ANNUAL REPORT 2000

www.solmelia.com CONTENTS

COMPANY PROFILE 2-7

LETTER FROM THE CHAIRMAN 8-11

COMPANY HISTORY 12-17

ORGANISATIONAL STRUCTURE 18-19

MILESTONES 2000 20-45

FINANCIAL RESULTS 22-26

HOTEL GROWTH 27-33

RESEARCH & DEVELOPMENT 34-36

HUMAN RESOURCES: EVERYTHING IS POSSIBLE CAMPAIGN 37-38

QUALITY & ENVIRONMENT 39-42

COMPANY AND SOCIETY 43-45

SOL MELIÁ IN THE 21ST. CENTURY 46-54

BRAND STRUCTURE CHANGE 48-49

NEW PROJECTS 50-51

COMPLETING THE E-TRANSFORMATION 53-54

GOOD GOVERNANCE CODE 55-67

OFFICIAL COMMUNIQUÉS 68-70

FINANCIAL REPORT 72-160

CORPORATE INFORMATION 161 ANNUAL REPORT 2000

COMPANY PROFILE

ASIA: (10) EUROPE: (241+34) LATIN AMERICA & CARIBBEAN: (58+33) Indonesia (7), Malaysia (1), Thailand (1) Andorra (1), Belgium (1), Croatia (27), Argentina (1), Brazil (15 + 25), Colombia (7), and Vietnam (1). France (8), Germany (12), Italy (1 + 4), Costa Rica (4), Cuba (20 + 5), Malta (+1), Portugal (13+1), Spain (172 + 28), Dominican Republic (5), Guatemala (1), MEDITERRANEAN: (26+3) Turkey (5) and United Kingdom (1). Mexico (10 + 1), Panama (1), Peru (1+1), Egypt (1+2), Morocco (7), Puerto Rico (+1), Uruguay (1) Tunisia (18+1). MIDDLE EAST: (1) and Venezuela (2). Lebanon (1).

+ (Includes projects signed by Sol Meliá)

S OL M ELIÁ

A NNUAL R EPORT 2000 3 COMPANY PROFILE

CURRENT SOL MELIÁ POSITIONING DIVERSIFICATION: A COMPANY SUCCESS STORY

DIVERSIFICATION OF CITY & RESORT HOTELS • The largest resort hotel company in the world. (NUMBER OF HOTELS) • Leader in the Spanish market in both business and leisure hotels. • Leading hotel company in Latin America and the Caribbean. 49% 51% • Second largest hotel company in Europe. • Seventh largest hotel company in the world by market capitalisation. • Tenth largest hotel company in the world by number of rooms.

• Hotels in 30 countries. City Hotels Resorts Hotels - More than 33,000 employees.

DIVERSIFICATION BY MANAGEMENT TYPE GROWTH IN NUMBER OF HOTELS, ROOMS AND BEDNIGHTS (Percentage of rooms)

81.942 12% 400 80.000 31%

350 68.766 70.000 65.597 44% 13% 335 300 60.000 52.359 250 50.000 47.938 262 246 200 227 40.000 205 Franchise Owned 150 30.000 Management Leased

100 20.000

50 C.A.G.R. 14,3% 10.000 DIVERSIFICATION BY HOTEL CATEGORY

0 0 (Percentage of rooms) 1996 1997 1998 1999 2.000

Nº of Hotels Nº of Rooms 24% C.A.G.R. for Nº of Rooms 37% 39% BEDNIGHTS

YEARS BEDNIGHTS 1998 19 Million 3 Stars 1999 21 Million 4 Stars 2000 23 Million 5 Stars & Deluxe

S OL M ELIÁ

A NNUAL R EPORT 2000 4 COMPANY PROFILE

DIVERSIFICATION OF NUMBER OF ROOMS DIVERSIFICATION BY GUEST BY GEOGRAPHY NATIONALITY

4% 8% (3+1%) 3% 1% 5% 7% 31% 7% 22% 44% (7+15%) (19+25%) 22% 8% 10% 16% (5+17%) 12%

Spain Africa-Mediterran. Spain France Rest of Europe Asia United Kingdom Italy Latin America & Caribbean Germany Benelux USA & Canada Asia In brackets, City%+Resort% Latin America Others

BRANDS - CATEGORY - SECTOR

BRAND CITY RESORT

5 STAR ALL INCLUSIVE

5 STAR · SUPERIOR 4 STAR 5 STAR · SUPERIOR 4 STAR

4 STAR · SUPERIOR 3 STAR

4 STAR · SUPERIOR 3 STAR

S OL M ELIÁ

A NNUAL R EPORT 2000 5 COMPANY PROFILE

FINANCIAL PROFILE BASIC RATIOS

• Company foundation: 1956 PER 17.4 • Date of IPO: 2nd. July, 1996 EV / EBITDA 11.25 • IPO share price (before split): 900 pesetas (5.41 euros) NET DEBT / • Ticker Symbol: Sol SHAREHOLDER EQUITY 77.6% • Markets: Continuous Market (Spain) FIXED CHARGE COVERAGE 5.1 X • Forms part of IBEX 35 and EuroSTOXX MARKET CAPITALISATION € 2,034,392.32 • Shares issued: 184,776,777 IBEX WEIGHTING 0.6 • Share price at 31/12/00: 11.01 Euros • Rating BBB Stable from Standard & Poor’s • Increase in value from IPO to 31/12/00: 103.5%

SOL MELIA’S SHARES

15 4000000

14 3500000

13 3000000 12 2500000 11 2000000 10 1500000 9 1000000 8

7 500000

6 0 30/12/99 15/2/00 29/3/00 16/5/00 28/6/00 10/8/00 22/9/00 8/11/00 27/12/00

Stock Market Quotation € SOL MELIÁ Stock Market Quotation € IBEX Volume of shares

1999 Price % Increase IBEX-35 Max. Min Average Daily Volume Dividend EPS CFPS (31/12/99) Shares Euros (M) €€€ 11.25 +13.41% +18.35% 13.53 8.42 388,000 4.6 0.120 0.55 0.92

2000 Price % Increase IBEX-35 Max. Min Average Daily Volume Dividend EPS CFPS (31/12/00) Shares Euros (M) €€€ 11.01 -2.13% -21.75% 14.28 8.8 416,000 4.9 0.144 0.63 1.14 (+20%) (+24%)

S OL M ELIÁ

A NNUAL R EPORT 2000 6 COMPANY PROFILE

ANALYSIS OF ACTIVITIES

Data in thousand pesetas

31-DEC-99 INCREASE 31-DEC-00 HOTEL REVENUES 94,845 (€570 Mill.) 36.8% 129,735 (€780 Mill.) European Resort 42,859 (€258 Mill.) 14.5% 49,087 (€295 Mill.) European City 30,382 (€183 Mill.) 61.6% 49,102 (€295 Mill.) Americas Division 21,604 (€130 Mill.) 46.0% 31,546 (€190 Mill.) MANAGEMENT FEES 5,734 (€34 Mill.) 17.4% 6,729 (€40 Mill.) CASINOS 2,056 (€12 Mill.) 0.4% 2,064 (€12 Mill.) TIMESHARE 1,931 (€12 Mill.) 25.6% 2,426 (€15 Mill.) OTHERS 5,018 (€30 Mill.) 48.4% 7,446 (€45 Mill.) TOTAL REVENUES 109,584 (€659 Mill.) 35.4% 148,399 (€892 Mill.)

ECONOMIC PROGRESS

Data in thousand euros

1996 1997 1998 1999 2000 C.A.G.R.

REVENUE 51 80 95 659 892 105% - 57% 19% 596% 35% EBITDA 27 43 52 199 261 76% - 59% 21% 283% 31% NET PROFIT 21 34 42 88 113 52% - 62% 24% 110% 28%

1000 300 120 892 261 250 100 800 113 659 200 199 80 600 88 150 60 400 C.A.G.R. 52% 100 C.A.G.R. 76% 40 C.A.G.R. 105% 42 34 200 50 43 50 50 21 95 27 51 80 0 0 0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000

Revenues EBITDA Net Profit

S OL M ELIÁ

A NNUAL R EPORT 2000 7

LETTER FROM THE CHAIRMAN

Dear shareholders,

The year 2000 has been, without a shadow of a doubt, a key year for Sol Meliá. The acquisition and integration of Tryp Hotels and the conse- quences of the deal represent great milestones in company development and da major step towards our consolidation as a major player on the world stage. More than 330 hotels with more than 82,000 rooms in 30 countries makes us not only the biggest resort hotel company in the world, but also undis- puted leaders in Spain and in Latin America and the Caribbean, as well as the second largest hotel chain in Europe. And after almost half a century, all of this has made the year 2000 a year in which Sol Meliá has entered the prestigious “Top Ten” hotel companies in the world. A team of more than 33,000 people and a portfolio of 80 new hotel projects already signed for development will take Sol Meliá to 410 hotels with 102,000 rooms in less than 2 more years.

As one would expect, the company that now emerges from this deal is much more structurally sound, blessed with greater operational capacity and with great expectations for improvements in results. The acquisition has also reaf- firmed our philosophy of diversification of our hotel portfolio and our ability to provide solutions to the needs of all different types of business and leisure travellers. Our consolidation in the city hotel arena and our clear leadership of the Spanish market have also made it more difficult for foreign companies to gain a significant foothold in our domestic market, while also improving our position in terms of variable and structural costs.

This significant deal has not only served to increase the number of hotels in our portfolio, but it has also provided, as expected, an increase in com- pany profitability. Our earnings before interest, taxes, depreciation and amortisation (EBITDA) have reached 43,377 million pesetas – 260.7 million euros-, an increase of 31% over the previous year and, once again, far in excess of the 20% annual growth we have always set as our objective.

The new and strategic incorporations, the benefits generated by the exten- sive refurbishment programme in a large number of hotels and the reposi- tioning of company hotels and brands after such an important deal have had an exceptional result: the achievement of record financial results for the year 2000. Consolidated turnover increased by 35%, while consolidated revenues grew to 149,399 million pesetas – 891.9 million euros -, and net profits rose to 19,750 million pesetas – 118.7 million euros.

These results, the financial solvency of the company and the excellent pers- pectives for the future have given us the second best credit rating in the

S OL M ELIÁ

A NNUAL R EPORT 2000 9 LETTER FROM THE CHAIRMAN

hotel industry, a BBB (stable) from Standard & Poor’s. The achievement of the rating was also a starting point for the launch of a Eurobond issue aimed at diversifying our sources of finance and which ended its first phase in 2000 with spectacular results.

And if the purchase of Tryp was the most important deal of the year, our firm commitment to the use of new technology (the so-called e-transfor- mation of the company) is another of the key elements of the evolution of the business in 2000. In general terms, the e-transformation involves the modernisation and automation of a wide range of internal processes and external transactions, affecting all departments in the company and the three areas termed the Inside, Sell Side and Buy side.

Activities on the Inside include the integration of the SAP (System Application Program) platform, an immense database designed to facilita- te and improve processes using the benefits of the internet and assisting in placing the customer at the very heart of our organisation. Sales force auto- mation, a new Property Management System at the hotel Front Desk (RA 2000), new instruments for financial control (FICO), human resources (PA & PD) or procurement (MM) will provide significant savings in time and money. Thanks to a global communications network, this revolutionary system will also provide extensive detailed information on all of the activi- ties carried out in hotels and corporate departments and on each of the guests that stay in any of the company’s hotels.

The Sell Side includes the businesses fronted by the websites of AOL Avant and Meliá Viajes and the solmelia.com site. Sol Meliá was a co-founder of the family leisure portal, Prodigios, the embryo for what has now become AOL Spain, the launch pad for America On Line in Spain, based in Palma de Majorca, and for which Meliá Viajes is the exclusive supplier of travel reservation services. Besides this major new venture, we are also working hard on a new generation website and the growth of our multi-channel tra- vel agency Meliá Viajes.

Finally, Buy Side ventures include our participation in the HotelnetB2B market place for the hotel industry. This initiative, founded by Sol Meliá, Telefónica and BBVA, has now attracted 19 partners from amongst the lea- ding hotel companies in Spain and aims to provide the finest possible ser- vice to hotel managers and suppliers through the optimisation of purcha- sing processes using Internet technology.

Within the framework of the modernisation policy, the company has also modified its Statutes so as to better adapt its management to the growing demands of the market as well as facilitating the decision-making process. The Shareholders’ Meeting held on the 23rd. October approved the initia- tive with a quorum of 99.48 % of the representation of 82.41%.

Sol Meliá has also completed the final stages of its three-year Hotel Refurbishment Programme, an ambitious project involving the modernisa- tion of a large part of the company’s hotels so as to adapt them to the needs and standards of their respective hotel brands and equip them with the latest modern technologies while maintaining the style and appeal of their diffe- rent local architectural styles and their respect for the natural environment.

S OL M ELIÁ

A NNUAL R EPORT 2000 10 LETTER FROM THE CHAIRMAN

And it is precisely this policy of expansion and adaptation to new techno- logies and the increasing demands of a highly competitive market that forms the basis of our future strategy, aiming to consolidate the more than 80 hotel projects that we have already signed and successfully completing the e-transformation of the company. As well as these future additions to the portfolio, over the year 2000 we have added a total of 81 hotels in 11 countries with over 14,000 rooms, creating more than 3,000 jobs.

Our ambitious development programme, which will see more than 20,000 new rooms added, equivalent to the total size of some of our most direct competitors in Spain, will be the cornerstone of the Sol Meliá of the futu- re, a grand company with a presence in the business and leisure destinations most popular amongst our European and American clients.

Furthermore, and in line with the trends in the international hotel industry, the company has reorganised its brand portfolio, reducing it to 4 key brands, so as to simplify and better segment our hotel products. Tryp Hotels will include all of our 3 and 4 star city hotels, while Sol Resorts will include all of our resort properties in the same categories. Meliá Hotels & Resorts will continue to be associated with superior 4 star and 5 star pro- perties in both major cities and first class leisure destinations. Paradisus Resorts, meanwhile, will remain as deluxe “all inclusive” properties in pri- vileged exotic locations.

Slowly but surely, and not without the occasional difficulty, Sol Meliá is managing to firmly establish its quality standards and its position as a com- pany of reference in the hotel business. How is it done? Quite simple really: through the implementation of challenging service, quality, technology and environmental policies, the launch of an innovative “Everything is Possible” campaign, the implementation of a Guest Satisfaction Assurance programme, the constant refurbishment and enlargement of our hotel portfolio, our link with social organisations and events and, above all, our insistence on pla- cing the customer at the very heart of our organisation and our belief in our lemma “your satisfaction, our commitment”.

Guests, shareholders, suppliers, employees and hotel owners are the cre- ators of the success of a company that is now almost fifty years old. Their confidence, their efforts and their co-operation will make tomorrow’s Sol Meliá a truly great company on which the sun never sets and in which, more than ever, Everything is Possible.

Gabriel Escarrer Juliá Chairman

S OL M ELIÁ

A NNUAL R EPORT 2000 11

COMPANY HISTORY

A dream is born ...

1956.- At only 21 years of age, an entrepreneurial Gabriel Escarrer began to rent and operate his first hotel, the Altair in the residential area of Son Armadans (Palma de Majorca). 60 rooms that would later beco- me Sol Meliá.

aThe tourism boom of the 1960’s were fundamental to the con- 60’s.- solidation of the structure of a growing business. Through reinvestment of profits, increased co-operation with Tour Operators and bank loans, the company began to take shape. The tenacity of Gabriel Escarrer and his team, led by Juan Vives, his charisma and innate flair for sales and marketing would do the rest.

70’s.- This was a time for growth in the Balearic Islands, the most popu- lar destinations on the Spanish mainland and the Canary Islands with the acquisition of the company’s first resort hotels. The entrepreneurial vision and spirit of its founder and, once again, a risky but firm commitment for making his name in the hotel business were key in this growth.

Over a 20 year period, coinciding with the growth of Spain as a tourism destination, Escarrer built up a small hotel chain with a strong presence in the Balearic Islands operating as Hoteles Mallorquines until 1976, Sol Cala Blanca and also laid the foundations for what is still company philosophy: rein- vestment of profits in new hotels, growth through the purchase of other hotel chains and constant renovation of hotel facilities.

The embryo of a great company

At the end of the 70’s, Sol Meliá began to consolidate its expansion in Spain with a presence in most popular tourism destinations on the mainland and in the Canary Islands, changing its name along the way to Hoteles Sol.

1984.- Time for real growth. In a joint deal with Aresbank (financial representative of the KIO group in Spain), the 32 hotels of the HOTASA chain in Spain were acquired. The purchase meant the beginning of a pre- sence in the city hotel market and the company moved up to number 37 in the world ranking of hotel chains. At the same time, the company also became the largest hotel chain in Spain, a position it has held ever since.

S OL M ELIÁ

A NNUAL R EPORT 2000 13 COMPANY HISTORY

Meliá De Mar

Meliá De Mar

1985.- The company began its international expansion with its first hotel outside Spain: the Bali Sol. The business instincts of Gabriel Escarrer once again led to commercial success as the company became the first international chain to build a hotel in the then-unknown des- tination of Bali. It seemed like a very risky bet. Nowadays all of the major world hotel companies are there, but only one can proudly claim to be a pioneer.

1986.- Continuing with a policy of growth through acquisition, Hoteles Sol took over Compañía Hotelera del Mediterráneo, including 11 hotels partly owned by the airline British Caledonian.

...and then there was Meliá

1987.- 27th. June, 1987 was the date for another milestone in com- pany history. Owned by the Luxembourg-based company Interport,with Giancarlo Parretti at its head, the 22 Meliá hotels were the object of desire of major international hotel groups including Sheraton, Wagon- Lits or Hilton. Arduous negotiations finally led to Gabriel Escarrer becoming the new Chairman of Hoteles Meliá.

Growth continued in mainland Europe, the Americas, the Caribbean, South-east Asia and the Mediterranean. Globalisation and diversifica- tion became the watchwords of the times.

S OL M ELIÁ

A NNUAL R EPORT 2000 14 COMPANY HISTORY

New management

1993.- The incorporation of Sebastián Escarrer brought new ways to the company as he began a revolution in Sol Meliá business strategy and implemented the organisational structure that is in place today.

To favour continued growth, the management team was reinforced and changes were made in management procedures and systems (informa- tion technology, accounts, quality control, bonus systems, financial Meliá Bali management, added values for the 5 types of clients, etc...). Faithful to its origins, the company also adopted a management style aimed at encouraging an entrepreneurial and team spirit, with fluid lines of com- munication and a greater focus on the market and the customer.

That same year the company was named as the recipient of the Príncipe (Prince) Felipe Award for excellence in tourism for its management, growth and contribution to the industry.

Meliá Castilla

Going public

1996.- Once the new organisation and management systems were consolidated, on 2nd. June, 1996, Sol Meliá became the first hotel management company in Europe to be floated on the stock exchange. Prior to the flotation the company had been split into two new entities: Inmotel. SA., the owner of hotels and the new Sol Meliá S.A., a hotel management company and target of the flotation.

On 30th. December 1996, the value of the company’s shares had incre- ased by 72.2% and had been incorporated into the IBEX 35 index along with all other major Spanish public companies.

S OL M ELIÁ

A NNUAL R EPORT 2000 15 COMPANY HISTORY

Just six months later, the US agency Standard & Poor’s granted a credit rating of BBB+, rating Sol Meliá as the most solvent hotel company in Europe and allowing much greater capacity to obtain financing on capital markets.

Time for integration: the new Sol Meliá

1998-1999.- A strategic decision is made to reintegrate the hotel mana- gement and property businesses, to further strengthen company growth and initiate the company’s technological transformation. The integration ended in 1999 with the take-over of Meliá Inversiones Americanas (MIA) and the merger with Inmotel Inversiones. The new Sol Meliá became the 12th. largest hotel group in the world with more than 260 hotels in 27 countries and a market capitalisation of 382,646 million pesetas (2.300 million euros).

After the creation of the new Sol Meliá, another of the Chairman’s sons, Gabriel Escarrer Jaume, joined the company as Chief Executive Officer. He had held the same position with Inmotel Inversiones, a period during which he brought about an important modernisation and adaptation of the company to prepare for merger with Sol Meliá, while also initiating an ambitious and highly successful plan for renovation of the hotel portfolio.

1999.- In 1999, the company added 27 hotels and purchased 34, furt- her reinforcing and developing its presence in its three key natural mar- kets: Latin America, the Mediterranean and major European cities. The investment made in purchases reached 100,623 million pesetas (605 million euros).

Thanks to these investments, the company established a presence in Europe’s foremost capital cities and business and leisure tourism desti- nations: Rome, Paris and London.

S OL M ELIÁ

A NNUAL R EPORT 2000 16 COMPANY HISTORY

Adapting to a new age: E-Transformation

The natural evolution of the market led to Sol Meliá creating a new E-Business Division, headed by Luis del Olmo, Executive Vice President of Sales & Marketing. The Division is charged with adapting all of the company’s purchasing and sales activities, as well as its inter- nal management, to the new technological environment, creating a true “solmelia.com” on the Inside, the Sell Side and the Buy Side.

Tryp Hotels, the latest major deal

On 21st August, 2000, Sol Meliá sealed its purchase of Tryp Hoteles. With the incorporation of the 60 hotels of the company led by Antonio Briones, Sol Meliá has consolidated its leadership position in both the business and leisure hotel markets in Spain, Latin America and the Caribbean, and its ranking as number 2 in Europe. At the same time, Sol Meliá has achieved a place in the Top Ten hotel companies in the world by number of rooms and has become the undisputed leader of the Spanish city hotel market.

Sol Meliá currently operates more than 330 hotels in 30 countries on 4 continents with a team of over 33,000 employees.

Meliá Colón

S OL M ELIÁ

A NNUAL R EPORT 2000 17

ORGANISATIONAL STRUCTURE

CHAIRMAN Gabriel Escarrer Juliá [email protected]

VICE CHAIRMAN Sebastián Escarrer Jaume [email protected]

CHIEF EXECUTIVE OFFICER Gabriel Escarrer Jaume [email protected]

ADMINISTRATION Mark Hoddinot [email protected]

FINANCE Onofre Servera [email protected] AMERICAS Evagrio Sánchez HOTEL DEVELOPMENT [email protected] Ángel Palomino [email protected] ASIA Miguel Payeras HUMAN RESOURCES [email protected] Pending announcement HOTEL CUBA INFORMATION SYSTEMS Gabriel Cánaves Hervé Imbert [email protected] [email protected] EUROPEAN CITY LEGAL Andrés Encinas Juan Rotger CLIENT [email protected] [email protected] EUROPEAN RESORT MARKETING, SALES & E-BUSINESS Marcello Pigozzo Luis del Olmo [email protected] [email protected]

QUALITY & TECHNOLOGY Agustín Serrano [email protected]

WORKS & MAINTENANCE Antonio de La Calle [email protected]

S OL M ELIÁ

A NNUAL R EPORT 2000 19

MILESTONES 2000

New entry in the Top Ten

Sol Meliá ended the 20th. century with a truly remarkable achievement. At the end of the year 2000, the company had achieved record profits thanks to the positive performance of its European City and Resort Divisions and recovery in the Asian and Latin American markets. Above all other factors, however, the achievement of such extraordinary results was in large part due sto what, without a shadow of a doubt, was the most important deal of the year: the integration of the 75 hotels of the Tryp Hotels chain, with 60 hotels already in operations and 15 under development.

Above and beyond the contribution to the leadership of Sol Meliá in Spain, Latin America and the Caribbean and our second position in the European ranking, the deal also meant that Sol Meliá entered the “top ten” ranking of world-wide hotel companies. This was a spectacular achievement and represents another positive step towards the achieve- ment of the company’s growth and diversification objectives. During the year 2000 another 81 hotels in 11 countries were added to the Sol Meliá portfolio and agreements were signed to add another 70 new projects in the next two years.

The “E-transformation” of Sol Meliá, its firm commitment to the use of new technologies to allow the company to advance and adapt to the new needs and preferences of the market, was another key feature of the year. The application of a wide range of new technologies will facilitate proces- ses and reduce costs to the benefit of both hotel operations and guest ser- vices. The 33,000 Sol Meliá employees that make up this immense global team will thus be available, more than ever, to ensure that in Sol Meliá, Everything is possible.

Finally, and in parallel with the company “e-volution”, Sol Meliá has con- tinued to make great advances with its Quality Assurance and Environmental Protection programmes, efforts that have been rewarded for yet another year by a large number of awards and certifications to a growing number of hotels world-wide. Sol Meliá has also kept up its support of social, cultural and sporting events through different types of sponsorship aiming to provide a service to society and contribute to improvements in the quality of life.

S OL M ELIÁ

A NNUAL R EPORT 2000 21

MILESTONES 2000· FINANCIAL RESULTS

Excellent results for the year 2000

2000 was another record year for Sol Meliá.At As expected in our projections, the Americas the end of the year the company had far exce- Division saw a recovery over the year. The pro- eded its objectives for the year and had obtai- fitability of hotels added in more recent times ned RevPar growth of 19%, a figure way above such as the Meliá Mexico Reforma and the the average for the rest of the Spanish and recovery of the Latin American market, led to winternational hotel industry. These results are RevPars up to 30% above the previous year. reflected in the INCOME STATEMENT: Finally, management fee revenues also grew by 18%, thanks to the contribution of the Cuba Division (+ 10%) and, above all, Asia Pacific (+ ITEM 2000 INCR. Figures 25%) and the Americas (+ 23%). Consolidated Sales: 148,399 mill. ptas. + 35% (891.9 mill. euros) Performance may be summarised as follows: EBITDA: 43,377 mill. ptas. + 31% (260.7 mill. euros) Net Profits: 19,750 mill. ptas. + 26% (118.7 mill. euros) Income statement Profits to Mother Company: 18,761 mill. ptas. + 28% (112.6 mill. euros)

Data in thousand Pesetas. INCOME STATEMENT Dec-00 Dec-99 Dec-98 The performance of the different Divisions is TOTAL REVENUES 148,399,154 109,584,292 15,749,996 as follows: OPERATING EXPENSES (105,018,980) (76,485,646) (7,488,615) EBITDA 43,380,174 33,098,646 8,261,381 With a RevPar increase of 15%, the European DEPRECIATION / AMORTISATION (13,984,526) (10,379,849) (804,121) City Division, which includes the major part EBIT 29,395,648 22,718,797 7,457,260 of the hotels added after the purchase of Tryp PROFIT FROM EQUITY INVEST. 158,539 161,248 579,889 Hotels, became the best performer for the year. FINANCIAL EXPENSES (16,387,435) (10,367,021) (350,165) The excellent conditions for business travel in FINANCIAL REVENUES 7,878,646 6,186,070 457,081 Europe and especially in Spain were decisive FINANCIAL RESULTS (8,508,789) (4,180,951) 106,916 factors behind the spectacular performance of CONSOLIDATION GOODWILL AMORT. (443,670) (304,151) (231,119) the Division. At the same time, the positive PROFIT / (LOSS ) FROM ORD. ACTIV. 20,601,728 18,394,943 7,912,946 evolution of the summer 2000 season, once EXTRAORDINARY PROFIT/ (LOSS) 3,458,069 884,574 (174,482) PROFIT BEFORE TAXES & MINOR. 24,059,797 19,279,517 7,738,464 again, especially in Spain, also took the TAX EXPENSE (4,321,366) (3,611,561) (752,314) European Resort Division to a RevPar increa- MINORITIES (992,641) (1,024,201) (70,375) se of 11%. NET PROFIT/(LOSS) AFTER MINOR. 18,745,790 14,643,755 6,915,775 FUNDS FROM OPERATIONS 33,729,836 26,528,584 7,615,983

S OL M ELIÁ

A NNUAL R EPORT 2000 23 MILESTONES 2000· FINANCIAL RESULTS

As regards the Balance Sheet, the most impor- “From a financial During the year Sol Meliá sold the Meliá Bávaro tant changes that have been seen are due to the point of view, the (Dominican Republic), Sol Inn Bardinos (Gran purchase of Tryp Hotels, thanks to which Sol year 2000 has been Canaria), Sol Las Olas (Fuerteventura), Sol Punta Meliá assets have grown to almost half a another record year Elena Apartamentos (Fuerteventura) and the billion pesetas. for Sol Meliá. The Guadalajara Industrial Laundry. These sales occu- purchase of Tryp rred as part of an asset sales plan for the year 2000 Net debt has increased by 57% due to the large Hotels has made an that has generated additional revenues of 15,000 enormous contribu- number of investments that have been made, million pesetas –90 million euros- and capital tion to our firm € particularly, as we have already mentioned, the policy of providing gains of 4,250 million pesetas ( 25.54 million). purchase of Tryp. The ratio of net debt to own greater value for funds has increased from 67% to 77.6%, a fact shareholders, The main objective of the plan has been to bene- which has meant that the average weighted allowing us to fit from good divestment opportunities for non- cost of debt has risen from 5.1% to 5.7%. increase the size strategic assets or in areas where the company Finally, the ratio of interest coverage was at 5.1 and profitability of has already consolidated its presence, freeing up times EBITDA at the end of the year, while all the company and resources for increasing the category of the com- short term liquidity ratios have improved with increasing earnings pany portfolio in new destinations. respect to the previous year. per share”. During the year there was also a gross dividend This excellent situation, together with well payment of 20,057 pesetas to shareholders rela- Onofre Servera, structured financial planning for the coming Executive Vice President ted to 1999 results, and there was also an atten- Finance ” years have led Standard & Poor’s to classify the dance premium at the latest General health of the company balance sheet with a Shareholders’ Meeting of € 0.02 (3,33 pesetas) BBB (stable) rating. gross per share.

Balance sheet 2000 Cash Flow

Another of the key features of Sol Meliá financial policy for the year 2000 is 131,947 Data in thousand Ptas. million pesetas (€ 792 million) made in CASH FLOW 2000 investments, of which 60,000 million pesetas € ( 360 million) was used for the acquisition FUNDS FROM OPERATIONS 33,729,836 of Tryp. The financing of that deal was achie- (INCREASE) / DECREASE OF WORKING CAPITAL (11,802,286) ved through a capital increase of 33,000 CAPITAL EXPENDITURE (131,309,219) million pesetas (€ 198 million) and debt of PROCEEDS FROM ASSET SALES 14,170,521 27,000 million pesetas (€ 162 million). The CAPITAL INCREASE 32,999,602 total increase in debt for the year 2000 rose to INTEREST BEARING FINANCING 68,065,186 68,000 million pesetas (€ 409 million). DIVIDENDS PAID AND ATTENDANCE PRIME (3,902,625) INCREASE / (DECREASE) OF CASH 1,951,016 Amongst other ends, other investments made BEGINNING CASH 10,425,394 during the year 2000 included the hotel pro- ENDING CASH 12,376,410 jects Meliá Avenue Louise Boutique Hotel INCREASE IN DEBT NET 66,114,170 (Brussels), Meliá Milano (Italy) and Paradisus Puerto Rico (Puerto Rico), as web as the E- transformation process and the renovation and refurbishment of the company hotel portfolio.

S OL M ELIÁ

A NNUAL R EPORT 2000 24 MILESTONES 2000· FINANCIAL RESULTS

Balance Sheet 2000

Data in thousand Ptas. ASSETS Dec-00 Dec-99 Dec-98 LIABILITIES Dec-00 Dec-99 Dec-98

CASH 12,376,399 10,425,394 4,008,228 TRADE ACCOUNTS PAYABLE 19,473,781 11,797,816 867,735 SHORT TERM INVESTMENTS 7,281,309 12,999,339 127,677 SHORT TERM LOANS 24,903,879 25,660,065 2,423,780 SHORT TERM DEBTORS 31,173,393 17,000,251 5,792,587 OTHER SHORT TERM LIABIL. 10,796,005 8,519,657 2,124,210 INVENTORY 5,992,508 4,232,986 21,262 CURRENT LIABILITIES 55,173,665 45,977,538 5,415,725 OTHER CURRENT ASSETS 3,124,854 1,730,880 879,908 CURRENT ASSETS 59,948,463 46,388,850 10,829,662 LONG TERM LOANS 169,731,234 100,909,862 45,261 OTHER LONG TERM LIABIL. 30,373,651 27,466,078 1,003,620 GROSS FIXED ASSETS 362,508,419 296,114,440 2,328,041 TOTAL LIABILITIES 255,278,550 174,353,478 6,464,606 ACCUMULATED DEPRECIATION -87,373,658 (68,541,373) (631,087) NET FIXED ASSETS 275,134,761 227,573,067 1,696,954 MINORITY INTERES 9,799,570 7,250,035 123,935 LONG TERM DEBTORS 7,438,278 7,248,697 1,768,320 TOTAL COMMON EQUITY 224,949,555 166,217,239 48,004,568 OTHER FIXED ASSETS 147,506,173 66,610,138 40,298,173 SHAREHOLDER EQUITY 234,749,125 173,467,274 48,128,503

TOTAL ASSETS 490,027,675 347,820,752 54,593,109 TOTAL LIABILITIES 490,027,675 347,820,752 54,593,109 & EQUITY

Investments Ratios

Data in Million pesetas Data in thousand Ptas. MOST IMPORTANT INVESTMENTS FIXED CHARGE COVERAGE Dec-00 Dec-99 Dec-98 F.F.O. / NET DEBT 18.5% 22.8% -494.8% TRYP HOTELS 60,000 EBITDA / NET INTEREST 5.1 x 7.9x -77.3 x FÉNIX AND COLÓN HOTELS (SPAIN) 12,501 NET DEBT / EBITDA 4,2x 3,5x -0.2 x MELIÁ AVENUE LOUISE (BRUSSELS) 1,538 HOTEL AZAFATA (VALENCIA) 842 LIQUIDITY Dec-00 Dec-99 Dec-98 PUERTO RICO RESORT DEVELOPMENT 6,440 CURRENT ASSETS / CURRENT LIABILITIES 109% 101% 200% MELIÁ MILAN CONSTRUCTION 5,315 F.F.O. / CURRENT LIABILITIES 61% 58% 141% GOLF COURSE AND OTHER FACILITIES F.F.O. / TOTAL DEBT 17% 21% 308% (DOMINICAN REPUBLIC) 3,247 PARTICIPATION IN AOL-AVANT 3,506 LEVERAGE Dec-00 Dec-99 Dec-98 E-TRANSFORMATION (SAP) 2,808 NET DEBT 182,258,713 116,144,533 -1,539,187 HOTELNETB2B.COM 519 WEIGHTED AVERAGE COST OF DEBT 5.7% 5.1% 4.9% MELIAVIAJES.COM 264 NET DEBT / TOTAL ASSETS 37.2% 33.4% -2.8% REFURBISHMENT HOTELS IN SPAIN 18,335 NET DEBT / SHAREHOLDER EQUITY 77.6% 67.0% -3.2% REFURBISHMENT HOTELS IN LATIN AMERICA 1,931 NET DEBT / MARKET CAP (*) 53.84% 36.17% -1.00%

FIRST STAGE REFURBISHMENT (*) Price at closing (31/12/00): 1,832 ptas. (Eur 11.01) MELIÁ WHITE HOUSE (LONDON) 1,587 REFURBISHMENT HOTELS IN PARIS 1,225 OTHERS 11,252

TOTAL 131,309

S OL M ELIÁ

A NNUAL R EPORT 2000 25 MILESTONES 2000· FINANCIAL RESULTS

Standard & Poor’s BBB rating receive regular updates on financial perfor- mance, Annual General Meetings and In November 2000, Standard & Poor’s granted Dividends, amongst other things, while they a BBB (stable) rating to Sol Meliá, the second may also use the direct line set up with the highest credit rating in the world for a hotel company to request any additional informa- company and the only such rating for a tion they may require. Spanish hotel group. Club members receive a membership card These circumstances assist in increasing the giving them the following benefits in Sol capacity of Sol Meliá to obtain resources from Meliá hotels: preferential rates, free newspa- capital markets, a policy which the company is pers, priority reservations, express check in and promoting as it looks to diversify its sources of late check out (until 16:00 hours), amongst finance. others. In addition, for every stay in a Sol Meliá hotel, Club members also earn points that they can later exchange for free stays in Euronote issue programme company hotels world-wide.

The application of this financial diversification Those members of the Club that remain as policy has been seen in the programme to issue shareholders for a certain amount of time will Medium Term Euro Notes for a total value of also receive additional benefits such as greater 249,900 million pesetas (€1,500 million). With- discounts for hotel stays, welcome gifts on in the mentioned plan, an initial issue of 56,644 arrival at hotels and discounts in hotel restau- million pesetas (€340 million) has been made, rants. with a duration of 5 years and with the Deutsche Bank as Global Co-ordinator. Sol Meliá also intends to introduce a new sec- tion on its website specially for shareholders The funds obtained from the issue have been providing such tools as a share price calculator used for the acquisition of Tryp (26,990 million and calendar of events, presentations, infor- pesetas (€162 million) and refinancing existing mation on dividends, analysts recommenda- debt (22,990 million pesetas (€138 million). tions, annual reports, video clips, quarterly reports, etc.

