redemption and Purchase - Llnscheduled redemption for tau reasons” bek~.

Application has been made to list the Bonds 011 the Luxembourz Stock Exchange.

The obligations of the Issuer under the Bonds ;ire secured in favour of the Security Trustee as described in “The Financing of the Project - Security Agreements” below.

The Bonds have been rated AAA by Standard & Poor’s Ratings Services. a division of The McGraw-Hill Companies. Inc. (“S&P“).This rating is based solely upon the financial strength rating of XLCA. A credit rating is not a recommendation to buy. sell or hold securities and may be subject to revision. suspension or withdrawal at any time.

The Bonds are represented by a permanent global bond in bearer Uorm. without coupons. which has been deposited with 3 common depositary for Euroclear Bank S.A./N.V.. as operator of the Euroclear System (“Euroclear”) and Clearstream Banking. societe anonyme, Luxembourg (“Clearstream, Luxembourg”). The permanent global bond will be exchangeable fnr definitive Bonds in bearer form, with coupons for principal and interest attached. only in the limited circumstances described in “Summary of Provisions relating to the Bonds while in Global Form” on page 75 below.

Particular attention is drawn to the section entitled “Risk Factors” on pages 57 to 62 of this Offering Circular.

SANTANDER CENTRAL HISPANO HYPOVEREINSBANK INVESTMENT 18 September, 2001 http://www.oblible.com

Each of the Issuer and Euroscut accepts responsibility for the information (other than the XLCA Information. as defined below) contained in this Offering Circular. To the best of the knowledge and belief of the Issuer and Euroscut (each of which has taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.

Although the Issuer and Euroscut believe that projections contained in this Offering Circular are reasonable, neither the lssuer nor Euroscut can give any assurance that such projections will prove to have been correct. Important factors that could cause actual results to differ materially from such projections are disclosed in this Offering Circular, including, without limitation, under “Risk Factors” on page 57, and any projections are expressly qualified in their entirety accordingly. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA XLCA accepts responsibility for the information contained in the sections of this Offering Circular entitled “Bond Financial Guaranty”, “Description of XLCA” and “Financial Statements of XLCA” and in paragraphs l(c), 4(c), 5(b) and 7(b) of the section entitled “General Information” (together, the “XLCA Information”). To the best of the knowledge and belief of XLCA (which has taken all reasonable care to ensure that such is the case), the XLCA Information is in accordance with the facts and does not omit anything likely to affect the import of the XLCA Information. XLCA accepts no responsibility for any other information contained in this Offering Circular. Save for the XLCA Information, XLCA has not separately verified the information contained herein. No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by XLCA as to the accuracy or completeness of any information contained in this Offering Circular (other than the XLCA Information) or any other information supplied in connection with the Bonds or their distribution. No person is or has been authorised to give any information or to make any representation other than the information or the representations contained in this Offering Circular in connection with the Issuer. Euroscut or XLCA, in connection with the issue or sale of the Bonds and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, Euroscut, XLCA, Banco Santander Central Hispano, S.A. and Bayerische Hypo-und Vereinsbank AG 1“HypoVereinsbank”) (together the “Lead Managers”), the Bond Trustee or the Security Trustee.

Neither the delivery of this Offering Circular nor any offering, sale or delivery made in connection herewith shall, under any circumstances, constitute a representation or create any implication that there has been no change in the financial situation or the affairs of either of the Issuer, Euroscut or XLCA since the date hereof or, as the case may be, the date upon which this document has been most recently amended or supplemented or that there has been no adverse change in the financial position of the Issuer, Euroscut or XLCA since the date hereof. Unless otherwise indicated herein, all information in this Offering Circular is given as of the date of this Offering Circular. None of the Lead Managers, the Bond Trustee or the Security Trustee have separately verified the information contained in this Offering Circular. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Lead Managers, the Bond Trustee or the Security Trustee as to the accuracy or completeness of the information contained in this Offering Circular or any other information supplied in connection with the Bonds or their distribution. The statements made in this paragraph are without prejudice to the respective responsibilities of the Issuer. Euroscut and XLCA. Each person receiving this Offering Circular acknowledges that such person has not relied on the Lead Managers, the Bond Trustee or the Security Trustee nor on any person affiliated with any of them in connection with its investigation of the accuracy of such information or its investment decision. Each person contemplating making an investment in the Bonds must make its own investigation and analysis of the creditworthiness of the Issuer, Euroscut and XLCA and its own determination of the suitability of any such investment. with particular reference to its own investment objectives and experience and any other factors which may be relevant to it in connection with such investment. A prospective investor who is in any doubt whatsoever as to the risks involved in investing in the Bonds should consult independent professional advisers.

The Bonds have not been and will not be registered under the United States Securities Act of 1933 (as amended) (the “Securities Act”) and arc subject to United States tax law requirements. The Bonds may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Bonds are being offered outside the United States in accordance with Regulation S under the Securities Act. See “Subscription and Sale” below. The distribution of this Offering Circular and the offering or sale and delivery of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer. Euroscut and XLCA to inform themselves about and to observe any such restriction. For a description of certain restrictions on offers. sales and deliveries of Bonds and on distribution of this Offering Circular see "Subscription and Sale" below. This Offering Circular does not constitute. and may not be used for the purposeszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of. an offer or solicitation by any person to subscribe or purchase any Bonds. In this Offering Circular. unless otherwise specified or as the context otherwise requires. references to "Guilders" and "NGL'' are to the lawful currency of The Netherlands. references to "US.$". "US. Dollars" and "dollars" arezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to the lawful currency of the United States of America. referenceszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to "Escudos". "Esc" and "PTE'' are to the lawful currency of the Republic of Portugal (as defined in Council Regulation (EC) No. 974/98 on the introduction of the Euro) and references to "Euro". "EURO" or 'C' are to the single currency which was introduced at the start of the third stage of European Economic zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand Monetary Union pursuant to the treaty establishing the European Communities (as amended by the Treaty on European Union) (the "Treaty"). IN CONNECTION WITH THE ISSUE OF BONDS, BANCO SANTANDER CENTRAL HISPANO, S.A. MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILISE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT ANI. TIME.

3 CONTENTS zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA SUMMARY OF THE PROJECT zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 5 DESCRIPTION OF THE PROJECT .. .. 6 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 1. INTRODUCTION .. .. 6 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2. PROJECT DESCRIPTION .. 8

3. COMPETITION .. .. 14

4. SHADOW TOLL METHODOLOGY .. .. 15

5. TRAFFIC GROWTH AND OTHER TRENDS ...... 16

6. TRAFFIC SURVEYS .. .. 17

7 CALCULATION OF THE SHADOW TOLLS ...... 22

8. PROJECTED REVENUES .. .. 23

9. PROJECTED EXPENDITURE...... 31

10. OPERATION AND MAINTENANCE .. .. 33

11. ENVIRONMENT ...... 33

12. CURRENT FINANCIAL STATUS ...... 33

13. SUMMARY OF THE CONCESSION AGREEMENT...... 34

14. SUMMARY OF THE CONSTRUCTION CONTRACT .. .. 37

INDEPENDENT ADVISERS .. .. ._ 40

THE FINANCING OF THE PROJECT .. .. 41

RISK FACTORS .. .. 57

TERMS AND CONDITIONS OF THE BONDS ...... 63

SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM .. 75

BOND FINANCIAL GUARANTY .. .. 77

DESCRIPTION OF THE ISSUER ...... 87

DESCRIPTION OF XLCA .. ._ 88

DESCRIPTION OF THE SHAREHOLDERS .. .. 91

TAXATION .. .. 101

SUBSCRIPTION AND SALE ...... 103

GENERAL INFORMATION .. .. 106

FINANCIAL STATEMENTS OF EUROSCUT ...... 108

FINANCIAL STATEMENTS OF XLCA ...... 120

GLOSSARY .. .. ' .. .. 140

ANNEXA .. .. 147

4 SUMMARY OF THE PROJECT

The Project The PortuguesezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Republic has granted to Euroscut a concession with respect to a shadow toll road in Southern Portugal, together with related facilities and works. all as described in more detail in "Description of the Project" on page 6.

The Issuer The Issuer is a special purpose company incorporated in The Netherlands on 33 April. 1001. established for the principal purpose of raising finance for the Project. It is owned and controlled by the same shareholders who own and control Euroscut. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Financing of the Project The Project is to be financed by the issue of the Bonds. in addition to which the Issuer has entered into ii revolving credit facility (the "VAT Facility") with Banco Santander Central Hispanu. S.A. andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Hypovereinsbank (together the "VAT Lenders") and a term loan facility (the "EIB Facility") with European Investment Bank ("EIB"). The proceeds from these sources of finance are as follows:

Bonds (net proceeds) € 115.944.000 VAT Facility €2 5 .OOO.OOO zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA EIB Facility €130.000.000zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Total €280,944.000

The Issuer has lent to Euroscut the aggregate of such proceeds. by way of an intercompany loan. Each of the Bonds and the loans under the VAT Facility and the EIB Facility benefit from financial guarantees issued by XLCA. As security for the Issuer's obligationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA under the Bonds. the VAT Facility and the EIB Facility. both Euroscut and the Issuer have granted security to the Security Trustee (for the benefit of the Bond Trustee. XLCA. E1B and the VAT Lenders). For further details of the security agreements. see the description of the security documents in "The Financing of the Project" on page 41. The terms and conditions of the Bonds are set out on pages 63 to 74.

5 DESCRIPTION OF THE PROJECT

The ,follonYiig is N sui~mnrj.of the Project arid should be rend iii coiljuiictioiizyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Iritli tlic rest of’ this Oljieriiig CircularzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAiiicludiiig the Glossur:,. 011 pge 140. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 1. INTRODUCTION 1.1 The Shadow Toll SCUT Programme ThezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA SCUT Programme involves the privatisation of the construction and operation of a number of roads in Portugal. The private sector is invited to take over sections of existing motorway and undertake specified improvements or new construction. with revenues to be paid by the Portuguese State (the “State”) on a shadow toll basis. Decree-law number 267/97 dated 2 October, 1997 set up the conditions and procedures for tenders under the SCUT Programme including the Algarve motorway concession. Pursuant to the Decree-law, SCUT concessions are granted to the concessionaires following an international bidding process after which a concession agreement is signed between the State and the concessionaire. This international bidding process is overseen by the National Road Department, the lnstituto das Estradas de Portugal (“IEP”), subject to the authority of the Ministry of Social Equipment (”MES”). All proposals are presented by the bidders to a commission which receives and admits the proposals and are subsequently analysed by another commission designated jointly by the Ministry of Finance and MES. Each concession agreement must be entered into with a joint stock company (to be incorporated by the bidder alone or jointly by all members of a joint venture) with a registered office in Portugal. incorporated with the sole object of undertaking the concession. The tender programme and the tender specification are approved jointly by the Ministry of Finance and MES. The tender programme is designed to lay down the relevant criteria and requirements for the awarding of the concessions; the tender specification is designed to lay down the general and specific conditions of each concession, for example, the scope of the concession, the duration of the concession, the scope of any indemnities and the conditions of any possible loan facility. The general criteria to evaluate the proposals and to choose the concessionaire to be awarded the concession include, among others and in order of importance, the:

0 expected net amount of the financing costs to be supported by the State:

0 risk and compromise connected with the expected net amount of the financing costs to be supported by the State;

0 dates of entering into service;

0 contractual, corporate and financial structure of the concessionaire.

0 quality of the proposal (conception, project, construction and operation): and

0 quality of services and security. The Ministry of Finance and MES are jointly responsible for the selection of the final bidders which then negotiate with the commission the terms of the concession agreement. They then select the final, successful bidder. The decisions of the commission responsible for the reception and admission of the proposals may be contested within eight business days of the selection of the successful bidder by an appeal to the Ministry of Finance and MES. The Ministry of Finance and MES then have 10 business days within which to allow the appeal; if they do not allow the appeal, it is deemed to be denied. All other aspects of the bidding process can be the subject of an appeal to the Portuguese courts. The State approves the general bases of each concession by means of a specific Decree-law and the draft of each concession agreement is approved by a resolution of the Council of Ministers.

1.2 The Euroscut Consortium In September 1998, a consortium formed by two subsidiaries of the Spanish Grupo Ferrovial (Cintra and Ferrovial-Agroman S.A.) and seven Portuguese contractors (together the “Consortium”) submitted to the MES a competitive tender for the concession in respect of the shadow toll motorway of the Algarve (the “Concession”). 6 1.3 The Bidding Process In addition to the ConsortiumzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA six other consortia also submitted tenders in the bidding process. In June 1999, the State shortlisted two bidders (one of them being the Consortium). inviting them to present their Best and Final Offer ("BAFO") by 22 November. 1999. The Concession was awarded to the Consortium's company. Sociedade Concessionliria da Scut do Algarve, S.A. ("Euroscut"). through joint declarations of the Ministry of Finance and MES dated 22 March. 2000 and 13 March. 2000. This decision became definitive with its publication in the Official Gazette on 14 April. 2000. Decree-law number 55-A/ 2000 dated zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA14 April. 2000 approved the general basis of the Concession. 1.4 Euroscut Euroscut is a limited liability company formed in Portugal by the Consortium. Euroscut's corporate objects as outlined in article 3 of its Articles of Association are designing. constructing. financing. operating and maintaining the Concession. Euroscut's principal activities are described further in this section. "Description of the Project." Euroscut was incorporated under Portuguese Law on the 28 April. 2000 pursuant to a notarial deed signed on 27 April. 2000. The Consortium members hold shares in Euroscut as follows:

Cintra Concesiones de Infraestructuras de Transporte. Sociedad Anonima ("Cintra") .. _. 3.1 13.886 Ferrovial-Agroman. S.A. _. 361.128 Construqoes Gabriel AS Couto _. 135.798 ECOP Arnaldo de Oliveira _. 135.798 Eusebios e filhos ._ .. 135.198 Empreiteiros Casais .. 135.798 J. Gomes S. Construqoes do Cavado .. 135.798 Aurelio Martins Sobreiro e Filhos ,. .. 135.798 Antonio Alves Quelhas .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA135.798 The shares subscribed for by the Consortium Members consist of a single class of ordinary nominative shares and have been fully paid up in cash. (See page 91 ("Description of the Shareholders") for more details) The Board of Directors of Euroscut comprises: Vitor Manuel Domingues dos Santos (President) Juan Bejar Ochoa Alvaro Echaniz Urcelay Enrique Fuentes Egusquiza Carlos Albert0 Freitas Couto The following directors of Euroscut hold the following executive positions with Cintra: Juan Bejar Ochoa is Cintra's Chief Executive Officer Alvaro Echaniz Urcelay is Cintra's Chief Financial Officer Lucas Osorio lturmendi is Cintra's General Counsel The Presidency of the General Meeting of Euroscut comprises: Rui Manuel Parente Chancerelle de Machete (President) Lucas Osorio Iturmendi (Assistant to President Joiio Paulo Rosado Correia (Assistant to President) The Statutory Audit Committee of Euroscut comprises: Belen Castro Gimenez (President) Nuno Filipe dos Santos Oliveira e Silva Paranhos (Vice President) Freire. Loureiro e Associados - SROC (Statutory Auditor). represented by Carlos Manuel Pereira Freire (Member ) Juan Ramon Peres Peres ( 1st Alternate Member) Antonio Dias e Associados - SROC (Statutory Auditor). represented by Antonio Marques Dias (2nd Alternate Member)

7 The senior management of Euroscut are as follows: General Lead Manager: Fernando Guedan Pecker (Portimio) Financial Lead Manager: Eugenio Miguel Miguel () Technical Lead Manager: Daniel Quintero Martinez (PortimBo) Production and Expropriation Lead Manager: Javier Martin Rivals (Portimgo) The capitalisation of Euroscut is as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Euro (thousands)

31 December, 31 March, 2000 2001

(uudited) f urtciudited) Short Term Debt .. .. 0 0 Long Term Debt zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. .. 0 0 Share Capital .. 45,266 45.266 Profit/(Loss) .. .. 2 0 Shareholder' Equity .. 45,268 45.268 Total Assets .. .. 48,762 50.1 82 Total Liabilities .. 3,494 4,9 14 Other than the monies lent to Euroscut by the Issuer by way of an intercompany loan (see pagezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5) there has been no material change in the capitalisation of Euroscut since 31 March. 2001. The figures in the above table have been determined in accordance with Portuguese GAAP. The complete audited financial statements of Euroscut from 27 April, 2000 (date of incorporation) to 3 1 December. 2000. prepared in accordance with Portuguese GAAP. are included in "Financial Statements of Euroscut" on page 108. These are the only financial statements produced byzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Euroscut since its incorporation and there are no subsequent financial statements available.

2. PROJECT DESCRIPTION 2.1 Scope of the Concession The Concession covers the existing east-west IPI motorway (running between the Spanish border and an intersection with the north-south IP1 motorway to/from Lisbon) and a new section of the IC4 motorway. In respect of the latter, the Concession will involve the design, construction, operation and maintenance of a 38.4 km new section of the IC4 motorway (which joins the IPl at Albufeira). as well as the refurbishment. operation and maintenance of a further 91.5 km stretch of motorway, which already exists (the "Project"). The entire motorway (a total of approximately 130 km) will be transferred in sections by the State to Euroscut under the State's Shadow Toll SCUT Programme described above. The Concession covers three distinct sections of motorway as shown on the map below: 0 The 38.4 km section to be built by Euroscut between Lagos (Bensafrim) and Alcantarilha.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA This new section will involve the construction of underpasses, bridges, interchanges, access roads, two service areas, one maintenance area, a full traffic control system (for the whole motorway) and other related facilities. This section is expected to be completed by 11 April, 2003.

0 The 9.3 km section between Alcantarilha and Guia. This section was constructed by the IEP, was transferred to Euroscut in June 2000, and is currently being operated by Euroscut. In addition to the main 9.3 km section, this section includes 3 km of connecting links to nearby towns. This section marks the beginning of the motorway extension westwards.

0 The existing motorway section, 82.2 km in length, between Guia and the Spanish border near Vila Real de Sto. Antonio. This section has been in service for five years. connecting the south of Portugal to the Spanish border and the main Spanish network. It is constructed from continuous reinforced concrete and has a centreline formed by a concrete protection barrier. This section is scheduled to be transferred to Euroscut by 1 November, 2001 and will involve the construction of another maintenance area, one service area as well as a full traffic control system.

8 9 2.2 Road Description The Algarve is a regionalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA tourist destination stretching along most of the southern coast of Portugal. Real estate developments are concentrated not only in the larger urban areas of Faro, Loule, Portimiio, Olhiio and Silves but also in other smaller centres (Lagos, Tavira, Albufeira) and in extensive ribbon type developments along the coast. Apart from the towns of Silves and Loule, inland areas are significantly more rural in nature. The population of the Algarve () in 1996 was 346,000 of whom almost 100,000 lived in the two principal towns of Faro and Loule. The east-west IPMC4 motorway runs through the Algarve region parallel to the southern coast of Portugal, and is intended to provide easy access to the main population centres of this region. It is anticipated that the new motorway will become a key element of the Portuguese road network, as well as the main link to the Spanish border with southern Portugal. Once completed, the TPMC4 motorway (also known as Via Longitudinal do Algarve or Via de Infante de Sagres) will be the main connecting road through the Algarve, connecting the towns of Lagos, Portimiio and Lagoa with Faro, the region’s capital, and its international airport. The east-west IPI/IC4 will connect directly, at the Guia Junction, to the 1P1 north-south motorway which links the Algarve to Lisbon and to the centre and north of Portugal. In addition, the existing connection of the east-west IPl with Spain, through the Guadiana Bridge, allows for the total integration of the Concession with the Spanish motorways network. In a separate project, BRISA, one of the National Concession Companies (“BRISA”), and the IEP are currently developing the north-south 1P1 motorway from Lisbon to its connection with the east-west IPl. They are also developing the connection from the east-west IP1 to Olhiio and Tavira. These connections are expected to be completed by August 2002. It is expected that this separate project will result in an increase in traffic on the Concession.

2.3 Connections The Concession also requires the construction by Euroscut of several roads, with an approximate length of 20.0 km, connecting the concession road with the existing network (principally with the N125) as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Length E.cpected Connection zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(km) Approvals Current Stage Cotnpletion Date Silves-Lagoa 6.2 All approvals granted Under construction 11 February, 2003 Portimlo 2.5 Design approved by IEP Expropriation process 11 April, 2003 Alvor 1.8 Environmental approvals Design phase 11 April, 2003 granted Odiaxere 3.2 Environmental approvals Design phase 11 April, 2003 granted Mexil hoeira 1.2 Environmental approvals Design phase 11 April, 2003 Lagos 5.1 Environmental approvals Awaiting 11 April, 2003 granted environmental approval In respect of the Lagos connection two alternative routes have been submitted to the Portuguese Environmental Ministry for approval. The Ministry is expected to approve one of the two routes by the end of September 2001.

2.4 Service Areas The Concession Agreement requires that the motorway be equipped by Euroscut with three service areas. In addition to these three service areas, to be operated by Euroscut, the IEP has approved two further service areas, at Guadiana and Boliqueime on the Guia-Vila Real de Sto. Antonio section of motorway. These service areas will be operated by independent companies and the revenue for these service areas will not go to Euroscut.

10 The following table summarises the approved locations for Euroscut's service areas: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA E.\pected Service Areii Sectioii Lorcitioir Opeiwtioiiiil Dcite ~~ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- Tavira Guia Vila Real de Sto. Antonio November 2002 Porches Lagoa -- Alcantarilha August 2003 Lagos Lagos - Lagoit October 7003 The Concession Agreement states that these service areas must be operational six months after the relevant section is completed. Euroscut are planning to open the service areas at the same time as the relevant sections are completed. The construction. operation and maintenance of these service areas will be put out to tender on the basis that Euroscut will receive a percentage of the revenues. Any sub-contract in relation to these service areas must be approved by the IEP. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2.5 Project Construction The only part of the Project which will not be sub-contracted by Euroscut is the operation of the traffic control system (see "Shadow Toll Methodology'' on page 15). The design and construction of the new IC4 motorway section will be carried out by ;I construction .joint venture, Vialscut Construcao da Scut do Algarve. A.C.E. (the "Constructor") formed by Ferrovial- Agroman. S.A. and the Portuguese contractors Construcoes Gabriel AS Couto. ECOP Arnaldo de Oliveira. Eusebios e filhos. Empreiteiros Casais. J. Gomes S. Construcoes do Cavado. Aurelio Martins Sobreiro e Filhos. and Antonio Alves Quelhas. The shareholding in the Constructor is as follows:

Shllrcholder Percwitqe Slicireholdiiig

Ferrovial-Agroman. S.A. Construcoes Gabriel AS Couto ECOP Arnaldo de Oliveira Eusebios e filhos Empreiteiros Casais J. Gomes S. Construqoes do Cavado Aurelio Martins Sobreiro e Filhos Antonio Alves Quelhas The Board of Directors of the Constructor comprises: Enrique Martin (Chairman and Executive Director) Avelino Correia (Executive Director) Jaime Simon Carlos Rodrigo Marcelino Lajo The senior management of the Constructor consists of its Financial Lead Manager. Manuel Valencia. Euroscut entered into a fixed price construction contract (the "Construction Contract") with the Constructor on 11 May, 2000, under which the Constructor will effectively assume. on a back-to-back basis, all the construction - related obligations of the Concession. The shareholders of the Constructor will be jointly and severally liable to Euroscut for the performance of the Construction Contract. The main terms of the Construction Contract were agreed prior to BAFO. These terms are summarised in "Summary of the Construction Contract)" on page 37. The motorwayzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA sections still to be constructed by the Constructor are Lagos to Lagoa. and Lagoa to Alcantarilha.

11 A summary of construction work for the Project is as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Lengtli Actual or Esyected Scctioli zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(kni) Operational Date Currerit Stoge Lagos - Lagoa .. 29.4 April 2003 Under construction Lagoa zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- Alcantarilha .. 9.1 February 2003 Under construction Alcantarilha - Guia .. 9.3 June 2000 Operational

Guia - Vila Real de Sto. Antonio .. 82.2 November 2001 Constructed and operated by the State. To be transferred to Euroscut zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Total length.. .. 130.0

The construction of the new section between Alcantarilha and Lagoa started on 12 February. 2001. as scheduled. The construction of the new section between Lagos and Lagoa started on 15 May, 2001 and at the date of this Offering Circular the work involved has mainly been concentrated on land movement. In accordance with the Construction Contract, Euroscut has to make a 15 per cent. advance payment of the fixed contract price of PTE 43,734,000,000 to the Constructor, due in three instalments: 0 5 per cent. (PTE 2,186,700,000) paid at the signing date. 11 May, 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0 5 per cent. paid when half of the design process was complete, in October 2000

0 5 per cent. when Bonds were issued on 5 July, 2001

2.6 Progress of Project To carry out the design work for the Project, the Constructor has hired the services of Cenor Plan, SlPCA and AMB Veritas. Before sending the design proposals to the IEP for approval, the proposals are reviewed by the State's engineers to check that they fulfil the State's requirements. The design proposals are then formally submitted to the IEP. The IEP has twenty days to make significant alterations or raise questions. If there are no significant alterations made or questions raised by the IEP within that period, then sixty days after the submission of the design proposals they are deemed approved. although proposals can be actively approved by the 1EP before the sixty day period has elapsed. No significant alterations or questions in relation to any of the design proposals delivered to the IEP have so far been made or raised. The design proposals submitted to the IEP up to 31 August, 2001 are as follows: Section Lagos-Lagoa (including the connections to Portirniio and to Mexilhoeira):

Project Submitted to IEP Approvul Status

Preliminary road design .. .. Yes Yes Preliminary infrastructure .. Yes Part approved Construction road design .. Yes Yes Environmental impact .. Yes Yes Construction infrastructure .. Part submitted Part approved Other complementary projects .. .. Part submitted Part approved

12 Section Lagoa-Alcantarilha (including the connection Silves to Lagoa):

SiibniirtetizyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Projtw to IEP

Preliminary road design .. .. Yes Yes Preliminary infrastructurezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. Yes Yes Preliminary of "cut and cover" tunnels .. Yes Yes Construction road design .. Yes Yes Environmental impact _. YCS Yes: Construction infrastructure .. Part submitted Part approved Construction of "cut and cover" tunnels: .. .. Part submitted Part approved Other complementary projects.. .. Part submitted Part approved Connections: P1.0ject zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Lagos West ...... July 2001 Decem bel- 200 1 Odiixere (Lagos East) .. __ September 2001 October 1001 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Alvor ...... September 2001 October 2001

The fixed price Project budget as of August 2001 is as follows: P TE Projccr riiillioti

Paid up to August 2001 .. 735 To pay .. .. 31 I zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Total Fixed Price Project Budget .. 1.046

Most of the design proposals have been delivered to the IEP on schedule and those design proposals delivered late have not adversely affected the construction timetable.

2.7 Expropriation Completion of the Project requires the expropriation of land from its private owners or occupants. There are three sections of land to be expropriated: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0 The section Lagos-Lagoa (including the connections to Portimlo and to Mexilhoeira)

0 The section Lagoa-Alcantarilha (including the connection Silves to Lagoa)

0 The connections at Lagos West Odiaxere (Lagos East) and Alvor .

The schedule to expropriate these sections is as follows:

tl\-propricrriori

Cbtii~,l~~tc~lE.\ecre~ Drirc q f ' Dtdrrntiorr C'oriiplrtioii (?I'Public zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Utilit?. Section Lagos-Lagoa .. .. September 2001 21 February, 2001 Section Lagoa-Alcantarilha ...... Yes 15 December, 2000 Connections Mexilhoeira-PortimBo .. October 2001 Connections Lagos West, Odiixere (Lagos East) and Alvor .. .. January 2002 The expropriation process is run by the IEP and the lnstituto para a Construcciio Rodoviaria ("ICOR"), another State road department, in co-ordination with Euroscut.

The IEPllCOR attempts to expropriate by agreeing a price with the property owner. However. IEPACOR can unilaterally expropriate the land by a declaration of public utility. 13 Under Portuguese law, the expropriation process is subject to the Expropriation Code (law number 168199 dated 18 September, 1999). Under Portuguese law. the Concession has been declared a public utility and this gives IEP/ICOR the right to take prompt zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBApossession of the land to be expropriated through a legal procedure known as "administrative possession". Administrative possession enables Euroscut to occupy the land and continue the Project regardless of negotiations and/or any agreement between IEP/ICOR and the owner. As such the Project will avoid extended delays caused by the expropriation process. When administrative possession occurs, the applicable compensation is placed into a blocked account in order to pay the owner. The legal process of administrative possession is relatively straightforward and in most cases the expropriated land will be made available to Euroscut for occupation 90 days after the date on which the declaration of public utility is issued. Under the Concession Agreement, Euroscut has a payment cap of PTE 2.400 million (€12.0 million) in relation to expropriation compensation payments. Sums in excess of this amount must be paid by IEP/ICOR. Euroscut has reached an agreement with IEP to transfer the payment of the PTE 2,400 million cap to ensure that IEP/ICOR is provided with enough money to make sure the expropriation progress takes place according to schedule. The only project risk Euroscut assumes in respect of the expropriations is in relation to its own negligence. As the expropriation process is almost complete the risk of delayed expropriations adversely affecting the Project has reduced. Thus the ultimate cost of the expropriation process cannot affect Euroscut's budget. The expropriation payments made and projected to be made by Euroscut are as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADO id Espropriutioii zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPajviieiits PTE (niillion) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAte Pu First lnstalment .. 240 1.2 20 November. 2000 Second lnstalmentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. .. 300 1.5 23 January, 2001 Third lnstalment .. 150 0.7 26 February, 2001 Fourth Instalment .. 500 2.5 26 March, 2001 Fifth lnstalment .. 150 0.7 8 May, 2001 Sixth Instalment .. 300 1.5 23 June, 2001 Seventh lnstalment .. .. 200 1.o 6 August, 2001 Eighth lnstalment .. 150 0.7 33 August, 2001 Future lnstalments .. .. 710 3.5

Total Expropriation Budget 2,400 12.0

The expropriation process, except for that in respect of the connections in the section between Lagos and Lagoa, was almost entirely completed by the end of August 2001.

3. COMPETITION 3.1 Roads The existing principal road network in the area of the Algarve relating to the Concession comprises:

0 the N 125 road running west-east close to the coast between Sagres through Alcantarilha to Vila RealzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA de Sto. Antonio;

0 the existing part of the west-east IPl motorway between Alcantarilha through Guia (the junction with the main north-south 1P1 motorway) to Vila Real de Sto. Antonio, near the Spanish border. which runs parallel to N125 but further north; and

0 the north-south IP1 motorway that provides the principal route to the rest of Portugal. There are also a few minor roads running parallel to these two east-west roads north of the motorway. The proposed extension of the 1C411P1 motorway will continue it on from its present western terminus north of Alcantarilha to a point north west of Lagos, the most westerly town of any significance. The N125 directly serves most of the population of the area and is the busiest road. It is mainly single carriageway with hard shoulders on each side, but there are occasional short sections of dual carriageway and other longer sections of single carriageway without hard shoulders. On those sections outside urban areas that run parallel to the existing motorway, speeds of around 70 kph can be achieved, although there are a number of intersections with other roads. Progress is much slower through some of the urban areas 14 around Olhiio and Faro and where traffic is forced to join the N125. West of this point, traffic is genei-allJ- more congested and moves more slowly than in the east. with further slow sections to the east and west of Lagoa. The existing east-west IP1 motorway is a dual carriageway with a coiicrete safety barrier bctween the carriageways and nine separated intersections between the Spanish border and the current western terminus. The road is not usually ovcrcrowded, with traffic flows well below congestion levels. Speeds of 120 kph are possible. The concrete safety barrier means that temporary traffic manaeement measures are required to deal with emergencies or maintenance, althoush some gaps haw becn lcft to facilitate the transfer of traffic between carriageways. The road is well sign-posted from N125 and from the main nortb- south IPl. The north-south IP1 is a part motorway and part single carriageway road. Traffic flows are relatively light but fast progress (120 kph) is possible only on the motorway. The single oarriagewa?. is generally more congested and moves more slowly. Other east-west roads north of the N125 are generally narrow with frequent bends. Most (but not all) are well surfaced. Average traffic speeds are generally between 50-80 kph. Traffic flows ai-e very light. and these roads do not seem to be used as alternatives to either the motorway or the N195. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 3.2 Railway A single track railway runs close to the N125 along the coast. with a lint running north-south to the rest of Portugal from a point close to the current \vestern end of the motorway (at Tunes). There are usually 9 or 10 daily trains from Portimgo to Faro. The journey time is between 1 hour and 20 minutes and 2 hours and 44 minutes. There is no direct railway lint bctween Lagos and Faro. All journeys between Lagos and Faro involvc an interchange at Tunes.

3.3 Air trawl TherezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA are four scheduled flights a day between Lisbon and Faro.

3.4 Overview In terms of travel speeds and times, there is no significant competition to the motorway from either other roads or other modes of transport. The misting east-west IP1 motorway is well sipposted and has been open for over five years. There is no traffic congestion on this section. In practice, the only road running parallel to the motorway with sipificant traffic flon-s is the N135. This road directly serves much of the coastal development wherc thc motol-way has limited access, especially at Faro (where the motorway runs 10 km to the north). For many shorter trips, the N125 therefore offers the only practical route. The motorway extension will run much closer to the N125 than the existing IPMP motonvay between Alcantarilha and Vila Real de Sto. Antonio and will have shorter sections between interchanges (there will be a further eight interchanges over a total length of roughl3-half that of the existing road). It will therefore be able to attract shorter trips than the existing motorway and could be expected to attract a higher proportion of the N 135 traffic. As traffic levels increasezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA in the future, senice levels on the NE5 are not expected to improve as settlements and other real estate developments along the road mean that there is little opportunity to increase the road’s capacity. As the motorway offers the only alternative to this traffic. its traffic flow are likely to increase at a faster rate than general traffic growth.

4. SHADOW TOLL METHODOLOGY The toll system imposcd by the IEP requires the installation of vehcle-counting equipment at various points along the motorway. Euroscut. taking into account the State requirements, will determine the type of counting equipment. This equipment will permit the State to monitor the number and type of vehicles that circulate on the motorway, and will also be used to calculate the shadow toll income due to Euroscut after 1 January. 2004. The counting equipment will be designed to enable: The counting and classification of vehicles into the cight different statistical categories defined ill the Concession Agreement. For the purpose of calculating revenues. the kehicles are grouped only into “Light” and ”Heavy” categories.

15 The data transmission, in real-time, from the counting equipment on the motorway to Euroscut’s Exploration Centre (which will be constructed in Loule) and the IEP offices in Almada. The provision of the counting equipment has been put out to tender and the equipment will be tested for a period of three months to ensure maximum reliability. It is expected that counting accuracy of at least 98 per cent. will be achieved. Following the specifications of Article 50 of the Concession Agreement. the vehicle-counting and classification system will be installed betweenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA each of the connections with maximum intervals between the counters of 20 km. In practice this means that Euroscut must install 19 items of counting and classification equipment. which will monitor, at each point, the traffic in each lane of the motorway. These systems will be interconnected and also connected to Euroscut’s Exploration Centre through a fibre optics cable. The utilisation of a communication hardware and software structure will permit the transmission, saving and management of data in real-time. Based on Cintra’s experience with similar traffic-counting equipment in Spain and other countries, this approach should ensure a very high level of reliability. Euroscut’s Exploration Centre will have a main communications room, in which the information transmitted by the different systems will be located. The system will be designed and installed in such a way as to also permit the information to be accessed from a remote workstation installed at the IEP office in Almada. This remote workstation will communicate, in real-time, with the Euroscut Exploration Centre through a high capacity connection. The counting equipment on the motorway will be supported by a closed-circuit television system. Television cameras will be installed at the countingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA points, which will enable real-time checking of the data received from the counting and classification equipment. The television images will be transmitted to the Exploration Centre, where they will be studied alongside the information coming from the counting systems. In addition, recording equipment connected to the closed-circuit television will be installed in the IEP office in Almada. As required by the Concession Agreement. Euroscut will provide dynamic weighing equipment at two points on the motorway alongside the counting equipment: Counting point of section between Loule and Faro/Airport (traffic in east direction) Counting point of section between FarolAirport and Lou16 (traffic in west direction) The dynamic weighing equipment will be connected, in real-time, with the Exploration Centre. Euroscut intends that this equipment will operate in conjunction with variable electronic traffic lights in the slow lane, to order the deviation of excess weight vehcles so they can be controlled with newly installed weighbridges (one in each direction).

5. TRAFFIC GROWTH AND OTHER TRENDS 5.1 Population Between 1995 and 1999: the latest year for which data is available, the overall population of the Algarvc region grew by 1.3 per cent. Th~scompares with a 1.1 per cent. growth in the period 1991-1995. Across individual municipalities within the region. the population growth pattern has not changed significantly in the last four or five years. The highest population growth continues to be seen in the coastal strip west of Faro. where annual growth rates as high as I .5 per cent. in Lagoa and 1.3 per cent. in Albufeira and Vila do Bispo have been observed. The population zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAof the mountainous interior and the eastern municipalities meanwhile continues to fall. The municipality of Monchique, for example. has seen an 11 per cent. fall in population between 1995-1999 following a previous 11 per cent. fall in population between 1991 -1 995.

5.2 Gross Domestic Product (,‘GDP’’) Between 1991 and 1994, the economy of the Algarve grew at an average of 0.5 per cent. per annum during a time of recession in the early 1990’s when the GDP of Portugal as a whole rose by only 0.33 per cent. per annum on average. Between 1994 and 1997, the economy of the Algarve grew at an average of 3.9 per cent. per annum while during the same period. the GDP of Portugal as a whole rose by an average of 3.2 per cent. per annum. 1997 is the last year for which GDP information is available for the Algarve. Nationally however, more recent data is available and this reveals that the economy of Portugal has continued to grow at a healthy rate. A growth rate of 3.9 per cent. was achieved in 1998. 2.0 per cent. in 1999 and an estimated 3.0 per cent. inzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the year 2000. The economy is forecast to grow at 3.5 to 3.6 per cent. per annum until 2004. If recent trends continue, it could be expected that the economy of the Algarve will grow at a slightly higher rate than the national average at around 4 per cent. per annum over the short- term. 16 5.3 Tourism Tourism,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA is a key driver of the economy of the Algarve: has also seen steady growth in the last fen years and this trend looks set to continue. The total number of visitors to the Algarve rose by 8 per cent. in the period 1996-1998. The number of passengers at Faro airport meanwhile rose at an average of 4.5 per cent. per annum from 1995 to 3000. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5.4 Car Owncrship Car ownership levels in the Algarve have grown significantly over the last few years. Between 1997 and 1999 the total number of cars in the Algarve rose by 18 pel- cent.. following a 12 per cent. rise between 1995 and 1997. In 1995 there were an averagc of 308 cars per thousand head of population in the Algane. By 1999 this figure had risen to 402 per thousand head of population, a car ownership level rapidl) approaching that of thc United Kingdom (430 per thousand head of population in 1999). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5.5 Traffic Growth There are five permanent automatic traffic count sites in the Algarve region operated by the IEP. The table below gives a summary of the average annual daily traffic fl0n.s (and the growth multiplier) at each of these five sites over recent years. /-I zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArerogc Aiiitirnl zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADuilr T7-ufli'c Grolidl zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGi-uii~h Site Road Localioti --~~-~-1594 1595 1996 19.V 1558 1999 2000 1590-1997 195?-2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA A52 N125 Estombar 18.800 19.700 19,800 20.100 21.300 22.300 27.800 1.07 1.13 A53 N125 Pata 12.300 12.600 12.600 13.000 11.000 0.8s A50 IPl Loult 11.100 12.300 13.100 14.300 15.200 16.900 19.800 1.26 1.42 A55 IPl Guadiaiia 5.100 5,600 5.700 5.700 6.000 6.200 6.400 1.12 1.13 A84 IPl/ICl Eerreiras 9.900 11,800

. .

Source: Halcroa Fox

The table shows that overall traffic has grown strongly 111 the Algarve over the last fivc to SLY years On the existing IC1 at Loule for examplc. daily traffic flows grew by 36 per cent. between 1994 and 1997 (an annual average of 6 per cent.) and 42 per cent. between 1997 and 2000. Thc latter figure bowever is somcwhat distorted by a huge increase in traffic between 1999 and 2000 (an annual average of 9.3 per cent.) on this road. while traffic flows on the parallel N125 (see site A53) fell sharply. The reason for this transfer of traffic from the N125 to the IP1 is not entircly clear. While undoubtedly the opening of a new 9 km section of the IC4 from Ferreiras to Alcantarilha would have some effect. this does not tell the whole story.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA as thc new scction of road did not open until July 2000 while the major shift in traffic betwecii the tno roads seemed to have commenced in January 2000. Taking the two sites together. as a proxy for the total corridor traffic in the Loule area. traffic grew by 3 per cent. between 1999 and 2000 and 16 per cent. in thc period 1997-2000.

Traffic at the eastern end of the study area mcanwhile has grown at a steady rate of around 4 per cent. pcr annum. Traffic flow on the IPl at the Spanish frontier grew by 12 per cent. in the period between 1993 and 1997 and 13 per cent. between 1997 and 3000.

In the western part of the study area. steady traffic growth has also been observed on the EN125 at Estombar. Between 1994 and 1997 daily traffic flows increased by 7 per cent. while the corresponding figure for the period 1997 to 2000 was 13 per cent. Traffic growth has been constrained in this area by capacity limitations of the single carriageway EN135. This can clearly be seen through analysis of the monthly traffic figurcs. In the busiest month (August) For example. daily traffic flo\vs have not increased since 1995 and have remained largely at around 30.000 vehicles per day (which is at. or exceeding the theoretical capacity of a single carriageway road). Traffic growth in out-of-season months however has been much stronger. for example 35 per cent. in Novembei- during the same period between 1995 and 2000. rising from 15,000 vehicles a day to 20.000.

Data for the IC1 North-South route is only available for the years 1999 and 2000 (site A84j. It can be seen that there is an 18 per cent. growth in traffic at this site between 1999 and 2000. 17 6. TRAFFIC SURVEYS 6.1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Introduction The Consortium hiredzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ETT, a reputable Spanish traffic consultant, to undertake a comprehensive traffic forecast study for the project. The ETT report was audited by MVA. at the request of the Consortium. In addition it was completely reviewed by Halcrow Fox & Associates Ltd. ("Halcrow Fox''), acting as an independent traffic adviser. In May, 2001 Halcrow Fox producedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA a report updating the traffic projections for the Project. In order to assist in the updating of the traffic model from the previous base year of 1997 to the current year, journey time and traffic count surveys were carried out by Halcrow Fox at key locations in February 2001.

6.2 Journey Time Surveys Journey time surveys were undertaken along the existing ICl/IC4 route and the parallel EN125 and E124 routes between Vila Real de Sto. Antonio and Lagos, and Ferreiras and Silves respectively. A short summary of the journey time survey results is shown below: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Joulney A vernge Route Roud From To Distuiice Time Speed

1E IP 1 Alcantarilha Castro Marin 92 km 53 min 105 kph 1w 1P1 Castro Marin Alcantarilha 92 km SO min 112 kph 2E N 125 IC l/IP 1 Junction Vila Real 88 km 91 min 58 kph Interchange 3w N 125 Vila Real IC l/IPl Junction 88 km 99 inin 53 kph 3E N125 Lagos ICllIP 1 Junction 44 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAkm 41 rnin 65 kph 3W N125 IC VIP1 Junction Lagos 44 km 42 rnin 6063 kph 4E N369 Silves Ferreiras 33 km 23 rnin 4w N269 Ferreiras Silves 23 km 22 min 63 kph Source: Halcrow Fox The highest speeds recorded on the existing IF1 motorway were 11 9 kph, whilst over the whole journey time surveys average speeds of 105 kph were recorded castbound and 112 kph westbound. Average speeds on the parallel N125 route betwcen Vila Rcal and the ICl/IPl interchange near Ferreiras were 58 kph eastbound and 53 kph westbound. The highest section speeds recorded on this route were in the order of 75 kph, while the lowest were 26 kph (passing through Faro). In the west of the study area. average speeds on the N125- between the ICl/IPl interchange and Lagoa, were around 64 kph. Low speeds of below 35 kph were recorded on short stretches of the road around Odiixere. Lagoa and Guia. Averagc speeds on thc N 269 between Silves and Ferreiras meanwhile were observed to be around 60 kph.

6.3 Traffic Counts The locations of the traffic counts were concentrated in the west of the study and were designed to provide maximum assistance in predicting traffic on the section of the IC4 under construction. Particular attention was paid to traffic movements in the ICl/IPl/N125 interchange area. A traffic count on the 1C1 in the east of the study area was also carried out to check that the pattern of trafficzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA flows on the existing motorway in this area had not changed significantly since 1997.

18 Vehicles were counted by vehicle class, by hour, from Xam until 8pm. apart from Site 3. where a 33-hour count was undcrtakeii. Jhc results of the additional traffic counts are summaiiscd below: TrujficzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Count zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASurve!. Results zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASwiiniar~*112 hours) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Heny' Count Site Road Location Vehicles Total

1 N 120 Bensarrim 330 2.0s 1 3,311 -7 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAEN125 Mexilhoeira 1.106 11.S69 12,955 3(Day)* EN125 Porches 1,256 17.088 18,344 3(Night)** EN 135 Porches 196 3.359 3,555 4 EN369 375 7 5?? zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2.797 5.1 IC1/IP 1 Ferreiras 323 2.007 2.330 5.3 IC1 /IPI Ferreiras 372 1.711 1.983 5.3 ICl/IPl Ferreiras 83 311 397 5.4 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAlC1 /IPl Fci-reiras 359 1,212 1.47 1 5.5 IC 1/IP 1 Ferreiras 114 1.125 1.239 5.6 IC 1/IP1 Ferreiras 122 1.509 1.631 5.7 ICl/IPl Ferreiras 50 47 1 52 1 5.8 IC 1/IP1 Ferreiras 167 1.657 1.824 5.9 IC l/IP1 Ferreiras 91 1.299 1,390 5.10 ICl/IPI Ferreiras 196 1,408 1.604 5.11 IC 1/IP 1 Fei-reiras 498 3.359 3.857 5.12 IC 1/IP 1 Ferreiras 400 3.409 3.809

6.1 IC 1/N 125 Ferreii-as 77 1 -1.250 5.031 6.2 IC 1/N125 Feri-eiras 623 3.140 3.763 6.3 IC 1/N 125 Ferreiras 133 978 1.111 6.4 IC 1/N 125 Ferreiras 428 3.900 3.378 6.5 IC 1/N 125 Ferreiras 175 1.309 1.484 6.6 IC 1/N 135 Ferrciras 353 3.120 3.473

7 SM124 Norinha 356 3.859 4,215 8 P1 Bira da Palma 411 2.936 3,337

* 8 am- 8 prn ** 11 pni - 8 pni

Source: Halcrow Fox

6.4 Traffic Forecasts The traffic forecasts for the short/medium term are presented on page 20. The projccted longer-term growth rates are summarised on page 21. The opening year flows on the new sections of the IC3 are predicted to be in the range of 5.500 to 18.700 vehicles per day. In 2003, the new sections are predictedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to contribute 35 per cent. of the total project road vehicle kilometres and thus revenue. By 2007, when the full effects of generated traffic are assumed to be in place. traffic flows on the new sections are predicted to rise to between 7.300 and 24.300 vehicles per day. Average dail? traffic flow across all sections is predicted to rise from 14.700 vehicles per da! in 2003 to 17.700 vehicles per day in 2007. with 10 per cent. heavy vehicles in both cases. In the longer term. traffic is expccted to rise by an avcragc of 3 per cent. per annum between 2007 and 2013. 2 per cent. per annum between 3013 and 2023 and by 1 per cent. per annum between 2023 and 2033. The percentage of heaky vehicles is expectcd to fall gradually over time from 10 per cent. in 2003 to 8 per cent. by 2033.

