| | SECURITIES AND EXCHANGE COMMISSION                          
| | ------------------------------------------------------------
| | WASHINGTON, D.C. 20549                                      
| |                                                             
| | FORM 10-K/AAMENDMENT NO. 1                                  
| |                                                             
| | x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)             
| | OF THE SECURITIES EXCHANGE ACT OF 1934                      
| | For The Fiscal Year Ended December 31, 2002                 
| |                                                             
| | or                                                          
| |                                                             
| | o  TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d)       
| | OF THE SECURITIES EXCHANGE ACT OF 1934                      
| |                                                             
| | Commission File No. 1-4748                                  
| |                                                             
| |                                                             
| | KERZNER INTERNATIONAL NORTH AMERICA, INC.                   
| | (Exact name of Registrant as specified in its charter)      
| |                                                             
| | DELAWARE                                                    
| | (State or other jurisdiction of corporation or organization)
| |                                                             
| | 59-0763055                                                  
| | (I.R.S. Employer Identification No.)                        
| |                                                             
| | 1000 South Pine Island Rd.                                  
| | Plantation, Florida  33324                                  
| | (Address of principal executive offices)                    
| |                                                             
| | 954-809-2000                                                
| | (Registrant ́s telephone number, including area code)        

Securities registered pursuant to Section 12(b) of the Act:
        None

Securities registered pursuant to Section 12(g) of the Act:
        None

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

Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K.x

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):
      Yeso
Nox

As of November 13, 2003, there were 100
shares of the registrants common stock outstanding, all of which were owned by one
shareholder. Accordingly there is no current market for any such shares.

The registrant meets the conditions
set forth in General Instruction I (1) (a) and (b) of Form 10-K and is therefore filing
this Form 10-K with the reduced disclosure format permitted by that General Instruction.



---

KERZNER INTERNATIONAL NORTH AMERICA, INC
FORM 10-K/A 
ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
TABLE OF CONTENTS

|                                                |                                                                                       |   
|----------------------------------------------- | ------------------------------------------------------------------------------------- | --
|PRESENTATION OF FINANCIAL AND OTHER INFORMATION | 3                                                                                    
|FORWARD-LOOKING STATEMENTS                      | 3                                                                                    
|PART I                                         
|ITEM 1.                                         | BUSINESS                                                                              | 4 
|ITEM 2.                                         | PROPERTIES                                                                            | 15
|ITEM 3.                                         | LEGAL PROCEEDINGS                                                                     | 15
|ITEM 4.                                         | SUBMISSIONS OF MATTERS TO A VOTE TO SECURITY HOLDERS                                  | 17
|PART II                                        
|ITEM 5.                                         | MARKET FOR REGISTRANT'S COMMON EQUITY STOCK AND RELATED STOCKHOLDER MATTERS           | 17
|ITEM 6.                                         | SELECTED FINANCIAL DATA                                                               | 18
|ITEM 7.                                         | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 18
|ITEM 7A.                                        | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 31
|ITEM 8.                                         | FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA                                            | 32
|ITEM 9.                                         | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  | 80
|PART III                                       
|ITEM 14.                                        | CONTROLS AND PROCEDURES                                                               | 80
|PART IV                                        
|ITEM 15.                                        | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                       | 81
|SIGNATURES                                      |                                                                                       | 86



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# PREFATORY NOTE

This Form 10-K/A is being filed for
the purpose of amending and restating Items 1, 7 and 8 to reflect the restatement of our
consolidated financial statements for the years ended December 31, 2002, 2001 and 2000.
This restatement resulted primarily from the restatement of historically reported
financial results by Trading Cove Associates, a partnership in which we own a 50%
interest. The consolidated financial statements as of and for the years ended December 31,
2002 and 2001 are audited. The consolidated financial statements for the year ended
December 31, 2000 are unaudited, as an audit could not be completed without undue cost or
effort to the Company. This is due to the sale of Resorts Atlantic City, a significant
subsidiary which has been sold and whose results are included in our consolidated
financial statements for the year ended December 31, 2000. Items 3 and 7A have also been
updated. All other information in this Form 10-K/A is as of December 31, 2002 and does not
reflect, unless otherwise noted, any subsequent information or events other than those
changes related to the restatement. See the Notes to Consolidated Financial Statements,
Note 2  Restatement, for further discussion of the restatement.

# PRESENTATION OF
FINANCIAL AND OTHER INFORMATION

In this Annual Report,
KINA or the Company refers to Kerzner International North America,
Inc. (formerly known as Sun International North America, Inc.), and the terms
we, us, our and similar terms refer to KINA and any or
all of its subsidiaries and investments as the context requires.

The financial statements contained in
this Annual Report have been prepared in accordance with accounting principles generally
accepted in the United States of America (US GAAP).

# FORWARD-LOOKING
STATEMENTS

This Annual Report contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to financial condition, results of operations,
business strategies, operating efficiencies or synergies, plans for future expansion and
other business development activities as well as other capital spending, financing sources
and the effects of regulation (including gaming and tax regulation) and competition,
markets for Kerzner Internationals ordinary shares and other matters. Statements in
this Annual Report that are not historical facts are forward-looking
statements for the purpose of the safe harbor provided by Section 21E of the
Exchange Act and Section 27A of the Securities Act of 1933, as amended (the
Securities Act). Forward-looking statements, including, without limitation,
those relating to our future business prospects, revenues and income, wherever they occur
in this Annual Report, are necessarily estimates reflecting the best judgment of our
senior management and involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by forward-looking statements. You
should consider forward-looking statements, therefore, in light of various important
factors, including those set forth in this Annual Report. These risks and uncertainties
include, but are not limited to, development and construction activities, dependence on
existing management, leverage and debt service (including sensitivity to fluctuations in
interest rates), availability of financing, democratic or global economic conditions,
pending litigation, changes in tax laws or the administration of such laws and changes in
gaming laws or regulations (including the legalization of gaming in certain
jurisdictions).

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

Information contained in this Annual
Report reflects our managements best estimates based upon information obtained from
our customers and from trade and business organizations and other contacts within the
businesses in which we compete.