Creation of Shareholders’ Club

The Sol Meliá Shareholders’ Club is an innovati- ve initiative which aims to improve the servi- ces the company provides to some of its most important clients: its minority shareholders. The Club offers a wide range of benefits for clients staying in any Sol Meliá hotel while also providing regular detailed information on company development.

A special telephone hotline specifically for shareholders has been set up along with an e- mail service at [email protected]. Members of this exclusive Club will thus

S OL M ELIÁ

A NNUAL R EPORT 2000 26

MILESTONES 2000· HOTEL GROWTH

Year 2000 data

During the year 2000 the company added a “The agreement Entering the “Top Ten”: total of 81 hotels with 14,264 rooms as between Sol Meliá The integration of Tryp Hotels follows: and Tryp creates a giant hotel company Sol Meliá growth policy in 2000 was somew- with Spanish hat marked by an event of tremendous impor- d majority capital tance for the future: the purchase of the Tryp HOTELS BY TYPE and also unites two Hotels chain. The deal was sealed on the 21st. SEGMENT HOTELS / ROOMS complementary August 2000 and brought with it the extension strategies to take on CITY HOTELS 53 hotels (7,171 rooms) of the company’s leadership position in the RESORT HOTELS 28 hotels (7,093 rooms) new projects that will allow us to Spanish city and resort hotel markets, the con- continue our ascent solidation of its second position in the HOTELS BY DIVISION in the world European ranking and a position as the leading ranking” hotel company in such important leisure tou- DIVISION HOTELS / ROOMS rism destinations as Cuba and Tunisia. Above AMERICAS 7 (1,430 rooms) all, however, this giant leap forward brought CUBA 6 (2,593 rooms) about the entry of Sol Meliá in the world top EUROPEAN CITY 46 (5,741 rooms) Sebastián Escarrer, ten, the ranking of the 10 largest hotel compa- EUROPEAN RESORT 22 (4,500 rooms) Vice Chairman” nies in the world.

HOTELS BY COUNTRY Commercial and strategic reasons abound for the purchase of Tryp: the size of the company, COUNTRY HOTELS / ROOMS relatively easy to digest but, at the same time, BELGIUM 1 (80 rooms) BRAZIL 5 (960 rooms) CUBA 6 (2,593 rooms) GERMANY 2 (251 rooms) ITALY 1 (270 rooms) MOROCCO 1 (147 rooms) PANAMA 1 (287 rooms) PERU 1 (183 rooms) PORTUGAL 2 (260 rooms) SPAIN 51 (6,783 rooms) TUNISIA 10 (2,450 rooms)

Tryp Fénix (future Gran Meliá Fénix)

S OL M ELIÁ

A NNUAL R EPORT 2000 28 MILESTONES 2000· HOTEL GROWTH

with a presence all over Spain, the absence of TOTAL COST 60,891 Million pesetas any net debt so as not to compromise the futu- PAYMENT STRUCTURE 27,000 Million pesetas in cash payment + re growth of Sol Meliá, the possibility of gene- 13,222,266 Sol Meliá shares (at 15€) rating cost savings of around 1,100 million % OF SOL MELIÁ CAPITAL IN OWNED pesetas - 7 million euros- through synergies in BY TRYP SHAREHOLDERS operations, the barrier to entry created for (Antonio Briones, Rufino Calero y Max Mazin) 7.2% international hotel groups to get a significant MEMBERS OF TRYP IN foothold in Spain and, above all, the impact on SOL MELIÁ BOARD 1 financial results. Nº OF HOTELS INCORPORATED 60 + 15 signed projects COMPLEMENTARY ADQUISITION Hotels Tryp Fenix (Madrid) (Included in total nº of hotels) and Tryp Colón (Sevilla) The deal in figures PRICE OF COMPLEMENTARY ADQUISITION 12,500 Million pesetas With a very strong position in Spain with a portfolio of 50 hotels, the Tryp chain also had an international presence with 3 hotels in Cuba, 1 in Andorra and 7 in Tunisia. Its solid RANKING INTERNATIONAL LEVEL* position in the city hotel market and, particu- RANKING COMPANY HOTELS ROOMS larly, its outstanding presence in Madrid make the new company a reference point if the 1 CENDANT CORP. 6,315 542,630 Spanish city hotel market. 51% of Sol Meliá’s 2 BASS HOTELS & RESORTS 2,886 471,680 hotel portfolio is now in city locations with 3 MARRIOTT INTERNATIONAL 1,888 355,900 49% of hotels in resorts. 4 ACCOR 3,234 354,652 5 CHOICE HOTELS INTERNATIONAL 4,248 338,254 6 BEST WESTERN INTERNATIONAL 4,037 313,247 The purchase of Tryp Hotels means the addi- 7 HILTON HOTELS CORP, 1,700 290,000 tion of 60 hotels and more than 9,700 rooms, 8 STARWOOD HOTELS & RESORSTS 716 217,651 figures which take us to more than 330 hotels 9 CARLSON HOSPITALITY 616 114,161 in 30 countries on 4 continents. The company 10 SOL MELIÁ + TRYP 420 103,274 portfolio also includes 81 signed new projects 11 HYATT 195 85,743 (15 from Tryp) which will take the total num- 12 SOCIÉTÉ DU LOUVRE 990 65,970 ber of Sol Meliá hotels in 2003 to at least 410 13 HILTON INTERNATIONAL 217 61,889 14 FORTE HOTEL GROUP 449 58,636 with more than 102,000 rooms. 15 FELCOR LODGING TRUST 188 50,000 Source: Hotels Magazine, july 2000. (*) Including signed projects for Sol Meliá & Tryp. RANKINGS OF SPANISH COMPANIES* COMPANY HOTELS ROOMS

SOL MELIA 203 42,281 EBITDA MULTIPLE ANALYSIS RIU HOTELS 59 14,377 NH HOTELS 86 10,101 Acquisition of lease / management company 2000 2001(*) FIESTA HOTELS 34 8,369 IBEROSTAR 25 8,173 Purchase of tryp before synergies(1) 9.36x 6.87x BARCELO HOTELS 28 7,743 Purchase of tryp after synergies(2) - 5.89x H10 HOTELS 21 6,647 Purchase of Tryp after synergies and fiscal HOTELES GLOBALES 31 6,376 deduction of Goodwill(3) 5.25x 3.30x PRINCESS HOTELS 15 5,910

GRUPOTEL 38 5,470 (1) At Friday 1st December closing price of € 9.11 Source: Hostelmarket. (2) Sol Meliá estimates 6,87 million euro synergies. (*) Including signed projects for Sol Meliá. (3) Goodwill’s fiscal deduction 124,2 million euro

S OL M ELIÁ

A NNUAL R EPORT 2000 29 MILESTONES 2000· HOTEL GROWTH

Meliá Balneario Mondariz

Consolidating our position which (4,978 rooms) in city destinations and in Spain 10 (1,887 rooms) in resorts.

As we have seen, the integration of Tryp has Amongst the most significant hotels that have strengthened Sol Meliá’s leadership position in joined the portfolio in Spain, special mention its domestic market where, after the addition must be made of the Tryp Fénix (future Gran of the projects currently under development, Meliá Fénix) in Madrid, the Meliá Colón the company will provide more than 200 city (Seville) or the Meliá Balneario Mondariz and resort hotels. Meliá María Pita (Pontevedra).

Within this framework, Madrid has become one The evolution of Sol Meliá in the Spanish of the destinations most favoured by the deal, market is a result of a dual objective: to diver- with the addition of the 20 Tryp hotels in city sify the hotel portfolio to respond to the needs making the new Sol Meliá the undisputed leader of different customer segments and to consoli- in the hotel industry in the Spanish capital with date the company’s position as the leading 27 hotels with 5,069 rooms. hotel chain in Spain through a high profile presence in the company’s major cities and Throughout the year 2000, Sol Meliá added a provincial capitals. total of 50 hotels (6,865 rooms) in Spain, 40 of

S OL M ELIÁ

A NNUAL R EPORT 2000 30 MILESTONES 2000· HOTEL GROWTH

Meliá Avenue Louise Boutique Hotel

Growth in European Cities “The incorporation Diversification in European of the Meliá Roma Resorts For Sol Meliá 2000 was a year for the conso- Aurelia Antica is lidation of its European expansion programme another step Sol Meliá ended the year 2000 having added and its firm commitment to the city hotel towards the 23 hotels with 4,790 rooms. Amongst the market, 50% of its total supply in Europe. development of our additions, the company confirmed its firm Over the course of the year a total of 46 hotels expansion policy in intention to remain the market leader in the capitals and were added with almost 6,000 rooms in resort hotels in the Mediterranean with 11 major cities of important cities in Belgium, Germany, Italy, Europe and another Portugal and Spain. sign of our firm commitment to Sol The company has opened its first hotel in the Meliá growth in Italian capital, the Meliá Roma Aurelia Antica Italy, a country that and has also added the Meliá Avenue Louise is host to an average Boutique Hotel (Brussels-Belgium), the Sol Inn of 35 million Wolfsburg and Sol Inn München in Germany visitors per year”. and the Meliá Confort Doña María or Tryp Atlántico in Portugal. The number of city hotels in Spain also grew by 40 properties. Andrés Encinas, Executive” Vice President Our arrival in Rome and Brussels is also anot- European City Division her step towards achieving our objective of being in all of the major European cities and establishing our position as an important pla- yer in the European business travel market. Meliá Royal Tanau Boutique Hotel

In European cities Sol Meliá currently has a new hotels in Tunisia (8 of which came with portfolio of 153 hotels with 22,649 rooms, 132 the purchase of Tryp) and another in of them (19,581 rooms) in operations and 21 Morocco. The addition of the Tryp Roc de under development in Spain, Italy and Caldes made Andorra the 30th. country in the Portugal with a total of 3,068 rooms. Sol Meliá portfolio.

S OL M ELIÁ

A NNUAL R EPORT 2000 31 MILESTONES 2000· HOTEL GROWTH

In Spain the number of hotels grew by 10: 6 on “Sol Meliá is firmly The European Resort Division includes 154 the Costa del Sol, 2 in the Canary Islands, 1 in committed to hotels with 46,819 rooms, of which 137 hotels Lérida and 1 in Pontevedra (Galicia). Amongst development in the with 41,954 rooms are currently in operation. the new hotels, special mention must be made of Mediterranean The additional 17 hotels with 4,865 rooms the Meliá Royal Tanau Boutique Hotel (Valle de region, an area currently under development will be located in Arán - Lérida), which together with projects which is still one of Egypt, Italy, Malta, Spain and Tunisia. The under development for new hotels in Formigal the world’s most figures illustrate the objective of Sol Meliá to popular, competitive and Vielha, will further strengthen Sol Meliá’s maintain its position as the world’s largest and profitable leadership of the Spanish ski resort market. holiday destinations. resort hotel company. We are also firmly Many of the hotels in the Division have also committed to aiding seen considerable improvements to their facili- socio-economic and The power of Latin America ties: enlargement of sports and leisure installa- cultural development and the Caribbean tions, perfection of entertainment program- in those countries in mes, new food and beverage concepts, environ- which we operate”. At the end of 2000, Sol Meliá closed another mental protection or changes in the organisa- year as the leading hotel company in Latin tion of services to better adapt them to the real America and the Caribbean, the opening of 13 needs of guests. more hotels in the two regions having exten- Marcello Pigozzo, Executive” Vice President ded this lead even further. During the year 7 A large number of resort hotels have also added European Resort Division new hotels with 1,430 rooms were added in 3 options for congresses, conventions and incentives. countries in the Americas Division: Brazil (5), These new and comfortable facilities for business Panama (1) and Peru (1), and another 6 with travellers are equipped with the latest modern 2,593 rooms joined the Cuba Division. technologies and provide an interesting and com- plementary addition to hotel facilities that is The company thus was able to consolidate its expected to reduce seasonality in the business. position in Brazil, now with 13 Sol Meliá hotels, and extend its presence to new countries The intense activity carried out by the Division such as Peru and Panama. With easy access to in making improvements to product and servi- the nearby airport, historical city centre and ce quality has been rewarded by many major Congress Centre, the Meliá Lima provides tour operators. Over the year 2000, many excellent business and leisure options. The hotels have received awards, including: Meliá Panama Canal, located in a spectacular natural environment, provides great sports and business facilities adapted to satisfy the needs AWARD TOUR HOTEL of the widest range of different types of guests. OPERATOR ACCOMODATION AWARD Airtours -Sol Magalluf Park (Majorca) -Sol Alcúdia Center (Majorca) The 20 hotels operated by Sol Meliá in Cuba -Sol Élite Gavilanes (Menorca) make the company the leading hotel company -Sol Élite Menorca (Menorca) in this Caribbean island. The 6 hotels added BEST 3 STAR ON THE Airtours -Sol Príncipe-Principito during the year 2000 are a further indication of COSTA DEL SOL (Torremolinos-Malaga) the company’s firm commitment to this first OVERALL AWARD BEST 4T HOTEL Thomson -Sol Príncipe-Principito SKYTOURS PROGRAMME (Torremolinos-Malaga) class tourism destination and, especially, to the GOLD AWARD Thomson -Sol Guadalupe (Majorca) booming region of “Los Cayos”. Sol Meliá -Sol Mirlos Tordos (Majorca) currently operates 3 hotels in Cayo Coco, 2 in -Sol Cala Blanca (Majorca) Cayo Guillermo and one in Cayo Largo and is GOLD AWARD FOR BEST SUMMER Thomson -Sol Élite Gavilanes (Menorca) soon scheduled to open another hotel in Cayo RESORT DESTINATION Santa María.

S OL M ELIÁ

A NNUAL R EPORT 2000 32 MILESTONES 2000· HOTEL GROWTH

Paradisus Punta Cana

Latin America and the Caribbean are conside- “We aim to maintain red to be natural markets for Sol Meliá and the our leadership company has thus extended and improved its position in Latin portfolio in the region, both in the city, with a America and the presence in most of the region’s capital cities, Caribbean with and in resorts, with the inauguration of hotels in paradise modern Convention Centres in three of its locations, able to offer the finest finest properties: the Meliá Cancun, the Meliá accommodation, food Cabo Real (Mexico) and the Meliá Caribe and beverage and (Punta Cana-Dominican Republic). entertainment services with the The quality of the products and services provi- support of the latest ded by Sol Meliá in the region has also been modern technologies recognised by many important Tour Operators. and extensive The Meliá Azul Ixtapa and Meliá Cabo Real in meeting and Mexico have received the Golden Apple Award convention facilities. from the US Tour Operator Apple Vacations, We will thus attract while Jet Tours has named the Paradisus Punta both business and Meliá Panamá Canal Cana (Dominican Republic) as winner of its leisure travellers and Quality Facilities Trophy. achieve one of our eternal objectives: the reduction of With a portfolio of 100 hotels and 26,057 seasonality”. rooms, the future of the leadership of Sol Meliá in the region is guaranteed. Furthermore, the 34 hotel projects under development will add a further 8,102 rooms in Brazil, Cuba, Mexico, Evagrio Sánchez, Executive” Vice President Peru and Puerto Rico. Americas Division

S OL M ELIÁ

A NNUAL R EPORT 2000 33

MILESTONES 2000 · RESEARCH & DEVELOPMENT

E-Transformation: Creating a Company for the 21st. Century

During the year 2000, Sol Meliá embarked on a “We aim to generate a greater number of reservations with process of “E-Transformation”, a complex but generalise the use of a consequent increase in revenues and decrease wholly necessary process to adapt the company the Internet and in distribution costs. to the needs of a 21st. century business. With a new technologies to find new ways of budget of around 12,000 million pesetas for cre- distributing our dating new technological infrastructures and par- the company is currently products and Solmelia.com.- ticipating in joint ventures, the company aims to improving the working on the development of a new genera- remain highly competitive in a world in which services we provide tion website (www.solmelia.com) to adapt the new technologies will play an increasingly to our guests, site to the developing needs of users. A faster important role. The investment is distributed as centralising all of and easier search engine, a more modern follows: E-Transformation (5,000 million pese- our procurement design and the incorporation of innovative tas - 30 million Euros), E-Procurement (500 procedures and new services are just some of the features that million pesetas - 3 million Euros), Prodigios carrying them out the new site will have. (3,500 million pesetas - 21 million Euros) and online, improving Meliaviajes.com (3,000 million pesetas - 18 the efficiency of our million Euros). operations and Meliaviajes.com.- This new multi- optimising the channel travel company is destined to become functionality of the To assist in the implementation the company a major player in the travel industry. Initially Sol Meliá Intranet has created a new E-Business Division led by to improve internal the company will operate in Spain and Luis del Olmo, also the Executive Vice management at all Portugal, before moving on to Latin America. President of Sales & Marketing. Company levels”. The investment earmarked for development is strategy is divided into three areas which are set at almost 3,000 million pesetas. enormously different but in which there are three common objectives: to place the custo- mer at the heart of the organisation, to make Luis del Olmo Piñeiro, AOL Avant.- Sol Meliá was a co-foun- Executive” Vice President processes more efficient and save costs. The E-Business der of the generalist portal “Prodigios” which three areas are: was later also supported by Planeta and BSCH. The initiative has ended up being integrated with AOL Avant, the Spanish arm of America 1. Business to Consumer Online which has been set up at the ParcBit in (B2C) or Sell Side.- Palma de Majorca. With a shareholding of 6.2%, Sol Meliá is also taking part in family Based on changes in our relations with our and leisure portal through Meliaviajes.com, customers, improving the distribution of our the exclusive provider of travel reservation ser- products, improving the ability to attract new vices through the site. The Banco Santander customers and retain them through efficient Central Hispano (BSCH) and American Online loyalty programmes and also improving the (AOL) hold 40% stakes in the business and services and information provided to real and Planeta holds 6.17% with the remainder in the potential hotel guests. This is expected to hands of minor shareholders.

S OL M ELIÁ

A NNUAL R EPORT 2000 35 MILESTONES 2000 · RESEARCH & DEVELOPMENT

2. Inside. Sol Meliá is a co-founder together with Telefónica, Barceló, Iberostar and the BBVA of the The company is working on optimising the Hotelnetb2B.com portal. A further 18 hotel functionality of its Intranet to improve inter- companies have taken a stake in the venture nal company management at all levels. The which aims to provide the finest possible service incorporation of the SAP platform (System to all hotel managers and their suppliers to allow Application Programmes) will allow the sto- them to optimise the purchasing process for rage of an immense amount of data, required goods and services using new technologies. to accelerate and improve processes using Internet channels. The new applications cover The portal aims to operate throughout Spain, 5 main areas: Sales Force Automation (SFA), the Mediterranean and Latin America and alre- hotel receptions (RA 2000), financial control ady has a portfolio of more than 900 hotels in 21 tools (FICO), Human Resources (PA and countries. The expected investment for its first PP) and purchasing (MM). The integration two years of operations is 5,000 million pesetas and use of these valuable applications are (€30 Mn.). expected to generate significant savings in time and money. This firm commitment to e-transformation has already begun to bear fruit, with awards received during the year 2000 including the following:

3. Business to Business (B2B). AWARD FROM TO Buyside. Estrategas.com Dinero Magazine Sebastián Escarrer (Vice Chairman Sol Meliá) The incorporation of new technologies will Best Website CETT (Hospitality & Sol Meliá also bring the centralisation of purchasing pro- Tourism Research Centre) cesses and allow them to be carried out online, Hermes Award HTR Magazine (France) Sol Meliá leading to improved efficiency, more competi- for Best Website tive pricing and reductions in operating costs.

S OL M ELIÁ

A NNUAL R EPORT 2000 36

MILESTONES 2000 · EVERYTHING IS POSSIBLE CAMPAIGN

With Sol Meliá, everything is possible

More than 33,000 people in 30 countries on 4 “The success of any On an institutional level, Sol Meliá enjoys continents are at work every day to ensure that good business person active and fruitful relations with prestigious when we say that in Sol Meliá “everything is depends on them universities and other centres of learning possible” we really mean it. It is the excellent surrounding world-wide co-operating on the placement of work and enthusiasm of this immense team themselves with a students and training courses. that is the principle ingredient in the com- truly great team and in a situation mpany’s recipe for success. In June 2000 Sol Meliá signed an agreement where positions are earned rather than with the Autonomous University of Barcelona to During the year 2000 Sol Meliá has very suc- granted”. jointly develop projects aimed at improving the cessfully incorporated the more than 2,000 training and education of future professionals employees of the Tryp hotel chain to the team. in the tourism and hospitality industries. Together with the incorporation of a stream of new hotels due to the rapid growth of the com- D. Gabriel Escarrer Juliá, The agreement includes cooperation in deve- Chairman” pany, the deal has led to the creation of many loping an integrated tourism training model to new opportunities for professional develop- cover the entire educational cycle and combine ment and an enriching exchange of experience both practical and theoretical learning. More and know-how. than 1,000 students from the Catalonian Tourism and Hospitality faculties will be given Training and promotion are the foundations in-house training at the Tryp Campus, a hotel on which Sol Meliá human resources policy is which is managed by Sol Meliá and located in built, a philosophy that has remained intact the same building as the two faculties. since the day the company began. An example may be seen in the collection of training cour- The company has also been involved in a ses out together by the Human Resources large number of similar projects including Department aimed at achieving company sponsorship of wine education courses ate the objectives on product and service quality. Balearic Islands University or the course on Tourism Development Management organi- The company also continues to develop its sed by the University of Wisconsin-Stout,the extensive internal Management Development Balearic Islands Hotel School and the Balearic Programme for Hotel General Managers, inaugu- Islands University Tourism School. The com- rated in 1988, based around an 18-month pany also reached an agreement with the period of theoretical and practical training Galicia Hospitality School to train senior followed by a period as Assistant General managers. Manager in a hotel before moving up to a General Manager position. The Human Resources Department also coordinates Finally, the Sol Meliá website (www.solme- Corporate Career Plans for key positions in lia.com) also has a special section for employ- the company structure, and internal develop- ment opportunities with the company and a ment programmes for Sales Managers and dedicated e-mail service for candidates at Administration Managers. ([email protected]).

S OL M ELIÁ

A NNUAL R EPORT 2000 38

MILESTONES 2000 · QUALITY & ENVIRONMENT

Towards Total Quality

Sol Meliá continues with the implementation “At Sol Meliá we of its ambitious corporate standards program- encourage a me, working towards “Total Quality”. Under philosophy of the slogan “Your satisfaction, our commit- Continuos Improvement and ment”, the philosophy of the company is based competitiveness, saround placing its 5 different types of clients which means not (hotel owners, shareholders, suppliers, guests only complying and employees) at the very heart of the organi- with standards, but sation and adapting its products and services to also going one step their needs and preferences. further, keeping up with our clients as During the year 2000 the Guest Satisfaction their needs develop Programme has been given a further impulse and trying to stay aiming to provide an immediate response to one step ahead of the needs of increasingly discerning guests. those needs”. The company is in the process of gradually introducing a new Guest Satisfaction Assurance programme which aims to improve Gabriel Escarrer Jaume, Sierra Nevada service quality and levels of personalisation, Chief Executive” Officer while also increasing the motivation of hotel efforts by the company to grow and adapt to teams through a flexible system which focuses the changing needs of guests have been rewar- on Creating Memories for guests and anticipa- ded with a large number of official certifica- ting their needs. tions. In 1996 Sol Meliá became the first European hotel company to achieve ISO 9002 Thanks to the fine-tuning of processes, the use Quality Certification, a distinction that would of new quality control tools and the active and later be shared by the Meliá Lebreros hotel enthusiastic involvement of personnel, pro- (Seville) or Meliá Kuala Lumpur (Malaysia), blems may be detected and resolved more amongst others. quickly, while fluid communication channels and a will to learn from the experiences of Another 12 company hotels in Spain have also others mean that in Sol Meliá its really true merited the “Q” for Quality granted by the that “everything is possible”. Spanish Hotel Quality Institute to those hotels that tirelessly strive to create “continuous improvements” in their products and services. Recognition for a job The hotels are the Meliá Zaragoza, Meliá well done Sierra Nevada and Meliá Granada (Granada), Meliá Balneario Mondariz (Pontevedra), Gran Since the company created its firs Guest Meliá Don Pepe, Meliá Costa del Sol, Sol Élite Satisfaction Programme in 1994, the constant Gran Meliá Don Pepe Aloha Puerto, Tryp Alameda and Sol Príncipe-

S OL M ELIÁ

A NNUAL R EPORT 2000 40 MILESTONES 2000 · QUALITY & ENVIRONMENT

Principito (Malaga), Gran Meliá Bahía del “Increasing environ- Apart from creating its own internal Duque (Tenerife), Sol Magalluf Park (Majorca) mental sensitivity Environmental Management Systems, Sol and Meliá Altea Hills Resort (Alicante). The bring a need to define Meliá has also taken part in a large number of Meliá Varadero in Cuba has also received the and document in a initiatives organised by private and public written Manual our “Quality 2000” award from the Tour Operator bodies aiming to continue to make progress in company policies. Sol Cubanacan. Meliá believes in an the application of its environmental protection equation that says policies. Company representatives have taken Better environment part in the AENOR Work Group designing Respecting the Environment: + Better product + regulations to adapt ISO 14001 to the hotel a commitment to Sustainable Better Service = sector, which a large number of hotels have Tourism Better quality. also signed up with the Environmental Training our staff Foundation. and improving the Always conscious of the importance of envi- information we ronmental respect and conservation, Sol Meliá provide to our guests The Environmental Department organises and was the first Spanish company to create its is the road we have manages hotel staff attendance on courses and own Corporate Environmental Protection to follow to ensure we seminars on environmental policy and offers Manual back in 1995. The insistence of the achieve our environ- consultancy services for hotels. Sol Meliá also company’s senior management has been a deci- mental plans and provides internal assessment services on envi- sive factor in making the environment a prio- that our achieve- ronmental legislation for certified hotels and rity concern in all company activities and in ments are rewarded.” works together with hotels to constantly upda- introducing the concept of sustainable deve- te procedures manuals to ensure continued lopment in the company’s strategic planning compliance with environmental protection processes. Agustín Serrano, guidelines. Executive” Vice President Quality and Technology

Meliá Varadero

S OL M ELIÁ

A NNUAL R EPORT 2000 41 MILESTONES 2000 · QUALITY & ENVIRONMENT

Sol Gavilanes

Rewarding Environmental CERTIFICATION Concern ISO 14001 HOTEL The great challenges Sol Meliá has overcome Sol Élite Falcó (Menorca) Sol Pelícanos Ocas (Benidorm-Alicante) to implement its environmental protection Sol Élite Milanos/Pingüínos (Menorca) policies have been amply rewarded both in Meliá Confort Montevideo (Uruguay) Spain and abroad with numerous awards from Sol Magalluf Park (Majorca) prestigious environmental protection organi-

Sol Magalluf Park sations. CERTIFICATION EMAS (European Community “Eco-Management and These are the hotels that have received envi- Audit Scheme”) ronmental management certification: HOTEL Sol Élite Falcó (Menorca) Sol Cala d’Or ( Majorca) Sol Élite Gavilanes (Menorca) Sol Pinet Playa (Ibiza) Meliá Barcelona (Barcelona) Meliá Confort Apolo (Barcelona) Meliá Confort Girona (Gerona) Meliá Sitges (Barcelona)

CERTIFICATION GREEN GLOBE COMMENDATION AWARD 1999 and 2000 HOTEL Meliá Bali (Indonesia)

Sol Falcó

S OL M ELIÁ

A NNUAL R EPORT 2000 42

MILESTONES 2000 · COMPANY AND SOCIETY

A Useful Member of Society: Sponsoring with Sensitivity

A high level of commitment to society has “Sol Meliá has EVENT always been one of the distinctive characteris- always professed a BENEFICIARY SPONSORED tics of Sol Meliá. In this sense, our sponsorship firm desire to offer a of cultural and sports events or other occasions service to society NIDO Foundation for Christmas market to and to contribute to assistance and support gather funds to benefit society has always been the most for the disabled to assist with acommon means of demonstrating our commit- improvements in attending to the ment and contributing to the development of the quality of life”. needs of members. less privileged communities while encouraging ACTION AGAINST Inclusion in Solidarity excellent relations between our hotels and their HUNGER Campaign of neighbours. Jaime Puig de la Bellacasa, Clara Magazine to finance Director of” a Nutrition Therapy Centre Communication and in Gao (Mali). During the year 2000 Sol Meliá worked toget- Institutional Relations her with a very wide range of organisation on 4 SOLIDARITY PROJECTS Participation in the many different projects, all aimed at encoura- · Untouchables in India “Solidarity Telephone” ging the integration into society of people with · Angolan war victims initiative organised by the some type of problem, fighting injustice, relie- · Straits of Gibraltar immigrants Sunday supplement · Street children Brazil of the Spanish daily ving illness or epidemics or improving the qua- newspaper “La Vanguardia”. lity of life in areas in need: SPANISH ASSOCIATION Sponsorship of Grand AGAINST CANCER Charity Gala Dinner for the Balearic Delegation of the Spanish Association Against Cancer.

WORLD HEART Sponsorship of FEDERATION “World Heart Day” September 2000.

MESSENGERS Participation in the OF PEACE “Telemarathon” organised by Antena 3 TV.

Co-operation in the Christmas Charity Concert Organised by Globomedia and shown on Tele 5 TV.

S OL M ELIÁ

A NNUAL R EPORT 2000 44 MILESTONES 2000 · COMPANY AND SOCIETY

Support for education, the arts and culture, On the sporting field, Sol Meliá was an active whatever the genre or origin, is another of the participant in a number of events through dif- constant pillars of the company sponsorship ferent sorts of sponsorship. Our support and programme. Over the year we took part in: promotion of the benefits of sport were seen in:

The firm commitment of Sol Meliá to spon- sorships that bring some benefit to society will continue in the 21st. century, maintaining our EVENT solidarity with local communities as we prepa- BENEFICIARY SPONSORED re to face the challenges of increasingly com- plex markets. Concert by JOSÉ CARRERAS in Palma de Majorca SPORT EVENT SPONSORED Red Cross Co-operation agreement With the Spanish Tennis III Edition of the Majorca Red Cross to train Open ATP Tennis Tournament employees

Sailing Regatta Hotel School European Wine Cadiz - Havana of the Balearic Islands Management UIB Tourism School course organised by the & University of Hotel School Diving World Record Attempt Wisconsin-Stout of the Balearic Islands La Palma-Isla Bonita the UIB Tourism School and the Golf Corporate Challenge University of Golf Spain Wisconsin-Stout

Europa Universitas XIII Edition of the Foundation Europa Universitas Awards

October Productions Filming of the “El Mar de l’Home” series

S OL M ELIÁ

A NNUAL R EPORT 2000 45

SOL MELIÁ IN THE 21ST. CENTURY

Looking to the Future

Sol Meliá faces the 21st. century with the solidity and confidence that has been gained from almost half a century of operations and having set in motion the internal reorganisation that will allow the company to meet the growing challenges of the new millennium. One of the major featu- res of this preparation has already been seen when after detailed research sand analysis Sol Meliá has slimmed down and reorganised its hotel brand portfolio to better focus and segment its products and services.

The finalisation of the three-year hotel refurbishment programme, with investments of over 60,000 million pesetas, and the current pipeline of over 80 signed hotel development projects, means that by 2003 the com- pany will have grown to at least 420 hotels in 32 countries with more than 102,000 rooms.

The coming years will also see the consolidation of the company’s investments in new technology. Greater flexibility in processes and important cost savings will be the first noticeable consequences of new systems. At the same time we will also see the release of the fourth gene- ration www.solmelia.com, continued growth in quality joint ventures aimed at increasing our distribution, the growth and consolidation of our multi-channel travel agency, meliaviajes.com and the automation of internal systems to allow us to move towards far greater personalisation and superior quality service.

The 21st. century Sol Meliá will continue to be a company that is firmly committed to preserving the natural environment, passionate about qua- lity and placing the customer at the very heart of our organisation. A company in constant growth, perfectly integrated in its social and natu- ral environments. A company that will continue to strive to maintain its position as one of the world’s finest hotel chains and with the finest team of people working to achieve that aim.

S OL M ELIÁ

A NNUAL R EPORT 2000 47

SOL MELIÁ IN THE 21ST. CENTURY · BRAND STRUCTURE CHANGE

Simplifying things: New Sol Meliá Brand Structure

BRANDS - CATEGORY - SECTOR The rapid growth enjoyed by Sol Meliá in recent “Sol Meliá has years together with the development of the decided to simplify BRAND CITY RESORT international hotel industry in general brought and clarify its 5 STAR ALL INCLUSIVE the company around to analysing its hotel port- brand structure, eliminating those 5 STAR 5 STAR folio and considering the possibility of introdu- SUPERIOR 4 STAR SUPERIOR 4 STAR brands that may tcing certain modifications aimed at simplifying 4 STAR have created and better segmenting its hotel products. SUPERIOR 3 STAR confusion or lacked 4 STAR high brand SUPERIOR 3 STAR After the purchase of Tryp Hotels, the incorpo- awareness, and ration of a new group of hotels provided an ideal repositioning the opportunity for revisiting the subject of brand remaining brands Paradisus Resorts: exceptional “all inclu- structure with the assistance of Infratest Burke,a in the market niches sive” hotels located in exotic and very special world leader in ad-hoc market research and stra- to which they are destinations. tegic brand positioning, and analysing the mar- best suited” ket perception of company brands and the cha- Meliá Hotels & Resorts: prestigious, racteristics they are felt to have. luxury hotels in the five star and superior four star categories, especially suitable for meetings Sebastián Escarrer, The results of the analysis made it very clear that Vice Chairman” and conventions. the Meliá brand is extremely well known and respected and that the Meliá Confort brand is Tryp Hotels: located in major city destina- associated with Meliá but transmits no clear tions, providing excellent value for money for notion of the services its hotels might provide business travellers. nor its category. The Tryp brand is very clearly associated with city locations and functional Sol Resorts: great value for money and the hotels. Sol and Sol Élite hotels are not seen to be widest range of sports and entertainment activi- any different from each other, while Sol Inn is a ties for the whole family. brand with limited recognition and confusion over its nature. 8 (3) The company will be investing a total amount of 2,000 million The research also showed how the international 100 (90) pesetas in carrying out the hotel market concentrates a large number of 155 (137) changes required to adapt to properties in a limited number of brands and 157 (111) the new brand structure, 400 uses the concept of sub-brands for specialist million of which will be market segments such as health, golf and con- spent on an advertising cam- gresses, amongst others. paign.

As a result of the conclusions of the research, Sol Sol Hotels & Resorts Meliá Hotels & Resorts Meliá has reorganised its hotel portfolio into a Tryp Hotels Paradisus Resorts new brand structure: ( ) Operating Hotels

S OL M ELIÁ

A NNUAL R EPORT 2000 49

SOL MELIÁ IN THE 21ST. CENTURY · NEW PROJECTS

Sol Meliá: consolidating constant growth

Sol Meliá is the biggest resort hotel company “Our main objective rated, will bring the portfolio up to 420 in the world, leader in the Spanish, Latin is to continuing hotels 102,000 rooms in less than 3 years. American and Caribbean markets, the second growing in our natu- Next year will also see continuity in the pro- largest hotel company in Europe and the ral markets: major cess of renovations of the portfolio to adapt tenth largest in the world. These market seg- cities in Spain and them to company product and service quality ments will also form the backbone of the Europe, the Medi- standards. terranean region and scompany’s expansion policy, aiming to Latin America and strengthen its leadership position in its key the Caribbean. In The regions of Latin America and the destinations. Thus Latin America and the parallel we will be Caribbean, Europe and Spain’s major cities, Caribbean, the Mediterranean region and absorbing the 22,000 and the Mediterranean region in general are major cities in Spain and Europe are the rooms already not only the company’s natural markets, but areas in which hotels are under development scheduled to be added also the destinations in which all new pro- and in which future focus will continue to and to reaffirm our jects are located. Sol Meliá will continue to reside, with particular attention to the city commitment to focus on the city hotel market and the conso- hotel market and consolidating leadership geographical and lidation of its market leadership. positions in all markets. business diversification”. After the purchase of the Tr yp hotel chain, on 31/12/00 Sol Meliá had a portfolio of 347

hotels in 30 countries and 83 signed agree- Ángel Palomino, ments for new hotels*, which, when incorpo- Executive” Vice President Hotel Development

• As of 31/12/00 but susceptible to modification in the coming months as the Company incorporates new development projects.

Gran Meliá Jakarta

S OL M ELIÁ

A NNUAL R EPORT 2000 51 SOL MELIÁ IN THE 21ST. CENTURY · NEW PROJECTS

The 83 projects under development with 21,000 rooms are distributed as follows:

NEW HOTEL PROJECTS BY DIVISION

EUROPE · MEDITERRANEAN

Resort City TOTAL Hotels 23 25 48 Rooms 6.946 3.375 10.321

AMERICAS · CUBA

Resort City TOTAL Hotels 7 28 35 Rooms 4.595 6.081 10.676

NEW HOTELS (ROOMS) BY OWNERSHIP TYPE

Owned Leased Managed Franchised Total

2000* 5 (1,027) 48 (6,978) 23 (5,224) 6 (1,252) 82 (14,481) 2001 3 (915) 9 (1,515) 29 (7,632) 2 (162) 43 (10,224) 2002 5 (1,443) 7 (1,245) 17 (5,881) ——— 29 (8,569) 2003 ——— 3 (424) 8 (1,780) ——— 11 (2,204)

TOTAL 8 (2358) 19 (3184) 54 (15,293) 2 (162) 83 (20,997)

* Hotels already incorporated (including Tryp)

After gaining a position in the world hotel company top ten, Sol Meliá continues to seek future growth based on sustainable expansion in its main markets but with a view to beco- ming an increasingly global company. This growth is expected to reinforce the company’s leadership positions and its brand awareness world-wide.