19 ShortlMedium-Term Traffic Forecasts, March 2001 Average Annual Daily Traffic zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Lagos Odiaxere 3.60 4.900 600 Odiaxere Mexil hoeira 5.10 10.400 1,200 Mexilhoeira Figueira 3.40 10.500 1.200 Figueira Portimao 6.30 s.000 1,100 Portimao Lagoa 8.10 15,400 1,700 Lagoa Alcantarilha 9.10 16,900 1.800 Alcantarilha Algoz 3.10 12,700 1.300 14.200 1.600 15.700 1.600 21,900 2,600 Algoz Guia IP1 6.20 14,300 1,500 15,600 1,700 17.000 1.700 11.600 2,600 Guia IPI Boliqueime 13.10 17,300 1.100 18.200 2.300 19.000 2.300 20.400 2.400 Boliqueime Louie 8.10 16.000 1.800 16.700 1.000 17.300 2.000 17,600 2.000 Loulk Faro Oeste 5.60 17,800 2,000 18.600 2.200 19.200 2,200 19.600 2.200 Faro Oeste Faro Este 7.00 10.700 1.200 11.200 1,300 11.500 1.300 11.800 1.300 Faro Este Olhao 11.60 11,500 1,200 11.900 1,300 12,200 1.300 12.500 1,300 Olhao Tavira 10.80 12,200 1.100 12.500 1.200 11.800 1.200 13,200 1,200 Tavira Moiite Gordo 19.90 4,100 500 4.200 500 4.400 500 4.500 500 Monte Gordo Vila Real 6.00 ------~-3.000 300 3.000 400 3.100 400 3,100 400 Average Section (weighted) ------11.200 1.200 11.700 1,400 12,200 1.400 12,900 1.400 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Source: Halcrow Fox zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA From zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATO ----~---- Lagos Odiixere 3.60 5,100 600 5,300 700 5,500 700 5.700 700 Odiaxere Mexilhoeira 5.10 10,800 1.300 11.300 1.300 11.700 1.400 11,100 1.400 Mexillioeira Fi&ueira 3.40 10.900 1,300 11,400 1.300 11.800 1.400 12,200 1.400 Figueira Portimao 6.30 8,300 1.200 8,700 1,100 9.000 1,300 9.300 1,300 Portimao Lagoa 8.10 16,000 1,800 16,700 1.900 17.300 1.900 17,900 2.000 Lagoa Alcantarilha 9.10 17,600 1,900 18.300 2.000 18.900 2.000 19,600 2.100 Alcantarilha Algoz 3 10 22,800 2,700 23,700 2.800 24.500 2,900 25,400 3,000 Algoz zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGuia IPl 6.20 22.500 2,700 23,400 2,800 24,200 2.900 25,100 3.000 Guia IP1 Boliqueime 13.10 21,200 1,500 22,100 1.600 22.900 2,700 23.700 2.800 BoliqueirnezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Loult 8.10 18.400 2.100 19.100 1,200 19,800 1,300 20,500 2,300 Louli: Faro Oeste 5.60 10,400 2,300 11,200 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2.400 22.000 2,500 21.800 2,600 Faro Oeste Faro Este 7.00 12,200 1.400 12.700 1,400 13,200 1.500 13,700 1,600 Faro Estc Olhao 11.60 13,000 1,400 13,500 1.400 14.000 1,500 14.500 1.500 Olhao Tavira 10.80 13.700 1,300 14.300 1,300 14,800 1,400 15.300 1,400 Tavira Monte Gordo 19.90 4.700 500 4,900 600 5,000 600 5.200 600 Monte Gordo Vila Real 6.00 ------~-3,200 400 3,400 500 3.500 500 3,600 500 Average Section (weighted) 13,400 1,500 14.000 1,600 14,400 1,600 15.000 1,700 ------I_----- Source: Halcrow Fox For an explanation of the calculation of weighted figures see Price zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAEscalatioii and Euiid~son page 22.

20 Long-Term Annual Traffic Growth Projections zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA TI-@' Heqi. GI-oirthzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Veliicles zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2007-2013 .. .. 3 7'0 10% 2013-2023 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. .. 3YOzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 9% 2023-2033 .. .. 13'0 8% Source: H~CJOWFox zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The traffic risk profile of the Project is low. duc to the fact that the cxisting 82.2 km motorway will account. after thc completion of the Project. for 70 per cent. of the total income. Predicted traffic levels for the new IC4/IP1 section of motorway are based on historical data of road use in the area. provided by pcriodic orisin-destination surveys performed by MES. and on specific surveys conducted for this study. From August 2000 Euroscut has becn recording real traffic data at Four different points on the motorway. The following are the actual figures for September 2000 to May 2001:

hiiiial -4wrnge .4111i~iulA veiuge nail). TrnLfir Dailj- Triffic Moiirh lEuroscut fipresj iBAFO figures)

September 2000 (actual) .. .. 13,134 14.847 October 2000 (actual) .. 11.281 12,809 Novembei- 2000 (actual) .. .. 10.367 11.113 December 2000 (actual) .. .. 9,796 10.980 Avcragc Year 2000.. .. 11,515 12.334 January 3001 (actual) .. 9.917 9,117 February 2001 (actual) .. .. I 1.756 10.846 March 2001 (actual) .. 11,643 11,317 April 2001 (actual) .. .. 14.310 13,747 May 2001 (actual) 13,266 12.408 Average Year 7001.. .. 12,880 1 1,540 Source: Euroscut The traffic figures in the year 2000 were 7.6 per cent. less than the figures predicted in the BAFO. For the first 5 rnoiiths of the year 2001 the traffic was 5.3 per cent. higher than the figures predicted in the BAFO.

21 7. CALCULATION OF THE SHADOW TOLLS PaymentszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of shadow tolls are fixed using a band tariff system, based on the following formula: 3 p = zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPB(i) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAi= 1 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Where: P = payments by the MES in a certain year PB(i) = annual payment relative to price band 1 PB(i) is calculated according to the following algorithm:

~[TMDAE~)a LO)] - vs (i - I) - ~[TMDAEO) Lu)] - Vs (i) + [Vs(i) - vs (i - 111 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAJ

where: T(i 1 = Tariff values for price band I Lcj) = Length of section j VS(i) = Upper limit (average annual daily traffic in equivalent vehicles per km) of the band (for price band 1. VS(i-1) = 0) TMDAEQ) = Average Annual Daily Traffic in equivalcnt vehicles in section j

bcing TMDAEO) = TMDAVLO)+ fp 0 TMDAvpO) where: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA TMDAvLC~) = Avcrage Annual Daily Traffic for light vehicles in section j TMDAvpCj) = Average Annual Daily Traffic for heavy vehicles in section j FP = Equivalence factor for hcavy vehicles.

There is a maximum value for the Average Annual Daily Traffic in equivalent vehiclcs of TMDAvLO) + TMDAvPU) 6zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 38.000 7.1 Price Escalation and Bands The shadow tolls are divided into three different price bands:

f

Years

Each price band is defined as: Equivalent vehicles * Km (VhlKm)

In order to arrive at the equivalent vehicle figure. heavy vehicles are multiplied by a factor of 2.2. and light vehtcles by a factor of 1.0. Multiplying actual traffic figures by these factors produces weighted traffic figures for the purposes of the base case financial model. Light and hcavy vehicles are the only categories used for calculating Euroscut’s revenues despite the more detailed vehicle classification information that Euroscut must provide to the State. The three price bands evolve in time according to the following table: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Aiiiiual Aiiiiucrl Atiiitral A 1711 tlUl I 1 I 711 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Bme Year Gm vth Gron-th Gro G~.oirfhzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2001 - ,7005zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2006 -- 2010 2011 - 2020zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2021 - 2030 ( VldKiv) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Band 1 .. 1.602.391 1.00 Yo 1.00 Yo 0.50 n(’6 0.50 ?’b Band? , 1.637,961 3.10 Yo -.-7 76 ?/n 1.56 Y, 0.84 :a Band 3 1.91 8.449 5.10 Yo 3.60zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Yo 1.85 5%zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0.97 The annual growth figures for band 2 includes the annual growth of price band 1 and the annual growth figures of band 3 includes the annual grouth of price bands 1 and 2. Price band 1 has been defined in such a way that, even allowing for a zero per cent. growth during the life of the Concession. the Project will still be able to repay the long-term indebtedness of Euroscut, so that effectively price bands 2 and 3 are for the benefit of the shareholders’ return and provide a cushion for the third party finance providers to the Project.

7.2 Tariffs The tariffs for the diffei-cnt price bands are as follows:

0 Band 1 7.00 Escudos per km

0 Band:! 4.20 Escudos per km

0 Band 3 3.3 1 Escudos per kni The tariffs are defined by rcference to current Escudos as at 1 January. 1998 and the Concession Agreement provides that they will increase annually at a rate of 90 per ccnt. of thc Portugucsc Consumer Price lndex (.’CPI”). lncrcases in the CPI for 1998. 1999 and 2000 wcrc 3.20 per cent.. 3.0 per cent. and 3 85 pcr cent. respcct jvclq .

8. PROJECTED REVENUES Euroscut has three sources of revenues for the Project:

0 Fixed income until 31 December. 2003 Shadow toll revenue from 1 January, 2004

0 Servicc station revenue The Concession Agreement involves two different payment structures: fixed income until 3 1 December: 2003, and shadow toll revenue for the rest of the Concession Period. The projections referred to below are extracted. without material amendment. from a financial model prepared by Euroscut at thc request of XL. The base case financial model does not take into account the following factors which could increase traffic on the Concession motorway and as such have a beneficial effect on future Project revenues:

0 Currently under construction in Spain is a new motorway whch connects with the IPl on the Portuguse border at Huelva. This is expected to be operational in October 2001. The north-south 1P1 motorway is currently being extended by ERISA from Lisbon to link to the east- west 1P1. This is expected to be completed in August 3003.

0 The IEP is building two more connecting roads to the Concession motorway. These coniiections will be at Tavila and Olhso.

8.1 Income until 31 December, 2003 Existing sections transferred by the State: Payments are fixed as at 1st January. 1998 and have increased by a formula based on the Portuguese CPI at 4,000,000 EsclKmlYear. from the first day of the month following the transfer to Euroscut of the existing motorway, provided that a certain operation and maintenance standard is achieved.

0 Sections constructed by Euroscut:

33 In the event of the new motorway sections being completed before the initial four year period has expired (that is. beforc 31 December, 2003), Euroscut will have the right to additional payments equivalent to 50 per cent. of those payments due with the low tariff (first price band), up to a maximum of 10,000.000 Esc/ WYear. plus a fixed instalment of 10.000,OOOzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA EsclKmlYcar. This sum was fixed in June 1998 and has since increased in line with the Portuguese CPI. The base case for the fixed income makes the following assumptions: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Eiid of Section ConsrructioiizyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATransfer Date Lagos - Lagoa .. 11 April, 2003 - Lagoa zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- Alcantarilha .. .. I1 February, 2003 - Alcantarilha - Guia .. .. N/A 8 June, 2000 Guia - Vila Real de Sto. Antonio ...... N/A 1 November, 3001 The projected revenue (in rounded figures) during the first four years is as follows:

Year 1 €1 00,000 Year 2 f490.000 Year 3 €2,000,000 Year 4 f4.400,000 These projected revenues are calculated according to the following tables:

24 REVENUES FOR YEARS 1 - 4 (figures in million Euro except where indicated)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Lagos - Lagoa Section 26.5 kni 2000 2001 2002 2003 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYear 1 Year 2 Year 3 Yecir. 4 a) Fixed Instalmerit BasezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA number .. 0.05 0.05 0.05 0.05 Km .. 26.5 26.5 26.5 26.5 Opcrational Factor .. O.OO?,b o.ooo/o 0.009,; 55.62% Inflation factor .. 1.04 1.os 1.10 1.11 Total Fixed Instalment .. 0 0 0 0.82 b) Vm%ibIe Ii~stalnient Equivalent daily traffic .. 13,368 Knl .. 36.5 36.5 36.5 26.5 Fixed Factor .. 0.50 0.50 0.50 0.50 Base number (EscudodKm) .. .. 7.31 7.42 7.54 7.66 Operational Factor .. o.ooo/; 0.00% 0.00% 5 5.6290 Total Potential Variable Instalment .. 0.00 0.00 0.00 1.37 Minimum Between Fixed and Variable 0.00 0.00 0.00 0.82 Final Variable lnstalment .. 0.00 0.00 0.00 0.82

Total Payment Lagos-Lagoa Section 0.00 0.00 0.00 0.82

Total Revenue Lagos-Lagoa Section 0.00 0.00 0.00 1.64

Lagoa - Alcantarilha Section 9.1 bll 2000 2001 2002 2003 Inr I Year 2 Yem 3 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYecii. 4 a) Fixed Imtabiiettt Base number .. 0.05 0.05 0.05 0.05 Km .. .. 9.1 9.1 9.1 9.1 Operational Factor .. 0.00% o.oo”/o 0.00YP 72.33% Inflation factor ., 1.04 1.os 1.10 1.11 Total Fixed Instalment .. .. 0.00 0.00 0.00 0.37 b) Variable Irtstcrlment zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Equivalent daily traffic .. .. 20,860 Km .. .. 9.1 9.1 9.1 9.1 Fixed Factor .. 0.50 0.50 0.50 0.50 Base number (Escudos/Km) .. .. 7.31 7.42 7.54 7.66 Operational Factor .. 0.00% o.oo”/x O.OO”/’n 72.33% Total Potential Variable Instalment .. 0.00 0.00 0.00 0.96 Minimum Between Fixed and Variable 0.00 0.00 0.00 0.37 Final Variable Instalment .. 0.00 0.00 0.00 0.37

Total Payment Lagos-Lagoa Section 0.00 0.00 0.00 0.37

Total Revenuc Lagos-Lagoa Section .. 0.00 0.00 0.00 0.74

25 Alcantarilha-Guia Section 9.3 knr 2000 2001 2001 2003 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYear 1 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYeur 2 Year 3 Yeur 4 a) Fixed Instnhiient BasezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA number .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA0.02 0.02 0.02 0.02 Km .. ..zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 9.3 9.3 9.3 9.3 Operational Factor .. 50.14% 100,0O'l/o 100.00% 100.00% Inflation factor .. 1.04 1.06 1.10 1.11 Total Fixed Instalment .. .. 0.10 0.30 0.20 0.21 b) Vuriuble Instubnent .. NIA N/A NIA N/A zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Equivalent daily traffic .. .. Km .. .. Fixed Factor .. Base number (EscudosKm) ,. Operational Factor .. Total Potential Variable Instalment .. Minimum Between Fixed and Variable Final Variable Instalment ..

Total Payment Alcantarilha-Guia Section .. 0.10 0.20 0.20 0.21

Total Revenue Alcantarilha-Guia Section .. 0.10 0.20 0.30 0.21

Guia - Vila Real de Sto. Antonio Section 52.2 bn 2000 2002 2003 Year 1 Yew 3 Yecrr 4

zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA0 0 0 0 a) Fixed Iiistalitiertr .. Base number .. 0.02 0.07 0.02 0.02 Km .. .. 82.2 82.2 82.2 83.3 Operational Factor .. 0 .oo"/o 16.44'/0 100 .OOYo 100.00"/0 Inflation factor .. 1.04 1.os 1.10 1.11 Total Fixed lnstalment .. .. 0 0.29 1.80 1.83 h) Variable Iiistlzltneiu N /A NIA NIA NIA Equivalent daily traffic .. .. Km .. .. Fixed Factor .. Base number (PTEIKrn).. .. Operational Factor .. Total Potential Variable Instalment .. Minimum Between Fixed and Variable Final Variable Instalment ..

Total Payment Guia - Vila Real de Sto. Antonio Section.. .. 0.00 0.29 1.so 1.83

Total Revenue Guia - Vila Real de Sto. Antonio Section.. .. 0.00 0.29 1.80 1.83

26 8.2 Shadow Toll Revenue For the purposes of the shadowzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA toll base case projections. 2000 is taken as the base year. and the base traffic and the subsequent traffic growth changes (both for light and heavy vehicles) are adjusted in line with the different assumptions applied to each scenario. The base case has been prepared having taken into consideration the traffic figures provided in the Halcrow Fox report. In the base case a medium sccnario (between the optimistic and pessimistic scenarios also prepared for BAFO) has been adopted. This predicts traffic increasing in the following manner: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGrowth Groi rrh Grnndz Groitdt 2001 -2005 2006 -2010 2011 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- 1020 2021 -2030 Lagos - Lagoa .. .. (1.58%) 3 .160;'0 1.30/n 1.30",'0 Lagoa - Alcantarilha .. 4.275'0 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA3.12Y.iO zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2.30% 1.3 O",; Alcantarilha - Guia .. .. 10.19Y0 3.22% 0.90?/0 0 .OO% Guia - Vila Real de Sto. Antonio .. 5.637'; 3.200,.; 3.06Yn 0.76%

The length attributed to each car journey for the purposes of calculating revenue depends on the length ascribed to the point in which the counting is made. Thc following table shows the breakdown of counting points:

Secrioii Leiigth iii kills

Lagos - Odiaxere .. 3.60 Odiaxerc - Mexilhoeira .. 5.10 Mexilhoeira - Figuiera .. 3.40 Figuiera - Portimao .. 6.30 Portimao - Lagoa .. 8-10 Lagoa - Alcantarilha .. .. 9-10 Alcantarilha - Algoz Pera .. 3.10 Algoz Pera - Guia IP1 .. 6.20 Guia IP1 - Boliqueime .. 13.20 Boliqueime - Loule .. s.10 Louk - Faro Oeste .. 5.60 Faro Oeste - Faro Este .. 7.00 Faro Este - Moncaparacho .. 11.60 Moncapararho - Tavira .. 10.80 Tavjra - Monte Gordo .. 19.90 Monte Gordo - Castro Marin 6.00

Total.. .. 137.10

This table is used for the sole purpose of calculating shadow toll revenue. On the basis of these figures the base case projected revenues are outlined in the tables on the nest two pages.

27 PROJECTED REVENUES 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- 2015zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

BAND 1 Daily Floor ._ .. ._ .. _. ._ 0 0 0 I1 0 (1 (1 0 0 0 (1 (1 u 0 t1 0 Dnily Cap .. , ...... 1.~2.391zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 1.618.415 1.634.~1,650.945 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1.667.454 1.684,129 1.?(m.970 1.717.980 1.735.160 1,752.51 I 1.770.0~ 1.778.887 1.787.781 1.7~6.720 1.805.703 1.814.732 ------EPlective Daily Traffic (Equivalent Vehiclw) 1.667.454 t.hh7.454 I h84.129 I .1110.9711 1.7 17,980 I .735.16U 1.752.5 t I I .770.036 1.778.887 1.787.781 I .?96,?211 1.805.703 1.814.732 ~----~___----~- zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Real Tarifl (MEIKrn) _. .. ._ .. 1.00 7.0U 7.011 7.00 7.M 1.011 7.00 1.011 7.U0 7.00 7.00 7.00 7.00 7.00 7.110 7.00

Current Tarifl(PTE/Km) .. ._ _. 7.3 I 1.56 7.68 7.80 ’ 7.91 8.0s 8.17 8.m 8.43 8.57 8.70 8.84 8.98 9.12 9.26 9.41 ~~~-~-~~~-~~- Total Revenups Band I (million Euro) _. 23.68 24.05 24.67 2S..1l 25.97 26.64 27.33 28.04 28.67 29.22 29.83 30.45 31.08 ~~~~~-~___~-~~~ BAND 2 Daily Floor ._ __ _. ., .. ., .. 1.6l12.391 1.618.415 1.634.599 1.650.945 1,667,4.54 1.684.129 1.7110.~70 1.717.980 1.735.16(3 1.752.51 I 1,770,036 1.778.887 1.787.781 1.796.720 1.805.703 1.814.732 Daily CapzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ._ .. .. _. .. __ .. 1.637.961 1 .6S8.538 I .740.750 1.794,654 I .850.308 1.907.772 l.950.823 1.994.8711 2.039.937 2.1186.1)48 2.1 33,229 2.1 66.572 2.2011.469 2.234.930 7.269.965 1.305.585 ~---~~~~~-~-- Effective Daily Traffic (Equivalent Vehicles) 181.854 182.854 223.643 249.853 276.890 3114.777 333.537 363,193 387.685 41 2.688 438.210 4h4.262 490.S51 ------~-- Real TarilT (PTWKtn) ...... 4.20 4.20 4.?(1 4.20 4.31 4.21) 4.20 4.21) 4.20 4.20 4.211 4.211 4.10 4.20 4.X 4.20 00 Current Tariff (PTE/Km) _. _. ._ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA4.38 4.54 4.61 4.68 4.75 4.83 4.90 4.98 5.06 5.14 5.22 5.3n 5.39 5.47 S.56 5.64 ~~~~---~----~ Total Revenues Band 2 (million Euro) ,. 1.56 I38 1.97 2.23 2.51 2.81 3.12 3.4s 3.74 4.05 4.36 4.70 5,lN ~~~----~~--~- BAND 3 Daily Flour ...... I .637.9hl 1.688.538 1.740.750 1.794.654 I .850.308 1.907.771 1,950.823 I .444.870 7.1139.937 2.086.048 2.1 33.219 2.1 66.572 2.7n0.469 7.334.w~ 2.2h9.96S 2.105.585 Daily Cap .. _. ._ ...... I .9l8.449 1.1116.229 2;l 19.193 1.727.618 2.341 -817 2-46?. I37 2.SSll,hO3 2.647.485 1.737.913 2.837.0M 2.9411.062 2.993.142 3.049.19h 3.1OS.550 3.1 62.916 1.211.450 ~~------zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Effective Daily Traffic (Equivalent Vehicles) 190.004 777.186 308.850 345.257 378.316 414.445 431.66s 46n.015 504.4711 550.704 s98.128 613.~6 h38.610 ~~~~~~--~~~-- Real T;irifl (PTEIKin) .. .. _. . 3.31 3.31 1.31 3.3 I 3.31 3.31 3,3l i31 3.3 I 3.3 I 3.31 3.3 I 3.31 3.3 I ?,.?I 3.3[ Ctirren! TxilT(FTE/Kiii) ._ .. .. 3.45 3.57 3.63 3.69 3.75 3,SO 3.86 3.93 3.99 4.1)s 4.1 I 4.18 4.24 4.3 I 4.38 4.4s ~~---~~--~~~~ Total Revenues Band 3 (million Euro) .. 1.28 1.89 2.14 1.43 2.711 2.94 3.18 3.45 3.84 4.26 4.69 4.89 5.09 ~~~----~-~--~ I Total Revenues For All Three Bands (mittion Euro) 0.OU 27.52 28.78 2’1.97 31.18 32.38 33.63 34.93 36.31 37.52 38.89 40.114 41.22 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA------~------PROJECTED REVENUES zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2016 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- 2030 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 21116 1'017 31/44 ?(l/Y 2~120 2lL? I 21122 2023 1024 2025 2Wh 2027 2028 2029 Yiw I7 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYLW Id zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAl'wr 19 I'cjrrr 211 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAYLW 21 Yoor 22zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Yiw 2.3 Ycwr -74 Yoor IS I'iw 2A Yijur 27 YIW 28 Yiw 24 YNN 31) ~~ ~~~ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA-~ BAND I Daily Flour .. .. _. ._ .. .. __ 0 0 I) 0 1) 0 0 0 0 0 0 0 0 0 Daily Cap .. ._ ...... 1,823.806 I 332.925 1,842,089 1 ,R5 I,300 1.8h0,55h I ,8h9.859 1.879.208 I .888.604 I ,898-047 1 .9O7.538 I ,9 17,075 I ,92h,h6 1 1.936,294 1.945,975

~-~~ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA~---~~ Effective Daily Traffic (Fquivafent Vehicles) ,, l.823,806 I -832.925 I .842,089 I .85 I .300 I .86(1,556 I .8h9.X59 I .879.208 I .888,W4 1,898.047 I .W7.588 1.9 17,075 I .92h,hb I I -936,294 1.945,975

~~~~-~~~ Real Twin' (PTEIKni) .. ., .. _. .. 7.00 7.00 7 .on 7.w 7 .on 7.00 7." 7sm 7.00 7.00 7.00 7.00 7.00 7.00 Current T;irifT (PTE/Kni) ., ...... 9.56 9.7 I 9.Xh 10.n1 10.17 10.33 10.49 I0.hh 10.83 11.0(1 11.17 11.35 11.53 11.71

~--____~~~~~~~ Total Revenues Band 1 (million Euro) ,, .. 31.73 32.39 33.06 33.75 74.46 35.17 35.91 36.65 37.42 38.20 38,99 39.80 40.63 41.48

~~ -~ ~~~~~~~ BAND 2 Daily Floor .. ._ __ __ .. .. ._ I ,823,806 1.832,925 1,842,089 I .851,300 1 .860.556 1,869.859 I,879.208 I .8XX,M)4 I ,898J147 1.907.538 I .9 17.075 1,926.66 I 1.936.294 I.945,975 D;iily Cap .. ,, ...... ,, .. 2,341,800 2,378.620 2.416,056 2,454.1 19 2.492.820 2-513,660 2534,090 2,555.913 2,577,330 2.598,943 2,620.754 2,h42,76h 2.h64,979 2,687,397

-~~~~~~~~ Effective Daily Trdflic (Equiialent Vehicles) .. S 17.994 545,695 573,967 602,8 19 632.204 h43.XO I 055.482 667.309 679.283 691.405 703,h79 7 I h. I05 72X,685 741,422 t4 ~~~~~~~~~~~____~~ W Rcd TxtitT (PTEKm) ., ,, ...... 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 4.20 11.20 Currcnt Tiirif'l' (PTEIKni) ., ...... 5.73 5.82 5.92 6.1) I 6.10 6.2(1 h.30 6.4 6.50 6.60 6.70 6.81 6.92 7.02 -~--~~--~- Total Revenues Rand 2 (mitlicin Euro) ,, __ 5.4 I 5.79 6.18 h.59 7.03 7.27 7.51 7.77 8.03 8.31 8.59 8.88 9.17 9.48