# PART I

# ITEM 1. BUSINESS

# (A) GENERAL DEVELOPMENT
OF BUSINESS

KINA was incorporated in Delaware in
1958. Our executive offices are located at 1000 South Pine Island Road, Plantation,
Florida 33324 and the telephone number is 954-809-2000. As a result of a merger
transaction, KINA has been a wholly owned subsidiary of Kerzner International Limited
(formerly Sun International Hotels Limited), a corporation organized and existing under
the laws of the Commonwealth of The Bahamas, since August 1993. Kerzner International,
through its subsidiaries, develops and operates premier resort and casino properties
throughout the world. In the United States, Kerzner International owns and operates its
properties and investments through KINA and its subsidiaries.

In July 2002, we changed our name
from Sun International North America, Inc. to Kerzner International North America, Inc.
The name change was implemented in accordance with agreements related to the restructuring
of Kerzner Internationals former major shareholder in July 2001. There was no change
in our management or operations as a result of the name change.

We earn income based on the gross
revenues of a casino operated by an unaffiliated entity in Connecticut, which is further
described below under Item 1. Business (C) Narrative Description of
BusinessConnecticut. We also earn income by providing management services to
certain of our affiliated companies and we own a tour operator that wholesales tour
packages and provides reservation services. We previously owned a resort and casino
property in Atlantic City, New Jersey (Resorts Atlantic City), which we entered
into an agreement to sell to an unaffiliated entity in the fourth quarter of 2000 and closed
on April 25, 2001.

# Sale of Resorts Atlantic
City

On April 25, 2001, we sold Resorts
Atlantic City, a 644-room casino and hotel property, and certain related assets to an
affiliate of Colony Capital LLC (Colony) for a purchase price of approximately
$144 million, including accrued interest (the Resorts Atlantic City Sale).

The proceeds received from Colony
consisted of approximately $127 million in cash and an unsecured $17.5 million note (the
Promissory Note), bearing interest at a rate of 12.5% per annum payable
semi-annually. In March 2002, we received $18.0 million from Colony as payment in full of
the Promissory Note and all outstanding accrued interest. Of the cash proceeds from the
Resorts Atlantic City sale, $79 million was used to pay in full the borrowings outstanding
by Resorts Atlantic City under a bank credit facility dated November 1, 1999 (as amended,
the Revolving Credit Facility). Resorts Atlantic City, along with Kerzner
International, Kerzner International Bahamas Limited (formerly Sun International Bahamas
Limited) (KIB), a wholly owned subsidiary of Kerzner International outside of
KINAs consolidated group, and Kerzner International Nevada, Inc. (formerly Sun
International Nevada, Inc.), a wholly-owned subsidiary of KINA, were co-borrowers under
the Revolving Credit Facility. The remaining $48 million of cash proceeds from the Resorts
Atlantic City Sale was advanced to KIB and was used to permanently reduce borrowings
outstanding by KIB under the Revolving Credit Facility.

We entered into an agreement to sell
Resorts Atlantic City in the fourth quarter of 2000, and as of December 31, 2000, we
accounted for Resorts Atlantic City as an investment held for sale. The carrying value of
the net assets to be disposed of was reclassified to net assets held for sale on our
consolidated balance sheets and, in the fourth quarter of 2000, we recorded a loss of
$229.2 million resulting from the write-down of net assets held for sale to their
realizable value. The net proceeds received at closing equaled the carrying value of the
net assets disposed of. The consolidated financial statements as of December 31, 2001
include the results of operations of Resorts Atlantic City from January 1, 2001 to April
24, 2001. These results included a net loss attributable to Resorts Atlantic City of $4.9
million, which is included as a component of an offsetting gain on net assets held for
sale, which resulted in no change in net income from this adjustment.

Pursuant to the terms of the Resorts
Atlantic City Sale, we granted Colony a two-year option (the Atlantic City
Option) to acquire certain undeveloped real estate which we own, adjacent to Resorts
Atlantic City, for a purchase price of $40 million, which option can be extended by Colony
for two additional one-year periods upon notice to us prior to the expiration of the
then-current option period and payment to us of a $2.5 million extension payment for each
renewal period. In July 2003 and through various extensions thereafter, we and Colony
agreed to extend the initial option period through September 12, 2003 in exchange for an
option extension payment of $1,250,000, which was paid on July 9, 2003. Our agreement with
Colony also provides for an additional payment of $1,250,000 in the event we are not able
to reach an agreement to sell the undeveloped real estate. The additional
$1,250,000 has not yet been received as we and Colony are currently in negotiations to
reach an agreement to sell the undeveloped real estate. Effective April 25, 2001, the
closing date of the Resorts Atlantic City Sale, Colony leases from us certain of the
property included in the Atlantic City Option for $100,000 per month. If Colony does not
exercise the Atlantic City Option, upon its expiration, the land lease will continue on a
month-to-month basis. At that time the lease can be terminated by either Colony or us with
thirty days notice, subject to certain conditions.

# Mohegan Sun Expansion

In June 1994, we established Kerzner
Investments Connecticut, Inc., formerly known as Sun Cove Limited (Kerzner
Connecticut). Kerzner Connecticut has a 50% interest in, and is a managing partner
of, Trading Cove Associates (TCA), a Connecticut general partnership. In
September 1995, TCA entered into a Gaming Facility and Construction Agreement with the
Mohegan Tribal Gaming Authority, an instrumentality of the Mohegan Tribe of Indians of
Connecticut (the Mohegan Tribe) pursuant to which TCA assisted the Mohegan
Tribe with the design, development and financing of the Mohegan Sun resort and
entertainment complex situated in the town of Uncasville, Connecticut (Mohegan
Sun).

In August 1995, TCA entered into a
gaming management agreement (the Management Agreement) with the Mohegan Tribe
pursuant to which TCA provided certain management, marketing and administrative services
to the Mohegan Tribe upon the opening of Mohegan Sun in October 1996. In February 1998,
TCA and the Mohegan Tribe entered into an agreement (the Relinquishment
Agreement) pursuant to which the Management Agreement was terminated effective
January 1, 2000, the Mohegan Tribe assumed full management responsibility for Mohegan Sun
and TCA receives annual payments of five percent of the gross revenues of Mohegan Sun for
a 15-year period. In addition to the Relinquishment Agreement, in February 1998 the
Mohegan Tribe and TCA entered into a development agreement pursuant to which TCA was
appointed to develop the Mohegan Tribes approximate $1.0 billion expansion of
Mohegan Sun for a fee of $14.0 million. The expansion included the Casino of the Sky, a
10,000-seat arena, a 300-seat cabaret, a 130,000 square foot specialty retail area and
restaurants that opened in September 2001. The expansion also included a 100,000 square
foot convention center and a 34-story, 1,176-room hotel that opened with 734 rooms in
April 2002. The remainder of the expansion opened in phases that were completed by June
2002.