Meliá México Reforma

S OL M ELIÁ

A NNUAL R EPORT 2000 52

SOL MELIÁ IN THE 21ST. CENTURY · COMPLETING THE E-TRANSFORMATION

A Company for the New Millennium: completing the E-transformation

The first few years of the 21st. century will see the “Sol Meliá is In parallel with these internal changes, the com- consolidation of the Internet as a channel for an modernising its pany is also working on several important initiati- important volume of sales transactions. In this new entire technological ves on both the Sell Side (clients) and Buy Side economy, the only companies that will remain com- platform in order to (suppliers) to change the way that we do business. petitive are those that have been able to adapt their prepare the company for a new era and torganisation to the requirements of the emerging On the Sell Side, the use of new technologies in face the challenges of market and whose structure is sufficiently flexible different aspects of the company’s business is the 21st. century in and open to grow along with it. Fully aware of the optimum conditions. expected to generate significant increases in need for change to face the new future, in the year This commitment revenues and reductions in distribution costs: 2000 Sol Meliá began an ambitious “e-transforma- will allow us to fully tion” process which is now nearing completion. adapt our internal SolRes.- The central reservations system and external rebuilt using latest generation technology and with Given that an optimum performance would never management to new a centralised structure operating 24 hours a day. be possible without solid internal infrastructure, technologies and the company is also finalising the renovation of all really become a www.solmelia.com.- The fourth gene- of its computer systems to create a single, unified “solmelia.com”. ration of the website will personalise interactions and integrated platform which will provide cost with users as they make real time reservations reductions, accelerate processes and store and and greatly extend the information available on process enormous amounts of information. This the company and its hotels. Hervé Imbert, new nucleus will avoid loss of information, exter- Executive” Vice President nal filtration and pirate programmes. The final Information Systems meliaviajes.com.- A new multi-channel stage of the integration of SAP (System travel agency aiming to become market leader Application Programme) will take place over the providing a wide range of destinations and holi- next couple of months, allowing the automation day experiences tailor-made for customers on an of most of the company’s principal functions. individual basis.

Sol Meliá and Telefónica Data have reached an Loyalty programmes.- The consolida- agreement to implement the “SolNet” network tion of company Loyalty Programmes is another allowing an “on line” connection of all of the of the objectives of the e-transformation. company’s hotels in 30 countries on 4 continents Members are already able to access all of the as well as its different corporate offices. The cre- information on programmes through the websi- ation of a modern global network will increase te (www.solmelia.com) as well as checking their the efficiency of internal communications while account. also generating important savings in time and money. It will also ensure the receipt of more The company is also actively supporting joint reliable information both on guests and on inter- ventures or alliances in new technology ventures nal operations, and, in the short-term, allow with market leaders in different sectors of the direct Internet access for all guests from their economy that are expected to add value to the hotel rooms. products and services provided by Sol Meliá.

S OL M ELIÁ

A NNUAL R EPORT 2000 54

GOOD GOVERNANCE CODE

The following section describes how the company Statutes, regulations for the Board of Directors and company activities comply with the recommendations that appear in the Good Governance Code for public companies published in February 1998 by the Special Commission for tthe study of an Ethical Code for Company Board of Directors.

1 Function of the Board of Directors

“That the Board of Directors should explicitly assume as the nucleus of their mission the general function of supervision; exercise without dele- gation the responsibilities this implies; and establish a formal record of the items reserved for their knowledge”.

Article 34 of the Statutes states that the Board of Directors is responsi- ble for the representation, direction and administration of the company with respect to all of the activities undertaken within the objectives of the company as limited by the Statutes, as well as those activities requi- red by Law and the Statutes, and without prejudice to those activities specifically reserved for them at the General Shareholders’ Meeting. The mentioned Article details the legal acts or business which are within the competence of the Board of Directors.

2 Independent Directors.

“That the Board of Directors includes a reasonable number of indepen- dent Directors that are persons of professional prestige unrelated to the company management team nor significant shareholders”.

Article 31 of the Statutes specifies the requirements for Independent Directors. The same Article states that, without prejudice to the stipu- lations of Company Law, and to guarantee the independent criteria of the Board and the defence of the best interests of the company and its shareholders, at least one third (1/3) of the members of the Board of Directors must be Independent Directors.

S OL M ELIÁ

A NNUAL R EPORT 2000 56 GOOD GOVERNANCE CODE

The Board of Directors of the company on 31st. December, 2000 consis- ted of six non-Independent Directors and five Independent Directorsocho.

3 Composition of the Board of Directors.

“That external Directors (representatives of majority shareholders and independents) should represent a large majority of the members of the Board of Directors with respect to company executives and that the proportion between representatives of majority shareholders and inde- pendents should be established bearing in mind the relation that exists between majority and minority shareholders”.

The Sol Meliá, S.A. Board of Directors at 31st. December, 2000 comprised:

Executive Chairman Gabriel Escarrer Juliá Non-Independent Director

Non-Executive Vice Chairman Juan Vives Cerdá Non-Independent Director (Representative)

Executive Vice Chairman Sebastián Escarrer Jaume Non-Independent Director

Chief Executive Officer Gabriel Escarrer Jaume Non-Independent Director Oscar Ruiz del Río Non-Independent Director (Representative) AILEMLOS S.L.* Non-Independent Director (Representative) Hoteles Mallorquines Consolidados S.A. P.P.by: Mª Antonia Escarrer Jaume Non-Independent Director (Representative) Eduardo Punset Casal Independent Director Alfredo Pastor Bodmer Independent Director José Joaquín Puig de la Bellacasa Urdampilleta Independent Director Emilio Cuatrecasas Figueras Independent Director José María Lafuente López Secretary Independent Director

* The company AILEMLOS S.L was designated as Director in January 2001, making the total number of current Directors 12.

4 Number of Directors

“That the Board of Directors adjusts its size in order to achieve more efficient and participative operations. In principal, the appropriate size may oscillate between five and fifteen members”.

S OL M ELIÁ

A NNUAL R EPORT 2000 57 GOOD GOVERNANCE CODE

According to the Statutes, articuloArticle 31.2, “The Board of Directors should consist of a minimum of five and a maximum of twenty members chosen by the General Shareholders’ Meeting”.

On 31st. December, 2000, the Board of Directors comprised 11 members.

5 The Chairman of the Board of Directors

“That, should the Board opt to combine the roles of Chairman and chief Executive in one person, the Board should adopt all necessary cautionary measures to reduce the risks of concentration of power in one person”.

This recommendation has been carried out given that the Chairman of the Board of Directors does not have and faculties delegated by the Board of Directors. At the same time a number of additional measures are in place to ensure compliance: appointment of two Vice Chairmen and a Chief Executive Officer, creation of two delegate commissions, etc.

6 The Secretary of the Board of Directors

“That the figure of Secretary of the Board be given far greater relevan- ce, reinforcing their independence and stability and highlighting their function to ensure the formal and material legality of the actions of the Board”.

Article 33 of the Statutes, as well as the Regulations of the Board of Directors, in its Article 12, highlight the figure of the Secretary of the of the Board of Directors placing amongst his functions to support the Chairman in his labours and to provide directors with the advice and information they require as well as conserving all documentation and maintaining minutes on the development of the sessions and agreements reached. Directors are also formally committed to appointing a person that is capable of performing the role appropriately as Secretary.

The current Secretary of the Board of Directors is an Independent Director.

7 The Executive Commission

“That the Executive Commission, wherever such exists, should reflect the same balance as the Board between different types of Directors and

S OL M ELIÁ

A NNUAL R EPORT 2000 58 GOOD GOVERNANCE CODE

that the relations between both bodies is based on principals of trans- parency, in such a way that the Board is fully aware of the matters dealt with and decisions made by the Commission”.

Article 39 of the Statutes foresees the possibility of the constitution of such a commission, although it has not been deemed necessary to date given that a full meeting of the Board has always been required.

8 Delegate Control Commissions

“That the Board of Directors creates within its ranks delegate control commissions, made up exclusively of external Directors, to monitor accounts information and control (Audits); selection of Directors and senior management; remuneration policies and reviews; and the evalua- tion of governance”.

On 23rd. February, 1999, the Board of Directors agreed to create, in line with Article 14 of the Regulations of the Board, the following delegate commissions:

1. Auditing and Compliance Commission, which includes amongst its functions the proposal of Auditors, the review of annual accounts and of compliance with legal requirements, correct appli- cation of accountancy principles and the provision of financial information adapted to those principles, as well as examining com- pliance with the internal regulations governing compliance with Stock Markets, the Regulations of the Board of Directors and the governance rules of the company.

2. Appointments and Remuneration Commission, which includes amongst its basic functions the formulation and revision of the cri- teria that must be followed to form the Board of Directors and the selection of candidates, the proposal to the Board of appointments of Directors and of members that should form part of Commissions, the periodic review of remuneration policies, the supervision of the transparency of remuneration and information on transactions that may imply conflicts of interests and, in gene- ral, for the items included in Chapter VIBII of the Regulations of the Board of Directors regarding the Duties of Directors.

S OL M ELIÁ

A NNUAL R EPORT 2000 59 GOOD GOVERNANCE CODE

The Commissions are made up of three Directors, including at least one Independent Director.

9 Information to the Directors

“That all necessary measures are taken to ensure that Directors are pro- vided sufficiently in advance with the information they require, specifi- cally prepared to assist in the duties of the Board without prejudice, except in exceptional circumstances, to the importance or reserved nature of the information”.

The Regulations of the Board of Directors in its Article 19 foresees that Board meetings are convened by letter, fax, telegram or e-mail authori- sed by the signature of the Chairman or the Secretary on behalf of the Chairman. They also foresee the possibility that extraordinary sessions of the Board are convened by telephone whenever the Chairman may feel that circumstances make this appropriate.

In compliance with Article 35.2. of the Statutes, this communication must include the agenda for the session along with a summary of the information required.

Under normal circumstances the information will be provided to Directors fifteen days in advance.

10 Functions of the Board of Directors.

“That, to ensure the appropriate performance of the duties of the Board, meetings should be held with the frequency required to allow achievement of objectives; that the Chairman should encourage the intervention and independence of mind of all Directors; that special care should be taken with the taking of minutes and that an assessment of the quality and efficiency of the work of the Board should be carried out at least once per year”.

The Board of Directors, as stated in articuloArticle 35.1 of the Statutes must meet at least five times per year and whenever the interests of the company require, whenever decided by the Chairman or by his substitu- te, or on request of at least one third of the members of the Board, in which case the Chairman should convene a Meeting of the Board wit- hin a period of ten days from such a request.

During the year 2000, a total of eight Meetings of the Board were held.

S OL M ELIÁ

A NNUAL R EPORT 2000 60 GOOD GOVERNANCE CODE

11 Selection and re-election of Directors.

“That the intervention of the Board of Directors in the selection and re-election of its members is carried out using formal and transparent procedures after presentation of a reasoned proposal by the Appointments Commission”.

Article 16 of the Regulations states that the Appointments and Remuneration Commission should formulate and revise the criteria to be applied to the composition of the Board of Directors and the selec- tion of candidates.

The Commission must thus propose the appointment of Directors so that the Board may directly approve them or submit such a decision to the General Shareholders’ Meeting.

According to Article 31.3 of the Statutes, at least one third of the members of the Board must be Independent Directors. These should be persons of acknowledged prestige with no relation to the executive team or Major Shareholders (as defined in Royal Decree 377/1991, of 15th. March).

12 Resignation of Directors

“That companies include in their regulations an obligation that Directors resign in circumstances which might have a negative effect of the functioning of the Board or the credit or reputation of the company”.

The Statutes state that the absence of any Director at three consecutive meeting of the Board or at any four meetings within the same financial year, without appropriate justification, will give ground to the Board to declare that Directors automatic release from his position and to then designate a provisional successor until such may be submitted to the next General Shareholders’ Meeting for ratification.

Chapter VIII of the Regulations of the Board of Directors also deals with this matter.

13 Age of the Directors

“That a maximum age is set for the position of Director, that may be between sixty five and seventy for Executive Directors and the Chairman, and more flexible for other members of the Board”.

S OL M ELIÁ

A NNUAL R EPORT 2000 61 GOOD GOVERNANCE CODE

Neither the Regulations of the Board nor the Statutes include maximum limits on the age of Directors.

14 Information for Directors

“That there is formal recognition of the right of all Directors to gather and obtain the information and advice required to perform their super- visory duties, and that appropriate means are established to allow this right to be exercised, including the use of external experts in special cir- cumstances”.

As stated in Article 35.8 of the Statutes, in the performance of their duties Directors have the right to request the professional assistance of company executives and internal advisors. They must also have free and direct access either personally or through others delegated by them to all of the company’s books and files, unless the Chairman refuses such right in defence of the interests of the company. Such a refusal will not be per- mitted whenever the Director in question has requested and obtained a favourable vote of at least twenty five per cent (25%) of the inscribed shareholders with a right to vote, as expressed in the General Shareholders’ Meeting.

This right is also detailed in Chapter VI of the Regulations of the Board of Directors.

15 Remuneration of Directors

“That the remuneration policy applied to Directors, the proposal, eva- luation and revision of which should be carried out by the Remuneration Committee, should reflect moderation and company performance with detailed and personalised information”.

As stated in Article 35 of the Statutes, Independent Directors receive an amount of one million five hundred thousand pesetas for their atten- dance at each session. This amount may be increased on agreement by the Board in proportion with any increase in the consolidated profits of the company, without prejudice to its posterior ratification by the General Shareholders’ Meeting, either explicitly or through approval of the Annual Accounts.

The remuneration of Non-independent Directors will consist of a fixed annual amount, the same for all of them, to be defined or ratified by the General Shareholders’ Meeting, without prejudice to the payment of

S OL M ELIÁ

A NNUAL R EPORT 2000 62 GOOD GOVERNANCE CODE

fees or other amounts that may be due from the company for the provi- sion of professional services or derived from their private work as may be the case.

Remuneration will be paid out after the end of the month in which it may have been earned to ensure that it is proportional to the time that the Director may have served on the Board during the year.

16 General duties of Directors and conflicts of interest.

“That the internal regulations of the company detail the obligations derived from the general duties of diligence and loyalty expected of Directors, including, specifically, matters relating to conflicts of inte- rest, confidentiality requirements, the exploitation of business opportu- nities and the use of company assets”.

Article 26 of the Regulations of the Board of Directors and others indi- cate the obligations of Directors.

The most relevant obligations are:

1. The Director must maintain confidentiality regarding the delibe- rations of the Board and the delegate Commissions of which they may form part and, in general, must abstain from revealing infor- mation to which they have had access due to their position. 2. The aforementioned confidentiality must be maintained even after such person ceases to be a Director. 3. The Director may not occupy management positions in compa- nies whose mission or nature that is partially analogous with that of the company, with the exception of other companies controlled by the group. 4. Before accepting any management position with another company, the Director must consult the Appointments and Remuneration Commission. 5. The Director may abstain from attending or intervening in delibe- rations that may affect matters in which they may be personally involved. 6. The Director may not carry out, neither directly nor indirectly, commercial transactions with the company. 7. In the performance of their duties, the Independent Directors must declare any developments in their relations with the com- pany, controlling shareholders or companies associated with con- trolling shareholders.

S OL M ELIÁ

A NNUAL R EPORT 2000 63 GOOD GOVERNANCE CODE

17 Transactions with major shareholders

“That the Board of Directors should promote the adoption of appro- priate measures to extend the duties of loyalty to major shareholders, establishing, specifically, cautionary procedures relating to any transac- tions carried out between such shareholders and the company”.

This recommendation is in place and regulated in Article 35 of the Regulations of the Board concerning hypothetical relevant transactions that may occur between major shareholders, after a report by the Appointments and Remuneration Commission.

18 Communication with shareholders

“That measures are taken to make mechanisms for delegating votes more transparent and to reinforce communications between the com- pany and its shareholders, particularly with institutional investors”.

As established in Article 25.1. of the Statutes, the Board of Directors may demand that in the convening of the General Shareholders’ Meeting the company is in possession of the delegation of representa- tion by shareholders at least two days before the day on which the General Shareholders’ Meeting is to be held, specifically indicating the name of the corresponding representative.

This representation must be assigned in writing for each General Shareholders’ Meeting within the terms established by Company Law.

Since the company IPO there have been many contacts with institutio- nal investors and shareholders. Sol Meliá, S.A. is very active regarding providing information for investors and carries out a minimum of one or two roadshows per quarter to provide information on company activities and performance. In parallel, further roadshows are held whenever any important event requires the supply of information.

The company has also held meetings and maintained other forms of contact with shareholders in Spain and other countries.

The principal executives of Grupo Sol Meliá, S.A. have attended roadshows in cities such as London, Paris, Frankfurt, Edinburgh, Milan, Geneva, Cologne, Dublin, Brussels, Amsterdam, Eindhoven, Madrid, Barcelona and Zaragoza, amongst others, visiting existing and potential investors.

S OL M ELIÁ

A NNUAL R EPORT 2000 64 GOOD GOVERNANCE CODE

Amongst the numerous visits to investors, shareholders and analysts, the following are highlighted: • Information roadshows on company results • Information roadshows on the Tryp acquisition • Information roadshows on the bond issue by one of the subsidiaries

All of the activities described in this section are carried out in observan- ce of the regulations of the stock market and after providing, if required, the corresponding reports to the Spanish Stock Exchange Commission (CNMV) for publishing.

In addition, during the Extraordinary General Shareholders’ Meeting of 23rd. October, 2000 the company made a series of changes to the Statutes, introducing the possibility, on request by the Chairman, of requesting from intermediary bodies the identities of the shareholders of Sol Meliá.

This measure aimed to reaffirm the mechanisms in place for transpa- rency within the company and put in place controls that would clarify the evolution of the shareholder structure.

Sol Meliá has also recently launched an “Investors Club” to provide regular financial information to those shareholders that request such information, as well as other benefits including an investors “Hotline”.

19 General information

“That the Board of Directors, over and above the requirements of existing legislation, should assume responsibility for providing the markets with rapid, precise and reliable information, particularly regarding the shareholder structure, substantial modifications to the rules of governance, particularly relevant deals or operations and company shareholdings”.

As indicated in Article 38 of the Regulations of the Board , the company has provided information considered to be of sufficient detail and through the appropriate channels (Statements to CMNV, regular published information, communications regarding majority sharehol- ders, other communications, etc.), on matters regarding the share price and any other matter considered relevant, as well as regular information on the company rules of governance.

S OL M ELIÁ

A NNUAL R EPORT 2000 65 GOOD GOVERNANCE CODE

20 Financial information

“That all of the regular financial information as web as the annual information offered to the markets is generated using the same profes- sional principles and practises as the annual accounts and that, before being published, are verified by the Audit Commission”.

Amongst their duties, the Board of Directors, along with the Audit and Compliance Commission are entrusted with the duty of providing financial information to the markets following the same professional principles, criteria and practises as those employed in the production of the annual accounts.

Financial analysts have also been kept informed through conference calls on quarterly results after their presentation and registration with the CNMV.

21 External Auditors

“That the Board of Directors and the Audit Commission supervise situations that may present a risk to the independence of the company’s external auditors and, specifically, that they verify the amounts paid to external auditors as a percentage of the total revenues of the auditing firm, and that they make public information on fees paid for services other than audits”.

The Board of Directors and Audit and Compliance Commission have made an analysis of the possible risks regarding the independence of external auditors.

That total amount paid to the external auditor Ernst & Young reached 105,761,085 pesetas for auditing and consulting services. This amount is equivalent to 0.7 % of the total revenues of the firm in Spain.

In addition, the company has paid out a total of 11,800,000 Pesetas to Arthur Andersen and 370,019 Pesetas to KPMG in consultancy fees.

22 Production of the Annual Accounts.

“That the Board of Directors should avoid presenting accounts to the General Shareholders’ Meeting that contain exceptions and reserva- tions in the auditors’ report, and that, whenever this is not possible, both the Board of directors and the auditors must clearly explain to sha- reholders and to the market the content and scope of the discrepancies”.

S OL M ELIÁ

A NNUAL R EPORT 2000 66 GOOD GOVERNANCE CODE

This recommendation is included in article 39 of the Regulations of the Board, and it is being accomplished by the Company.

23 Information on Governance rules.

“That the Board of Directors include in their Annual Report informa- tion on their Governance rules, providing explanations for any that do not comply with the recommendations contained within this Code”.

This report aims to clearly and precisely reflect the degree to which the recommendations of the Code of Good Governance has been imple- mented in the company, and particularly in regard to the obligations, duties and procedures followed by the Sol Meliá, S.A. Board of Directors so as to comply with said recommendations.

S OL M ELIÁ

A NNUAL R EPORT 2000 67

OFFICIAL COMMUNIQUÉS

The following is a summary of the different communiqués sent by Sol Meliá to the Comisión Nacional del Mercado de Valores (Spanish Stock Exchange Commission) during the year 2000:

28th. February tWith reference number 20990, Sol Meliá announced results for the second half of 1999.

16th. May With reference number 22214, the company sent an advance of results for the first quarter of 2000.

22nd. May With reference number 22319, the Board announced the celebration of the Ordinary and Extraordinary General Shareholders’ Meeting for 29th. May.

29th. May With reference number 22542, the company sent information on the matters agreed at the Ordinary General Shareholders’ Meeting held the same day.

1st. June With reference number 22639, Sol Meliá announced the acquisition of 90% of the capital of the company Azafata S.A.

21st. June With reference number 22939, Sol Meliá announced the entry of the Banco Santander Central Hispano (BSCH) in Prodigios, a project to create a gene- ralist portal site aimed at Spanish and Portuguese speaking families.

4th. July With reference number 23493, the company provided information on the liquidation of warrants by Hoteles Mallorquines Agrupados S.A., Hoteles Mallorquines Asociados S.A. and Hoteles Mallorquines Consolidados S.A.

21st. July With reference number 2319, Sol Meliá announced results for the first half of the year 2000.

S OL M ELIÁ

A NNUAL R EPORT 2000 69 OFFICIAL COMMUNIQUÉS

25th. July With reference number 23940, Sol Meliá responded to news that had appeared in the press concerning a possible alliance with the UK-based hotel group Hilton International.

31st. July With reference number 24064, Sol Meliá announced the signature of a Letter of Intent regarding the negotiation of the acquisition of the hotel chain owned by Tryp S.A.

21st. August With reference number 24279, Sol Meliá and Tryp S.A. announced the signature of the final agreement by which Sol Meliá integrated all of the shares in Tryp S.A. for 60,000 million pesetas and the creation of one position on the Board for ex-shareholders.

22nd. August With reference number 24355, Sol Meliá provided information on the financial repercussion of the acquisition of Tryp S.A. on company accounts.

26th. September With reference number 24912, Sol Meliá announced the celebration of the Extraordinary General Shareholders’ Meeting for the 23rd. and 24th. October.

4th. October With reference number 25072, the company provided information on the attendance conditions for the mentioned Meeting.

17th. October With reference number 25235, Sol Meliá announced approval of a new variable bonus system for management, not including Board members, to be applied for 2000.

23rd. October With reference number 25331, the company informed that the Extraordinary General Shareholders’ Meeting had approved a capital increase to allow the shareholding agreed with Tryp S.A.

17th. November With reference number 25637, Sol Meliá provided information on results for the third quarter of 2000.

S OL M ELIÁ

A NNUAL R EPORT 2000 70

CONSOLIDATED ASSETS In thousands of Pesetas. 31/12/1998 31/12/1999 31/12/2000 A. UNCALLED SHARE CAPITAL

B. FIXED ASSETS I. START-UP EXPENSES 1,524,980 3,486,086 3,473,216 II. INTANGIBLE FIXED ASSETS 1. Intangible assets and rights 1,156,783 37,219,295 54,739,424 2. Provisions and amortization (170,480) (2,358,929) (4,283,168) III. TANGIBLE FIXED ASSETS 1. Land and buildings 1,250,909 225,809,503 277,877,304 2.Technical installations and machinery 286,847 22,325,498 30,227,956 3.Other fixed assets 786,718 43,354,676 50,447,938 4.Prepayments and tangible fixed assets in progress 3,567 4,624,763 3,905,221 5.Provisions and depreciation (631,087) (68,541,373) (87,373,658) IV. INVESTMENTS 1.Participations by equity method 13,190,153 2,943,132 3,586,697 2.Loans to subsidiaries 4,999,817 2,428,594 3.Long-term securities portfolio 22,353,409 16,343,600 18,320,265 4.Other long-term receivables 1,768,320 7,248,697 7,438,278 5. Provisions (1,364,325) (293,925) V. OWN SHARES

TOTAL FIXED ASSETS 41,520,118 296,090,439 360,494,142

C. GOODWILL ON CONSOLIDATION 1. From companies consolidated under full consolidation 1,881,494 2,557,898 65,624,776 2. From companies consolidated by equity method 361,835 233,211 329,030

TOTAL GOODWILL ON CONSOLIDATION 2,243,329 2,791,108 65,953,806

D. DEFERRED EXPENSES 2,550,355 3,631,264

E. CURRENT ASSETS II. INVENTORIES 21,262 4,232,986 5,992,508 III. DEBTORS 1.Trade debtors 5,129,569 13,084,251 17,889,520 2. Subsidiaries 80,114 110,716 1,542,070 3. Other debtors 962,401 5,637,280 15,360,579 4. Provisions (379,497) (1,831,996) (3,618,776) IV. SHORT-TERM INVESTMENTS 1. Short-term securities portfolio 8,408 3,550,310 2. Loans to subsidiaries 10,278,821 30,196 3. Other loans 127,677 2,743,622 3,700,803 4. Provisions (31,512) V. OWN SHARES 704,550 1,123,106 1,802,468 VI. CASH AND BANKS 4,008,228 10,425,394 12,376,399 VII. PREPAYMENTS AND ACCRUALS 175,358 607,774 1,322,386

TOTAL CURRENT ASSETS 10,829,662 46,388,849 59,948,463

TOTAL ASSETS 54,593,109 347,820,752 490,027,675

S OL M ELIÁ

A NNUAL R EPORT 2000 76 CONSOLIDATED LIABILITIES In thousands of Pesetas 31/12/1998 31/12/1999 31/12/2000 A. EQUITY I. SHARE CAPITAL 3,100,000 5,708,859 6,148,854 II. SHARE PREMIUM 33,095,450 100,418,656 132,298,900 III. REVALUATION RESERVE R.D.L. 7/96 8,032,947 8,032,947 IV. RESERVES 1. Distributable reserves 1,693 709,003 5,092,764 2. Reserve investments Canary Islands Law 19/94 951,121 2,033,319 3,265,127 3. Reserves in Cies. consolidated under full consolidation 4,623,663 26,064,671 38,184,435 4. Reserves in Cies. consolidated by equity method 339,506 392,171 364,978 5.Non-distributable reserves 1,101,089 1,837,935 2,953,870 6.Results from prior years 16,577 16,577 VII. FOREIGN CURRENCY GAINS/(LOSSES) 1. From Cies. consolidated under full consolidation (290,189) 6,378,310 9,865,367 2. From Cies. consolidated by equity method (610,117) (18,963) (3,475) VIII. PROFIT AND LOSSES FROM PARENT COMPANY 6,915,775 14,643,755 18,745,790 1.Consolidated profit and losses 6,986,150 15,667,956 19,738,432 2.Profit and losses attributed to minority interests (70,375) (1,024,201) (992,642) IX. INTERIM DIVIDEND PAID IN PREVIOUS YEAR (1,240,000)

TOTAL EQUITY 48,004,568 166,217,239 224,949,555

B. MINORITY SHAREHOLDERS 123,935 7,250,035 9,799,570 C. NEGATIVE CONSOLIDATION DIFFERENCE 1. From companies consolidated under full consolidation 238,091 2,520,938 3,716,226 2. From companies consolidated by equity method 32,633

TOTAL NEGATIVE CONSOLIDATION DIFFERENCE 238,091 2,520,938 3,748,859

D. DEFERRED INCOME 1.Capital grants 3,000 580,767 605,237 2. Other deferred income 252,775 2,653,662 3,083,803

TOTAL DEFERRED INCOME 255,775 3,234,429 3,689,040

E. PROVISIONS FOR LIABILITIES AND CHARGES 58,506 8,845,618 9,437,013 F. LONG-TERM LIABILITIES I. Issue of debentures and other marketable securities 33,511,454 68,588,250 II. Debts with credit institutions 45,261 67,398,408 101,142,984 III. Debts with subsidiaries 115,996 66,284 IV. Other liabilities 335,251 12,798,810 13,498,739

TOTAL LONG-TERM LIABILITIES 496,508 113,774,956 183,229,973

G. SHORT-TERM LIABILITIES I. Issue of debentures and other marketable securities 97,552 98,464 II. Debts with credit institutions 2,423,780 25,562,513 24,805,414 III. Debts with subsidiaries 571,969 7,432 779,993 IV.Trade creditors 867,735 11,797,816 19,473,781 V. Other non-trade debts 1,532,685 7,746,211 8,242,457 VI.Trade provisions 19,556 4,074 695,596 VII. Accrued expenses 761,938 1,077,958

TOTAL SHORT-TERM LIABILITIES 5,415,725 45,977,538 55,173,664

TOTAL LIABILITIES 54,593,109 347,820,752 490,027,675

S OL M ELIÁ

A NNUAL R EPORT 2000 77 CONSOLIDATED PROFIT AND LOSS ACCOUNT In thousands of Pesetas

31/12/1998 31/12/1999 31/12/2000 A. EXPENSES

1. Supplies and other external expenses 29,526 14,282,829 19,299,455 2. Personnel expenses a) Salaries, wages and related expenses 2,198,493 25,844,228 34,321,572 b) Social Security 634,377 8,837,938 11,001,002 3. Fixed assets depreciation charges 804,121 10,379,850 13,984,526 4. Changes in trade provisions 284,350 239,348 614,507 5. Other operating expenses 4,341,869 27,281,303 39,782,444

I. OPERATING PROFIT 7,457,260 22,718,797 29,395,648 6. Financial expenses 90,158 4,883,404 9,415,580 7. Changes in provisions for decline in value of investments 31,512 (14,534) 8. Foreign currency losses 260,007 5,452,105 6,986,389

II. FINANCIAL PROFIT 106,916 - - 9. Amortization of consolidation goodwill 231,119 304,151 443,670

III. PROFIT FROM ORDINARY ACTIVITIES 7,912,946 18,394,943 20,601,728 10. Losses arising from sale of fixed assets 497,417 122,713 82,105 11. Changes in fixed asset provisions (47,721) 288,409 12. Extraordinary expenses and losses 349,117 1,401,461 13. Expenses and losses from prior years 851,565 1,513,441

IV. EXTRAORDINARY PROFIT --- 884,574 3,458,069

V. CONSOLIDATED PROFIT BEFORE TAXATION 7,738,464 19,279,517 24,059,797 10. Corporation tax 752,314 3,611,561 4,321,366

VI. CONSOLIDATED RESULT FOR THE YEAR (PROFIT) 6,986,150 15,667,956 19,738,432 11. Result attributed to minority shareholders 70,375 1,024,201 992,642

VII. RESULT FOR THE YEAR ATTRIBUTED TO PARENT COMPANY (PROFIT) 6,915,775 14,643,755 18,745,790

S OL M ELIÁ

A NNUAL R EPORT 2000 78 CONSOLIDATED PROFIT AND LOSS ACCOUNT In thousands of Pesetas

31/12/1998 31/12/1999 31/12/2000 B. INCOME

1.Turnover net 11,207,266 104,565,401 140,965,519 2. Other operating income 4,542,730 5,018,891 7,433,635

I. OPERATING LOSSES - - - 3. Income from share capital investments 62,578 572,395 180,219 4. Other financial income 156,093 418,435 758,570 5. Foreign currency gains 238,410 5,195,239 6,939,857

II. FINANCIAL LOSSES --- 4,180,951 8,508,789 6. Particip. in profits from companies consolidated by equity method 579,889 161,248 158,539

III. LOSSES FROM ORDINARY ACTIVITIES - - 7. Profit on disposal of fixed assets 7,637 251,500 3,302,602 9. Capital grants transferred to results for the year 500 22,293 24,228 10. Extraordinary income or profits 314,798 1,656,394 3,297,366 11. Income or profit from previous years 230,062 119,288

IV. EXTRAORDINARY LOSSES 174,482 - -

V. CONSOLIDATED LOSSES BEFORE TAXATION - - -

VI. CONSOLIDATED RESULT FOR THE YEAR (LOSSES - - -

VII. RESULT FOR THE YEAR ATTRIBUTED TO PARENT COMPANY (LOSSES) - - -

S OL M ELIÁ

A NNUAL R EPORT 2000 79 1 Group Activities

The parent company, SOL MELIA, S.A., was formed in Madrid on June 24, 1986 with the name Investman, S.A. In February 1996 the Company modified its official name, becoming SOL MELIA, S.A., inscribed in the Mercantile Registry of the Balearic Islands, volume 1335 of the Companies Book, folio nº PM 22603, third inscription, with its registered address in Calle Gremio Toneleros, 24 of Palma de Mallorca.

The activities of SOL MELIA, S.A and its subsidiaries (hereinafter “SOL MELIA” or the “Group”) basically consist of tourism in general and, specifically, in the management and operation of owned or rented hotels under management or franchise agreement. The activities also consist in the promotion of any type of business related to the tourist and hotel trade or related to leisure, recreation or amusement as well as in the participation in the creation, development and opera- tion of new business, establishments or entities within the tourist and hotel trade and in any leisure, recreation or amuse- ment activity. Some GROUP companies also carry out real estate activities, taking advantage of the synergies obtained from hotels development due to the great expansion process. These activities are carried out in Germany, Andorra, Argentina, Belgium, Brazil, Colombia, Costa Rica, Croatia, Cuba, Egypt, Spain, France, Greece, Guatemala, Indonesia, Italy, Malaysia, Morocco, Mexico, Panama, Peru, Portugal, Puerto Rico, United Kingdom, Dominican Republic, Thailand, Tunisia, Turkey, Uruguay, Venezuela and Vietnam.

Public Offering of Acquisition of shares of Meliá Inversiones Americanas

During July 2000, Hoteles Mallorquines Agrupados, S.L., Hoteles Mallorquines Asociados, S.L., and Hoteles Mallorquines Consolidados, S.A. paid the related warrants. The corresponding price was 6.02 euros per share and the total amount of the transaction was Ptas. 4,845 million, which did not affect Sol Meliá, S.A.

Integration of the Tryp Hotel Chain

On December 1, 2000, Sol Meliá S.A. formalised the acquisition of all the shares of the Tryp Hotel Chain, thereby con- cluding the agreement reached in August. With this acquisition 60 operating hotels are incorporated, with more than 9,700 rooms, in addition to 15 establishments with signed agreements, thus strengthening Sol Meliá’s leadership in the Spanish hotel sector and extending its presence in Tunisia, Andorra, Cuba and Portugal.