~~~~ ~~ BAND 3 Daily Fluor .. .. __ __ .. .. __ 2,341,81)0 2.378,620 2,41hJ)Sh 2,454.1 19 2.492,820 2.51 3.000 2.S34.690 2.555.91 3 2.577.330 2.598.943 2.620.754 2542.766 2.664.979 2,687,397 Daity C';ip _. .. .. __ ,. .. __ 3,2H 1. I47 3.342,042 3,404, I62 3,467,534 3.527,590 3,560.8'34 3.594,h23 3.628.782 3,663.37X 3.h98.4 I7 3,733.90s 3.769.84R 3,806,254 3.843, I28 ----~------EFTective Daily Traftic (F,quivalmt Vehicles) .. W4,OIO 652.(H)S 658,08 I 662.437 664,7 I I 685.h66 707.266 729.526 730.280 731.07 I 729.201 726.932 724,660 722.383

~~~~~ ~~~~~~~~ Rc;il Tririfj'(PTWKn1) ._ ...... __ 3.71 3.31 3.3 I 3.31 3.3 I 3.31 3.3 I 3.3 I 3.3 I 3.31 7.3 I 3.3 I 3.31 3.31 Current TariK (PTP/Kni) __ ...... 4.52 4.5') 4.hh 4.74 4.x I 4.89 4.M 5.04 s.12 5.20 S.28 5.37 5.45 5.54 ~~~-~~~-~~~~~ Total Revenues Band 3 (million Euro) .. .. 5.30 5.45 5.59 5.71 5,x2 (1. IO 6.34 6.6') 6.8 I 6.92 7.01 7.1I1 7.19 7.28 ~~~~~~~~~~~~-~ Total Revenues All Three Bands ,. ., ., 42.43 43.62 44.83 46.06 47.311 48.54 49.81 51.12 52.26 53.43 54.5c) 55.78 57.(#) 58.24 (million Euro) ---~~~~~~~~~~~ ------8.3 Scrvicc Station Revenues Base case nssuiiiptioiis zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Gas price:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA100 PTE/Litre Consumpti on : 10 Litred100 Km Profit on gas: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA8% Euroscut’s percentage of profits: 30Yn

Revenue (Million Yeur Euro)

1 (2000) 0 2 (2001) 0 3 (2002) 0 4 (2003) 0.61 5 (2004) 0.65 6 (2005) 0.69 7 (2006) 0.73 8 (2007) 0.76 9 (2008) 0.80 10 (2009) 0.84 11 (2010) 0.88 12 (2011) 0.92 13 (2012) 0.97 14 (2013) 1.01 15 (2014) 1.05 16 (2015) 1.09 17 (2016) 1.13 18 (2017) 1.16 19 (2018) 1.20 30 (2019) 1.24 21 (2020) 1.28 22 (2021) 1.31 33 (2022) 1.36 24 (2033) 1.40 25 (2024) 1.43 26 (2025) 1.47 27 (2026) 1.50 28 (2027) 1.54 29 (2028) 1.57 30 (2029) 1.61

Total Revenue 30.20

30 9. PROJECTED EXPENDITURE 9.1 Dircct Expenditure The total direct expenditurezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA until 31 December, 2003 is projected to be the following: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Item Milliori Euro

Civil Works .. 313.19 Equipment zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 5.95 Maintenance during construction .. 1.09 Project and Engineering .. 1.71 Expropriation .. .. 12.72 Bidding Overheads .. .. 1-34zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Compensation to IEP .. 0.49 Miscellaneous .. .. 0.32 Guarantees and Insurance .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2.06 Total .. 237.98

Although the completion of construction is scheduled to take place by 31 December. 2003. the construction expcnses will be incurred during the first three years of the Concession. However. in order to calculate the total amount to be financed through long tei-ni finance, additional items have been taken into account such as operational cash-flow (this is expected to be negative in the first four years as the instalments to be paid bv tbc State will not be able to cover the maintenance expenses of the transferred sections of motorway and of the sections of motorway completed before the end of the fourth year)?financial expenses, fees and other related expenses.

9.2 Other Expenditure Euroscut has approximately PTE 3.500 million remaining from the equity investment of PTE 9.075 million. The main current expense itcrns are ordinary maintenance expenses. overhead expenscs. concessionaire expenses and other maintenaiice cxpenses. Other major expenses include thc follou ing: 0 Extraordinary maintenance expenses. whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA arc concentrated in years 2005. 2006. 2012. 1013. 2016. 2017. 2013, 2024, 2027 and 2029:

0 Deferred investment. which is concentrated mainly in 2012 and 3074. with minoi- expcnditure in 2013. 2014. 2025 and 2026.

31 The following table outlines Euroscut's projected expenditure during the life of the Project. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Projcct Expenses (Base zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBACase Projections) (PTE inillion,) Mi,!ucl1unt.oir.szyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA hhc elluneoiis Ordiitarr E.vtruordinut-j- Orerheud CoiiresJion Muinreituncr To tu1 Opci-uling Yeor Muiiirenunce Muinrenurrcr E.xpen.rw E.xpeiiscs Espenses E.ypeii.res

1 (2000) 18 0 73 36 41 169 2 (2001) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA149 0 93 46 52 340 3 (2002) 387 0 114 57 64 62 1 4 (2003) 539 0 104 67 76 785 5 (2004) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA517 0 157 78 88 840 6 (2005) 533 535 195 89 101 1.453 7 (2006) 550 697 219 101 I14 1.681 8 (2007) 547 0 224 103 116 985 9 (2008) 604 0 229 105 118 1.056 10 (2009) 559 0 240 106 170 1,025 11 (2010) 557 0 246 108 127 1.033 12 (201 1) 636 0 252 110 124 1,123 13 (7012)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 592 1,587 257 I12 126 2,674 14 (2013) 590 49 1 262 114 128 1.585 15 (201.1) 656 0 267 116 131 1,169 16 (7015) 628 0 272 118 133 1.152 17 (2016) 645 874 279 120 135 1.053 18 (2017) 659 1,331 285 122 138 2.535 19 (2018) 662 0 290 124 140 1.216 20 (2019) 683 0 296 127 142 1,248 21 (2020) 70 1 0 303 179 145 1.278 22 (2021) 697 0 309 131 147 1.285 23 (2022) 719 0 316 133 150 1.318 24 (2023) 767 1.747 32' 136 153 3,120 25 (2024) 720 1,259 326 138 155 2.598 26 (2025) 74 1 0 33 1 140 158 1.370 27 (2026) 807 0 338 133 161 1,449 78 (1027) 787 1.890 344 145 164 3,331 29 (2028) 750 0 347 148 I67 1.411 30 (1029) 899 1,639 354 150 169 3.213

18,289 12.049 7,645 3,353 3,775 45.1 14

32 10. OPERATION AND MAINTENANCE The operation and maintenance of the motorwayzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA will be pcrformcd by Euroscut itself, with the support of Cintra. Cintra will be fully involved in the operation and maintenance of the road through secondment of the employees to Euroscut so that Euroscut can fully benefit from its world-wide experience. Nevertheless, Euroscut has evaluated the possibility of subcontracting the maintenance of the motorway to an experienced company in this area, provided that the company can be under the control of Euroscut and benefit from the technical advice of Cintra. The operation and maintenance of the new 9.3 km section of the lC4/IPl motorway has been sub- contracted to INTEVIAL. the company that is currentlyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA running the maintenance of the IP1 motornaj- from Guia to Vila Real de Sto. Antonio. There is no cap on the total amount of expenses that may be paid out yearly under the operation and maintenance expenses, which will be a Project risk.

11. ENVIRONMENT An Environmental Impact Assessment was conducted by the Portuguese environmental authorities ill 1998 and 1999. As different alternative lay-out and design proposals were possible for the tender. Euroscut appointed the Portuguese independent environmental consultant, IPA, whose views were taken into account during the tender design process. A public information process was also held in 1999, during which individuals and private and public organisations were invited to contribute their opinions on the environmental impact. The result of this process was taken into account by the State in selecting the final designs and lay-outs for the Project. As a result of this process, the current preliminary design. as proposed b!. Euroscut and selected by IEP. strictly complies with all the environmental requirements outlined in the cnvironmental impact studies and the public information process. A similar procedure to that described above is currently being followed for the connection at West Lagos not included in the main Project. The environmental evaluation for this connection is being done under Decree-law number 69/2000 which will establish within a 140 day period the time needed foi- evaluation and approval. This project is currently in the last stage of design.

12. CURRENT FINANCIAL STATUS 12.1 2000 Financial Statements The complete financial statements of Euroscut for the year 2000 are included in full in “Financial Statements of Euroscut” on page 108.

12.2 VAT Rebates Euroscut received a VAT rebate of PTE 381 million in February, 2001 and further VAT rebates of PTE 51 million in September, 2001. These were the result of tax return requests submitted to the Portuguese taxzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA authorities. At the end of the year 2000 Euroscut asked the Portuguese tax authorities to change the system to a monthly declaration system in order to facilitate quicker rebates to Euroscut. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA As of 31 August, 2001 there were outstanding VAT rebates due to Euroscut in the amount of PTE 1.165 million. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

33 12.3 Cash-flow The following tablezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA gives a brcakdown of Euroscut’s cash-flow as of zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA30 June, 2001: EUROSCUT CASH-FLOW

PTE Euro finillion) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (thousands) Cash in Shareholders Equity .. .. 9,075 45.266 Financial Revenues zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. .. 172 858 Toll Revenues .. ,. 46 229 VAT Repayments .. 381 1.900

9,674 48,254

Cash out AnticipatedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Advance Payments to Contractors (24,826j Projects .. .. (3:666)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Expropriations .. .. (6,684) Financial Expenses .. (3,995) Advisers and others .. .. (2,968) Administration .. .. (529) Motorway Maintenance .. (100)

(7,979) (39,799)

Total .. .. 1.100 5,487

13. SUMMARY OF THE CONCESSION AGREEMENT The Jbllowiiig is a brief sumrnuiy of certniii provisions of the Concessioii Agr:reemeiit between the Store aiid Euroscut. This descriytionzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA does not purport to be complerezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and is qualified in its entirety bv rejererice to the jull test zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAof the Concession Agreement. Reference should also be nude to the Glossary on page 140. General The Concession Agreement has a term of 30 years commencing at the date of signature. Under the Concession Agreement Euroscut undertakes to complete the motorway section between Lagos and Lagoa by April 2003 and the section between Lagoa to Alcantarilha by February 2003. The construction activities are stated to begin nine months after the signature of the Concession Agreement. Once the construction is completed, the IEP will check whether the works satisfy the technical specifications defined in the Concession Agreement. Once the works have been approved by the IEP Euroscut is entitled to open the service on the motorway.

Performance Bonds In order to guarantee its obligations to the State during the construction and operation phase, Euroscut will deliver a bank guarantee of a minimum of PTE 500.000,OOO. During the construction phase this figure is calculated as being 5 per cent. of the construction annual budget and during the operation phase as being 1 per cent. of the tangible fixed assets (this amount being updated annually in accordance with the Portuguese CPI).

Shareholders’ Transfer Restriction The transfer of Euroscut’s shares requires prior authorisation from the State until three years after opening all sections of the motorway to traffic. For the remainder of the Concession. the initial shareholders must maintain a qualified majority of votes in the general meetings of Euroscut, enabling them to appoint the majority of the members of the board of directors, to amend the articles of association and to approve any resolution in a general meeting. 34 Expropriation Under the ConcessionzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Agreement the State assumes the obligation to expropriate the necessary land in order to carry out the works. For the purpose of the expropriation process, Euroscut will pay to the State a maximum amount of PTE 2,400,000,000. Any costs in excess of this amount will be borne by the State. In case of delays (exceeding 60 days) in handing over the expropriated plots to Euroscut, Euroscut will be entitled to obtain the “Financial Rebalancing” as outlined in the Concession Agreement (see “Financial Rebalancing” below).

Force Majeure The Concession Agreement states that Euroscut shall not be considcred liable for the non-pcrformance of those obligations arising from the Concession Agreement which cannot be duly complied with as a conscquence of Force Majeure events. Force Majeure events under the Concession Agreement result in an obligation for the State to indemnify Euroscut as reflected in the “Financial Rebalancing”. Continued Force Majeure events may result in termination of the Concession. as described below.

Financial Rebalancing The Concession Agreement specifies that if any of thc following events occurs:

(i) A breach by the State of its obligations. comprising, iiztel- alia. the opening of comperiiq roads not projected in the national roads plan (the plan that haszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA beenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA used as a base for the traffic study); (ii) A change in the ordcrs imposed by the State or changes to the operational requirements of thc Concession; (iii) A Force Majeure event and/or delays in expropriation and other State obligations: (iv) Any legislative modifications which impact dii-ectly on thc income or costs in respect of any part of the Concession; or (v) Any other circumstance where entitlement to financial re-balancing is expressly contemplated in the Concession Agreement: then Euroscut will have the right to have its financial situation I-e-balanced by means of compensation that aclueves, at minimum. two out of the following three targets:

(1) Restoring the annual debt service cover ratios projected in the base case financial model until the end of the Concession: (ii) Restoring the loan life debt service cover ratio projected in the base case financial model: or (iii) Restoring the Shareholders’ IRR projected in the base case financial model. Under the Concession Agreement the compensation will take the form of a payment from the State and/or an increase in toll tariffs and/or any other method agreed by the parties.

Expiry Date The Concession will expire 30 years after the date on which the Concession Apxment is signed. Upon expiration, Euroscut will return to the MES all the works and infrastructures subject to the Concession in the conditions stated in the technical base section of the Concession Agreement so that the continuity of the service is guaranteed. Euroscut will take all measures to make sure that these conditions are met. A failure to comply with the conditions will give MES the right to call the performance bonds (see “Performance Bonds’’ below).

Euroscut Default Euroscut is subject to the application of contractual fincs (ranging from PTE 1.000.000 to PTE 20,000,000) for non-compliance with its contractual obligations. Setting the lcvels of the lines is the State’s exclusive right, without prejudice to any revision by the arbitration tribunal. Thc imposition of these fines will not prejudice any indemnity for damages to which the State may be entitled to as a consequence of the breach by Euroscut of its contractual obligations. If the default consists in delays to the service date for the sections, the fines will be applied for each day of delay, with a maximum total amount of PTE 750.000.000. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 35 Prior to the application of any fines. the State must give Euroscut a reasonable time to comply with the relevant obligation. If Euroscut does not comply with the relevant obligation within such a time, thc applicable fines may be imposed. However, the Concession Agreement specifies that fines will not be imposed unless Euroscut has been previously consulted by the State. Certain particularly severc defaults and defaults that remain uncured once the relevant grace period has elapsed may result in the Concession Agreement being terminated. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Termination (i) Breach by Euroscut Certain specified events of non-compliance under the Concession Agreement by Euroscut are considered serious enough to determine its termination. These specified termination events are: abandoning or renouncing the construction. operation or maintenance of the Concession; a Euroscut’s bankruptcy or failure; non-delivery of the guarantees at the times outlined by the Concession Agreement: failure by Euroscut to provide the guarantee or to reinstate the same to its full amount in the terms and within the periods foreseen: giving up, transferring or allowing trespass on all or part of the Concession without previous authorisation; a repeated failure to comply with certain obligations of the Concession Agreement; refusal or inability to reassume the Concession under the tcrms of clause 81.7 of the Concession Agreement, or, a continuation of the situation leading to sequestration; failure to comply with judicial or arbitration decisions; or a repeated failure to comply with the instructions of the State, with prejudice to the execution of the works or to thc operation and conservation of the motorway. (ii) Breach by the State In the event that the Stare breaches an obligation as a result of which the Concession has to be terminated, the State expressly commits to assume Euroscut’s obligations to its lenders under the Finance Documents, in addition to paying any corresponding indemnity. (iii) Force Majeure In the event that a Force Majeure event makes it impossible or unfeasible to continue with the Concession, the State expressly commits to assume Euroscut’s obligations to its lenders under the Finance Documents.

Operation and Maintenance Euroscut will start operation and maintenance on the date the constructed sections enter into service, and, in respect of the transferred sections. started operation and maintenance on 30 June, 2000. Six months after the signing of the Concession Agreement, Euroscut is obliged to deliver to the State for approval, an Operation and Maintenance Manual, as well as a quality control plan.

Surveillance Euroscut’s obligations will be supervised by the Ministry of Finance in respect of the economic and financial obligations and by MES in respect of the remaining obligations.

Arbitration Any dispute between the State and Euroscut regarding the application or interpretation of the Concession Agreement may be raised to an arbitration commission consisting of an arbitrator appointed by the State, another one appointed by Euroscut and a third independent arbitrator nominated by the two arbitrators appointed by the parties.

Change Orders The State has the right to modify the characteristics of the planned works to be done by Euroscut if there is a public interest reason, subject to the payment of an indemnification in the event of loss to Euroscut as reflected in the Financial Rebalancing (see above). 36 Toll Escalation The fixed toll andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the fixed structure of the toll bands approved in the Concession Agreement will be adjusted in line with inflation every year.

Reclamation of the Concession During the last five years of the Concession. the State may reclaim the Concession provided that one ycar’s prior notification has been given to Euroscut. In such a case, the State will assume all the rights and obligations arising from the operation, maintenance and financial agreements entered into by Euroscut in connection with the Concession prior to the date of receipt of the notice from the State. Those rights and obligations arising from agreements entered into by Euroscut after the receipt of the notice. where the approval of the State has been given. would also be assumed by thc State. Once six months have elapsed from the date on which the State reclaims the Concession, all guarantees granted by Euroscut and its shareholders will be released.

Confiscation of the Concession The State may temporarily confiscate the Concession in the event that Euroscut does not duly complJ-Kith its obligations under the Concession Agreement. Once the Concession has been confiscated. Euroscut will not be entitled to any furthcr payments under the Concession Agreement for the period during which the Concession remains confiscated. Nevertheless. all payments due and payable under the Concession Agreement prior to the confiscation date must be paid to Euroscut by the State. Once the normal operation and development of the Concession has been achieved. the Concession will be transferred again by the State to Euroscut. In the event that the State does not transfer the Concession to Euroscut within six months from the date in whch the normal operation and development of the Concession is achieved, Euroscut will be entitled to terminate the Concession Agreement. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 14. SUhlblARY OF THE CONSTRUCTION CONTRACT TliezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA follou.ing is u brief sirnimurj. of cermin povisioris of the Consrr*trcrioriContrnct. This desn-@rron does not piirport to be completezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA arid is qualified in in entirerj. bj.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA reference to the full test of tlie Construction Contrcrct entered iiiro bentven Etrsosctrt und u rnii/ti-pui.tTjoint reiitzrre. r’iulscut Coitslrtrquo do Scut do dlgarre. A. C.E. f“Vial5cut” orzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the “Contractor”) Reference should ulso he inude to the Glossas!, 011 page 140.

General Thc Construction Contract provides for the design, engineering, procurement and construction of the motorway sections betwccn Lagos and Lagoa. and Lagoa and Alcantarilha (including the procurement and installation of the traffic control system and related operating equipment) (the “Works”). The Construction Contract has back-to-back provisions. All the obligations and liabilities assumed by Euroscut. as against the State. in the Concession Agreement in relation to thc Works are. as against Euroscut. assumcd by thc Contractor. The joint venture contractor partics are jointly and severally responsible for each obligation arising from the Construction Contract.

Performance Bonds The Contractor is obliged to deliver a performance bond of an amount equivalent to 5 per cent. of the global price of the Works to be performed under the Construction Contract. Further performance bonds will be delivered by the Contractor in the event that additional works are to be carried out by the Contractor under the Construction Contract. Each of the corresponding performance bonds for these additional works will amount to 5 per cent. of the additional price to be satisfied as consideration for the new works. The performance bonds will be released once two years have elapsed from the provisional completion of the Works, after prior authorisation from the State.

Guarantee Period The Contractor is obliged to fix at its own expense any defects arising in the Works during a guarantee period of five years after the issuance of the provisional completion certificate.

31 Environmental The ContractorzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA must comply with, and carry out the works in accordancc with, all the environmental regulations, including, but not limited to the environment impact studies that have been prepared and approved prior to the date the Concession was awarded to Euroscut.

Expropriation Euroscut is responsible to the Contractor for the availability of the Project lands according to the agreed schedule. This obligation is a back-to-back provision from the Concession Agreement, where MES is responsible for completing the expropriation process within maximum agreed delays and within Euroscut’s budgct (PTE 2,400,000.000). Any deviation in the said amount is directly covercd by MES. Delays in the expropriation process as a result of any default by MES allow for a rc-adjustment of the Concession conditions. Project lands used for construction purposes such as plant installation, access roads. pits, dump areas and any other auxiliary use are the Contractor’s responsibility, as is their restitution to their original condition after the completion of the Project.

By-passes, Existing Roads and Utilities The Contractor must, at its own cost: keep the public roads or bypasses through which it may be necessary to divert traffic because of the execution of the Works clear and serviceable for all vehicles. In addition. the Contractor must repair any damage caused to any public motorways used to transport the material. equipment and plant machinery used on the site. The Contractor is also responsiblo for any necessary removal and replacement of utilities (including all necessary permits and associated costs) within the agreed timetable.

Quality The Contractor is responsible for the proper quality and correct execution of the Works and installations as well as for the quality of the materials supplied by the Contractor, its sub-contractors, suppliers, fitters or thrd parties. For this purpose, a quality assurance/quality control plan will be implemented.

Subcontractors The Contractor may sub-contract part of the Works subject to the prior approval of MES. Nonetheless, the Contractor shall be the sole party liable to Euroscut for the execution of thc Works.

Completion of the Works The term for execution and delivery of all the Works, up to the issuance of the final completion certificate, is 35 months after the signature of the Construction Contract, in accordance to the detailed planning proposed in the tender. The Contractor is only be entitled to an extension of time (and accordingly a compensation for additional costs) if the Concession Agreement allows for such extension, or in case of failure by Euroscut to comply with its obligations.

Penalties and Loss of Operating Margin If there is a failure to comply with the contract schedule, the Contractor will cover not only any possible penalty imposed by MES on Euroscut, but also any possible loss of gross operating margin borne by Euroscut due to construction delay, up to a limit equivalent to 10 per cent. of the contract price.

Bonuses for Early Completion In zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the event of early completion and delivery of the Works by the Contractor, provided that such an early delivery is accepted by the State and by Euroscut, Euroscut will pay the Contractor 50 per cent. of the gross operating revenue obtained as a result of the early completion.

Price of the Works The risk of increased construction costs has been transferred to the Contractor as a lump sum to be increased by applicable VAT. This amounts to PTE 43,734,000,000 (excluding VAT). 38 Payment for the Works The Works will be paid zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAfor monthly, with payments to be received 60 days after the Contractor issues the relevant invoice. Invoices must be based on the Works carried out in the corresponding month as reflected in a monthly progress report drafted by the parties.

Advance Payments Euroscut will pay the following amounts in advance upon receipt of performance bonds: 0 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA5 per cent. of the global price (i.e. PTE 2,186.700,000) at the date of signature of thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Construction Contract. 5 per cent. of the global price (ix. PTE 2,186,700.000) upon the completion of 50 per cent. of the Works.

0 5 per cent. of the global price (Le. PTE 2,186.700:000) on the date of the start of the construction (although the Contractor has agreed to postpone this payment until the Bonds are issued).

Final Completion Certificate If the Works have been properly executed in accordance with the speclfications. a Final Completion Certificate will be issued by Euroscut and MES. Where Euroscut or MES do not consider the execution of the Works to be correct or in accordance with the Concession Agreement. Euroscut will notify the Contractor of the same and the latter shall be obliged to rcpair such defects at its own expense until final approval is given b>-Euroscut and MES.

Tcrmination The Construction Contract may be terminated in a number of circumstances including: Unauthorised and material delays in the construction of the Works:

0 Serious deficiencies in the fulfilment of the technical standards defmed in the Concession Agrecment which are attributable to thc Contractor;

0 The Contractor's failure to deliver to Euroscut the invoices evidcncing the payment of the insurance premiums;

0 Unjustified interruption of the Works for a period of time exceeding eight days or. on a non- continuous basis. 15 days: or Material default by Euroscut in its payment obligations to the Contractor.

39 INDEPENDENT ADVISERS Independent Technical Adviser Prointec, S.A. has been appointedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to act as independent technical adviser in relation to the Project. Prointec haszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA conducted an independent revicw (the “Prointec Report”) of the Project and has concluded that: (a) the technical aspects of the Concession Agreemcnr in relation to the Project appear reasonable; (b) Euroscut’s proposals for the Project appear technically sound; and (c) Euroscut’s costings for the Project appear reasonable.

Independent Accountants Emst & Young have reviewed the financial model in relation to the revenue projections for the Project. Ernst zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA& Young are of the opinion that the assumptions that underly the Base Case are reasonable and the calculations in respect of the financial model are accurate. A copy of the Ernst & Young report is included on page 147 (“Annex A”) of this Offering Circular.

Independent Traffic Consultant Halcrow Fox & Associates Ltd. have prepared an independent report (the “Halcrow Fox Report”) on traffic projections for the Project and are of the opinion that the assumptions on which the Base Case figures are based are reasonable.

A copy of the Halcrow Fox Report and the Prointec Report is available for inspection at the specified office of the Bond Trustee and the specified office of the Paying Agent in Luxembourg. The financial model relating to the financial projections outlined in this Offering Circular will be updated and audited annually. A copy of the most up to date audited financial model will be available for inspcction at the specified officc of the Bond Trustee and the specified office of the Paying Agent in Luxembourg. Other than the annual update of the financial model described above it is not anticipated that any further reports will be prepared in respect of the shadow toll revenues as outlined in “Projected Revenues’’ on page 23 of this Offering Circular. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

40 THE FINANCING OF THE PROJECT

Thejollon7iiigis cr suinnzari of the Fiiiaizciiig qf the Project and should be read iii zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAcoipiictioit irirli the rest of‘ thO Ojjeriiig Cil-culmzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and, inzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA relation to defined teims, the GlossiqgzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA set out ut the eitd of thi;\ Offeriiig Circulur. THE BONDS AND THE BOND FINANCIAL GUARANTY Thc following is a summary of the principal tcrms of the TermszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and Conditions of the Bonds (the “Conditions” and each a “Condition”) as set out on pages 63 to 74 of this Offering Circular.

Issuer: Algarve International B.V., a private limited liabilitv company (“hesloten wiiiootschup met beperkte aaiispr~~kelijkieicJ.‘:).incorporated under Netherlands law, having its corporate seat in Amsterdam aiid its registered office at Strawinskylaan 1725: Tower B, 1077 XX Amsterdam. Thc Netherlands. Issue: Euro 126,500,000 6.4 per Cent. Guaranteed Bonds due 2027. Issue Price: 100 per cent. Lead Managers: Banco Santaiider Central Hispano. S.A. and HypoVereinsbank Interest and Payments of interest and principalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA on the Bonds will be due as set out in Redemption: “Tcrms and Conditions of the Bonds - Payments” bclow. Bond Financial An unconditional and irrevocable financial guaranty provided by XLCA as to Guaranty scheduled payments of principal and interest (but excluding Default Interest (as defined below) on the Bonds) and certain additional amounts in respect of Dutch withholding taxes in respect of the Bonds and United States R-ithholding taxes in respect of the Bond Finaiicial Guaranty will be issued in favour of the Bond Trustcc. Counter-Indcmnity: The Issuer will be obliged to reimburse XLCA in respcct of payments made under zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAthe Bond Financial Guaranty. In addition. XLCA will be subrogated to the rights of the Bondholdcrs (as defined below) in respect of any payments madc by it under the Bond Financial Guaranty. Status of Bonds: The Bonds and the Coupons constitute direct, secured obligations of the Issuer which rank and at all times pari piissir and ratcably without any preference or priority among themselves and will rank at least pari pnssir to all unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Status of Bond The Bond Financial Guaranty provided by XLCA in respect of the Bonds Financial Guaranty constitutes a dircct, unsecured obligation of XLCA which ranks and at all times at least pari passu with all other unsecured obligations of XLCA save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Listing: Application has been made to list the Bonds on the Luxembourg Stock Exchange. Rating: The Bonds were rated, upon issue! AAA by S&P. Settlement and Euroclear Bank S.A.1N.V. and Clearstream Banking. societe anonyme, Clearance: Luxembourg and any additional or substitute clearing system outside the United States and its possessions from time to time (nominated in accordance with the Bond Trust Deed). Bond Trustee: Citibank, N.A. acting in its capacity as Bond Trustee. Security Trustee: Citibank, N.A. acting in its capacity as Security Trustee. Principal Paying Citibank, N.A. acting in its capacity as Principal Paying Agent. Agcnt: Form and The Bonds are in bearer form in the denomination of Euro 500,000 each. Denomination: The Bonds were initially represented by a temporary global bond in bearer form, without coupons, deposited with a common depositary for Euroclear and Clcarstream. Luxembourg (the Temporary Global Bondj. The Temporary Global Bond was exchanged. not earlier than 40 days after the issue date of the 41 Bonds and upon certification of non-U.S. bcneficial ownership. for interests in a permanent global bond in bearer form, without coupons. which was also deposited with such common depositary for Euroclear and Clearstream. Luxembourg (the Permanent Global Bond). The Permanent Global Bond will be exchangeablc for definitive bonds in bearer form, with coupons for principal and interest attachcd in the limited circumstances described under “Summary of Provisions relating to the Bonds while in Global Form”. Taxes: All paymentszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of principal and interest under the Bonds will be made free and clear zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAof, and without withholding or deduction for, Dutch taxes unless required by law. If such taxes are imposed then, subject to certain exceptions. the Issuer will pay additional amounts so that the Bondholders and Couponholders receive the full amount of principal and interest which would otherwise have bcen received. All payments under the Bond Financial Guaranty will be made free and clear of, and without withholding or dcduction for, United States withholding taxes, unless required by law. If such taxes are imposed by the United States, subject to certain exceptions, XLCA will pay additional amounts so that the Bondholders and Couponholders receive the full amount which would otherwise have been received under the Bond Financial Guaranty. Governing Law: The Bonds are governed by English law and the Bond Financial Guaranty is governed by New York law.

SECURITY AGREEMENTS Thefdlowing is a sunintnrj* of certaiiizyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of the provisions of’the Securitj’ Agreenients. It is not exhniistire mid is subject to the detailedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA provisiotis of the Securit!. Agreements. 1. Company Guaranty Under the Company Guaranty governed by English law and dated 2 July, 2001. among the Company. the Security Trustee, the Bond Trustee, EIB, the VAT Facility Agent and XLCA (the “Company Guaranty”). the Company agrees to guarantee all of the Senior Debt Obligations (as defined below). “Senior Debt Obligations” means the obligations to pay principal, interest (including any interest accruing after the filing of a petition with respect to, or the commencement of. any proceeding. whether or not a claim for post-petition interest is allowed in such proceeding), any premium and additional amount in respect of Senior Debt (defined in the Common Terms Agreement to mean debt of the Issuer issued to or held by the Senior Creditors). and any withholding or similar tax required to be withheld in accordance with any applicable law in respect of Senior Debt, as well as any and all commissions, fees. indemnities, additional amounts, reimbursements, prepayment premiums and other amounts payable under the agreements relating to the Senior Debt.

2. Company Security Agreement As security for the Company’s obligations under the Intercompany Loan Agreement and the Company Guaranty (as defined above), under a security agreement governed by Portuguese law and dated 2 July 2001, among the Company, the Shareholders (as defined below). the Issuer. XLCA, EIB. the VAT Facility Agent, the Bond Trustee and the Security Trustee the Company agrees to grant security over (a) some of its assets and (b) its credit entitlements from the State and the Shareholders agree to grant security over the sharcs of the Company. “Shareholders” means Cintra, Ferrovial-Agroman. S.A., ConstruGGes Gabriel A.S. Couto, S.A., ECOP-Ernpresa de ConstruqGes e Obras Publicas de Arnaldo de Oliveira. S.A., Eusebio & Filhos, S.A., Empreiteiros Casais de Antonio Fernandes da Silva, SA., J. Gomes-Sociedade de ConstrucdeszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA dc Chado. S.A., Aurelio Martins Sobreiro & Filhos, S.A. and Antonio Alves Quelhas, S.A.

3. Dutch Pledge Agreement In order to secure the payment in full of the Secured Indebtedness (as defined below), under a Dutch Pledge Agreement governed by Dutch law and dated 2 July: 2001. between the Issuer and the Security Trustee, the Issuer agrees to create a first priority disclosed right of pledge (”openbnar pmzdreclir eerste in rang”) on the Collateral (as defined below). 42 The Issuer pnts and, as the case may be, grants in advance (“bij voorbanr”) a right of pledge (“ymicireclit”) on the Collatcral to the Security Trustee in accordance with SectionszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 3236 paragraph 2 and 3:94zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA paragraph 1 of The Netherlands Civil Code. to secure to the Security TrusteezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the payment in full of the Secured Indebtedness. The Collateral is pledged to the Security Trustee with all dependent and affiliated rights (“rLfliuiikelijke en nei~eiirechreii”)connected therewith. In so far as necessary, the Issuer irrevocably authorises and gives power of attorney to the Security Trustee foor the duration of the right of pledge on the Collateral to exercise such rights on behalf of the Issuer. “Secured Indebtedness“ means (i) the Secured Obligations (as defined below) and (ii) the Parallel Debt (as defined in the Common Terms Agreement). in so far as (i) and (ii) consist of obligations to pay a monetary claim (“i~erhiiztenissentot betaliiig iwi eeii geldsoin”) to the Security Trustee. “Secured Obligations” meanszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA at any time all amomts which are or at any time in the future may become payable to the Beneficiaries or the Security Trustee under the Finance Documents. including contingent liabilities (as defined by GAAP) (and shall include, without limitation. an!. obligations of the Company or the Issuer which may from time to time arisc by way of subrogation). “Collateral” means (i) any and all of the Issuer’s present and future claims (whcther actual or contingent) (“i~oi.~eri~igsrechteiioy itiiuiii”) against the Issuer’s Account Bank in respect of the general account and any other Issuer account that may be created pursuant to the lssuer Accounts Agreement; (ii) any and all of the Issuer’s present and future claims (whether actual or contingent) (“I.or~eriIigsreclrteiiop /7um7’.) against the Company under the Intercompany Loan Agreement: and (iii) any and all of the Issuer’szyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA present and future claims (whether actual or contingent) (“~~or.ner.iiz~s~~~l?te~iop iicmni’’) against Citibank. N.X. as the Company’s account bank pursuant to the Company Accounts Agreement. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 4. Deed of Pledge of Shares Under the Deed of Pledge of Shares. between the Issuer. its shareholders and the Security Trustee. governed by Dutch law and dated 2. July 2001. the shareholders of the Issuer agree to provide securit! to the Security Trustee for the discharge of the Secured Indebtedness (as dcfined above) by granting a right of pledge over their shares in the Issuer in favour of the Security Trustee.

INTERCOMPANY LOAN AGREEMENT The .followiiig is n summur.?. of certain of the proi-isions qf the Iiirerconipiinj* LOCII~Agreenieiit. It is not e.diuustii3e mid is subject to the detailed prorisioiis qf the Interconipaiig. Loaii Agreement. Under the Intercompany Loan A@-eementgoverned by English lau- and dated 2 July, 2001. between the Issuer, the Company and the Security Trustee the Issuer agrees to lend to the Company all of the proceeds of the issue of the Bonds. the borrowings undcr the €113 Facility and the borroLYings under the VAT Facility. Loans under the Intercompany Loan Agreement (together: thc “Intercompany Loan”) are divided into three tranches: tranche A which reflects the amount of the Bond issue. tranche B whch reflects the amount of the EIB Loans and tranche C which reflects the amount of the outstanding VAT Loans. The interest payable on each of the tranches reflects the interest payable on the underlying bond or loan financing. In the event that the Issuer is obliged to redeem the Bonds or repay the E113 Loans or the VAT Loans. then the Issuer is able to call on the Company to repay the Intercompany Loan in order to finance the redemption or repayment. Similarly the Company can choose to prepay the Intercompany Loan even though the Issuer is not obliged to make any redemption (e.g. where the Bonds are voluntarily redeemed or redeemed for tax reasons) provided that the Issuer is in a position to redcem the Bonds or repay the EIB Loans or the VAT Loans, as the case may be. The Intercompany Loan Agreement provides that all payments by the Company to the Issuer will be free and clear of all withholding taxes. If Portuguese withholding tax is imposed on payments by the Company in respect of the Intercompany Loan. then the Company undertakes to pay an increased amount so as to cnsure that the Issuer receives a net amount equal to that which it would have received but for the withholding. The Company also provides an indemnity to the Issuer under which the Company will make reparation to the Issuer in the event that any Portuguese taxes have to be paid by the Issuer on payments received from the Company under the Intercompany Loan. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

43 INTERCREDITOR DEED Tlie Jollolving is 11 suniniarj. qfzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA certain of the proiVsions of the Intercrediror. Deed. It is 1101 erhaustiw mid is subjecr to the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAdetailedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA provisims of’ the Iutercreditor Deed. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Bonds arc subject to an Intercreditor Deed governed by English law and dated 2 July, 2001 (the ”Issue Date”) (as amended, supplemented or replaced from the to time, the “Intercreditor Deed”) among the Issuer, the Company, the Security Trustee, the Principal Paying Agent, the Bond Trustee. EIB, the VAT Facility Agent and XLCA (together the “Beneficiaries”).

General The primary purpose of the Intercreditor Deed is to regulate the ranking of claims under the finance documents relating to the Project as outlined in the Common Terms Agreement (the “Finance Documents”) and the exercise of and enforcement of rights under the Financc Documents.

The Intercreditor Deed provides for an instructing creditor (the “Instructing Creditor”) to act on behalf of the Beneficiaries in relation to the cxercise of their rights under the Finance Documents (the “Financing Rights”). Specifically the Intercreditor Deed provides that the Instructing Creditor has the exclusive right. power and authority to direct, or to refrain from directing, the Beneficiaries and the Security Trustce in the exercise of their Financing Rights without regard to the interests of any other person and further provides that the Instructing Creditor will not owe fiduciary duties to any person.

Exercise of rights Where the exercise of rights, powers and discretions have been vested in the Instructing Creditor pursuant to the terms of the lntercreditor Deed, the Company and the Issuer are each entitled to deal with and rely upon (as final and binding on the Beneficiaries and the Security Trustee) the decisions made by. waivers, consents and approvals granted by. and agreements reached with, the Instructing Creditor in the exercise by the Instructing Creditor of those rights. powers and discretions. The Security granted to the Security Trustee pursuant to any of the Security Documents will be held pursuant to the terms of the Intercreditor Deed by the Security Trustee on trust for the Beneficiaries. provided that the Security created or contemplated by the Deed of Pledge of Sharcs (see below) and the Dutch Fledge Agreement (see above) will be held by the Security Trustee as security for the amounts due and owing to it pursuant to the Parallel Debt. When excrcising the Financing Rights in accordance with the instructions of the Instructing Creditor. the Security Trustee is not required to have regard to the interests of the Beneficiaries in relation to the exercise of such rights and has no liability to the Bondholders as a consequence of so acting.

Entrenched Rights Each of the Beneficiaries and the Security Trustee have a number of rights outlined in Annexes to the Intercreditor Deed which are expressed to be entrenched rights (the “Entrenched Rights”). The parties have an absolute veto in respect of any matter expressed to be an Entrenched Right in their favour. In addition EIB has a number of specified consultation rights which address a number of areas under which the Instructing Creditor is obliged to consult the EIB before taking action. Other than its Entrenched Rights and, in the case of EIB, the EIB consultation rights, each of the Beneficiaries and the Security Trustee:

0 is not able to exercise any Financing Right to which it is entitled at any time except as directed by, or with the prior written consent of, the Instructing Creditor; and

0 is obliged to exercise the Financing Rights to which it is entitled in accordancc with the terms of any Finance Document as directed by the Instructing Creditor.

Retained Rights Each of the Beneficiaries and the Security Trustee have a number of rights outlined in thc Intercreditor Deed which are expressed to be retained rights (the “Retained Rights”). Each of the Beneficiaries and the Security Trustee may exercise any Retained Right at any time in its sole discretion. Nothing in the Intercreditor Deed affects the rights of the Beneficiaries and the Security Trustee to exercise their respective Retained Rights. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 44 Instructing Creditor XLCA shall be the Instructing Creditor and unless and until such time that a specified XL Event of Default or XL DowngradezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (as these terms are defined in the Intercreditor Decd) has occurred and is continuing. An XL Event of Default 01-XL Downgrade will not be considered cured or waived unless EIB (or, in thc eventzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of an XL Event of DefaultzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA arising out of any failure by XLCA to pay under any Financial Guaranty, the affected Beneficiary) confirms to the Security Trustee that that is the case. Tf there is an XL Evcnt of Default or XL Downgrade the Majority Creditors (see below.) shall act as Instructing Creditor unless and until such XL Event of Default or XL Downgrade is no longer in existence or has been cured or waived. The Majority Crediors are: at any time. Creditors who together hold or are obligated to lend, or as the case may be. more than 66’/3 per cent. of the aggregate of (i) the aggregate outstanding principal amount ofthe Bonds, the EIB Loans and the VAT Loans, (ii) thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA oatstanding amount of any lctters of credit issued under the VAT Facility, (iii) the aggregate undrawnzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA commitment under the EIB Facility and (ii.) the Available Facility (as defined in the VAT Facility)! provided that the Bond Creditor (as defined in the Bond Trust Deed) shall be deemed to bc the holder of all of the outstanding Bonds and the VAT Creditor (as defined in the VAT Facility) shall be deemed to hold all of the Outstandings (as defined in the VAT Facility) and the aggrcgate Available Commitments (as defined in the VAT Facility).

Protection of Security or Financing Rights The Instructing Creditor may. if in its reasonable opinion it is necessary in order to preserve or protect against the imminent risk of serious and irreparable harm to the Security or the Financing Rights of the Beneficiarics taken as a whole, direct the exercise of any of the Financing Rights (includine anj- Entrcnched Right) without having obtained the consent of the applicable Beneficiary. In this case the Instructing Creditor shall consult with the other Beneficiaries to the extent possible prior to such direction. but the Instructing Creditor shall not have any liability to the Security Trustee or any other Beneficiar>-as a result of such direction save in respect of its wilful defaultzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or gross negligence. Enforcement So long as anyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA liabilities of the Issuer or the Companj are or may be outstanding. no-one other than the Instructing Creditor will be entitled to require the Security Trustec to enforce any security conferred by any of the Security Documents or to rcquire any other person to ciiforce the samc. The Sccurity Trustee. if so instructed by the Instructing Creditor (and. for the avoidance of doubt. not otherwise). shall enforce the Security in accordance with the terms of the Security Documents at any time after the Security Documents have become enforceablc in accordance with their respcctive terms.

Powers of Security Trustee The Security Trustee, if instructed to enforce the Security is entitled to give such directions and do such other things in relation to enforcement as it is required to do under or pursuant to the Intercreditor Deed and the Security Documents. Any partial enforcement of the Security Documents wdl be considered to be an enforcement for the purposes of the Intercreditor Deed.

Proceeds of Enforcement of Security Following an enforcement any proceeds of Enforcement or other moneys paid to or collected by the Security Trustee shall be held by the Security Trustee on trust. and applied in the following order (subject to XL’s subrogation rights and payments made to the Principal Paying Agent): (A) with respect to any procceds of enforcement or other moneys paid to or collected by the Security Trustce under the Intercreditor Deed or under any of the Company Security Documents or otherwise held by the Security Trustec on account of the Company as part of the Company Security, to the satisfaction of all amounts payable by the Company under the Intercompany Loan Agreement, whereupon such amounts shall constitute part of the Issuer Security and be applied in accordance with the following paragraphs (E) to (HI; (B) to payment of Step-In Obligor Expenses (as defined in the Common Terms Agreement) to the relevant step-in obligor; (C) to payment to the Security Trustee or any receiver of any unpaid remuneration and all costs and cxpenses; 45 (D) to payment: (i) of the Bond Trustee’s costs and expenses under the Intercreditor Deed and the Bond Trust Deed; (ii) to cach Beneficiary of all amounts due and payable to such Beneficiary in respect of transaction expenses and Beneficiaries’ and Security Trustee’s costs of the Common Terms Agreement. in respect of amounts paid to third parties by agreement among the Credit Parties: (E) to payment to XLCA. EIB, the VAT Facility Agent and the Bond Trustee or (if so directed by the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBABond Trustee) the Principal PayingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Agent and any additional senior creditor of various payments of interest, principal and contractual compensation due to them under the Finance Documents: (F) to payment to the Beneficiaries of: (i) all afiounts then due and payable to the Beneficiaries in respect of transaction expenses, stamp taxes, Beneficiaries’ and Security Trustee’s costs) and the currency indemnity under the Common Terms Agreement (except as outlined in paragraph (D)(ii) above) and all amounts due and payable under Conditions 5(B), (C) and (D) of the Bonds and the provisions of thc VAT Facility Agreement in respect of mandatory costs, stamp taxes, increascd costs. fces. costs and expenses; and (ii) any other amounts due and payable to any Beneficiary; (G) if any liabilities (actual or contingent) remain outstanding. to be retained pending any such amounts becoming payable and being paid; and (H) to the Jssuer and any other person then entitled thereto. any amounts remaining after application pursuant to paragraphs (A) to (G) above.

Payments to Principal Paying Agent not distributed to Bondholders To the extent that a payment has been made to the Principal Paying Agent and not distributed to the Bond Trustee or the Bondholders: (A) where the corresponding payment in respect of the same payment date has not been made to EIB and/ or the VAT Facility Agent, the Principal Paying Agent shall, upon demand by the Security Trustee following an enforccrnent, pay the amount so received by the Principal Paying Agent to the Security Trustee for application in accordance with the provisions of the Intercreditor Deed. provided that the Principal Paying Agent shall not be required to repay such amount if it has already given irrevocable instructions for its distribution to Bondholders; or (B) where the corresponding payment in respect of the same repayment date has been made to EIB and/or the VAT Facility Agent. any proceeds of enforcement or other moneys paid to or collected by the Security Trustee on account of the Issuer as part of the Security comprising the rights of the Issuer under the Paying Agency Agreement shall be paid to the Bond Trustee or (if so directed by the Bond Trustee) the Principal Paying Agent without being available for distribution to the other Beneficiaries.

Balance to be paid to the Issuer or the Company Any balance held by the Security Trustee on discharge in full of the outstanding liabilities of the Issuer and the Company (after providing for payments ranking in priority as a matter of law) shall be paid to the Issuer or the Company. as the case may be.

Obligation to provide information on Senior Debt Obligations Each Beneficiary will, at all times, promptly provide the Security Trustee andlor any receiver on request with a certificate setting out detailed information as to the amount of Senior Debt Obligations owing (actually or contingent) to it and such other information as the Security Trustee and/or any receiver may reasonably require.

COMMON TERMS AGREEMENT The following is a summary of certain ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the provisions of the Common Terms Agreement. It is not exhaustive and is subject zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAto thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA detailedprovisionszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of the Common Terms Agreement. The Common Terms Agreement governed by English law and dated 2 July. 2001 (as anicnded, supplemented or replaced from time to time, the “Common Terms Agreement”) among the Issuer, the 46 Company, the Security Trustee. the Bond Trustee. EIB, thc VAT Facility Agent and XLCA (“CTA”) scts out a number of representations and covenants given by thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Issuer and the Company in favour of the Beneficiaries and the Security Trustee.

Senior Dcbt At any time and from time to time the Issuer may, subject to the requirements of the CTA. designate additional senior debt to be incurred by the Issuer as Senior Debt (as defined in the CTA). Upon satisfaction of certain conditions precedent set out in the CTA. such designated additional senior debt (once incurred) shall be Senioi- Debt entitled to the benefits of the CTA and the Security Documents as Scnior Debt.

Subordinated Debt The Company may incur subordinatcd debt from time to time. In the event of any conflict between the provisions of the CTA and the provisions of any of the agreements relating to the Senior Debt, the provisions of the CTA will prevail.

Representations and Warranties of the Issuer Under the CTA the Issuer makes to each of the Beneficiaries and the Security Trustee. representations and warranties addressing, inrer alia. the following matters: 1. The incorporation.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA exisrencczyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and due authorisation of the Issucr under the laws of The Netherlands; 2. The power and authority of the Issuer to execute, deliver and perform its obli&ationsunder the CTA and each other finance document to wluch it is. os is to be. a party: 3. The legality of the execution, delivery and perfoi-mance of the CTA and each other finance document to which the Issues is, or is to be, a party, the consummation of any of the transactions contemplated thereby and the performance of or compliance by thc Issuer with the terms and conditions thereof: 4. That the Issuer is not a credit institution (“kre~jetiitsre~liiz~”)for the purposes of Dutch law and that the issue of the Bonds are in compliance with all requirerncnts under the Dutch Act on the Supervision of Securities Trade 1995 (” Wer roezicht ejjecteirrer-keer 1995”); -.5 That all payments required to be made by the Issuer under any Finance Document will be made free zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand clear of Dutch withholding tax: 6. That the Issuer’s payment obligations under the Finance Documents rank and will rank at least pari pussu with the claims of all its other unsecured and unsubordinated creditors. except for obligations mandatorily preferred by law applying to companies generally; 7. That in any proceedings taken in England and Wales or in The Netherlands in relation to the transaction documents to which the Issuer is a party, the Issuer will not bc entitled to claim for the Issuer or any of the Issuer’s assets immunity from suit. execution, attachment or other legal process: 8. That no stamp. registration documentary or similar tax is payable. and no fihg or registration is required, in connection with the execution. issue: delivery. registration. notarisation, performance or enforcement of any transaction document, other than the ”iniposto de selo” required to be paid under Portuguese law: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 9. That the Issuer has title to the property, assets and revenues over which it is creating security and the Issuer’s security documents will have the effect of granting a legal. valid and enforceable first-priority encumbrance to the Security Trustee, on all of the property, assets and revenues of the Issuer over which they purport to create an encumbrance, and that all necessary recordings and filings to reflect this have been or will be rnadc; 10. That the Issuer has fully and accurately complied with all registration, recording, filing or notarisation arrangements applicable to any of the Transaction Documents and the security; 11. That neithcr the Issuer nor any Issuer shareholder has taken corporate action, nor has any meeting been convcncd, have any other steps been taken or legal proceedings commenced or threatened against the Issuer, for the dissolution. winding-up or bankruptcy (“J;.rilli~-sei72eiIt’:)of the Issuer or any of its shareholders or for the granting of suspension of paymentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (“na-seance 1mhetaliizg”) of the Issuer or any of its sharcholders and that there has been no corporate action takenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA by the Issuer with respect to a legal merger (“jlcridischeJzrsie”) or legal demerger (“jtrridisclre splirsing”) of the Issuer;