The companys investment in TCA
is reflected within investments in associated companies in the accompanying consolidated
balance sheets.

See Item 1. Business (C)
Narrative Description of BusinessConnecticut for a further description of TCA
and our business activities related to Mohegan Sun.

# Trading Cove New York

Through Kerzner Investments New York,
Inc.(KINY) a wholly owned subsidiary, we own 50% of Trading Cove New York, LLC
(TCNY), a Delaware limited liability company. TCNY is managed by KINY and
Waterford Development New York, LLC. In March 2001, TCNY entered into a development
services agreement (the  TCNY Development Agreement) with the
Stockbridge-Munsee Band of Mohican Indians (the Stockbridge-Munsee Tribe) for
the development of a casino project (the Project) in the Catskill region of
the State of New York (the State). The Development Agreement was amended and
restated in February 2002. The Stockbridge-Munsee Tribe does not currently have
reservation land in the State, but is federally recognized and operates a casino on its
reservation in Wisconsin. The Stockbridge-Munsee Tribe has land claim litigation pending
in the US District Court for the Northern District of New York (the Court)
against the State, the counties of Madison and Oneida and several municipalities to
recover lands within the state that it alleges were wrongfully taken from the tribe. The
Court has stayed the litigation but in February 2003 the Stockbridge-Munsee Tribe filed a
motion with the Court to partially lift the stay in an effort to advance the litigation.
This motion is pending.

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

In October 2001, the State enacted
legislation authorizing up to three Class III Native American casinos in the counties of
Sullivan and Ulster and three Native American casinos in western New York pursuant to
Tribal State Gaming Compacts to be entered into by the State and applicable Native
American tribes (Chapter 383 of the Laws of 2001). In January 2002, a lawsuit was filed in
the Supreme Court of the State of New York (the Supreme Court) (Index No.
719-02) by various plaintiffs against New York Governor George Pataki, the State of New
York and various other defendants alleging that Chapter 383 of the Laws of 2001 violates
the New York State Constitution. Motions to dismiss the litigation were filed in April
2002. In July 2003, the Supreme Court issued a ruling upholding the validity of Chapter
383 of the Laws of 2001. Plaintiff has appealed that decision to the Appellate Division of
the New York Supreme Court.

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

The Project is contingent upon the
receipt of numerous federal, state and local approvals to be obtained by the
Stockbridge-Munsee Tribe, including the execution of a Class III Gaming Compact with the
State, which approvals are beyond the control of TCNY. We can make no representation as to
whether any of the required approvals will be obtained by the Stockbridge-Munsee Tribe or
whether the Project will be completed.

The Companys investment in TCNY
is reflected within investments in associated companies in the accompanying consolidated
balance sheets.

# Consent Solicitation of
Noteholders

On July 10, 2001, KINA along with
Kerzner International (together, the Companies), commenced a consent
solicitation with holders of the Companies $200 million principal amount of 9.0%
senior subordinated notes due 2007 (the 9% Senior Subordinated Notes). The
Companies sought proposed amendments of certain provisions of the indenture pursuant to
which the 9% Senior Subordinated Notes were issued.

The proposed amendments effectively
eliminate (as of December 31, 2000, the date the charge was recorded) the impact of $199.2
million of the total $229.2 million loss recorded by KINA in connection with the Resorts
Atlantic City Sale, for purposes of determining the ability of Kerzner International and
its affiliates to make certain investments, such as certain minority investments in joint
ventures. In addition, the amendments increased, from 2.0:1 to 2.5:1, the consolidated
coverage ratio required in order for the Companies to incur additional indebtedness. The
consolidated coverage ratio is defined as consolidated earnings before interest expense,
income taxes, depreciation and amortization (EBITDA) to fixed payments, as
defined in the indentures. The consent solicitation, as amended and extended, was
finalized on July 23, 2001.

On July 24, 2001, the Companies
announced that they had received the requisite consents from the holders of their 9%
Senior Subordinated Notes. Accordingly, the Companies and the trustee under the indenture
executed and delivered a supplemental indenture containing the amendments described in the
amended consent solicitation. Pursuant to the consent solicitation, we paid $1.0 million
to holders of the 9% Senior Subordinated Notes. These debt issuance costs are included
within deferred charges and other assets in the accompanying consolidated balance sheets.

# Issuances of 8-7/8%
Senior Subordinated Notes

In August 2001, the Companies issued
$200.0 million principal amount of 8-7/8% senior subordinated notes due 2011 (the
8-7/8% Senior Subordinated Notes), which, after costs, resulted in net
proceeds of approximately $194.0 million. All of the proceeds received from the issuance
of the 8-7/8% Senior Subordinated Notes were advanced to KIB to repay amounts outstanding
under the Revolving Credit Facility. Therefore, interest expense related to the 8-7/8%
Senior Subordinated Notes is offset by affiliated interest income from KIB.

In May 2002, the Companies issued an
additional $200.0 million of 8-7/8% Senior Subordinated Notes and used the proceeds to
repay the Companies outstanding 9% Senior Subordinated Notes pursuant to the Tender Offer,
Consent Solicitation and Redemption of such notes described below.

The 8-7/8% Senior Subordinated Notes,
which are unsecured obligations, are unconditionally guaranteed by substantially all of
the wholly owned subsidiaries of Kerzner International and KINA. Interest on the 8-7/8%
Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002. The
indenture for the 8-7/8% Senior Subordinated Notes contains certain covenants, including
limitations on the ability of the Companies to, among other things: (i) incur additional
indebtedness, (ii) incur certain liens, and (iii) make certain other restricted payments.