S OL M ELIÁ

A NNUAL R EPORT 2000 80 2 Consolidation Scope

2.1 Subsidiaries

The subsidiaries defined as the companies in which Sol Meliá, S.A. directly or indirectly holds more than 50% or a controlling position is exercised, are listed below:

COMPANY ADDRESS COUNTRY ACTIVITY DIR P. IND P. TOTAL HOLDER IND. PART

AKUNTRA s. XXI S.L. Ronda de Sant Pere 17, Barcelona Spain Holding 100.00% 100.00% TRYP,S.A. APARTOTEL, S.A Orense 81 (Madrid) Spain Managing company 99.73% 99.73% AZAFATA, S.A. Autopista Aeropuerto S/N (Valencia) Spain Ownership and operating Azafata 100.00% 100.00% BEAR SA de CV Paseo de la Reforma,1 (México) Mexico Owns and operates Mexico Reforma 100.00% 100.00% BISOL VALLARTA SA DE CV Paseo de la Marina Sur (Puerto Vallarta) Mexico Hotels ownership and operating 95.22% CALA FORMENTOR S.A. DE C.V. 2.99% 98.21% MELIÁ INV. AMERICANAS N.V. CADLO FRANCE, S.A. Rue de Caumartin 28 (Paris) France Managing company 100.00% 100.00% SOL MELIA FRANCE CADSTAR FRANCE S.A. Rue Caumartin 28 (Paris) France Managing company 100.00% 100.00% SOL MELIA FRANCE CALA FORMENTOR SA DE CV Boulevard Kukulkan (Cancún) Mexico Owns and operates Meliá Cancún 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. CARIBOTELS DE MEXICO S.A Playa Santa Pilar, Aptdo 9 (Cozumel) Mexico Owns and oper. Cozumel & Cabañas 17.98% 5.93% OPERADORA MESOL S.A. 26.60% 50.51% MELIA INV. AMERICANAS N.V. CASINO PARADISUS S.A Playas de Bavaro (Higuey) Dom. Rep. Casino operating 50.00% 49.10% INVERSIONES AGARA S.A. CASINO TAMARINDOS, S.A Retama, 3 (Las Palmas) Spain Casino owner 99.50% 0.50% 100.00% MESOL MANAGEMENT S.L. COM.PROP.SOL Y NIEVE Plaza del Prado Llano (Sierra Nevada) Spain Owns and oper.Meliá Sol y Nieve 87.84% 87.84% COMP.TUNISIENNE GEST.HOT Cite Mahrajene-Imm Chiaaar, 1 (Tunis) Tunisia Managing company 0.10% 79.70% SOL MANINVEST B.V. 10.00% M.I.H. S.A. 0.10% MARKSERV B.V. 10.00% SOL MELIÁ INVESTMENT N.V. 0.10% 100.00% MESOL MANAGEMENT B.V. CONS.INMOB.ALCANO S.A Ctra. Málaga Km 437 (Granada) Spain Owner of Sol Inn Alcano 100.00% 100.00% CONSORCIO EUROPEO, S.A. Darro 22, (Madrid) Spain Owner of Hotel Tryp Colon 100.00% 100.00% TRYP,S.A. CONT.TUR. COZUMEL, S.A. Playa Santa Pilar, Aptdo 9 (Cozumel) Mexico Owner of Caribotels México 23.91% OPERADORA MESOL 27.09% 51.00% MELIA INV. AMERICANAS N.V. CORBEIL HOT. PARIS COLOM. Rue Caumartin 28 (Paris) France Owns and oper. Hotels in France 100.00% 100.00% CADSTAR FRANCE, S.A. CORP.HOT. HISP.MEX. Boulevard Kukulkan (Cancún) Mexico Owns and operates Turquesa 9.08% CALA FORMENTOR S.A. DE C.V. 89.13% 98.21% MELIÁ INV. AMERICANAS N.V. DARCUO S. XXI S.L. Ronda de Sant Pere 17, Barcelona Spain Holding 100.00% 100.00% TRYP,S.A. DES TURIST DEL CARIBE SA De Ruyterkade, 62 (Curaçao) Panama Marketing 98.21% 98.21% DES.TUR.DEL CARIBE N.V DES.HOT.SAN JUAN B.V Strawinskylaan, 307 (Amsterdam) Holland 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. DES.TUR.DEL CARIBE N.V De Ruyterkade, 62 (Curaçao) Neth. Antilles Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. DESARROLLOS SOL S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. DOCK TELEMARKETING,S.A Orense 81 (Madrid) Spain Sales offices 95.09% 4.91% 100.00% MESOL MANAGEMENT S.L. DOMINICAN INVESTMENT NV The Ruyterkade, 62 (Curaçao) Neth. Antilles Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. DOMINICAN MARKTING SERV De Ruyterkade, 62 (Curaçao) Neth. Antilles Marketing 98.21% 98.21% GESMESOL, S.A DORPAN, S.L Gremio Toneleros, 42 (Palma de Mallorca) Spain Trademarks owner 99.99% 0.01% 100.00% MESOL MANAGEMENT S.L. FARANDOLE B.V World Trade Center-Toer 17b (Amsterdam) Holland Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V.

S OL M ELIÁ

A NNUAL R EPORT 2000 81 CONSOLIDATION SCOPE

COMPANY ADDRESS COUNTRY ACTIVITY DIR P. IND P. TOTAL HOLDER IND. PART GESMESOL, S.A Elvira Méndez, 10 (Panamá) Panama Managing company 100.00% 100.00% GEST.HOT.TURISTICA MESOL Gremio Toneleros, 42 (Palma de Mallorca) Spain Export to Cuba 100.00% 100.00% GRUPO SOL ASIA LTD 1109/10 Admiralty Centre Tower Hong Kong Holding 60.00% 60.00% GRUPO SOL SERVICES 80, Raffles Place, 25-01 UOB Plaza Singapore Services 60.00% 60.00% GRUPO SOL ASIA LTD H MEL INTERN COLOMBIA SA Calle, 68 (Bogotá) Colombia Managing company 100.00% 100.00% M.I.H. S.A. HOSTERIAS DE CASTILLA La Pesca, 5 (Salamanca) Spain Inactive 100.00% 100.00% HOT.SOL INTERNACIONAL Edificio Banco do Brasil (Panamá) Panama Holding 100.00% 100.00% HOTEL ABBAYE THELEME S.A. Rue Ville de Saxe 9 (Paris) France Operating Hotel Saxe 100.00% 100.00% CORBEIL HOT. PARIS COLOMBRES HOTEL ALEXANDER S.A. Avenue Víctor Hugo 102 (Paris) France Operating Hotel Alexander 100.00% 100.00% LONDIM FRANCE S.A. HOTEL BELLVER S.A Av Ingeniero Gabriel Roca (Palma de Mca.)Spain Owner Hotel Bellver 66.95% 66.95% HOTEL BLANCHE FONTAINE S.A. Rue Fontaine 34 (Paris) France Oper. Colbert and Blanche Fontaine 100.00% 100.00% CORBEIL HOT. PARIS COLOMBRES HOTEL BOULOGNE ADAGIO S.A. Rue des Abundances 22 (Paris) France Operates Hotel Adagio 100.00% 100.00% LSO FRANCE INVESTMENTS S.A. HOT. CONVENTO DE EXTR. S.A. Plaza de San Juan 11-13 (Cáceres) Spain Owner of Extremadura Convent 51.32% 51.32% HOTEL FRANCOIS S.A. Boulevard MontMartre 3 (Paris) France Operating Hotel Francois 100.00% 100.00% CADSTAR FRANCE, S.A. HOTEL MADELEINE PALACE Rue Cambon 8 (Paris) France Operating Madeleine Palace 100.00% 100.00% CADLO FRANCE S.A. HOTEL METROPOLITAN S.A. Rue Cambon 8 (Paris) France Owns and oper. Madeleine Palace 100.00% 100.00% CADLO FRANCE S.A. HOTEL ROYAL ALMA Rue Jan de Goujon 35 (Paris) France Operates hotel Royal Alma 100.00% 100.00% CADSTAR FRANCE, S.A. HOTELES MELIA, S.L. Gremio Toneleros 24, (Palma de Mallorca) Spain Inactive 100.00% 100.00% HOTELES SOL MELIA. S.L. Gremio Toneleros 24, (Palma de Mallorca) Spain Inactive 100.00% 100.00% HOTELES SOL S.L. Gremio Toneleros 24, (Palma de Mallorca) Spain Inactive 100.00% 100.00% HOTELES TURISTICOS S.A Orense 81 (Madrid) Sapin Owns and oper. Meliá Granada 94.48% 94.48% IHLA BELA GESTAO E TURISMO 31 de Janeiro 81 Founchal, Madeira Portugal Hotel management in Cuba 65.00% 65.00% TRYP,S.A. IMPULSE DEVELOPEMENT INCStrawinskylaan, 2001 (Amsterdam) Holland Inactive 100.00% 100.00% HOTELES TURISTICOS S.A IMPULSE HOT.DEVELOPEMENT Strawinskylaan, 2001 (Amsterdam) Holland Inactive 100.00% 100.00% INDUSTRIAS TURISTICAS Orense 81 (Madrid) Spain Owns and oper. Meliá Torremolinos 97.58% 97.58% INMOBILIARIA BULMES, S.A. Darro 22, (Madrid) Spain Owner of hotel Tryp Fénix 100.00% 100.00% TRYP,S.A. INMOTEL INTERNACIONAL SA Edificio Banco do Brasil (Panamá) Panama Holding 100.00% 100.00% INMOTEL INV.ITALIA S.R.L Via Pietro Mascagni, 14 (Milano) Italy Owns and operates Meliá Milano 1.00% 99.00% 100.00% MELIÁ EUR. HOLD. DE ENT. S.A. INV TURIST DEL CARIBE SA Lope de Vega, 4 (Santo Domingo) Dom. Rep. Holding 100.00% 100.00% INV. LATINOAMERICA 2000 Gremio Toneleros, 24 (Palma de Mallorca) Spain Holding 100.00% 100.00% INV.EXPLOT.TURISTICAS Orense 81 (Madrid) Spain Hotels owner and operator 55.10% 55.10% INV.INMOB.IAR 1997 CA Avenida Casanova (Caracas) Venezuela Owns and oper. Caracas 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. INVERSIONES AGARA S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Owns and operatesPunta Cana 98.21% 98.21% NEALE S.A. INVERSIONES CORO S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Owns and operates Tropical 98.21% 98.21% DOMINICAN INVESTMENT N.V. INVERSIONES GUAMA S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Owns and operates Caribe 98.21% 98.21% DESARROLLOS SOL S.A. INVERSIONES INVERMON Av. Venezuela, Edif.T. América (Caracas) Venezuela Inactive 100.00% 100.00% M.I.H. S.A. INVERSIONES JACUEY, S.A. Lope de Vega, 4 (Santo Domingo) Dom. Rep. Owns and oper. Casino Palma Real 98.21% 98.21% INVERSIONES GUAMA S.A. IRTON COMPANY N.V. The Ruyterkade, 62 (Curaçao) Neth. Antilles Marketing 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. LATIN AMERICA LOG.CORP 1000, Brickell Av. suite 500 (Miami) U.S.A. Services 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. LAVANDERIAS COMPARTIDAS Paseo Colorado, 26 (Torremolinos) Spain Laundry 100.00% 100.00% LIRAX ltd Wickham's Cay road town (Tortola) Virgin Is. (U.K.) Holding 100.00% 100.00% SOL MANINVEST B.V. LOMONDO LTD Albany Street-Regents Park (Londres) U.K. Owns and operatesWhite House 100.00% 100.00% LONDIM FRANCE S.A. Rue de Caumartin 28 (Paris) France Owns and operates Hotel Alexander 100.00% 100.00% SOL MELIA FRANCE LSO FRANCE INVESTMENTS S.A.Rue Caumartin 28 (Paris) France Owns and operates Hotel Adagio 100.00% 100.00% SOL MELIA FRANCE M.I.H., S.A Edificio Fiducidario (Panamá) Panama Holding 100.00% 100.00% M.I.H. U.K. LTD. Cent House-Upper Woburn Place (Lon) U.K. Holding 100.00% 100.00% M.I.H. S.A. MARINA INTERNAT. HOLDING Elvira Méndez, 10 (Panamá) Panama Holding 100.00% 100.00% M.I.H. S.A. MARKSERV B.V Parklaan, 81 (Amsterdam) Holland Management and Holding 51.00% 49.00% 100.00% SOL MANINVEST B.V. MARKSOL TURIZM Calakli Manavgat (Antalya) Turkey Management 10.00% 90.00% 100.00% MARKSERV B.V. MARKTUR TURIZM Daire 3, Gençlik Mahallesi (Antalya) Turkey Inactive 100.00% 100.00% MARMER, S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Owns and operates Bávaro 98.21% 98.21% DES.TURÍSTICOS DEL CARIBE S.A.

S OL M ELIÁ

A NNUAL R EPORT 2000 82 CONSOLIDATION SCOPE

COMPANY ADDRESS COUNTRY ACTIVITY DIR P. IND P. TOTAL HOLDER IND. PART MELIA BRASIL ADMINISTRAC Avenida Cidade Jardim, 1030 (Sao Paulo) Brazil Hotels operations 20.00% LIRAX Ltd 80.00% 100.00% MARKSERV B.V. MELIA CATERING S.A. Gremiio Toneleros 24, Palma de Mallorca Spain Catering services 100.00% 100.00% MELIA EUR.HOLD.ENTIDADESGremio Toneleros, 42 (Palma de Mallorca) Spain Holder of foreign securities 90.00% 10.00% 100.00% HOTELES SOL INTNAL. S.A. MELIA INV.AMERICANAS N.V Strawinskylaan, 2001 (Amsterdam) Holland Holding 80.78% 17.43% 98.21% SOL MELIÁ INVESTMENT N.V. MELIA MANAGEMENT, S.A Lope de Vega, 4 (Santo Domingo) Dom. Rep. Management 100.00% 100.00% INV TURIST DEL CARIBE SA MELSOL MANAGEMENT B.V Strawinskylaan, 307 (Amsterdam) Holland Management 100.00% 100.00% MELSOL PORTUGAL Avenida do Brasil, 43-8 (Lisboa) Portugal Management 80.00% 80.00% MESOL MANAGEMENT, S.L Avda. Colón, 22 (Puerto de la Cruz) Spain Holding 95.00% 5.00% 100.00% DORPAN S.L. MOT.GR.RUTAS ESPAÑOLAS Orense 81 (Madrid) Spain Owns and operates Hidalgo 74.54% 74.54% MOTELES ANDALUCES S.A Orense 81 (Madrid) Spain Owns and operates Caballo Blanco 74.42% 74.42% NEALE S.A Edificio Arango Orillac (Panamá) Panama Marketing 98.21% 98.21% HOTELES TURISTICOS S.A OP.PASEO DE LA REFORMA Paseo de la Reforma,119 (México) Mexico Land owner 98.21% 98.21% FARANDOLE B.V. OPERADORA COSTARISOL Avenida Central, 8 (San José) Costa Rica Management 100.00% 100.00% M.I.H. S.A. OPERADORA MESOL SA DE CVBosque de Duraznos 69-b, (México D.F.) Mexico Management 90.00% 10.00% 100.00% MARKSERV B.V. PARKING INTERNACIONAL, S.A.Darro 22, (Madrid) Spain Owner of parking hotel Fénix 99.00% 99.00% TRYP,S.A. PARQUE SAN ANTONIO S.A Rey 1, (Puerto de la Cruz) Spain Owns and oper. Parque San Antonio 72.33% 72.33% PLAYA SALINAS S.A Avenida Marítima, 1 (Santiago del Teide) Spain Land owner 49.00% 47.81% INDUSTRIAS TURISTICAS 1.89% 98.70% HOTELES TURISTICOS, S.A. PROP.EN ARRIENDO, S.L Gremio Toneleros, 42 (Palma de Mallorca) Spain Inactive 40.00% 60.00% 100.00% CASINO TAMARINDOS S.A. PUNTA ELENA S.L San José, 33 (Tenerife) Spain Owns and operates Punta Elena 50.00% 50.00% RANDLESTOP CORP.N.V De Ruyterkade, 62 (Curaçao) Neth. Antilles Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. REALTUR S.A Orense 81 (Madrid) Spain Owner of Meliá Madrid 96.49% 96.49% SAN JUAN INVESTMENT B.V Strawinskylaan, 307 (Amsterdam) Holland Holding 98.21% 98.21% MELIÁ INV. AMERICANAS N.V. SECADE s. XXI S.L. Ronda de Sant Pere 17, Barcelona Spain Holding 100.00% 100.00% TRYP,S.A. SECURISOL S.A Gremio Toneleros, 42 (Palma de Mallorca) Spain Security 100.00% 100.00% SILVERBAY, S.L. Rafael Salgado 7-5a Izq. (Madrid) Spain Owner of land in Cadiz 100.00% 100.00% SOL FINANCE N.V De Ruyterkade, 62 (Curaçao) Neth. Antilles Inactive 100.00% 100.00% HOTELES SOL INTNAL. S.A. SOL GROUP B.V Parklaan, 81 (Amsterdam) Holland Holding 100.00% 100.00% SOL GROUP CORPORATION 2100, Coral Way, suite 402 (Miami) U.S.A. Services 100.00% 100.00% SOL GROUP B.V SOL HOTEL U.K. LTD Cent House-Upper Woburn Place (Lon) U.K. Sales office 100.00% 100.00% SOL MANINVEST B.V Parklaan, 81 (Amsterdam) Holland Management and Holding 100.00% 100.00% SOL MELIA BENELUX B.V. Rue Blanche 4 (Bruselas) Belgium Owns and oper. Avenue Luis 99.99% 99.99% SOL MELIA CROACIA Vladimira Nazora, 6 (Rovijn) Croatia Management 100.00% 100.00% SOL MANINVEST B.V. SOL MELIA EUROPE B.V Strawinskylaan, 307 (Amsterdam) Holland Issuer of convertible bonds 100.00% 100.00% SOL MELIA FRANCE Rue Caumartin 28 (Paris) France Management of French companies 100.00% 100.00% SOL MELIA GUATEMALA S.A Primera Avenida, 8-24 (Guatemala) Guatemala Management 99.95% M.I.H. S.A. 0.05% 100.00% MARKSERV B.V. SOL MELIA INVESMENT, N.V Strawinskylaan, 2001 (Amsterdam) Holland Holding 100.00% 100.00% INV. LATINOÁMERICA 2000 S.L. SOL MELIA PERU, S.A. Av. Salaberri 2599, San Isidro, Lima Peru Management Meliá Lima 100.00% 100.00% SOL MELIA SERVICE S.A Rue de Chantemerle (Friburgo) Switzerland Services 100.00% 100.00% TALON. CINCO NOCHES, S.L Gremio Toneleros, 42 (Palma de Mallorca) Spain Travel agency 99.94% 0.06% 100.00% DORPAN S.L. TENERIFE SOL S.A Gremio Toneleros, 42 (Palma de Mallorca) Spain Hotels ownership and management 50.00% 50.00% TORRESOL DES.TURISTICOS Gremio Toneleros, 42 (Palma de Mallorca) Spain Land owner 80.00% 80.00% TRIBENOL S.L. Alameda de Mazarredo 5 Bilbao-Viscaya Spain Holding 100.00% 100.00% TRYP MEDITERRANEÉ Hammamet Yasmine 8050,Tunez Tunisia Management of hotels in Tunisia 85.40% 85.40% TRYP,S.A. TRYP S.A. Mauricio Legendre 16, Madrid Spain Management of hotels in Spain 67.58% 32.42% 100.00% TRIBENOL, S.L. URME REAL S.L Orense 81 (Madrid) Spain Parking Meliá Madrid 92.80% 92.80% REALTUR S.A.

S OL M ELIÁ

A NNUAL R EPORT 2000 83 CONSOLIDATION SCOPE

The consolidation of these companies has been prepared according to the full consolidation method.

The sole and exclusive authorised activities of Meliá Brasil Administraçao are those which relate to the management of hotels. In spite of this fact, since the hotels are under joint ownership and are not legally authorised to carry out operating activities, in view of the local requirements, Meliá Brasil Administraçao had to assume the operating of the hotels in Brazil on behalf of the joint owners. For this reason, the Company includes only the remuneration from the operation of the hotels received by the Group and does not include related income and expenses in the consolidated profit and loss account.

Meliá Inversiones Americanas is quoted on the Madrid Stock Exchange.

2.2 Associated companies

The companies associated with the Group, defined as those in which the direct or indirect participation ranges between 20% and 50%, or with a lower participation but with a significant influence over management, are listed below:

COMPANY ADDRESS COUNTRYACTIVITY DIR P. IND P. TOTAL HOLDER IND. PART.

AGOTEL GMBH Josef Haumann Strasse 1 (Bochum) Germany Hotels operating 100.00% 100.00% APARTHOTEL BOSQUE, S.A Gremio Toneleros 42 (Palma de Mallorca) Spain Owns and oper. H. Sol Bosque 25.00% 25.00% C.P.COSTA DEL SOL Paseo Marítimo 11 (Torremolinos) Spain Community property owners 0.33% 18.69% 19.02% APARTOTEL S.A. COM.PROP.MELIA CASTILLA Capitán Haya 43 (Madrid) Spain Community property owners 28.80% 28.80% HELLENIC HOTEL MANAGEMENT Panepistimiou 40 (Atenas) Greece Managing company 40.00% 40.00% HOTEL CAMPUS, S.L. Villa Universitaria, Bellaterra C. (Barcelona) Spain Owns and oper. H. Meliá Campus 40.00% 40.00% INV.TUR.CASAS BELLAS S.A Barrio de Chamberí s/n (Sta. Cruz Tenerife) Spain Land owner 23.75% 23.75% MELIA MERIDA S.L Moreno de Vargas, 2 (Mérida) Spain Owner Hotel Meliá Mérida 44.14% 44.14% NEXPROM S.A Avda. del Lido s/n (Torremolinos) Spain Owns and oper. D. Pedro & D. Pablo 14.39% 5.67% 20.06% PROMEDRO PROMEDRO S.A Avda. del Lido s/n (Torremolinos) Spain Holding 20.00% 20.00% SOFIA HOTELES S.L. Mariano de los Cobos 1 (Valladolid) Spain Hotels management in Spain 49.01% 49.01% TRYP S.A. SOL HOTI PORTUGAL HOTELS Avda. da Republica 85 1º Esq. (Lisboa) Portugal Hotels management 45.00% 45.00% SOL MELIA TRAVEL S.A. Gremio Toneleros 42, (Palma de Mallorca) Spain Travel agency 100.00% 100.00% VIVA TOURS S.A. Trespanede 29 (Madrid) Spain Touroperator 21.98% 21.98%

Sol Meliá Travel, S.A, has initiated its activity during the year as a travel agency and is presently involved in the develop- ment of tools for sale by Internet. The Company has decided to consolidate this company by the equity method to avoid distorting the information in the profit and loss account, which is not homogeneous with the other Group companies.

During the current year the share in Agotel GMBH. increased up to 100%. Nevertheless, pending the definitive control of the company’s management, the financial statements of this company have been consolidated by equity method.

S OL M ELIÁ

A NNUAL R EPORT 2000 84 CONSOLIDATION SCOPE

2.3 Companies excluded from the consolidation scope

There is a group of companies which, although they do meet the aforementioned requirements, are not included in the Group’s consolidation scope. These companies are listed below:

COMPANY ADDRESS COUNTRY ACTIVITY DIR P.IND P. TOTAL HOLDER IND. PART.

CARIBOOKING & RESERVAT, N.V. De Ruyterkade 62 Curaçao, Antilles Neth.Antilles Inactive 98,21% 98,21% DES.TUR. DEL CARIBE N.V. CARIBOOKING & RESERVAT, N.V. Guernsey Inactive 98,21% 98,21% DES.TUR. DEL CARIBE N.V. CORP.HOTELERA METOR Faustino Sánchez Carrión s/n (Lima) Peru Hotels ownership and operations 40,03% MARINA INTERNATIONAL H. 19,61% 59,64% MELIA INV AMERICANAS DES. HOTELERA DEL NORTE, S. EN C.S.E. C.3 S. Coco Beach 955-I (Río Gde) Puerto Rico Hotels ownership and operations 47,50% SAN JUAN INVESTMENT B.V. 47,50% 95,00% DES. HOTELEROS SAN JUAN B.V. DETUR PANAMA, S.A. Residencial Espinar, Colon Aptdo 2268 Panama Concessionaire Panama Canal 31,79% 20,00% 51,79% MELIÁ INT HOTELS S.A. GUPE INMOBILIARIA Estrada da Luz, 90 6ºF,(Lisboa) Portugal Hotels management 99,99% 99,99% TRYP,S.A. HOTEL LAS AMERICAS, S.A Las Américas 9 (Ciudad de Guatemala) Guatemala Hotels ownership 20,00% 20,00% MARINA INTERNATIONAL H. HOTEL NET B2B.COM, S.L. Gremio Tejedores 5 (Palma de Mallorca) Spain Portal de Internet wholesaler 24,50% 24,50% M.I.H. EUROPE & M. Cavendish Square, 6 (London) U.K. Inactive 100,00% 100,00% MELIÁ INT. HOTELS S.A. MOGAN PROMOC. S.A. de C.V. (Cancún) Mexico Land owner 33,33% 33,33% MARKSERV B.V. PROM. PYA. BLANCA S.A. de C.V. Pza. San Ángel,15 (Cancún) Mexico Land owner 33,33% 33,33% MARKSERV B.V. PUNTA CANA RESERVAT., N.V. De Ruyterkade 62 Curaçao, Antillas Neth.Antilles Marketing 98,21% 98,21% RANDELSTOP CORP.N.V. SOL MELIA SUISSE, S.A. Rue de Messe 8-10 (Geneva) Switzerland Holding 100,00% 100,00%

The Company intends to sell the share in Detur Panamá, S.A., and for this reason the short-term portfolio balance was reclassified and is not included in this year’s consolidation. Likewise, no provision for decline in value is included since the Company does not expect that any loss will arise from the transaction.

Corporación Hotelera Metor has initiated the operation of a hotel in Lima during the current year. On the closing date of the accompanying annual accounts the Company has no standardized balance sheet and profit and loss account available to include this transaction in the consolidation. The value of the participation is stated at cost (See Note 12.2.)

At the year-end closing the Group has no accounting information available for Hotel Las Américas, S.A., and therefore the latter is not included in the consolidated annual accounts, despite the fact that it holds 20% share of this company. Its portoflio is duly provided for.

Desarrolladora Hotelera del Norte, S. en C.S.E., was formed in view of the construction of a hotel complex in Puerto Rico. The company’s balance sheet includes assets amounting to 9.5 million dollars and current assets of 100.3 million dollars, resulting from the capital contribution of 39 million dollars and from a loan received to start the hotel development of 70.8 million dollars. The company is not included in the consolidation since activities have not yet begun.

The other companies excluded from the consolidation are either dormant or are being integrated into the Group at December 31, 2000.

The exclusion of these companies from the consolidation scope has no significant effect on the net equity, financial posi- tion and results of the consolidated companies, their shares being valued at cost in the accounting records.

S OL M ELIÁ

A NNUAL R EPORT 2000 85 CONSOLIDATION SCOPE

2.4 Changes in the consolidation scope

Shares of Meliá Inversiones Americanas were acquired during 2000, so that the participation in the latter at year-end is of 98.21%. This participation increase is also reflected in the increase in the participation in its subsidiaries.

At the end of 1999 the Sol Meliá Group in France acquired companies that own (A) eight hotels. These companies were not included in the consolidation scope of the 1999 annual accounts and the investment was recorded at cost. In 2000, after integrating their management, these companies are consolidated under the full consolidation method in the Group’s financial information.

Shares of Controladora Turística Cozumel, S.A. de C.V. were acquired and in 2000 a participation of 50.51% is held in this company which, in turn, is the owner of 100% of Caribotels S.A. de C.V., which owns and operates the hotels Paradisus Cozumel and Sol Cabañas del Caribe.

As explained in Note 1, the companies (B) forming the Tryp S.A. Hotel Chain were acquired and therefore their financial information is included under the full consolidation method. The participation in Sofía Hoteles S.L., manager of the hotel Sofía Parquesol, was included by the equity method.

The Group has increased its participation from 8.7% up to 97.23% in Azafata S.A., which owns and operates the hotel Meliá Confort Azafata, and was consolidated in the current year by the equity method.

In May the Group acquired 40% of Hotel Campus S.L., which owns and operates the hotel Meliá Campus. Therefore it will be consolidated by the equity method.

Meliá Catering S.A., with a 100% participation of Sol Meliá, was formed to render catering services in view of the com- pany’s experience in the restaurant trade.

Sol Meliá has also acquired Sol Meliá Benelux, S.A., which owns and operates the Meliá Avenue Louise Boutique, a hotel in Belgium. The participation is 100% and its financial information is consolidated under the full consolidation method.

The changes that took place in the consolidation scope in 2000 are indicated below:

S OL M ELIÁ

A NNUAL R EPORT 2000 86 CONSOLIDATION SCOPE

ADDITIONS INCREASE OF PARTICIPATION % DISPOSALS

(B) AKUNTRA s. XXI S.L. AGOTEL GMBH LAVADORAS INDUSTRIALES DE GUADALAJARA (*) AZAFATA S.A. BISOL VALLARTA S.A. SAFIVIC, S.A. (*) (A) CADLO FRANCE S.A. CALA FORMENTOR S.A. SERVICIOS CORPORATIVOS MESOL (**) (A) CADSTAR FRANCE S.A. CASINO PARADISUS S.A. SOL HOLDING CORPORATION (***) CARIBOTELS DE MEXICO S.A COM PROP MELIA CASTILLA SOL HOTEL MANAG COMPANY (***) (B) CONSORCIO EUROPEO, S.A. COM PROP MELIA SOL Y NIEVE SOL HOTEL MIAMI BEACH (***) CONTROLADORA TURISTICA COZUMEL CORP HOT HISPANO MEXICANA (A) CORBEIL H.P.COLOMBRES DES HOT SAN JUAN B.V. (B) DARCUO s. XXI S.L. DES TUR DEL CARIBE N.V. (A) HOTEL ABBAYE THELEME S.A. DES TURISTICOS DEL CARIBE (A) HOTEL ALEXANDER S.A. DESARROLLOS SOL (A) HOTEL BLANCHE FONTAINE S.A. DOMINICAN INVESTMENT (A) HOTEL BOULOGNE ADAGIO S.A. DOMINICAN MARKETING SERV HOTEL CAMPUS S.L. FARANDOLE B.V. (A) HOTEL FRANCOIS S.A. HOTELES TURISTICOS S.A. (A) HOTEL MADELEIN PALACE INV INMOBILIARIAS IAR 1997 (A) HOTEL METROPOLITAIN INV TURISTICAS CASAS BELLAS (A) HOTEL ROYAL ALMA INVERSIONES AGARA S.A. HOTELES MELIA S.L. INVERSIONES CORO S.A. HOTELES SOL MELIA S.L. INVERSIONES GUAMA HOTELES SOL S.L. IRTON COMPANY N.V. (B) IHLA BELA GESTAO E TURISMO LATINAMERICAN LOGISTIC (B) INMOBILIARIA BULMES, S.A. MARMER S.A. INVERSIONES JACUEY MELIA INVERSIONES AMERICANAS (A) LONDIM FRANCE MOT GRANDES RUTAS ESPAÑOLAS (A) LSO FRANCE INVESTMENTS S.A. NEALE, S.A. MELIA CATERING NEXPROM S.A. (B) PARKING INTERNACIONAL, S.A. OP.PASEO DE LA REFORMA S.A. PROPIDADES EN ARRIENDO, S.L. PLAYA SALINAS (B) SECADE s. XXI S.L. RANDLESTOP CORP.N.V. SILVERBAY S.L. SAN JUAN INVESTMENT (B) SOFIA HOTELES S.L. URME REAL S.R. SOL MELIA BENELUX B.V. (A) SOL MELIA FRANCE SOL MELIA PERU SOL MELIA TRAVEL S.A. (B) TRIBENOL S.L. (B) TRYP MEDITERRANEE (B) TRYP S.A.

(A) Companies of the Sol Meliá Group in France (*) Sold companies (B) Companies of the Tryp Hotel Chain (**) Merger with operadora mesol (***) Dissolved companies

S OL M ELIÁ

A NNUAL R EPORT 2000 87 3 Basis of Presentation of the Consolidated Annual Accounts

The accompanying consolidated annual accounts consist of the consolidated balance sheet and profit and loss account for the years 2000 and 1999 and of the consolidated Notes thereto for the year 2000. In addition, the consolidated balance sheet and profit and loss account, together with the breakdown of some balance sheet and profit and loss data as well as other consolida- ted information relating to the year 1998, are also included.

3.1 True and fair view

The consolidated balance sheet and profit and loss account have been prepared from the internal accounting records of the parent company, Sol Meliá, S.A. and from the accounting records of the other companies included in the consolidation as detai- led above. The figures of the consolidated balance sheet, consolidated profit and loss account and of the Notes to the accounts are expressed in thousands of pesetas, unless otherwise indicated.

3.2 Comparison of information

The consolidated annual accounts at December 31, 2000 are presented following the structure established in the Spanish General Chart of Accounts, and also reflect the comparative figures of the two preceding year.

In relation to the consolidation scope, the main changes, which took place in 2000 with respect to the preceding year, are explained in Note 2.

During 1999, Sol Meliá, S.A. has concluded the Public Offering of Acquisition of Shares of MIA and the merger with Inmotel Inversiones, S.A. and includes in the 2000 balance sheet and profit and loss account the financial statements of the hotels acqui- red in France as well as the incorporation of the Tryp Hotel Chain. Given the circumstances indicated above, the balance sheet and profit and loss account figures for 2000, 1999 and 1998 are not comparable.

3.3 Consolidation principles

The consolidation has been prepared according to the full consolidation method for the subsidiaries in which SOL MELIA, S.A. holds directly or indirectly more than 50% of the shareholding or exercises a control position. Minority interests in the net equity and results of the consolidated companies are presented under a separate heading in the consolidated balance sheet lia- bilities and in the consolidated profit and loss account, respectively.

The companies with no direct or indirect majority holding by SOL MELIA, S.A. (between 20 and 50%), and those with a lower participation but in which the Company has significant influence, are presented in the consolidated balance sheet under the heading of Investments, “Participations consolidated by the equity method” for the book value of the participation. The parti- cipation of these companies in the consolidated results for the year is reflected in the accompanying consolidated profit and loss account as “Participation in profits of Companies consolidated by the equity method”.

The Group’s “significant influence” relates to participations exceeding 3% in companies that are quoted on the Stock Exchange or where a significant influence exists with respect to the company’s management in case of companies that are not quoted on the Stock Exchange.

S OL M ELIÁ

A NNUAL R EPORT 2000 88 4 Appropriation of Results

The Board of Directors of each company will propose the appropriation of results to the General Shareholders Meeting.

The parent company, Sol Meliá, S.A., will propose that results be appropriated as follows:

BASIS OF APPROPRIATION

Profit and Loss (Net profit for 2000) 7,996,917

APPROPRIATION

To legal reserve 87.999 To reserves for investments in the Canary Islands 3,265,636 To voluntary reserves 233,478 To dividends 4,409,804

At the General Shareholders’ Meeting, the Board of Directors will propose the distribution of a dividend of Ptas. 23’8660 per share, excluding own shares, for which a dividend of Ptas. 24’00 per share will be paid.

S OL M ELIÁ

A NNUAL R EPORT 2000 89 5 Accounting Principles

The most significant accounting principles applied in the preparation of the 2000 consolidated annual accounts are as follows:

5.1 Goodwill and negative differences on consolidation

The valuation differences between the investment and the equity, whenever these could not be attributed to specific assets or liabilities at purchase time are reflected, when first consolidated, under two possible headings:

• Goodwill on consolidation The differences between the acquisition price of subsidiaries or associated companies (Note 2) and their net book value, whenever these are not attributable as a higher value of specific fixed assets of the acquired companies, are recorded as goodwill, which is amortised on a straight-line basis over a 10 year period for those existing at December 31, 1998 and over 20 years for the differences arising after that date. The reason for amortising over more than 10 years is due to the fact that this is considered as the period during which the investment will contribute to generate profits for the Group (See Note 6).

The surplus assigned to specific assets is amortized, when applicable, based on the actual depreciation.

• Negative consolidation differences The negative consolidation difference is calculated by taking into account the difference between the book value of the participation, direct or indirect, of the parent company in the subsidiary’s share capital and the value of the pro- portional part of the subsidiary’s equity attributable to such participation on the first consolidation date (See Note 7). Negative consolidation differences are recorded under liabilities in the consolidated balance sheet.

5.2 Minority shareholders and results

• Minority shareholders: This heading in the balance sheet liabilities includes the proportional part of the shareholders’ equity on the first con- solidation date that corresponds to third parties not belonging to the Group (See Note 19).

• Results attributed to minority shareholders This is the participation in the consolidated profit or losses for the year that corresponds to minority shareholders (See Note 19).

5.3 Transactions between consolidated companies

Results arising from internal operations within the consolidated group are eliminated, whenever the amount is significant, and deferred until they are realised with third parties outside the Group.

S OL M ELIÁ

A NNUAL R EPORT 2000 90 ACCOUNTING PRINCIPLES

Credits and debits between the companies included in the consolidation as well as internal income and expenses have been eliminated in the consolidated annual accounts.

5.4 Uniformity

It has not been necessary to adjust the individual accounts of the Group’s companies to unify them since, in general, the same uniform internal norms exist and are applied.

The annual accounts year-end closing date for all the consolidated companies is December 31, 2000.

5.5 Conversion of annual accounts of foreign companies

All assets, rights and obligations of the foreign companies included in the consolidation are converted into pesetas by appl- ying the exchange rate prevailing on December 31, 2000.

The items of the profit and loss account have been converted by applying an appropriate weighted average exchange rate in view of the volume of the transactions during each period.

The difference between the amount of the foreign companies’ equity, including the balance of the profit and loss account calculated according to the preceding paragraph, converted at the historical exchange rate, and the net worth resulting from the conversion of the assets, rights and obligations according to the first paragraph, are recorded as gains or losses, whene- ver applicable, in the shareholders’ equity of the consolidated balance sheet under the heading “Foreign currency gains/(Losses)”, after deducting the part of such difference that corresponds to the minority shareholders recorded in “Minority shareholders” on the liabilities side of the consolidated balance sheet (See Notes 18.5 and 18.6).

5.6 Start-up expenses

The start-up expenses of the different companies included in the consolidation are valued at cost, net of the corresponding amortisation which is calculated using the straight-line method over 5 years (See Note 9).