37 12. That there is no outstanding litigation, arbitration or mediation, administrative or criminal proceedings by or before any court, tribunal. arbitrator or other governmental authority in relation to the Issuer; 13. That the information provided by the Issuer to any relevant party or contained in the documcnts does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information contained therein not misleading: 14. That i) this Offering Circular contains all information with respect to the Issuer. the Project and the BondszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA which is material in the context of the issue and offering of the Bonds, (iiJ the statements contained in it relating to the Issuer and thc Project are in every matcrial particularzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA true and accurate and not misleading. fiii) the opinions. projections and intentions expressed in it with regard to the Issuer and the ProjectzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA are honestly held, have been reached after considering all relevant circumstances and are based on reasonable assumptions, (iv) there are no other facts in relation to the Issuer, the Project or the Bonds, thc omission of whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA would, in the coniext of the issue and offering of the Bonds, make any statement, opinion. projection or intention in this Offering Circular mislcading in any material respect, and (v) all reasonable enquiries have been made by the Issuer to ascertain such facts and to verify the accuracyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of all such information and statements; 15. That save for Permitted Encumbrances (as defined in the CTA), no encumbrances exist over all or any of its present or future revenues or assets and the Issuer’szyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA execution of the transaction documcnts to which it is a party and Issuer’s exercise of its rights and performance of its obligations thereunder will not result in the existence of. nor oblige the Issuer to create, any encumbrance over all or any of the Issuer’s present or future revenues or assets (save for Permitted Encumbrances); 16. That as of the lssue Date, all of the issued share capital of the Issuer is legally and bcneficially owned by the Issuer shareholders, and such share capital is fully paid up; 17. That the Issuer has no Subsidiaries (as defined in the CTA), and no interest in the share capital of any corporate body: 18. The Issuer has not received any communications from, nor is aware of any proceeding by any governmental authority that could reasonably be expected to result in a Material Adverse Change (as defined in the CTA); 19. That all tax returns and reports required by law to be filed by the Issuer have been duly filed and all taxes imposed, levied or assessed upon the Issuer. or its propertics or its income or assets. which are due and payable. have been paid, other than those presently payable without penalty or interest and those which are subject to a good faith contest: 20. That no person has (other than as a shareholdcr) any rights to participate in its profits or to call for the issue by the Issuer of any of its share capital and no contract or arrangements, conditional or unconditional, exist whereby any person may acquire or exercise any such right other than pursuant to the Finance Documents; 21. That all representations and warranties given or made or deemed to be given or made by the Issuer under or pursuant to the Transaction Documents to which it is a party arc true and accurate save to the extent that breach of any such representation or warranty would not have an adverse effect on the implementation of the Project or on the relevant rights of the parties thereunder; and 22. That the Issuer does not form and has not at any time formed part of a fiscal unity (‘yfisculeeenheid’) within the meaning of Section 15 of The Netherlands Corporate IncomezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Tax Act 1969 (“Wet op de vennootscltupshelasting 1969”) and Section 7(4) of The Netherlands Turnover Tax Act I968 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(“ Wet op de onrethelasting lY68”). Representations and Warranties of the Company Under the CTA the Company makes representations and warranties in favour of the Bcneficiaries and the Security Trustee in the same terms as are outlined in numbers 1,2,3,5,6,8,10 and 12 to 14 of the Issuer’s representations above (save that references to the Issuer are to the Company and refercnces to The Netherlands in the case of the lssuer are to the Republic of Portugal in the case of the Company) and in addition, inter alia, makes representations and warranties in terms of the following: rn That neither the Company, nor any of its assets (save for the assets referred to in Articles 10, 12, 69 and 84 of the Concession Agreement) is entitled to immunity from suit, execution, attachment or other legal process; 48 That no meeting has been convened for winding-up the Company or any of its shareholders, no such step is intended by it and. so far as it is aware, no petition or application is outstanding or threatened for winding-up the Company or any of its sharcholdcrs: That the Company is not. and has not been in the past, in any material way in violation of any environmental law and is in compliance in all material respects with the teims of all environmental approvals; That the Company has in place valid insurance policies complying with the requirements specified in the CTA; That, save as otherwise notlfied in writing by the Company to the Credit Parties. each other party (other than the counterparties to the CTA but, for the avoidance of doubt, including the Company and the Issuer) to the Transaction Documents is in compliance in all material respects with all the provisions of such Transaction Documents to which it is a party: That any assumptions and other financial information which the Company has provided or used for the purposes of the financial modcl werc made in good faith and were arrived at hoiiu.ficle by it and its directors after careful consideration and cnquiry and genuinely reflected their respcctivezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA views at the time at which the financial model was delivered hereunder: That the Company has notified thc Credit Parties in writins of all disputes or circumstances of which it is aware (or ought reasonably to be aware after making due and careful enquiry) under or in connection with the Concession Agreement andlor of all disputes or circumstances of which it is aware under or jn connection with the other Project Documents relative to the Project, in either case. where it is awarezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA that such disputes or circumstances would. if deteimined adversely. or might reasonably be expected to. give risc to the imposition of an)- contractual fine in excess of Portuguese Escudos 5,000!000 and/or notifications under Article 78 of the Concession Agreement: That all representationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and warranties given or made or deemed to be given or made by it under 01- pursuant to the other Transaction Documents to which it is a party are true and accurate save to the extent that breach of any such representation or warranty would not have an adverse effect on the implementation of the Project or on the relevant rights of the parties thereunder: That all government or other public authority clearances, consents, liccnces. registrations or authorisations required under Portuguese law to be in place in respect of the Company and the Project have becn obtained and are in full force and effect, save to the extent relating to the subsequent performance of its obligations under the Transaction Documents: That, except as disclosed to the Credit Parties, the Company has no freehold or leasehold interest, legal or beneficial or otherwise, in any real property; That the copies of the Project Docunients which it has delivered to the Credit Parties are true and complete copies of those contracts: That there are no other material agreements to which it is a party on the date of the CTA copies of which have not been delivered to the Credit Parties on or prior to the Issue Date; That no Force Majeure Event (as defined in the CTA) has occurred and is continuing for thc purposes of any Project Document; zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA That as far as the Company is aware and to the extent they are applicable, the signature and delivery of each of the Transaction Documents on its behalf and its exercise of rights and perfoimance of its obligations under the Transaction Documents are not prohibited by, and do not constitute a breach under, EU procurement rules; and That the Company has not entered into any interest rate swap agreements, interest rate cap agreements, interest rate collar agreements? interest rate insurancc, currency swap agreements, currency options, futures or purchase or sale agreements or other agrecments and arrangements designed to protect against fluctuations in interest rates and currency exchange rates that constitute debt.

Affirmative Covenants of the Issuer Under the CTA the Issuer provides affirmative covenants for the benefit of each Beneficiary and the Security Trustee under which. inter alia. the Issuer undertakes to:

0 obtain and maintain all appropriate governmental approvals zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand any other necessary permits; 49 preserve and enforce all its rights, and comply with all its obligations, under the Finance Documents and all other documents to which it is a party and comply with all applicable laws (including. for the avoidance of doubt, the laws of the European Union) and governmental approvals; e keep all its properties and assets free of all encumbrances other than Permitted Encumbrances; e ensure that that at all times, the Issuer Security Documents constitute, save as expressly provided therein, valid first-ranking pledges over the assets secured under the relevant security document: ensure that its payment obligations under the Issuer Finance Documents rank at least pcrripassu with the claims of all its other unsecured and unsubordinated creditors, exccpt for obligationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA mandatorily preferrcd by law applying to companies generally; cause all proceeds of the Senior Debt to be onlent to the Company pursuant to the terms and conditions of the Intercompany Loan Agreement; act promptly and correctly in relation to the payment, returns and claims relating to its taxes; open, maintain and make payments into and from each of its relevant accounts in accordance with the provisions of the Issuer Accounts Agreement and ensure at all times that the amount on deposit in any of its accounts is at least equal to the relevant minimum account balance: not open or maintain any bank accounts other than the accounts specified in the Issuer Accounts Agrecment; conduct its business in a proper and efficient manner and in accordance with the Finance Documents to which it is a party: use all reasonable endeavours to maintain (or obtain if a listing has been lost) the listing of the Bonds on the Luxembourg Stock Exchange or (if the listing is lost) another appropriate exchange; use all reasonable endeavours to provide to any stock exchange on which the Bonds are for the time being quoted or listed any information required by it in accordance with its rules or with any arrangements approved by it and to comply with all information obligations under the securities laws of any relevant jurisdiction; on the obtaining of a quotation or listing of the Bonds on a stock exchange other than the Luxembourg Stock Exchange, enter into a deed supplemental to the Bond Trust Deed to makc any consequential amendments to it required by the Bond Trustee and the Instructing Creditor in the context of such listing or necessary to comply with that stock exchange’s requirements: maintain one or more Paying Agents in accordance with the terms and conditions of the Bonds; use all reasonable endeavours to procure that the Paying Agents observe and comply with all their respective obligations under the Paying Agency Agreement; if any amount due in respect of the Bonds is paid unconditionally to the Principal Paying Agent or the Bond Trustee after its due date for payment, immediately arrange for notice to be given to the Bondholders that such payment has been made unless the Bond Trustee othcrwise agrees in writing; e deliver to the Bond Trustee and XLCA an officer’s certificate of the Issuer setting out the total number and aggregate principal zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAamount outstanding of Bonds which are at the date of such certlficate held beneficially by or for the account or benefit of the Issuer or any holding company or Subsidiary of the Issuer or any affiliate of the Issuer: use all reasonable endeavours to procure that each of Clearstream and Euroclear issues any certificate or other documents requested by the Bond Trustee or the Instructing Creditor as soon as practicable after such request; a furnish, or procure that there is furnished to Standard & Poor’s, from time to time, such documents zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand information and such commercially reasonable accesszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to such documents and information that may be necessary in order to maintain a rating of the Bonds and a shadow rating by Standard & Poor’s; make available through the Paying Agents or otherwise such documents as may be required by the Bondholders in connection with meetings of Bondholders; execute all such other documents and instruments and do all such other acts and things as any of the Credit Parties or the Security Trustee may reasonably request to give effect to the provisions of thc Finance Documents and the Project Documents and duly register, notarise or stamp such document in the relevant jurisdiction; zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 50 take such steps (in addition to those steps specified in the CTA) to remedy or mitigate the effcct of any Relevant Event (as defined in the CTA) or any other event or circumstance described in other clauses of the CTA as the Instructing Crcditor may reasonably request in the circumstances: and e procure that it shall not be a credit institution (“kl-eciietiizste1Ziitg”)as defined in Section l(l)(a) under zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAthe Act on the Supervision of Credit InstitutionszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (” Wer Toezicltr Kredzetweicn”) and comply with all stipulations attached to any determination relatingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA thereto. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Affirmative Covenants of thc Company Under the CTA thc Company provides affirmative covenants for the benefit of each Bencficiary and the Security Trustee under which. inter diu: the Company undertakes to: obtain and maintain all appropriatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA governmental approvals and any other necessary permits; procure at its own expense and maintain in full force and effect at all times. on and after the Issur Date and continuing throughout the term of the CTA. insurance of the types and in the form and content required by the Concession Agreement and will also, inter ah, make an)- required disclosures; ensure that at all times thc lssuer Security Documents constitute. save as cxpressly provided therein. valid first-ranking pledges over the assets secured under the relevant security document; ensure that its payment obligations under the Company Finance Documents and the Direct Agreement rank at least pari posszi with the claims of all its other unsubordinated and unsecured creditors except for obligations mandatorily preferrcd by law applying to companies generally: construct, repair. maintain and operate the shadow toll road in accordaiicc with, and at all times comply with. the provisions of the Concession and the Concession Agreement. and procure rhat the Project is completed and the construction works are carried out and completed in accordance with the Project Documents; conduct its business with due diligence and efficiency and in accordance with good industry practice and in accordance with the Technical Description (as defincd in the EIB Facility); design, construct, operate and maintain the shadow toll road and all plant and equipment in compliance with! and ensure that the design, construction, operation and maintenance of the shadow toll road and all plant and equipment is in compliance with. the applicable environmental laws. occupational health and safety requirements of the laws of Portugal, and thc terms of an!‘ environmental approval and in accordance with good industi3- practice; and to infoimi the Security Trustee if any specified environmental event OCCUTS: act promptly and correctly in relation to the payment. mums and claims relating to its taxes: open, maintain and make payments into and from each of the relevant accounts in accordance with the provisions of the Company Accounts Agreement and ensure that at all times the amounts on deposit in each account meet the required minimum balances: not, without the consent of the Instructing Creditor, open or maintain any bank accounts other than the accounts specified in the Company Accounts Agreement; cause the proceeds of the Senior Debt of the Company to be applied exclusively to pay Project costs: execute all such other documents and instruments and do all such other acts and things as any of the Credit Parties or the Security Trustee may reasonably request to give effect to thc provisions of the Finance Documents and thc Project Documents and cause such Finance Document or such Project Document to be duly registered, notarised and stampcd in such jurisdiction; pay or procure to be paid, in accordance with all proper demands therefor. all sums due or to become due from it under the Transaction Documents. to ensure that no material breach of the Transaction Documents is committed by the Company and exercise all rights, remedies. powers and discretions available to it to ensure. to the extent it can thereby ensure. the due perfoimaiice in all matcrial respects by all other parties thereto of their obligations under the Transaction Documents; obtain the consent of the Instructing Creditor before taking any decisions to be taken by the Company with reference to Articlc 87 of the Concession Agreement; take such steps (in addition to any steps proposed to be taken under other clauses of the CTA) to remedy or mitigate the effect of any Relevant Event (as defined in the CTA) or any other event or circumstance described in other clauses of the CTA as the Instructing Creditor ma)- reasonably request in the circumstances:

51 carry on and conduct its affairs and business in a proper manner; ensure that goods and equipment are purchased. services are secured and works ordered for the Project, so far as appropriate and possible, and in a manner satisfactory to the Instructing Creditor and the EIB, by international tender (i) open at least to nationals of all countries which are signatories of the Agreement on the EuropeanzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Economic Area or, as the case may be, fii) in accordance with each Directive of the Council of the European Union applicable to the Project:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and comply at all times with the provisions of Article 35 of the Concession Agreement; furnish, or procure that there is furnished to Standard & Poor’s, from time to time. such documents and information and such commercially reasonable accesszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to such documents and information that may be necessary in order to maintain a rating of the Bonds and a shadow rating by Standard & Poor’s in respect of the Senior Debt of the Issuer; and cause all VAT refunds to be applied, promptly upon receipt thereof, exclusively for thc prepayment of Tranchc C Loans or Tranche C LIC Loans (as defined in the Intercompany Loan Agrcement). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Information Covenants Both the Issuer and the Company agree under the CTA to provide information to any Bcneficiary or the Security Trustee in respect of, mter alia, accounts. financial statements, Relevant Events (as defined in the CTA). legal proceedings, officers’zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA certificates, financial models. auditors’ certificates. notices to and from the Portuguese State, progress reports. payments, insurance, budgets and traffic reports.

Negative Covenants of the Issuer Under the CTA the Issucr provides negative covenants for the benefit of each Beneficiary and the Security Trustee under which, inter. diu, the Issuer undertakes: 1. not to create or attempt to create any encumbrances upon, or pcrrnit any encumbrances to arise on. subsist or affcct all or any part of its undertaking, business or assets other than Permitted Encumbrances (as defined in the CTA): -.3 not to incur any dcbt other than Senior Debt. additional senior debt and Permitted Interest Rate Hedgcs (as defined in the CTA); 3. not, without the prior written consent of the Instructing Creditor. in any transaction or series of related transactions, to sell or otherwise dispose of any property or assets except as required, permitted or as expressly contemplated to occur under the terms of any Finance Document; 4. not, without the prior written consent of the Instructing Creditor, to (a) request or agree to any zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmaterial amendment (including for this purpose entering into a separate agreement with the same parties which would have the commercial effect of amending any Transaction Document or of affecting the exercise or enforceability of any rights or obligations thereunder) to any Transaction Document or (b) terminate or abandon any Transaction Document or (c) waive any material provision of any Transaction Document which, in any such case. is adverse to thc interests of any Credit Party: 5. not to make any Issuer Restricted Payment (as defined in the CTA) unless, on thc date of such Issuer zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBARestricted Payment. the conditions outlined in the CTA are satisfied: 6. not to consolidate, directly or indirectly, with or merge with or into any other person; 7. not to enter into any transaction with any person (including the shareholders of the Issuer or of the Company and their respective affiliates). except in the ordinary course of business. on ordinary commercial terms and on the basis of arm’s length arrangements; 8. not to make or permit to be made any investments in any shares, futures, options, bonds, warrants, or in any other type of securities, derivatives or securitisation instruments, save for authorised investments; 9. not to enter into any partnership, joint venture, profit-sharing or royalty agreement or similar arrangement whereby the Issuer’s income or profits are, or might be. shared with any person. 10. not to carry on any business, enter into any material contracts. agreements or other arrangements or commitments or acquire or invest in any way in any immovable or tangible assets (whether through a shareholding or otherwise) except as contemplated in zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA01’ incidental to the Finance Documents: 52 . -. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

11. not to make or grant any loan or advance or provide or extend any credit or accommodation or givc any guaranty. indemnity or other assurance against loss to or for the bencfit of any person or act its surety or otherwise voluntarily assume any liability, whether actual or contingent. in respect of anyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA obligation of any other person, other than to the Company pursuant to the Intercompany Loan Agreement: 12. not. except for the grant of the encumbrances to the Security Trustee for the benefit of the Beneficiaries and the Security Trustee pursuant to the Security Documents, to issue or suffer or permit to occur any issuance of sharc capital, riehts, warrants or other ownership interests in the Issuer, except to an Issuer shareholder: and 13. not at any time to form part of a fiscal unity ("fiscnleeenlteid') within thc meaning of Section 15 of The Netherlands Corporate Income Tax ActzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 1969 (" WetzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA op de ~~ennnotsclicry.sb~lustiiig1969") and Section 7(4) of The. Netherlands Tumover Tax Act 1968 (" Wet op de omrerbelusting 1968").

Negative Covenants of the Company The Company provides negative covenants for the benefit of each Beneficiary and the Security Trustee in the same terms as are outlined in numbers 1 to 7. 11 and 12 of the Issuer's negative covenants above (save that references to the Issuer are to the Company) and in addition the Company, iizrer diu. undertakes: not to do or suffer to be done to the shadow toll road or any part thereof. or permitzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA any act, matter or event to happcn thereupon. or bring or keep anything therein or thereon, whereby an)' insurance policy required to be effected by the Company would. or would in the reasonable opinion of the Company be likely to, be rendered void, voidable or incapable of being effected. maintained 01- renewed, nor do any other act nor permit any other act to be done whereby any such insurance policy or any provision thereof would, 01-would in the reasonable opinion of the Company be likely to. be suspended. impaired or defeated:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA not to enter into any partnership, joint venture. profit-sharinz or royalty agreement or similar arrangement whereby the Company's income or profits are. or inisht be, shared with any person: not to carry on any business other than as required for the purposes of carrying out the Project and performing its obligations under the Concession and the Concession Agreement or as may be necessarily incidental thereto or enter into any material contracts, agreements 01-other arrangements or commitments, in addition to the Transaction Documents save for any permitted or required by the Transaction Documents acquire or invest in any way in any immovable or tangible assets (whether through a shareholding or otherwise) other than such as are reasonably incidental to or related to its interest in the Project or materially change the nature of the Project; not to appoint or agree to the appointment of any person(s) other than, or dismiss or replace the appointment of. or concur in the dismissal or replacement of thc appointmcnt of. those persons who are the contractor, the technical assistant, and the Independent Technical Adviser unless the Instructing Creditor otherwise consents in writing: not to take any action or fail to perfom any duty or obligation, which action or failure will or Nould be reasonably likely to cause or lead or contribute to the revocation of the Concession: not to enter into any agreements of a type described in the CTA that would constitute debt; not to amend its charter documents in any wa>-without the prior written consent of the Instructing Creditor; to use its best efforts when entering into any agreements with any other person (other than the Transaction Documents) relating to the use of land or facilities within the territory covered by the Concession to preclude exposing the Company or the Project to any material risk, liability. cost or damage; and not to make any reimbursement or indemnification payment with respect to any performance bond (with certain exceptions) unless. on the date of such payment, specdied conditions are satisfied.

Events of Dcfault and Remedies The following is a summary of the events of default under the CTA: (a) Non-payment. The Company or the Issuer fails to pay any sum due under any of the Finance Documents on the due date or, if so payable. on demand and such amount remains unpaid for a period of five Business Days from the due date or the date of demand. as the case may bc. or any demand for payment is made under any of the Financial Guaranties; or 53 Other Defaults. Any Relevant Shadow Toll Road Party fails in any material respect to observe or perform any of itszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA obligations under the applicable Transaction Documents other than an obligation of the type referred to in sub-clause (a) and, in the case of a failure which is capable of being remcdied, the Instructing Creditor determines that it has not been remedied within 21 days after the Relcvant Shadow Toll Road Party has received notice from the Instructing Creditor of such failure; or Failure under the Project Documents. Any of the parties (other than the Relevant Shadow Toll Road Parties) to any of the Project Documents fails in any material respect to observe or perform any of its obligations thereunder andl in the case of a failure which in the opinionzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of the Instructing Creditor is capable of being remedied, the Instructing Creditor determines that it has not been remedied within 21 days; or Shareholders’ non-payment. Any Shareholder fails to pay any amount due by it under the Shareholder Undertaking on the due date and such amount remains unpaid for a period of fifteen Business Days; or Unlawfulness or repudiation. Any material provision in any of the Transaction Documents is or becomes for any reason invalid, illegal or, subject to the exceptions set out in the legal opinions of the Credit Parties delivered as conditions precedent, unenforceable, or the validity. legality or enforceability of any of the Transaction Documents or of any material provision therein is contested by any Relevant Shadow Toll Road Party; or Inability to pay debts. The Company or, until the Operating Date, any of the other Relevant Shadow Toll Road Parties is unable to pay its debts as they fall due. stops, suspends or threatens to stop or suspend payment of all or any part of its debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its indebtedness (or of any part of its indebtedness which it will or might otherwise be unable to pay when due) or proposes or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or any group or class thereof or ceases or threatens to cease to carry on all or any part of the business carried on by it or files a petition for suspension of paymcnts (“sui-siance IUM betaling’‘ in the case of the Issuer) or other relief of debtors or for bankruptcy (‘~dlirsemerzt”in the case of the Issuer) or is declared bankrupt (“failliet” in thc case of the Issuer) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAor a moratorium is agreed or declared in respect of or affecting all or any part of its indebtedness. There will not be an Event of Default under this Sub-clausc (0 unless the inability to pay debts as they fall due exceeds 100.000,000 Portuguese Escudos in zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArespect of the Company or 500,000,000 Portuguese Escudos in respect of any of the other Relevant Shadow Toll Road Parties or its equivalent in other currencies; or Attachment or distress. A distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or any substantial part of the assets of the Company or, until the Operating Date, all or any substantial part of the assets of any of the other Relevant Shadow Toll Road Parties and in respect of any indebtedness of more than 50,000.000 Portuguese Escudos in respect of the Company (or its equivalent in other currencies) or 250,000,000 Portuguese Escudos in respect of any of the other Relevant Shadow Toll Road Parries (or its equivalent in other currencies) and such process is not discharged, withdrawn or discontinued within 28 days save where in the reasonable opinion of the Instructing Creditor such process is being contested by the Company or applicable Relevant Shadow Toll Party, as the case may be, in good faith; or ih) lnsolvency or reorganisation. Any procedure is commenced with a view to the winding up or zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAreorganisation of the Company or any Relevant Shadow Toll Road Party or with a view to the appointment of an administrator, receiver or trustee in bankruptcy in relation to the Company or any Relevant Shadow Toll Road Party or all or any substantial part of the Company’s or any Relevant Shadow Toll Road Party’s assets or anything analogous to these events is commenced in any relevant jurisdiction and the same is not discharged, withdrawn or discontinued within 28 days (provided that such cure period shall not apply if such procedure is commenced by, or at the initiative of, the Company or the applicable Relevant Shadow Toll Road Party, as thc case may be). No Event of Default shall be declared where such procedure is frivolous, vexatious or an abuse of process of the court or relates to a claim to which the Company or the applicable Relevant Shadow Toll Road Party. as the case may be, is contesting such claim in good faith; or Enforcement of Security. An encumbrancer takes possession or any action is taken for or with a view to the appointment of (or there is otherwise appointed) a receiver, administrator (“be~t.invoel.~er”in the case of the Issuer), trustee, custodian, liquidator (“vereffenaan” in the case of the Issuer) or other similar officer in relation to the Company or any otherzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Relevant Shadow Toll Road Party or all or any substantial part of the assets of the Company or all or any substantial part of thc assets of a Relevant Shadow Toll Road Party; or zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 54 Representations. Any representation, warranty or statement which is made or deemed to be repeated by any RelevantzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Shadow Toll Road Party in or pursuant to any of the Transaction Documents proves to be incorrect in any material respect when made or deemed to be repeated: or Default under the Concession.

(i) The Company defaults under the Concession Agreement and a notice is served pursuant to Article 82.3 of the Concession Agreement: or (ii) the rights and obligations of the Company under the Concession: except to the extent necessaiT to give effect to Chapter XVIII of the Concession Agreement. cease on the occurreiicc of an!- event described therein: or (iii) the Concession is revoked otherwise than under Articles 80. 81 and 82 of the Concession Agreement: except. in the case of each of (i): (ii) and (iii) above. where the Portuguese State undertakes: pursuant to the Concession Agreement, the rights and obligations of the Company under the “Contratos de Financiamento” as such term is defined therein: or Unlawfulness, rcpudiation or termination of Project Documents or Finance Documents. Any material provision in any of the Transaction Documents is or becomes for any reason invalid, illegal or, subject to the exceptions set out in the legal opinions of the Credit Parties delivercd as conditions precedent, unenforceable. or the validity. legalitj- or enforceability of any of thc Transaction Documents or of any material provision therein is contested by any Relevant Shadow Toll Road Party or any of the Project Documents or the Finance Docunients is terminated or otherwise ceases to remain in full force and effect (other than by performance or effluxion of time) unless the same has been replaced by another document approvcd by the Instructing Creditor: or Litigation. Any litigation, arbitration or administrative proceeding before or of any court. tribunal. arbitrator, binding adviser or other relevant authority is begun against the Company or the lssuer \vhich, by itself or together with any other such proceedings. will or is reasonably likely to result in a Material Adverse Change: or Change of business. The Company or the Issuer changes or threatens to change the nature or scope of its business or the Company or the Issuei- or: until the Operating Date, any other Relevant Shadow Toll Road Party suspends a substantial part of the present business operations which it nom- conducts directly or indirectly unless, in the case of an! Relevant Shadow Toll Road Party-,such suspension could not reasonably be expected to result in a Material Adverse Change or in the case of the Contractor, such person is replaced within 30 days by another contractor approved by the Instructing Creditor; or Cross default. A default or defaults shall have occurred under any agreement or instrument in respect of any debt of the Issuer, the Company, or, up to and including the Completion Date, Ferrovial- Agroman, S.A. or Cintra which in the aggregate is equal to or exceeds (i) in the case of the Issuer, €500,000, (ii) in the case of the Company. €1,000,000, (iii) in the case of Ferrovial-Agroman. S.A., €5:000.000, or (iv) in the case of Cintra €10,000,000 (or the equivalent in other currencies). which, with the passage of time OJ giving of notice, Q-ould entitle the holder(s) of such Debt (or its or their trustee, agent or other representative)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to accelerate such Debt or to exercise any remedies it may have against any of the Security and which in the case of Cintra could reasonably be expected to result in a Material Adverse Change: or Ownership; merger. Prior to the Complction Date. there shall occur any direct or indirect transfer of any Issuer Shares or other interest in the Issuer (other than (s)any transfer from any Issuer Shareholder to any Subsidiary of Grupo Ferrovidl, S.A.. (y) any transfer from any Issuer Shareholder that is not a Subsidiary of Grupo Ferrovial. S.A., to any other lssuer Shareholder or (z) any transfer with the consent of thc Instructing Creditor): Prior to the Completion Date. there shall occur any direct or indirect transfer of any shares or other interest in thc Company (other than (x) any transfer from any Shareholder that is a Subsidiary of Grupo Ferrovial. S.A. to another Subsidiary of Grupo Ferrovial. S.A. or (y) any transfer from any Shareholder that is not a Subsidiai? of Grupo Ferrovial. S.A. to any other Shareholder. in each case with the consent of the Portuguese State):

55 After the Completion Date. there shall occur any direct or indirect transfer of any shares, or other interests in the Issuer or the Company unless after giving effect to such transfcr Gtupo Ferrovial. S.A. holds and controls directly or indirectly through Its Subsidiaries. at lcast 51 per cent. of the voting power and beneficial and economic ownership interest in the Company or the lssuer, as the case may be; or Either the Company or the Issuer shall merge with any person: or In the event of any transfer not constituting an Event of Default under (i), (ii). (iii) or (iv) above, thc transferee of such shares or other interests fails, prior to or simultaneously with such transfer, to execute and deliver a pledge and security agreement in a form acceptablc to the Instructing Creditor and to accede to the Shareholder Undertaking by delivering a deed of accession in the form acccptable to the Instructing Creditor or the general meeting of Issuer Shareholders shall fail to approve the (conditional) transfer of the voting rights of such shares to the Security Trustee; or Material Adverse Effect. ThcrczyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA shall occur any event or occurrence which shall have a Material Adverse Effect; or Failure of Purpose. The Issuer fails to use the proceeds of the Senior Debt for its prescribed purposes or the Company fails to use the proceeds of thc Intercompany Loans for its prescribed purposes; or Total Loss. A Total Loss occurs, unless it is due to a Force Majeure Event: or Failure of Operating Date. The Operating Date does not occur within the initial period of the Concession (unless an extension of the Construction Period is granted under the Conccssion Agreement in which case the Operating Date must occur during the period of such extension) and such non-occurrence will have a Material Adverse Effcct; or Shadow Toll Road Closure. At any time after the Operating Date the Shadow Toll Road is closed for a continuous period exceeding three months except where the Company demonstrates to the satisfaction of the Instructing Creditor that thc revenues lost during the period of closure have been or will be fully covered by insurance or by any of the Project Documents; or Force Majeure. Any Force Majeure Event shall have continued in effect for 180 days which could reasonably be expected to result in a Material Adverse Change on the Project. except whcre the Company demonstrates to the satisfaction of the Instructing Creditor that the revenues lost and costs incurred during the continuancc of such Force Majeure Event have been or will be fully covered by insurance, provided that it shall not be an Event of Default if the Portuguese State has confirmed in writing to the Instructing Creditor that it has assumed the payment obligations of the Company pursuant to the “Contratos de Financiamento” as such term is defined in the Conccssion Agreement as contemplated by Article 79.9 of the Concession Agreement; or Modification or Termination of the Concession. The Concession Agreement and/or the Concession is modified (in a manner causing a Material Adverse Change), suspended (other than a sequcstration), rescinded, terminated or declared to be invalid, ineffective or null and void. No Event of Default may be declared by the Beneficiaries insofar as the conditions or facts which would qualify as an Event of Default have led or may lead. to a written request being served by the Company under Article 87.10 of the Concession Agreement within the period allowed therefor in the Concession Agreement, and if such request is served for so long thereafter as the Portuguese State has not fully rejected such request by the Company (a “Delayed Event of Default”). Notwithstanding the previous sentence. the Beneficiaries may declare an Event of Default in respect of a Delayed Event of Default in the event that the Portuguese State and the Company have not reached an agreement in respect of the financial rebalancing of the Concession (“Reposigao do Equilibrio Finuticeiro do Concesscio”) as set out in Article 87.4 of the Concession AgreementzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA withinzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 270 days afterzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the occurrence of the relevant event. For the avoidance of doubt, Events of Default shall not be considered Delayed Events of Default where the relevant Event of Default does not fall within the scope of Article 87 of the Concession Agreement. On the occurrencc of an Event of Default. a number of remedies are. subject to the Intercreditor Deed. available to the Beneficiaries including. inrer alia, managing the bank accounts of the Issuer and the Company, requiring the payment default interest, acceleration. enforcement. appointing managers or operators, initiating investigations and exercising step-in rights.

56 RISK FACTORS Prior to niakitig an inl’esttnent decision, purchasers ojthe Boiids shouldzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA carejirllj. comider all of die fbllowiiig ii?vestineittzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA corisiderations (each of u’liichpotential,’?* could lime a material adverse inipuct on thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Isstrer or the Cornpanj- and Bond1ioldei.s). CIS n.eI1 us the other ii!formation in this Ofleriiig Circular. T1ii.s section does not describe all of the risks mid zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAother iiiilestineiit considerations (iiicluditig those reluting to eucli investor’s particdm circunistuiices) of an iiirestnieiit in the Bonds. The Irsuer, tlie Conipaiij. uric1 XLCA disckiiin any responsibilitj, to adrise iiirestors of‘ such risks aiid iiiwstmeiirzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA considerritions lis the). exist as at the date hereof or subsegueiit to the due q f‘this Offeriiig Circulnr. Eucli investor shotrld constrlt its o\\.iifiiianciul, ms, accoiiiitiiig mid legallregulutorj. cic1visei.s 11s to the risks am1 ill FeStlnellt considerations arisilig iii respect ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ail ii?vestment ill the Bonds. the upproyriate Tools to CIIiU~i.Se such aii investnient, rind the suitubilir!. of such iiili~ST171ell~iii the coiitest of‘theparticular- circuinstaiices qf such investor The management of the Company believes that the assumptions underlying thc base case Financial Model in respect of the Project (the ”Base Case”) are reasonable. The Project has been extensively researched and thc proposed construction appears reasonable and technically sound (see “Independent Advisers” on page 40). Prospective investors are. however. advised that there may be circumstances where Bondholders will be exposed to the risk of adverse events which may affect the Company and thus the Issuer’s abiht>-to meet its obligations under the Bonds. These risks may be within or outside the control of the Issuer or the Company and include: (a) the risk that the Project works are not completed to schedule, in accordance with thc requirements provided for in the Concession Agreement: or (b) the risk that: once the Projcct works are completed. the Project is unable to generate revenue in accordance with thc Base Case assumptions or incurs costs higher than those assumed in the Base Case. Mitigation or full coverage of these risks may be available through one or more of the following: (a) insurance; (b) bank funding: (c) performance undertakings or guarantees, indemnities and liquidated damages from the relevant contractor under the Construction Contract. This section contains an analysis. in broad terms. of some of the significant business risks involved in the Project. It is intended to assist an evaluation of selected aspects of the Project. but cannot list or evaluate all potential risks. The analysis involves certain business judgements. and must be read in that context.

Termination and Reversion of Concession and Restrictions on Assets Almost all of the Company’s revenues are derived from operations conducted pursuant to the Concession Agreement with the State. The Concession held by the Company is subject to earl)- termination under certain circumstances. Upon either the expiration of the Concession in accordance with its terms or its early termination, substantially all of the assets of the Company will revert to the State, and the Company will be entitled to compensation only in certain limited cases. See “Description of the Project - Summary of the Concession Agreement” on page 34. A substantial portion of the assets controlled b>-zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA thc Company, particularly the motorway and connecting roads, are within the domain of the State. Therefore the administration of such assets is under the control of the Company during the period of the Concession Agreement, but the Concession Agreement has the legal status of an administrative contract under Portuguese law giving the State certain unilateral powers to alter the content of the obligations contained in the Concession Agreement.

General Construction and Operating Risks The management of the Company believes that the Company’s ability successfully to complete construction of the remainder of the motorway subject to the Concession and to undertake ancillary projects, such as the construction of connecting roads, is supported by the operating history of the Company’s shareholders, but will nonetheless continue to be subject to certain risks inherent in the construction of large-scale projects. These risks are well known in the construction sector and ma): include construction material and labour shortages. increases in the costs of labour and materials, changes in general economic, business and credit conditions. the non-performance or unsatisfactory performance of contractors and sub-contractors and interruptions resulting, for example, from inclement weather and 57 unforeseen engineering problems. Although the Company, through its sharoholders, has significant experience in managing these sorts of risks and has sought to transfer ultimatc cconomic liability for such risks to the Contractor undei* the Construction Contract (as to which, see “Description of the Project - Summary of the Construction Contract” on page 37). no assurance can be givenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA that these factors will notzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA have a material adverse effect on the Company inzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA circumstances where the Contractor fails to perform its obligations under the Construction Contract. If the Company becomes unable to complete its motorway construction obligations on a timely basis, penalties may be applied under the Concession Agreement. See “Description of the Project - Summary of the Concession Agreement” on page 34.

Concentration of Revenue Sources As outlined in “Description of the Project - Projected Revenues” on page 23, all of the Company’s toll revenues will be earned by one motorway, the regular operation of which has and will continue to have. accordingly. a significant impact 011 the Company’s results of operations. Although the Company maintains a level of insurance coveragezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA designed adequately to insure against business interruptions, any event or circumstance resulting in a prolonged reduction in traffic volume and shadow toll revenues collected from the motorway could have a significant impact on the Company’s results of operations.

Substantial Indebtedness When the financing of the Project is in place, the Company will have substantial indebtcdness. Although the managerncnt of the Company believes this level of indebtcdness will not hamper the efficient conduct of the Company’s business, the Company’s level of indebtedness could have material consequences in circumstanccs where a substantial portion of the Company’s cash-flow from operations must be applied to the paymcnt of the principal of and interest on this indebtedness and will not bc available for other purposes. thereby reducing the Company’s flexibility to respond to changing business and economic conditions. In addition, the ability of the Company to obtain financing in the future for working capital needs. capital expenditures. general corporate purposes or other purposes could, in certain circumstances, be materially limited by the level of its indebtedness. See “Description of the Project - Projected Expenditure” on page 31. However, it should be noted that the Financial Model has bcen designed so that the Company will be able to service its indebtedness even in circumstances where there is no growth in the volume of traffic on the motorway the subject of the Concession.

Financing Future Construction Costs The Company bears the primary responsibility for financing the costs related to the construction of the motorway the subject of the Concession and the ancillary works related to the motorway. The Company has projected its capital construction expenditure up to April: 2003 to be approximately 43 billion Escudos. There is a possibility, however, that the Project will experience cost overruns. While the management of the Company believes that the Company has accurately projected future costs, no assurances can be given that the Project will not encounter significant construction difficulties rcsulting in cost overruns in the future. Although the management of the Company believes that the Company will be able to finance its projected capital expenditure and although the Company has effectively transferred to the Contractor under the Construction Contract the risk of cost overruns (as to which, see “Dcscription of the Project - Summary of the Construction Contract” on page 37), the Company may be exposed to the risk of such cost overruns in circumstances where the Contractor is unable to absorb them.

Factors Affecting Shadow Toll Revenue The amount of shadow toll revenues from the motorway operated by the Company is a key component of the Company’s business and is dependent on, among other things. the number of motorists using the motorways different tariff and tariff bands, and the continued fitness of the motorway network to bear traffic. Traffic volumes and thus shadow toll revenues are affected, directly, by a number of factors, including the quality and proximity of, and travel time on, alternative roads. the quality of construction and maintenance of the motorway, economic conditions in or affecting Portugal. fuel prices, environmental regulations (including efforts to restrict motor vehicle usage to control air pollution levels) and access by motorists to other means of transportation, including any alternate forms of mass transportation that already existzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or may be built. The level of traffic on a given motorway is also influenced heavily by its integration into other parts of the national motorway and road network. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 58 Competition Without prejudicezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to the exclusive rights of the Company relating to the motorway the subject of the Concession, the State to construct other roads all of which may present competition for the Company’s motorway. However, the State’s National Road Plan (“PRN Z000”j does not envisage the construction of any new motorway which would compete with the Company’szyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA motorway and the Concession Agreement prohibits the State from upgrading (as distinct from maintaining) those existing roads (such as N125) whch offer alternative routes to the motorway. The Company bclicves that any new concessions and new roads which interconnect with the Company’s motorway will provide motorists with better access to more areas of Portugal and therefore result in higher overall traffic on all of the motorways in Portugal. including the Company’s motorway. No assurance, however, can be given as to whether or how new concessions. new roads. improvements to the national motorway network or other enhancements to thc Portuguese transportation infrastructure will. in the medium to longer term, affect the volume of traffic on the motorway operated by the Company.

Early Redemption of Bonds for Taxation Reasons Condition 5(C) of the Bonds cntitles the Issuer in certain circumstances to redeem the Bonds prior to their Scheduled Payment Dates. The Issuer is entitled. subject to certain conditions, to redeem the Bonds prior to their Scheduled Payment Dates if Dutch withholding tax is imposed in respect of payments of principal or interest in respect of the Bonds. The Issuer is also entitled, at any time after the sccond anniversary of the Issue Date, subject to certain conditions, to redeem the Bonds prior to their Scheduled Payment Dates if both of the following occur: (i) Euroscut does not have the benefit of a withholding tax excmption pursuant to Article 36 of the Portuguese Tax Benefit Code in respect of payments to bc made by it under the Intercompany Loan (the “EU~-en7ption”)and (ii) Portuguese withholding tax in excess of 10 per cent. is imposed in respect of such payments.

Application for the Exemption was made on 77 April. 2001 but the Exemption has not yet been granted. Three conditions must be fulfilled in order forzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the Exemption to be granted: (ij the lender (in this case, the Issuer) must be a non-resident of Portugal for tax purposes: (ii) the loan principal must be advanced from outside Portugal: and (iji) the borrower (in this case. Euroscut)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA must be eneaged in rendering a public service in Portugal. The Issuer and Euroscut believe that these conditions are fulfilled in the circumstances of the Intercompany Loan. However, there is a risk that the Portuguese tax authorities may not accept that these conditions are fulfilled and, even if they are fulfilled. the Portuguese tax authorities retain a residual discretion as to whether to grant the Exemption. Accordinglyl no assurance can be given that the Exemption will be granted, or that, once granted, it will not be withdrawn.

At present. the double tax treaty between The Netherlands and Portugal provides that Portuguese withholdins tax in respect of payments of interest on a loan made by a Dutch lender to a Portuguese borrower is to be reduced from 20 per cent. to 10 per cent. If the Exemption is not grantcd. or is granted and subsequently withdrawn. the Issuer will not be entitled to redeem the Bonds under Condition 5(C) unless the double-tax treaty between The Netherlands and Portugal is either terminated or amended in such a way as to increase the effective rate of Portuguese withholding tax above 10 per cent.

Nevertheless, Bonds will be liable to be redeemed prior to their Scheduled Payment Dates if the Exemption is either not granted or is granted and subsequently revoked, and in addition the double-tax treaty between The Netherlands and Portugal is terminated or amended as described above.

Modification of Provisions of Finance Documents affecting Bondholders Thc Bond Trustee may not agree to any modification to the Terms and Conditions of the Bonds. the Bond Financial Guaranty, the Bond Trust Deed or an! other Finance Document without the prior writtcn consent of the lnstructing Creditor pursuant to the Intercreditor Deed. Unlcss the modification rclates 10 the Bond Trustee’s Retained Rights or the Bond Trustee‘s Entrenched Rights, the Bond Trustee will be obliged to agree to any such modification required by the Instructing Creditor.

For these purposes:

(i) under the Intercreditor Deed. XLCA will be treated as the Instructing Creditor unless and until such time as the Security Trustee shall have received notice confirming that an XL Event of Default or an XL Downgrade has occurred and is continuing; 59 (ji) the Bond Trustee’s Retained Rights means thc right of the Bond Trustee: 1. to make any determination contemplated or required to be madc by it under the Finance Documents applicable to the Bonds (but not the right to exercise any Financing Right consequent upon such determination); 2. to payment of all amounts owing to it under the relevant Finance Documents, including the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAright to make a claim under thc Bond Financial Guaranty (but not the right to enforce such rights to payment unless XL has breached its payment obligations under the Bond Financial Guaranty): 3. to request the Issuer and the Company to deliver financial statements. reports and other zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAinformation or to exercise inspection rights pursuant to Clauses 8 (Information Covenants of the Issuer) and 9 (Information Covenants of the Company) of the Common Terms Agreement /but not the right to enforce such rights if the Issuer or the Company fails to comply): 4. to instruct the Security Trustee to demand that the Company prcpay the tranche of the Intercompany Loan under the Intcrcompany Loan Agreement which is referable to the Bonds at any time after an unscheduled redemption of the Bonds shall have occurred; and to require performance by each Beneficiary or the Sccurity Trustee of its obligations under the Intercreditor Deed and to enforce any remedies arising under applicable law with respect to any brcach thereof; (iii) the Bond Trustee’s Entrenched Rights means the right of the Bond Trustee to veto: 1. any change in the interest, fees, expenses, commissions or other remuneration receivable by the Bond Trustee or the Bondholders under thc Bond Trust Deed or the Bond Financial Guaranty (except to the extent expressly and originally contemplated in such documents): 2. any waiver or amendment (or any consent having the effect of an amendment) to any provision of the Bond Trust Deed or any provision of the Intercreditor Deed, including the schedules. but not the right to veto any waiver, amendment or consent rclating to any other Finance Document merely because such waiver, amendment or consent would have an effect under Clauses 1.1 (Definitions), 4 (Covenants to Comply with Trust Deed and Schedules) (first sentence) or 5 (Covenants by the Issuer) of the Bond Trust Deed; 3 any waiver of or amendment (or any consent having the effect of an amendment) to any provision of the Bond Financial Guaranty (including. without limitation. any waiver of a payment default thereunder) or of any Event of Default arising as a result of XL disclaiming, disaffirming or repudiating in writing the validity thereof: and 4. any waiver or amendment (or consent having the effect of an amendment) to any undertaking contained in Clauses 6.7 (Maintenance of Listing), 6.8 (Information to Stock Exchange), 6.9 (Supplemental Bond Trust Deed), 6.10 (Maintenance of Paying Agent), 6.1 1 (Compliance by Paying Agents), 6.12 (Notice to Bondholders), 6.13 (Ascertainment of Outstanding Principal Amount), 6.14 (Certificates from Depositary), 6.15 (Maintenance of Rating and Shadow Rating) or 6.16 (Meetings of Bondholders) of the Common Terms Agreement. The Bond Trustee’s right to veto any of the matters listed above includcs its right to refuse to comply with any instruction or direction issued by the Instructing Creditor to the extent compliance therewith would result in consummation of the matter sought to be vetoed by the Bond Trustee; (iv) an XL Event of Default is defined as any of the following events; 1. any scheduled payment which is due for payment is not paid by XL on or within five days after thc date specified for such payment in any Financial Guaranty:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or 2. XL disclaims. disaffirms or repudiates in writing the validity of any Financial Guaranty; or 3. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAany of the following events occurs with respect to XL: (a) entry by any competent governmental authority of any jurisdiction or a court having jurisdiction in the premises of (A) a decree or order for relief in respect of XL in an involuntary case or proceeding, under any applicable bankruptcy, insolvency, reorganisation, liquidation, rehabilitation or other similar law or (B) an involuntary or contested decree or order adjudging XL a bankrupt or insolvent, or approving as properly filed a petition seeking reorganisation. liquidation, arrangement, rehabilitation. adjustment or composition of or in respect of XL under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee. sequestrator or other similar 60 official of XL or of any substantial part of the property of XL: or orderins any marshalling of assets of XL, or ordering the winding up or liquidation of thc affairs of XL: or (b) commencement by XL of a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganisation, or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by XL to the entry of a decree or order for relief in respect of XL in an involuntary case or proceeding under ~IJJ- applicable bankruptcy, insolvency, reorganisation, liquidation, rehabilitation or other similar law or to the commencement of any bankruptcy or insolvent>- casc or proceeding against XL, or the filing by XL of a petition or answer or consent seeking reorganisation or relief under any applicable law; or consent by XL to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator. assignee. trustee. sequestrator or similar official of XL or of any substantial part of the property of XL, 01- ordering any marshalling of assets of XL! or the making by XL of an assignment for thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA benefit of creditors, or the admission by XL in writing of its inability to pay its debts generally as they become due, or the taking of corporatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA action by XL in furtherance of any such action: or 4. at any time any Financial Guaranty shall cease to be in full force and effect or it becomes unlawful for XL to perform its obligations thereunder: and (v) an XL Downgrade is defined as thc loss of Qualified Guarantor status pursuant to clauses ii), (ii) or (iii) of Article 16.4 of the Ell3 Facility unless such Qualified Guarantor status is preserved pursuant to either of the two provisos to Article 16.4 of the EIB Facility, or is restored in accordance with Article 16.3 thereof. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Clauses (i), (ii) and (iii) of Article 16.4 of the EIB Facility provide that if: (i) one of the ratins agencies Moody’s Investors Services, Inc., Standard & Poor‘s Rating Services: a division of the McGraw-Hill Companies Inc., Fitch IBCA Limited or another credit rating agency of (in the opinion of EIB) equal repute (each an “approvcd rating agency”) has assigned a credit rating in respect of its (i) claims paying ability or insurance financial strength or (ii) most recent issued unsecured (and unsubordinatcd) long-term or medium term issue on an>-zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAcapital market below AA, Aa or equivalent, or has withdrawn a previously assigned rating: or (ii) it bccornes unlawful for the Guarantor under any applicable law to continue to maintain. perform or comply with its obligations under the Financial Guaranty in respect of the ElB Facility; or (iii) the Guarantor as a condition of its status as a Qualifying Guarantor and EIB enter into an agreement for the provision of certain security to EIB (such security being a requisite of its status as a Qualifying Guarantor) and such security is not provided within the period agreed between the Guarantor and EIB or such security ceases to satisfy the requirements set out in relevant agreement: then, in any such case. the Guarantor shall ccase to be a Qualifying Guarantor. Accordingly, Bondholders assume the risk that, so long as XLCA is the Instructing Creditor. XLCA will be entitled to require modification of provisions of the Finance Documents provided such modification does not affect the Bond Trustee’s Retained Rights or Bond Trustee’s Entrenched Rights. even though such modifications may adversely affect the interests of Bondholders.