# Fourth Amended and
Restated Credit Facility (the Amended Revolving Credit Facility)

On November 13, 2001, Kerzner
International, KINA and KIB, as co-borrowers, entered into the Amended Revolving Credit
Facility with a syndicate of banks (the Lenders), with Canadian Imperial Bank
of Commerce (CIBC) acting as administrative agent. The borrowings then
outstanding under the previous Revolving Credit Facility, all of which were reflected on
the balance sheet of KIB, were paid in full. Under the Amended Revolving Credit Facility,
the maximum amount of borrowings that may be outstanding is $300.0 million, subject to the
borrowing base discussed below and certain other conditions. The Lenders have agreed that
up to an additional $50.0 million of borrowings may be available under the facility if we
are able to arrange additional commitments in that amount. Effective February 7, 2003, the
co-borrowers obtained approval from the required Lenders under our Amended Revolving
Credit Facility to, among other things, calculate borrowings available using a borrowing
base calculation, such that we can draw the lesser of the borrowing base or the commitment
amount. Under the borrowing base calculation as of the year ended December 31, 2002, our
borrowing limit would have been $300.0 million, as the anticipated borrowing base
calculation would have exceeded the commitment amount.

Loans under the Amended Revolving
Credit Facility bear interest at (i) the higher of (a) CIBCs base rate or (b) the
Federal Funds rate plus one-half of one percent, in either case plus an additional 0.25%
to 1.75% based on a debt to earnings ratio during the period, as defined (the
Leverage Ratio) or (ii) London Interbank Offered Rate (LIBOR) plus
1.25% to 2.75% based on the Leverage Ratio. For loans based on the LIBOR, interest is
payable on the last day of each applicable interest period, or the date of any payment or
prepayment of such loans. For loans based on the Alternate Base Rate (as defined),
interest is payable quarterly. At December 31, 2002, the weighted average interest rate on
amounts outstanding under the Amended Revolving Credit Facility was 3.40%. Loans under the
Amended Revolving Credit Facility may be prepaid and re-borrowed at any time and are due
in full in November 2006. Commitment fees are calculated at per annum rates ranging from
0.25% to 0.50% based on the Leverage Ratio, applied to the undrawn amount of the Amended
Revolving Credit Facility and are payable quarterly.

The Amended Revolving Credit Facility
contains restrictive covenants that Kerzner International must comply with, which among
other things: (a) require periodic financial reporting, (b) require meeting certain
financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the
incurrence of indebtedness and (e) limit asset expenditures and dispositions outside the
ordinary course of business.

The amount of borrowings outstanding
as of December 31, 2002 on the Amended Revolving Credit Facility was $72.0 million, all of
which was drawn by KIB and is reflected on KIBs balance sheet. This amount is
unconditionally guaranteed by KINA.

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

On May 8, 2002, the Companies
commenced a cash tender offer to purchase any and all of their outstanding 9% Senior
Subordinated Notes. The tender offer was made pursuant to an Offer to Purchase, Consent
Solicitation Statement and a related Letter of Transmittal and Consent, dated May 8, 2002.
In conjunction with the tender offer, the Companies solicited consents to proposed
amendments to the indenture governing the 9% Senior Subordinated Notes. The proposed
amendments eliminated substantially all of the restrictive covenants and certain events of
default from the indenture governing the notes. Holders that tendered their notes were
required to consent to the proposed amendments and holders that consented to the proposed
amendments were required to tender their notes. At the expiration time, a total of
approximately $177.5 million of the outstanding $200.0 million aggregate principal amount
of the notes were tendered and accepted for purchase in the tender offer. On June 21,
2002, the Companies redeemed, in accordance with the terms of the indenture governing the
notes, all of the 9% Senior Subordinated Notes that remained outstanding at the time, at
the applicable redemption price of $1,045 per $1,000 of principal amount thereof, plus
interest accrued to the redemption date. The Companies used the proceeds from the issuance
of their $200.0 million of 8-7/8% Senior Subordinated Notes on May 20, 2002 to retire
their outstanding 9% Senior Subordinated Notes pursuant to the tender offer and
redemption.

# Shelf Registration

In May 2002, Kerzner International
and KINA filed a universal shelf registration statement on Form F-3 (the Universal
Shelf) with the SEC relating to the sale of up to $500.0 million in securities. As
KINA is a non-compliant filer due to the fact that its 2000 consolidated financial
statements are unaudited, it and Kerzner International may not register securities under
the Universal Shelf until such time that it becomes a compliant filer. In addition, we do
not expect to raise any capital through the issuance of KINA securities that are required
to be registered with the SEC on Form S-3 or F-3 (including the Universal Shelf) until we
and Kerzner International are able to comply with the requirements of Regulation S-X
regarding audited financial statements and the timely filing of our periodic reports.

# Issuance and Redemption
of 8-5/8% Senior Subordinated Notes

On December 15, 1997, Kerzner
International and the Company, as co-issuers, issued $100.0 million principal amount of
8-5/8% Senior Subordinated Notes due 2007. All of the proceeds received from the issuance
of these notes were advanced to entities outside of the KINA consolidated group and were
used for general corporate and working capital purposes, as well as to help fund capital
expenditure projects for these entities. As a result, any interest expense incurred on the
8-5/8% Senior Subordinated Notes, including amortization of debt issuance costs, was
offset by affiliated interest income from Kerzner International, resulting in no impact to
net income or loss in any of the periods presented.

On November 27, 2002, the Companies
called for the redemption of the entire outstanding principal amount of our 8-5/8% Senior
Subordinated Notes due 2007 pursuant to the terms of the indenture governing these Notes.
The Companies purchased $25.8 million of the 8-5/8% Senior Subordinated Notes through
transactions on the open market. On December 27, 2002, the Companies redeemed the
remaining $74.2 million aggregate principal amount outstanding at the redemption price of
104.313%, or $1,043.13 for each $1,000.00 of principal amount outstanding, plus accrued
interest.

# Palmilla Management
Contract

On September 12, 2002, Kerzner
International acquired a 50% ownership interest in the 115-room Palmilla Resort, a deluxe,
five-star property located near Cabo San Lucas in Baja, Mexico.

In connection with the purchase, we
entered into long-term management and development agreements related to the property that
will expire in 2022. Fees for management services to Palmilla Resort during the period
from September 12, 2002 through December 31, 2002 were $128,000 and are included in
Management and other fees in the accompanying consolidated statement of
operations.

# (B) FINANCIAL
INFORMATION ABOUT SEGMENTS

Not applicable, as the Company
manages and internally reports its operations in one business segment.

# (C) NARRATIVE
DESCRIPTION OF BUSINESS

# Connecticut

We own a 50% interest in, and are a managing
partner of, TCA, a Connecticut general partnership that developed and, until January 1,
2000, managed Mohegan Sun, a casino and entertainment complex in Uncasville, Connecticut.
TCA managed Mohegan Sun from its opening in October 1996 to December 31, 1999 pursuant to
a Management Agreement from which TCA earned management fees based on a percentage of
Mohegan Suns earnings after depreciation and interest.