5.7 Intangible fixed assets

Intangible fixed assets relate to sundry software applications and rights derived from financial leasing contracts.

Software applications are valued at cost and are amortised on the straight-line method over a five-year period.

Acquisition goodwill is amortised on the straight-line method over 5 to 20 years.

The cost of the assets acquired by financial leasing contracts does not include financing charges but it does include the value of the legal revaluation according to Royal Decree Law 7/1996, of June 7th (See Note 11 and 18) and is accounted for in accordance with the prevailing Spanish General Chart of Accounts.

S OL M ELIÁ

A NNUAL R EPORT 2000 91 ACCOUNTING PRINCIPLES

The amount of the fixed assets revaluation was established by applying, to the purchase or production cost and to the corresponding annual amortisation charges considered as deductible expenses for fiscal purposes, coefficients in view of the purchase year of the items and the figures thereby obtained were reduced by 40% to take into account the financing con- ditions, in compliance with such rulings.

The annual amortisation/depreciation charge is calculated on the straight-line method over the estimated useful lives of the different assets, which are as follows:

Buildings 30-50 years Installations 8-18 years Machinery 8-18 years Furniture 10-15 years Software 5-8 years Vehicles 6-10 years

5.8 Tangible fixed assets

Tangible fixed assets are stated at acquisition price which includes any additional expenses incurred until the item is put to use, and increased by the legal revaluations commented on in Note (11). No financing cost is included. In 1996 tangible fixed assets were revalued in accordance with Royal Decree Law 7/1996 of June 7th, (See Notes 11 and 18).

The amount of the fixed assets revaluation was established by applying, to the purchase or production cost and to the corresponding annual depreciation charges considered as deductible expenses for fiscal purposes, coefficients in view of the purchase year of the items and the figures thereby obtained were reduced by 40% to take into account the financing con- ditions in compliance with such rulings.

Repairs which do not represent an extension of the useful life and maintenance expenses are charged directly to the profit and loss account. Costs which prolong or improve the useful life of the asset are capitalised as an increase in their value.

The Group’s tangible fixed assets are depreciated using the straight-line method over the estimated useful life of the assets which are as follows:

Buildings 30-50 years Installations 8-18 years Machinery 8-18 years Furniture 10-15 years Software 5-8 years Vehicles 6-10 years Other fixed assets 4-8 years

The net book value of tools and fittings corresponds to the value as per stocktakings carried out in the different centres at year end.

The revaluations and capital gains attributable to tangible fixed asset items are depreciated following the same criteria applied to the revalued and/or affected items.

S OL M ELIÁ

A NNUAL R EPORT 2000 92 ACCOUNTING PRINCIPLES

5.9 Investments

The investments in associated companies have been recorded according to the equity method based on the net book value which is adjusted, when applicable, by the specific valuation made of their assets and liabilities (See Note 8). Results for the year obtained by these companies are reflected in the consolidated profit and loss accounts as “Participation in profit (losses) of companies consolidated by the equity method” (See Note 25).

Unquoted securities are valued at cost of acquisition less the corresponding amortisation when applicable.

Securities, both of fixed and variable interest, included under the Investments and Short-term investments headings are valued at their acquisition price upon subscription or purchase and include the expenses inherent to each operation.

Non-trade credits are recorded for the amount paid and corrected at year-end, whenever applicable, by the corresponding provision to cover risks involved due to possible insolvencies. At year-end, provisions are applied to the appropriate concept.

5.10 Deferred expenses

Expenses for fomalisation of debts are valued at cost.

Expenses for deferred interest relate to the difference between the repayment value and the nominal value of the relevant debts.

These expenses are written down over the period of maturity of the corresponding debts and according to a financing plan.

5.11 Non-trade loans

Both short and long-term non-trade loans are shown at repayment value on the assets side of the consolidated balance sheet.

5.12 Inventories (Trade inventories, raw materials and other supplies)

Raw and ancillary materials are valued at their average acquisition cost which is, generally, lower than the realisable value. The acquisition price includes the amount invoiced plus all additional expenses incurred until the goods are stored in the warehouse. In the case of real estate inventories, the accounting values include tacit capital gains recorded for consolida- tion purposes only (See Note 14).

5.13 Clients

Clients’ balances are reflected in the balance sheet at real value and corrected, whenever applicable, by the corresponding provision to cover risks involved due to possible insolvencies. Such provisions are applied when the debt is considered as irrecoverable.

The Group has ceded accounts receivable (factoring) for a total mount of Ptas.5,705 million to the company Compas Sigma.

S OL M ELIÁ

A NNUAL R EPORT 2000 93 ACCOUNTING PRINCIPLES

5.14 Capital grants

Capital grants are not repayable and are recorded for the amount received at the time of the grant as deferred income, which is released to results using the straight-line method over the useful life of the assets thereby financed (See Note 20).

5.15 Provisions for pensions and similar obligations

Certain Collective Wage Agreements prevailing and applicable in 2000 establish that the permanent staff retiring betwe- en 60 and 65 years of age will be entitled to a cash premium equivalent to a number of monthly salaries proportional to the number of years of service.

During the year an evaluation of these commitments was performed in accordance with the actuarial assumptions contai- ned in the externalization Regulations, by applying the calculation method known as the “projected unit credit” and the population assumptions corresponding to the GRM95-GRF95 tables. According to this study, the commitments accrued at December 31, 2000 in accordance with the Externalization Regulations amount to Ptas. 2,701 million. The provision for liabilities and charges covers these commitments as well as the commitments acquired with six executives of the com- pany absorbed in 1999.

5.16 Provisions for liabilities and charges

In addition to the accounting provisions for potential insolvencies (estimated) relating to accounts receivable, the Group also books long-term provisions in the balance sheet liabilities, estimated according to the principle of prudence and follo- wing conservative criteria, to cover the different risks and contingencies due to the different possible interpretation of the prevailing fiscal rulings, contingent risks for bank and other guarantees given, legal claims and lawsuits under way and other possible liabilities arising from operations. At year end, provisions are applied to the respective concepts.

5.17 Non-trade debts

Both short and long-term non-trade debts are recorded at their repayment value. The difference between this value and the amount received is accounted for under the assets heading “Deferred expenses”, and released to results on a yearly basis according to a financial criteria (See Note 22).

5.18 Short and long-term classification

The short and long-term classification depends on the expected term of maturity, disposal or cancellation of the Company’s obligations and rights. A period of more than 12 months as from the year-end closing date is considered long-term.

5.19 Income and expenses

Income and expenses are recorded according to the accruals principle, regardless of when actual payment or collection occurs (See Note 25).

S OL M ELIÁ

A NNUAL R EPORT 2000 94 ACCOUNTING PRINCIPLES

5.20 Corporation Tax

Corporation Tax is calculated according to the results for the year and taking into account the differences between the accounting and fiscal results (taxable income) and their “permanent” and “temporary” nature in order to determine the cor- poration tax for the year.

Fiscal credits deriving from the carryforward tax losses are recorded for an amount no higher than the deferred taxation figure accounted for at that date and do not imply, therefore, any cash outlay.

The deferred tax liabilities balance maintained in the balance sheet relates mainly to differences arising from the fiscal tre- atment applied to financial leasing contracts and to the deferral of taxation for capital gains from reinvestments.

The eventual deferred taxation which would relate to the revaluation recorded according to Law 29/1991 is not accounted for since the sale of the revalued buildings is not included in the Company’s corporate purpose.

The tax criteria applied to financial leasing contracts signed after January 1, 1996 consist of applying amortisation rates which are twice the maximum rates established in the tax charts. The effect of this temporary difference is reflected in the corporation tax expense (See Note 23).

5.21 Transactions in foreign currency

Debit and credit balances in foreign currency are valued at the exchange rate prevailing on the corresponding transaction date and are converted at year end at the rate then in force.

Unrealised foreign currency losses are considered as expense of the year in which they are incurred while unrealised foreign currency gains are considered when arising as deferred income. Nevertheless, if unrealised foreign currency losses were recorded during the year or in previous years, the unrealised foreign currency gains would be considered income of the period for the same amount of unrealised foreign currency losses. Remaining unrealised foreign currency gains would be accounted for as deferred income.

5.22 Severance payments

In accordance with the prevailing labour agreements in some countries where the Group operates, the companies are obli- ged to pay severance to employees dismissed without due cause. Given that there is no staff reduction plan, no provision is deemed necessary for this concept.

5.23 Parent company shares

The own shares held by Sol Meliá, S.A. are valued at the lower of the acquisition or purchase price and the quotation price at December 31, 2000.

The Options Programmes for executives, establishing their right to purchase up to 200,000 old shares of Sol Meliá, S.A., in 1999 (50,000 shares) and in the year 2000 (150,000 shares), have been cancelled during the year.

S OL M ELIÁ

A NNUAL R EPORT 2000 95 ACCOUNTING PRINCIPLES

5.24 Provision for bad debts

The provision for bad debts aims to cover the possible losses that might incur in the full recovery of the accounts receiva- ble. This provision appears under “Debtors” on the assets side of the consolidated balance sheet. At year end, the provi- sions are applied to the respective concepts.

5.25 Subsidiaries and associated companies

In this respect, please see Note 2 where subsidiaries and associated companies are detailed.

5.26 Modifications to the consolidation scope

Modifications to the consolidation scope are identified and explained in Note 2.

5.27 Income from time-sharing

Income from time-sharing is accounted for according to cash criteria, which is more prudent than the sale criteria applied to the building, whose ceded right of use is equivalent to the useful life.

S OL M ELIÁ

A NNUAL R EPORT 2000 96 6 Goodwill on Consolidation

Goodwill on consolidation and its amortisation are detailed below:

6.1 Companies consolidated by full consolidation method

(Thousands of pesetas) Balance 12/31/1998 Balance 12/31/1999 Amortisation 2000 Additions Transfers Disposals Balance 12/31/2000 Akuntra XXI S.A. 21 21 Apartotel, S.A. 263,392 227,474 (35,917) 191,557 Azafata, S.A. (16,576) 497,283 480,707 Tamarindos, S.A. 237,804 (37,548) 200,256 Cadlo France, S.A. (12,280) 245,609 233,329 Darcuo XXI S.A. 21 21 Dock Telemarking, S.A. 2,702 2,333 (369) 1,965 Dorpan, S.L. 50,631 43,726 (6,904) 36,822 Grupo Sol Asia Ltd. 40,861 35,288 (5,572) 29,717 Hotel Alexander, S.A. (28,995) 579,900 550,905 H. Boulogne Adagio (20,596) 411,911 391,316 H.C. Extremadura, S.A. 85 85 H.Meliá Internacional de Colombia 2,907 2,510 (396) 2,114 Ihla Bela de Gestao e Turismo, S.A. 42,965 42,965 Inmotel I. Italia, S.R.L. (104) 104 Inversiones Latinoamérica 2.000, S.L. 275 Inversiones Turísticas de Caribe, S.A. 14,117 12,191 (1,925) 10,267 Inversiones y Explotaciones Tur. S.A. 56 56 Lirax 423,282 380,597 (42,684) 337,914 Lomondo Ltd. 671,032 (38,913) 92,949 725,069 Londim France (32,171) 643,417 611,246 M.I.H. U.K. LTD 1,992 1,719 (272) 1,449 Markserv, B.V. 94,451 81,571 (12,880) 68,692 Marksol Turizm 28,255 24.,401 (3,853) 20,551 Melia International Hotels, S.A 118,594 102,421 (16,172) 86,250 Melsol Management B.V. 863 744 (118) 628 Mesol Management, S.L. 733 632 (100) 533 Operadora Mesol, S.A. de C.V. 163,090 140,850 (33,192) 69,364 177,023 Playa Salinas,S.A. 9 9 Secade XXI S.A 21 21 Sevicios Corp. Mesol, S.A. de C.V. 80,316 69,363 (69,364) Sol Group B.V. 31,324 27,051 (4,272) 22,781 Sol Hotel Miami Beach 3,236 2,794 (2.794) Sol Hotel U.K. LTD 166,104 143,453 (22,650) 120,803 Sol Maninvest, B.V. 4,543 3,923 (620) 3,304 Sol Meliá Benelux, S.A. (3,128) 250,225 247,097 Sol Meliá Croacia 317,424 283,414 (34,009) 249,404 Sol Meliá France, S.A.S. (5) 101 96 Sol Meliá Perú S.A. 10,596 10,596 Talonario 5 Noches, S.L. 72,400 62,526 (9,873) 52,654(0) Tribenol, S.L. 18,783,941 18,783,941 Tryp Meditérranée, S.A. 361,447 361,447 Tryp S.A. 41,571,166 41,571,166

TOTAL 1.,881,494 2,557,898 (422,092) 63,491,740 (2.794) 65,624,776

S OL M ELIÁ

A NNUAL R EPORT 2000 97 GOODWILL ON CONSOLIDATION

Additions and disposals arise mainly from the changes introduced in the Group’s consolidation scope, as explained in Note 2.

Sol Meliá has acquired Tryp, S.A.’s shares, with goodwill of Ptas. 60,758 million. The conclusion date of the acquisition contract was December 1, 2000 when all legal actions agreed upon in the contract were completed. In view of the fiscal implications to be taken into account for the deductibility of goodwill and in order to be coherent in the application of accounting policies, both in the parent company and in the consolidation, Sol Meliá’s directors have postponed until next year, when the companies are expected to merge, the tax treatment of goodwill, and do not question its economic and accounting efficiency at the present time.

Likewise, tacit surplus existing on the acquisition date of the corresponding share and attributable to land and buildings was included in fixed assets and inventories. This surplus is amortised over the useful life and the breakdown by company is as follows:

(Thousands of pesetas) BALANCE AMORTISATION ADDITIONS DISPOSALS BALANCE 31/12/99 2.000 31/12/00

Apartotel, S.A. 149,860 (3,234) 146,628 Casino Tamarindos, S.A. 446,424 (16,333) 430,092 Consorcio Europeo S.A. 1,773,621 1,773,621 Corbeil H.Paris Colombes, S.A. (73,425) 7,342,504 7,269,079 Desarrollos Sol, S.A. 3,227,646 3,227,646 H. Metropolitan, S.A. (31,277) 3,127,703 3,096,426 Inmobiliaria Bulmes S.A. 5,682,915 5,682,915 LSO France Investiments, S.A. (12,768) 638,413 625,645 Parking Internacional S.A. 7,955 7,955 Playa Salinas, S.A. 1,120,983 593 1,121,577 Realizaciones Turísticas, S.A. 2,147,880 (34,924) (55,297) 2,057,659 Silverbay S.L. 361,492 361,492 Urme Real, S.L. 397,572 (7,782) (13,990) 375,801

TOTAL FIXED ASSETS 7,490,366 (179,744) 18,935,196 (69,286) 26,176,535

Desarrollos Sol, S.A. 1,120,577 (112,269) 1,008,308

TOTAL INVENTORIES 1,120,577 (112,269) 1,008,308

S OL M ELIÁ

A NNUAL R EPORT 2000 98 GOODWILL ON CONSOLIDATION

6.2 Companies consolidated by the equity method

The breakdown of goodwill on consolidation in companies consolidated by the equity method is as follows:

(Thousands of pesetas) BALANCE BALANCE AMORT. ADDITIONS DISPOSALSBALANCE 31/12/1998 31/12/1999 2000 31/12/2000

Agotel Gmbh 409 409 Aparthotel Bosque, S.A. 86,483 74,690 (11,793) 62,897 Casino Tamarindos, S.A. 275,352 Hotel Campus, S.L. (1,470) 117,600 116,130 Inversiones Turísticas Casas Bellas, S.L. 216 (216) Meliá Mérida, S.L. 14 14 Touroperador Viva Tours,S.A. 157,895 (8,315) 149,580

TOTAL 361,835 233,211 (21,578) 117,614 (216) 329,030

Additions and disposals arise mainly from the changes introduced in the Group’s consolidation scope, as explained in Note 2.

In like manner, the tacit surplus attributable to tangible fixed assets items existing on the acquisition of these participations was included as an increase in the value of the participation with the corresponding proportion. This surplus is amortised over the useful life and the breakdown by company is as follows:

(Thousands of pesetas) BALANCE AMORT. ADDITIONS DISPOSALS BALANCE 31/12/99 2.000 31/12/00

Aparthotel Bosque, S.A. 2,595 (70) 649 3,174 Hotel las Américas, S.A. 301,711 (301,711) Nexprom, S.A. 200,587 (5,497) 622 195,712

TOTAL 504,893 (5,567) 1,270 (301,711) 198,886

The effect on the balance sheet is included under “Participations in companies consolidated by the equity method” for the corresponding participation (See Note 8).

The disposal in Hotel Las Américas, S.A. is due to the departure of this company from the consolidation scope, as indica- ted in Note 2.

S OL M ELIÁ

A NNUAL R EPORT 2000 99 7 Negative Consolidation Differences

The negative consolidation differences are listed below:

7.1 Companies consolidated by full consolidation method

(Thousands of pesetas) BALANCE AMORTISATION ADDITIONS DISPOSALS BALANCE 31/12/99 2000 31/12/00

Bear S.A. De C.V. 2,282,816 2,282,815 C.Tunissienne de G.H. 396 396 396 Controladora Turística Cozumel, S.A. De C.V. 1,201,903 1,201,903 Gesmesol, S.A. 154,466 154,466 154,466 Grupo Sol Services 31,913 31,913 31,913 Impulse Hotel Development 16 16 Inversiones Jacuey 1,919 1,919 Irton Company, S.A. 4 5 Meliá Brasil Adminitraçao, S.A. 27,782 27,782 27,782 Meliá Mérida S.L. 11 (11) 0 Meliá Venezuela S.A. 12,409 12,409 12,409 Melsol Portugal, S.A. 1,611 1,611 1,611 Sol Group Co. 974 974 974 Sol Holding Co. 7,583 7,583 (7.583) 0 Sol Holding Management Co. 958 958 (958) 0 Sol Meliá Benelux, S.A. 18 18 TOTAL 238,091 2,520,938 1,203,839 (8,552) 3,716,226

Additions and disposals arise mainly from the changes introduced in the Group’s consolidation scope, as explained in Note 2.

7.2 Companies consolidated by the equity method

(Thousands of pesetas) BALANCE 31/12/99 ADDITIONS DISPOSALS BALANCE 31/12/00

Sofía Hoteles S.L. 32,633 32,633 TOTAL 32,633 32,633

The share in the managing company of Hotel Sofía Parque Sol is incorporated as a result of the acquisition of the Tryp Hotel Chain.

S OL M ELIÁ

A NNUAL R EPORT 2000 100 8 Participations by the Equity Method

The investments corresponding to participations in associated companies have been valued in accordance with the equity method of consolidation. The amounts obtained by the equity method are as follows:

(Thousands of pesetas) BALANCE BALANCE RESULT ADDITIONS DISPOSALS EXCHANGE BALANCE 31/12/98 31/12/99 2000 DIFFERENCE 31/12/00

Agotel Gmbh (269.567) (69.025) 706.096 (269.566) 97.938 Aparthotel Bosque, S.A. 166.854 179.092 14.367 (16.064) 177.395 C.P.Meliá Castilla 311.248 252.734 5.052 (233.729) 335.306 C.P.Meliá Costa del Sol 237.306 238.948 91.948 (70.556) 260.343 Casino Tamaindos, S.A. 1.665.178 Hellenic Hotel Management 28.669 15.131 (18.167) (274) (3.309) Hotel Campus S.L. (25.028) 82.400 57.372 Hotel Las Américas, S.A. 406.523 383.318 (383.318) I.Turísticas Casas Bellas, S.L. 1.499.790 (2) 461 (1.617) 1.498.632 Meliá Inversiones Americanas, N.V. 10.678.746 Meliá Mérida, S.L. (2.361) 204.986 202.625 Nexprom/Promedro 346.680 57.088 1.162 404.931 Sofía Hoteles S.L. (11.027) 140.431 129.404 Sol Hoti Portugal Hoteis 6.877 17.916 (1.520) 16.396 Sol Meliá Travel, S.A. (65.218) 329.504 264.287 Touroperador Viva Tours, S.A. 220.574 (65.251) (9.945) 145.378

TOTAL 13.190.153 2.943.132 158.539 1.470.092 (984.795) (274) 3.586.697

Additions and disposals arise mainly from the changes introduced in the Group’s consolidation scope, as explained in Note 2, and from the adjustments arising from the write-off of provisions and dividends made in the consolidation process.

The value of the participations includes tacit surplus relating to buildings not recorded by the subsidiaries. This surplus is amortised over the useful life of the different buildings it relates to. (See Note 6).

S OL M ELIÁ

A NNUAL R EPORT 2000 101 9 Start-up Expenses

The breakdown of this consolidated balance sheet heading is as follows:

(Thousands of pesetas) BALANCE BALANCE AMORT. ADDITIONS DISPOSALS CONV. BALANCE 31/12/98 31/12/99 DIF. 31/12/00

Formation expenses 1,952 15,302 (5,840) 22,348 50 31,860 Initial set-up expenses 514,807 1,910,398 (394,681) 438,032 (159,301) 47,020 1,841,480 Other deferred expenses 168,548 625,633 (192,132) 365,764 7,627 806,894 Share capital increase 839,673 934,752 (482,305) 340,536 1 792,982

TOTAL 1,524,980 3,486,086 (1,074,958) 1,166,679 (159,301) 54,698 3,473,216

The additions in “Other deferred expenses” relate mainly to the acquisition of Tryp, S.A.

The additions in “Share capital increase” relate to the share capital increase resulting from the non-monetary contribution for the acquisition of the Tryp Hotel Chain.

S OL M ELIÁ

A NNUAL R EPORT 2000 102 10 Intangible Fixed Assets

The breakdown of the cost and accumulated amortisation of intangible fixed assets is as follows:

(Thousands of pesetas) COST BALANCE AT BALANCE AT ADDITIONS TRANSFER DISPOSALS CONV. BALANCE AT 31/12/98 31/12/99 TANG. ASSETS DIF. 31/12/00

Land 273 540,174 3,071 (27,226) (62,431) 453,588 Buildings 81,831 23,011,612 6,233,692 (14,513,742) (207,618) 3,215 14,527,158 Installations 5,431,109 6,285,961 (508,848) 11,208,222 Machinery 602,031 475,607 (82,272) 995,365 Tools 436,005 2,400 (236,933) (903) 200,569 Furniture 5,271,652 2,125,623 (393,001) 7,004,274 Data processing equip. 85,986 381,385 (24,845) 442,526 Vehicles 30,406 10,645 1,989,617 2,030,668 Ind.Prop rights/R+D exp. 897,671 187,361 493,873 (11,993) 669,241 Goodwill 1,257,444 164,341 7,320 1,429,105 Transfer rights 786 12,800,598 (196,177) 12,605,208 Software 177,008 365,517 2,814,907 (7,352) 429 3,173,500

TOTAL COST 1,156,783 37,219,295 18,992,291 (996,652) (278,304) (197,206) 54,739,424

ACCUMULATED BALANCE AT BALANCE AT CHARGE FOR ADDITIONSTRANSFER DISPOSALS DIF. BALANCE AT AMORTISATION 31/12/98 31/12/99 THE YEAR TANG. ASSETS CONV. 31/12/00

Buildings 17,315 801,991 178,010 45,714 (527,800) (38,253) 439 460,100 Installations 406,181 484,194 1,282 (98,928) 1 792,731 Machinery 43,329 46,528 (15,000) 74,857 Tools and fittings 32,196 700 (938) (230) 31,728 Furniture 479,233 421,015 5,562 (94,144) (1) 811,665 Data processing equip. 28,488 16,982 (9,882) 35,588 Vehicles 2,682 103,026 (1,036) 104,672 Ind.Prop rights/R+D exp. 126,268 234 1,082 455,902 (11,398) 445,821 Goodwill 295,720 159,525 147,465 (5,321) 597,389 Transfer rights 392,772 169,367 (17,236) 544,903 Software 26,897 116,874 100,784 15,811 (1,972) 271 231,768 Provisions 152,000 152,000

TOTAL ACCUM. AMORT. 170,480 2,358,929 1,903,918 672,436 (578,361) (40,455) (33,245) 4,283,168

NET BOOK VALUE 986,303 34,860,366 50,456,255

S OL M ELIÁ

A NNUAL R EPORT 2000 103 INTANGIBLE FIXED ASSETS

There are 1,622 financial leasing contracts pending maturity at December 31, 2000, of which 791 expire between 1 and 2 years, 42 in 3 years, 785 up to 5 years and 4 between 6 and 10 years. The instalments pending payment at December 31, 2000 amount to a total of Ptas. 18,591 million, of which Ptas. 7,245 are short-term and the rest long-term. The total resi- dual value of the contracts in force amounts to Ptas. 1,086 million (See Note 22).

The main additions recorded during the year relate to sundry repairs and refurbishments carried out by the Group in various hotels operated by Group companies as well as to the incorporation of software applications for several areas of the Company, which will permit the integration of the different management areas of the hotels and provide support to the Group’s growth and globalisation processes. Among them are the front office, selling points, SAP and Internet applications.

The amount recorded for reclassified transfer rights relates to the leasehold contract of Lomondo Ltd.

S OL M ELIÁ

A NNUAL R EPORT 2000 104 11 Tangible Fixed Assets

The movements of the different headings of tangible fixed assets and the accumulated depreciation during 2000 are as follows:

(Thousands of pesetas) COST BALANCE AT BALANCE AT ADDITIONS TRANSFER DISPOSALS EXCHANGE BALANCE AT 31/12/98 31/12/99 FROM INTANGIBLE DIFFERENCES 31/12/00

Land 170,777 59,857,662 14,373,725 27,226 (1,543,871) 1,577,796 74,292,535 Buildings 1,080,132 165,951,840 31,011,689 4,672,573 (8,109,730) 10,058,395 203,584,769 Sub-Total 1,250,909 225,809,503 45,385,414 4,699,799 (9,653,601) 11,636,192 277,877,304

Installations 218,893 17,990,582 6,781,894 626,344 (242,133) (11,570) 25,145,117 Machinery 67,954 4,334,916 1,071,650 (33,276) (290,402) (51) 5,082,837 Sub-Total 286,847 22,325,498 7,853,544 593,068 (532,535) (11,621) 30,227,956

Furniture 237,547 34,570,172 7,486,204 790,706 (7,652,462) 1,248,164 36,442,784 Tools 3,158 480,473 93,178 1,836,083 (19,145) 67,207 2,457,791 Sub-Total 240,705 35,050,645 7,579,382 2,626,789 (7,671,608) 1,315,372 38,900,575

Vehicles 44,600 2,582,419 129,190 (1,989,519) (201,440) 24,310 544,960 Data processing equip. 416,273 3,510,165 760,906 35,943 (315,747) 118,854 4,110,094 Other fixed assets 85,140 2,211,427 5,689,217 241,131 (1,251,358) 1,892 6,892,309 Sub-Total 546,013 8,304,011 6,579,313 (1,712,446) (1,768,545) 145,055 11,547,363

Works in progress 3,567 4,624,763 10,032,979 (5,210,558) (5,619,568) 77,605 3,905,221

TOTAL COST 2,328,041 296,114,438 77,430,632 996,652 (25,245,857) 13,162,603 362,458,420

ACCUMULATED BALANCE AT BALANCE AT CHARGE FOR ADDITIONS TRANSFER DISPOSALS EXCHANGE BALANCE AT DEPRECIATION 31/12/98 31/12/99 THE YEAR FROM INTANGIBLE DIFFERENCES 31/12/00

Buildings 148,718 39,309,154 4,636,632 4,186,277 (2,371,238) (2,571,274) 1,845,381 45,034,931 Installations 40,816 9,938,422 1,343,647 2,940,391 96,703 (222,370) (1,798) 14,094,995 Machinery 12,174 2,140,819 325,712 354,475 350,471 (182,577) 998 2,989,898 Sub-Total 201,708 51,388,395 6,305,991 7,481,143 (1,924,063) (2,976,221) 1,844,581 62,119,824

Furniture 79,924 13,754,136 2,550,618 3,403,881 2,259,970 (2,839,718) 893,577 20,022,464 Tools and fittings 2,212 7,007 3,520 131,413 3,247 (644) (86) 144,457 Vehicles 28,216 281,789 345,979 81,977 (24,766) (140,821) (554) 377,522 Data processing equip. 241,183 2,252,813 416,201 510,044 80,647 (213,094) 91,551 3,138,162 Other fixed assets 77,844 759,693 1,382,786 177,240 183,327 (1,586,697) (11,551) 1,093,371 Provisions 0 97,540 554 402,228 0 0 21 500,343 Sub-Total 429,379 17,152,978 4,699,657 4,706,784 2,502,425 (4,758,481) 972,958 25,276,320

TOTAL ACCUM. DEP. 631,087 68,541,373 11,005,648 12,187,927 578,361 (7,734,697) 2,817,539 87,373,658

NET VALUE 1,696,954 227,573,065 275,084,761

S OL M ELIÁ

A NNUAL R EPORT 2000 105 TANGIBLE FIXED ASSETS

In case of merger, or non-monetary contributions of activities, in accordance with the norms on formulation of consolida- ted annual accounts, the difference between the book value of the participation in the absorbing company and the net book value of such participation according to the books of the absorbed company may be attributed to the corresponding assets and up to the limit of their market value. For this reason, Sol Meliá, S.A. has recorded as additions for the year the surplus recorded in several hotels as a result of the merger with Inmotel Inversiones, S.A.for an amount of Ptas. 5,157 million, of which Ptas. 2,745 million correspond to Meliá Lebreros, Ptas. 1,748 million to Meliá Sevilla and Ptas. 664 million to Sol Elite Barbados.

The main tangible fixed assets additions recorded during the year are as follows:

• Incorporation to the consolidated Group of the companies that own the eight hotels acquired in France in November 1999 for a net value of Ptas. 12,681 million.

• Acquisition of the hotels Fénix and Colon for Ptas. 7,749 and 3,343 million, respectively.

• Acquisition of building sites of tourist interest in the Canary Islands, the purchase value of which is of Ptas. 1,050 million in case of execution.

• Incorporation of Azafata, S.A., owner of Hotel Azafata for Ptas. 800 million.

• Incorporation of Caribotels de México, S.A. de C.V., owner of Hotel Paradisus Cozumel for Ptas. 6,800 million.

• Incorporation of Sol Melia Benelux, B.V., owner of Hotel Melia Avenue Louise for Ptas. 1,450 million.

• The main tangible fixed assets disposals recorded during the year are as follows:

• Sale of Hotel Sol Las Olas, located in Corralejo-Fuerteventura, the selling price of which was Ptas. 2,300 million.

• Sale of Hotel Sol Bardinos, located in Gran Canaria-Las Palmas, the selling price of which was Ptas. 1,400 million.

• Sale of Hotel Melia Bavaro, located in Playa Bavaro-Santo Domingo, for 55 million of US-dollars.

The Company is also carrying out important repairs and refurbishments in many of its hotels, which has given rise to important additions and disposals of tangible fixed assets.

The sales of Hotel Sol Las Olas and Hotel Bardinos are subject to the fulfilment by Sol Meliá, S.A. of certain requirements which are being processed on the formulation date of these annual accounts. The directors do not expect that any signifi- cant contingencies will arise from this transitory situation.

After the integration of the Tryp Hotel Chain, the Group operates under leasing contracts a total of 67 hotels, of which 5 are five-star hotels with 784 rooms, 36 are four-star hotels with 6,087 rooms, 19 are three-star hotels with 3,680 rooms, 4 are two-star hotels with 212 rooms and 3 are establishments of three-key apartments with 784 apartments. In addition, leasing contracts are signed for 35 hotels which will be operated in 2001, 2002 and 2003, with an approxima- te total of 6,927 rooms.

S OL M ELIÁ

A NNUAL R EPORT 2000 106 TANGIBLE FIXED ASSETS

The net capital gains derived from the revaluations of assets carried out prior to 1997 by having recourse to sundry legal regulations and voluntary revaluations in order to correct the effects of inflation, are as follows, in thousands of pesetas:

(Thousands of pesetas) Revaluation Law 76/61 9,210 Revaluation Law 12/73 429,130 Revaluation Budget Law 1979 4,980,884 Revaluation Budget Law 1980 4,800,546 Revaluation Budget Law 1981 719,368 Revaluation Budget Law 1982 4,405,826 Revaluation Law 1983 239,080 Voluntary revaluation prior to 1990 523,432 Revaluation R.D.L. 796 9,718,258

TOTAL REVALUATIONS 25,825,734

Additionally, the balance sheet at December 31, 2000 includes revaluations of land and buildings for a total cost of Ptas. 29,312 million that were recorded as required by Law 29/1991.

Several owned buildings are mortgaged to guarantee various loans.

All the fixed assets investments, both in tangible and intangible fixed assets, relate to buildings and other assets related to operations.

At December 31, 2000 Sol Meliá has a purchase option right for Hotel Balmoral.

Some Group companies located in countries with high rates of inflation restate their financial statements in order to adjust the real value of their fixed assets. The accumulated amount included for this reason in the above tangible fixed assets table is as follows:

(Thousands of pesetas) 1999 2000

Land 9,483,720 13,111,259 Buildings 38,056,030 50,436,937 Furniture 5,170,765 6,357,142 Data processing equip. 193,324 361,499 Vehicles 43,425 57,122

Accumulated depreciation (12,629,775) (16,902,272)

TOTAL 40,317,489 53,421,688

The depreciation charge referred to in the previous paragraph amounted to Ptas. 2,145 million for the current year.

The 1998 figures are not included since the companies that record inflation restatement in their financial statements belong to Melia Inversiones Americanas, and the latter has been consolidated by the full consolidation method as from 1999 onwards.

S OL M ELIÁ

A NNUAL R EPORT 2000 107 12 Investments

12.1 Loans to subsidiaries

(Thousands of pesetas) 1999 2000

ARESOL CABOS, S.A. de C.V. 1,234,672 1,355,384 CARIBOTELS DE MEXICO S.A. de C.V. 1,554,981 CORPORACION HOTELERA METOR 469,369 116,034 DETUR PANAMÁ 435,217 F.S.P.TURIZM 1,364,270 MOGAN PROMOCIONES 376,525 391,959 MELIÁ MÉRIDA S.L. 130,000

TOTAL 4,999,817 2,428,594

The balance of Ptas. 1,355 million of Aresol Cabos S.A de C.V. relates to a loan granted by Operadora Mesol, S.A. de C.V.

The loan to F.S.P.Turizm has been cancelled during the year.