Enforcement No Bondholder may take any action to enforce its rights in respect of the Bonds or in relation to the Bond Financial Guaranty or to enforce any security constituted b>- the Security Documents otherwise than through the Bond Trustee. The Bond Trustee will. so long as XLCA is thc Bond Creditor (except in relation to the Bond Trustee’s Rctained Rights and subject to the Bond Trustee’s Entrenched Rights). be obliged to takc action to exercise or enforcc its rights under the Bond Trust Deed or the Sccuritl; Documcnts or in respect of the Bonds if required to do so by the Bond Creditor (provided that the Bond Trustee has been indemnified or furnished with security to its satisfaction) and will not in most circumstances be entitled to take any such action without the prior written consent of XLCA as long as XLCA is the Bond Creditor. Under the Intercreditor Deed, XLCA will be treated as the Bond Creditor unless and until such time as the Security Trustee shall have received notice confirming that an XL Event of Default has occurred.

61 It follows that, until an XL Event of Default occurs, Bondholdcrs will not be entitled. inter diu, to accelerate repayment of the Bonds or to enforce their rights under the Security DocumentszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA uponzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the occurrence of an Event of Default. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA XL Event of Default Bondholders assume the risk of an XL Event of Default (as defined above). If XLCA does not perform its obligations under the Bond Financial Guaranty or becomes insolvent, it is not the intention of Euroscut to procure the replacement of XLCA by another monoline insurer for the purpose of providing a guarantee in respect of the Bonds.

Government Approval of the Refinancing The refinancing of the Project. being effected, inter diu. by the issue of the Bonds, requires the approval of the Portuguese Government. Approval was givenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA byzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the Portuguese Council of Ministers on 21 June, 2001. Howevcr, as at the date of this Offering Circular, the approval has not been gazetted in the Official Gazette of the State. this being the last formal legal step in the approval process and required for the enforccability of thc approval. The Company believes that, in accordance with the legal requirement that Government decisions be gazetted within 30 days, the approval will be gazetted no later than 21 July, 2001. In accordance with common practice, the gazetting may well be retrospective to 21 June. 2001. The approval is not expected to have been gazetted by the Issue Date. Portuguese counsel to the Lead Managers has advised that, unless and until gazetting occurs, the Government approval, albeit validly resolved in a definitive manner. is not enforceable. There is accordingly a risk that the Government could alter the approval, or indccd suspend it, prior to it becoming enforceable. However. this would require a new decision of the Council of Ministers. The Company considers this risk to be extremely remote.

62 TERMS AND CONDITIONS OF THE BONDS The issue of the Euro 126,500,000 6.4 per cent. Guaranteed Secured Bonds due 2027zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (the “Bonds”) was authorised by a resolution of the Board of Managing Directors of Algal-ve International B.V. (the “Issuer”) passed on 27 June, 2001. The Bonds are to be issued pursuant to a bond trust dced dated 2 July. 2001 (as amended. supplemented or novated from time to time. the “Bond Trust Deed”) among the Issuer,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Euroscut - Sociedade, Concessionaria da Scut do Algal-ve. SA. (“the Cornpan?.”). XL Capital Assurance Inc. (“XL.”),zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Citibank, N.A. as security trustee (thc “Security Trustee”, which expression includes all personszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA for the time being security trustee or security trustees appointed under the Intercreditor Deed (as defined in Condition 2(E)) and Citibank, N.A. as bond trustee (the “Bond Trustee”. which expression includes the trustee or trustees for the time being of the Bond Trust Deed). The Bonds are unconditionally and irrevocably guaranteed as to scheduled payments of principal, interest and certain additional amounts in respect of the Bonds pursuant to a financial euaranty dated 2 July, 2001 (the “Bond Financial Guaranty”) issued by XL to the Bond Trustec. The Bonds also have the benefit of the security more particularly described in Condition 2(C).

Payments in respect of the Bonds will be made pursuant to a paying agency agreement dated 2 July. 2001 (as amended or supplemented from time to time, the “Paying Agency Agreement”) among the Issuer. thc Company. XL, Citibank, N.A., as principal paying agent (the “Principal Paying Agent”: u-hich cxpression includes an>- successor principal paying agent appointed under the Paying Agent>- Agreement ). Dexia Banque Internationale P Luxembourg, as paying agent (the “Paying Agent’’ and. together with the Principal Paying Agent,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the “Paying Agents“. which expression includes any successor or additional paying agents appointed thereunder), the Bond Trustee and the Security Trustee. The holders of the Bonds (the “Bondholders”) and the holders of the related interest coupons (the “Couponholders” and the “Coupons”, respectively) will be have the benefit of. will be bound by and are deemed to have notice of, all the provisions of the Bond Trust Deed. the Bond Financial Guaranty, the Common Terms Agreement (as defined in Condition ?(D)). thc Security Documents (as defined in Condition 2(C))- the Intercreditor Deed (as defined in Condition ?(E)). the Paying Agency Agreement andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the other Finance Documents (as defined in the Common Terms Agrcement) applicable to them. Copies of the Bond Trust Deed, the Bond Financial Guaranty, the Common Terms Agreement. the Security Documents, the Intercreditor Deed, the Paying Agency Agreement and the other Finance Documents are available for inspection during normal business hours at the specified office for the time being of the Bond Trustee, being at the date hereof 5 Carmelite Street, London EC4Y OPA and at the specified office for the time bcing of the Paying AgentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA in Luxembourg being at the date hereof 69 Rue d’Each, L-2953 Luxembourg.

Form, Denomination and Title Form and Deiioiniiintion The Bonds are in bearer form, serially numbered. in denominations of Euro 500.000 each n-ith Coupons for interest attached at the time of issue.

Title and Ownersk@ Title to the Bonds and the Coupons will pass by delivery. The holder of an>-Bond or Coupon shall (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein. any writing thereon or any notice of any previous loss or theft thcreof) and no person shall be liable for so treating such holder.

Status, Bond Financial Guaranty and Securit! Stutus of the Boilds zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Bonds constitute direct and unconditional obligations of the Issuer. are secured by the Security (as defined below) and rank pari passu and rateably without any preference or priority among themselves and will rank at all times in accordance with the provisions of the Intercreditor Deed: save for such obligations as may be preferred by pi-o\,isionsof law that are both mandatory and of general application.

63 (B) Bond Fiiiancial Guaraniji zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAThc BondszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA have the benefit of thc Bond Financial Guaranty which has been issued pursuant to a guaranty and reimbursement agreement dated 2 July, 2001 among the Issuer, the Company and XL. under which XL has unconditionally and irrevocably agrecd to pay to the Bond Trustee all sums due and payable but unpaid by the Issuer in respect of scheduled principal and interest on. and additional amounts payable under Condition 7 in respect of, the Bonds, all as more particularly described in the Bond Financial Guaranty. The terms of the Bond Financial Guaranty provide that amounts which become due under the Bonds on an accelerated basis (whether by virtue of any default by thc Issuer, any mandatory or optional redemption or any other cause) will not be guaranteed by XL other than on the relevant Scheduled Payment Date (as defined in Condition 3) unless XL in its sole discretion elects so to do. If no such election is made, XL will continue to be liable to make payments in respect of the BondszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA pursuant to the Bond Financial Guaranty in such amounts and at such times as payments would have been due had there not been any such acceleration. Any earlv redemption premium payable pursuant to Condition 5 and any Default Inwrest (as defined in Condition 4(A)), are not guaranteed under the Bond FinancialzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Guaranty, even where they constitutezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA part of any accelerated amount.

(C) Securitj. Thc Bonds have the benefit of the security constituted by:

(i) a pledge over the shares in the capital of the Issuer granted by the shareholders of the Issuer and a Dutch pledge agreement (which includes a pledge over the Issuer’s bank accounts) to be made bctwccn the Issuer and the Security Trustee for the benefit of XL. the Bond Trustec (in its capacity as trustee for the Bondholders and in its own capacity). European Investment Bank (“EIB”). Banco Santander Central Hispano, SA. (the “VAT Facility Agent”) and the Security Trustee;

(ii) a security agreement, under which the Company grants security over its assets to secure the Company’s obligations under the loan agreement between thc Issuer and the Company under which the Issuer will lend (iizter alia) the net proceeds of the issue of the Bonds to the Company (the “Intercompany Loan Agreement”) and the Company Guaranty (as defined below). to be made between the Company. its shareholders. the Issuer, XL. the Bond Trustee. ETB, the VAT Facility Agent and the Security Trustee; and

(iii) an unconditional and irrevocable guarantee by the Company of, iizter alia, all amounts due from the lssuer to the Bondholders pursuant to these Conditions to be made between the Company, XL, EIB, the VAT Facility Agent, the Bond Trustee and the Security Trustee (the “Company Guaranty”) (together. the “Security Documents”) Each of the assets of the Issuer or the Company or the Shareholders that are subject to the Security Documents are referred to in these Conditions as the “Security”. The Security will also stand as security for amounts payable by the Issuer to other “Beneficiaries” (as defined in the Common Terms Agreement). The benefit of the Security will be held by the Security Trustee on behalf of the Bondholders and other Beneficiaries. The respective riEhts and liabilities of the Bondholdcrs and other Beneficiaries in respect of the Security are regulated by the terms of the lntercreditor Deed, pursuant to which the exercise by thc Bond Trustee of rights under the Bonds and the Trust Deed is. in most circumstances, subject to the direction of the Instructing Creditor (as defined in the Intercreditor Deed) and/or subject to the prior consent of other parties to the Intercreditor Deed.

(D) Conirnoii Terms Agreement Subject to the terms of the Intercreditor Deed, the Bond Trustee on behalf of the Bondholders has the benefit of certain representations and covenants set out in an agreement dated on or about the Issue Date (as amended, supplemented or replaced from time to time, the “Common Terms Agreement”) between the Issuer, the Company, the Security Trustee, the Bond Trustee. EIB, the VAT Facility Agent and XL. 64 (E) 61tercreditor zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Deed zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAThe Bonds are subject to an intercreditor deed dated 2 July, 2001 (the ’’Issue Datc”) (as amended, supplemented or replaced from time to time. the “Intercreditor Deed”)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA among the Issuer, the Company, the Security Trustee, the Principal Payins Agent, the Bond Trustee, EIB, the VAT Facility Agent and XL, pursuant to which the exercise by the Bond Trustee of rights under the Bonds and the Bond Trust Deed is in most circumstances subject to the direction of, and/oi- the prior consent of. other parties to the Intercreditor Deed. The Intercreditor Deed provides that the Instructing Creditor has the exclusive right. power and authority to direct, or to refrain from directing, the Beneficiaries and the Securit>-Ti-ustee in the exercise of thc Financing Rights (as defined in the Intercreditor Deed) without regard to the intcrests of any other person and thc Jnstructing Creditor will not owe fiduciary duties to any person. When exercising the Financing Rights in accordance with the instructions of the Instructing Creditor, the Security Trustee is not required to have regard to the interests of the Beneficiaries in relation to the exercise of such rights and has no liability to thc Bondholders as a consequence of so acting. (Fj zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAEffeci on Boridio1der.s mid Couponlioldcl-s The BondholderszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and the Couponholders have the benefit of. are bound by and are deemed to have notice of. all the provisions of the Bond Trust Deed. the Bond Financial Guaranty, the Common Terms Agrecment. the Security Documents, the Intercreditor Decd, the Paying Agency Agreement and the other Finance Documents to which the Bond Trustee or the Security Trustee arc party. Copics of cach of these documents are available for inspection dui-ing normal business hours at the registered office for the tlmc being of the Bond Trustee and at the specified office of the Pal-ing Agent in Luxembourg. Notwithstanding anything to the contrary contained in the Bond Trust Deed. at any time when XL is Bond Creditor (as such term is defined in the Bond Trust Deed). XL shall bc entitled to vote with respect to all matters relating to the Intercreditor Deed (other than in rclation to the exercise of riehts reserved to the Bond Trustee) as though it were the holder of all outstanding Bonds.

3. Interest The Bonds will bear interest on their outstanding principal amount (“Scheduled Interest”) from the Issue Date at the rate of 6.4 per cent. per annum (the “Rate of Interest”). Scheduled Interest will be payable annually in arrear on each scheduled payment date listed in Condition 6 (each, a “Schedulcd Payment Date”). The first Scheduled Interest payment will be made on 15 December. 7001 in respect of the period from, and including, the Issue Datc to. but excluding. 15 December, 3001.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA If interest is required to be calculated for any period of less than 12 months. it will be calculated on the basis of the actual number of days in the calculation period dividedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA by 365 (or? if any portion of that calculation period falls in a leap year, the sum of (a) the actual number of days in that portion of the calculation period falling in a leap year divided by 366 and (b) the actual number of days in that portion of the calculation period falling in a non-leap year divided by 365).

4. Dcfault Interest (A) Amounts of principal in respect of each Bond will cease to bear interest from the Scheduled Payment Date for the payment of such principal amount unless. upon due presentation, payment is improperly withheld or refused, in which case the unpaid amount will bear default interest (“Default Interest”) at the Rate of Interest (after as well as before judgment) until whichever is the earlier of: (i) the day on which all principal sums due in respect of such Bond up to that day are received by or on behalf of the relevant Bondholder: and (ii) the day which is seven days after the Principal Paying Agent or the Bond Trustee has notified the Bondholders that it has received all principal sums due in respect of the Bonds up to such seventh day (except to the extent that there is any subsequent default in payment in which case interest shall continue to accrue on any principal amounts until such principal amounts are received by or on behalf of the relevant Bondholders). (B) Any amounts of Default Interest arising prior to the final Scheduled Payment Date will be payable on the next Scheduled Payment Date (a ”Default Interest Payment Date“). Any amounts of Default Interest arising after the final Scheduled Payment Date shall be immcdiately due and payable. Each

65 period bcginning on (and including) the date 011 which the relcvant payment is improperly withheld or refused or on any Default Interest PaymentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Date and ending on (but excluding) the next Default Interest Payment Date is herein called a *‘Default Interest Period”. (C) The amount of Default Interest payable in rcspect of each Bond for any Default Interest Pcriod shall be calculated on the basis of the actual number of days in the calculation period divided by 365 (or, if any portion of that calculation period falls in a leap year, the sum of (a) thc actual number of days in that portion of the calculation period falling in a leap year divided by 366 and (b) the actual number of days in that portion of the calculation period falling in a non-leap year divided by 365). Default Interest does not accrue on Scheduled Interest or Default Interest. The payment of zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADefault Interest is riot guaranteed by XL under the Borid FinancialzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Guaranty. 5. Redemption and Purchase (A) Scheduled redemption zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAUnless previously redeemed, or purchased and cancelled. the Issuer will redeem the Bonds by the payment of principal (“Scheduled Principal”) on the Scheduled Payment Dates, as provided in Condition 6. The final Scheduled Payment Date is the Scheduled Payment Date falling on 15 June 2027. (B) Unscheduled redemption at the option of’ the Issuer. The Bonds may be redeemed on or after the second anniversary of the Issue Date in whole. but not in part. at the option of the Issuer with (except with respect to any prepayment of all outstanding Senior Debt with respect to which a Financial Guaranty (as defined in the Common Terms Agreement) has been issued) the consent of XL if it is the Bond Creditor, on any Scheduled Payment Date at a price (the “Early Redemption Price”) equal to the sum of (i) their principal amount outstanding on such Scheduled Payment Date (together with all accrued interest up to and including such Scheduled Payment Date) and (ii) the Make Whole Premium (as defined below) on the Issuer’s giving not less than 45 nor more than 60 days’ notice to the Bondholders in accordance with Condition 14 (which noticezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA shall be irrevocable and shall oblige the Issuer to redeem the Bonds on the relevant ScheduledzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Payment Date at such price). “Make Whole Premium” means the excess, if any. of (i) the present value of the future Debt Service (as defined below) on the Bonds being redeemed discounted at fifty (50) basis points above the then current yield on the German Bundcsobligationen of a maturity comparable to the remaining average life of the Bonds over (ii) the outstanding principal amount of the Bonds being redeemed. “Debt Service” means all interim and final payments of principal of, and premium, if any. and interest on (including additional amounts or similar gross-ups in respect of taxes). and other amounts (including fees and commissions) in respect of the Bonds. including without limitation, scheduled and unscheduled payments, prepayments, redemptions and repurchases of the Bonds. Any amount by which the Earl17 Redemption Price exceeds the outstanding principal amount of the Bonds (plus accrued interest) is not guaranteed by zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAXL under the Bond Financial Guaranty. (C) Unscheduled redemption for tax reasons The Bonds may be redeemedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA at the option of the Issuer with (except with respect to any prepayment of all outstanding Senior Debt with respect to which a Financial Guaranty (as defined in the Common Terms Agreement) has been issued) the consent of XL if it is the Bond Creditor, in whole, but not in part. at any time on giving not less than 30 nor more than 60 days’ notice to the Bondholders in accordaiice with Condition 14 (which notice shall be irrevocable) at a price equal to the sum of the Bonds outstanding on such date (together with all accrued interest up to and including such date), if the Issuer satisfies the Bond Trustee immediately before giving such notice that: (i) it has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of The Netherlands (or any taxing jurisdiction other than The Netherlands which the Issuer becomes subject to at any time) or any political subdivision or any authority thereof or therein having power to tax. or any change in the application or official interpretation of such laws or regulations (including a ruling by a court of competent jurisdiction), whch change or amendment becomes effective on or after the Issue Date; or (ii) at any time on or after the second anniversary of the Issue Date, (a) the Company does not have the benefit of a withholding tax exemption pursuant to Article 36 of the Portuguese Tax Benefit Code (€statuto Dos Benefi’cios Fiscatis) in respect of payments to be made by the Company 66 under the Intercompany Loan (as defined in the Common Terms Agreement) and (b) a withholding tax in excess of 10 per cent. has been imposed on the Company by the Portuguese State or any authority thereof or therin having powcr to tax in respect of such payments; and (iii) such obligation cannot be avoided by the Issuer or the Company (as the case may be) taking reasonable mcasures available to it; provided, however, that no such notice of redemption shall be given earl-licr than 90 dap prior to the earliest date on which, in the case of Condition 5(C)(i), the Issuer would be obliged to pay such additional amounts if a payment in respect of the Bonds were then duc or, in the case of Condition S(C)(ii), the Company would be obliged to make a payment to the Issuer subject to the withholding tax there referred to. Priorto the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Bond Trustee: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (x) a certificate signed by two managing directors of the Issuer stating that the circumstances referred to in Conditions 5(C)(i) or S(C)(iij and (in either case) S(C)(iii) above prevail and setting out details of such circumstances: and

(y) an opinion in form and substance satisfactory to the Bond Trustee of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Bond Trustee shall be entitled to accept such certificate and opinion as sufficient evidence of the satisfaction of the circumstances set out in Conditions 5(C)(i) or S(C)(ii')and (in either case) S(C)(iii) above, in which event they shall be conclusive and binding on the Bondholders. Upon the expiry of any such notice as is referred to in this Condition 5('C), the Issucr shall be bound to redeem thc Bonds in accordance with this Condition 5(C). No other redeniptioii zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA WithoutzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA prejudice to Condition 8, the Issuer shall not be entitlcd to redeem the Bonds otheiuise than as provided in Conditions 5(A). 5(B) and 5(C) above. Ptrrcliase The Issuer (on or after the second anniversary of the Issuc Date), the Company and an!. Shareholder may, subject to compliance with any applicable requirement of the Luxembourg Stock Exchange. at any time purchase Bonds in the open market 01- otherwise and at any price: provided that all unmatured Coupons appertaining thereto are purchased therewith. Any purchase b>-tender shall be made available to all Bondholders alike. Caiicellation zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA All Bonds so redeemed or purchased by the Issuer. and any unmatured Coupons attached to or surrendered with them, shall be cancelled and may not be reissued or resold. Any redemption of Bonds pursuant to Conditions 5(B) or 5(C) will result in an unscheduled payment being made. No Bond or Coupon will be cancelled in circumstances where XL has made payment to the Bondholders or Couponholders under the Bond Financial Guaranty of amounts due in respect of such Bond or Coupoii unless and until XL has received payment equivalent to that paid to the Bondholders or Couponholders in respect of such Bond or Coupon under the Bond Financial Guaranty, from or on behalf of the Issuer. In the event that XL makes any payment under the Bond Financial Guaranty in respect of all or part of a Bond or Coupon, the Paying Agent through whom payment is made shall endorse on such Bond or Coupon a statement indicating the amount and date of such payment by XL and (where such Bond or Coupon would otherwise be cancelled) shall forward to XL such uncancelled Bonds or Coupons.

Payments Scheduled payments The Issuer will in respect of each Euro 500.000 in original principal amount of each Bond make the relevant total payment (comprising the relevant payment of interest and. if applicablc. the relevant payment of principal) set oppositc cach Scheduled Payment Date bclow on such Scheduled Payment Date.

67 Outstmidirig Sclierluled Scheduled Priiic@ul Scheduled zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPnymeiit Date Priiiciyal zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAInterest Total Amouiit 15 December. 2001 €0 14.290.41 €14.290.41 €500,000.00 15 December, 2002 €0 €32,000.00 €32 .OOO. 00 €500,000.00 15 December, 2003 €0 €32,000.00 €32,000.00 €500,000.00 15 December. 2004 €0 €32.000.00 €32,000.00 €500,000.00 15 December, 3005 €0 €32,000.00 €32.000.00 €500,000.00 15 December, 2006 €1.800.00 €32.000.00 €33.800.00 €498,200.00 15 December. 2007 €15,900.00 €31,884.80 €47,784.80 €482,300.00 15 December, 2008 €20,550.00 €30,867.20 €51,417.20 €461.750.00 15 December. 2009 €27.1 00.00 €29,5 52 .OO €56,652.00 €434,650.00 15 December. 2010 €33,650.00 €27.81 7.60 €61.467.60 ~401,000.00 15 December, 201 1 €0 €25,664.00 €25.664.00 €401.000.00 15 December. 2012 €0 €25.664 .OO €25,664 .OO €40 1,000.00 15 December, 2013 €0 €25,664.00 €25,644.00 €401,000.00 15 December. 2014 €0 €25,664.00 f25.664.00 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA€401,000.00 15 December, 2015 €3,250.00 €25.664.00 €28,914.00 €397,750.00 15 December, 2016 €1.850.00 €25,456.00 €27.306.00 €395,900.00 15 December. 2017 €2,3 50.00 €25,337.60 €27,487.60 €393.550.00 15 December, 2018 € 12.650.00 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA€25,187.20 €37,837.20 €380.900.00 15 December, 2019 €18,450.00 €24,3 77.60 €42,827.60 €362,450.00 15 December: 2020 €23,650.00 €23,196.80 €46.846.80 €3 3 8.800.00 15 December, 2021 €30.450.00 €2 1.683.20 €52,133.20 €308,350.00 15 December, 2022 E38.250.00 €1 9,734.40 €57,984.40 €370:100.00 15 December, 2023 €31,800.00 €17,284.40 €49,086.40 €238,300.00 15 December. 2024 €37,750.00 €15,251.20 €53.001 20 €200.550.00 15 December, 2025 €75,900.00 12,835.20 €88.735.20 €124,650.00 15 December. 2026 €83.100.00 €7,977.60 €9 1.077.60 €4 1,550.OO 15 June. 2027 €41,550.00 €1,325.95 €42,87 5.95 €0.00 Paweiits onlv cigaiiist presentation Subject to Conditions 6(D) and 6(F). payments in respect of the Bonds by the Issuer will be made only against: (i) presentation and surrender of the appropriate Coupons; and (ii) in the case of final redemption (provided that payment is made in full) surrender of the relevant Bonds, at the specified office of any Paying Agent outside the United States by Euro cheque drawn on. or by transfer to, a Euro account (or other account to which Euro may be credited or transferred) maintained by the payee in a Participating Member State. Pawwits subject to fiscal lun*s All payments in respect of the Bonds are subjecI in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Bondholder or Couponholders in respect of such payments. Urinintured Coupons void On the early redemption in full of any Bond pursuant to Conditions ,S(B), 5(C) or 8. all unmatured Coupons appertaining theretozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (whether or not still attached) shall become void andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA no payment will bc made in respect thereof. Payments on business dq-s If the due date for paymentzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of any amount in respect of any Bond or Coupon is not a business day in the place of presentation, the holder shall not be entitled to payment in such place of the amount due until the next following business day in such place and shall not be entitled to any further interest or other payment in respect of any such delay. 68 ...... -. . zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Port in1 Pciynents If a PayingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Agent zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmakcs a partial payment in rcspect of any Bond or Coupon, such Paving Aeent will endorse on such Bond a statement indicating the amount and date of such payment. Subrogation Without prejudice to its other rishts and remedies. XL shall be subrogated to any rights of the Bondholders or Couponholders and the Bond Trustee against the Issuer in respect of amounts due in respect of the Bonds or Coupons which have been paid by XL under the Bond Financial Guaranty. hterpretation In these Conditions: “business day” means,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA in respect of any place of presentation. any day (i) other than a Saturday or Sunday orzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA other day on which commercial banking institutions are authorised or obligated by law to be closed and (ii) on which the TARGET system is operating: “Euro” or ,‘E” means the single currency which was introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty: “Participating Member State’’ means a Member State of the European Communities uhch adopts the Euro as its lawful curl-cncy in accordance with the Treaty; the ”TARGET system” means the Trans-European Automated Real-time Gross Settlement Express Transfer system; and the “Treaty” means the Treaty cstablishing the European Communities, as amended by the Treat>-on European Union.

Taxation All payments of principal and interest in respect of thc Bonds and the Coupons by the Issuer shall be made without withholding or deduction for any present or future tax. assessment or other governmental charge imposed. levied, collected, withheld or assessed by The Netherlands or any political subdivision or taxing authority thereof or therein, unless such withholding or deduction is required b>- law. If an>- such withholding or deduction is required by law, the Issuer or the relevant Paying Agent (as the case may be) shall pay such additional amounts as will result in the receipt by the Bondholders and the Couponholders of such amounts as would have been received by them if no such withholding OJ deduction had been required, except that no such additional amounts shall be payable for or on accountzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of: any tax. assessment or other governmental charzc to the extent such tax, assessment or other governmental charge would not have been imposed but for such Bondholder or Couponholder or the holder of a beneficial interest in the Bond or Coupon having some connection with The Netherlands or any political subdivision or taxing authority thereof or therein, other than the mere holding of such Bond or Coupon or a beneficial interest therein; any tax, assessment or other governmental charge to the extent such tax. assessment or other governmental charge would not have been imposed but for the failure of such Bondholder 01- Couponholder, or the holder of a bcneficial interest in such Bond or Coupon to provide any declaration, certification or documentation that is a precondition to exemption from. or reduction of. such tax, assessment or other governmental charge; any Bond or Coupon presented for payment in The Netherlands: any Bond or Coupon presentcd for payment more than thirty (30) days after the Relevant Date, except to the extent that the relevant holder would have been entitled to such additional amounts if it had presented such Bond or Coupon on the last day of such period of thirty (30) days irrespective of whether such day was a business day (as defined in Condition 6(H)); any tax, assessment or other governmental charge imposed on a payment to. or for the account of. an individual where such tax. assessment or other go\-ernmental charge is imposed pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November, 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive (together, the “EU Directive”); or any tax, assessment or other governmental charge that could have been avoidcd if such Bond or Coupon had been presented to another Paying Agent in a Member State of the European Union. 69 In these Conditions “Relevant Date” means whichever is the later of (a) the datc on which the payment in question first becomeszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA due andzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (b) if the full amount payable has not been received in London by the Principal Paying Agent or the Bond Trustee on or prior to such due date, the date on which the full amount of such payment has been so received and noticc to that effect has been given to the Bondholders. Any reference in these Conditions to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may bc payable under this Condition 7.

If the Issuer becomes subject at any time to any taxing jurisdiction other than The Netherlands. references in these Conditions to The Netherlands shall be construed as references to The Netherlands andlor such other jurisdiction. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 8. Events of Default If any Event of Default (as defined in the Common Terms Agreement) occurs. then thc Bond Trustee shall (if indemnified to its satisfaction), upon being so directed in accordance with the Intercreditor Deed (subject to the provisions of the Common Terms Agreement) by the Instructing Creditor and may, if so entitled under the Intercreditor Deed, declare by written notice to the Issuer that each Bond is immediately due and payable whereupon without furthcr action or formality the Bonds shall becomc immediately due and payable, at their outstanding principal amount together with accrued interest. The Events of Default zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAare set out zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAin the Common Terms Agreement. The Bond Trustee is not responsible for monitorins compliance by the lssuer or the Company with any matter set out in the Common Terms Agreement including whether an Event of Default has occurred and. if the Bond Trustee is the Bond Creditor and is for whatever reason required to make any determination of Material Adverse Change. or like matter, as referred to in the Common Terms Agreement, it may, in its absolute discretion. seek directions from thc Bondholders by means of any Extraordinary Resolution or seek advice from an expert, both in accordance with the Bond Trust Deed. and the Bond Trustee will not be responsible for the consequences of any delay involved in so doing.

9. Prescription Claims for principal and interest shall become void unless the relevant Coupons and/or the relevant Bonds (as the case may be) are presented for payment within ten years of the appropriate Relevant Date.

10. Replacement of Bonds and Coupons If any Bond or Coupon is lost, stolen, mutilated. defaced or destroyed. it may be replaced at the specified office of the Principal Paying Agent, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of all costs and expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the lssuer and the Principal Paying Agent may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.

11. Bond Trustee, Security Trustee and Paying Agents (i) Under the Bond Trust Deed, the Bond Trustee is entitled to be indemnified and relieved from responsibility in certain circumstances and to be paid its costs and expenses in priority to the claims of the Bondholders. In addition, the Bond Trustee is entitled to enter into business transactions with the Issuer, the Company, XL and any entity related to the Issuer. the Company or XL without accounting for any profit.

(ii) In thc exercise of its powers and discretions under these Conditions, the Bond Financial Guaranty, the Bond Trust Deed and the Intercreditor Deed, the Bond Trustee will have regard to the interests of the Bondholders as a class and will not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Bond Trustee shall not be entitled to require from the Issuer, the Company, XL or the Security Trustee, nor shall any Bondholder or Couponholder be entitled to claim from the Issuer, the Company, XL. the Bond Trustee or the Security Trustee, any indemnification or other payment in respect of any consequences (including without limitation, any tax consequence) for individual Bondholders or Couponholders of any such exercise. 70 (iii) The Security Trustee is entitled to be indcmnificd and relicved from responsibility in certain circunistanccs and to be paid its costs and expenses in priority to the claims of the Bondholders. In addition. the Security Trustee is entitled to enter into business transactions with the Issuer, the Company, the Shareholders. XL. the Bondholders, the Coupoiiholdcrs and any entity related to the Issuer, the Company, the Shareholders or XL without accounting for any profit. (iv) Neither the Bond Trustee nor the Security Trustee have investigated nor are they responsible or liable for any loss arising as a result of any failure to investigate the validity. value. sufficiency or enforccability of the security created by the Security Documents or the validity or enforceability of any contracts over which such securitJ- is created and both of the Bond Trustee and the Securit>- Trustee shall accept without investigation. requisition or objection and without any I-esponsibility or liability for doing so such right and title as the Issuer. the Company and the Shareholders. as the case may be. have to the property assets and rights oyer whch security is created pursuant to the Security Documents. Neither the Bond Trustee nor the Security Trustee shall be responsiblc for or liable for loss which results should any deficiency arise between the amount realised in rcspcct of the property assets and rights over which security is given by the Security Documents and sums due in respect of the Bonds because the Security Trustee 01- thc Bond Trustee is liable to tax in respect of the property assets and rights over which such security is created. Ncithcr the Bond Trustee nor the Security Trustee shall be responsible for monitorins the obligations of any person to the Issuer and each of them shall. until they have actual acknowledge to the contrary. assume that all such persons are duly performing the same. Neither the Bond Trustee nor the Security Trustee shall be obliged to take any action under the Bond Trus~Deed or thc Intercreditor Deed unless either or each is indernnificd to its satisfaction in respect of any personal liability or expense which it ma>-in its opinion incur. Protection and realisation of the security may be prevented or delayed as a result. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (v) In acting undcr the Paying Agency Agreement and in connection with thc Bonds and the Coupons: the Paying Agents act solely as agents of the Issuer and (to the extent provided therein) the Bond Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of thc Boiidholders or Couponholders. (vi) The initial Paying Agents and their initial specified offices are listed below. The Issuer reserves the right (with the prior approval of the Bond Trustee) at any time to vary or teiminatc the appointment of any Paying Agent and to appoint a successor principal paying agcnt and additional or successor paying agcnts, provided, however, that the Issuer shall at all times maintain (a) a Paying Agent with a specified office in a major city approved by the Bond Trustec in continental Europe,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (b) so long as the Bonds are listed on the Luxembourg Stock Exchange. at least one Paying Agent with a specified office in Luxembourg and (c) if the conclusions of the ECOFIN Council meeting of 26th-77th November, 2000 are implemented, a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to the ELI Directive. Notice of any change in any of the Paying Agents or in their specified offices shall promptly be given by the Issuer to the Bondholders in accordance with Condition 13. (vii) Each of the lssuer and the Company has covenanted in the Common Terms Agreement to make available its annual audited accounts to the Paying Agents at their specified offices. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 12. Meetings of Bondholders, Modification and Waiver (A) Meetings of zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBABondholders Thc zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBABond Trust Deed contains provisions for convening meetings of Bondholders to consider zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(i) matters affecting their interests. including the modlfication of these Conditions, thc Bond Trust Deed. the Common Terms Agreement. the Intcrcrcditor Deed and the Bond Financial Guaranty. Any such modification may. subject to Condition 13(A) and subject to the prior written consent of XL if it is the Bond Creditor. be made if sanctioned by a resolution passed at a duly convened meeting of the Bondholders by a majority of not less than 75 per cent. of the votes cast (an “Extraordinary Resolution”) as further provided in the Bond Trust Deed.

(ii) Every voter shall have one vote on a show of hands. and on a poll one vote in respect of cach Euro 500,000 in aggregate of the outstanding principal amount of Bonds held by hm. 71 (iii) A meeting of Bondholdcrs will also have the power (exercised by Extraordinary Resolution) to zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAadvisc or instruct the Bond Trustee in connection with the exercise by the Bond Trustee, subject to Condition 13(A), of any of its rights. powers and discretions under the Finance Documents to appoint any persons (whether Bondholders or not) as a committee to represcnt the interests of the Bondholders and to confer upon such committee any powers which thc Bondholders could themselves exercise by Extraordinary Resolution. (iv) The quorum at any meeting convened to vote on an Extraordinary Resolution is two or more persons holding or representing not less than 50 per cent. of the aggregate outstanding principal amount of the Bonds or, at thc adjourned meeting, two or more persons being or representing Bondholders whatever the principal amount of the Bonds held or reprcsented by them, provided, however, that any proposal to: (a) change any date fixed for payment or principal or interest in respect of the Bonds. to reduce the amount of principal or interest payable on any date in respect of the Bonds or to alter the method of calculating thc amount of any payment in respect of the Bonds or the date for any such payment; (b) effect any cxchange of the Bonds for, or the conversion of the Bonds into, shares, bonds or other obligations of the Issuer, XL or any other person or to approve the substitution of any person for the Issuer as principal obligor under the Bonds or the substitution of any person for XL as guarantor under the Bond Financial Guaranty: (c) change the currency of payments under the Bonds: (dj modify any provision of the Bond Financial Guaranty; (e) change the quorum required at any meeting of the Bondholders or the majority required to pass an Extraordinary Resolution; (f) at any time when XL is not thc Bond Creditor. release the Security other than in accordance with the Security Documents:

(9) alter the rights of priority on enforcement as set out in the lntercreditor Deed: 01' (h) amend any of the above reserved matters, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA may only be sanctioned by an Extraordinary Resolution passed at a meeting of Bondholders at which two or more persons holding or representing not less than 75 per cent. or, at any adjourned meeting. at least 25 per cent. in outstanding principal amount of the Bonds form a quorum. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Bondholders and Couponholders whether present or not. In addition. a resolution in writing signed by or on behalf of all holders of all outstanding Bonds will take effect as if it were an Extraordinary Resolution. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders. In addition, the Security Documents and the Common Terms Agreement may be modified in accordance with thc Intercreditor Deed. The Bond Trustee will not be entitled tozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA agree to any modification to these Conditions, the Bond Financial Guaranty, the Bond Trust Deed or anj other Finance Document without the prior written consent sf XL so long as it is the Bond Creditor pursuant to the Intercreditor Deed and will in certain circumstanceszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA be obliged to agree to any such mod$cation if required to do so by the Instructing Creditor. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA As provided in the Bond Trust Deed, XL is entitled to receive notice of and attcnd meetings of Bondholders but is not entitled to vote (save in its capacity (if any) as a holder of any Bond). Modification and waiver zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Bond Trustee may, subject to Condition 13(A), without the consent of the Bondholders or Couponholders, concur with the Issuer and (so long as it is the Bond Creditor) XL and any other relevant parties in making: (i) any modification to these Conditions. thc Bond Trust Deed, the Bond Financial Guaranty, the Security Documents, the Common Terms Agreement and the other Finance Documents which is of a formal, minor or technical nature or is made to correct a manifest error; and 72 (ii) any other modification and any waiver. authorisation or determination of any breach or proposcd breach of these Conditions or any such document which is in the opinion of the Bond Trustee not materially prejudicial to the interests of Bondholders. Any such modification, waiver, authorisation or determination shall be binding on all Bondholders and Couponholders and. if the Bond Trustee so requires, notice thereof shall be given by thc Issuer to the Bondholders as soon as practicable thereafter in accordance with Condition 14. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 13. Exercise and Enforcement (A) Exercise mid Euforcenient zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAAs more zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAparticularly provided in the Intercreditor Deed, the Bond Trustee will. so long as XL is the Bond Creditor (except in relation to the Bond Trustec’s Retained Rights and subjcct to the Bond Trustee’s Entrenched Rights, as such terms are defined in the Intercreditor Deed). be oblieed to take action to exercise or enforce its rights under the Bond Trust Deed or the Security Documents or in respect of the Bonds if required to do so by the Bond Creditor (provided that the Bond Trustee has been indemnified or furnished with security to its satisfaction) and will not in most circumstances be entitled to take any such action without the prior written consent of XL so long as XL is the Bond Creditor. Subject as aforesaid, the Bond Trustee shall not be bound. as against the Bondholders. to take any such action unless: (1) it has been so requested in mlriting by the holders of at least 25 per cent. in outstanding principal amount of the Bonds or has been so directed by an Extraordinal-! Resolution of the Bondholders; and (ii) it has been indemnified or provided with security to its satisfaction. Whether or not XL is the Bond Creditor, the Bond Trustee is entitled to exercise its Retained Rights (as defined in the Intercreditor Deed) as it shall in its sole discretion determinc.

(B) Action /?J. Bondholders zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBANo Bondholder may take any action against the Issuer to enforce its rights in respcct of the Bonds 01- in relation to the Bond Financial Guaranty or to cnforce all or any of the security constituted by the Security Documents otherwise than rhrough the Bond Trustee.

14. Notices Notices to thc Bondholders shall be valid if published in a leading English language daily newspaper published in London (which is expected to be the Fiiinnciul Times) and as long as the Bonds are listed on the Luxembourg Stock Exchange, a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburge~.Wol-t) or. if such publication is not. in the opinion of the Bond Trustee. practicable. in a leading English language daily newspaper having general circulation in Europe. Any such notice shall bc deemed to have been given on the date of first publication. Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to tho Bondholders. A copy of every notice to Bondholders will be supplied by the Issuer to Euroclear Bank S.A/N.V. as operator of the Euroclcar System and Clcai-stream Banking. societe anonyme for so long as thc Bonds are cleared and settled through those clearing systems or to any additional or substitute clearing system from time to time nominated by the Issuer or the Bond Trustee and approved by XL (so long as it is the Bond Crcditor) through which the Bonds are cleared and settled.

15. Governing Law The Bond Trust Deed and the Bonds are governed by. and shall be construed in accordance with, English law. The Bond Financial Guaranty is governed by. and will be construed in accordance with. the laws of thc State of New York.

16. Jurisdiction (A) The Courts of England are to have jurisdiction to settlc any disputes which may arise out of or in connection with the Bond Trust Deed, the Bonds or the Coupons and accordingly any legal action or proceedings arising out of or in connection with the Bond Trust Deed, the Bonds or the Coupons (“Proceedings”)mal- be brought in such courts. Each of the Issuer and XL has in the Trust Deed irrevocably submitted to the jurisdiction of the courts of England and waived any objection to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. 73 (B) The Issuer has irrevocably appointed Cintra Airports UR Ltd at Bristol Airport, Lulsgate. Bristol BS19 3DY or its other registered office for thc time being to receive. for it and on its behalf. service of process in any Proceedings in England. XL has irrevocably appointcd Debevoise & Plimpton Services Limited at 14th Floor. Tower 42, International Financial Centre, 25 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAOld Broad Street. London EC2N IHQ, or its other registered office for the time bcing to receive. for it and on its behalf, service of process in any Proceedings in England. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 17. Rights of Third Parties A person who is not a party to the Bonds has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term or condition of the Bonds, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

ISSUING AND PRINCIPAL PAYING AGENT Citibank, N.A. S Carmelite Street London EC4Y OPA

PAYING AGENT Dcxia Banque Intcrnationale A Luxembourg 69 Rue d’EachzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA L-2953 Luxembourg and/or such other or further Paying Agents and/or specified offices as may from time to time be appointed by the Issuer and notice of which has been given to the Bondholders.

USE OF PROCEEDS The net proceeds of the issue of the Bonds (after deducting underwriting and management fees and selling commissions) will amount to Euro 125,994,000, were loaned by the Issuer to Euroscut pursuant to the Intercompany Loan Agreement, and will be used by Euroscut to fund the costs of the Project.

74 SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Permaneiir Global Bond contains proyisioiis which mod$)> the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATernis aid ColldiTiOIlS of the Borids CIS rliej. qylj. to the PernimeiitzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Global Bond, some of which rtiod$r the ejject ojzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArlie Conditions.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The folloiriiigzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA is u sumniar?' of certain of those provisions: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

1. Exchange The Permanent zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Global Bond will become exchangeable in whole, but not in part. (free of charge to the holder) for Bonds in definitive form (i'Dehitive Bonds") in the denomination of Euro 500,000 each at the request of the bearer of the Permanent Global Bond against presentation and surrender of the Permanent Global Bond to the Principal Paying Agent if either of the following events (each an "Exchange Event") occurs: (a) Euroclear or Clearstream. Luxembourg or any additional or substitute clearing system outsidc the United States and its possessions from time to time nominated by the Issuer or the Bond Trustee and approved by XLCA (if it is the Bond Creditor) through which the Bonds are cleared ("Additional or Substitute Clearing System") is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or (b) the Bonds becomc due and payable pursuant to Condition 8. The Permanent Global Bond will also become exchangeable. in whole bur not in part only and at the option of the Issuer. for Definitive Bonds if. by reason of any change in the laws of The Netherlands, the Issuer is or will bc required to make any withholding or deduction from any payment in respect of the Bonds which would not be 1-equircdif the Bonds were in definitive form. Whenever the Permanent Global Bond is to be exchanged for Definitivc Bonds. the Issuer shall procure the prompt delivery (frce of charge to the bearer) of such Definitive Bonds at the specified office of the Principal Paying Agcnt in London and the speclfied office of the Paying Agent in Luxembourg, duly authenticated and with Coupons attachcd, in an aggregate principal amount equal to the principal amount of the Permanent Global Bond to the bearer of the Permanent Global Bond against thc surrender of the Permanent Global Bond at the specified office of the Principal Paying Agent within 30 days of the occurrence of the relevant Exchange Event.

2. Transfers Bonds which are represented by a Permancnt Global Bond will only be transferable in accoi-dancewith the rules and procedures for the time being of Euroclear or Clearstream. Luxembourg. as the case may be. Any reference herein to Euroclear and/or Clearstream, Luxembourg, shall. whenever the context so permits.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA be deemed to include a reference to any Additional or Substitute Clearing System.

3. Pavments Payments of principal and interest (if any) in respect of Bonds represented by the Permanent Global Bond will (subject as provided below) be made against presentation for endorsement and, if no further payment falls to be made in respect of Bonds, surrender, of the Permanent Global Bond at the specified office of ani- Paying Agent. A record of each payment made against presentation or surrender of such Permanent Global Bond, distinguishing between any payment of principal and any payment of interest, will be made on the Global Bond by the Paying Agent to which the Permanent Global Bond is presented and such record shall be priniu jbcie evidence that such payment has been made. The holder of the Permanent Global Bond shall be the only person cnritled to receive payments in respect of Bonds represented by the Permanent Global Bond and the Issuer or. as the case may bc, XLCA will be discharged by payment to: or to thc order of. the holder of the Permanent Global Bond in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular principal amount of Bonds must look solely to Euroclear 01- Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or XLCA to: or to the order of, the holder of the Permanent Global Bond. No person other than the holder of the Pcrmanent Global Bond shall have any claim against the Issuer or XLCA in respect of any payments due in respect of that Permanent Global Bond.

4. Notices Notwithstanding Condition 14, while all the Bonds are represented by the Permanent Global Bond and the Permanent Global Bond is deposited with a common depositary for Euroclear and Clearstream, Luxembourg or any Additional or Substitute Clearing System, notices to Bondholders may be given by 75 delivery of the relevant noticc to Euroclear and Clearstream, Luxembourg or any such Additional or Substitute Clearing System for communication by them to its accountholders with cntitlements to thc Global Bond in substitution for publication in newspapers as required by Condition 14 and such notices shall be deemed to have been given to the Bondholdcrs in accordance with Condition 14 on the date of delivery to Euroclear and Clearstream, Luxembourg or any such Additional or Substitute Clearing System. In addition, for so long as the Bonds are listed on the. Luxembourg Stock Exchange and the rules of that Exchangc so require, notices will also be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBALuxemburger Wol-r). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5. Prescription ClaimszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA in respect of the principal and interest on the Bonds while the Bonds are represented by thc Global Bond shall become void unless it is presented for payment within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Datc (as defined in Condition 7).

6. Meetings A proxy for the holder of the Permanent Global Bond will be treated as being two persons for the purposes of any quorum requirements of a meeting of Bondholders.

7. Cancellation Cancellation of any Bond represented by the Permanent Global Bond will be effected by reduction in principal amount of the Permanent Global Bond.

8. Bond Trustee’s powers In considering the interests of Bondholders while the Global Bond is held on behalf of a clearing system the Trustee may have regard to any information provided to it by such clearins system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Bond and may consider such interests as if such accountholders were the holders of the Global Bond.

76 BOND FINANCIAL GUARANTY The jolloir-iiig is the test, subject to completioii zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand nnieiidiiieiit, of the BoiidzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Fiiiancinl zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGunl-aiitj, XL CAPITAL ASSURANCE INC. BOND FINANCIAL GUARANTY Date of Issuance: 2001 Bond Financial Guaranty Numbcr CA00040A

Re: ALGARVE 1NTERNATIONAL B.V. (the “Issuer”).