In 1998, the Mohegan Tribe appointed
TCA to develop a $1.0 billion expansion of Mohegan Sun for a development fee of $14.0
million. In addition, TCA and the Mohegan Tribe entered into the Relinquishment Agreement
whereby it was agreed that effective January 1, 2000, TCA would turn over management of
Mohegan Sun to the Mohegan Tribe. Pursuant to the Relinquishment Agreement, the Management
Agreement was terminated early and, commencing January 1, 2000, TCA receives annual
payments of five percent of the gross revenues of Mohegan Sun for a 15-year period. For
seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the profits
it receives each year pursuant to the Relinquishment Agreement as a priority payment prior
to making pro rata distributions to its partners.

The payments received by TCA in 2001
and 2000 under the Relinquishment Agreement contributed less income than was previously
earned under the Management Agreement. However, the Relinquishment Agreement will expire
at the end of 2014, whereas the Management Agreement was to expire at the end of 2003. In
addition, fees received pursuant to the Relinquishment Agreement have increased since 2000
as a result of increasing gross revenues of Mohegan Sun.

We are one of two managing partners
of TCA. All decisions of the managing partners require the concurrence of us and the other
managing partner, Waterford Gaming, L.L.C. In the event of deadlock there are mutual
buy-out provisions. We account for our investment in TCA under the equity method of
accounting and the companys investment in TCA is reflected within investments in
associated companies in the accompanying consolidated balance sheets.

# Description of Property

Mohegan Sun incorporates its
historical Native American theme through unique architectural features and the use of
natural design elements such as timber, stone and water. Mohegan Sun is located on 240
acres and currently features the 176,500 square foot Casino of the Earth and the 119,000
square foot Casino of the Sky, which combined have approximately 6,200 slot machines, 260
table games, 36 poker tables and various other amenities, and a recently opened 34-story,
1,176-room luxury hotel.

We oversaw the recently completed
$1.0 billion expansion of Mohegan Sun through TCA. This expansion included the Casino of
the Sky, a 10,000-seat arena, a 300-seat cabaret, and specialty retail areas and
restaurants that opened in September 2001. The expansion also included a 100,000 square
foot convention center and a 34-story, 1,176-room luxury hotel that opened with 734 rooms
in April 2002. Mohegan Sun opened the remaining rooms in phases through June 2002 and also
added an additional 2,700 parking spaces in June 2002.

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

# Seasonality and Weather

Inclement weather can adversely
affect the operations in Connecticut as the principal means of transportation to this
property is by automobile or bus. Higher revenues and earnings are typically realized from
the Connecticut operations during the second and third quarters of the year.

# Competition

The Connecticut market is the fourth
largest gaming market in the United States, with approximately 22 million adults within
150 miles of Mohegan Sun. Mohegan Sun and Foxwoods Resort and Casino at present are the
only two casinos in the Connecticut market. Foxwoods now has approximately 6,600 slot
machines and, for the twelve months ended December 31, 2002, reported slot revenue to the
State of Connecticut of approximately $789.3 million. The Oneida Nation operates a casino
near Syracuse, New York and other Native American tribes in the states of New York, Rhode
Island, Massachusetts and Connecticut are seeking approvals to establish gaming operations
which would further increase competition, particularly for day-trip patrons. Mohegan Sun
also competes with Atlantic City and several small Native American gaming facilities
throughout the northeastern United States.

In Connecticut, under the tribal
state compacts between the State and each of the Mohegan Tribe and the other Native
American casino in the State, Mohegan Sun is subject to a 25% gaming fee on slot revenues
payable to the State of Connecticut so long as the State does not issue any further
licenses for gaming operations with slot machines or other commercial casino games (other
than to a Native American tribe on Native American land). In June 2002, the BIA issued a determination concerning the applications of
two Connecticut bands of Eastern Pequot Indians, approving the federal recognition of the
two bands as one federally recognized tribe known as the Historic Eastern Pequot
Tribe. The State of Connecticut and a number of Connecticut municipalities have
filed an appeal of the BIA determination to the Department of the Interior, Board of
Indian Appeals, which appeal is pending. The ultimate decision of the Department of the
Interior may be appealed to the Federal courts. In addition, three other Indian groups in
the Connecticut gaming market have filed applications with the BIA for federal recognition
as Indian tribes: the Golden Hill Paugussetts of Trumbull, the Schaghticoke tribe of Kent
and a Massachusetts tribe known as the Nipmucs. Each of these groups as well as the
Historic Eastern Pequot Tribe has expressed interest in obtaining trust lands for the
purpose of conducting gaming in Connecticut.

Casino gaming in the northeastern
United States may be conducted by federally recognized Indian tribes operating under the
Indian Gaming Regulatory Act of 1988. A federally recognized tribe in Rhode Island and a
federally recognized tribe in Massachusetts are each seeking to establish gaming
operations in their respective states. Also, as previously discussed, in October 2001, the
State of New York enacted legislation authorizing up to three Native American casinos in
certain counties. The Stockbridge-Munsee Tribe is seeking to develop a casino project in
the Catskills region of New York. We cannot predict whether any of these tribes will be
successful in establishing gaming operations and, if established, whether such gaming
operations will have a material adverse effect on the operations of Mohegan Sun.

# Regulation

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

Each of the partners of TCA must be
licensed by relevant tribal and state authorities. Each of the partners of TCA has
received a gaming registration from the Commissioner of Revenue Services of the State of
Connecticut that is renewed annually. In addition, gaming licenses or management
agreements held or subsequently acquired by us pursuant to applicable law and regulations,
including the Indian Gaming Regulation Act (IGRA) and the National Indian
Gaming Commission (the NIGC) regulations, may require review, approval or
licensing of any person or entity directly, or indirectly possessing or acquiring 10% or
more of our equity securities (a Substantial Interest). The NIGC may be
required to review and approve any such person or entity and make a finding of suitability
pursuant to the IGRA and NIGC regulations. If the NIGC were to determine that a person or
entity holding a Substantial Interest in a gaming management agreement was unsuitable,
prior approval of the management agreement could be revoked, subsequent approvals or
renewals could be blocked and certain required gaming licenses could be suspended,
rescinded or denied.