S OL M ELIÁ

A NNUAL R EPORT 2000 108 INVESTMENTS

12.2 Long-term securities portfolio

The participations by holding company, in thousands of pesetas, are listed below:

(Thousands of pesetas) INVESTMENTS PARTIC. % BALANCE BALANCE ADDITIONS DISPOSALS CONVERSION BALANCE 31/12/98 31/12/99 DIF. 31/12/00

SOL MELIÁ S.A. 22,158,564 14,163,907 9,155,067 Azafata S.A. 8.70% 45,000 45,000 (45,000) D.H. Guanacaste 15.00% 1,675,000 1,962,764 140,184 2,102,948 D.I.Guanacaste 15.00% 132,000 132,000 132,000 Edificaciones Gobelas, S.A. 20.00% 255,387 Grupo Inmotel Inversiones 18.85% 16,643,000 Detur Panamá S.A. 31.78% 733,089 (733,089) H. Sancti Petri 19.50% 195,000 195,000 195,000 Horotel S.A. 12.40% 50,000 50,000 50,000 Hotel Net B2B.com S.A. 24.50% 518,519 518,519 I.H. Los Cabos 15.00% 550,000 550,000 550,000 I.H. Playa del Duque 5.00% 446,282 446,282 446,282 Inmobiliaria Conchal Pacífico 15.00% 46,000 46,000 46,000 Lanzarote 6 S.A. 5.56% 249,912 249,912 Orgesa Holding 14.17% 1,195 1,195 1,195 P.T. Surlaya Internacional 16.52% 1,500,000 1,500,000 1,500,000 Port Cambrils Inv. 15.00% 48,760 48,760 Prodigios Interactivos S.A. 12.84% 3,506,313 (376,604) 3,129,709 Propiedades en Arriendo. S.l. 100.00% 200 200 (200) Sol Meliá France S.A. 100.00% 8,286,124 (8,286,124) Sol Meliá Suisse S.A. 100.00% 5,242 5,242 Turismo de Invierno S.A. 19.47% 179,500 179,500 179,500 Tuoroperador Viva Tours, S.A. 21.98% 440,000 Varios u/p 31,511 (31,511)

INEXTUR S.A. 391 391 Oblig. Club Marítimo Marbella u/p 391 391

APARTOTEL S.A. 70,885 70,885 Plaza Puerta del Mar S.A. 7.10% 70,885 70,885

CASINO TAMARINDOS S.A. 50,407 50,107 Obligaciones del Gobierno de Canarias u/p 50,107 50,107 Propiedades en Arriendo 300 (300)

PARQUE SAN ANTONIO S.A. 500 500 Aguas Teide u/p 500 500

TRYP,S.A. 9,129 Gupe Inmobiliaria 99.99% 9,129 9,129

RANDLESTOP CORP,N.V. 994 1,060 Punta Cana Reservations N.V. 100.00% 994 66 1,060

S OL M ELIÁ

A NNUAL R EPORT 2000 109 INVESTMENTS

INVESTMENTS PARTIC. % BALANCE BALANCE ADDITIONS DISPOSALS CONVERSION BALANCE 31/12/98 31/12/99 DIF. 31/12/00

DES. TUR. CARIBE N.V. 994 1,060 Caribooking & Reservations N.V. 100.00% 994 66 1,060

D HOTELEROS SAN JUAN B.V. 3,219,994 Desarrolladora Hot. Del Norte 47.50% 3,219,994 3,219,994

SAN JUAN INVESTMENT B.V. 3,219,994 Desarrolladora Hot. Del Norte 47.50% 3,219,994 3,219,994

MARKSERV B.V. 145 103,262 822,244 Mogan Promociones 33.33% 145 282 282 Promociones Playa Blanca S.A. 33.00% 102,980 717,235 820,215 Sol Meliá Marruecos 100.00% 1,747 1,747

MELIA INV AMERICANAS N.V. 906,465 536,201 Corporación H. Metor 19.97% 536,203 (2) 536,201 Controladora T. Cozumel 51.00% 370,262 (370,262)

OPERADORA MESOL, S.A. DE C.V. 45,217 54,715 Controladora T. Cozumel 51.00% 45,217 54,715 (54,715)

MARMER S.A. 232 Inversiones Guizá 50.00% 232 232

MELIA INTNAL HOTELS S.A. 149,483 339,343 8,325 C.A.H.T. Puerto La Cruz 0.38% 2,524 2,932 195 3,127 Corp. Hotelera Halmel 1.07% 4,197 4,875 324 5,199 Detur Panamá S.A. 20.00% 142,762 331,536 (331,536)

MARINA INTNAL HOLDING 651,737 1,225,074 Corporación H. Metor 40.03% 651,737 43,232 694,969 Hotel Las Américas 20.00% 530,106 530,106

TOTAL 22,353,409 16,343,600 12,162,126 (10,229,341) 43,881 18,320,265

PROVISIONS PARTIC. % BALANCE BALANCE ADDITIONS DISPOSALS CONVERSION BALANCE 31/12/98 31/12/99 DIF. 31/12/00

SOL MELIÁ S.A. (28,873) Sol Meliá Suisse S.A. 100.00% (58) (58) Hotel Net B2B.com S.A. 24.50% (28,815) (28,815)

MARINA INTNAL HOLDING (265,053) Hotel Las Américas 20.00% (265,053) (265,053)

TOTAL (293,926) (293,925)

NET VALUE 22,353,409 16,343,600 11,868,200 (10,229,341) 43,881 18,026,340

U.P.: Unquantified percentage

S OL M ELIÁ

A NNUAL R EPORT 2000 110 INVESTMENTS

Disposals for the year relate to changes in the consolidation scope, as explained in Note 2.

The disposal in the provisions balance appearing in the 1999 balance sheet (Ptas. 1,364 million) relates to the application of the provision covering the loan granted by Hoteles Sol Internacional, S.A. to F.S.P.Turizm.

The registered address, activity and accounting data of the companies are indicated below, except for those with an insig- nificant participation:

(Thousands of pesetas) NET NET COMPANY ADDRESS COUNTRY ACTIVITY CAPITAL RESERVES RESULT % BOOK INVESTM. VALUE VALUE

IBOOKING & RESERV. N.V. De Ruyterkade 62 (Curaçao) DUTCH ANT. Marketing 1,060 100.00% 1,060 1,060 CORP .HOTELERA METOR Faustino Schez. Carrión s/n (Lima) PERU Hotels owner 1,663,271 12,614 (370,437) 60.00% 783,269 1,231,170 DES. HOT. GUANACASTE Central y ocho C 33 (San José) C. RICA Hotel development 9,284,285 4,164,088 (912,560) 15.00% 1,880,372 2,102,948 DES. INM. GUANACASTE Central y ocho C 33 (San José) C. RICA Golf and apart. Dev. 715,745 70,442 15.00% 117,928 132,000 HOROTEL, S.A. Marqués Villanueva del Prado s/n SPAIN Hotels owner 540,000 607,659 143,320 12.40% 160,081 50,000 HOT. SANCTI PETRI, S.A. G.Toneleros 24 (Palma de Mca.) SPAIN Hotels owner 1,000,000 (138,765) (7,226) 19.50% 166,532 195,000 INM. CONCHAL PACIFICO Central y ocho C 33 (San José) C. RICA Land owner 56 270,819 15.00% 40,631 46,000 INV. HOT. LOS CABOS Samuel Lewis C 33 (Panamá) PANAMA Holding 6,657,251 (332,463) 1,299 15.00% 948,913 550,000 INV. HOT. PYA. DEL DUQUE Barrio Chamberrí s/n (Tenerife) SPAIN Hotels owner 432,392 3,194,174 2,310,211 5.00% 296,839 446,282 MOGAN PROMOCIONES Quintana Roo, Cancún MEXICO Hot. in construction 945 (29,346) 33.33% (9,466) 282 ORGESA HOLDING Collomas de Chapultepec MEXICO Hotels owner 6,006 3,540,740 731,285 14.17% 606,197 1,195 P.T.S.A.I. Jalan Taman Patra, XIV (Jakarta) INDONESIA Hotels owner 585,699 1,428,349 (1,271,843) 16.52% 122,612 1,500,000 PLAZA PUERTA DEL MAR S.A. Pza. Puerta del Mar, 3 (Alicante) SPAIN Hotels owner 998,316 (7,317) (76,136) 7.10% 64,955 70,885 PROM. PYA. BLANCA S.A. de C.V. Pza. San Ángel,15 (Cancún) MEXICO Hot. in construction 2,366,199 33.00% 780,846 820,215 PUNTA CANA RESERV. N.V. De Ruyterkade 62 (Curaçao) DUTCH ANT. Marketing 1,060 100.00% 1.,060 1,060 SOL MELIA SUISSE S.A. Rue de Hesse, 8-10 (Ginebra) SWITZERLAND Inactive 10,369 100.00% 10,369 5,184 TURISMO DE INVIERNO Plaza Pradollano s/n (Monachil) SPAIN Hotels owner 114,000 624,485 79,546 19,47% 159,271 179,500 HOTEL NET B2B.COM S.A. Gremio Tejedores, 5 (Palma de Mca.) SPAIN Internet portal B2B 18,181 1,982,819 (117,611) 24.50% 461,430 299,704 PRODIGIOS INTERACTIVOS S.A. ParcBit. Camí ca'n Manuel s/n (Palma) SPAIN Internet portal 94,844 35,826,223 (431,182) 12.84% 4,556,901 3,129,709 PORT CAMBRILS INV. Sin Definir SPAIN Hotels owner n/c n/c n/c 15.00% n/c 48,760 LANZAROTE 6 S.A. Av. Ansite 3-1º (Las Palmas de G.C.) SPAIN Hotels owner n/c n/c n/c 5.56% n/c 249,912 GUPE INMOBILIARIA Estrada da Luz, 90 6º-F (Lisboa) PORTUGAL Hotels management 8,319 99.99% 8,318 9,129 DESARR. DEL NORTE S.enC. S.E. Carr.3,S. Coco Beach 955-I (Rio Grande)P.RICO Owns and oper. hotels 6,901,876 95.00% 6,556,783 6,439,988 HOTEL LAS AMÉRICAS S.A. Las Américas, 9 (Ciudad de Guatemala) GUATEMALA Owns and oper. hotels 805,198 (286,459) (171,667) 20.00% 69,414 265,053

TOTAL LONG-TERM 32,205,072 50,928,062 5,179 17,808,370 17,965,036

DETUR PANAMA S.A. Elvira Méndez, 10 .Bco do Brasil PANAMA Hotels owner 2,473,827 (695,494) 35.00% 622,417 1,227,980

TOTAL SHORT-TERM 2,473,827 (695,494) 622,417 1,227,980

S OL M ELIÁ

A NNUAL R EPORT 2000 111 INVESTMENTS

Sol Meliá, S.A. has subscribed and paid up the capital increase (Ptas. 518 million ) carried out in Hotel Net B2B. COM, S.A., a company engaged in marketing hotel services.

Sol Meliá, S.A. has subscribed and paid up the share capital increase (Ptas. 249 million.) carried out in Lanzarote 6, S.A., owner of land for the construction of a hotel.

Sol Meliá, S.A. has subscribed and paid up the share capital increase (Ptas. 48 million ) carried out in Port Cambrils Inversions, S.A., a hotel operating company.

Sol Meliá, S.A. has subscribed and paid up the share capital increase (Ptas. 3,129 million) carried out in Prodigios Interactivos, S.A., a company engaged in developing business through internet.

The increment in Desarrollos Hoteleros Guanacaste is the result of its last share capital increase.

No provision is booked for the participation in P.T.S.A.I., because it maintains its level of activity since most of its income is earned in dollars. The directors therefore consider that no loss will be incurred.

No provision is booked either for the companies, which present underlying capital gains due to the favourable forecast of results and to the value of their buildings.

S OL M ELIÁ

A NNUAL R EPORT 2000 112 INVESTMENTS

12.3 Other long-term receivables

(Thousands of pesetas) 1998 1999 2000

AGOTEL 217,246 BANCA DI ROMA 1,031,176 BANCA NAZIONALE DEL LAVORO 1,031,176 CLIENTES TIEMPO COMPARTIDO 1,213,353 1,968,700 GOLDEN ASSET COMPANY LTD. 356,650 414,275 441,755 HOTELES CIBELES S.A. 36,900 45,259 SAUCISSE 546,824 URINCASA S.A. 245,575 245,575 AURELIA CENTRO 267,417 MUNA TURIZM 153,497 HOTELES REX, S.L. 105,838 DAELLOS, S.A. 77,421 I. CAUNEL,GOLF Y H. ARENA GORDA 195,935 OTROS 1,458 39,098 2,375 LONG-TERM LOANS 575,354 2,496,025 5,566,125

SOL MELIA S.A. 2,788,790 HOTELES TURISTICOS S.A. 3,089 MOTELES ANDALUCES S.A. 1,317 TENERIFE SOL S.A. 102,838 DEFERRED TAX ASSETS 2,896,034

SOL MELIA S.A. 100,631 59,847 DESARROLLOS TURISTICOS DEL CARIBE S.A. 165,710 DOCK TELEMARKETING S.A. 100 100 INDUSTRIAS TURISTICAS S.A. 167 167 INVERSIONES Y EXPLOTACIONES TURISTICAS S.A. 210 483 LAV. INDUST.GUADALAJARA 326 MESOL MANAGEMENT S.L. 10,000 MOTELES ANDALUCES S.A. 205 205 TENERIFE SOL S.A. 60 TRYP S.A. 81,542 INMOBILIARIA BULMES S.A. 16,997 AZAFATA S.A. 351 PARKING INTERNACIONAL S.A. 52 H.BOULOGNE ADAGIO 1,954 LONG-TERM GUARANTEE DEPOSITS 277,409 161,699

SOL MELIA S.A. 1,400,460 10,594 C.T.G.H. 597 1,319 HOTELES TURISTICOS S.A. 437 437 LOMONDO LTD. 177,068 174,354 MARKTUR TURIZM 67 TENERIFE SOL S.A. 600 600 GRUPO SOL MELIÁ EN FRANCIA 50,087 IHLA BELA 1,590 TRYP MEDITERRANEE 265,185 INMOTEL INV. ITALIA S.L. 860 MOTELES GRANDES RUTAS ESP.S.A. 41 LONG-TERM DEPOSITS 1,579,229 505,067

BILLS RECEIVABLE 1,205,387

TOTAL OTHER LONG-TERM RECEIVABLES 575,354 7,248,697 7,438,278

S OL M ELIÁ

A NNUAL R EPORT 2000 113 INVESTMENTS

Sol Meliá, S.A is the holder of two bank deposits in Italian Lira for an equivalent in pesetas of 2,061 million, which guarantee credit transactions of the subsidiary Inmotel Inversiones Italia, S.R.L., in relation to the construction of a hotel in Milan.

Grupo Sol Asia Ltd. has granted a loan of US-$ 2.5 million to the hotel Sol Twin Towers (Golden Asset Company Ltd.) which bears interest at the rate of LIBOR plus 2%. Steps are being taken to recover the loan, nevertheless, in case of non- payment, this balance would be covered by the provision for liabilities and charges.

The loans granted to Aurelia Centro SRL. for Lira 1.7 million and up to Euros 1.8 million are intended to finance its tra- ding activities.

The loan to Hotel Cibeles, S.A. bears no interest.

The loan granted to Muna Turizm, AS up to 5 million German Marks is intended to finance its trading activities.

The disposal in the deferred tax assets balance is explained in Note 22.

S OL M ELIÁ

A NNUAL R EPORT 2000 114 13 Deferred Expenses

(Thousands of pesetas) BALANCE AT ADDITIONS DISPOSALS BALANCE AT 31/12/99 31/12/00

Arrangement of loans 168,255 118,376 (38,237) 248,395 Issue of Convertible bonds 781,564 (168,416) 613,148 Interest on purchase of fixed assets 1,600,536 1,801,709 (632,524) 2,769,721

TOTAL 2,550,355 1,920,085 (839,177) 3,631,264

The interest for purchase of fixed assets relates mainly to leasings for renovation of hotels and for the construction of the Hotel Meliá Milano.

S OL M ELIÁ

A NNUAL R EPORT 2000 115 14 Inventories

The Group has no firm purchase or sales commitments nor any other limitations affecting inventories.

The main supplier with a turnover figure higher than Ptas. 1,000 million was Carma (Ptas. 3,607 million), a related com- pany. None of the other suppliers has reached a figure higher than Ptas. 500 million.

(Thousands of pesetas) 31/12/98 31/12/99 31/12/00

Goods 201,856 417,420 Raw materials 724,326 763,472 Fuel 53,375 82,604 Spare parts 159,663 542,232 Cleaning materials 345,045 Ancillary materials 106,941 Advertising and entertainment materials 47,812 Replacement articles 8,974 Sundry materials 21,262 535,369 8,331 Office equipment 147,148 185,796 Real estate assets 1,550,645 1,774,794 Prepayments to suppliers 860,604 1,709,086

TOTAL 21,262 4,232,986 5,992,508

Sol Meliá, S.A. includes in inventories several buildings of no tourist interest, all of them for sale, which are included in the real estate assets balance shown above.

The real estate assets item also includes a balance from Desarrollos Sol, S.A. relating to an important real estate develop- ment in Santo Domingo, which is not intended for tourist operations and is consequently for sale. Ptas. 1,008 million are also included for tacit capital gains relating to building sites for sale.

S OL M ELIÁ

A NNUAL R EPORT 2000 116 15 Debtors

The breakdown of the short-term debts with subsidiaries is presented in Note 22.

The other increments in the debtors heading are due to the business growth and to the new acquisitions of the Group as well as to the sales of buildings carried out by the Company.

16 Short-term Investments

The increase in the short-term securities portfolio mainly relates to the transfer of the participation in Detur Panamá, S.A. as explained in Note 2.2., and to financial investments from the Sol Meliá Group companies in France.

The reduction of loans to subsidiaries relates to the cancellation of the loan from Sol Meliá, S.A. to Sol Meliá France, S.A.S., since the latter is consolidated in 2000 by full consolidation method (See Note 2.3).

The movement of the other loans balance shows an increase due to the short-term deposit of US-$ 5 million of Melia International Hotels, S.A. in the B.B.V.A.

Sol Meliá, S.A. has deposited Ptas. 1,400 million in Bankinter to guarantee a loan to Mirador del Duque S.L. for the cons- truction of a hotel in Tenerife. This deposit earns 3.03% interest.

S OL M ELIÁ

A NNUAL R EPORT 2000 117 17 Own Shares

The breakdown and movement of the own shares are as follows:

(Thousands of pesetas) AVERAGE AVERAGE SHARES PRICE PRICE AMOUNT AMOUNT PTAS. EUROS PTAS. EUROS

Balance at 12/31/1999 600,000 2,044,89 12,29 1,226,936,462 7,374,037 Acquisitions of the year 630,362 1,699,70 10,22 1,071,428,509 6,439,415 Disposals of the year (195,425) (2,044,89) 12,29 (399,623,072) (2,401,783)

TOTAL 1,034,937 1,834,64 11,03 1,898,741,899 11,411,669

Provisions (96,273,821) (578,617)

TOTAL OWN SHARES 1,034,937 1,741,62 10,47 1,802,468,078 10,833,052

Disposals for the year arise from the non-monetary contribution for the acquisition of the shares of Azafata, S.A.

The Options Programmes for executives, establishing their right to purchase up to 200,000 old shares of Sol Meliá, S.A., have been cancelled during the year.

At December 31, 2000 the total own shares represent 0.56 per cent of share capital.

S OL M ELIÁ

A NNUAL R EPORT 2000 118 18 Equity

The breakdown and movements of the items in this heading of the accompanying 2000, 1999 and 1998 balance sheets are shown below:

(Thousands of pesetas) BALANCE BALANCE DISTRIBUTION OF ADDITIONS TRANSFERS DISPOSALS BALANCE 31/12/98 31/12/99 1999 RESULTS 31/12/00

Capital 3,100,000 5,708,859 439,995 6,148,854 Non-distributable reserves 1,101,089 1,837,935 426,942 688,992 2,953,870 Share premium 33,095,450 100,418,656 32,559,608 (679,363) 132,298,900 Reserves REV. R.D.I. 7/96 8,032,947 8,032,947 Reserve Inv. Canary I. 951,121 2,033,319 1,231,808 3,265,127 Voluntary reserves 18,270 725,580 7,351,279 448,674 (3,432,770) 5,092,764 Reserves Cies. full cons. 4,623,663 26,064,671 5,472,480 7,349,787 (457,313) (245,211) 38,184,435 Reserves Cies.Eq. Method 339,506 392,171 161,249 6,459 (990) (193,913) 364,978 Conv.dif. Cies. full cons. (290,189) 6,378,310 3,487,057 9,865,367 Conv. Dif. Cies. Eq. Method (610,117) (18,963) 15,487 (3,475) Interim dividend (1,240,000) Consolidated P/L. 6,986,150 15,667,956 (15,667,956) 19,738,432 19,738,432 Minority interest P/L. (70,375) (1,024,201) 1,024,201 (992,642) (992,642)

TOTAL 48,004,568 166,217,239 62,604,155 0 (3,871,893) 224,949,526

18.1 Share capital

The share capital of SOL MELIA, S.A. at December 31, 2000 comprises 184,776,777 bearer shares with a par value of Euros 0.2 each, fully subscribed and paid up.

All the shares comprising share capital quote on the Stock Exchange and have the same rights, except for the own shares.

At the Ordinary and Extraordinary General Shareholders’ Meeting held on May 29, 2000, the shareholders empowe- red the Board of Directors to increase share capital without their prior consent, up to a maximum of Euros 17,155,647 (Ptas. 2,854 million). The Board of Directors was also authorised to issue convertible bonds within a maximum period of 5 years and up to Euros 17,155,467, thereby nullifying, with regard to the pending execution period, the authorisa- tion given by the shareholders at the General Shareholders’ Meeting held on July 16, 1999 for the application of Euros 3.9 million.

The Board of Directors, empowered by the shareholders at the General Extraordinary Shareholders’ Meeting held on October 23, 2000, agreed in its meeting of November 20 to increase share capital by Euros 2,644,421.40 euros by issuing and putting into circulation a maximum of 13,222,107 new ordinary shares with a par value of Euros 0.2 each and with a

S OL M ELIÁ

A NNUAL R EPORT 2000 119 EQUITY

share premium of Euros 14.8 per share. This share capital increase, arising from the purchase of the shares of Tryp, S.A. (See Note 1), was subscribed and paid up by the non-monetary contribution of shares that represent 55 per cent of the sha- res of Tribenol, S.L. and 38.4 per cent of the shares of Tryp, S.A.

At December 31, 2000 the main shareholders with direct or indirect participation in SOL MELIA, S.A. are as follows:

SHAREHOLDERS PARTICIPATION %

Hoteles Mallorquines Consolidados, S.A. 27.90% Hoteles Mallorquines Asociados S.A. 16.30% Hoteles Mallorquines Agrupados S.A. 6.20% Other control shareholders 10.50% Others 39.10%

TOTAL 100%

18.2 Reserves from parent company

18.2.1 Share premium The increase in share premium during the year arises from the purchase of the shares of the Tryp Hotel Chain explained in Note 1.

18.2.2 Legal reserves SOL MELIA, S.A. has the obligation of transferring 10% of the profits for the year to constitute the legal reserve until this equals at least 20% of the share capital. This reserve is not distributable to the shareholders and may only be used to offset losses, should no other reserves be available.

18.2.3 Reserves for own shares This reserve was set up for the acquisition of own shares (1,034,937 shares) and is unavailable until the disposal of said shares at acquisition cost, less the provision charge recorded at year-end. These shares are recorded in assets in the balance sheet of these annual accounts (See Note 17).

18.2.4 Reserve Law 19/94 Reinvestment in the Canary Islands This reserve is unavailable since it was created based on SOL MELIA, S.A.’s commitment to invest in new fixed assets located in the Canary Islands, with a 3 years investment term, an amount equal to the abovementioned reser- ve for investments in the Canary Islands Law 19/94.

18.2.5 Revaluation reserve R.D.L. 7/1996 of June 7 This reserve, incorporated as a result of the merger in the balance sheet included in the balance sheet of the 1996 annual accounts of Inmotel Inversiones, S.A., is the consequence of the revaluations of the intangible and tangible fixed assets carried out according to the relevant rulings, less 3% of the revaluations amount for taxation.

S OL M ELIÁ

A NNUAL R EPORT 2000 120 EQUITY

The breakdown of the balance of the Revaluation reserve is as follows:

(Thousands of pesetas)

Revaluation of intangible fixed assets 242,271 Revaluation of tangible fixed assets 8,099,422 Taxation - 3% of revaluation (308,746)

TOTAL REVALUATION RESERVE 8,032,947

This reserve may be applied to offset losses, to increase the Company’s share capital and, after December 31, 2006 (10 years starting from the date of the balance sheet including the revaluation), this reserve will be freely distributable. The balan- ce of the reserve cannot be distributed, directly or indirectly, unless the revaluation value has materialized by the sale or full depreciation of the revalued items.

18.2.6 Results from prior years Results from prior years relate to retained earnings and are freely distributable.

S OL M ELIÁ

A NNUAL R EPORT 2000 121 EQUITY

18.3 Reserves of companies consolidated by full consolidation method

The most significant movements in this consolidated balance sheet heading during 2000 relate to the distribution of the 1999 results.

The breakdown of this item of the consolidated balance sheet, by companies and in thousands of pesetas, is as follows:

(Thousands of pesetas) BALANCE AT BALANCE AT 1999 ADDITIONS TRANSFERS DISPOSALS BALANCE AT 31/12/98 31/12/99 RESULTS 31/12/00

Apartotel, S.A. (43,811) (17,384) 73,246 26,614 82,476 Bear S.A. De C.V. 161,270 (37,305) 555,864 679,828 Bisol Vallarta S.A. De C.V. 1,364,068 (242,379) 924,417 2,046,106 C.Tamarindos, S.A. 167,961 (52,797) (37,548) (33,874) 43,742 C.H.H. Mexicana, S.A. De C.V. 2,366,319 (195,818) 776,726 2,947,227 C.I. Alcano, S.A. 230,108 1,423 231,532 C.P.Sol y Nieve 226,255 52,481 634 (43,918) 235,452 C.Tunissienne de G.H. 10,829 8,560 21,445 190 (21,369) 8,825 C.T. Cozumel/Caribotels de México (1) 81,339 81,339 Cala Formentor S.A. De C.V. 6,058,246 229,648 1,526,784 7,814,678 Casino Paradisus 20,168 86,968 3,739 (58,317) (6,671) 45,887 D.H. San Juan (102) 28 (1) (74) D.Mk.Services/Inversiones Coro (1) 89,433 (457,855) 269,199 (5,556) (104,778) D.T.C./Marmer (1) 117,024 155,468 1,148,951 1,421,443 D.T.Caribe N.V. (1,690) (730) 1,608 (813) Desarrollos Sol S.A. 273,653 52,995 326,648 Dock Telemarking, S.A. 441 1,311 1,941 (369) 2,884 Dominican Investment NV (47,781) (407) (283) (48,471) Dorpan, S.L. 16,871 21,979 19,017 (6,893) 34,104 Farandole B.V. (73,035) (11,519) (584) (85,137) G.H.T. Mesol, S.A. (1,788) 5,494 3,706 Gesmesol, S.A. 843,937 1,663,154 920,110 (13) 2,583,251 Grupo Sol Asia Ltd. 122,719 215,030 55,287 (5,572) 264,745 Grupo Sol Meliá en Francia (1) 58,870 8 58,876 Grupo Sol Services 10,085 10,487 7,550 2,096 20,133 H.C. Extremadura, S.A. 227 227 H.Meliá Internacional de Colombia 370 (74) 475 322 723 Hosterias De Castilla, S.A. (37) 140,922 (140,922) (37) Hotel Bellver, S,A. 586,489 20,140 (19,973) (112) 586,544 Hoteles Sol Internacional 9,694,548 (178,147) 726,955 10,243,356 Hoteles Turísticos, S.A. 649 36,744 131 (36,697) 827 Impulse H.Development 17,219 (19,579) 434,958 432,597 Industrias Turísticas, S.A. 0 42,752 (42,751) 1 Inmotel Internacional (90) (758) 702 725 580 Inmotel Inversiones Italia, S.R.L. (521) (22,233) 22,233 231 (290) Inmpulse Development Inc. (3,439) (5,417) 2 (434,958) (443,813) Inversiones Inmobiliarias IAR 3,382,511 (621,054) 1,094,305 3,855,763 Inversiones Latinoamerica 2.000, S.L. (2,934,120) (4,542) 25 (2,938,637) Inversiones Turísticas del Caribe (2,561) 13,777 2,590 (1,927) 14,440 Inversiones y Explotaciones Tur. S.A. 2,618 265,813 (265,283) 3,148 Irton Co./Inversiones Guamá (1) (191,607) 337 (1,713) (192,983) Latin America Logistics Co, 8,636 (38,491) (214) (30,069) Lavanderias Compartidas, S.A. 20 8,988 9,008 Lavanderias Ind. Guadalajara, S.A. 8,147 1,757 (9,905)

S OL M ELIÁ

A NNUAL R EPORT 2000 122 EQUITY

(Thousands of pesetas) BALANCE AT BALANCE AT 1999 ADDITIONS TRANSFERS DISPOSALS BALANCE AT 31/12/98 31/12/99 RESULTS 31/12/00

Lirax 4,163 2,196 (42,682) (40,486) Lomondo Ltd. 309,617 (14,277) 295,340 M.I.H. U.K. LTD (2,006) (2,335) (52) (268) (2,654) Marina International Holding 30,981 30,385 (303) (2,578) 27,504 Markserv, B.V. (10,855) (20,509) (209,701) 309,013 78,803 Marksol Turizm 40,206 57,053 (22,629) 54,104 88,528 Marktur Turizm (21,326) (21,885) (3,578) (46,790) eliá Brasil Administraçao. 55,789 82,954 68,981 (49) 151,886 Meliá Europa Holding de Entidades, S.A. 12,316 200,286 (746,993) (534,391) Melia International Hotels, S.A 2,689,578 3,877,020 1,399,557 (15,503) 5,261,074 Melia Inversiones Americanas, N.V. (6,440,231) 1,281,428 (33,260) (5,192,063) Melia Management Co. 19,254 106,651 29,517 (258) 135,909 Meliá Venezuela S.A. (99,522) (108,303) 16,696 512 (91,094) Melsol Management B.V. (63) (51,230) (3,633) 26 (54,837) Melsol Portugal 4,217 4,372 13,705 14,327 32,404 Mesol Management, S.L. (574) 2,210 (31,838) 1,729 (27,899) Moteles Andaluces, S.A. (0) 7,748 (7,748) (0) Moteles Grandes Rutas Españolas, S.A. 73 13,109 739 (12,903) (16) 1,003 Neale/Inversiones Agara (1) 492,720 837,680 (79,825) 1,250,574 Op. Paseo de la Reforma, S.A. De C.V. 132 1 134 Operadora Costarisol 13,818 168,849 (348,253) 434 (178,970) Operadora Mesol,S.A. De C.V. 375,420 790,549 173,766 377,397 34,780 1,376,492 Parque San Antonio S.A. 602,615 49,202 (46,989) (20) 604,808 Playa Salinas,S.A. 874 874 Propiedades en Arriendo, S.L. (32) (32) Punta Elena, S.L. 6,308 6,619 12,927 Randlestop 329 (1,309) 361 (619) Realizaciones Turísticas, S.A. 26,869 83,710 110,579 Safivic, S.A. (0) 14,870 (14,870) San Juan Investment (102) 28 (1) (74) Securi Sol , S.A. (33) (859) 859 (32) Servicios Corp. Mesol, S.A. De C.V. 25,535 4,657 (13,567) 8,910 Sol Finance (33,406) (1,021) (34,426) Sol Group B.V. 29,905 27,305 (4,518) (3,128) 19,660 Sol Group Co. (37,714) (37,866) 39,679 1,813 Sol Holding Corporation (241) (406) (559) 965 Sol Hotel Management Co. (1,546) (1,588) (20) 1,607 Sol Hotel Miami Beach (2,311) (2,777) (134) 2,910 Sol Hotel U,K. Ltd. 90,748 78,064 (25,799) 413,481 (22,650) 443,095 Sol Maninvest, B.V. (47,688) 4,544 (68,915) 65,294 923 Sol Melià (458,303) 23,107 458,303 23,107 Sol Meliá Croacia 4,943 22,113 (34,008) (6,952) Sol Melia Europe, B.V. (1,727) 2,447 720 Sol Melia Guatemala 10 28,463 58,301 86,765 Sol Meliá Investment NV (605) (1,779) (2,384) Sol Meliá Sevice 521,823 779,416 691,159 6,803 (101,202) 1,376,176 Talonario 5 Noches, S.L. (34,144) 72,318 15,407 (25,246) 62,479 Tenerife Sol, S.A. 2,170,377 560,095 2,730,472 Torresol Desarrollos Turísticos, AIE (3) (3) Urme Real, S.L. (4,206) (6,695) (10,901) TOTAL RESERVES OF COMPANIES BY FULL CONSOLIDATION 4,623,663 26,064,671 5,014,176 7,349,787 990 (245,211) 38,184,435

S OL M ELIÁ

A NNUAL R EPORT 2000 123 EQUITY

The balances of the above table are broken down by each Group subsidiary in which the parent company owns a direct or indirect share (See Note 2). Nevertheless, the companies (1), which have the same business line, given the shareholding structure of the subsidiaries, are presented jointly to faciliate comprehension of their contribution to the consolidated Group.

The additions in the companies residing in Mexico (Bear. S.A. de C.V., Bisol Vallarta, S.A. de C.V., Corporación Hotelera Hispano Mexicana, S.A. de C.V.,Controladora Turística Cozumel S.A. de C.V., Caribotels de México, S.A. de C.V., Cala Formentor, S.A. de C.V., and Operadora Mesol, S.A. de C.V.) and Venezuela (Inversiones Inmobiliarias IAR), countries with high inflation rates, are due mainly to these companies’ obligation to restate their financial statements.

Additions included for the D.T.C./Marmer group of companies relate mainly to a dividend collected for the sale of Hotel Meliá Bavaro.

The other movements relate mainly to the changes introduced in the consolidation scope as described in Note 2.3. and to the adjustments for write-off of provisions and dividends made in the consolidation process.

18.4 Reserves of companies consolidated by the equity method

The movements in this heading of the liabilities side of the consolidated balance sheet relate to the distribution of the 1999 results.

The breakdown of this heading of the consolidated balance sheet, by companies, is as follows:

(Thousands of pesetas) BALANCE AT BALANCE AT 1999 ADDITIONS TRANSFERS DISPOSALS BALANCE AT 31/12/1998 31/12/1999 RESULTS 31/12/2000

Agotel Gmbh (195,357) (131,644) (269,693) (596,694) Aparthotel Bosque, S.A. 43,789 35,893 17,182 (24,293) (6,064) 22,718 C.P.Meliá Castilla 256,870 234,900 5,052 (180,522) (4,064) 312,236 C.P.Meliá Costa del Sol 154,616 219,368 82,661 (63,081) (594) 238,357 Casino Tamarindos, S.A. 205,271 Hellenic Hotel Management (8,685) (13,664) 25,592 3,243 Hotel Campus, S.L. Hotel Las Américas, S.A. 26,940 (72,025) (26,039) 98,065 I.Turísticas Casas Bellas, S.L. 6 245 (1,617) (1,366) Meliá Inversiones Americanas, N.V. (91,367) Meliá Mérida, S.L. Nexprom, S.A. 153,911 34,147 1,162 (73,052) 116,168 Promedro, S.A. (2,813) 5,887 (3,074) Sofía Hoteles, S.L. Sol Hoti Portugal Hoteis 257 5,009 11,029 16,038 Sol Meliá Travel, S.A. Touroperador Viva Tours, S.A. (53,216) 317,440 (9,945) 254,279

TOTAL 339,506 392,171 161,249 6,459 (990) (193,913) 364,978

S OL M ELIÁ

A NNUAL R EPORT 2000 124 EQUITY

The balances of the above table are broken down by each Group subsidiary with direct or indirect participation of the parent company (See Note 2).

The additions and disposals mainly relate to the changes introduced in the consolidation scope as described in Note 2 and to the adjustments for write-off of provisions and dividends made in the consolidation process.