Guaranteed Obligations: €1 ?6.500.000 aggregate principal amount of thc Issuer’s 6.4 per cent. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAGuaranteed Secared Bonds due 2097 (the “Bonds”). plus scheduled interest due and payablc on the Bonds. plus certain additional amounts payablc in respect of thc Bonds pursuant to Condition 7 of thc Bonds. Citibank N.A., in its capacity as Bond Trustee under the Bond Trust Deed and any successor in such capacity (the “Bond Trustee”), for the benefit of each Bondholder (as defined in the Bond Trust Deed). The Issuer has requested XL Capital Assurance Jnc.. a New York stock insurance companj- (“XI,”),to issue this guaranty pursuant to the Guaranty and Reimbursement Agreement. dated 2 July, 2001zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA~ among XL, the Issuer and Euroscut-Sociedade Concessionaria da Scut do Algarve. S.A., in order to guaranteezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA certain of the Issuer’s obligations under the Bond Trust Dccd. XL. for good and valuable consideration. receipt of which is hereby acknowledged by it. hereby unconditionally and irrevocably guarantees to the Beneficiarl-, subject only to the terms of this Bond Financial Guai-anty (this ”Bond Financial Guaranty“). the full and complete payment by the Issuer of Scheduled Payments (as defined below) in respect of the Bonds, to the extent of any Non-payment (as defined belowj of such Scheduled Payments b>-the Issuer. For all purposes of this Bond Financial Guaranty, unless otherwise dcfined herein. capitalized terms used herein shall have the meanings given to such terms in the Common Terms Agreement, dated 2 Jul)‘. 2001. among the Issuer, Euroscut-Sociedade Concessionaria da Scut do Algarve. SA.. the SecuritJ- Trustee, the Bond Trustee. European Investment Bank, the VAT Facility Agent and Xl (the “Common Terms Agreement”). For purposes of this Bond Financial Guaranty, the term “Scheduled Payments” shall mean payments required to be made in accordance with the original terms and conditions of the Bonds and the Bond Trust Deed pursuant to which they were issued, without regard to any amendment or modification of the Bonds or the Bond Trust Deed after the date this Bond Financial Guaranty is issued (the “Date of Issuance”), unless such amendment or modification is approved b>-XL, and consisting only of the following:

(a) interest due and payable on the Bonds on each Scheduled Payment Date; (b) principal due and payable in respect of the Bonds on each Scheduled Payment Date upon which principal is due and payable pursuant to Clause 2.2 of the Bond Trust Deed: and

(c) certain additional amounts payable in respect of the Bonds on each Scheduled Payment Date pursuant to Condition 7 of the Bonds; provided that “Scheduled Payments” shall in no event include payments in respect of any Bond which become due on an accclcratcd basis prior to the originally scheduled dates for the payment thereof under the Bonds and the Bond Trust Deed, whether as a result of lij any default by the Issuer, (ii) any mandatory or optional redemption? or iiiij any other cause, unless XL. in its sole discretion, elects to make such payments on an accelerated basis and, if XL does not so elcct to make such payments on an accelerated basis, such payments shall be made in such amounts and at such times as such payments would have been due had there not been any such acceleration, and proridedfurtlier that “Scheduled Payments” shall not include any amounts due in respect of the Bonds to the extent attributable to any Make Whole Premium (as defined in Condition 5 of the Bonds) payable in respect thereof or any increase in interest rate, penalty or other sum payable by the Issuer by reason of any Potential Event of Default or Event of Default in respect of the Bonds or otherwise.

77 For purposes of this Bond Financial Guaranty, the term “Non-payment” shall mean the failure of the Beneficiary to receive in full from the Issuer any ScheduledzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Payment in accordance with the Bond Trust Deed on any Scheduled Payment Date in funds available for distribution to the Bondholders on such Scheduled Payment Date and the term “Scheduled Payment Date” shall mean each date that a Scheduled Payment is required to be made as set forth in the definition of Scheduled Payments. XL will pay any amount payable hereunder in respect of Scheduled Payments on the Bonds out of funds of XL by 12:OO noon, New York City time. on the later to occur of (i) the second Business Day (as defined below) following Receipt (as defined below) on a Business Day byzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA XL at its address set forth below of a notice for payment in the form of Exhibit I hereto (a “Notice for Payment”), appropriately completed and executed by the Beneficiary and (ii) the Scheduled Payment Date for such Scheduled Payment. Payments due hereunder in respect of Scheduled Payments on the Bonds will be disbursed to, or to the order of, the Beneficiary by wire transfer in immediately available funds to such account in New York or London as the Beneficiary shall specify in the Notice For Payment in respect of such Scheduled Payments.

For purposes of this Bond Financial Guaranty, the term “Business Day” shall mean any day other than (1) a Saturday, Sunday or other day on which commercial banking institutions in New York, New York arezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA authorized or obligated by law to be closed, (I>) a day on which commercial banking institutions in London, England are generally closed, or (2) a day which is not a TARGET Day. The terms “Receipt” and “Received” with respect to this Bond Financial Guaranty shall mean actual delivery to XL prior to 12:OO noon, New York City time, on a Business Day. Delivery either on a day that is not a Business Day, or after 12:OO noon, New York City time, on a Business Day, shall be deemed to be Received on the next succeeding Business Day. In all cases, ”actual delivery” to XL shall require (a)the delivery of the original Notice For Payment or other applicable documentation to XL at its address set forth below or (b)facsimile transmission of the Notice For Payment, notice or other applicable documentation to XL at zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAits facsimile number set forth below. If delivery is made by facsimile transmission, the Beneficiary shall (i) at or about the time of transmission confirm transmission by telephone with XL at its telephone numberzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA set forth below and (ii) as soon as reasonably practicablc, deliver the original Notice For Payment or other applicable documentation to XL at its address set forth below. If any Notice For Payment or other applicable documentation actually delivered (or attempted to be delivered) under this Bond Financial Guaranty by the Beneficiary is not in proper form or is not properly Completed, executed or delivered as required by the terms hereof, Receipt by XL shall be deemed not to have occurred, and XL shall promptly so advise the Beneficiary. which may submit an amended Notice For Payment or other applicable documentation, as the case may be, to XL. XL’s obligations hereunder in respect of Scheduled Payments shall be discharged to the extent funds are paid to, or to the order of, the Beneficiary as provided herein, whether or not such funds are properly applied by the Beneficiary. If the payment of any amount in respect of any Scheduled Payment on a Bond is voided or set aside or ordered to be refunded or reduced in whole or in part (each an “Avoidance Event”) under any applicable bankruptcy: insolvency, receivership or similar law (including without limitation pursuant to the Dutch Civil Code (Bul-gerlijk Wetboek), the Dutch Bankruptcy Code (Faillissenzentsw,et) and the applicable provisions of the Dutch Act on the Supervision of Credit Institutions (Wet roezichr kredietirezen 1992) (each such event a “Bankruptcy”) and, as a result of such Avoidance Event, the Beneficiary is required to return such voided payment or any portion of such voided payment (an “Avoided Payment”), XL shall pay the amount of the Avoided Payment out of the funds of XL when due to be paid pursuant to the Order referred to below, but in any event no earlier than the second Business Day following Receipt by XL from the Beneficiary of fi)a certified copy of a final, nonappealable order of a court or other governmental body exercising jurisdiction in such Bankruptcy to the effect that the Bondholder is required to return such Avoided Payment in respect of the Guaranteed Obligation paid during the Term of this Bond Financial Guaranty because such payments were voided as a preferential transfer or otherwise rescinded or required to be restored by the Bondholder (the “Order”), (ii) a certificate by or on behalf of the Bondholder that the Order has been entered and is not subject to zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAany stay, (iii) an assignment, substantially in the form attached hereto as Exhibit 11, duly executed and delivered by the Bondholder, irrevocably assigning to XL all rights and claims of the Bondholder relating to or arising under the Guaranteed Obligations against the estate of the Issuer or otherwise with respect to such Avoided Payment and (iv) a Notice For Payment in the form of Exhibit I hereto appropriately completed and executed by the Beneficiary. XL shall pay the full amount of the Avoided Payment either (s) to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order, and not to the Beneficiary or the Bondholder directly, or (1,) to the Beneficiary for the benefit of a Bondholder to the extent such Bondholder, directly or through the Beneficiary. has made a payment to the court or such receiver, conservator, debtor-in-possession or trustee 78 in bankruptcy named in the 01-der, or to such other person named in the Order subject to the delivery of (a) thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA items referred to in clauses (i), (ii), (iii) and (iv) above to XL and (b) evidence satisfactory to XL that paynicnt has been made to such court or rcceivcr, conservator, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA debtor-in-possession or trustee in bankruptcy named in the Order.

Notwithstanding the foregoing paragraph, in no event shall XL be obli&ated to make at any time an! payment (i) in respect of an Avoided Payment relating to the Bonds as described above, prior to the Scheduled Payment Date with respect to such Avoided Payment or (ii) in respect of the Guaranteed Obligations, in excess of the following aggregate amount (the “Maximum Guaranteed Amount”): (A) €126,500.000, plus (E) interest accrued on the Bonds in accordancczyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA with the Bond Trust Deed, rniizus (C) the amounts theretoforezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA paid by the Issuer to the Beneficiary in respect of the Guaranteed Obligations and not subject to an Avoidance Event.

XL may in the future appoint a fiscal agent hereunder (the “Fiscal Agent”) by giving written notice to the Beneficiary. at the address specified in the Bond Trust Deed notice provision. of the name and address of such Fiscal Agent. Thereafter, XL may 1-eplace such Fiscal Agent with a new Fiscal Agent by written notice to the Beneficiary. specifyinp the name and notice address of such new Fiscal Agent. At any time when a Fiscal Agent has been appointed by XL hereunder. copies of all notices and documents required to be delivered to XL pursuant to this Bond Financial Guaranty shall be simultaneously delivered to the Fiscal Agent and to XL. proiided that any failure or dela>-in the delivery of any documents to the Fiscal Asent shall not limit or excuse any of XL’s obligations under this Bond Financial Guaranty. All payments required to be made by XL under this Bond Financial Guarant>-may be made directly b>-XL or by the Fiscal Agent on behalf of XL. The Fiscal Agent is the agent of XL only and the Fiscal Agent shall in no event be liable to the Beneficiarv for an>-failure of XL to deposit, or cause to be deposited. sufficient funds to make payments due under this Bond Financial Guaranty.

All payments by XL under this Bond Financial Guaranty shall be made without withholding or deduction for any present or future tax: asscssmcni or other governmental charge imposed, levied, collected. n-ithheld 01- assessed by The Netherlands or the United States of America or any political subdivision or taxing zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA authority thereof or therein, unless such withholding or deduction is required by law. If any such withholding or deduction is required by law. XL shall pal; such additional amounts as will result in the receipt by the Bondholders and the Couponholders of such amounts as would have bccn received by them had no such withholding or deduction bem I-equired, except that no additional amounts shall be payable for or on account of:

any tax, assessment or other governmental charge to the extent such tax. assessment or other governmental charge would not have been imposed but for such Bondholder or Couponholder. or the holder of a beneficial interest in the Bond or Coupon, having some connection with The Netherlands or the United States of America or any political subdhision 01 taxing authority thereof or therein. other than thc mere holding of such Bond or Coupon or a beneficialzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA interest therein: any tax. assessment or other governmental charge to the extent such tax, assessment or other goveinmental charge would not have been imposed but for the failure of such Bondholder or Couponholder, or the holder of a beneficial interest in such Bond or Coupon. to pro\ide an! declaration, certification or documentation that is a prccondition to exemption from. or reduction of. such tax, assessment or other governmental charsc:

any Bond or Coupon presented for payment m The Netherlands:

any Bond or Coupon presented for payment more than 30 days after the Relevant Date. except to the extent that thc rclcvant holder would have been entitledzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to such additional amounts if it had presented such Bond or Coupon on the last day of such period of 30 days irrespective of whethcr such day was a business day (as defined in Condition 6(G) of the Terms and Conditions of the Bonds);

any tax, assessment or other governmental charee imposed on a payment to: or for the account of, an individual where such tax, assessment or other governmental chargc is imposed pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 36-37 November. 2000 or any law implementing or complying with. or introduced in order to conform to, such Directive: or

any tax, assessment or other governmental charge that could have been avoided if such Bond or Coupon had been presented to another Paying Agent in a Member State of the European Union. 79 For purposes of this provision, “Relevant Date” means whichever is thc later of (i) the date on which the payment in question first becomeszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA due and (ii) if the full amount payable has notzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA been received in London by the Principal Paying Agent or the Bond zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATrustee on or prior to such due date, the date on which the full amount of such payment has been so received and notice to that effect has been given to the Bondholders. All amounts payable by XL shall hereunder be in the currency in which the amounts are payable by the Issuer. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA This Bond Financial Guaranty is neither trdnsferabk nor assipable either by the Beneficiary or by XL except, in whole but not in part, to a successor Beneficiary (a “Successor Beneficiary”) duly appointed and qualified as a Bond Trustee under the Bond Trust Deed. Upon such transfer and assignment, the withdrawing Beneficiary and the Successor Beneficiary shall deliver to XL a certificate. properly completed and signed by the withdrawing Beneficiary and the Successor Beneficiary, in the form of Exhibit I11 hereto (whch shall be conclusive evidence of such transfer and assignment), and thc Successor Beneficiary instead of the withdrawing Beneficiary shall, without the necessity of further action, be entitled to all the benefits of and rights under this Bond Financial Guaranty in the withdrawing Beneficiary’s place. All notices, presentations. transmissions. deliveries and communications made by the Beneficiary to XL with respect to this Bond Financial Guaranty shall specifically refer to the number of this Bond Financial Guaranty. shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail: personally delivered or faxed to XL as follows: XL Capital Assurance Inc. 250 Park Avenue, 19th Floor New York, NY 10177 Attention: Surveillance Telephone: 1-646-658-5900 Facsimilc: 1-648-658-5910 or such other address, officer, telephone number or facsimile number as may be designated by XL in writing from time to time. Each such notice, presentation, transmission, delivery and communication shall be effective only upoii Receipt by XL. The obligations of XL under this Bond Financial Guaranty are irrevocable and primary, and, except as expressly provided herein, absolute and unconditional. None of the failure of the Beneficiary, the Issuer or any other Person to perform any covenant or obligation in favor of XL (or otherwise), the occurrence of any Relevant Event, the breach of any representation or warranty or the failure of any condition under the Guaranty and Reimbursement Agreement, the failure or omission to make a demand permitted hereunder, and the commencement of any Bankruptcy by or against the Issuer or any other Person shall in any way affect or limit XL’s obligations under this Bond Financial Guaranty. In the event of any Non-payment of a Scheduled Payment, XL shall be subrogated to the rights of the Beneficiary and the Bondholders to receive such Scheduled Payment under the Bonds and the Bond Trust Deed, but only if and to the extent XL pays to the Beneficiary, in the manner provided herein, the entire amount of such Scheduled Payment as to which there was a Non-payment. To the fullest extent permitted by applicable law, XL hereby waives and agrees not to assert any and all defenses, set-offs and counterclaims including, without limitation, any such rights acquired by subrogation, assignment or otherwise, only in the event any such defenses, set-offs and counterclaims may be available to XL so as to deny payment of any amount due in respect of this Bond Financial Guaranty. There shall be no acceleration of payment due under this Bond Financial Guaranty unless such acceleration is made at the sole option of XL. This Bond Financial Guaranty and the obligations of XL hereunder shall terminate upon the expiration of the Term of the Bond Financial Guaranty. The “Term of the Bond Financial Guaranty” means thc period from and including the Date of Issuance to and including the earlier of (i) the date on which XL shall have paid the Maximum Guaranteed Amount at such time and (if) the date on which all Scheduled Payments have been paid, provided that if a Bankruptcy by or againstzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the Issuer is existing during such period, then this Bond Financial Guaranty and XL’s obligations hereunder shall not terminate before the date of the conclusion or dismissal of such Bankruptcy without continuing jurisdiction by the court in such Bankruptcy, and provided, further, that if the Bondholders are required to return any Avoided Payment as a result of such Bankruptcy, then this Bond Financial Guaranty shall not terminate before the date on which XL has made all payments required to be made under the terms of this Bond Financial Guaranty in respect of all such Avoided Payments. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 80 This Bond Financial Guaranty shall be returned to XL by the Beneficia9 upon its termination together with a notice substantially in the form of Exhibit IV hereto. THIS BOND FINANCIAL GUARANTY IS NOT COVERED BY THE PROPERTYICASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE SEVENTY-SIX OF THE NEW YORK STATE INSURANCE LAW. This Bond Financial Guaranty sets forth in full the undertaking of XL, and shall not be modified. altered or affected by any other agreement or instrument, including any modification or amendment thereto. or by the merger, consolidation or dissolution of the Issuer or any othcr Person and may not be canceled or revoked prior to the time it is terminated in accordancc with the express terms hercof. THIS BOND FINANCIAL GUARANTY SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAHEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF NEW’ YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF LAWS OF A JURJSDICTION OTHER THAN NEW YO=. IN WITNESS WHEREOF. XL has caused this Bond Financial Guaranty to be exccuted on the date first written above. XL CAPITAL ASSURANCE INC. By: Name: Title:

By: Name: Title: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

81 XL Capital Assurance Inc. Exhibit I to Bond Financial 250 Park Avenue, 19th Floor Guaranty Number CA00040A New York, NY 10177 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA NOTICE FOR PAYMENT UNDER THE BOND FINANCIAL GUARANTY NO. CA00040A The undersigned individual, a duly authorized officer of Citibank, N.A.. as Bond Trustee under the Bond Trust Deed (the ‘‘Beneficiary”), hereby certifies to XL Capital Assurance lnc. (*‘XL’’),with reference to the Bond Financial Guaranty No. CA00040A, dated 2001 (the “Bond FinancialzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Guaranty”: terms defined in the Bond Financial Guaranty being used herein as used or defined therein unless otherwise defined herein), as follows: 1. The BeneficiaryzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA is the Bond Trustee under the Bond Trust Deed. 2. Thc Beneficiary is entitled to make a demand under the Bond Financial Guaranty as a result of Non- zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBApayment by the Issuer of a Scheduled Payment or as a result of an Avoidance Event in respect of an Avoided Payment. [For Notice for Payment in respect of a Scheduled Payment Date use the following paragraphs 3 through 7.1 3. This notice relates to the [insert date] Scheduled Payment Date (the “Schedultd Payment Date”). 4. Thc Bond Trustce hereby notifics XL that it has been notified by the Company Account Bank that zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAthere is a Debt Service Shortfall (as defined in the Company Accounts Agreemcnt) and demands payment of Ea (the “Shortfall”). being the amount by which the Scheduled Payments described in [specify, as applicable] clause [(a)] [(b)] and/or [(c)] of the definition of Scheduled Payments (which aggregatc €a)due on such Scheduled Payment Date exceeds the amount of funds available to the Principal PayingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Agent or the Bond Trustee for distribution to the Bondholders (the “Available Amount”). In the event that on or prior to the time XL is required under thc Bond Financial Guaranty to makc payment of the Shortfall. to the extent the Shortfall is otherwise paid. this Notice for Payment shall automatically be deemed to be withdrawn and shall be of no further force or cffect with respect to the Available Amount as at the opening of business on the Schedulcd Payment Date. 5. Upon receipt by the undersigned of the amount demanded hereby, fi) the undersigned will hold such funds in trust and apply the sarnc in accordance with the Bond Trust Deed to the payment when duc of the Scheduled Payment for which demand is being made and (ii) the undersigned will maintain an accurate record of such payments with respect to each Bond and the corresponding claim on the Bond Financial Guaranty and proceeds thereof and. if a temporary or permanent global bond or a Coupon (as defined in Bond Condition 1) is required to be surrcndered, presented or endorsed for such payment, shall stamp, or procure that there is stamped. thereon the legend “f [Insert applicable amount] paid by XL” and then shall, if the relevant documcnt is required to bezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA surrendered, deliver, or procure the delivery of, the same to XL. 6. The Beneficiary hereby assigns to XL all of its rights with respect to the Bonds to the extent of any payments made under the Bond Financial Guaranty. The foregoing assignment is in addition to. and not in limitation of, rights of subrogation otherwise available to XL in respect of such payments. The Beneficiary shall take such action and deliver such instruments as may be reasonably requested or required by XL to effectuate the purpose or provisions of this paragraph. 7. The amount demanded hereunder is to be paid by wire transfer to [specify account]. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA[For Notice For Payment in respect of an Avoided Payment use the following paragraphs 3 through 5.1 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 3. Based on the documents referred to in the following sentence, the amount entitled to be drawn under the Bond Financial Guaranty on the date hereof in respect of Avoided Payments is €0.The documents required by the Bond Financial Guaranty to be delivered in connection with such Avoided Payment have previously been presented to XL or are attached hereto. 4. The Beneficiary hereby demands payment of €#. 5. The amount demanded hereunder is to be paid by wire transfer to [specify account].

82 ANY PERSON WHO KNOWINGLY AND WITH lNTENT TO DEFRAUD ANY FINANCIAL GUARANTOR OR OTHER PERSON FILES AN APPLICATION FOR A FINANCIAL GUARANTY OR STATEMENTzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS, FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED FIVE THOUSANDzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH VIOLATION. IN WITNESS WHEREOF, this notice has been executed this day of e. e. Citibank. N.A.. as Bond Trustee B}:. Name: Title: cc: Algarve International B.V. Citibank. N.A.. as Principal Paying Agent

83 Exhibit I1 to Bond Financial GuarantyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Number CA00040A FORM OF ASSIGNMENT IN CONNECTION WITH AVOIDED PAYMENTS Referencc is made to the Bond Financial Guaranty No. CA00040A, dated 2001 (the “Bond Financial Guaranty”: terms defined in the Bond Financial Guaranty being uscd herein as used or defined therein unless otherwise defined herein), issued by XL Capital Assurance Inc. (“XL”)relating to the Bonds. In connection with the Avoided Payment of paid by the undersignedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (the “Bondholder”) on [insert date] and the payment by XL in respect of such Avoided Payment pursuant to the Bond Financial Guaranty, the Bondholder hereby irrevocably and unconditionally, without recourse: representation or warranty (except as provided below). sells, assigns, transfers, conveys and delivers all of such Bondholder’s right, title and interest in and to any rights or claims. whether accrued, contingent or otherwise, which the Bondholder now has or may hereafter acquire against any person relating to, arising out of or in connection with such Avoided Payment. The Bondholder represents and warrants that such claims and rights are free and clear of any lien or encumbrance created or incurred by such Bondholder.

IN WITNESS WHEREOF, this Assignment has been executed this day of 7 [Name of Bondholder] zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

By: .- ~ ~ - Name:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Title: In the event that the terms of this form of assignment are reasonably detcrrnined by XL, on the advice of counsel. to be insufficient to fully vest all of the Bondholder’s right. title and interest in such rights and claims. the Bondholder and XL shall agree on such other form as is reasonably necessary to effect such assignment, which such assignment shall be without recoursc. representation or warranty except as provided above.

84 Exhibit 111 to Bond Financial Guarantj- Number CA00040A zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA FORM OF WITHDRAWAL CERTIFICATE [Date] XL Capital Assurance Inc. 250 Park Avenue. 19th Floo~ New York, NY 10177

Dear Sirs:

Reference is made to the Bond Financial Guaranty No. CA00040A. dated 2001 (the “Bond Financial Guaranty”: terms defined in the Bond Financial Guarantj- being used herein as used or defined therein unless otherwise defined herein), which has been issued by XL Capital Assurance lnc. (-‘XL’’) in favor of Citibank, N.A., as Bond Trustee (the “Withdrawing Trustee”). The undersigned Withdrawing Trustee has transferred and assigned (and hereby confirms to you such transfer and assignment) all of its rights in, to and under the Bond Financial Guaranty to pame of Successor Bond Trustee] in its capacity as the successor Bond Trustee under the Bond Trust Deed (the “Successor Trustee”) and confirms that the Withdrawing Trustee no lonp has any rights under 01 intcrest in such Bond Financial Guaranty. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Withdrawing Trustee and the Successor Trustee have indjcated on thc face of the Bond Financial Guaranty that it has been transferred and assisned to the Successor Trustee. The Successor Trustee hereby certifies that it is a duly authorized transferee under the terms of the Bond Financial Guaranty and is accordingly entitled, upon presentation of the document(s) called for therein. to receive payment thereunder. Citibank, N.A., as Bond Trustee

By: -. Namc:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Title:

Fame of Successor Trustee]

By: .. . .- .- . Name: Title: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

85 Exhibit IV to Bond Financial Guaranty Number zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBACA00040A FORM OF NOTICE [Date] XL Capital Assurance Inc. 250 Park Avenue, 19th Floor New York, NY 10177 Attention:

Dear Sirs:

Reference is made to the Bond Financial Guaranty NO. CA00040A, dated a 2001 (the “Bond Financial Guaranty”; terms defincd in the Bond Financial Guaranty being used hereinzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA as used or defined therein unless otherwise defined herein). which has been issued by XL Capital Assurance Inc. in favor of Citibank, N.A., as Bond Trustee. The undersigned hereby certifies and confirms that the Term of the Bond Financial Guaranty has expired. The original of the Bond Financial Guaranty is enclosed herewith.

Citibank, N.A., as Bond Trustee

By: . . Name:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Title:

86 DESCRIPTION OF THE ISSUER

Incorporation and Status Algarve International B.V.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA is an exernptcd limited liability company (“bed oteii 1~ennootschcq7met beperkre uanspl.akelijkltei~’~,incorporated under Netherlands law on 23 April,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 200 1 for an unlimited duration,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA with registration number 341 5541 1 (the “Issucr”). The Issuer‘s official scat is in Amsterdam. Thc Ncthcrlands and the registered office of Algarve International B.V. is at Strawinskylaan 1725. Tower B. 1077 XX Amsterdam. The Netherlands.

Shareholders The current shareholders of the Issuer are Cintra. Fcrro\ial-Agroman. S.A.. ConstiucGes Gabriel A.S. Couto, S.A., ECOP-Empresa de Construqh e Obras Publicas de Arnaldo de Oliveira. S.A.. Eusebio & Filhos. S.A., Empreiteiros Casais de Antonio Fernandes da Silva. S.A., 3. Gomes-Sociedade dezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ConstruC6es de Civado, SA.. Aurelio Martins Sobreiro & Filhos. S.A. and Antonio Alves Quelhas. S.A., and any other person holding a beneficial interest in the shares of the Company.

Share Capital The authorised capital of the Issuer comprises €90,000, divided into 900 ordinary shares with a nominal value of €100 each. Its issued capital amounts to €18,000.

Business The corporate purpose of the Issuer is primarily to finance companies and enterprises and to borrow. to lend or to raise funds. including the issue of bonds. debentures and other securities and to create security in conncctioii therewith.

Management Board The management board of the Issuer consists of an A director and four B directors. The A director is Trust International Management (T.I.M.) B.V., a private cornpan). with limited liability (“besloren ~ennoorsckcip met beperkre aansprakelijclieis’) with its official seat in Amsterdam. The Netherlands. and maintainins its principal place of business a1 Strawinskylaan 17 ZM, 1077 XX Amsterdam. The B directors are: Fransisco Clemente Eugenio Miguel Migucl Victor Domingues dos Santos Manuel Pereira Lopes

Financial Year The Issuer’s financial year is thc calendar year.

Capitalisation The following table sets out the balance sheet of Algarve International B.V. as at 2 July, 2001 CURRENT ASSETS Euro Cash at Banks .. .. 18.000

18,000

SHAREHOLDERS’ EQUITY AND LIABLLITIES Shareholders’ equity Issued and paid-up share capital.. .. 18,000 Retained earnings .. (99) 17,901 Short term liabilities Capital tax .. 99

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES .. .. 18,000 Other than those liabilities outlined in the above table thc Issuer has no outstanding indebtedness or liabilities.

87 DESCRIPTION OF XLCA

General XL CapitalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Assurance Inc. (“XLCA”) is a monoline financial guaranty insurance company incorporated on 25 July, 1991 under the laws of the State of New York. XLCA is currently licensed to do insurance business in, and is subject to the insurance regulation and supcrvision by, the State of New York, thirty eight other states. the District of Columbia and Singapore. XLCA has license applications pending in thc majority of states in which it is not currently licensed. XLCA is also authorised to issue the Bond Financial Guaranty in The Netherlands. XLCA is an indirect wholly owned subsidiary of XL Capital Ltd, a Cayman Islands corporation (“XL Capital Ltd”). Through its subsidiaries, XL Capital Ltd is a leading provider of insurance and reinsurance, including coverages relating to certain financial risks, to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. The common stock of XL Capital Ltd is publicly traded in the United States and listed on the New York Stock Exchange. Neither XL Capital Ltd nor, except as set forth below, any subsidiarics or shareholders of XL Capital Ltd is obligated to pay the debts of or claims against XLCA. XLCA was formerly known as The London Assurance of America (”London”). On 22 February, 2001, XLCA’s direct parent, XL Reinsurance America Inc. (“XL Re”), acquired 100 per cent. of the stock of London. XL Re merged its former financial guaranty subsidiary. known as XL Capital Assurance Inc. (formed 13 Scptember, 1999) with and into London, with London as the surviving entity. London immediately changed its name to XL Capital Assurance Inc. The name change is effective in the majority of states where XLCA is licensed: including the State of New York. XLCA has applications pending to change its name with the insurance departments of several other states in the United States. All previous business of London was 100 per cent. reinsured to Royal Indemnity Company, the previous owner at the time of acquisition.

Reinsurance XLCA has entcred into a facultative quota share reinsurance agreement with XL Financial Assurance Ltd, a monoline financial guaranty insurance company organized under the laws of Bermuda. and an affiliate of XLCA (“XLFA”). Pursuant to this reinsurance agreement, XLCA expects to cede up to 90 per ccnt. of its business to XLFA. In addition, the obligations of XLFA to XLCA under the reinsurance agreement are unconditionally guaranteed by XL Insurance Ltd (“XLI”), a Bermuda company and one of the world’s leading excess commercial insurers. XLI is a wholly owned indirect subsidiary of XL Capital Ltd. XLFA also has the benefit of a nine-year stop-loss reinsurance facility from an “AAA” rated reinsurer with coverage of $100 million for losses in excess of $250 million. As of 31 December, 2000, the capital and surplus of XLI is approximately $3.025 billion and the capital and surplus €or XLFA is approximately $281 million. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA XLCA may also cede reinsurance to third parties on a transaction-specific basis. which cessions may bc any or a combination of quota share, first loss or excess of loss. Such reinsurance is used by XLCA as a risk management device and to comply with statutory and rating agency requirements and does not alter or limit XLCA’s obligations under any financial guaranty insurance policy. Notwithstanding thc capital support provided to XLCA described in this paragraph, the holders of the Bonds will have direct recourse against XLCA only. and neither XLFA nor XLI will be directly liable to the holders of the Bonds.

Financial Strength and Financial Enhancement Ratings XLCA’s financial strength is rated “AAA” by Standard & Poor’s Ratings Services. a division of the McGraw-Hill Companies, Inc. (“S&P”)and Fitch, Inc. (“Fitch”).zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA In addition, XLCA has obtained a financial enhancement rating of “AAA” from S&P. These ratings reflect S&P’s and Fitch‘s current assessment of XLCA’s creditworthiness and claims-paying ability. The reinsurance arrangement with XLFA described under “Reinsurance” above is integral to these ratings given XLCA’s relatively small capital base. The above ratings are not recommendations to buy, sell or hold securities: including the Bonds and are subject to revision or withdrawal at any time by S&P or Fitch. Any downward revision or withdrawal of these ratings may have an adverse effect on the market price of the Bonds. XLCA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. 88 Capitalisation of XLCA The following table presentszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA selectcd financial information of XLCA detemmined in accordancc with gcnerally accepted accounting principles in the Unitcd States of America (“GAAP”).

iii zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Dollnrs zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAthousands) 31 December, 2000 30 June, 2001

zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA( (audited) Liimidiired) Short TermDcbt .. .. 0 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0 Long TennDebt .. .. 0 0 Share Capital .. 85.000 109.060

Profit/(Loss) .. .. 1.149 (4.678) Shareholders’ Equity .. S2.884 102.266

On August 33, 2001, XL Reinsurance America Inc. contributed $25,000.000 of capital to XLCA. Other than this contribution. there has been no material change in the capitalisation of XLCA since 30 June. 7001. As of 31 December. 1999, XLCA had total admitted asscts of $S3.964,000 (audited). total liabilities of $751,000 (audited) and total capital and surplus of $83,?13.000 (audited) determined in accordance u-ith statutory accounting practices prescribed or permitted by insurance regulator!. authorities in the United States of America (“SAP”). As of December 31, 2000. XLCA had total admitted assets of $86.959.000 (audited). total liabilities of $5275,000 (audited) and total capital and surplus of $8 1.684.000 (audited) determined in accordance with SAP. Furthcr information concerning XLCA may be found in thc Financial Statements of XLCA and the notes thereto. prepared in accordance with GAAP? set out on page 120 of this Offering Circular.

Regulation of XLCA XLCA is regulated by the Superintendent of Insurance of the State of New York. In addition. XLCA is subject to regulation by the insurance laws and reqlations of the other jurisdictions in which it is licensed. As a financial guaranty insurance company licensed in the State of New York, XLCA is subject to Article 69 of the New York Insurance Law-, which. among other things, limits the business of each insurer to financial guaranty insurance and related lines. prescribes minimum standards of solvencv, including minimum capital requirements, establishes contingency. loss and unearned premium reserve requirements. requires the maintenance of minimum surplus to policyholders and limits the aggregate amount of insurance which may be written and the maximum size of any single risk exposure whch may be assumed. XLCA is also required to file detailed annual financial statements with the New York Insurance Department and similar supervisory agcncies in each of the other jurisdictions in which it is licensed. The extent of state insurance regulation and supervision varies by jurisdiction, but Nen- York and most other jurisdictions have laws and regulations prescribing permitted investments. payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liabilities for borrowings. THE FINANCIAL GUARANTY INSURANCE POLICIES ISSUED BY XLCA, INCLUDING THE BOND FINANCIAL GUARANTY, ARE NOT COVERED BY THE PROPERTYKASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. The principal executive offices of XLCA are located at 250 Park Avenue, 19th Floor. New York, New York 10177 and its telephone number at this address is (H6) 658-5900.

89 Management As of the date hereof. the members of the Board of Dircctors of XCLA are as follows: KennethzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA E. Connell Jerry M. dc St. Paer Michael P. Esposito, Jr. Paul S. Gjordano Frederick E. Hnat Edward E. Hubbard Robcrt M. Lichten Fiona E. Luck Robert R. Lusardi Patrick L. Mathis James P. McNichols Alan Z. Senter David C. Stevens

90 DESCRIPTION OF THE SHAREHOLDERS

The Shareholders The shareholders ofzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the Issuer have shareholdings in thc Issuer in proportion to their holdings in Euroscut as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Nmze

Cintra.. Ferrovial-Agronian, SA. .. Construqoes Gabriel AS CoutozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. €COP Arnaldo dc Oliveira .. .. Eusebios e Filhos .. .. Empreiteiros Casais .. J. Gomes S. Construqks do Cavado Aurelio Martins Sobreiro e Filhos .. Antonio Alves Quelhas .. .. CINTRA Cintra Concesiones de Infraestructuras de Transporte, Sociedad Anonima (“Cintra”). created in 1998. is a subsidiary of Grupo Ferrovial, specifically devoted to developing Ferrovial’s transportation infrastructure business. When creatin? Cintra, Ferrovial decided to spin off the business of private development of infrastructures. and transferred to the new company its equitj- stakes in a number of transportation concessions. Cintra was furnished with substantial financial resources and staffed with a hghlp specialised team that endowed it with the capabilities to take part in eveiy step of the development of a concession contract. Cintra WLS. thus, born with an accumulatcd experience of over 30 years in the design, promotion. financing and operating of transportation infrastructures. Cintra’s main areas of activity are highways, airports and parking lots: with 17 highways, 12 airports and 132.427 parking spaces currently under management. In 1999. following a successful bid for the 407ETR highway in Toronto, Cintra became the wol-ld leader in private transportation infrastructure development by volume of invcstment.

Highway Concessions Airport Concessions

zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- (b) (Year) (millions of traffic units 1 passenger or 100 kgzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of cargo) 1,404.7 1000 14.00 3000 1,250.5 1999 11.68 1999 968.7 1998

Parking Concessions Direct Investments in Concessions (Number of parking spaces) (Year) (as at 30 June, 2000) (million Euros)

132,437 2000 900 2000 113,943 1999 878 1999 83,667 1998 463 1998

Cintra’s Equity (million Euros) (Year)

626 2000 572 1999 196 1998

91 Project Analysis One of Cintra’s zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAkeys to success in the promotion of infrastructures is in-depth project analysis. This analysis attempts to minimise certain risks which are inherent to the concession activity such as building, financing and operating risks.

To achieve these objectives, the projects arc structured with turn-key construction contracts, long-term financing with substantial local currency funding, and direct management of the operation and maintenance by the concession company.

Financial Capacity Cintra’s growth strategy lies in maintaining a balanced portfolio of projects in operation and projects in financing and construction stages, as well as on diversifying its geographical areas of activity. New projects in Europe and North America have recently been added to Cintra’s portfolio. previously centred in Spain and South America.

Cintra usually teams up with local partners capable of providing extra added value to its projects so as to minimise the cntry risk in new markets.

Cintra’s Highway Concessions With experience dating back to 1968, when Ferrovial was awarded the Bilbao-Behobia highway, Cintra has consolidated its position as world-wide leader in the field of private highway development. currently managing 15 concessions with a total of over 1,400 km.

The projects awarded during the last threc years in Spain (Tunel de Artxanda, Estepona - Guadiaro and M-45), Chile (Santiago - Taka and Collipulli - Temuco). Canada (407ETR highway in Toronto).zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Portugal (Algarve shadow toll highway) and Spain (R4 highway). illustrate Ferrovial’s commitment, through Cintra, to growth in the sector of highway concessions.

Cintra’s growth strategy in highway infrastructure development industry is based on risk-minimisation by ensuring non recourse financing using the most innovative Project Finance techniques and by entering into fixed price turn-key construction contracts. Ferrovial-Agroman with over 40 years’ experience in the design and construction of highway infrastructures co-operates with Cintra in achieving this objective. Spanish Highway Concessions zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA CINTRA Concession Total eguitj: share Concessions Km Status * Period Itwestmen t ** zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- -. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0 1968-2003 838.0 26.53 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Europistas (Bilbao-Behobia) .. 105.6 Eurovias (Burgos-Armiiion) ,. 84.3 0 1974-2017 285.7 26.44 Autema (Terrassa-Manresa) .. 48.3 0 1986-2036 312.2 77.67 Autopista del Sol (Milaga-Estepona) .. .. 82.7 0 1996-2046 451.8 66.63 Tunel de Artxanda (Bilbao) .. 3 .O C 1998-2048 78.0 35.31 Autopista del Sol zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Estepona-Guardiaro) .. 22.0 C 1999-2054 211.4 66.63 M-45 (O’Donnell-N-IV) .. 14.4 C 1999-2023 148.0 50.00 R-4 (Madrid-Ocafia) .. .. 96 0 2000-2065 7,392 45.00

Total ,. 360.3 2,325.1

investment in millions of Euros

* C (under construction) 0 (under operation) P (project) ** CINTRA equity share includes direct and indirect shares

92 International Highway Concessions zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Total Imwtnmit Coricessioii (niillioii Cintra Eqiiitj. Concessions zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAKin Status * Period Eiiros) Slial-e (%) ** Columbia. Buga-Tulua- zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA LaPalia (PISA) .. 60.0 c-0 1993-2013 59.7 16.24 Chilc, Talca-ChillianzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. 193.0 c-0 1496-2007 163.5 27.00 Chile, Collipulli-Temuco 143.0 C 1997-2022 266.4 75.00 Chle. Temuco-Rio Bueno 171.7 C 1997-7033 333.3 100.00 Chle. Santiago-Taka .. 340.4 P 1999-2024 806.6 40.00' ') Canada 407 ETR .. 108.@ c-0 1999-3098 2.476.2 61 29 Portugal. Scut Algarve .. 127.0 P 2000-2030 259.6 71 .OO Portugal. Scut do Norte Litoral .. .. 113.0 P 2001-2031 407 71 .OO

Total .. .. 1.157.1 4693.3

. * C (under construction) 0 (under operation) P (project) ** Cintra equity share includes dircct and indirect shares (1) Fei-1-ovial is legally committed IO provide liquidity for thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA remaining 60 pcr ccnt.

407 ETR Highway Toronto This was the largest highway concession tendered in the world in the last 10 years. It is the first operating highway in the world with a totally electronic toll and unrestricted access.

0 Management of an existing stretch of 69 km and construction zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAand management of a nea- 39 km stretch. Investment of 7,476 million Euros, of which 300 million are for the new construction.

Cintra Airport Division In the creation of the Airport Division, Cintra decided to actively build up a significant presence in the market for the dcveloprnent, financing and management of airport infrastructures. which is opening to the private sector in an increasing number of countries. The large number of airport privatisation projects being launched to the market world-wide has led Cintra to a strategic commitment to growth in this activity, setting a goal in the medium term for the Airport Division to represent 15 per cent. of Cintra's value. To achieve this goal, Cintra relies on its know-how in project analysis and financing and on a specialised team of professionals with long experience in the airport industry. Cintra is Spain's leading operator of international airports. managing a total of 13 airports in the UK. the US, Mexico and Chle which handle over 14 million passengers per year. Cintra participates in 3 concessions comprising 9 airports in south east Mexico. Cancun and Meiida being the main ones,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Antofagasta airport in Chile and Niagara Falls airport in the US (only the second privatised airport in the US). In these two latter contracts Cintra holds 100 per cent. of the equity of the concessionaire. these concessions can be summarised as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA a 24.5 per cent. stake in a holding company which, in turns have a 15 per cent. stake in a Mexican company owning 9 airports in the South East of the country (the major airport be& Cancun) 100 per cent. stake in the Antofagasta airport, located in the north of Chile close to the major copper mines of the country 100 per cent. stake in the Niagara Falls airport Cintra also has a 50 per cent. stake in the Bristol International Airport in thc UK. This consortium is a joint venture with Macquarie Bank, a leading Australian Investment Bank. The consortium has purchased the entire airport, including land, buildings and facilities. The consortium will operate all airport services, 93 including aeronautical operations, air traffic control, rescue and fire fighting, aircraft fueling and car parking. There are no geographic limitations within Cintra airports division growth strategy, with opportunities in all continents being under consideration at thc moment. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Cintra Car Parks Cintra designs, constructs and operates both on-street and off-street parking lots. Ths type of parking, usually located in major cities. requires an in-depth analysis of the particular environment and problems of the location in order to develop an optimum solution that creates new space below in order to free space on the street. The number of vehicles in circulation in Spanish city centres has dramatically increased from 3 to 21 million since Ferrovial started this activity in 1968. This increase in the number of vehicles in urban transit requires a strategic re-structuring of the available space that Ferrovial, with over 30 years’ experience in designing, building, setting-up, operating and maintaining car park infrastructures and systems, can manage. Cintra owns the leading company in the sector in Spain, managing more than 132,427 parking lots and being the only company in Spain capable of providing full services (surface, underground and residential) to Local Councils. Cintra’s scope of business in this area is thc integrated management of car parking services, facilities and systems in any environment, covering on-street parking and off-street parking, both short stay and residential. Cintra is the market leader in these areas in Spain and Puerto Rico.

Short stay parking Cintra has developed significant design. construction, operation and management projects for short and mcdium stag off-street parking. In areas with a space shortage such as historic town centres, hospitals, businesses and administrative centres Cintra provides mobility solutions that allow for motorists to ‘park to move around’ rather than ‘to move around to park’.

FERROVIAL-AGROMAN Ferrovial-Agroman S.A. (“Ferrovial-Agroman”).also a subsidiary of Grupo Ferrovial. the parent company of the construction division of Grupo Ferrovial. is a recently created company resulting from the mcrgcr of Ferrovial S.A. and Agroman S.A in 1999. The key objectives of the merger were to boost profitability on the back of cost reductions, economies of scale and optimised management. Ferrovial-Agroman has a wide experience in motorway construction both in Portugal and abroad, and is the leading contractor in the Spanish domestic market and the leading foreign contractor in the Portuguese market. Ferrovial-Agroman S.A. has an 8 per cent. stake in the Euroscut and the Issuer (ensuring the construction experience requested by the bidding specifications to the shareholders) and a 79 per cent. share in the Constructor. In a bid to establish itself as the most profitable of all Spanish construction groups, Ferrovial-Agroman has adopted a strategy which gives profitability priority over volume growth. This strategy is also designed to boost Ferrovial-Agroman‘s market share in private construction while preserving its lead in civil engineering. On the international front, Ferrovial-Agroman is pursuing a selective growth strategy, based on development of the infrastructure concessions business to leverage a rapid, secure and profitable expansion. successful completion of its existing order book and providing support for Spanish clients expanding overseas. In 1999, the construction division generated consolidated revenues of €2,212 billion, an advance of 2.9 per cent. on 1998 levels. Operating profit was 19.1 per cent. higher than the previous year, moving up to €79.2 million. At year-end 1999 the order book backlog stood at €4,022.2 billion, up 6 per cent. on year-end 1998 levels. International sales advanced by 3 per cent. in 1999 relative to 1998. to €274 million. This increase was well short of the growth achieved in thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA previous year, mainly because works contracted in Chile progressed at a slower pace. At year-end 2000 the international order book stood at €965.7 million. up 6.6 per cent. on the previous year. Ferrovial-Agroman came from the integration of the construction businesses of Ferrovial S.A. and Agroman S.A. into a single company a process fully completed before the end of 1999. The merger is expected to produce savings in direct and indirect costs equivalent to a 1 to 1.25 per cent. improvement in operating margin. Although the integration process generated extraordinary costs of €31.9 million, these were posted in full in 1999. 94 As sector leader. Ferrovial-Agroman regards customer satisfaction, profitability and quality as the guiding principleszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of its day-to-day operations in all segments of the construction industry it is active. Fel-rovial-Agroman’s exccllencc in its field was endorsed in 1999 when thc group won the IV Puente de Alchtara international award for best public building constructed in Spain, Portugal and Latin America for its work 011 the Guggenheiin Museum in Bilbao. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA GRUPO FERROVIAL ((‘FERROVIAL”) Fcirovial is a Spanish based industrial ?roup comprising more than 100 companies and with over 45 years‘ cxpericnce in the construction industry. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Ferrovial is currently the leading group in the Spanish civil construction sector and has also developed a solid presence in international construction markets. Ferrovial also holds leading positions in other hgh growth potential business areas such as transportation. infrastructure concessions: (where it is the world’s leader in highways) real estate development, industrial construction, municipal services and telecommunications.

Ferrovial is the parent company of a number of companies involved in the following busincss lines. construction (.including civil works, building, engineering, industrial, infrastructure conservation and building materials). concessions (including toll roads, car parks and airports), real estate (housing development, communities management. real estate management and land management). services (solid urban waste collection, street cleaning, integrated water management. facilities maintenance) and telecommunications (cable communications and fixed line telephony). Both Cintra and Ferrovial-Agroman are subsidiaries of Grupo Ferrovial, S.A.

The Ferrovial company structure in relation to these companies (including Euroscut) is as follows: Grupo Ferrovial, S.A. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 199.9%99.9% 67.6% Ferrovial- Agroman S.A. I I 32.4% 8% Cintra S.A.

171%

Euroscut

I

Recent Developments On 4 September, 2001. Grupo Ferrovial (“Ferrovial”) si-med an agreement with Australian group Macquarie Infrastructure Group (“MIG”). whch is managed by Macquarie Bank Limited, under which MIG will become a shareholder in Cintra, with a 40% stakc. At thc same time. Cintra’s airport and car park divisions (which are not included in the deal)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA will be transferred to Ferrovial. Ferrovial and Macquarie Airports Group will continue as equal partners in Bristol Airport. acquired by Cintra in January 2001.

95 Macquarie Infrastructure Group, which comprises Macquaric Infrastructure Trust (I), Macquarie Infrastructure Trust (11) and Macquarie European Infrastructure Plc. is one of thc world’s largest investors in toll roads. A large number of its assets are located in Europe (in the UK, Germany and Portugal) and zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAin Australia. To finance the acquisition of this stake, MIG will shortly raise funds on the Australian and international capital markets and it has arranged the appropriate underwriting contracts for this purpose. It has been agreed that. once the funds have been obtained, the investment will be made by means of the subscription and payment by MIG of a capital increase at Cintra. The most likely date for this is envisaged to be January 2002. The agreements delimit the scope of Cintra’s future business to toll roads within Europe, the US. the OECD countries and other areas with similar economic conditions. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Cintra’s other infrastructure business lines, such as airports and car parks will be transferred to Ferrovial in order to enable Cintra to concentrate on managing the toll road business. As shareholders of Cintra, Ferrovial and MIG will bid for projects of this type via Cintra. Ferrovial will continue to develop infrastructure projects other than toll roads for its own account. Under the agreements between Ferrovial and MIG. Ferrovial-Agromin, Ferrovial’s construction subsidiary, will be the preferred contractor under market conditions for projects and works that arise from new concessions. Additionally: Ferrovial and MlG will analyse the possibility of Cintra and MIG co-operating more closely in developing their respective businesses, and with this in mind will examine the possibility of listing Cintra, forming a strategic alliance or other forms of co-operation. Set out below are a summary of the consolidated financial statements for Ferrovial and its dependent companies for the years ended 31 December. 1999 and 2000.

96 GRUPO FERROVIAL, S.A. AND DEPENDENT COMPANIES CONSOLIDATED BALANCE SHEETS FOR THE YEAR ENDED 31st DECEMBER, 1999 AND 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Assets 2000 1999 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA f Thoiis~~iidsof Euros) Due from shareholders for uncalled capital zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 5.055 - Fixed and other non-current assets .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA4.864.195 4,017,374 Start-up expenses .. .. 9.369 9.635 Intangible assets .. 189.648 175.461 Intangible assets and rights .. 204.28 1 186.192. Provisions and accumulated amortization .. (14.633) (10.731) Tangible fixed assets .. 3.910,256 3.316.136 Investments in toll roads .. .. 3.626.354 3,100.131 Land and structures .. .. 184.673 145.098 Tcchnical installations and machinery .. .. 233.216 193.017 Other tangible futed assets .. .. 98.520 60.398 Provisions and accumulated depreciation .. (232.507) (182.518) Long-term financial investments .. 690.546 5 14.261 Holdings in group companics .. 3.371 12.331 Holdings in companies carried by thc equity method 761.086 293.047 Loans to companies carried by the equity method .. 3.135 3.226 Long-term investment securities .. .. 13s. 185 43.247 Other loans .. 337.769 166.470 Provisions .. (43.010) (5.060) Shares of the controlling company .. .. 63.376 1.68 1 Goodwill in consolidation .. 156.163 55.324

Deferred charges .. .. 795.499 427.483 . ... Current assets .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA3.000,471 2.317,533 Inventories .. .. 736.831 463.037 Accounts receivable .. 1.622.215 1.5 38 -373 Customer receivables for sales and sei-viccs .. .. 1.366.936 1.401-559 Receivable from companies carried by thc equity method 2.589 10.237 Other accounts receivable .. .. 299.11 5 181.848 Provisions .. (46.435) (55.300) Short-term financial investmciits .. 439.536 175.294 Toll road concession-holders .. 18l.130 56.922 Short-term invcstment securities .. .. 250.371 98.154 Loans to associated companies .. 7 423 Other loans .. 7.097 19.966 Provisions .. (179) (171) Cash .. .. 181.437 312.353 Toll road concession-holders .. 37.793 76,863 Other .. 144.144 135,490 Accrual accounts .. .. 20.453 28,495

Total assets .. .. 8.821,383 6.917,734

97 GRUPO FERROVIAL, S.A. AND DEPENDENT COMPANIES CONSOLIDATED BALANCE SHEETS FOR THE YEAR ENDED 31st DECEMBER, 1999 AND 2000 (continued)

Shareholdcrs’ equity and liabilities Shareholders’ equity zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1,049 865 928.237 Capital stock .. 140.265 142.132 Additional paid-in capital .. 193,192 193.192 Reserves for own shares.. .. 65,742 1.681 Other reserves of the controlling company ,. 242,430 269.702 Unrestricted reserves .. .. 228.446 259,255 Restricted reserves .. 13.984 10,447 Reserves at companies consolidated by the global integration method .. ,. 165,096 80.128 Reserves at companies carried by the equity method .. .. 64.609 115,639 Translation differences .. .. 37,336 28.639 Intcrirn dividend paid during the year .. (1 8,020) (14,095) Income attributable to the controlling company .. 159.215 111,219 Consolidated income .. 179,579 128.728 Income attributed to minority interests .. 20,364 17,509 Minority interests .. 400.12 1 311.042