# Waiver of Sovereign
Immunity

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

# Atlantic City Real Estate

As described in Item 1.
Business, (A) General Development of BusinessSale of Resorts Atlantic City,
effective April 25, 2001, we lease certain of the property included in the Atlantic City
Option to Colony. Pursuant to the lease agreement, Colony pays us a fee of $100,000 per
month. We also own certain other undeveloped parcels of land in Atlantic City, which are
available for sale. See Item 2. Properties for a further description of land
owned by KINA.

# Administrative Services

In Florida, we provide general and
administrative support services, marketing services, travel reservations and wholesale
tour services for Kerzner Internationals properties in The Bahamas. To a much lesser
extent, we also provide travel reservation services for unconsolidated affiliated
properties in The Bahamas. In addition, we lease office space in New York City for our
corporate marketing and public relations office, which provides services to KINA as well
as its affiliated companies. We provide these services pursuant to an agreement with
certain unconsolidated affiliates for which we receive management fees.

# (D) FINANCIAL
INFORMATION ABOUT GEOGRAPHIC AREAS

Not applicable.

# ITEM 2. PROPERTIES

# Atlantic City

We own approximately 13 acres of real
property immediately adjacent to Resorts Atlantic City. These properties, which are
included in the Atlantic City Option, are zoned for casino hotel use. Certain of these
properties are being leased by Colony for a fee of $100,000 per month.

We own approximately five acres of
undeveloped property in the Southeast Inlet section of Atlantic City. In addition, we own
approximately 45 acres of property located in Atlantic City on Blackhorse Pike, a portion
of which may be considered to be wetlands.

All of the property that we own in
Atlantic City, except for that which is subject to the Atlantic City Option, is available
for sale. See Item 1. Business, (A) General Development of BusinessSale of
Resorts Atlantic City, for a description of the Atlantic City Option and the lease
with Colony.

# ITEM 3. LEGAL PROCEEDINGS

# US District Court Action
 KINA v. Lowenschuss

In September 1989 KINA filed an
action in the US District Court for the Eastern District of Pennsylvania to recover
certain sums paid to the defendant, as trustee for two Individual Retirement Accounts and
the Fred Lowenschuss Associates Pension Plan (the Pension Plan), for KINA
stock in a 1988 merger, in which KINA was acquired by Merv Griffin. This action was
transferred to the NJ Bankruptcy Court in connection with the Companys former
bankruptcy case commenced there in 1989.

In February 1992, the NJ Bankruptcy
Court issued an opinion granting partial summary judgment in favor of KINA on one of its
six causes of action. The NJ Bankruptcy Court reserved the issue of remedies for trial.

In August 1992, Fred Lowenschuss
filed for Chapter 11 reorganization in the US Bankruptcy Court for the District of Nevada
(the Nevada Bankruptcy Court). As a result, the NJ Bankruptcy Court stayed
KINAs action against Lowenschuss.

The Nevada Bankruptcy Court confirmed
Fred Lowenschuss plan of reorganization in October 1993. KINA appealed certain
portions of the confirmation order and other orders of the Nevada Bankruptcy Court. In
June 1994, the US District Court for the District of Nevada (the Nevada District
Court) granted KINAs appeal in all respects. In October 1995, the US Court of
Appeals for the Ninth Circuit affirmed the Nevada District Courts ruling in all
respects, and in November 1995, the Court of Appeals denied Fred Lowenschuss
petition for rehearing. On June 10, 1996, the United States Supreme Court denied Fred
Lowenschuss petition for a writ of certiorari.

All interested parties, including
KINA, filed motions with the Nevada Bankruptcy Court about their respective claims and
priority rights under the US Bankruptcy Code. The Nevada Bankruptcy Court ruled on these
motions, and KINA and other parties appealed, first to the Nevada District Court and then
to the Court of Appeals for the Ninth Circuit. At the time that the United States Supreme
Court denied KINAs petition for a writ of certiorari, on November 29, 1999 (see
discussion below), KINA had three appeals pending, one in the Court of Appeals and two in
the Nevada District Court. KINA voluntarily dismissed all three appeals and simultaneously
withdrew its proofs of claim in Lowenschuss bankruptcy case.

On November 2 and 3, 1995, the NJ
Bankruptcy Court held a trial on the merits of KINAs claims against the trustee of
the Pension Plan. On April 22, 1997, the NJ Bankruptcy Court issued a final opinion in
KINAs favor, and on May 20, 1997 entered a judgment in KINAs favor finding
that the trustee for the two Individual Retirement Accounts and the Pension Plan committed
fraud against KINA and that KINA was entitled to restitution. The NJ Bankruptcy Court
awarded KINA $3.8 million plus prejudgment interest and $250,000 punitive damages, for a
total award of approximately $5.7 million. On July 7, 1997 the NJ Bankruptcy Court amended
the judgment to apportion the damages between the Pension Plan and the Individual
Retirement Accounts. The NJ Bankruptcy Court also denied Defendants request for a
stay of enforcement of the judgment. Subsequently, the Defendants filed an appeal of the
NJ Bankruptcy Courts decision in the US District Court for the District of New
Jersey (the New Jersey District Court). On March 26, 1998, The New Jersey
District Court reversed the judgment of the NJ Bankruptcy Court. KINA filed an appeal of
the New Jersey District Courts decision with the US Court of Appeals for the Third
Circuit (the Circuit Court). On June 30, 1999, the Circuit Court issued an
opinion affirming the New Jersey District Courts decision. KINAs subsequent
petition for a writ of certiorari to the United States Supreme Court was denied on
November 29, 1999, thereby concluding this litigation.

In connection with that litigation,
Laurance Lowenschuss, as trustee for the Pension Plan, and Fred Lowenschuss, as trustee of
the Trusts and as custodian, filed an action in May 1996 against KINA for preliminary and
permanent injunctive relief. The Lowenschusses sought an order from the US Bankruptcy
Court for the District of Delaware (the Delaware Bankruptcy Court) to extend
the post-confirmation bar date of the Plan and to secure the return of certain escrowed
distributions to holders of Old Series Notes (as defined in the Plan).

On May 9, 1996, the Delaware
Bankruptcy Court entered an order, to which the parties had stipulated, extending the
Lowenschuss date of surrender for Old Series Notes through November 10, 1996. By
further stipulations, the date of surrender was further extended through May 12, 2000.