18.5 Exchange differences of companies consolidated by full consolidation method

(Thousands of pesetas) BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE 31/12/1998 31/12/1999 31/12/2000 31/12/1998 31/12/1999 31/12/2000

Bear S.A. de C.V. 326,638 815,431 Markserv, B.V. 4,180 947 2,767 Bisol Vallarta S.A.de C.V. (85,975) (93,125) Marksol Turizm (40,452) (60,018) (48,803) C.H.H.M. S.A. de C.V. 983,065 1,617,262 Marktur Turizm 14,002 17,725 C.T. Cozumel/Caribotels de Mésxico (1) 140,673 Meliá Brasil Administraçao (14,533) (30,120) (40,789) C.Tunissienne de G.H. (541) (2,256) 218 Melia International Hotels, S.A 195,676 917,783 1,255,861 Cala Formentor S.A. de C.V. 3,251,821 4,873,370 Melia Inversiones Americanas NV 191,068 191,894 Casino Paradisus (26,887) (50,347) Melia Management Co. (35,625) (50,915) (87,014) D.H. San Juan 87 90 Meliá Venezuela S.A. 15,823 13,950 13,539 D.Mk.Services/Inversiones Coro (161,676) (59,645) Melsol Management B.V. (388) (121) (122) D,T.C./Marmer (56,201) (1,209,189) Melsol Portugal 29 (14,271) (14,270) D.T.Caribe N.V. 525,835 995,415 Neale/Inversiones Agara 281,389 647,910 Desarrollos Sol S.A. 4,492 19,948 Operadora Costarisol (17,566) (6,765) (31,821) Dominican Investment NV 13,276 26,926 Operadora Mesol, S.A. De C.V. (217,579) 67,061 218,267 Farandole B.V. (156) (180) O. Paseo de la Reforma S.A. de C.V. 21 170,054 Gesmesol, S.A. 8,505 401,678 603,209 Randlestop 119,060 220,353 Grupo Sol Asia Ltd. (6,476) 23,763 40,042 San Juan Investment 87 90 Grupo Sol Services (2,564) 3,484 2,015 Servicios Corp. Mesol, S.A. de C.V. (8,825) 13,334 H.Meliá Intnal de Colombia (968) (1,053) (2,296) Sol Finance (5,314) (7,863) Hoteles Sol Internacional 1,071 1,030 Sol Group B.V. (37) (22) (22) Ihla Bela de Gestao e Turismo 0 (742) Sol Group Co. 9,113 24,291 35,540 Impulse Development Inc. 0 397 Sol Holding Co. 899 2,200 Impulse H. Development (15) (17) Sol Hotel Management Co. 1,059 1,128 Inmotel I. Italia (0) (37.327) Sol Hotel Miami Beach (541) (1,607) Inmotel Internacional 123 731 Sol Hotel U.K. Ltd (24,941) (53,274) (289,154) Inversiones Inmobiliarias IAR (141,186) (223,622) Sol Maninvest, B.V. 4,966 2,999 2,998 Inversiones Jacuey 0 (6,470) Sol Meliá Croacia (826) 1,100 1,096 Inversiones Turísticas del Caribe 342 (2,249) (2,995) Sol Melia Guatemala (2,668) (1,334) 3,639 Irton Co./Inversiones Guamá (1,860) 101,799 Sol Meliá Investment NV (142,093) (182,782) (182,817) Latin America Logistics Co. (1,138) (3,045) Sol Meliá Perú S.A. 0 (231) Lirax 184 272 Sol Meliá Sevice 17,021 14,916 105,195 Lomondo Ltd. 96,543 161,513 Tryp Meditérranée 0 (7,394) M.I.H. U.K. LTD (225) (830) (935) Marina International Holding (30,954) (31,062) (21,668)

TOTAL (290,189) 6,378,310 9,865,367

S OL M ELIÁ

A NNUAL R EPORT 2000 125 EQUITY

18.6 Exchange differences of companies consolidated by the equity method

(Thousands of pesetas) BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE 31/12/1998 31/12/1999 31/12/2000 31/12/1998 31/12/1999 31/12/2000

Agotel Gmbh 12 26 Meliá Inv. Americanas, N.V. (591,234) Hellenic Hot Mgment Co.HB,.SA. (3,368) (3,242) (3,516) Sol Hoti Portugal Hoteis L.D.A. 3 14 15 Hotel Las Américas, S.A. (15,518) (15,747)

TOTAL (610,117) (18,963) (3,475)

S OL M ELIÁ

A NNUAL R EPORT 2000 126 19 Minority Interest

Some consolidated companies have minority shareholders, which represent the following amounts of the companies’ equity and results:

(miles de pesetas) BALANCE AT BALANCE AT 2000 ADDITIONS TRANSFERS DISPOSALS EXCHANGE BALANCE AT 31/12/98 31/12/99 RESULTS DIFFERENCES 31/12/00

Apartotel, S.A. 1,108 1,475 78 188 1,741 Bisol Vallarta S.A. De C.V. (1,219) (2,353) 35,122 1,693 33,242 C.H.H. Mexicana, S.A. De C.V. 78,887 (9,802) (7,577) 11,883 73,391 C.P.Sol y Nieve 33,228 (3,195) (634) 29,400 C.T. Cozumel/Caribotels de México (1) (201,467) 2,025,634 2,867 1,827,035 Cala Formentor S.A. De C.V. 252,299 1,559 (35,806) 14,762 232,815 Casino Paradisus 113,116 36,637 (51,758) 3,561 101,556 D.H. San Juan 3 15,033 (2) 15,033 D.Mk.Services/Inversiones Coro (1) (14,203) (8,493) 9,278 1,928 (11,490) D.T.C./Marmer (1) (51,920) 2,983 55,127 662 6,852 D.T.Caribe N.V. 5,136 (568) (66,842) 6,414 (55,860) Desarrollos Sol S.A. 7,103 (5,246) (1,933) 1,147 1,071 Dominican Investment NV (1,210) (21) 564 254 (414) Farandole B.V. (2,163) (1,519) 608 (3,074) Grupo Sol Asia Ltd. 112,462 169,479 15,401 10,853 195,734 Grupo Sol Services 6,112 14,347 1,195 418 15,961 H.C. Extremadura, S.A. 185,199 646 185,846 Hotel Bellver, S.A. 363,347 10,526 112 373,985 Hoteles Turísticos, S.A. 49,496 3,197 (356) 52,337 Ihla Bela de Gestao e Turismo 15,806 87,250 (400) 102,656 Industrias Turísticas, S.A. 25,422 1,495 26,918 Inversiones Inmobiliarias IAR 66,859 (6,431) 156 (814) 59,769 Inversiones Jacuey 1,629 (2) (116) 1,511 Inversiones y Explotaciones Tur. S.A. 1,252,596 338,685 1,591,282 Irton Co./Inversiones Guamá (1) (4,954) (15,301) 1,365 1,927 (16,963) Latin America Logistics Co. (792) (124) 208 (20) (727) Lavanderias Ind. Guadalajara, S.A. 23,084 (578) (23,085) (578) Melia Inversiones Americanas NV 851,287 64,383 (249,057) 666,613 Meliá Mérida S.L. 199,989 (199,989) Melsol Portugal 4,253 4,104 4,423 (3,199) 5,329 Moteles Andaluces, S.A. 31,071 7,044 38,115 Moteles Grandes Rutas Españolas, S.A. 29,257 1,848 (739) 30,365 Neale/Inversiones Agara (1) 36,302 9,984 (7,310) 5,612 44,586 Op. Paseo de la Reforma, S.A. 1 3,101 3,102 Parking Internacional S.A. 48 3,119 3,167 Parque San Antonio S.A. 260,083 21,485 (13,835) 267,734 Playa Salinas,S.A. 10 (5) 6 Punta Elena, S.L. 163,177 47,778 210,955 Randlestop 1,153 (16) 981 1,871 3,989 Realizaciones Turísticas, S.A. 118,497 3,181 121,678 Safivic, S.A. 10,714 1,784 (10,714) 1,784 San Juan Investment 3 15,033 (2) 15,033 Tenerife Sol, S.A. 2,961,036 558,236 3,519,270 Torresol Desarrollos Turísticos, AIE 19 (1) 19 Tryp Meditérranée 68,157 (53,112) (1,264) 13,781 Urme Real, S.L. 18,715 (497) (3,201) 15,017 TOTAL 123,935 7,250,035 992,642 2,222,811 (729,157) 63,242 9,799,570

S OL M ELIÁ

A NNUAL R EPORT 2000 127 20 Deferred Income

20.1 Capital grants

The breakdown of the grants reflected in the balance sheet for each company and their accrual in the profit and loss account of the current year are as follows:

(Thousands of pesetas) BALANCE 31/12/98 BALANCE 31/12/99 BALANCE 31/12/00 ADDITIONS B/S. P/L. B/S. P/L. B/S. P/L. 2000

AZAFATA, S.A. 4,180 849 5,028 DOCK TELEMARKETING, S.A. 3,000 500 2,500 500 2,000 500 HOTELES TURISTICOS, S.A. 18,436 2,179 16,257 2,179 INDUSTRIAS TURISTICAS, S.A. 7,261 443 6,818 443 INV. y EXPLOTACIONES TURISTICAS, S.A. 58,440 2,962 62,515 3,423 7,498 MOT. GRANDES RUTAS DE ESPAÑA, S.A. 1,059 41 1,019 41 SOL MELIA, S.A. 493,071 16,168 512,449 16,794 36,172 TOTAL 3,000 500 580,767 22,293 605,237 24,228 48,699

These grants were used mainly to finance purchases of tangible fixed assets.

20.2 Other deferred income

The breakdown of other deferred income reflected in the balance sheet for each company is as follows:

(miles de Pesetas) BALANCE BALANCE BALANCE 30/12/98 31/12/99 31/12/00

BEAR, S.A. De C.V. 91,491 91,491 CALA FORMENTOR, S.A. De C.V. 341,954 M.I.H. U.K. Ltd. 5,449 MARKSOL TURIZM 11,360 MELIÁ INVERSIONES AMERICANAS, B.V. 561,451 302,175 SOL MELIÁ CROATIA, S.A. 969 33,274 SOL MELIÁ, S.A. 252,775 554,679 677,379

Unrealised foreign currency gains 252,775 1,567,352 1,104,319

Deferred interest 16,847 11,830

Deferred time sharing income 1,069,463 1,967,654

TOTAL 252,775 2,653,662 3,083,803

S OL M ELIÁ

A NNUAL R EPORT 2000 128 21 Provisions for Liabilities and Charges

The balance sheet reflects in the long-term liabilities a balance of Ptas. 9,437 million as Provisions for liabilities and char- ges. As indicated in Note 5 this heading includes the Group’s commitments with its personnel (movement and breakdown not specifically quantified) as well as the provisions recorded to cover the various liabilities and contingencies arising from operations, the commitments acquired and guarantees given to third parties, risks for legal claims and lawsuits and possi- ble liabilities deriving from the different possible interpretations of prevailing legal regulations. It also includes the provi- sions for taxation from previous years, which are being appealed or are pending court resolution according to the following details, in thousands of pesetas:

TAXES YEARS 12/31/2000

Tax on business location 1980, 1983 and 1987 6,456 Turnover tax 1977, 1978 and 1977 121,000 Urban land tax 1979, 1980, 1984, and 1986 to 1988 15,096 Luxury taxes 1975 a 1980, 1984 and 1985 17,209 Tax on real estate 1990 5,000 Appealed additional tax assessments 157,103

TOTAL 321,864

S OL M ELIÁ

A NNUAL R EPORT 2000 129 22 Non-trade Debts

22.1 Issue of debentures

On September 15, 1999 Sol Meliá, S.A. carried out the so-called “Issue of Convertible Debentures of Sol Meliá, S.A., September 1999”, amounting to Euros 200 million, the main characteristics of which are as follows:

Amount of the issue € 200,000,000 Par value of bond: € 1,000.00 Maturity: 5 years Debt status: Senior (Not subordinate) Issue price: 100.00% Issue date: September 15, 1999 Maturity date: September 15, 2004 Coupon: 1.00% (e10,00) annual upon maturity Maximum and minimum conversion price: 16.81 / 15.00 (35.54% / 21.00%) Minimum conversion premium: 21.00% Conversion ratio: 66.6489 shares per Bond Redemption price: 112.02% Bond yield upon maturity: 3.25% Possibility of cancellation by issuer: After the third year. (Subject to limit of 130% e19.51) Credit quality: BBB+ Maximum of shares to be issued: 13,329,779

The balance at December 31, 2000 is as follows:

Issue principal 33,277,200 Accrued interest at 2.25% 1,035,534

TOTAL 34,312,734

Sol Meliá, S.A. guarantees this issue of debentures amounting to Euros 200 million with the Total Equity of the Company.

S OL M ELIÁ

A NNUAL R EPORT 2000 130 NON-TRADE DEBTS

On December 7, 2000 Sol Meliá Europe, B.V. carried out a private placing of debentures among investors of Deutsche Bank for a total of Euros 206 million under the following terms:

Amount of the issue € 206,000,000 Par value of bond: € 10,000.00 Maturity: 114 days Issue price: 98.26% Issue date: December 7, 2000 Maturity date: March 30, 2001 (February 12, 2006) Redemption price: 100% Bond yield upon maturity: 5.644%

The balance at December 31, 2000 is as follows:

Issue principal 34,275,516

TOTAL 34,275,516

For presentation purposes, on the Group’s Financial Statements the balance of Ptas. 34,276 million has been reclassified to long-term. This balance relates to the private placing of bonds of Euros 206 million, which was formalised to cover termporarily the financing of the acquisitions made during the year and which, on the formulation date of the accompanying annual accounts, has been covered by the issue of bonds of Euros 340 million with five-year maturities, as explained in Note 27.

S OL M ELIÁ

A NNUAL R EPORT 2000 131 NON-TRADE DEBTS

22.2 Debts with credit institutions

(Thousands of pesetas) LOANS AND CREDIT LINES DETAILS OF CREDIT LINES S/T L/T TOTAL LAST LIMIT BALANCE BALANCE CURRENCY MATURITY MATURITY MATUR. MATUR. BALANCE AVAILABLE USED

AZAFATA, S.A. LEASING 6,493 6,726 13,219 PTA.

BEAR S.A. de C.V. SOMEX 18,084 18,084 USD BCO. SABADELL 260,222 5,453,948 5,714,170 23/6/2011 USD SUB-TOTAL 278,306 5,453,948 5,732,254

CALA FORMENTOR, S.A. de C.V. B.B.V. 1,269,946 8,254,651 9,524,597 30/6/2008 USD

CARIBOTELS de MEXICO S.A. de C.V. 83,174 83,174 USD

COM. PROP.SOL y NIEVE BANKINTER 125,000 375,000 500,000 17/9/2004 PTA. LEASING 70,182 238,676 308,858 PTA. INTEREST PAYABLE 963 963 SUB-TOTAL 196,145 613,676 809,821

DOCK TELEMARKETING, S.A. LEASING 3,679 4,069 7,748 PTA.

HOTEL BELLVER, S.A. CAJA MADRID 4,000 20,000 24,000 3/7/2006 PTA. CAJA MADRID 6,000 30,000 36,000 3/7/2006 PTA. CAJA MADRID 10,000 70,000 80,000 1/7/2008 PTA. SA NOSTRA 20,000 20,000 PTA. LEASING 22,195 40,639 62,834 INTEREST PAYABLE 2,065 2,065 PTA. SUB-TOTAL 64,260 160,639 224,899

HOTEL CONVENTO DE EXTREMADURA, S.A BCO. DE EXTREMADURA 231,902 231,902 19/5/2017 500,000 268,098 231,902 PTA.

HOTELES TURÍSTICOS, S.A. LEASING 55,242 94,824 150,066 PTA.

INDUSTRIAS TURISTICAS, S,A. LEASING 7,148 4,235 11,383 PTA.

INMOBILIARIA BULMES, S.A. B.B.V.A. 1,314,000 1,314,000 28/2/2001

INMOTEL INVERSIONES ITALIA S.R.L. LEASING 494,741 8,080,758 8,575,499 LIT

INVERSIONES AGARA, S.A. BANCAJA 349,817 1,661,631 2,011,448 16/7/2006 USD INTEREST PAYABLE 32,613 32,613 USD SUB-TOTAL 382,430 1,661,631 2,044,061

INVERSIONES CORO, S.A. POPULAR DOMINICANO 699,634 1,049,451 1,749,085 30/4/2003 USD

S OL M ELIÁ

A NNUAL R EPORT 2000 132 NON-TRADE DEBTS

(Thousands of pesetas) LOANS AND CREDIT LINES DETAILS OF CREDIT LINES S/T L/T TOTAL LAST LIMIT BALANCE BALANCE CURRENCY MATURITY MATURITY MATUR. MATUR. BALANCE AVAILABLE USED

INVERSIONES GUAMA, S.A. BANCAJA 583,028 2,915,142 3,498,170 27/8/2006 USD INTEREST PAYABLE 83,211 83,211 USD SUB-TOTAL 666,239 2,915,142 3,581,381

INVERSIONES INMOBILIARIAS IAR 1997 CA B.S.C.H. 665,340 2,656,613 3,321,952 3/11/2005 USD BCO. SABADELL 429,993 2,432,540 2,862,534 12/2/2006 USD SUB-TOTAL 1,095,333 5,089,153 6,184,486

INVERSIONES Y EXPLOTACIONES TURÍSTICAS, S.A. HIPOTECARIO 90,000 1,790,363 1,880,363 15/5/2009 PTA. C.A.M. 100,000 1,000,000 1,100,000 12/4/2011 PTA. LEASING 82,318 111,547 193,865 PTA. INTEREST PAYABLE 23,054 23,054 PTA. SUB-TOTAL 295,372 2,901,911 3,197,283

LOMONDO LTD. B.B.V. 487,454 9,951,914 10,439,368 20/1/2016 LUK BARCLAYS 422,038 857,264 1,279,302 14/7/2003 LUK INTEREST PAYABLE 405,708 405,708 LUK SUB-TOTAL 1,315,199 10,809,178 12,124,378

MESOL MANAGEMENT, S.L. LEASING 449,836 1,611,904 2,061,740 PTA.

MOTELES ANDALUCES, S,A. LEASING 1,519 2,536 4,055 PTA.

MOTELES GRANDES RUTAS DE ESPAÑA, S.A. LEASING 12,774 18,102 30,876 PTA.

PARQUE SAN ANTONIO, S.A. LEASING 19,975 6,426 26,401 PTA.

SOL MELIA, S.A. B.B.V. 199,029 1,990,291 2,189,320 1/12/2011 PTA. B,N.L. 250,000 750,000 1,000,000 30/10/2004 PTA. B.S.C.H. 160,000 1,600,000 1,760,000 28/12/2011 PTA. C.A.M. 66,461 156,889 223,350 19/2/2004 PTA. C,A,M, 31,012 76,510 107,522 24/3/2004 PTA, C.A.M. 95,885 273,360 369,245 26/7/2004 PTA. CAJA CANARIAS 99,697 493,251 592,948 30/3/2007 PTA. CAJA CANARIAS 34,745 172,194 206,939 30/3/07 PTA. EXTERIOR 226,667 2,266,667 2,493,334 19/12/2011 PTA. EXTERIOR 85,101 112,158 197,259 30/4/2003 PTA. EXTERIOR 79,943 112,003 191,946 31/5/2003 PTA. LA CAIXA 92,988 929,878 1,022,866 30/6/2011 PTA. LA CAIXA 110,000 880,000 990,000 1/1/2009 PTA. LA CAIXA 151,010 113,256 264,266 27/8/2002 YEN MARCH 297,450 1,563,383 1,860,833 1/6/2006 PTA. RHEINHYP 572,125 2,288,500 2,860,625 27/6/2005 PTA. RHEINHYP (1) 4,061,567 4,061,567 30/6/2001 SWAP RHEINHYP (1) 2,411,555 2,411,555 30/6/2001 SWAP RHEINHYP (1) 190,386 190,386 30/6/2001 SWAP B,B.V. 4,923,148 4,923,148 19/6/2001 5,000,000 76,852 4,923,148 PTA. B.B.V. 479,090 479,090 19/6/2001 800,000 320,910 479,090 PTA. B.N.L. 474,659 474,659 19/7/2001 500,000 25,341 474,659 PTA.

S OL M ELIÁ

A NNUAL R EPORT 2000 133 NON-TRADE DEBTS

(Thousands of pesetas) LOANS AND CREDIT LINES DETAILS OF CREDIT LINES S/T L/T TOTAL LAST LIMIT BALANCE BALANCE CURRENCY MATURITY MATURITY MATUR. MATUR. BALANCE AVAILABLE USED

B.S.C.H. 970,540 970,540 7/5/2001 1,000,000 29,460 970,540 PTA. B.S.C.H. 783,906 783,906 26/11/2002 1,000,000 216,094 783,906 PTA. BANCA DI ROMA 178,024 178,024 20/5/2002 187,500 9,476 178,024 PTA. BANCAJA 367,649 367,649 22/10/2002 400,000 32,351 367,649 PTA. BANESTO 3,468,716 3,468,716 29/6/2001 3,500,000 31,284 3,468,716 PTA. BANKINTER 507,477 507,477 19/2/2011 500,000 (7,477) 507,477 PTA. BANKINTER 971,732 971,732 21/4/2011 1,000,000 28,268 971,732 PTA. BARCLAYS 910,827 910,827 28/7/2002 1,000,000 89,173 910,827 PTA. C.A.M. 1,897,173 1,897,173 16/12/2001 1,000,000 (897,173) 1,897,173 PTA. CAIXA CATALUNYA 296,902 296,902 31/7/2001 500,000 203,098 296,902 PTA. CAJA MADRID 1,464,928 1,464,928 1/1/2002 1,500,000 35,072 1,464,928 PTA. CREDITO BALEAR 66,143 66,143 3/10/2001 100,000 33,857 66,143 PTA. CHASE MANHATTAN 1,482,094 1,482,094 2/3/2003 1,500,000 17,906 1,482,094 PTA. DEUTSCHE BANK 279,350 279,350 8/9/2002 1,000,000 720,650 279,350 PTA. DRESDNER 1.003,205 1,003,205 30/1/2002 1,000,000 (3,205) 1,003,205 PTA. HERRERO 304,310 304,310 20/2/2001 400,000 95,690 304,310 PTA. LA CAIXA 3,011,996 3,011,996 30/4/2003 3,000,000 (11,996) 3,011,996 PTA. MARCH 228,026 228,026 15/10/2006 250,000 21,974 228,026 PTA. MARCH 251,708 251,708 15/10/2006 300,000 48,292 251,708 PTA. POPULAR 243,382 243,382 13/4/2001 250,000 6,618 243,382 PTA. SA NOSTRA 541,116 541,116 30/9/2002 750,000 208,884 541,116 PTA. SOLBANK 987,515 987,515 4/9/2003 1,000,000 12,485 987,515 PTA. LEASINGS 6,972,701 10,860,206 17,832,907 PTA. INTEREST PAYABLE 297,326 297,326 PTA. SUB-TOTAL 16,485,648 50,732,162 67,217,810 27,437,500 1,343,884 26,093,616

SOL MELIA CROACIA LEASING 666 666 KUNA

TENERIFE SOL, S.A. LEASING 16,557 2,316 18,873 PTA.

TRYP,S.A. B.B.V.A. 17,663 17,663 14/9/2001 300,000 282,337 17,663 PTA. BANC SABADELL 26,730 26,730 22/6/2001 100,000 73,270 26,730 PTA. BANCO DE VALENCIA 2,016 2,016 8/7/2001 50,000 47,984 2,016 PTA. BANCO GALLEGO 59,474 59,474 17/3/2001 100,000 40,526 59,474 PTA. BANCO ZARAGOZANO 2/11/2001 100,000 100,000 PTA. BANESTO 21/2/2001 150,000 150,000 PTA. BANESTO 1,696 1,696 17/3/2001 100,000 98,304 1,696 PTA. BANKINTER 164,850 164,850 23/2/2001 300,000 135,150 164,850 PTA. BCO. POPULAR ESPAÑOL 12/4/2001 125,000 125,000 PTA. CAJA MADRID 214,917 214,917 27/10/2001 300,000 85,083 214,917 PTA. DEUTSCHE BANK 302,721 302,721 14/10/2001 150,000 (152,721) 302,721 PTA. LA CAIXA 47,588 47,588 25/2/2001 100,000 52,412 47,588 PTA. LEASING 36,031 36,031 PTA. BILLS DISCOUNTED 82,000 82.000 PTA. INTEREST PAYABLE 3,822 3,822 PTA. SUB-TOTAL 923,477 36,031 959,508 1,875,000 1,037,345 837,655

TRYP MEDITERRANEE, S.A. CREDITS 44,223 3,771 47,994 DINAR INTEREST PAYABLE 21,238 21,238 USD SUB-TOTAL 21,238 21,238

TOTAL 24,805,414 101,142,984 125,948,398 29,812,500 2,649,327 27,163,173

(1) On December 29, 1995 an agreement was reached with Caja Madrid guaranteeing the payments of principal and interest in pesetas. Most of the loans and credit lines detailed above are backed by mortgage guarantee.

S OL M ELIÁ

A NNUAL R EPORT 2000 134 NON-TRADE DEBTS

As indicated in Note 27, on February 9, 2001 bonds with five-year maturities were issued for Euros 340 million to finan- ce the operations carried out during the current year, which were applied to repay the balances used of nearly all the short- term credit lines. Therefore, all the balances of the credit lines maturing in less than one year used to finance these opera- tions have been reclassified to long-term in order to give a true and fair view of the Group’s net financial position in the presentation of the financial statements.

On the formulation date of these annual accounts, the loan of Inmobiliaria Bulmes, S.A. with B.B.V.A. for Ptas. 1,314 million was cancelled and a new loan was granted by EURO HYPO for Ptas. 8,240 million which matures in 2018. For this reason, this balance was reclassified to long-term to better reflect the Group’s net financial position in the notes to the consolidated annual accounts.

The breakdown of maturities in millions of pesetas is as follows:

(Thousands of pesetas) YEAR AMOUNT

2001 24.805 2002 14.540 2003 12.344 2004 9.580 2005 and following 64.679

TOTAL 125.948

The average interest rate accrued by the aforementioned loans plus the issue of bonds during the current year is 5.67%.

S OL M ELIÁ

A NNUAL R EPORT 2000 135 NON-TRADE DEBTS

22.3 Balances with subsidiaries

The short-term Group companies’ balances with subsidiares are detailed below:

(Thousands of pesetas) BALANCE 31/12/98 BALANCE 31/12/99 BALANCE 31/12/00 DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

Apartotel Bosque, S.A. 3,203 57,249 61,310 59,857 Agotel, Gmbh 551,528 Bisol Investment, N.V. 11,630 C.P.Meliá Castilla 338,487 21 C.P.Meliá Costa del Sol 72,849 Caribotels de Mexico, S.A. de C.V. 10,430 Casino Tamarindos, S.A. 510,384 Corporación H. Metor 191,183 Deserrolladora H. Del Norte 310,613 Detur Panama 2,788 30,424 F.S.P.Tourizm 25,507 Gupe-Inmobiliária, S.A. 177,540 Helenic Hotel Management 12,978 9,282 33,990 Hotel las Américas S.A. 69,457 Melia Inversiones Americanas 63,518 Melia Mérida, S.L. 127.662 Mogan Promociones, S.A. De C.V. Nexprom, S.A. 651 99,282 Santo Domingo Logistics 17,323 Sofía Hoteles, S.L. 26,478 Sol Hoti Portugal Hotels 415 4,336 478 7,432 78 7,992 Sol Melia France, S.A. 270 Sol Melia Marruecos, S.A. 159 Sol Melia Travel, S.A. 1,537 193,975 TOTAL 80,114 571,969 110,716 7,432 1,542,070 779,993

22.4 Other non-trade debts

The breakdown of this heading by concepts is as follows:

(Thousands of pesetas) SHORT-TERM LONG-TERM

DEFERRED TAXES ON PROFIT 401,565 12,216,954 GUARANTEE DEPOSITS RECEIVED 93,351 491,431 REMUNERATION PENDING PAYMENT 2,379,561 PUBLIC TREASURY 2,989,321 84,886 SOCIAL SECURITY 869,941 PUBLIC TREASURY VAT PAYABLE 401,158 FIXED ASSETS SUPPLIERS 763,194 OTHERS 344,367 705,468 TOTAL OTHER CREDITORS 8,242,457 13,498,739

S OL M ELIÁ

A NNUAL R EPORT 2000 136 23 Fiscal Situation

23.1 Taxable income

In accordance with the prevailing legal regulations, tax returns cannot be considered final until they have been inspected by the tax authorities or the 4-year inspection period has elapsed, which may be extended due to tax inspection proceedings. In this regard the Group companies are open to tax inspection for the following taxes and years:

CORPORATION TAX YEARS 1996 to 1999 SALARY WITHHOLDINGS FOR INCOME TAX YEARS 1997 to 2000 V.A.T. YEARS 1997 to 2000 CANARY ISLANDS GENERAL TAX YEARS 1997 to 2000

Inmotel Inversiones, S.A. (company absorbed in 1999) has been inspected for individual and consolidated corporation tax for 1994 to 1997, V.A.T. and withholdings on interest for 1995 to 1997 and for salary income tax withholdings for 1995 to 1998. For this reason, the statute of limitations for inspection of Inmotel Inversiones, S.A. (absorbed company) is only 1998 for corporation tax, V.A.T. and withholdings on interest and 1997 and 1998 for the Canary Islands general tax.

The tax credits derived from tax losses pending set-off are recorded for the amount of the deferred taxes existing at year-end.

23.2 Deferred tax assets and liabilities

The breakdown of deferred tax assets and liabilities, in thousands of pesetas, is as follows:

(Thousands of pesetas) CREDITORS SHORT-TERM LONG-TERM

DEFERRED TAX ON PROFIT 401,565 12,216,954

TOTAL 401,565 12,216,954

S OL M ELIÁ

A NNUAL R EPORT 2000 137 FISCAL SITUATION

23.3 Tax credits

In accordance with Law 19/94 on investments in the Canary Islands, Sol Meliá, S.A. is required to invest in new fixed assets located in the Canary Islands during the following three years, as per the following details, in thousands of pesetas:

YEAR OF AMOUNT REINVESTED PENDING REINVESTMENT ORIGIN TO BE REINVESTED AMOUNT REINVESTMENT EXPIRATION

1996 396,864 396,864 31/12/99 1997 554,257 554,257 31/12/00 1998 1,082,197 1,082,197 31/12/01 1999 1,231,808 1,231,808 31/12/02 2000 3,265,635 3,265,635 31/12/03

TOTAL 6,530,761 3,265,126 3,265,635

The breakdown of tax losses pending set-off of Sol Meliá, S.A. and its consolidated tax group, in thousands of pesetas, is as follows:

AVAILABLE THOUSANDS OF YEAR UNTIL PESETAS

1997 2008 217,177

The breakdown of the tax deductions for export activities pending application by Sol Meliá, S.A. at December 31, 2000 and deducted for tax purposes during the year are as follows, in thousands of pesetas:

PORTFOLIO INVESTMENT DEDUCTION DEDUCTIONS PENDING INVESTMENTS AMOUNT AMOUNT 1999 2000 DEDUCTIONS

Bear, S.A. de CV 2,982,219 745,555 745,555 Lomondo Limited 1,935,798 483,950 284,154 199,796 Sol Meliá France, SAS 8,286,124 2,071,531 0 431,159 1,640,372 Agotel, GMBH 706,209 176,552 0 176,552 Sol Meliá Benelux, S.A. 1,255,373 313,843 0 313,843

TOTAL 15,165,723 3,791,431 1,029,709 630,955 2,130,768

Inmotel Inversiones, S.A. has taken advantage in 1996 of the tax benefits resulting from the reinvestment of extraordinary profits, not including in its taxable income the proceeds obtained from the transfer of assets, of Ptas. 8,193 million, through the corresponding adjustment to taxable income, and maintaining, subject to reinvestment, a total of Ptas. 10,724 million. This tax profit was adjusted during the inspection of Inmotel Inversiones, S.A. and following the inspection, Ptas. 5,231 million is pending reinvestment. The resulting total deemed tax exempt due to reinvestment amounts to Ptas. 4,060 million.

S OL M ELIÁ

A NNUAL R EPORT 2000 138 FISCAL SITUATION

As a result of the inspection adjustments, Sol Meliá, S.A. has applied tax losses amounting to Ptas. 7,248 million and tax liabilities and assets have decreased by Ptas. 1,476 and 2,550 million, respectively, with the corresponding effect on the pro- fit and loss account. This was the main reason for the increase in the tax rate of the Group’s parent company in 2000 when compared with the previous year.

The tax benefits of Sol Meliá, S.A., arising from the sale of assets and tax exempt due to reinvestment, as well as the dis- posal amounts to be reinvested, in thousands of pesetas, are as follows:

AMOUNT PROFIT PENDING EXPIRATION YEAR SALE OF SALE ON SALE REINVESTED REINVESTMENT DATE

1996 Sundry assets 5,231,169 4,060,445 5,231,169 0 1999 1997 H. Don Manolo 578,000 259,108 578,000 0 2000 1998 Sundry assets 1,469,773 977,146 1,469,773 0 2001 1999 H. Sol Canarios 825,000 369,669 825,000 0 2002 2000 Lav. Industrial de Guadalajara 215,250 172,801 0 215,250 2003

TOTAL 8,319,192 5,839,169 8,103,942 215,250

The 1996 amounts reflect the write-off of balances previously applicable to reinvestments, which have been adjusted at the afo- rementioned inspection.

As indicated in Note 5 above, the tax criteria applied to financial leasing contracts signed after January 1, 1996 were modified in 1999.

The information stipulated in Article 98 of Law 43/95, of December 27, on Corporation Tax, and on mergers and spin-offs of activities carried out in previous years is included in the first Notes to the consolidated annual accounts approved after each transaction, the summary of which is as follows:

Inmotel Inversiones, S.A.: 1993, 1996, 1997 and 1998 Sol Meliá, S.A.: 1999

The breakdown of tax deductions applicable for new fixed assets acquired in the Canary Islands by Sol Meliá, S.A. is:

YEAR INVESTMENT DEDUCTION APPLICATION PENDING (QUOTA)

1999 2,457,600 614,400 500,000 114,400 2000 624,577 156,144 0 156,144

TOTAL 3,082,177 770,544 500,000 270,544

S OL M ELIÁ

A NNUAL R EPORT 2000 139 FISCAL SITUATION

23.4 Reconciliation between taxable income and accounting results of the parent company

(Thousands of pesetas) TAX INCREASE DECREASE EFFECT Accounting results for the year (Profit before taxation): ------10,203,210

TEMPORARY DIFFERENCES: Amortisation of residual value of financial leasing contracts 25,323 Deductible financial leasing instalments 119,591 Amortisation of intangible fixed assets 484,370 Interest of financial leasing contracts 51,545 Double amortisation of financial leasing 2,703,865 Indemnities to personnel 76,475 261,392

PERMANENT DIFFERENCES: Reserve for investments in the Canary Islands Law 19/94 3,265,635 Sundry Community of Owners 72,650 Adjustment Sol Gelat 13,719 Fiscal transparency released to results 18,013 Current accounts interest of commercial Group 507,400 Disallowable expenses Fines and Sanctions 27,298 Disallowable expenses 41,385 Reinvestment of extraordinary profits 112,698 172,801 Adjustment of monetary reinvestment 629,277 Provisions 257,557 Provision Group companies 464,455 Provision Associated companies 31,265 PRELIMINARY TAXABLE INCOME 2,034,830 7,301,884 4,936,156

TAX QUOTA (35%) 1,727,655 Deduction National double taxation 20,648 Deduction International double taxation 55,706 ADJUSTED TAXABLE INCOME 1,651,301

DEDUCTIONS FOR THE YEAR Export activities 577,955 Fixed assets Canary Islands 500,000 TAXABLE INCOME FOR THE YEAR 573,346

On-account payments and withholdings (1,526,298) TAX RECEIVABLE (952,952)

The Company applies the consolidated taxation system for corporation tax with the following Group companies:

Apartotel, S.A Inversiones Latinoamérica 2.000, S.L. Casino Tamarindos, S.A. Lavanderías Compartidas. S.A. Dock Telemarketing. S.A. Melia Catering, S.A. Dorpan, S.L. Mesol Management, S.L. Gestión Hotelera Turística Mesol, S.A. Propiedades en Arriendo, S.L. Hosterías de Castilla, S.A. Realizaciones Turísticas, S.A. Hoteles Melia, S.L. Securisol, S.A Hoteles Sol Meliá, S.L. Sol Meliá Travel, S.A Hoteles Sol, S.L Talonario Cinco Noches, S.L Hoteles Turísticos, S.A. Urme Real, S.A. Industrias Turísticas, S.A

S OL M ELIÁ

A NNUAL R EPORT 2000 140 FISCAL SITUATION

2000 Consolidated Corporation Tax

Individual preliminary taxable income

Apartotel, S.A. 202,871 Casino Tamarindos, S.A. 13,458 Dock Telemarketing, S.A. 25,230 Dorpan, S.L. 29,823 Gestión Hotelera Turística Mesol, S.A. 4,592 Hosterías de Castilla, S.A. 0 Hoteles Meliá, S.L. 0 Hoteles Sol Meliá, S.L. (1) Hoteles Sol, S.L. (1) Hoteles Turísticos, S.A. 68,295 Industrias Turísticas, S.A. 92,452 Inversiones Latinoamérica 2.000, S.L. (5,543) Lavanderías Compartidas, S.A. (12,565) Meliá Catering, S.A. 9,439 Mesol Management, S.L. (143,749) Propiedades en Arriendo. S.L. (20) Realizaciones Turísticas, S.A 231,326 Securisol, S.A. 0 Sol Meliá, S.A. 4,936,156 Sol Meliá Travel. S.A. (100,335) Talonario Cinco Noches, S.L. 12,882 Urme Real, S.A. 1,336

CONSOLIDATED PRELIMINARY TAXABLE INCOME 5,365,646 Tax Quota 35% 1,877,976

Deductions Double taxation 76,353

ADJUSTED TAXABLE INCOME 1,801,623

Deductions Export activities 630,955 Fixed assets 764 Fixed assets in Canary Islands 500,000

TAXABLE INCOME 669,904 On-account payments and withholdings (1,528,589)

TAX RECEIVABLE (858,685)

Due to the different interpretations of tax rulings in foreign countries some tax contingencies might exist which cannot be objectively quantified. However, in the management’s opinion, should contingencies materialise, the amounts involved would not be significant.

S OL M ELIÁ

A NNUAL R EPORT 2000 141 24 Guarantees, commitments and contingencies

The parent company has not booked any specific provision to cover the possible contingencies derived from Egeda’s claims since management does not consider that such claims may prosper. In any case, it is assumed that the general provision for liabilities and charges would cover such contingency.

The guarantee deposits maintained as guarantees given to third parties and other contingent liabilities are detailed below:

(Thousands of pesetas) AMOUNT Security deposits for rentals 346,362 Guarantee deposits for tax settlements 1,284,846 Sundry 2,311,646 Guarantee deposits in favour of third parties on behalf of Agotel GMBH 142,659 Pledged deposit in favour of Mirador del Duque, S.L. 1,400,000 Guarante deposit on loans granted to Community of Owners Meliá Castilla 375,000 Pledged deposits for loans granted to Inmotel Inversiones Italia 2,062,320 Credit line for guaranteeing factoring 1,346,576

TOTAL 9,269,409

Sol Meliá, S.A. guarantees with the Company’s Total Equity the issue of debentures amounting to Euros 200 million (See Note 22) of September 15, 1999 and the issue of bonds of Euros 206 million of December 9, 2000. The latter was inte- grated in the issue of bonds of Euros 340 million of February 2001 (See Note 27).

Sol Meliá, S.A. is the guarantor of Detur Panamá, S.A., owner of Hotel Meliá Panamá Canal, with Banca March, for 51.79% of a credit line of US-$ 10 million, US-$ 8.9 million of which were used at December 31. The guaranteed amount therefore amounts to US-$ 4.6 million.

Sol Meliá, S.A. secures with BBVA through mortgages on owned hotels and via personal guarantee a bank guarantee line of Ptas. 1,500 million. These guaranteed credit lines have not been used either by the Company or its subsidiaries. The maturity date is December 19, 2001.