Negative difference in consolidation .. ,. 3.520

Companies consolidated by the global integration method .. 3,520

Deferred revenues .. .. 54,271 38,401

Capital Subsidies .. .. 4,459 4.667 Exchange gains .. 5,613 5,25 1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Other deferred revenues .. .. 44,199 28.483 Provisions for contingencies and expenses .. 86,78 1 53.786

Reversion reserve .. .. 19,235 14,782 Other provisions .. .. 57,546 39,004 Long-term debt .. 4,417,168 3.142,242

Debentures and other marketable debt securities 2.644,556 1,526,440 Toll road concession-holders .. 2,644,556 1.521,451

Other companies .. I 4.989 Payable to credit entries.. ., 1,582,629 1,503,477 Toll road concession-holders .. 978.448 1$009.288 Other companies .. 604,18 1 494,189 Other accounts payable .. .. 122.751 97,094 Financial debt of concession-holders .. ., - 58,495 Long-term debt to other creditors .. 122,751 38.599 Uncalled capital payments payable .. .. 17,950 4,026 Associated companies .. 2,229 4,026 Other companies .. 15,721 I Notes payable .. 49,282 I 1,205 Current liabilities .. ,. 2,809.657 2,444.026

zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- Debentures and other marketable debt securities .. 15,682 Toll road concession-holders .. 15,682 - Payable to credit entities ., 270,001 202,451 Toll road concession-holders .. 55,637 108.882 Other companies .. 214,364 93,569 Payable to associated companies .. 7,974 796 Trade accounts payable .. .. 1,998,780 1,697,191 Other non-trade payables .. 415.891 4 12,446 Operating provisions .. 66991 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA84,632 Accrual accounts .. ,, 34,338 46,510

Total shareholders equity and liabilities .. 8,821,383 6.91 7.734

98 CRUPO FERROVIAL, S.A. AND DEPENDENT COMPANIES 2000 AND 1999 CONSOLIDATED STATEMENTS OF INCOME zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Assets zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2000 1999 (T~OUSOII~Sof Eui*os) Net salcs...... 3.597.644 2.645.1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 61zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Increase in finished product and work-in-process in\-entories ...... 26.595 68.788 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.... 1.701 21.241 Capitalized expenses of group work on fixed asserj ...... Inventories included in fixed assets ...... 1 E3 I s3 Other operating re\-enues ...... 9.471 10.03s zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Total operating revenues ...... 3.535.597 2.715.51 1

Materials used and other external expcnses ...... 1.928.933 1.731.585 Personnel expenses ...... 469.269 390.920 a) wages. salaries. eic...... 583.646 323.858 h) Employee welfare expenses ...... 85.623 67.072 Period depreciation and amortizalion ...... 64.860 51.632 Variation in operating provisions ...... 24.159 33.547 Othcr curreni operating expenses ...... 877.032 342.255

Total operating eapenses ...... 3364.353 1.550.939

Operating income ...... 271 213 194.472

Revcnues from sharcholdingj ...... 351 114 Revcnues horn other securiiies ...... 2.531 1.378 Other financial re\ enues ...... 36.6-61 41.516 Toll road concession-holdcrs...... 1.730 6.81 1 Other companies ...... 33.914 34.705 Gains on short-term financial investmcnts ...... 10.157 5.150 Exchange gains ...... 9.891 7.771

Total financial revenues ...... 59.574 56.1 79

~~ Financial espenses ...... 59.671 41.067 Toll road conccssion-holders...... 9.895 11.529 Other companies ...... 19.776 26.644 Variation in financial investment provision ...... - ( 106) Exchangc losses ...... 8.495 7.3 16

Total tinanrial expenses ...... 68.166 18.383

Financial loss of 1011 road concession-holders ...... (7.165) (7.71 8) Financial gain (loss) at other companies ...... ( 1.477) 15.514

~ Financial income (loss) ...... (8.592) 7.796

Sharc in losses of companies carried by thc equii)- method ...... - 1.746 Share in income or companics carried bx the equity method ...... 1.772 9.619 Amortization of goodwill in consolidation ...... 8.239 3.031

Income from ordinarj- activitie ...... 266.185 107.109

Capital subsidiaries transferred to incomc for the >-ear ...... 208 646 Gains on fixed assets ...... 3.s29 3.695 Extraordinary rewnues or income ...... 20.934 12.588

Total expenditure revenue ...... 21.971 36.929

Variation in provisions ...... 15.050 5.84s Losses on fixed assets ...... ?76 2.0 19 Extraordinary expenses and losses ...... 39.513 51,303

~ Total extraordinan' expenses ...... 54.789 59.170

Extraordinar!. loss ...... (29.818) 112.241)

Consolidated income before tax= ...... ,. 236.367 194.868

Corporate income tax ...... 56.788 66.140

Consolidated income for the year ...... 179.579 128.718

Income attributed to minority interests ...... 20.364 17.509

Income for the year attributed to the controlling cornpan!- ...... 159.11 5 111.219

99 Grupo Ferrovial, S.A. Board of Directors The Board of Directors of Grupo Ferrovial,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA S.A. is as follows: Chairman, President and Chief Executive Officer Rafael del Pino y Calvo-Sotelo Executive Vice-chairman Jaime Carvajal y Urquijo Chief Executive Officcr Santiago Bergarechc Busquet Board Members Javier Vega de Seoane Azpilicueta PROFESA INVESTMENTS! B.V. Manuel Azpilicueta Ferrer PORTMAN BAELA, S.L. Juan Arena de la Mora Santiago Equidazu Mayor Fernando del Pino y Calvo-Sotelo General Counsel and Secretary Jose M" Perez Tremps

PORTUGUESE SPONSORS Construqbes Gabriel AS Couto, ECOP Arnaldo de Oliveira, Eusebio e Filhos. Emprenteiro Casaia. J. Gonies S. Construcoes Do Cavado, Aurelio Martins Sobreiro c Filhos, Antonio Alves Quelhas are seven constructionzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA companies based in northern Portugal that have to participate in road concession projects. Each one of them holds a 3 per cent. share in Euroscut and the Issuer. These contractors, with which the cornpanics within Grupo Ferrovial have had a long standing and close relationship. ensure local experience and the availability of domestic resources to both Euroscut and the Constructor.

100 TAXATION The following is a general descriptioii of certain tax considerationszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA relating to the Bonds. It does not purport to be a complete analysis of all tax considerations relating to the Bonds. whether in The Netherlands or elsewhere. Prospective purchasers of Bonds should consult their own tax advisers as to which countries’ tax laws could be relcvant to acquiring, holding and disposing of Bonds and receiving payments of interest. principal and/or other amounts under the Bonds and the consequences of such actions under the tax laws of those countries. This summary is based upon the law as in effect on the date of this Offering Circular and is subject to any change in law that may take effect after such date.

THE NETHERLANDS Withholding zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATax All payments under the Bonds may be made free of withholding or deduction of, for or on account of any taxes of whatever nature imposed. levied, withheld or assessed by The Nethcrlands or any political subdivision or taxing authoiity thereof or therein, provided the Bonds do not qualifh- as profit sharing debentures zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(‘*irimtdeleizde obligaties”).zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Taxes on Income and Capital Gains A holder of Bonds will not be subject to any Netherlands taxes on (deemed) income or capital gains in respect of the Bonds, including such tax on any payment under the Bonds or in respect of any gain realised on the disposal. deemed disposal or exchange of the Bonds, provided that:

(1) such holder is neither a resident nor deemed to be a resident of Thc Netherlands, nor. if he is an individual, has elected to be taxed as a resident of The Netherlands: and (ii) such holder does not have an enterprise or an interest in an enterprise that is, in ivhole or in part, carried on through a permanent establishment or a permanent representative in The Netherlands and to which enterprise or part of an cnterprise, as thc case may be. thc Bonds are attributable; and (iii) such holder is not entitled to a share in thc profits of or has an interest in an enterpnsc effectivelv managed in The Netherlands other than by way of the holding of securities or throueh an employment contract, to which enterprise the payments b>-the Issuer are attributable: and (iv) if such holder is an individual, his activities in The Netherlands with respect to the Bonds do not exceed normal, active asset management; and (v) if such holder is an individual, neither such holder nor any of his spouse, his partner. a person deemed to be his partner, his cohabitant or a person deemed to be his cohabitant or other persons sharing such person’s house or household. or certain other of such persons’ relatives (including foster children). has a substantial interest in the Issuer: or in any company that legally or in fact, directl>-or indirectly, has the disposition of the proceeds in respect of which the Bonds arc issued. For purposes of ths clause (v), a Substantial interest is generally not present if an individual docs not hold. alone or together with his spouse or partner, whcther directly or indirectly, the ownership of, or certain other rights over, shares representing five per cent. or more of the total issued and outstanding capital (or the issued and outstanding capital of any class of shares) of the Issuer, or has profit sharing certificates relating to five per cent. or more of the profits of a company or five per cent. or more of the distribution at liquidation. If a holder of Bonds is a resident in a country other than The Netherlands and if a double taxation convention is in effect between The Netherlands and such counti?, such holder, may- depending on the terms of such double taxation convention. be eligible for a full or partial exemption from, reduction or refund of, Netherlands taxes (if any) on (deemed) income or capital gains in respect of the Bonds. A holder of Bonds will not bc, nor will they be deemed to be, resident. domiciled or carrying on business in The Netherlands by reason only of the execution, deliver?; and/or enforcement of the Documents and the issue of the Bonds or the performance by the Issuer of its obligations thereunder or under the Bonds.

Gift, Estate and Inheritance Taxes No gift, estate or inheritance taxes will arise in The Netherlands with respect to an acquisition of Bonds by way of a gift by, or on the death of. a holder of Bonds who is neithcr resident nor deemed to be resident in The Netherlands, unless: (i) such transfer is construed as a gift by or on behalf of a person who is a resident or a deemed resident of The Netherlands: 101 such holder at the time of the gift has or at the time of his death had an enterprise or an interest in an enterprise that is or was, in whole or in part, carried on through a permanent establishrncnt or a permanent representatjvc in The Netherlands and to which enterprise or part of an enterprise, as the case may be. the Bonds are or were attributable: or such holder is entitled to a sharc in the profits of or has an interest in an enterprise effectively managed in the Netherlands other than by way of the holding of securities or through an employment contract, to which enterprise the payments by the lssuer are attributable; or in the case of a gift of Bonds by an individual who at the date of the gift was neither resident nor decmed to be zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAresident in The Netherlands, such individual dies within 180 days after the date of the gift: while being resident or deemed to be resident in The Netherlands.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Turnover Tax No Netherlands turnover tax will arise in respect of any payment in consideration for the issue of the Bonds or with respect to any payment by the Issuer of principal, interest or premium (if any) on the Bonds.

Other Taxes and Duties No Netherlands registration tax, custom duty, transfer tax. stamp duty or any other similar documentary tax or duty, other than court fees. will be payable in The Netherlands in respect of or in connection with the execution, delivery and/or enforcement by legal proceedings (including the enforcement of any foreign judgment in the Courts of The Netherlands) of the Documents or the performance by the Issuer of its obligations thereunder or under the Bonds, with the exception of capital tax that may be due by the Issuer on capital contributions madc or deemed to be made under the Company Guarantee.

EUROPEAN UNION TAX CONSIDERATIONS The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State: subject to the right of certain Member States to opt instead for a withholding system for a transitional period in relation to such payments.

102 SUBSCRIPTION AND SALE

Subscription Banco SantanderzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Central Hispano, S.A. and Bayerische Hypo-und Vereinsbank AG (together the “Lead Managers” and each a “Lcad Manager”) has, in a subscription agreement dated 2 July 2001 (the “Subscription Agreement“) between the Issuer, the Company and the Lead Managers: subject to the satisfaction of certain conditions, agreed to subscribe for the Bonds at 100 per cent. of their principal amount less a combined management, underwriting and selling commission of 0.40 per cent. of their principal amount. In addition, the Issuer has agreed to reimburse the Lead Managers for certain of their expenses in connection with the management of the issue of the Bonds. The lssuer has also agreed that the Lead Managers may deduct from the issue price such amount as may be agreed in writing between the Issuer and the Lead Managers in respect of insurance fees payable to XLCA and paid by the Lead Managers, on behalf of the Issuer, to XLCA. The Lead Managers are entirlcd in certain circumstances to terminate the Subscription Agreement and to be released and discharged from its obligations undcr it before payment is made to the Issuer in respect of the issue of thc Bonds.

Selling Restrictions United States of America The Bonds have not becn and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of. United States persons except in ccrtain transactions cxempt fi-om the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act. The Bonds are subject to United States tax law requirements and may not be offered. sold or delivered within the United States or its possessions or to a United Sratcs person, except in certain transactions permitted by US.tax regulations. Tetms uscd in this paragraph have the meanings given to them b>-the U.S. lnternal zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBARevenue Code and regulations thercunder. Each Lead Manager has represented and agreed that. except as peiniittcd by the Subscription Agreement, it will not offer, sell or deliver the Bonds. (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date (as defined in the Subscription Agreement) within the United States or to. or for the account or benefit of. U.S. persons, and it will have sent to each dealer to which it sells Bonds a confirmation or other notice setting forth the rcstrictions on offers and sales of the Bonds within the United States or to, or for the account or benefit of, US.persons. In addition, until 40 days after the commencement of the offering, an offer or sale of Bonds within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A under the Securities Act (if available).

United Kingdom Each Lead Manager has represented and agreed that: (i) it has not offered or sold and will not offer or sell any Bonds to persons in the United Kingdom prior to the expiry of a period of six months from the issue date of such Bonds except to persons whose ordinary activities involve them in acquiring, holding. managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kinsdom within the meaning of the Public Offers of Securitics Rcgulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 (the ”Act”) (and, after they come into force, all applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”)) with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kmgdorn: and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom before the repeal of section 57 of the Act, any document received by it in connection with the issue of such Bonds, to a person who is of a kind described in article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or is a person to whom such document may otherwise lawfully be issued or passed on. After the repeal of section 57 of the Act it will only communicate or cause to be communicated any invitation or inducement to engage in investment 103 activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of the Bonds in circumstances in which sectionzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 21(1) of the FSMA does not apply to the Issuer or the Guarantor.

The Netherlands Each Lead Manager has represented and agreed that it has not. directly or indirectly. offered. sold or transferred and that it will not, directly or indirectly. offer. sell or transfer in or from The Netherlands any Bonds which are not listed on the stock market of Euronext Amsterdam N.V. (“Euronext Amsterdam”) and which have a denomination of less than NLG 100.000 (or its equivalent in any other currency). to any person (including legal entities) other than (a) to persons who trade or invest in securities in the conduct of their profession or trade within the meaning of the 1995 Act of the supervision of thc securities trade (‘* Wet toezicht eflectenverkeer 1995”. the “Durcli Securities Act”) and its implementing regulations. and zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (b)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA with due observance of article 2 paragraph 2 of the Exemption regulation pursuant to the Securities Act (‘ Vrijstellingregeling Wet toe_-ichteffectenverkeer 1995’), except in circumstances in which (i) one of the other exceptions set out in article 3 paragraph 2zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of the Dutch Securities Act or (ii) one of the other exemptions pursuant to article 4 of the Dutch Securities Act, is applicable, or (iii) thc Securities Board of The Netherlands has. upon request,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA granted an individual dispensation from the prohibition contained in article 3, paragraph 1, of the Securities Act and the conditions attached to such exemption to such exemption or dispensation are fully complied with.

Portugal The offer of the Bonds by the Lcad Managers in Portugal has not been and will not be registered as a public offer of securities (as defined under article 109” of the Portuguese Securities Market Code enacted by means of thc Decree-Law no. 486199, of 13 November. 1999). The Bonds are hence solely intended to be sold in Portugal to investors qualifying as Institutional Investors pursuant to articlc 30” of the Portuguese Securities Code. acting for thcir own account and so representing to the Lead Managers and shall hence be placed in Portugal by means of a private placement (as defined under article 110” of the Portuguese Securitics Code). The Bonds shall not be on-sold by the Lead Managers (and/or any of the Institutional Investors purchasing the Bonds) to investors not qualifying as Institutional Investors (pursuant to article 30” of the Portuguese Securitics Code), unless to less than 200 non-Institutional Investors in the aggregate having been identified prior to the Issuc Date. Each Lead Manager has represented that no market research activities in respect of demand for Bonds and no advertising or other promotional activities with respect to thc sale of the Bonds shall be undertaken in Portugal.

Spain Each Lead Manager has represented and agreed that the Bonds may not be offered or sold in the Kingdom of Spain (“Spain”) except in accordance with the requirements of the Spanish Securities Market Law (Ley2411988, de 28 de julio, del Mel-cado de Vulores).as amended and restated, and Royal Decree 291/1992, on issues and public offerings for the sale of securities (Real Decreto 291/1992, de 27 cle marx, sobre emisiones I: ofertas publicus de wzta de valores). as amended and restated. and the decrees and regulations made thereunder. Each Lead Manager has further represented and agreed that: (a) Bonds have not been offered and will not be offered to persons in Spain, other than to institutional investors (as defined in article 7.1 (a) of Royal Decree 291/1992), and (b) Bonds may be offered to institutional investors provided that prior to any such issue of Bonds notification of the issue (“comunicacion de la emisibn”) and certain documents relating to such offer (“documentos ucreditativos’))are versed by and registered with the Spanish Securities and Exchange Commission (“ Cornision Nucionul de1 Mercado de Vulores” (“CNMV’)) in accordance with Spanish law. This Offering Circular has not been verified nor registered in the administrative registries of the CNMV and therefore must not be used in relation to any offer or sale of the Bonds to the public in Spain and may only be distributed to institutional investors.

General Each Lead Manager has agreed that it will comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells Bonds or possesses or distributes this Offering Circular or any offering material and will obtain any consent, approval or permission required by it for the purchase, 104 offer or sale by it of Bonds under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases. offers or sales, and neither the Issuei-: XLCA nor the other Lead Maiiagcr shall have any responsibility therefor. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Neither the Issucr. XLCA or either of the Lead Managers represents that the Bonds may at any time lawfully be sold in compliance with any applicable registration or other requirements in any jurisdiction or pursuant to any exemption available thereunder or assumes any responsibility for facilitating such sale. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

105 GENERAL INFORMATION 1. Authorisations: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (a) The creation and issue of the Bonds has becn authorised by a resolution of the board of managing directors of the Issuer dated 27 June. 2001. The execution of all the Transaction Documents to which the Company is a party has been authorised by a resolution of the board of directors of the Company dated 18 June, 2001. The issue of the Bond Financial Guaranty by XLCA has been duly authorised by XLCA. Listing: Application has been made to list the Bonds on the Luxembourg Stock Exchange. Prior to the listing of the Bonds, a legal notice relating to the issue of the Bonds. a copy of the deed of incorporation and the current articles of association of the Issuer (L‘stat~rei~’’)and the certificate of incorporation and the current by-laws of XLCA, respectively willzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA be lodged with the Chief Registrar of the District Court in Luxembourg (Greffier en chef du Tribunal d’Arronilissenzent de et ci Lu~enzboui~g).where such documents may be inspected and copies obtained upon request. 3. Clearing: The Bonds have been accepted for clearance through Euroclear and Clearstream. Luxembourg. The International Securities Identification Number (ISlN) for the Bonds is XSOl322657 10 and the Common Code is 013226571. No Material Adverse Change: Save as disclosed in this Offering Cii-cular, there has been no significant change in the financial or trading position and no material adverse change in the financial position or prospects of the Issuer since the date of incorporation. Save as disclosed in this Offering Circular. therc has been no significant change in the financial or trading position and no material adverse change in the financial condition or prospects of the Company since 31 December. 2000. Save as disclosed in this Offering Circular, thcre has been no significant change in the financial or trading position of XLCA since 31 Decembcr, 2000 and, since such date, save as disclosed in this Offering Circular. there has been no material adverse change in the financial position or prospects of XLCA. Litigation: Neither the Issuer nor the Company is involved in any litigation or arbitration proceedings which may have a significant effect on their zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBArespective financial position, nor is the Issuer or the Company aware that any such proceedings are pcnding or threatened. XLCA is not involved in any litigation or arbitration proceedings which may have a significant effect on its financial position, nor is XLCA aware that any such proceedings are pending or threatened. Documents available: Copies of the following documents will be available, during usual business hours on any weekday (Saturdays and public holidays excepted), at the specified oftice of the Bond Trustee in London and. for so long as any Bonds are listed on the Luxembourg Stock Exchange at thc specified office of the Paying Agent in Luxembourg: (i) the deed of incorporation of the Issuer dated 23 April, 2001 and the the current articles of association (“staturen”) of the Issuer: (ii) the certificatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of incorporation and the current bylaws of XLCA; (iii) thc Finance Documents: (iv) the Project Documents; (v) the latest audited non-consolidated annual financial statement of the lssucr; (vi) the audited non-consolidated financial statements of the Company for the year ended 31 December, 2000; (vi;) the audited financial statements of XLCA for the year ended 31 December, 2000 and the unaudited financial statements of XLCA for the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAsix month period ended 30 June. 2001; (viii) the latest annual audited non-consolidated financial statements of the Company;

106 (ix) the latest audited financial statements and the latest unaudited interim financial statements of XLCA: (x) the most up to date audited financial model: and (xi) thc Ernst zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA& Young review of the financial model. 7. Accounts: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (a) The Issuer and the Company do not publish interim financial statements or consolidated financial statements. (b) XLCA publishes audited annual financial statements and unaudited quarterly financial statements.

107 FINANCIAL STATEMENTS OF EUROSCUT EUROSCUT zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- SOCIEDADE CONCESSIONARIA DA SCUT DO ALGARVE.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA S.A. NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2000

(Amounts expressed in thousands of Escudos - mEsc)

(Translation of a report originally issued in Portuguese - Note 51)

1. Introductory Note Euroscut - Sociedade Concessionaria da Scut do Algarve. S.A. (thc “Company”) has its head office in Lisbon (Avenida Praia da Vitoria, 48, 5’ E - Municipality of SGo Sebastiiio da Pedreira). was incorporated on 27 April, 2000 and its sole corporatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA object are operating thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA concession to conceive, construct. finance. maintain and operate the motorways and related roads referred to as the “Scut Algarve” concession. on a toll basis without charging the users (“SCUT”). As the result of a cornpctitive tender launchcd by the Portuguese Government and regulated by Decree-Law 267197 of 2 October. on 11 May, 2000 a concession contract was entered into between the Portuguese State and the Company (referred to as the entity to which the “SCUT Alprvc” concession was granted), in which among others was defined, a conccssion period of 30 years, as well as other matters relating to payments, guarantees (of mEsc 500,000 provided by the shareholders to thc Portuguese State), responsibilities, financing and other matters relating to management. The concession includes the scut toll scheme (“sem cobranp para o utilizador” - without charge to the user) for the following sectors of roads:

0 IC4 Lagos - Lagoa

0 IC4 Lagoa - Alcantarilha 0 IC4 Alcantarilha - Guia (already constructed, Note 44)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA IPl/IC4 Guia - Vila Real de Santo Antonio (already constructed)

The notes which follow are numbered in accordance with in the Official Chart of Accounts (“P/aao Oficiul de Contabilidde”) and the numbers not included relate to notes that are not applicable to the CompanyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or are not relevant or significant to the accompanying financial statemcnts.

3. Bases of Presentation and Principal Accounting Policies The accompanying financial statements were prepared on a going concern basis from the Company’s accounting records maintained in accordance with generally accepted accounting principles in Portugal (Note 51).

The financial statements as 31 December, 2000 are subject to approval by the Shareholders’ General Meeting. However, the Board of Directors believes that they will be approved without significant change.

The principal accounting policies used in the preparation of these financial statements are as follows: a) Intaitgible assets lntangible zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAassets, which comprise essentially expenses incurred with the incorporation of the Company, are recorded at cost and are amortised, in accordance with Regularnentary Decree 2/90, on a straight-line monthly basis over a period of three years. b) Tangible assets zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBATangible assets are recorded at cost of their construction cost of the motorways sections (includes supplies and services provided by sub-contractors, expropriation costs, as well as related financial and administrative costs incurred during the construction period).

108 Deprcciation is calculated in accordance with Regulamentary Dccree 2/90. on a straight-line monthly basis, in accordance with the following periods of estimated useful life: Years

Machinery and equipment .. 4 to 8 Administrative equipment zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA4 to 10 Fixed assets maintained under long terni lease and the corresponding liabilitics are not reflected in the accompanying balance sheet. The lease instalments under these contracts are recorded as expenses 111 the year to which they relate (Note 15). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA d) Fiiiniiciul costs zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAFinancial costs incurred related to loans received to finance the construction of the stretches of motorway under the concession contract, are charged to the construction costs of each stretch during the period of construction of stretches of motorway up to the time they are ready to operate (Notes 10 and 11). The statement of profit and loss caption “Own work capitalised’’ corresponds to financial charges of mEsc 81,006 capitalised in 2000 (Notes 10 and 11). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA e) Accr7ml.f hasis Income and expenses arc recorded on an accruals basis and. consequently. income and expenses are recorded in the period to which the). relate independently of when they are received or paid. Differences between the amounts received and paid and the related income and expenses are recorded under the captions “Accruals and deferrals” (Note 50). f) Dejerred tams The Company does not record deferred taxes resulting from timing differences between thc recognition of income and expenses for accounting and for tax purposes. However, the effect of this procedure is not significant in relation to the accompanying financial statements. g) Coriipoiieiits of cash mid its equiwleiits Cash and its equivalents at 31 December. 2000 reflected in the statement of cash-flows and reconciliation between that and the amounts reflected on the ba~dnccsheet are as follows. Cash .. 60 Bank deposits repayable on demand .. .. 2,993.440 9.99 3 ~ 500 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5. Taxes ThezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Company is subject to corporate income tax at the normal rate of 31 per cent.. increased b>- a Municipal surchargc at the rate applicable. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA In accordance with current legislation. tax returns are subject to review and correction by the tax authoritics during a period of four years (ten years for Social Security) and. consequently. the Company’s tax returns for 2000 are subject to review. The Board of Directors belicves that any corrections resulting from reviews/inspections by the tax authorities to these tax returns will not have a sipficant effect on the accompanying financial statements.

8. Installation Expenses Installation expenses at 3 1 December. 2000 correspond basicallj- to legal expenses incurred to incorporate the Company.

109 10. Movement in Fixed Assets During the period from 27 AprilzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA to 31 December. 2000, the movemcnt in intangiblc and tangible fixed assets and thc corresponding accumulatcd amortisation and depreciation accounts was as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Begiiiii iiig Eiidiiig bulniicezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Aditiolis bnluiice Assets Intangible assets: Installation expenses zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. - 73,589 73,589 Tangible assets: Machinery and equipment .. .. - 9,961 9,961 Administrative equipment . . - 5,778 5,778 Tangible assets in progress .. .. - 847,980 847,980 Advances on account of tangible assets .. - 4.216,128 4,316,128

- 5,079,847 5,079.847

Begiiiriing Ending balance bicrenses halniice

Accumulated amortisation and depreciation Intangible assets:

Installation expenses .. I 16.119 16,119

Tangible assets: Machinery and equipment .. .. - 618 618

Administrative equipment .. I 209 209

- 827 827

The caption “Tangible assets in progress” at 31 December: 2000 was made up as follows:

Construction of motorway stretches .. 498,532 Expropriation costs .. .. 240,000 Financial costs.. .. 8 1,004 Other ,. 28,442

847,980

In connection with the concession contract, on 11 May, 2000, a works contract was entered between the Company and VIALSCUT - ConstruqSo da SCUT do Algarve, ACE (a consortium - “Agruparnento Complementar de Empresas” made up essentially by Ferrovial-Agroman. S.A.j to conceive, develop the project and construct the stretches of motorway included by the concession, referred to in Note 1. At 31 December, 2000, the caption “Advances on account of tangible assets” corresponds to an advance made by the Company to the ACE amounting mEsc 4,216.128, in accordance with the provisions of the construction contract, which is guaranteed by financial entities.

11. Capitalised Financial Costs Capitalised financial costs at 31 December, 2000 on the tangible assets in progress amounted to mEsc 81,006 (Note 3.d).

14. Tangible Assets And Additional Information At 31 December, 2000 the net book value of tangible assets and work in progress relating to the concession and which at the end of the concession revert to the Portuguese State amounted to mEsc 6,774 and mEsc 847,980, respectively. 110 15. Long Term Rental At 31 Decembcr, 2000 thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Company had long term rental contracts (vehicles) under which it had rental instalments duc as follows: 2001 .. 3.668 2003 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 3:668 2003 .. 2.750

10,086

16. Associated Companies At 31 December, 2000 the Company had balances with the following associated companies in addition to those rcferred to in Note 10: Other debtors: Cintra Concessiones de Infracstructuras de Transporte: S.A. (Madrid) .. 530 Cintra Concessiones de Infraestructuras de Transporte, S.A. (Branch in Portugal) 12 Suppliers. current accounts: Cintra Concessiones de Infraestructuras de Transportc. S.A. (Madrid) .. 7.659 Cintra Conccssiones de lnfraestructuras de Transporte. S.A. (Branch in Portupl) 35.793 Ferrovial-Agroman, S.A. (Branch in Portugal) .. .. 117 Suppliers of fixed assets: VIALSCUT (Note 10) .. .. 129.230 Other creditors: Cintra Concessiones de Infraestructuras de Transporte. S.A. (Madrid) .. 299.314 31. Financial Commitments Assumed and not Included on thc Balance Sheet On 11 May. 2000 the Company signed a loan contract with a syndicate of banks (the agent of u-hich is Banco Santander Central Hispano. S.A.) totalling up to 232 million Euro to finance the construction of the motorway stretches) which bears interest at variable rates and at 31 December. 2000 had not yet been used. Ths financing facility includes a loan of 129.7 million Euro with European Investment Bank for w-hich the syndicate of banks must provide bank guarantees.

32. Guarantees Given At 31 Deccmber, 2000. the Company had outstanding parantees given to suppliers in the amount of mEsc 3,000. In addition the shareholders had provided bank guarantees. in name of the Company. to the Portugucse State ("Estado PortupCs"), in the amount of mEsc 500.000. as required by the concession contract (Note 1). zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

34. Movement in the Provisions The following movement was recorded in the provision accounts in the period from 27 April to 31 December. 2000:

zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBABegiiiii itig Eiiding hrilmcezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAIiicrease bnlaiice Other provisions for risks and charges .. .. - 2.074 2.074

111 36. Capital At 31 December,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000, the Company’s subscribed capital, and fully paid up in cash (in accordance with a public deed drawn up in the ?Ist Notary Office of Lisbon on 27 April. ZOOO), consisted of 4,526,600 shares of 10 Euro each. As of that date the shareholders and its capital percentage held are as follows: Amourit zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Thousands qf Percentuge Escudos Euro

Ferrovial Group companies: Cintra Concesiones de Infraestructuras de Transporte, S.A. .. 6.443,263 32,138,860 Ferrovial-Agroman,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA S.A. .. 726,005 3,621,280 79Yo 7,169,268 35.760,140 ConstruGCes Gabriel A.S. Couto, SA. .. 3% zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA272,250 1,357.980 Ernpresa de Construq6es c Obras zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPublicas Arnaldo de Oliveira, S.A. .. .. 3Yo 272,350 1,357,980 Eusebio & Filhos, S.A. .. .. 3% zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA272.250 I .357,980 Empreiteiros Casais de Antonio Fernandes da Silva. S.A. .. .. 3% 272,250 1,357,980 J. Gomes - Sociedade de Construq6es de Cavado, S.A. .. 3% 272,250 1,357.980 Aurelio Martins Sobreiro & Filhos, S.A. .. .. 3%) 272,250 1,357.980 Antonio Alves Quelhas, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASA. .. .. 3% 2 7 2: 2 50 1.357.980 9.075,018 45,266.000

44. Services Rcndered This caption corresponds to the fixed remuneration payablc by the Portuguese State for the ycar 2000 (Note 50), for maintenance and operation of the Alcantarilha - Guia stretch of motorway, already constructed and transferred to the Company on 8 lune, 2000, in accordance with the provisions of the concession contract (Note 1).

45. Statement Of Financial Results Net Financial results for the period from 27 April to 31 December, 2000 arc made up as follows: Expenses: Interest .. .. 74 Other (Note 50) .. 174,064

174,138 Net Financial results .. (1 2,582)

161.556

Income: Interest (on bank deposits, Note 49) .. .. 161,556

112 18. State And Other Public Entities At 31zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA December.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000 the balaiices with these entities are made up as follows: Receivable balances: Corporate income zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAtax - withholding at source .. 31.261 Value Added Tax zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. S26!838 858.099

Payable balances: Corporate income taxes for 2000 .. 1.579 Personal income tax .. .. 720

1,‘/99

The caption “Value Added Tax’’ includes PTE 397.902 million relating to repayments requested and not vet received from thc tax authorities.

49. Bank Deposits This caption is made up as follows at 31 December. 2000:

Demand deposits .. 123.440 Teim dcposits .. 2.870.000

2.993.340

The term deposits. which are maintained at a financial institution. bear interest at market rates (Note 45) and are repayable on 8 January. 2001.

50. Accruals And Deferrals At 31 December, 2000. the balances of these captions are made up as follows:

Accrued income: Interest (Note 49) .. 5.248

Deferred expenses: Specialised work: Studies and preparation of tenders .. 363.672 I.E.P. - Instituto das Estradas de Portugal .. 89,959 Expenses on loan contracts (Note 45) .. .. 324,613 Others .. 774 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 779.018

Accrued expenses: Financial charges (commission) .. 165,824 Construction work on motorway stretches (VIALSCUT, Note 10) .. .. 49.408 Others .. 2.567

2 17,799

The deferred expenses balance “Specialiscd work“ will be recognised in thc statement of profit and loss over the period of the concession and consists of the following costs relating to the “Scut do Algarve” concession: (i) expenses incurred to prepare and present the proposal for the concession. which were incurred by the majority shareholder and charged to the Company: and (ii) concession contract charges charged by I.E.P. - Instituto das Estradas de Portugal. Jn addition, the deferred expenses balance “Expenses on loan contracts’! relate to bank charges charged by financial entities to develop the bank funding for the project, which will be recognised in thc statement of profit and loss over the period of the concession.

113 51. Note Added For Translation ThezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA accompanying financial statementszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA arc a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the disclosures required by the Portuguese Official Chart of Accounts, some of which may not conform with or be required by generally accepted accounting principles in other countries. In the event of discrepancies the Portuguese language version prevails. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

114 EUROSCUT - SOCIEDADE CONCESSIONARIA DA SCUT DO ALGARVE, S.A. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASTATEMENT OF CASH-FLOWS FOR THE PERIOD FROM 27 APRIL, 2000 (DATE OF INCORPORATION) TO 31 DECEMBER 2000 (Translation of a statement originally issued in Portuguese - Note 51) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

(Amounts expressed in thousands of Portuguese Escudos) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2000

Operating activities: Received from clients .. 19,444 Paid to suppliers .. (577.513)

Flows generated by operations .. (588,069)

Paymentlreceipt of income taxes .. (31.361) Other paymentsheceipts relating to operating activities .. (537.153) (568.414)

Flows generated before extraordinary items .. (568,414)

Flows from operating activities (1) .. .. (1.126.483)

Investing activities: Reccipts relating to: Tnterest and similar income .. 156.306

Payments relating to: Tangiblc fixed assets .. (4.SGX616) Intangible fixed assets .. .. (73.589) (3.937205)

Flows from investing activities (2) .. .. (4.780.899)

Financing activities: Receipts relating to: Capital paid up .. 9.075.018 Payments relating to: Interest and similar expenses .. .. (1 74,136)

Flows generated by financing activities (3) .. 8-900.882 Variation of cash and its equivalents zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(4) = (1) + (2) + (3)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2,993,500 Cash and its equivalents at the beginning of the year

Cash and its equivalents at the end of the year .. 2.993.500

The accompanying notes from an integral part of this statement. 115

.. . EUROSCUT - SOCIEDADE CONCESSIONARIA DA SCUT DO ALGARVE, S.A. STATEMENTzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA OF PROFIT AND LOSS BY FUNCTIONS FOR THE PERIOD FROM 27 APRIL 2000 (DATE OF INCORPORATION) TO 31 DECEMBER 2000 (Translation of a statement originally issued in Portuguese - Note 51) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Amounts expressed in thousands of Portuguese Escudos) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000

1 Sales and services rendered .. 19.444 2 Cost of sales and services rendered .. (9,336) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Gross results.. .. 10,108 4 Distribution costs .. - 5 Administrative costs .. .. (76,656) 6 Other operating income: Own work capitalised .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA8 1.066 Operating results .. 14,518 7 Investment income: Relating to associated companies .. Relating to other companies .. Income from negotiable securities and other financial applications: Relating to associated companies .. - Others .. .. 161.554 9 Other interest and similar income: Relating to associated companies .. Others .. .. 10 Depreciation and provision for treasury applications and equity investment .. 11 Other interest and similar income: Relating to associated companies Others .. .. (174,136)

Current results .. .. 1,876 14 Extraordinary income 15 Extraordinary expenses Results before income tax .. .. 1,876 Income taxes for the period .. (1,578)

19 Net result for the period .. 29%

The accompanying notes form an integral part of this statement. 116 EUROSCUT - SOCIEDADE CONCESSIONARIA DA SCUT DO ALGARVE, S.A. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBABALANCE SHEET AS OF 31 DECEMBER 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Translation of a balance sheet originally issued in Portuguese zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- Note 511 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Gross &?tortiration aid h'otes assets ae~ll~~~l~ltl~~lzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA&et Assets .4111ounrsespsessed in tliousmids oj Portiiguese Escudos)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Assets FIXED ASSETS: Intangible assets: Installation expenses .. .. 8 and 10 73,589 (16,119) 57,450

Tangible assets: Machinery and equipment .. .. 10 9.961 (61 8) 9.343 Administrative equipment .. .. 10 5.778 (209) 5.569 Tangible assets in progress .. .. 10 847.980 - 847.980 Advances on account of tangible assets 10 4.216.128 - 4216.178

5.079.847 (827) 5.079.070

CURRENT ASSETS: Reccivablc from third parties: State and other public entities .. 48 858.099 - 858.099 Other debtors .. .. 16 3.321 - 3.421

861.520 - 861.520

Banks and cash: Bank deposits .. 49 2.993.440 2.993.40 Cash .. 60 60

2.993,500 2-993.440

ACCRUALS AND DEFERRALS: Accrued income.. .. 50 5.248 5.248 Deferrcd expenses .. 50 779.018 779.018

784,266 784.266

Total amortisation and depreciation .. (1 6.946)

Total assets .. .. 9.792,722 (16.946) 9.775.776

117 Notes 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Shareholdcrs’ equity and liabilities SHAREHOLDERS’ EQUITY: Capital .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA36 9.075,018 Net resultzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA for the period ,. 297 9,075,315

LIABILITIES: Provisions for risks and charges: Other provisions for risks and charges .. .. 2.074

Current liabilities: Suppliers, current accounts .. 16 50.560 State and other public entities .. 48 1.799 Suppliers of fixed assets, current accounts .. 16 135,325 Other creditors .. .. 16 293.004

480,588

ACCRUALS AND DEFERRALS: Accrued expenses .. 50 21 1.799

Total shareholders’ equity and liabilities .. .. 9,775.776

The accompanying notes form an integral part of this balance sheet. 118 EUROSCUT - SOCIEDADE CONCESSIONARIA DA SCUT DO ALGARVE, SA. STATEMENTzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA OF PROFIT AND LOSS FOR NATURE FOR THE PERIOD FROM 27 APRIL, 2000 (DATE OF INCORPORATION) TO 31 DECEMBER 2000 (Translation of a statement originally issued in Portuguesc - Note 51) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Amounts cxpressed in thousands of Portuguese Escudos)

EXPENSES Supplies and services .. 66,786 Amortisation and depreciation .. 10 16,946 Provisions .. 33 3,074 Taxes .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA118 Other operating costs .. 68

(A) 85.992 Financial expenses .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA45 173.1 36 iC) 360.128 Extraordinary expcnses .. .. -

(E) 260.128 Income taxes for the period .. 6 and 48 1.579

(GI 261.707 Net result for the period .. 397

262.004

INCOME Services rendered .. 44 19.444 Owwork capitalised .. 10 8 1.006

03) 100,450 Financial income .. 45 161,554

Extraordinary income ..

(F) 262,004

Operating results: .. .. (B)-(A) 14.458 Net Financial results: .. (D-B) - (C-A)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (12.582) Current results: .. .. (D)-TC) 1.876

Results bcfore income taxes: .. .. (F)-(E) 1,876

Net result for the period: ...... (F) - (G) 297

The accompanying notes form an integral part of this statement. 119 FINANCIAL STATEMENTS OF XLCA Unaudited Financial Statements to 30 June, 2001 XL Capital Assurance Inc. Condensed Balance Sheets 30 June, 2001 and 31 December, 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 30 June, 2001 31 December, (Uiiaudited)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000 (Dollurs iii thousands) Assets zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Investments:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Fixed maturities available for sale, at fair value (amortized cost: 2001 - $72.478; 2000 - $80,962) ...... $ 73,649 $ 82,425 Short-term investments,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA at fair value (amortized cost: 2001 - $9,911; 2000 - $0) .. 9,951 -

Total investments ,. 83,600 82,425 Cash and cash equivalents ., 15,121 5,004 Premiums receivable .. 436 27 Accrued investmcnt income .. 1,002 986 Reinsurance balances recoverable .. 349 6 Deferred acquisition costs .. 1,018 Prepaid reinsurance .. 7,174 Current Federal income tax receivable 1,885 Goodwill .. 11,676 - Other assets .. .. 468 31 3

Total assets .. .. $ 122,729 $ 88,761

Liabilities and Shareholder’s Equity Liabilities Uncarned premiums .. .. $ 7,971 $ Unpaid losses and loss expenses .. .. 365 7 Reinsurance premiums payable .. .. 4,684 19 Current Federal income tax payable .. 32 1 Accounts payable and accrued expenses 2,212 877 Intercompany payable to affiliates .. 4,099 4.121 Deferred Federal income tax liability .. 1,132 532

Total liabilities .. 20,463 5,877

Shareholder’s Equity Common stock (par value $7,500 and $6.000 for 30 June. 2001 and 31 December, 2000,2,000 shares authorized, issued and outstanding for June 30, 2001 and 2,500 shares authorized, issued and outstanding for 31 December, 2000) .. .. 15.000 15,000 Additional paid-in capital .. 94,060 70,000 Accumulated other comprehensive income .. 786 95 1 Accumulated deficit .. (7,580) (3.067)

Total shareholder’s equity .. 102,266 82,884 Total liabilities and shareholder’s equity .. .. $ 122.729 $ 88,761 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

See notes to condensed financial statements.

120 XL Capital -4ssurance Inc. Condensed Statement of Operations and Comprehensive Income For thc six month period ended 30 June, 2001 and 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 30 JU7le. 30 June, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2001 ,7000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Uiiauclited) Unnudited)

f Dollars iii thousands) Revenues Net premiumszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA earned .. .. % 60 5 Net investment incomezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. 2.821 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA2.597 Net realized capital gains (losses).. .. 467 (696)

Total revenues .. 3.348 1.90 1 Expenses Net losses and loss expenses .. 15 Policy acquisition costs .. .. 113 Operating expenses .. 9,105 102.

Total expenses .. 9.233 103

Loss before Federal income tax (benefit) expense (5.885) 1.799

Current Federal incornc tax (benefit) expense .. (2.060) 853 Deferred Federal income tax expense (benefit) .. 688 (244) (1.373) 609

Net (loss) incornc .. .. (4.513) 1.190

Other comprehensive income .. .. (165) 1.058

Comprehensivc (loss) income .. $ (4,678) % 1.248

See notes to condensed financial statements.

121 XL Capital Assurance Inc. Condensed Statement of Changes in Shareholder’s F,quitp For the six month period ended 30 June, 2001 and the year ended 31 December, 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 30 Jim, 2001 31 December, [Unaudited)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000 (Dollnrs iii thousarids) Common Shares zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Number of shares.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA beginning of year (period) .. 2,500 2.500 Shell acquisition - retirement of XL Capital Assurance Inc. shares .. (2,500) - Shell acquisition zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- issue new XL Capital Assurance Inc. shares .. 2,000 - Number of shares: end of period .. 2,000 7.500

Common Stock Balance - beginning of year (period) ...... $ 15.000 $ 15,000 Balance-end of period ,. 15,000 15.000

Additional Paid-In Capital Balance - beginning of year (period) .. .. 70,000 70,000 Contribution of The London Assurance of America Inc. 24,060 -

Balance-end of period .. ., 94,060 70,000

Accumulated Other Comprehensive Income Balance - beginning of year (period) .. .. 95 1 (1.374) Net change in unrealized appreciation of investments, net of deferred zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Federal tax benefit of $88 in 2001 and expense of $512 in 2000. .. (165) 2,325

Balance-end of period .. 786 95 I

Accumulated deficit Balance - beginning of year (period) .. (3,067) (1 .8gl) Net loss .. (4,513) (1,176) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Balance-end of period .. .. (7.5 80) (3,067)

Total shareholder’s equity .. .. $ 102.266 $ 82,884

See notes to condensed financial statements. I 22 XL Capital Assurance Inc. Condensed Statement of Cashflows For the six month period ended 30 Junc, 2001 and 2000

Cash provided by opcrating activities: Net (loss) income .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA9; (4,513) $ 1,190 Adjustments to reconcilezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA net income to net cash (used in) provided by operating activities Net realized (Sains) losses on sale of investments .. (467) 696 Amortization of (discount) premium on bonds .. 73 68 Amortization of goodwill .. .. 97 Increase in unpaid losses and loss expenses, net .. 15 Increase unearned premiums, net .. .. 797 Dcfcrred acquisition costs .. .. (1.018) lncrease in reinsurancc prcmiurns payable .. 4.665 lncrease in premiums receivable .. .. (409j (Increase) decrease in acci-ued investment income .. .. (16) (Decrease) increase in current Federal income tax .. .. (2.206) Increase (decrease) in deferred Federal income tax liability .. 688 Increase (decrease) in accounts payable and accrued expenses .. .. 1.336 (Decrease) increase in intercompany payable to affiliates.. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(22) Other .. (769)

Total adjustments .. .. 2.764 1.369 Net cash (used in) provided by operating activities .. ( 1.739) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1,659 Cash flows from investing activities: Proceeds from sale of fixed maturities and short term investments .. .. 30.475 7.244 Proceeds from maturity of fixed maturities and short term investments .. 37.099 7.337 Purchase of fixed maturities and short term investments .. .. (56.987) (15.915)

Net cash provided (used in) in investing activities .. 587 ( 1.334)

Cash flows from financing activities: Cash of contributed company.. .. 1 1.379

Net cash provided by financing activities .. .. 11,279 -

Increase in cash and cash cquivalents .. 10,117 1,325 Cash and cash equivalents-beginning of year .. 5:004 3,257

Cash and cash equivalents-end of period $ 15,111 $ 4.583

Taxes paid .. .. 9; 146 $ -

See notes to condensed financial statements. 123 XL CAPITAL ASSURANCE INC. NOTES TO CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2001 AND 2000 (Dollars in thousands) 1. ORGANIZATIONzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA AND OWNERSHIP XL Capital Assurance Inc. (the Company) is a wholly owned subsidiary of XL Reinsurance Company of America Inc. (”XL RE AM”), formerly known as NAC Reinsurance Corporation, which is an indirect wholly owned subsidiary of XL America Inc. (“XLA”), XLA is an indirect wholly owned subsidiary of XL Insurance Ltd. (“XL Insurance”). XL Insurance is an indirect wholly owned subsidiary of XL Capital Ltd. (“XL Capital”), a financial service holding company registered in the Cayman Islands. XLA is XL Capital’s U.S. holding company. XL Capital Assurance Inc. is an insurance company domiciled in the Statc of New York. The Company is primarily engaged in the business of providing financial guaranty insurance on asset- backed structured finance, essential infrastructure project finance. future flows and public finance transactions. 2. BASIS OF PRESENTATIONzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The accompanying condensed financial statements have been prepared by the Company and are unaudited. In the opinion of management. all adjustments, which include only normal recurring adjustments nccessary to present fairly the financial position, results of operations and cash flows at 30 June, 2001 and for all periods presented, have been madc. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These statements should be read in conjunction with the Company’s 31 December. 2000 financial statements and notes thereto. The accompanying condensed balance sheet as of 31 December, 2000 was derived from audited financial statcments, but does not include all disclosures requircd by accounting principles generally accepted in the United States of America. The results of operations for the periods ended 30 Junc, 2001 and 2000 arc not necessarily indicative of the operation results for the full year. 3. MERGER On 22 February, 2001, XL RE AM acquired all the outstanding shares of The London Assurance of America, Inc. (“LAA”). Prior to its acquisition by XL RE AM, LAA was a New York domiciled property and casualty insurance company that was licensed in 44 states and the District of Columbia. The business previously underwritten through LAA was ceded effective 1 July, 2000 to an affiliate of LAA under an assumption reinsurance arrangement. XL RE AM caused the Company to merge with LAA on the day of acquisition and for LAA to simultaneously adopt the name of XL Capital Assurance Inc.

124 The net effect of the merger is immaterial to the results of operations and cash flows for the period ended 30 June. 2001. The condensed unaudited balance shcet of LAA as of the date of merger. prepared in accoi-dance with generally accepted accounting principles, is as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA (Dollars in tllowmzcjs)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Assets zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Fixed maturities at fair value .. .. $ 1.763 Cash and cash equivalents.. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 11,279 Accrucd interest .. 7

Excess of purchase price over net assets acquired .. .. 11.156 Total assets .. 24.205

Liabilities and Shareholder’s Equity Deferred Federal income taxes .. .. 51 Common Stock .. 5,000 Additional paid-in-capital .. . . 16.856 Rctained earnings .. 2.204 Unrealized appreciation of investments: net .. .. 93 Total liabilities and shareholder’s equity .. .. $ 24:205 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 4. DEFERRED ACQUISITION COSTS Certain costs incurred, primarily related to the production of new business, haw been deferred effective in 2001. Thcsc costs include direct and indirect expenses related to underwriting. marketing and policy issuance, rating agency fees and premium taxes, net of reinsurance ceding commissions. The Company considers thc present value of future premiums under installment contracts written when determining the recoverability of deferred acquisition costs. The deferred acquisition costs are amortized over periods in which the related premiums are earned and such amortization amounted to $113 for the six month period ended 30 June, 2001. Deferred acquisition costs. net of such amortization amounted to $1:018 at 30 June, 2001. 5. NEW ACCOUNTING PRONOUNCEMENTS In July, 200 1, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 142. “Goodwill and Other Intangible Assets”. which changes thc accounting for goodwill and other intangible assets in business combinations from an amortization approach to an impairment-only approach. The adoption of SFAS No. 142 on January 1. 2002 will result in the Company’s discontinuation of amortization of its goodwill. However, the Company will be required to test its goodwill for impairment under the new standard, which could have an adverse effect on future results of operations if there is an impairment. Amortization of goodwill for the six months to June 30, 2001 was $97.

125 Audited Financial Statements for the years ended 31 December, 2000 and 1999 Report of Independent Accountants zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA To the Board of Directors and Shareholder of XL Capital Assurance Inc.:

In our opinion. the accompanying balance sheets and the related statements of operations and comprehensive income. changes in shareholder equity and cash flows present fairly, in all material respects, the financial position of XL Capital Assurance Inc. (the “Company”), a wholly owned subsidiary of XL Reinsurance America, Inc. (formerly known as NAC Reinsurance Corporation). at 51 December, 2000 and 1999, and the results of its operations and its cash flows for the years ended 31 December,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s rnanagcment: our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which requirc that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. assessing the accounting principles used and significant estimates made by management. and evaluating the overall financial statement presentation. We believc that our audits provide a reasonable basis for our opinion.

March 19. 2001

See notes to financial statements

126 XL Capital Assurancc Inc. Balance Sheets 31 December 2000 and 1999