On March 8, 1996, Fred Lowenschuss,
as trustee of various Lowenschuss childrens trusts (the Trusts), and
Laurance Lowenschuss, as trustee for the Pension Plan, filed a counterclaim and a third
party claim against KINA and First Interstate Trust Company in the NJ Bankruptcy Court
alleging that the Pension Plan and the Trusts timely surrendered certain securities for
exchange under the Companys 1990 plan of reorganization and that those securities
were wrongfully dishonored and returned. The Company replied to the counterclaims in April
1996 and denied the allegations. Since 1996, the parties have voluntarily stayed this
litigation, pending the resolution of Lowenschuss bankruptcy case in Nevada.

The foregoing litigation and
bankruptcy proceedings have spawned additional and related litigation, including the
following: (a) an injunction action brought by Fred Lowenschuss, wherein the Nevada
Bankruptcy Court enjoined KINA from proceeding against Fred Lowenschuss individually; the
Nevada District Court dismissed appeals by both KINA and Fred Lowenschuss, and the Ninth
Circuit, on March 6, 1997, affirmed the District Courts dismissal of Fred
Lowenschuss appeal; (b) a malicious prosecution action brought by Fred Lowenschuss
against KINA and its counsel that was dismissed by the Nevada Bankruptcy Court and the
Nevada District Court; on March 6, 1997, the Ninth Circuit affirmed the District
Courts dismissal of Lowenschuss appeal and awarded KINA monetary sanctions,
finding that the Lowenschuss appeal was frivolous; and (c) an action filed by
Laurance Lowenschuss, as trustee of the Pension Plan, in the Nevada District Court against
KINA, which was transferred to the NJ District Court; in January, 1996, the NJ District
Court referred the matter to the NJ Bankruptcy Court. In February 2001, the NJ Bankruptcy
Court granted KINAs motion to dismiss Lowenschuss action for malicious
prosecution in Adversary Proceeding No. 96-2350 and denied KINAs motion to dismiss
certain counterclaims in Adversary Proceeding No. 90-1005 related to the exchange of bonds
in the Delaware Bankruptcy Court proceeding discussed above.

In December 2001, KINA and
Lowenschuss entered into a Stipulation and Settlement Agreement to end all outstanding
disputes between the parties. In July 2002, the New Jersey Bankruptcy Court approved the
Stipulation and Settlement Agreement and the settlement has been finalized. The amounts
paid in connection with the settlement had been fully reserved for in prior years.

# ITEM 4. SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS

Not applicable.

# PART II

# ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

# (A) Market Information

There is no established public
trading market for KINA common stock.

# (B) Holders

All of the common stock of KINA is
owned by Kerzner International.

# (C) Dividends

No dividends were paid on KINA common
stock during the last two fiscal years and we do not anticipate making any cash dividend
on our common stock for the foreseeable future. The indentures for certain of KINAs
indebtedness contain certain restrictions as to the payment of dividends by KINA.

# (D) Securities
Authorized for Issuance Under Equity Compensation Plans

Not applicable.

# ITEM 6. SELECTED FINANCIAL DATA

The disclosure required by Item 6 has
been omitted pursuant to General Instruction I of Form 10-K.

# ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Managements Discussion and
Analysis of Financial Condition and Results of Operations set forth below in Item 7 has
been revised to reflect the completion of the restatement of our consolidated financial
statements for the years ended December 31, 2002, 2001 and 2000.

# Restatement

Subsequent to the issuance of the
December 31, 2002 consolidated financial statements, the Company has determined it
necessary to restate its consolidated financial statements as of December 31, 2002 and
2001 and for each of the three years in the period ended December 31, 2002.

On May 21, 2003, Kerzner
International announced that Trading Cove Associates (TCA), a Connecticut
general partnership in which the Company is a 50% partner, restated its historically
reported financial results. The primary effect of the restatement of TCAs financial
statements is to recognize as an expense certain contractual liabilities owed to its
partners and their affiliates for prior services performed under contract when their
payment became probable pursuant to Statement of Financial Accounting Standard No. 5, as
opposed to when such expenses were paid or payable. Additionally, TCA changed the manner
in which it recognized losses in connection with the development of Phase II of the
Mohegan Sun. Although the accounting for the development fee remained in accordance with
Statement of Position 81-1 Accounting for Performance of Construction-Type and
Certain Production-Type Contracts (SOP 81-1), the timing of recognition
changed such that losses were recognized at the time they were known, as compared to the
time in which costs which created the losses became payable.

The Company accounts for its
investment in TCA under the equity method of accounting. Based on the restatement by TCA,
the Company determined that it was necessary to restate its historical consolidated
financial statements.

The adjustments to the Companys
consolidated financial statements arising from the restatement by TCA primarily relate to
the change in equity income or loss resulting from the change in TCAs revenue and
expense recognition policies, as the Companys net income is affected by its
proportionate share of TCAs restated income or loss under the equity method of
accounting. We record equity income from TCA in Relinquishment and development
fees in the accompanying consolidated financial statements.

As previously described, the primary
effect of the restatement on the Company is to change the timing of recognition of certain
partnership revenue and expense items. This timing resulted in the Companys income
being increased in the years presented, while income reported in prior years not presented
was reduced. Although not as significant, the Company also reversed certain amortization
deductions related to its initial investment in TCA.

In connection with the TCA
restatement, TCA recognized an additional loss under its agreement with the Mohegan Tribal
Gaming Authority, which caused the Company to re-evaluate its own revenue recognition
related to this fee under a related development agreement between an affiliate of the
Company and TCA (the TCA Development Agreement), an agreement which was
assigned to the Company by its affiliate. As part of the restatement, the Company has
determined that its accounting under the percentage of completion method for development
fee revenue received under the TCA Development Agreement would be more properly reflected
if it utilized the costs incurred by TCA as the basis to determine the percent complete
and the amount earned at the end of each period. The Company believes that this basis of
measurement provides the most accurate reflection of the level of service performed. As of
December 31, 2002, the Company earned substantially all of its development fee under the
TCA Development Agreement.