Sol Meliá, S.A. is the guarantor, by deposit pledged in favour of Mirador del Duque, S.L., for a loan granted to the latter to build a hotel.

A confirming line was granted to Sol Meliá for a maximum of Ptas. 4,000 million.

Sol Meliá is the guarantor with Banco Central Hispano for two loans granted for US-$ 10 and 5 million, respectively.

The shares of Inversiones Hoteleras Los Cabos are pledged to guarantee a loan granted by Bancomex to its subsidiary Aresol Cabos, S.A. de C.V. which matures in 2004.

The shares of Desarrollos Inmobiliarios Guanacaste and Desarrollos Hoteleros Guanacaste are deposited as guarantee for a loan received by Desarrollos Hoteleros Guanacaste.

S OL M ELIÁ

A NNUAL R EPORT 2000 142 GUARANTEES, COMMITMENTS AND CONTINGENCIES

Sol Meliá, S.A. has acquired the commitment of financing, if needed, up to Ptas. 2,000 million of the construction of one of the hotels it will rent and of mortgaging other owned assets.

Sol Meliá, S.A. is the guarantor of Lomondo Ltd. (a Group company) and Promociones Playa Blanca, S.A. for loans for- malised with banks, the debts of which at December 31, 2000 amount to Sterling Pounds 15.6 million and Euros 4.8 million, respectively.

Sol Meliá, S.A., Meliá Inversiones Americanas, N.V. and Inmotel Inversiones, S.A. (absorbed company) signed a Global Agreement in March 1998 in order to regulate certain aspects of the intercompany relationship. The main terms of the Global Agreement are:

Non-competition Covenant: Inmotel Inversiones, S.A. and Sol Meliá, S.A agreed not to compete in the tourist business in Latin American and the Caribbean area unless otherwise authorized by Meliá Inversiones Americanas, N.V.

First refusal right: Meliá Inversiones Americanas, N.V. has granted to Sol Meliá, S.A. the first refusal right of operating any hotel owned by Meliá Inversiones Americanas. N.V. that the latter may acquire or use.

Management contracts: The following standard terms will be applied to any management contract signed by Meliá Inversiones Americanas, N.V.and Sol Meliá, S.A. or by any of their subsidiaries:

Initial period for the management contract 20 years Sales fees 4% on gross income Fees on G.O.P 10%

Market price: All the transactions between Meliá Inversiones Americanas, N.V. and Sol Meliá, S.A. which might imply a clash of interests will be carried out at market price.

Sol Meliá, S.A. has firm rental commitments, which range between one and eighteen years, including documentary com- mitments for approximately Ptas. 15,000 million, in accordance with the maturities of the corresponding rentals.

Sol Meliá has agreed with Tryp, S.A. (a Group company) that any amount it may receive from the former owners of the said company to cover risks materialised in the Tryp Group would be handed over to Tryp, S.A.

Sol Meliá secures up to Euros 1,500 million the fulfilment by the subsidiary Sol Meliá Europe, B.V. of any assumed obli- gation relating to the issue of “Euro Medium-Term Note Programme” Bonds to be carried out by the subsidiary. At December 31, 2000 Sol Meliá Europe, B.V. had issued Bonds for Euros 206 million, which mature on March 30, 2001.

During the year, Hoteles Mallorquines Agrupados, S.A., Hoteles Mallorquines Asociados, S.A. and Hoteles Mallorquines Consolidados, S.A., have paid to Sol Meliá, S.A. all the expenses and payments deriving from the warrants given to the shareholders of Melia Inversiones Americanas, N.V., who accepted the Public Offering of Acquisition of Shares of Melia Inversiones Americanas, N.V. approved by the Spanish National Stock Market Committee on December 30, 1998.

Claims for damages were lodged with a United States Court against various Group companies by a guest of one of the hotels managed in Mexico. The lawyer has affirmed that he cannot as yet give an opinion on the final outcome. The Company’s directors consider, however, that these claims will not have a significant impact on the Group’s results and equity since Sol Meliá has a minority holding in the company that owns and operates the hotel, and in any case the Group has an insurance policy to cover such contingencies.

S OL M ELIÁ

A NNUAL R EPORT 2000 143 25 Income and Expenses

25.1 Consolidated income distributed according to type of income

The amounts corresponding to operating income according to geographical markets are as follows:

(Thousands of pesetas) 1998 1999 2000

Spanish market 10,409,505 78,931,425 99,425,948 International market 5,340,491 30,652,867 48,973,206 Total 15,749,996 109,584,292 148,399,154

The breakdown of income by type of service is as follows:

(Thousands of pesetas) 1,998 1,999 2,000

Net turnover 11,207,266 104,565,401 140,965,519 Hotels income 94,845,175 129,735,296 Casinos income 2,055,793 2,064,006 Time sharing income 1,930,741 2,426,001 Management income 6,651,872 3,251,352 3,821,497 Administration income 4,247,970 2,095,026 2,481,216 Franchise income 307,424 387,314 437,503

Other operating income 4,542,730 5,018,891 7,433,635

TOTAL OPERATING INCOME 15,749,996 109,584,292 148,399,154

Financial income 457,082 6,186,069 7,878,646

Extraordinary income 322,935 2,160,249 6,743,484

TOTAL CONSOLIDATED INCOME 16,530,013 117,930,610 163,021,284

25.2 Consolidated average number of employees during 2000

The consolidated average number of employees during the year is 14,033 people, distributed as follows by job category:

1998 1999 2000

EXECUTIVES 34 282 318 HEADS OF DEPARTMENT 36 818 843 TECHNICIANS 242 5.220 5,584 AUXILIARY STAFF 47 4,871 7,288 TOTAL 359 11,191 14,033

S OL M ELIÁ

A NNUAL R EPORT 2000 144 INCOME AND EXPENSES

25.3 Consolidated personnel expenses

The breakdown of the consolidated personnel expenses is as follows:

(Thousands of pesetas) 1998 1999 2000

SALARIES, WAGES AND RELATED EXPENSES 2,198,493 25,844,228 34,321,572 SOCIAL SECURITY 336,071 7,270,556 8,960,218 INDEMNITIES 45,768 211,804 OTHER WELFARE EXPENSES 298,306 1,521,614 1,828,980

TOTAL 2,832,870 34,682,166 45,322,574

25.4 Extraordinary results

The breakdown of extraordinary results is as follows:

(Thousands of pesetas) 1998 1999 2000

PROFIT ON DISPOSAL OF FIXED ASSETS 7,637 251,500 3,302,602 CAPITAL GRANTS RELEASED TO RESULTS 500 22,293 24,228 EXTRAORDINARY INCOME 314,798 1,656,394 3,297,366 INCOME AND PROFITS FROM PRIOR YEARS 230,062 119,288

TOTAL 322,935 2,160,249 6,743,484

LOSSES ON DISPOSAL OF FIXED ASSETS 122,713 82,105 CHANGES IN FIXED ASSETS PROVISIONS (47,721) 288,409 EXTRAORDINARY EXPENSES 497,417 349,117 1,401,461 EXPENSES AND LOSSES FROM PRIOR YEARS 851,565 1,513,441

TOTAL 497,417 1,275,674 3,285,415

TOTAL EXTRAORDINARY RESULTS (174,482) 884,575 3,458,069

“Extraordinary income and expenses” for the year include gains or losses arising from the restatement of financial state- ments in countries with high inflation rates. For the current year the net extraordinary profit arising therefrom amounted to Ptas. 564 million.

A net amount of Ptas. 1,696 million relating to income obtained by the subsidiaries for operations in Puerto Rico is inclu- ded in “Extraordinary income.”

“Extraordinary expenses” includes an amount of Ptas. 500 million relating to the extraordinary charge for retirement pre- miums to personnel.

S OL M ELIÁ

A NNUAL R EPORT 2000 145 INCOME AND EXPENSES

The breakdown of the balance of “Profit on disposal of fixed assets” for the year, in millions of pesetas, is as follows:

Hotel Bardinos 588 Hotel Las Olas 534 Hotel Melia Bavaro 1,892 Other 288 TOTAL 3,302

25.5 Contribution of each company to consolidated results for the year

(Thousands of pesetas) 1998 1999 2000 CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. P/L INT. PARENT CO. P/L INT. PARENT CO. P/L INT. PARENT CO

SOL MELIA S.A. 3,357,111 3,357,111 9,010,030 9,010,030 8,125,913 8,125,913 ABBAYE DE THELEME 71,539 71,539 AKUNTRA XXI,S.L. (34,921) (34,921) APARTOTEL S.A. 73,444 (198) 73,246 28,819 (78) 28,742 AZAFATA, S.A. 53,053 53,053 BEAR S.A. DE C.V. 62,523 (169) 62,353 (37,305) (37,305) (15,652) (15,652) BISOL VALLARTA S.A. DE C.V. (248,568) 6,189 (242,379) (131,456) 2,353 (129,103) C.T. COZUMEL S.A. De C.V. (1,555) 769 (786) CADLO FRANCE (1,106) (1,106) CADSTAR FRANCE (1,464) (1,464) CALA FORMENTOR S.A. DE C.V. 244,244 (14,596) 229,648 87,113 (1,559) 85,554 CARIBOTELS S.A. De C.V. (405,574) 200,698 (204,876) CASINO PARADISUS S.A. 178,378 (91,410) 86,968 71,985 (36,637) 35,348 CASINO TAMARINDOS S.A. (52,797) (52,797) 58,034 58,034 COM. PROP.MELIA SOL Y NIEVE 59,883 (7,401) 52,481 (26,271) 3,195 (23,076) COMP.TUN.GESTION HOTEL. (2,269) (2,269) 21,445 21,445 (51,072) (51,072) CONS. INMOB. ALCANO, S.A. 1,423 1,423 1,352 1,352 CONSORCIO EUROPEO, S.A. 30,542 30,542 CORBEIL HOTEL PARIS-COLOMBES 68,176 68,176 CORP.HOT. HISPANO-MEXICANA (200,819) 5,000 (195,818) (547,600) 9,802 (537,798) CROATIAN HOTELS&RESORTS 25,627 25,627 22,113 22,113 54,126 54,126 D.Mkt.SERVICES/ I. CORO (1) (469,547) 11,692 (457,855) (474,482) 8,493 (465,989) D.T.C./ MARMER (1) 159,438 (3,970) 155,468 166,645 (2,983) 163,662 DARCUO XXI, S.L. (31,687) (31,687) DES. HOT. SAN JUAN B.V. 29 (1) 28 839,833 (15,033) 824,800 DES.TUR. DEL CARIBE N.V (749) 19 (730) (31,740) 568 (31,172) DESARROLLOS SOL 280,641 (6,988) 273,653 (293,065) 5,246 (287,819) DOCK TELEMARKETING S.A. 1,238 1,238 1,941 1,941 9,038 9,038 DOMINICAN INVESTMENT N.V. (418) 10 (407) (1,174) 21 (1,153) DORPAN S.L. 12,001 12,001 19,017 19,017 19,724 19,724 FARANDOLE N.V. (11,813) 294 (11,519) (84,882) 1,519 (83,362) GESMESOL 819,217 819,217 920,110 920,110 1,051,868 1,051,868 GEST. HOT.TURISTICA MESOL 5,494 5,494 2,425 2,425 GRUPO SOL ASIA Ltd. 163,138 (65,255) 97,883 92,145 (36,858) 55,287 38,504 (15,401) 23,102 GRUPO SOL SERVICES 2,745 (1,098) 1,647 12,583 (5,033) 7,550 2,989 (1,195) 1,793 H. ALEXANDER 118,170 118,170 H. BLANCHE FONTAINE 70,112 70,112 H. BOULOGNE ADAGIO 94,388 94,388 H. CONVENTO DE EXTREMADURA S.L. 442 (215) 227 1,328 (646) 681 H. FRANÇOIS 88,308 88,308

S OL M ELIÁ

A NNUAL R EPORT 2000 146 INCOME AND EXPENSES

(Thousands of pesetas) 1998 1999 2000 CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. P/L INT. PARENT CO. P/L INT. PARENT CO. P/L INT. PARENT CO

H. MADELEINE PALACE 55,806 55,806 H. METROPOLITAN (7,895) (7,895) H. ROYAL ALMA 201,445 201,445 H.MELIA INT. de COLOMBIA 1,130 1,130 475 475 (2,379) (2,379) HOSTERIAS DE CASTILLA 140,922 140,922 HOTEL BELLVER S.A. 30,082 (9,942) 20,140 31,849 (10,526) 21,323 HOTELES SOL INTNAL. S.A. (178,147) (178,147) (88,566) (88,566) HOTELES SOL MELIÁ, S.L. (1) (1) HOTELES SOL, S.L. (1) (1) HOTELES TURISTICOS S.A. 38,907 (2,163) 36,744 57,922 (3,197) 54,725 IHLA BELA DE GESTAO E TURISMO 45,159 (15,806) 29,353 IMPULSE HOT. DEVELOPMENT (5,417) (5,417) (4,199) (4,199) IMPULSE HOT. DEVELOPMENT B.V. (19,579) (19,579) (1,565) (1,565) INDUSTRIAS TURISTICAS S.A. 43,812 (1,060) 42,752 61,775 (1,495) 60,280 INMOBILIARIA BULMES, S.A. 25,230 25,230 INMOTEL INTERNACIONAL, S.A. (758) (758) (23,064) (23,064) INMOTEL INV. ITALIA, S.R.L. (22,233) (22,233) (103,487) (103,487) INV. EXPLOT.TURISTICAS S.A. 482,420 (216,606) 265,813 754,310 (338,685) 415,625 INV. INMOBILIARIAS I.A.R. 1997 (636,913) 15,859 (621,054) (359,279) 6,431 (352,848) INV.LATINOAMERICA 2000 S.L. (3,268) (3,268) (4,542) (4,542) (3,253) (3,253) INV.TUR. del CARIBE (2,846) (2,846) 2,590 2,590 747 747 INVERSIONES JACUEY 91,018 (1,629) 89,389 IRTON COMPANY/ I. GUAMA (1) (196.500) 4,893 (191,607) (854,824) 15,301 (839,522) LATIN AMERICA LOGÍSTICS CO. (39,474) 983 (38,491) (6,918) 124 (6,794) LAV. IND. GUADALAJARA, S.A. 2,341 (584) 1,757 (2,317) 578 (1,739) LAVANDERIAS COMPARTIDAS S.A. 8,988 8,988 (12,636) (12,636) LOMONDO Ltd. 309,617 309,617 (308,266) (308,266) LONDIM FRANCE (42,093) (42,093) LSO FRANCE INVESTIMENTS (37,814) (37,814) M.I.H. 1,202,944 1,202,944 1,399,557 1,399,557 2,694,061 2,694,061 M.I.H. U.K. Ltd. (55) (55) (52) (52) 4,770 4,770 MARINA INT. HOLDING (596) (596) (303) (303) (272,201) (272,201) MARKSERV B.V. (168,997) (168,997) (209,701) (209,701) (146,320) (146,320) MARKSOL TURIZM 27,313 27,313 (22,629) (22,629) (3,609) (3,609) MARKTUR TURIZM (21,885) (21,885) (1,461) (1,461) MELIA BRASIL ADMINIST. 55,606 55,606 68,981 68,981 91,465 91,465 MELIÁ CATERING, S.A. 9,439 9,439 MELIA E. HOLDING de ENT., S.A. 200,286 200,286 225,594 225,594 MELIA INV. AMERICANAS N.V. 1,328,488 (47,060) 1,281,428 3,596,807 (64,383) 3,532,424 MELIA MANAGEMENT 87,397 87,397 29,517 29,517 (17,439) (17,439) MELIA VENEZUELA (8,843) (8,843) 16,696 16,696 8,184 8,184 MELSOL MANAGEMENT (52,048) (52,048) (3,633) (3,633) 1,269 1,269 MELSOL PORTUGAL 19,263 (3,853) 15,411 17,131 (3,426) 13,705 22,116 (4,423) 17,692 MESOL MANAGEMENT S.L. 39 39 (31,838) (31,838) (93,644) (93,644) MOT. ANDALUCES S.A. 10,411 (2,663) 7,748 27,538 (7,044) 20,494 MOT. GRANDES RUTAS ESP.,S.A. 17,744 (4,635) 13,109 7,257 (1,848) 5,409 NEALE/ I. AGARA (1) 859,071 (21,391) 837,680 557,744 (9,984) 547,761 OPERADORA COSTARISOL 155,031 155,031 (348,253) (348,253) 53,434 53,434 OPERADORA MESOL 451,316 451,316 173,766 173,766 (138,950) (138,950) PARKING INTERNACIONAL, S.A. 4,836 (48) 4,788 PARQUE SAN ANTONIO S.A. 68,024 (18,822) 49,202 77,647 (21,485) 56,162 PLAYA SALINAS S.A. 884 (10) 874 PROPIEDADES EN ARRIENDO, S.L. (13) (13)

S OL M ELIÁ

A NNUAL R EPORT 2000 147 INCOME AND EXPENSES

(Thousands of pesetas) 1998 1999 2000 CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. CONSOL. MINOR. P/L. P/L INT. PARENT CO. P/L INT. PARENT CO. P/L INT. PARENT CO

PUNTA ELENA S.L. 13,238 (6,619) 6,619 95,555 (47,778) 47,778 RANDLESTOP CORP. (1,342) 33 (1,309) (890) 16 (874) REALTUR S.A. 86,755 (3,045) 83,710 90,616 (3,181) 87,435 SAFIVIC, S.A. 19,827 (4,957) 14,870 7,138 (1,784) 5,353 SAN JUAN INVESTMENT B.V. 29 (1) 28 839,833 (15,033) 824,800 SECADE, XXI, S.L. (29,406) (29,406) SECURISOL, S.A. (859) (859) 3,218 3,218 SERV. CORP.MESOL (9,825) (9,825) (13,567) (13,567) SOL FINANCE (1,021) (1,021) (1,185) (1,185) SOL GROUP B.V. 1,672 1,672 (4,518) (4,518) (1,680) (1,680) SOL GROUP CORP. 39,679 39,679 (89,896) (89,896) SOL H.MANAG. CO. (42) (42) (20) (20) SOL HOLDING CORP. (606) (606) (559) (559) SOL HOTEL MIAMI BEACH (22) (22) (134) (134) SOL HOTEL U.K. Ltd. (81,399) (81,399) (25,799) (25,799) (19,775) (19,775) SOL MANINVEST B.V. (62,405) (62,405) (68,915) (68.915) (74,740) (74,740) SOL MELIA BENELUX (78,229) (78,229) SOL MELIÁ EUROPE N.V. (1,727) (1,727) (32,075) (32,075) SOL MELIA FRANCE, S.A.S. (754,210) (754,210) SOL MELIA GUATEMALA 28,453 28,453 58,301 58,301 31,297 31,297 SOL MELIA INVESTMENT (605) (605) (1,779) (1,779) (1,919) (1,919) SOL MELIA PERÚ, S.A. 6,582 6,582 SOL MELIA SERVICE 348,144 348,144 691,159 691,159 683,830 683,830 TALONARIO 5N S.L. (21,821) (21,821) 15,407 15,407 48,289 48,289 TENERIFE SOL, S.A. 1,120,189 (560,095) 560,095 1,116,472 (558,236) 558,236 TORRESOL DES.TURISTICOS (4) 1 (3) (3) 1 (2) TRYP MEDITEERRANEE 466,829 (68,157) 398,672 TRYP,S.A. 2,085,645 2,085,645 URME REAL S.A. (7,271) 576 (6,695) (6,914) 497 (6,416)

RESULT BY FULL CONSOLIDATION 6,406,261 (70,375) 6,335,886 15,506,707 (1,024,201) 14,482,506 19,579,893 (992,642) 18,587,251

AGOTEL GMBH (131,644) (131,644) (69,025) (69,025) APART.BOSQUE 82,690 82,690 17,182 17,182 14,367 14,367 C.P.COSTA DEL SOL 3,841 3,841 82,661 82,661 91,948 91,948 CASINO TAMARINDOS, S.A. 58,393 58,393 COM, DE PROP.MELIA CASTILLA 234,900 234,900 252,734 252,734 HELLENIC HOT.MANAG. (13,664) (13,664) (18,167) (18,167) HOTEL CAMPUS, S.L. (25,028) (25,028) HOTEL LAS AMERICAS (26,039) (26,039) INV TURÍSTICAS CASAS BELLAS S.L. 6 6 (2) (2) MELIA INVERSIONES AMERICANAS 471,777 471,777 MELIA MERIDA, S.L. (2,361) (2,361) NEXPROM, S.A. (8,685) (8,685) 34,147 34,147 61,064 61,064 PROMEDRO, S.A. 5,887 5,887 (3,976) (3,976) SOFIA HOTELES, S.L. (11,027) (11,027) SOL HOTTI PORTUGAL 4.752 4,752 11,029 11,029 (1,520) (1,520) SOL MELIÁ TRAVEL, S.A. (65,218) (65,218) TOUROPERADOR VIVA TOURS S.A. (32,879) (32,879) (53,216) (53,216) (65,251) (65,251)

RESULT BY EQUITY METHOD 579,889 579,889 161,249 161,249 158,539 158,539

CONSOLIDATED TOTAL 6,986,150 (70,375) 6,915,775 15,667,956 (1,024,201) 14,643,755 19,738,432 (992,642) 18,745,790

S OL M ELIÁ

A NNUAL R EPORT 2000 148 26 Retribution and other Benefits to the Board of Directors

The retribution paid to the members of the Board of Directors of Sol Meliá, S.A. during 2000 was as follows, in thousands of pesetas:

(Thousands of pesetas) 31/12/98 31/12/99 31/12/00

Allowances for meetings attendance 35,000 44,000 62,500 Civil liability insurance 2,236 1,864 6,922 Retribution 20,275 113,837 95,000

TOTAL 57,511 159,701 164,422

None of the directors has received any type of loan or advance and the Company has not assumed any obligations with Board members.

27 Post-balance Sheet Events

On February 9, 2001, the subsidiary Sol Meliá Europe B.V. proceeded to issue the Bonds of the “Euro Medium-Term Note Programme” for Euros 340 million. Sol Meliá, S.A. secures the fulfilment by the subsidiary of any assumed obligation in rela- tion to the mentioned issue (See Note 24). This amount has been handed over to Sol Meliá, S.A. by virtue of a loan contract formalised on February 12, 2001 with a maturity date of February 12, 2006, at an annual interest rate of 6.375 per cent.

On February 5, 2001 Sol Meliá, S.A. sold 29,096 shares of Prodigios Interactivos, S.A. for a total of Euros 11.2 million (Ptas. 1,896 million).

No other significant event that might affect the Group’s financial statements has occurred.

S OL M ELIÁ

A NNUAL R EPORT 2000 149 Formulation of Accounts

The formulation of the accompanying annual accounts has been approved by the Board of Directors, in its meeting of March 26, 2001, with a view to the auditors’ verification and subsequent approval by the General Shareholders’ Meeting. These accounts comprise 67 pages, all of them signed by the Secretary of the Board. The last page is signed by all the members of the Board.

Signed: Gabriel Escarrer Juliá Signed: Juan Vives Cerdá Chairman Vice Chairman

Signed: Sebastián Escarrer Jaume Signed: Gabriel Escarrer Jaume Second Vice Chairman Managing Director

Hoteles Mallorquines Consolidados S.A. Ailemlos S.L. Signed by proxy by María Antonia Escarrer Jaume Signed by proxy by Ariel Mazin Mor Director Director

Signed: Oscar Ruíz del Río Signed: Alfredo Pastor Bodmer Director Independent Director

Signed: Eduardo Punset Casal Signed: Emilio Cuatrecasas Figueras Independent Director Independent Director Represented by Mr. Alfredo Pastor Bodmer

Signed: José Joaquín Puig de la Bellacasa Urdampilleta Signed: José Mª Lafuente Lopez Independent Director Secretary of the Board

S OL M ELIÁ

A NNUAL R EPORT 2000 150 This report analyses trends in the business activity and the consolidated results of Sol Meliá, S.A. and its subsidiaries (hereinafter “Sol Meliá” or the “Group”) for 2000.

1 Purchase of Own Shares

Following authorisation from the General Shareholders’ Meeting held in July 1997, Sol Meliá, S.A., acquired 50,000 sha- res in 1997, 100,000 in 1998 and 50,000 in 1999 at an average acquisition price of Ptas. 5,298, Ptas, 7,158 and Ptas. 4,912, respectively. The three for one split of August 9, 1999 affected the number of shares acquired during this period.

The exercise of the voting right and of the other political rights applicable to these shares is in abeyance. The economic rights inherent to said shares, except for the right of free transfer of new shares, will be attributed proportionally to the other shares.

These shares will be included in the calculations of capital needed to carry out the agreements adopted by the General Meeting.

The options program prevailing until 1999 was cancelled during the year.

During the year the Company contributed 195,425 own shares to the purchase of shares of Azafata, S.A.

At December 31, 2000 the Company has a total of 1,034,937 own shares with a par value of Euros 0.2, which represent 0.56% of the Company’s share capital.

S OL M ELIÁ

A NNUAL R EPORT 2000 152 2 Business Trends

In view of the agreements reached as a result of the acquisition of Tryp S.A., the Balance Sheet, Profit and Loss Account and Notes thereto for the year 2000 include the consolidated figures of the Tryp Group for the last six months of the year.

2.1 Property business

Tryp figures for the second half year, which are included in the consolidated profit and loss account, have also been included in statistics.

RevPar in the Property Business – including owned and leased hotels – has increased by 18.6%, driven by the positive perfor- mance of the three Divisions in which Sol Meliá operates owned and leased hotels.

With an accumulated RevPar increase of 11.2% -10.4% without Tryp-, the European Resort Division has evolved very satis- factorily thanks in great part to an outstanding summer season. The almost 16% increase in ADR was possible thanks to the refurbishment program and the positive trend of the resort business in Spain. The Company believes that the favourable trend of the resort business will go on in 2001, taking into account the evolution of sales to date. In the future, the renovations carried out in our resort properties will promote the Congress and Conventions market segments.

The 13.3% -14.9%, without Tryp, RevPar increase in the European City Division confirms the positive trend of the city busi- ness in Europe, specially in Spain. 10% is due to the evolution of the Spanish city hotels and to the incorporation of the Paris hotels and the Meliá White House in London, with significantly higher ADR’s, 42% and 50%, respectively.

We expect to achieve important increases in ADR’s in the forthcoming years as a consequence of the existing gap between Spanish city hotels and other European properties in terms of prices. The Company believes that the Euro currency will help to clarify rate differences between European Regions, with a positive impact on results.

The Company would also like to emphasise the recovery in the America Division during 2000, with a RevPar increase of 29.5%. This increase has been further boosted by the conversion of Dollars – the currency used in our hotels in Latin America – to Pesetas. Excluding the conversion factor, the increase in RevPar would have reached 12.3%. Furthermore, without taking into account the latest hotel incorporations, most of which have still not yet reached maturity in 2000, the RevPar increase would have been 28.5%, mainly due to the good performance of our resorts in Mexico and the Dominican Republic.

The Company has positive expectations for the America Division in the light of the recovery in the Latin American economy, the maturity of some units acquired in the last 18 months and the positive trend of hotel performance in the region so far.

S OL M ELIÁ

A NNUAL R EPORT 2000 153 BUSINESS TRENDS

Statistics for the owned and leased hotels.

Table 1

Hotel statistics 00/99 (RevPar & A.D.R. in pesetas.)

Owned and leased hotels Dic-00/99 % OCCUPANCY RevPar A.D.R.

EUROPEAN RESORT 2000 79.6% 6,127 7,682 %o/1999 -4.00% 11.20% 15.84% 1999 83.09% 5,510 6,631 EUROPEAN CITY 2000 70.55% 9,617 13,632 %o/1999 -2.47% 13.35% 16.22% 1999 72.34% 8.485 11.729 AMERICA 2000 63.72% 9,085 14,259 %o/1999 1.60% 29.48% 27.43% 1999 62.71% 7,017 11,189 TOTAL 2000 74% 7,861 10,654 %o/1999 -3.57% 18.63% 23.03% 1999 76.52% 6,627 8,660

Without taking into account Tryp Hotels, the RevPar increase in the European City and European Resort Divisions would have been 10.4% and 14.9%, respectively.

Please find below a breakdown of the components of growth in room revenues at the hotel level for owned and leased hotels. The increases in RevPar and in available rooms, consequence of the Tryp acquisition, explain the increase in Room Revenues in the European Division.

The increase corresponding to the America Division is explained by the increase in available rooms due to the new incorpora- tions in this Division – Meliá Mexico Reforma, Paradisus Cozumel, Sol Cabañas del Caribe (Mexico), Meliá Caribe (Dominican Republic) and Gran Meliá Caracas apartments (Venezuela) – as well as the increase in RevPar.

Table 2

Breakdown of room revenues owned/leased hotels 00/99

% Increase Dic-00/99 EUROPEAN EUROPEAN AMERICA TOTAL RESORT CITY RevPar 11.2% 13.3% 29.5% 18.6% Available rooms 3.9% 43.7% 17.9% 17.8% Room revenues 15.6% 62.9% 52.7% 39.8%

The following table shows the revenue split at the hotel level. The increase of “Other Revenues” in the American Division is due to meeting-room rental revenues generated by Congress and Convention activities.

S OL M ELIÁ

A NNUAL R EPORT 2000 154 BUSINESS TRENDS

This is also reflected in F&B increases, particularly in the America Division. Last year Sol Meliá incorporated 18 meeting rooms with capacity for 3,400 people in its hotels in the Caribbean. The increase in total revenues in the European Resort and City Divisions, without Tryp, would have been 3% and 25%, respectively.

Table 3

Hotel revenue split 00/99 for owned/leased hotels. Dic-00/99 EUROPEAN RESORT EUROPEAN CITY AMERICA TOTAL (Millions of pesetas) 00 %o/99 99 00 %o/99 99 00 %o/99 99 00 %o/99 99

ROOMS 28,542 16% 24,694 33,140 63% 20,345 15,065 53% 9,867 76,747 40% 54,907 F&B 18,105 15% 15,808 12,446 61% 7,754 13,176 41% 9,370 43,727 33% 32,932 OTHER REVENUES 2,443 4% 2,356 3,516 54% 2,282 3,305 40% 2,368 9,264 32% 7,006 TOTALREVENUES 49,091 15% 42,859 49,102 62% 30,382 31,545 46% 21,604 129,739 37% 94,845

2.2. Management Business

As it appears in the table below, management fees have increased by 17.6%. The Gross Operating Profit G.O.P. of these hotels has increased by 45.53%

The fees of the European Resort Division have increased by 22.8%, in good part due to the better performance of the Croatian resorts during the year.

The positive performance of the European City hotels explains the 13% increase of management fees. The evolution of the managed hotels in this division has been satisfactory as reflected by the 22% G.O.P. increase.

The 22.7% increase in the America Division reflects an improvement in the performance of its hotels. The improvement cannot be attributed to any specific area, being applicable to all the countries in which the Company operates.

Management fees in the Cuban Division have increased by almost 10%, in spite of the -6,8% decrease in Incentive Fees. The nominal percentage of Incentive Fees is charged according to the level of G.O.P.reached. In 2000 the Cuban Division has not reached the G.O.P. margins achieved in 1999.

Table 5

Management fees of hotels managed for third parties. Fee revenue (Millions of pesetas) Dec-00 Incr. 00/99 Dec-99 Fee revenue (Millions of pesetas) Dec-00 Incr. 00/99 Dec-99 EUROPEAN RESORT Basic 1,032 18.8% 869 ASIA-PACIFIC Basic 313 20.8% 259 Incentive 741 28.9% 575 Incentive 311 29.9% 239 1,773 22.8% 1,443 624 25.2% 498 EUROPEAN CITY Basic 998 14.9% 869 CUBA Basic 1,245 16.2% 1,072 Incentive 324 7.5% 302 Incentive 396 -6.8% 425 1,322 13.0% 1,171 1,642 9.7% 1,497 AMERICA Basic 670 17.6% 570 TOTAL BASIC 4,259 17.1% 3,639 Incentive 709 28.0% 554 TOTAL INCENTIVE 2,481 18.4% 2,095 1,380 22.7% 1,124 TOTAL 6,740 17.6% 5,734

S OL M ELIÁ

A NNUAL R EPORT 2000 155 3 Post-balance Sheet Events.

On February 9, 2001 bonds were issued for Euros 340 million at a fixed interest rate of 6.25% with five-year maturities in order to finance the acquisition of Tryp and to refinance part of the existing debt. This issue is part of the EMTN’s pro- gram (European Medium-Term Notes) of Euros 1,500 million carried out in 2000.

On February 5, 2001, Sol Meliá sold part of its participation in Prodigios Interactivos S.A. to Banco Santander Central Hispano for Euros 11.2 million. This sale gave rise to capital gains of Euros 7.5 million.

S OL M ELIÁ

A NNUAL R EPORT 2000 156 4 Foreseeable Outlook

The outlook for the Group is directly linked to the business prospects in the main operation areas of Sol Meliá and to the results of its five functional divisions.

In the European Resort Division, dependent on the main tourist destinations in Spain and the Mediterranean area, pros- pects are positive due to the ongoing refurbishment plan and to the incorporation of new hotels in the area.

The European City Division has experienced a diversification process over the last few years, with an opening from Spain towards other countries such as United Kingdom, France, Italy, Belgium and Germany. The prospects in these markets are good, especially for Spain where the Company has increased its capacity after the acquisition of Tryp hotels, a well-posi- tioned company in the Spanish city segment. The incorporation of Tryp Hotels will be especially profitable in Madrid, the most important European centre for Congress and Convention holding.

The foreseeable price increases in this segment in Spain and the good location of both existing and acquired hotels, as well as the addition of various new hotels to be incorporated in next 18 months in Spain, Italy and Portugal allow us to predict positive prospects for this division in 2001.

Given the economic recovery of Latin America since 1999, prospects for both city and resort hotels in the area are good. For Sol Meliá, specifically, the full development of the hotels acquired over the last 18 months in Mexico, Dominican Republic, Peru, Panama, Venezuela, Brazil and Argentina will benefit the performance of this division. During the next two years a great many hotels in Puerto Rico, Brazil, Mexico and Peru will be incorporated to the Group.

Cuba will continue to be one of the main tourist destinations in the Caribbean during both the current and forthcoming years. Sol Meliá, with 25 hotels and 11,000 rooms, holds 37% of the market share on the island with a dominant presence in the most important resort and city destinations. As for the Asia Division, tourism prospects are favourable in the region for 2001, specially in Indonesia where a 30% incre- ase of revenues is expected. 70 per cent of Sol Meliá’s hotels in the region are located in Indonesia.

S OL M ELIÁ

A NNUAL R EPORT 2000 157 5 Research and Development

Sol Meliá is constantly investigating its clients’ needs so as to offer them the products and services best adapted thereto. Such investigation includes clients’ questionnaires, opinion inquiries, quality audits, etc.

Furthermore, it endeavours to optimise quality and costs relating to the hotel operations and procedures. Sol Meliá has a hotel technology department that investigates each one of these operations and procedures, setting up optimum working methods and keeping up to date with the latest innovations in hotel technology and the possible application thereof.

2000 was the “e-transformation” year of Sol Meliá, with an investment of Ptas. 6,500 million in technological infrastruc- ture and involvement in joint venture projects. Within the e-transformation framework, Sol Meliá is launching the pro- jects meliaviajes.com, solmelia.com y hotelnetB2B.com (B2B portal for hotel companies, which comprises 18 companies of the sector that represent more than 900 hotels in 21 countries).

AOL Avant , initially known as Prodigios, was formed with a participation of Sol Meliá and an exclusive right agreement was signed whereby travel services will be provided by the Virtual Travel Agency meliaviajes.com.

The Company aims to complete satisfactorily its e-transformation and the various initiatives. The process of attaining cul- mination and interactivity in real time for the different systems will be carried out during 2001.

The introduction of the new information and communication technologies in the industry will not only mean cost savings, but is also essential to developing and maintaining competitive advantages in the future.

S OL M ELIÁ

A NNUAL R EPORT 2000 158 Formulation of the Management Report

The formulation of this management report has been approved by the Board of Directors, in its meeting of March 26, 2001. This management report comprises 8 pages, all of them signed by the Secretary of the Board. This last page is signed by all the members of the Board.

Signed: Gabriel Escarrer Juliá Signed: Juan Vives Cerdá Chairman Vice Chairman

Signed: Sebastián Escarrer Jaume Signed: Gabriel Escarrer Jaume Second Vice Chairman Managing Director

Hoteles Mallorquines Consolidados S.A. Ailemlos S.L. Signed by proxy by María Antonia Escarrer Jaume Signed by proxy by Ariel Mazin Mor Director Director

Signed: Oscar Ruíz del Río Signed: Alfredo Pastor Bodmer Director Independent Director

Signed: Eduardo Punset Casal Signed: Emilio Cuatrecasas Figueras Independent Director Independent Director Represented by Mr. Alfredo Pastor Bodmer

Signed: José Joaquín Puig de la Bellacasa Urdampilleta Signed: José Mª Lafuente Lopez Independent Director Secretary of the Board

S OL M ELIÁ

A NNUAL R EPORT 2000 159