31 December 2000zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1959 (D01lnr.s iii tlioosaiids) Assets zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA lnvestmentszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Fixed maturities available for sale, at fair value (amortized cost: 2000 - $80.962: 1999 - $75.498) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA5 82:425 5 74:584 Preferred stock available for sale,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA at fair value (cost: 3000 - $0: 1999 - $4.294) - zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA3.834 Total investments .. .. 82.425 78,118 Cash and cash equivalents .. 5,004 3,257

Premiums receivable .. 77 I Accrued investment income .. 986 835 Reinsurance balances recoverable .. .. 6 - zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Receivable from X.L. America, lnc. 80 Deferred Federal income tax benefit - 7 Other assets .. .. 313

Total assets .. .. $ 88,761 S 82.597

Liabilitics and Sharcholder’s Equit>- Liabilities Unpaid losses and loss expenses .. .. 5 7% - Reinsurance premiums payable .. .. 19 - zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Federal income tax .. 31 1 735 Accounts payable and accrued expenses .. 877 127 Intercompany payable to affiliates .. 4,121 - - Deferred Federal income tax liability .. .. 532.

Total liabilities .. 5.877 862 Shareholder‘s Equity Common stock (par value $6,000: 2,500 shares authorized, issued and outstanding for 2000 and 1999) .. 15.000 15.000 Additional paid-in capital .. .. 70.000 70.000 Accumulated other comprehensive income .. 95 1 (1.373) Accumulated deficit .. .. (3.067) (1.891)

Total shareholder’s cquity .. 82.884 8 1.735

Total liabilities and shareholder’s equity .. % 88.761 S 82.597

See notes to financial statemcnts

127 XL Capital Assurance lnc. Statements of Operations and Comprehensive Income For the years ended 31 December 2000 and 1999 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 31 December 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1999 (Dollnr~in thousands) Revenues Net premiumszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA earned .. .. $ 1$ - Net investment incomezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. 5,5 17 4.859 Net realized capital losses ,. (621) (6,276)

Total revenues .. 4,897 (1341 7) Expenses Net losses and loss expenses .. 1 Ceding commission (7) - Operating expenses .. 6,466 163

Total expenses .. 6,460 163

Loss before income tax (bcnefit) expense .. ,. (1,563) Current Federal income tax (benefit) expense (414) Deferred Federal income tax expense (benefit) 27

(387) 795

Net loss .. (1,176) (2 7 3 75) Other comprehensive income (loss) .. 2,325 (1,677)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Comprehensive income (loss) .. .. S 1.149 $ (4,052) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

See notes to financial statements

128 XL Capital Assurance Inc. Statements of Changes in Shareholder’s Equity For thc years ended 31 Deccmber 2000 and 1999 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 31 December. 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1999 (‘Dollars iii tlioirsuiid>-) Common Sham zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Number of shares. beginning of year (period) .. 2.500 4.000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- 25% Predecessor Company stock dividend .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1 .ooo Merger retirement of Predecessor Company sham.. .. - (5,000) Issuance of Company shares .. - 2.500

Number of shares. end of year .. 2.500 2.500

Common Stock Balance-beginning of year (period) .. % 15.000 $ 2.000 25Yn Predecessor Company stock dividend .. .. - 500 Merger par value increase from adjusted $1.000 to $6.000 per share .. .. - 12.500

Balance-end of year .. 15.000 15.000

-4dditional Paid-ln Capital Balance-beginning of year (period) .. 70.000 98.000 Predecessor Company extraordinary dividend .. - (15.000) Predecessor Company 35% stock dividend .. - (500,) Merger par valuc increase from adjusted $1.000 to $6.000 per share .. .. - (12.500,)

Balancc-end of year .. 70.000 70.000

.4ccumulated Other Comprehensive Income Balance-beginning of year .. .. (1.374) 303 Net change in unrealized appreciation (depreciation). net of deferred Fedcral tax expense of $512 in 2000 and benefit of $163 in 1999 .. 3.375 (1.677)

Balance-end of year .. 95 1 (1,373)

Accumulated deficit Balance-beginning of year .. .. (1.891) 483 Net loss .. .. ( 1.176) (3.375)

Balance-cnd of year .. (3.067) (1.891)

Total shareholder’s equity .. $ 83.884 $ 81.735

See notes to financial statements

129 XL Capital Assurance Tnc. Statement of Cashflows For the years ended 31 December 2000 and 1999 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 31 December 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAi999 (Dollurs in tliousands) Cash provided by operating activities: Net loss .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA$ (1,176) $ (2.375) Adjustments to reconcile net income to net cash provided by operating activities Net realized losses on sale of investments .. 62 1 6.276 Amortization of (discount) premium on bonds .. 120 100 Increase in unpaid losses and loss expenses, net .. 1 1 lncrease in reinsurance premiums payable .. 19 - Increase in premiums receivable .. .. (27) Increase in accrued investment income .. .. (151) (391) (Decrease) increase in current Federal income tax .. .. (414) 600 Increase in dcferred Federal income tax liability (benefit) .. 27 (7) Increase in accounts payable and accrued expenses .. 750 127 lncrease (decrease) in intercompany payableheceivable to affiliates .. 4.201 (80) Increase in other assets .. (313) -

Total adjustments .. .. 4,834 6,625

Net cash provided by operating activities .. .. 3,658 4,250

Cashflows from investing activities: Proceeds from sale of fixed maturities and short-term investments .. 15,215 162,747 Proceeds from sale of preferred stock .. .. 3,708 - Proceeds from maturity of fixed maturities and short-term investments 24,235 1,041 Purchase of fixed maturities and short-term investments .. .. (45,069) (185,735) Purchase of preferred stock.. .. - (2,045)

Net cash used in investing activities.. .. (1,911) (23,992)

Cashflows from financing activities: Predecessor company extraordinary dividend.. .. (15,000)

Net cash used in financing activities .. (15,000)

Increase (decrease) in cash and cash equivalents .. 1,747 (34,742) Cash and cash equivalents - beginning of year ,. 3,257 37,999

~ Cash and cash equivalents - end of year .. .. $ 5,004 $ 3!257

Taxes paid .. .. $ 202

130 XL Capital Assurancc Inc. Notes to Financial Statements 1, Organization and BusinesszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA X. L. Risk Solutions, Inc. (tlie ”Predecessor Company”) was formed on 8 October 1998 by X. L. America: Inc. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA(“XLA”) and was licensed as a Connecticut property and casualty insurer on 22 January 1999. The Predecessor Company did not write any direct or assumed business and was re-licensed as a Connecticut financial guarantee insurer and re-domesticated to New York on 30 September 1999, where it immediately merged with XL Capital Assurance Inc. (the “Company”). The Company is a licensed New York financial guarantee insurer focused on providing credit enhancement for domestic and international asset-backed structured financc. essential infrastructure project finance, future flows and public finance transactions. The Company was formed on 13 September 1999 and is the survivor by merger on 30 September 1999 with the Predecessor Company. The 1999 financial statements include the combined operations of the Company from its date of formation and the Predecessor Company. During 2000. the Company obtained approval from the Monetary Authority of Singapore to form and license a financial guarantee Branch office. On 30 November 1999. all of tlie Company’s common stock was purchased from XLA by XL Reinsurance America. Inc. (”XL RE AM”): formerly known as NAC Reinsurance Corporation, which is an indirect wholly owned subsidiary of XLA. XLA is an indirect wholly owned subsidiary of XL Insurancc Ltd (“XL Insurance”). XL Insurance is an indirect wholl!; owned subsidiary of XL Capital Ltd (“XL Capital”). a financial service holding company registered in the Cayman Islands. XLA is XL Capital’s U.S. Holding Company.

2. Summary of Significant Accounting Policies BasiszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA of presentation The accompanyingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP“): which for insurance companies differ in certain respects from the accounting practices prescribed or permitted by thc New York Insurance Department (See Note 12). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities in the Company’s balance sheets at 31 Deccmber 2000 and 1099 and the reported amounts of revenue and expenses in thc statement of operations during the year ended 31 December 2000 and 1999. Actual results may differ from those estimates. The Company’s significant GAAP accounting policies are as follows:

Investments All the Company’s investment in fixed maturity securities (bonds and preferred stocks) are designated as available for sale and accordingly are carried at fair value. Any resulting unrealized gains or losses are reflected as a component of othcr comprehensive income. net of applicable deferred federal income taxes. Bond discount and premium are amortized on the effective yield method over the remaining terms of securities acquired. For mortgagc-backed securities for which prepayment risk ma>- be significant, assumptions reprding prepayments are evaluated periodically and revised as necessary. Any adjustments required due to the resulting change in effective yields are recognized in current income. Short-term investments purchased with an original maturit). of ninety days or less are classified as cash equivalents. Realized gains and losses on sale of investments are determined on the basis of speclfic identification. Investment income is recognized when earned.

Preniiuai rewnue recopition Installment premiums arc carncd over each installment period zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA- typically a month or quarter. Losses mid loss acjjilrstnient expenses The CompanyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA maintains a non-spccific general reserve which is based on industry loss experience. This reserve is available to be applied to new case basis reserves that may be established for claims on current outstanding insured principal and interest in the future. This general reserve is established for expected levels of losses associated with currently insured issues and is based on a portion of premiums earned to date. Losses and loss adjustment expenses in the accompanying balance sheet are reflected gross of reinsurance. 131 hcotne tciscs zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA DeferrcdzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Federal income taxes are provided for temporary differences between the tax and financial reporting basis of assets and liabilities that will result in deductible or taxable amounts in future years when the reported amounts of the assets or liabilitieszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA are recovered or settled. 3. Investments Bonds with a par value of $2,570,000 and a fair value of $2,572,409 at 31 December 2000 were on deposit with the states of New York and Louisiana as required by those Insurance Departments. The amortized cost and fair value for fixed maturities as of 31 December 2000 and 1999 is as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 31 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBADecember 2000 Cost or Gross Gross Amortized Uiireoli,-ed Utirealixd Cost Gciiii.v Losses zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAFair Vulue (Dollurs in tkousniids) Bonds U.S. Govcrnment and government agencies and authorities .. .. $ 66.277 $ 1,011 $ (23) $ 67,265 Special revenuezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and assessment obligations of agencies and authorities of government and political subdivisions .. 4,103 74 - 4.177 Industrial and miscellaneous .. .. 10.582 442 (41) 10,983

Total bonds ...... $ 80.962 % 1.527 $ (64) $ 82,425

31 Deceinbel- 1999

Cost 01' Gross Gross Amortized Unreulized Unreirlized Cost Gnim Losses Fuir Value

(Dollars iii tlrousmids) Bonds U.S. Government and government agencies and authorities .. .. 9; 69,332 $ - $ (709) $ 68,623 Special revenue and assessment obligations of zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA agencies and authorities of government and political subdivisions .. 3,971 - (157) 3.814 Industrial and miscellaneous .. .. 2,195 - (48) 2:147

Total bonds .. .. 75,498 - (9 14) 74.584

Stocks Preferred .. 4:294 - (460) 3,834

Total ...... $ 79,792 $ - $ (1,374) $ 78.418

Fair value is based on the quoted market price or dealer quotes obtained from an independent source. The amortized cost and fair value of bonds at 31 December 2000 by contractual maturity is shown below. Actual maturity may differ from contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

132 Ailtortid COSTzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Fair Valiie (Dollnrs iii tlloliSclllds) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA$ 28.621 Within one year .. .. % 28.650zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Due after one yearzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA through five years 767 79 1 Due after five years throughzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ten years 7.327 2.501 Duc after ten ycars zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA5.331 5.563

Subtotal .. 37.175 37.482 Mortgage-backed securities .. 43.787 44.943 Total $ 80,962 $ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA89.415

Proceeds from sales of fixed maturities for the year ended 31 December 2000 were $15.215.182. Thc nct investment income for the years ended 31 December 2000 and 1999 was as follows:

Bonds U.S. Government and government agencies and authorities 5 1.673 E 1.010 Special revenue and assessment obligations of agencies and authorities of government and political subdivisions .. 98 3.770 lndustrial and miscellaneous .. 476 63

Preferred stock .. _. 1.12 183 Short-term investnients .. 113 604 Cash equivalents .. 21 1 445

Subtotals .. 5.715 5.076 Less: investment expenses .. 198 117 Net investment income ...... zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA5 5,517 S 4.859 The gross realized gains and gross realized losses for the year ended 3 1 Deccrnber 2000 and 1999 related to the sale of investments are as follows: 2000 1999 Gniirs Losses Guiiis zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBALosses (Dollus in rhournitcis) Bonds ...... $ 91 % (126) % 7 $ (6.310) Preferred stock .. - (586) Short-term investments .. .. - - 27 -

Total . . .. 5 91 5 (719) $ 33 $ (6.310)

4. Information Concerning Parent and Affiliates Espeiise Sharing Agreenieii i The Predecessor Company entered into an Expense Sharing Agreement effective 8 October 1998 with its then immediate parent. XLA. that was approved by the Connccticut Insurance Department. Undcr the terms of this agreement. operating expenses are allocated based on the requirements of Regulation 30 of thc Insurance Department of the State of New York (”NYID”). The amount of such expense for 1999 was $165,614. The Company entercd into an Expense Sharing Agreement effective 1 July 2000 with an affiliated company. Global Crcdit Analytics. Inc. (“GCA”). a wholly owned subsidiary of XLA. that was approved by thc NYID. GCA employs substantially all the personnel of the Company and provides the office space and furniture and equipment used by the Company. Under the terms of this agreement. operating espenses are 133

... . allocated based on the requirements of Regulation 30 of the NYID. During the second half of 2000 operating expenses relating to infrastructure start up, rating agency financial strength ratings and business development activities were allocated to the Company under this agreerncnt in the amount of $3,360,495. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Employee Beiiefit Plans XLA maintains a qualified defined contribution pension plan for the benefit of all eligible employees and a non-qualified deferred compensation plan for the benefit of certain employees of GCA and some other subsidiaries (the “Plans”). GCA’s discretionary contributions to both Plans are based on a fixed percentage of employee contributions zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA and compensation as defined by the Plans. The Company’s share of allocated pension expense, which is funded as accrued, was $97,206 for the second half of 2000.

Facultative Quotu Share Reinsurance Treaty On 6 October 1999, the Company entered into a Facultative Quota Share Reinsurance Treaty with XL Financial Assurance Ltd. (“XLFA”), a Bermuda financial guarantee insurer, which is 85% owned by XL Insurance Ltd. The remaining 15% is owncd by Financial Security Assurance Holdings Ltd., an unrelated company. Under the terms of this agreement XLFA agrees to reinsure up to 90?4 of the Company’s acceptable risks. The Company is allowed a 30% ccding commission on premiums written cedcd under the terms of this agreement. XL Insurance Ltd issued a reinsurance guarantee agreement dated 6 October 1999 to the Company. that unconditionally and irrevocably guarantees the full and complete performance of all obligations of XLFA to the Company under the above described Facultative Quota Share Reinsurance Treaty. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Office S)uce Sub-lease The Company has entered into a sub-lease agreemcnt effective 1 Junc 2000. and expiring 30 Scptember 2002 for office space with XL Re Ltd (formerly XL Mid Ocean Reinsurance Ltd.). an affiliarc, for its Singapore Branch office. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 5. Net Premiums Earned Premiums earned is comprised of: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Year Ended 31 December 2000

(Dollars ia thousands)

Gross premium written - direct .. ., 21 Reinsurance premium ceded zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 26 Net premium written ,, 1 Changed in unearned prcmiums .. .. -

Net premiums earned .. 1

6. Reinsurance The Company utilizes reinsurance principally to increase aggregate premium capacity and to reduce the risk of loss on financial guarantee business underwritten. This reinsurance includes thc Facultative Quota Share Reinsurance Treaty with an affiliate discussed in footnote 4 as well as other facultative reinsurance with non-affiliated reinsurers. The Company is liable with respect to reinsurance ceded to the extent that any reinsurance company fails to meet its obligation to the Company. The Company regularly monitors the financial condition of its reinsurers and believes there is no material unrecoverable reinsurance.

134 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Affiute IVoii-Al^filiate rota/

(Dollurs iii thoiisnnds) Year ended 31 December zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Written and earned premium ceded ...... % 24 % 3$ 26 Losses and loss expense ceded .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. .. $ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA5% 1$ 6 At 31 December zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Principal outstanding ceded .. .. 5 225.000 % 17.500 S 232.500 Unpaid losses and loss expense ceded. .. .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA$ 5s 1%zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 6

7. Net Outstanding Exposure The Company has issued one policy that insures scheduled payment of prmcipal and interest on the underlying obligation of $250.000.000. This is the first policy the Company has closed since it received its financial strength ratings on 6 December 2000. The Company intends to divcrsify its book of business both domestically and internationally, across multiple industries and by type of obligations insured. The net exposure retained on any risk is subject to formalized underwriting guidelines. The principal amount insured as of 31 December zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1000 (net of amounts ceded to reinsurers) and terms to maturity are as follow: 2000

/.Dollusin rlloll.rmld5-)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Terms to maturity 0 to 5 years ...... 9 7.500

Total .. .. $ 7.500

8. Income Taxes Thc Company‘s Federal income tax return is coiisolidated with XLA and its subsidiaries for the first half of 1999 and XL RE AM, its deemed holding company parent for tax purposes, for the second half of 1999 and all of 2000 undcr tax allocation ageemcnts approved by the Board of Directors of the Company/ Predecessor Company and the Connecticut and New York Insurance Departments. respectively. Those agreements provide that tax charges and refunds to thc Company are based on a separate return basis. During 2000 and 1999 the Company andlor the Predecessor Company paid $0 and $201.760 for Federal tax to XLA. respectively.

The U.S. Federal income tax rate applicable to ordinary income is 350,;;. The actual tax expcnse on income from operations differs from the ”expected” amount for the following reasons:

2000 I999

Perceiit of’ Perceiir of Pre-Tus Pre- Tar Anioiritt Loss ,4nlaLlllt bicoine

(Dollars iii tliozi.rancls--)

“Expected’’ tax (benefit) ...... $ (546) $ (35.0+;) % (553) $ (35.0%) Adjustments: Tax-exempt interest .. (39) ( 1* 9%) (818) (5 1.8%) Dividends received deduction (29) (1.9Yn) (39) (3.5?’0) Valuation allowance .. 217 14.0% 2.197 139.1 Yo Other.. .. 8 0.50/0

Actual tax (benefit) expense .. .. $ (387) $ (24.8’,;0) $ 795 5 (50.39;)

135 The components of the net deferred Federal income tax position of the Company as of 31 Dccember 2000 and 1999 were as follows: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 31 Deceniber ZOO0 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA1999 (Dollurs iii thouscliids) Deferrcd tax assets: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Realized capital loss carryforward .. .. % 2.414 $ 2,197 Unrealized depreciation of investments .. - 467 Other -net .. .. 7 7 Less valuation allowancezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. (2.4 14) (2,664) 7 7

Deferred tax liabilities: Unrealized appreciation of investments .. (512) - Accretion of discount .. (27) - Net deferred Federal Income zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAtax (liability) benefits ., .. !$ (532) $ 7 At 31 Decembcr 2000, the Company has capital loss carry-forwards available to offset future capital gains of $6,276,110 and $621.000 which will expirc in 2004 and 2005. respectively.

9. Accumulated Other Comprehensive Income The related tax effects allocated to the unrealized gains or losses component of other comprehensive income are as follows:

Before TKX Tns Espeme Net of TU.Y

(Dollars in thousmids) Year ended 31 December 2000 Unrealized gains (losses) on investments Beginnins balance .. .. $ (1,374) S - $ (1,374)

Unrealized gains arising during year .. 3,458 512 2,946 Less: reclassification adjustments for losses realized in income.. .. (621) I (62 1) Other comprehensive income .. 2,837 512 2,325

Ending balance...... $ 1,463 $ 512 $ 95 1

Year ended 31 December 1999 Unrealized gains (losscs) on investments Beginning balance .. .. $ 466 $ 163 $ 303

Unrealized losses arising during year .. .. (8,116) (13) (7,953) Less: reclassification adjustments for losses realized in operations . . (6,276) - (6,276)

Other comprehensive loss .. .. (1,840) (163) (1,677)

Ending balance...... $ (1:374) $ - $ (1,374)

136

. . 10. Commitments Thc Company has zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAentered into a sub-lease arrangement for office space with an affiliate. as more full!- described in footnote 3 and also entered into a housing lease for a Singaporc Branch office employee. Future minimum rentalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA payments are as follows: ,VOll- Ajfilia zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA tc Affilia re Total (Dollars in tliousmicls ) 2001...... 5 70 5 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA92 xzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 163 2003 .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA52 41 93 s 199 s 133 $ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA155 Rent cxpense for the year ended 31 December 2000 for affiliates and non-affiliates was $34.956 and $50.21 1. respectively. The Company is obligated to Citibank NA Singaporc for an unsecured bank guarantee in the amount of Singaporc $500.000 (approximately US$292.000) should the Monetary Authority of Singapore draw down on this guarantee for the Branch office’s operations. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 11. Disclosures About Fair Values of Financial Instruments The following estimated fair values have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret the data to develop thc estimates of fair value. Accordingly. the estimates presented herein are not necessarily indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Investments: The fair value of fixed income investments are based primarily on quoted market prices received from a nationally recognized pricing service or dealer quotes. Cash and cash equivalents: The fair values of cash equivalents are assumed to equal amortized cost. Premiums receivable and reinsurance premiums payable: The fair value of receivables from insured and reinsurance premiums payable are assumed to approximate carrying value. Losses and loss expenses, net of reinsurance balances recoverable : The carrying value is assumed to be fair value. because the provision is established for non-specific expected levcls of losses resulting from credit failures. lnstallment premiums: There is no carrying value for installment premiums in the balance sheet because these premiums when received in the future will be based on the insured’s then outstanding indebtedness. The fair value of installment premiums is estimated to be the net retained present value of such future premiums that would be paid to a third party reinsurer to transfer the Company’s financial guarantee exposurc. net of that portion of the premium that is retaincd as a ceding commission to compensate for originating and servicing the policy. The estimate of the present value and timing of the future installments is based on contractual premium rates. debt service schedules and expected run off scenarios. The estimated fair value of net retained installment premiums at 31 December 2000 is approximately $131,800.

12. Statutory Accounting Practices and Dibidend Restrictions GAAP differs in certain significant respects from accounting practices prescribed or permitted by the NYID.

137 The following summarizes the significant differences between statutory accounting practices and GAAP. 2000 zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAI999 (Dollm-s it1 thousaiwk) Net income: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA GAAP net losszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA .. .. $ (1,176) $ (2,375) Statutory adjustments:zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Net losses and loss expenses .. 1 - Deferred Federal income tax expense (benefit) .. .. 27 (7) Other .. .. (68) 111

Statutory net (loss) income .. .. ($ 1,216) $ (2,271)

Stockholder’s equity: GAAP shareholder’s equity .. $ 82.884 $ 81,735 Statutory adjustments: Deferred Federal income tax liability (benefit) .. .. 532 (7) Net unpaid losses and loss expenses .. .. 1 Contingency reserve .. (1) - Non-admitted assets .. (313) - Other .. .. 44 111 Unrealized (appreciation) depreciation of investments. net (1.463) 1.374

Statutory policyholders’ surplus .. .. $ 81.684 $ 83,213 The principal differences result from the following statutory accounting practiccs: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 0 Bonds and redeemable preferred stock are carried at amortized cost rather than designated as available for sale and carried at market value. Unrealized gains or losses are not recognized as a separate component of shareholder’s cquity net of applicable deferred Federal income tax.

Assets such as furniture and equipment, lcasehold improvements, prepaid expenses and deposits are non-admitted and a charge directly to policyholders’ surplus.

0 A formula based contingency reserve is established by an appropriation of unassigned surplus. This reserve is calculated at the greater of a prescribed percentage applied to insured outstanding principal or 50”/0 of premiums written, net of ceded reinsurancc. The prescribed percentage varies by the type of outstandingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA principal. The reserve is available to be applied to new case basis reserves that are established for claims on current outstanding insured principal and interest in the future. A non- specific general reserve is not recorded.

0 Federal income taxes are provided only on taxable income for whch incomes taxes are currently payable.

The National Association of Insurance Commissioners (“NAIC”) adopted a new Statutory Accounting Principles Manual (referred to as the “Codification”) effective 1 January 2001. The Codification replaces the prior Accounting Practices and Procedures Manual as the NAIC’s primary guidance on statutory accounting. The NYID adopted the Codification effective 1 January 2001, except where it is in conflict with New York Insurance Law and with certain specific prescribed additional practices and procedures. Management of the Company has reviewed the requirements of the Codification and the modifications of the NYlD and does not anticipate any significant changes in its opening statutory policyholders’ surplus or in the way it will report its 2001 statutory financial position and results of operations.

Under New York Insurance Law. the Company may pay dividends to XL RE AM, without the prior approval of the Superintendent of the NYID. only from earned statutory policyholders’ surplus subject to the maintenance of the minimum capital and surplus requirement. In addition, the dividend. together with all other dividends declared or distributed by the Company during the preceding twelve months, may not exceed the lesser of 10% of its policyholders’ surplus as shown in the Company‘s last filed annual statement. or adjusrcd net investment income, as defined, for such twelve-month period. As of 31 December 2000. the Company had no earned surplus available for the payment of dividends during the next twelve months. 138 13. Capital and Surplus The Predecessor CompanyzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA was organized in the Statc of Connccticut on 8 October 1998 as a wholly om-ned subsidiary of XLA. The Commissioner of the Connecticut Insurance Department approved a pre-re- domestication extraordinary dividend in the amount of $15,000,000 by the Predecessor Company that was declared on 24 September 1999 and paid on 10 November 1999 to XLA. On 24 September 1999. the Predecessor Company declared a 25”h stock dividend? comprising 1,000 shares of common stock with a par value of $500 per share, payablezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA on 30 September 1999 to XLA to satisfy the NYID’s minimum capitalization requirement for re-domestication. The Company was formed on 13 September 1999. with 2+500shai-es of common stock at a par value of $6.000 per share. On 30 September 1999, the Company merged with the Predccessor Company immediately upon its re-domestication to New Y-ork. In the merger process. the 5.000 outstanding shares of the Predecessor Company’s stock were retired aiid $12,500.000 of additional paid in capital was transferred to common stock of the Company to bring the par value of the 2,500 outstanding common shares from an adjusted $1,000 to $6.000 per share.

14. Subsequent Events On 30 February 2001, XL RE AM entered into a Surplus Maintenance Agreement with the Company. whereby XL RE AM agrees that it shall financially support the Company as permitted under Sections 1408(a) and 1409(a) of the New York Insurance Lalv to enable the Company to maintain Surplus as Regards Policyholders of at least $75.000,000 for a period of three years from the effective date of the agreement. On 32 February 2001, XL RE AM acquired all the outstanding shares of London Assurance of America, Inc. (“LAA”). Prior to its acquisition by XL RE AM, LAA was a New York domiciled propel-@ and casualty insurance coinpany that was licensed in 44 states and the District of Columbia. The business previously underwritten through LAA was ceded effective 1 July 2000 under a Reinsurance, Assignment and Assumption Agreement with a then affiliate of LAA. XL RE AM caused the Company to merge with LAA on the day of acquisition and for LAA to simultaneously adopt the name of XL Capital Assurance Inc. The new Company also immediately became licensed as a financial guarantee insurer in New York and is now in the process of getting this mci-ger recognized, getting its name change approved and adjusting its underwriting authorit?. to only transact financial guarantee business in the other statcs where it is licensed. The Company currently is licensed to transact financial guarantee and/or surety business in 33 states aiid the District of Columbia. The Company is also seeking financial guarantee and/or surety zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAunderwriting authority in the remaining states where LAA is not licensed to transact financial guarantee and/or suret>- business. The condensed GAAP balancezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA sheet (unaudited) of the acquired company as of the date of acquisition is as follows: /Dollars in thotrsnnds)

Assets Fixed maturities at fair value .. .. 1.763 Short term investments .. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA.. 3.568 Cash and cash equivalents .. 7.71 1 Accrued interest .. I zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Excess of purchase price over net assets acquired 11.156

Total assets .. .. 23.205

Liabilities and Shareholder’s Equity Deferred Federal income taxes.. .. 51 Common stock .. 5.000 Additional paid-in capital _. 16.856 Retained earnings .. .. 2,204 Unrealized appreciation of investments. net .. 94

Total liabilities and shareholdcr’s cquity .. $ 24.205

139 GLOSSARY Principal terms used in this Offering Circular have the followingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA meanings in summary. and reference should be madc to the relevant Transaction Document for the definitive meaning: “BAFO” the best and final offer made by thc Consortium to the State in seeking to obtain the Concession “Base Case” the base case financial model in respcct of the Project V3eneficiaries” XLCA, the Bond Trustee (in its capacity as trustee for the Bondholders and in its own capacity). EIB. the VAT Facility Agent (in its capacity as agent for the VAT Lenders) and any additional senior creditor of the Issuer or the Company brBonds” €126,500.000 6.4% Guaranteed Secured Bonds due 2027 to be issued by Algarve International B.V. “Bond Financial Guaranty” the financial guaranty issued by XL in respect of the Bonds as further described in “The Financing of the Project - The Bonds and the Bond Financial Guaranty” and the terms of whichzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA are set out in “Bond Financial Guaranty” “Bond Subscription Agreement” thc agreement between the Issuer, the Company and the Lead Managers pursuant to which the Lead Managers agrcc to subscribe the Bonds “Bond Trust Deed” the trust deed between the Issuer, Euroscut. XLCA, the Security Trustee and the Bond Trustee under which thc Bonds are to bc constituted as further described in “Thc Terms and Conditions of the Bonds” “Bond Trustee” Citibank, N.A. “ERISA” BRISA. one of the National Concession Companies “Cintra’’ Cintra Concesiones de Infrastructuras de Transporte. S.A. ((Clearstream, Luxembourg” Clearstream Banking, societe anonyme, Luxembourg “Common Terms Agreement” or the agreement between the Issuer, Euroscut, the Security Trustee, TTA” the Bond Trustee, EIB. the VAT Facility Agent and XLCA relating to certain basic and common terms of the financing of the Project as further described in “The Financing of the Project - Common Terms Agreement” Tompany” EUROSCUT-Sociedade Concessionaria da Scut do Algarve, S.A. “Company Accounts Agreement” the agreement between the Issuer, the Company, the Security Trustee. the Bond Trustee, EIB, the VAT Facility Agent, XLCA and Citibank, N.A. (as account bank) which provides for the maintenance and control of certain bank accounts of the Company Tompany Finance Documents” the Intercompany Loan Agreement, the Company Security Documents, the Company Guaranty, the Company Accounts Agreement. thc Intercreditor Deed and the Common Terms Agreement ‘Tompany Guaranty” the guarantee between Euroscut, the Security Trustee, the Bond Trustee, EIB. the VAT Facility Agent and XLCA, and under which Euroscut guarantees the payments due in respect of the Bonds as described further in “The Financing of the Project - Security Agreements” Tompany Security Agreement” the security agreement between the Company and, inter alios. the Bond Trustee under which the Company grants securityzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA over its assets in favour of the Bond Trustee and the Bondholders as security for the Company’s obligations under the Intercompany Loan Agreement and the Company Guaranty as described further in “The Financing of the Project - Security Agreements” 140 ‘Tompany Security Documents” the Company Security Agreement and the Shareholder zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAUndertaking “Completion Date” the date on which the Construction Works are to be completed under the Concession Agreement “Concession” the concession granted under the Concession Agreement to Euroscut in respect of the Project “Concession Agreement” the agreement dated 11 May 2000 bet\veen the Portuguese State and Euroscut under which the Portuguese State granted the Concession to Euroscut “Concession Period” 30 years from 11 May 7000 the consortium formedzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA in September 1998 b!) two subsidiaries of the Spanish Grupo Ferrovial (Cintra and Ferrovial-Agroman, S.A.) and seven Portuguese contractors in oi-der to obtain the Concession “Construction Contract” the fixed price construction agreement dated 11 May 2000 between Euroscut and the Constructor under whch the Constructor agrees to carry out the Works in respect of the Project as further described in “Description of the Project - Summary of the Construction Contract”: “Construction Period” the period durinz which the Construction Works are required to be completed under the Concession Agreement “Construction Works’’ the works to be carried out in respect of the Project during the Construction Period as required by the Concession Agreement bLConstructor”or VIALSCUT-Construqiio da Scut do Algal-vc: ACE. a construction ‘LContractor’’ joint venture. formed by Fcrrovial-Agronian. S.A. and the seven Portuguese contractors as described in parazraph 2.5 of “Description of the Project” “Credit Parties” XLCA, the Bond Trustee. EIB, the VAT Facility Asent and an)- additional senior creditor of the Issuer or thc Company “Deed of Pledge of Shares” the deed between the Issuer, its shareholders and the Security Trustee whereby the shareholders grant a pledge over their sham in the Issuer in favour of the Security Trustee. as further described in “The Financing of the Project - Securic Agreements” “Definitive Bonds” Bonds in definitive form “Direct Agreement” the direct agreement dated 2 July. 2001 between the Constructor, the Security Trustee, the Issuer. the Bond Trustee, XLCA, EIB, the VAT Facility Agent and Euroscut under which thc Security Trustee and the Senior Creditors are given dircct rights against the Constructor in respect of the Construction Contract “Dutch Pledge Agreement” the agreement between the Issuer and thc Security Trustee whereb!- the Issuer grants sccurity over its assets to the Security Trustee as further described in “The Financing of the Project - Security Agreements’. “EIB” European Investment Bank “EIB Facility” the term loan facility between the Issuer and EIB which provides for the making of the EIB Loans; “EIB Loans” term loans made available by EIB to Euroscut in an aggregate principal amount up to f130,0001000 to finance the Project ‘‘Escudos” ot “PTE” the lawful currency of the Republic of Portugal “Euro” or “EURO” or ‘F’ the single currency which was introduced at the start of the thrd zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAstage of European Economic and Monetary Union “Euroclear” Euroclear Bank S.A./N.V., as operator of the Euroclear system 141 ((Euroscut” or thc “Company” EUROSCUT-Sociedade Concessionaria da Scut do Algarve, zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBASA. ‘LEventof Default” each of the events of dcfault as summarised in “The Financing of the Project - Common Terms Agreement - Events of Default and Remedies”zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA “Finance Documents” the Company Finance Documents and the Issuer Finance Documents “Financial Guarantees” each of the Bond Financial Guaranty. the financial guaranty issued by XLCA in respect the EIB Facility and the financial guaranty issued by XLCA in respect of the VAT Facility “Force Majeure” or “Force Majeure any unforeseeable and irresistible events. the effects of which are Event” produced independently of the will or personal circumstances of Euroscut, including, iiiter ah, unforeseeable acts of war or subversion, hostilitieszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA or zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAinvasion. rebellion or terrorism, epidemics, atomic radiation, fire. lightening, catastrophic flood, cyclones, earthquakes and other natural cataclysms which directly affect the activities included in the Concession “GAAP’’ (a) in relation to Euroscut. thc accounting principles and practices generally accepted in Portugal: and (b) in relation to any other Relevant Shadow Toll Road Party. the accounting principles and practices generally accepted in the jurisdiction of incorporation of that party “Guarantor” XL Capital Assurance Tnc. “Guaranty Fee Letter” the letter agreement between the Issuer and XLCA under which the Issuer agrees to pay a fee to XLCA in consideration of XLCA issuing the Financial Guarantees “Guilders” or “NGL” the lawful currency of The Netherlands “Halcrow Fox Report” the independent report prepared by Halcrow Fox & Associates Ltd. on traffic projections for the Project “HypoVereinsbank” Bayerische Hypo-und Vcreinsbank AG “ICOR” Instituto para a Construc5o (TEP” National Road Department of the Portuguese State (Instituto das Estradas de Portugal) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA “Independent Technical Adviser” Prointec, S.A. ox its successor as independent technical adviser to the Project ((instructing Creditor” XLCA. unless and until an XL Event of Default or XL Downgrade has occurrcd or is continuing, in which case the Majority Creditors ((Intercompany Loan” the aggregate of the loans made under the Intercompany Loan Agreement “Intercompany Loan Agreement” the agreement between the Issuer, Euroscut and the Security Trustee which provides for the loan to Euroscut by thc Issuer of the net proceeds of the issue of the Bonds and the proceeds of the EIB Loans and the VAT Loans as further described in “The Financing of the Project - Security Agreements” “Intercreditor Deed” the deed between the Issuer, the Company, the Security Trustee. the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAPrincipal Paying Agent, the Bond Trustee, EIB, the VAT Facility Agent and XLCA. which regulates the ranking of claims under the Finance Documents and the enforcement of rights under the Finance Documents as further described in “The Financing of the Project - Intercreditor Deed” zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 142 ‘Llssuer’’ Algarve International B.V. “Issuer Accounts Agrcement” the agreement between the Jssuci-. the Company, the Security Trustee, the Bond Trustee, EIB, the VAT Facility Agent. XLCA and Citibank, N.A. which provides for the maintenance and control of certain bank accounts of the Issuer “Issuer’s Account Bank” Citibank, N.A. as the Issuer’s account bank “Issuer Finance Documents” each of the Bonds, the Bond Trust Deed, the Paying Agency Agreement, the Bond Subscription Agreement, the VAT Facility Asreement, the Financial Guarantees, the Reimbursement Agreement, the Intercreditor Deed. the Issuer Security Documents: the Issuer Accounts Agreement. the Common Terms Agreement, and any other document designated an Issuer Finance Document by the Issucr and thc Security Trustee %suer Securio Documents” the Deed of Pledge of Shares. the Dutch Pledge Agreement and an ancillary power of attorney “Issuer Shareholders” Cintra, Ferrovial-Agroman. S.A.. Construqdes Gabriel AS. Couto. S.,4., ECOP-Enipresa de ConstruC6es e Obras Publicas dc Arnaldo de Oliveira, S.A.. Eusebio & Filhos. S.A.. Empreiteiros Casais de Antonio Fernandes da Silva. S.A.. J. Gomes-Socicdade dc Construqbes do Civado. S.A.. Aurilio Martins Sobreiro & Filhos. S.A. and Antonio Alves Quelhas. S.A. (being the same persons as the Shareholders) “Issucr Shares” the shares in the capital of thc Jssuer

( ‘kph” zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAkilometres per hour “Lead Managers” Banco Santander Central Hispana. S.A. and HypoVereinsbank

“Majority Creditors” at any time. creditors who togcthcr hold OJ al-c obligated to Icnd, or as the case may be, more than 66 2/3 per cent. of the asgregate of (i) the aggregate outstanding principalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA amount of the Bonds. the EIB Loans and the VAT Loans. (ii) the outstanding amount of any letters of credit undcr the VAT Facilit>-:(ji) the aggregate undrawn commitment under the EIB Facility and (iv) the undrawn commitment under the VAT Facility, as more particularly describcd in “Thc Financing of the Project - Intercreditor Deed” ‘(Material Adverse Change” the occurrence of any event or series of events, including in relation to the Concession or Euroscut but excluding any- reduction in traffic, which has a Material Adverse Effect “Material Adverse Effect” an event or circumstance the occurrence or effect of which: zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAis or is likely to be materially adverse to the abilit>-of the Issuer, the Companq- or an>- Relevant Shadow Toll Road Party to perform and comply with any of its respective obligations under the Concession Agreement or any of its obligations under any other Transaction Document and such obligation is material zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAin the context of the Concession: 01- is or is likely to be materially adverse to thc business. assets or financial condition of the Company as a whole or its ability or that of the Issuer to pa)- or repay amounts which are or may become outstanding under the Company Finance Documents, the Direct Agreement or the Issuer Finance Documents, as the case may be. as they fall due: or is or is likely to be materially adverse to the abilit)- of the Company’s or the Issuer’s creditors to exercise or enforce their rights under the Company Finance Documents. the Direct Agreement OT the Issuer Finance Documents, as the case may be zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 143 ‘(MES” Ministry of Social Equipment of the Portuguesc State ‘60peratingDate” the date on which the Construction Works are to be completed &‘OperatingPeriod” the period from the complction of the Construction Works until the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAexpiry or earlier termination of the Concession Period “Parallel Debt” the undertaking by the Issuer to pay amounts to the Security Trustee equal to the Secured Obligations payable from time to time by the Issuer to the Beneficiaries, which shall become payablc at the same time as the corresponding amounts of the Secured Obligations are duc and payable by the Issuer to the Beneficiaries, and the obligations and liabilities resulting therefrom “Paying Agency Agreement” the agreement between the Issuer. thc Company, XLCA, the Principal Paying Agent, Dexia Banque Internationale a Luxembourg, the Bond Trustee and the Security Trustee which provides, inter alia, for the making of payments in respect of the Bonds zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA ‘LPortugal”or the the Republic of Portugal CLPortugueseState” “Principal Paying Agent” Citibank, N.A. ‘(PRN 2000” the National Road Plan of the Portuguese State rcProintecReport” the review of the Projccr by Prointec, S.A. in its capacity as Independent Technical Adviser (‘Project” all of thc design, development, financing, construction, completion. commissioning. testing. management. operation. refurbishrncnt and maintenance of the following sections of motorway in southern Portugal: (i) IC4 Lagos-Lagoa; (ii) IC4 Lagoa-Alcantarilha; and (iiij the link roads thereto: and refurbishment, maintenance or operational works on the following sections: (i) IC4 Alcantarilha-Guira: (iij IPlIIC4 Guia-Vila Real de Sto. Antonio; and (iiij the link roads thereto ((Project Documents” the Concession Agreement. the Construction Contract, the Technical Assistance Contract the Cintra Shared Ovcrhcads Agreement, the Cintra Secondment Agreement, the Construction Period Performance Bonds and the Upside Agreement (each as defined in the CTA) “Reimbursement Agreement’’ the Guaranty and Reimbursement Agreement bctween XLCA, the Issuer and the Company under which the Issuer agrees. inter. diu,to reimburse XLCA for any amounts paid by XLCAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA underzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA the Financial Guarantees

$$RelevantEvent ” an Event of Default or a potential Event of Default rcRelevantShadow Toll Road Party” the Issuer, Cintra, any Shareholder holding directly more than 30 per cent. of the share capital of the Company. for so long as it has any obligations to Euroscut, Ferrovial-Agroman, S.A. and the Constructor “S&P’’ or “Standard & Poor’s’’ Standard & Poor’s Ratings Services, a division of The McGraw- Hill Companies,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Inc. 144 ‘(Secured Obligations” all amounts which are or at any time in the future may become payable to the Beneficiaries or the Security Trustee under the Finance Documents. including contingent liabilities (as defined by GAAP) (including any obligations of Euroscut or the Issuer which may from time to time arise by way of subrogation) “Securities Act” the United States Securities Act of 1933 “Security” each of the assets of the Issuer, Euroscut or thc Shareholders which are encumbered under the Securitj- Documents “Security Documents” the Dutch Pledge Agreement, thc Deed of Pledge of Shares, the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBACompany Security Agreement and the Cornpan!- Guaranty as further described in Condition 7(C) under “Terms and Conditions of the Bonds’’ “Security Trustec” Citibank. N.A. “Scnior Creditors” the Bond Trustee. EIB. XLCA and the VAT Facility Agent ((Senior Debt” dcbt of the Issuer owed to Senior Creditors. or. as the contcxt requries. debt of thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Company owed to the Issuer under the Intercompany Loan Agreement “Shadow Toll Road” the shadow toll road in southcrn Portugal Lvhich is the subject of the Concession “Shareholders” Cintra. Ferrovial-Agroman, S.A.,Construqdes Gabricl A.S. COU~O. S.A., ECOP-Empresa de ConstruCbes c Obras Publicas de Ainaldo de Oliveira. S.A.. Eusebio & Filhos. S.A.. Empreiteiros Casais de Antonio Fernandes da Silva. S.A.. J. Gomes-Sociedade de Construcks do Cavado. S.A.. Aurelio Martins Sobreiro & Filhos. S.A. and Antonio Alves Quelhas. S.A. “Shareholder Undertaking” the shareholder undertaking between thc Shareholders. the Issuer. Euroscut. the Security Trustee. thc Bond Trustee. EIB. the VAT Facility Agent and XLCA under which the Shareholders undcrtake certain support obljgations in respect of liabilities of the Issucr and the Company owed to the Senior Creditors ((State” or “Portuguese State” the Republic of Portugal “Subsidiary” in relation to any person. any entit>-which is controlled directly or indirectly by that person or of whose dividends or distributions that person is entitled to receive more than 50 per cent. and an>-entit>- (whether or not so controlled) treated as a subsidiary in the latest financial statements of that person from time to time “Technical Assistance Contract” the contract entered into between Euroscut and Cintra under which Cintra provides technical assistance to Euroscut in connection with the Project “Technical Assistant” Cintra or its successor as technical assistant to Euroscut in connection with the Project “Total Loss” any situation which in the dctcmiination of the Independent Technical Adviser, after prior consultation with the Portuguese State. will render the Shadow Toll Road incapable of operation during the Operation Period for a continuous period of twelve months. escluding any such damage whch is fully covered by insurance policies or by the Concession Asreement ((Transaction Documents” each of the Finance Documents and the Project Documents “US. $” or “U.S. Dollars” or the lan-ful currency of the United States ‘LdoUars’’ zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA “VAT Facility” the revolving credit facility between the Issuer and the VAT Lenders which provides for the making of the VAT Loans “VAT Facility Agent” Banco Santander Central Hispano. S.A.

145 ‘VAT Lenders” Banco Santander Central Hispano, S.A. and HypoVereinsbank VAT Loans” the revolving loan and letter of credit facilities made available to the Issuer by the VAT Lenders in an aggregate principal amount up to €12,500,000 to finance the Project Works’’ the design. engineering. procurement and construction of the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAmotorway sections between Lagos and Lagoa and Lagoa and Alcantarilha (including the procurement and installation of the traffic control system and related operating equipment) “XL” or “XLCA” XL Capital Assurance Inc. “XL Downgrade” has the meaning ascribed to it in sub-paragraph (v) in “Risk Factors - Modification of Provisions of the Finance Documents affecting zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Bondholders” “XL Event of Default” has the meaning ascribed to it in sub-paragraph (iv) in “Risk zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAFactors - Modification of Provisions of the Finance Documents affecting Bondholders”

146 ANNEX A zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

147

. . Ernst & Young Lirnitada Tel 21 791 2000 EdificiozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Republica Fax 21 7957590 Av da Republica 90 -a Postal Address 1649-024 Lisboa zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAApartado 50602 Portugal 1712-001 Lisboa zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA OPINION LETTER

PRIVATE AND CONFIDENTIAL

For the attention of Euroscut-Sociedade Concessionhria da Scut do Algarve, S.A. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Dear Sirs zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA REVIEW OF FINANCIAL MODEL FOR PROJECT EUROSCUT

SCOPE OF WORK

In accordance with our cngagcmcnt letter dated 24/07/2001~ and our additional letter dated 07/08/2001. both addressed to Euroscut - Sociedude Coiicessioiidriu zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAdu Scut do Algnrve, S. A, we planned and performed a test program, usingzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA rcasonablc skill and care, in the context of your requirements. for the basc case Revenues Modules of the financial model (the base case version 'the Model'. being MODEL0 DEFINITIVO ALGARVExls, size 1395 KB, and the Revenues Modules being sheets Truffic Reverzues, Fixed Rereiiiies and HF Trujfic).

We have not been required to express any opinion on the validity of the assumptions, commercial risks associated with the project or on the possibility of the financial projections being achieved, and our opinion therefore provides no comfort on these matters.

148 THE MODEL zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA The Model has been developed on an annual basis by CINTRA - Concessiones de Infraestructuras de Transporte, S.A., both as a banking and shareholdcr evaluation model.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA uscd to assist you in the raising of dcbt finance and cvaluating your contemplated equity investment in connection with the bid process orpnised by the Portuguese State, for the construction (in some scctionsj and operation of a motorway in Algarve.

The objective of the Model is to generate projected profit and loss accounts. balance sheets: cash flow statements and certain financial ratios of Eiiroscut - Sociedude Concessioniria dii Scut do AIgmw. S. A., for the zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA30 year period from 2000 until 2029. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Thc Revenue Modules of the Model (the sole object of our revicw). are based on the key assumptions and input data set out in the traffic study by Halcrow Fox, and on the formulas described in the ‘‘Contrato de Concessdo” for the calculation of tariffs.

OPINION

Jn our opinion, based upon the work we have performed (revien- of the Revenue Modules of thc Model):

The traffic estimates for the period 2000-3007 set out in the study “SCCT do -4Zgarre. Updare qf

Traj$c Projections - Firiul Report”, by Halcrow Fox. dated May 2001. have been properly input into the model:

Assumptions for growth rates in subsequent periods set out in the same study. have been propcrly input into the Model, and arithmetical calculations have been properly performed;

The tariffs have been arithmetically well calculated. according to the formulas set out in the contract (“Contrato de Consesdo”) signed with the Portuguese State (represented bj- “Ministerio do Equipamento Social’’ and “Ministerio de Economia c Finanqas”):

The revenues have becn properly calculated for each year, multiplying the tariff of each band by the corresponding traffic estimate, and summing up the components. However. we stress the following aspects:

The period applied in the calculation of the revenues estirnatc for the beginning of operation year, was calculated in the basis of the number of days (counting from the beginning of operations until the end of that year). instead of the number of complete operating months. We stress the fact that this situation applies only to the month of beginning of operation (which is not a complete month), therefore, she impact should not be materially rehant:

Thcre may be a discrepancy between the beginning of operation date revealed in the construction plan and the financial model. The beginning of operations in the financial model occurs two months after the end of construction. whereas in the construction plan, the beginning of operations occurs one month later. However, even if this discrepancy applies. it should not impact significant1)- the model.

149

_. .. . . M ERNST&YOUNG DISTRIBUTION OF THIS LElTERzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA This letter is issued for thc purposc of assisting you in the task of listing “Euro 126.500.000, 6.4 per ccnt, Guaranteed Bonds, due 2027” in the Stock Exchange of Luxembourg.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA We agree that this opinion letter, (or. with the previous writrcn consent of Ernst & Young, a portion of it), will be included in the Brochure to be distributed to investors. zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

This letter should not be used or relied upon for any other purpose or by any other party, and it should not be distributed to any other party without our prior written consent.

Yours faithully, Ernst & Young. Lda.

Jose Gonzaga Rosa Pur.ti1 er zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA CorporatezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Firiance

150 THE ISSUER BOND FTNANClAL GUARANTOR Algarvc International B.V. XL Capital Assurance Inc. Strawinskylaan 1725, Tower zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBAB 250 Park Avenue, 19th floor 1077 XX, Amsterdam New York, NY 10177

BOND TRUSTEE and SECURITY TRUSTEE Citibank, N.A. Third Floor, Cottons Centre Hays Lane London SE1 2QT

PRINCIPAL PAYING AGENT PAYING AGENT Citibank, N.A. Dexia Banque Internationale a Lucmbourg 5 Carmelite StreetzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 69, Route d’Escli London EC4Y OPA L-3953 Luxemboui-g

LEGAL ADVISER

To the Issuer aid Euroscut To tlie Issuer rind Euroscut CIS to English, Duich. SpanishzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA aizd Neu.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA York lnw as to Portuguese Im FreshfieldszyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Bruckhaus Deringer Gonqalves Percira, Castelo Branco & Associados Fortuny, 6 Praqa Marques De PombalzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 28010 Madrid I-Sq 1250-160 Lisbon

To XLCA To XLC.4 as to Neiv York and Englisli Iniv as to Poimgicese Im’ Debevoise & Plimpton Antonio Frutuoso De Melo e Associados 875 Third Avenue Avenida da Liberdade, 35 - 7’zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA New York, NY 10022 1240-135 Lisbon zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

To XLCA as to Dutch laiv NautaDutilh One Rockefeller Plaza New York, NY 10020

To tlie Lead Managei.s, the Bond Trustee To the Lead Mmqers, the Bond Trustee ciizd the Security Triistee cis to Spanish law and the Security Trusree ns to English laic Uria & hlenendez zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA Slaughter and May Jorge Juan 6 35 Basiiighall Street 28001 Madrid London EC3V 5DB

To the Lead Mmiagers, die Bond Trusree To the Led Mmagers, the Bond Trustee and the Security Trustee aid the Seciirit!. Trustee as to Portuguese laic cis to Dutch knv Abreu & Marques E Associados Stibbe Rua Filipe Folkui, 2, 4O Strawinskylaan 2001 1069 121 Lisbon 1077 ZZ. Amstcrdam

151 AUDTTORS zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA To the Issuer To XLCA ArthurzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA AndersenzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA PricewatcrhouseCoopers W.H. KeesomlaanzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA 1177 Avenue of the Americas 1183 DJ, AmsterdamzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA New York, NY 10036 LISTING AGENT Dexia Banque Internationale a Luxembourg 69, Route d’Esch L-2953 Luxembourg

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