The effect of the TCA related
adjustments, which include the adjustments resulting from TCAs restated results and
the Companys proportionate share thereof, the reversal of certain amortization
deductions related to the Companys initial investment in TCA, and the Companys
correction in the manner of recognizing development fee revenue, for the years ended
December 31, 2002, 2001 and 2000, was to decrease our net loss or increase net income, as
applicable, by $0.9 million, $12.0 million and $17.5 million, respectively. As of January
1, 2000 the accumulated deficit increased by $24.3 million, approximately $5.3 million of
which pertains to revenue earned by the Company but recognized by an entity outside of the
KINA consolidated group and the remainder of which pertains to the adjustments discussed
above.

The Company has also made certain
other adjustments and reclassifications to its historically reported consolidated
financial statements. These adjustments include reclassifying the Companys
investment in Trading Cove New York, LLC from deferred charges to investment in associated
companies in the accompanying consolidated balance sheets and reclassifying the related
equity loss from selling, general and administrative expenses to equity in losses of
associated company in the accompanying consolidated statements of operations; adjusting
accounts payable and accrued expenses to correct for certain over and under accrued
expenses and reclassifying certain current receivables to other long-term assets and
reclassifying deferred tax asset and certain due from affiliates from current to
non-current. The effect of these other adjustments for the years ended December 31, 2002
and 2001 was to increase the net loss or decrease net income, as applicable, by
approximately $0.8 million and $0.4 million, respectively, and to decrease the accumulated
deficit by $0.7 million as of January 1, 2000. These adjustments had an insignificant
impact on the consolidated statement of operations for the year ended December 31, 2000.

The components of the adjustments
related to the restatement, as they relate to net income (loss), for the years ended
December 31, are as follows:

`2002         2001          2000
                                        -----------   ----------   -----------

    Net income (loss), as reported      $   (2,372)   $   1,098     $(249,656)
      Relinquishment fee adjustment          4,132        9,535        14,508
      Development fee adjustment            (3,673)       2,016         2,549
      Amortization                             480          480           480
      Other adjustments                       (836)        (377)           22
                                        -----------   ----------   -----------
    Net income (loss), as restated      $   (2,269)   $  12,752     $(232,097)
                                        ===========   ==========   ===========`

On December 15, 1997, Kerzner
International and the Company, as co-issuers, issued $100.0 million principal amount of
8-5/8% Senior Subordinated Notes due 2007. All of the proceeds received from the issuance
of these notes were advanced to entities outside of the KINA consolidated group and were
used for general corporate and working capital purposes, as well as to help fund capital
expenditure projects for these entities. As a result, any interest expense we incur on the
8-5/8% Senior Subordinated Notes, including amortization of debt issuance costs, would be
offset by affiliated interest income from Kerzner International, resulting in no impact to
net income or loss in any of the periods presented. These notes were previously not
reflected within the Companys consolidated financial statements, but instead were
recorded in the consolidated financial statements of an affiliate of the Company, within
Kerzner International consolidated group.

During 2002, the 8-5/8% Senior
Subordinated Notes were repurchased and redeemed by Kerzner International, resulting in a
loss on early extinguishment of debt which consisted of the premium paid on the repurchase
and redemption of the notes, the write-off of related debt issuance costs and other direct
costs. However, given that the proceeds of the original debt issuance were not used for
KINA purposes and that the redemption was made by entities outside of the KINA
consolidated group, the loss on the related debt extinguishment of $5.9 million was
reimbursed to KINA by these entities, resulting in no impact to the Companys
operating results in 2002.

As previously described in Item
1. Business (A) General Development of Business  Sale of Resorts Atlantic
City, the Company sold Resorts Atlantic City on April 25, 2001. The financial
results of Resorts Atlantic City from the period January 1, 2001 to April 24, 2001 were
previously excluded from the consolidated statement of operations for the year ended
December 31, 2001. As part of the restatement, the accompanying consolidated statement of
operations as of December 31, 2001 now includes Resorts Atlantic Citys financial
results from January 1, 2001 to April 24, 2001. The net loss incurred by Resorts Atlantic
City from the period January 1, 2001 to April 24, 2001 of $4.9 million is included within
the accompanying consolidated statement of operations together with an offsetting gain on
net assets held for sale, resulting in no impact on net income for the year ended December
31, 2001 from this adjustment. The following table summarizes the components of the gain
on net assets held for sale:

`Net loss of Resorts Atlantic City (a)       $   (4,893)
         Depreciation and amortization (b)                5,325
         Interest income (c)                             (2,664)
                                                    ------------
         Gain on net assets held for sale           $    (2,232)
                                                    ==============`

|(a) | Net loss of Resorts Atlantic City from the period January 1, 2001 to April 24,
          2001.
|--- | ----------------------------------------------------------------------------------------------

|(b) | As Resorts Atlantic City was classified as an asset held for sale, the Company
          ceased depreciation and amortization and accordingly, the expense is offset
          against the net loss incurred from the period January 1, 2001 to April 24, 2001.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | During the period January 1, 2001 to April 24, 2001, the Company recognized $2.7
          million of interest income paid to the Company by Colony on the proceeds of the
          sale. This amount is offset against the net loss incurred from the period
          January 1, 2001 to April 24, 2001 and has reduced interest income as previously
          reported by Kerzner.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The consolidated financial statements
for the years ended December 31, 2002, 2001 and 2000 have been restated to incorporate
these adjustments. See Note 2  Restatement in the accompanying notes to consolidated
financial statements for comparisons of the Companys accumulated deficit as of
January 1, 2000, consolidated balance sheets as of December 31, 2002 and 2001,
 and consolidated statements of operations for
each of the three years in the period ended December 31, 2002, as previously reported and as restated.

# RESULTS OF OPERATIONS

# COMPARISON OF YEARS
ENDED DECEMBER 31, 2002 AND 2001

# Casino and Resort
Revenues and Expenses

Casino and resort revenues and
expenses for the year ended December 31, 2001 reflect the operations of Resorts Atlantic
City from January 1, 2001 to April 24, 2001. As previously described, we sold Resorts
Atlantic City on April 25, 2001. Accordingly, as of April 25, 2001, the operations of
Resorts Atlantic City are no longer included in our consolidated financial statements.

# Tour Operations

Revenues and expenses from our tour
operations increased in 2002 compared to 2001, resulting in an increase in net earnings of
$0.7 million. This was a result of increased occupancy in 2002 compared to the same period
in 2001 at resort properties in The Bahamas operated by certain of our unconsolidated
affiliates.

# Relinquishment and
Development Fees

Relinquishment and development fees
in 2002 increased by $4.2 million (15.6%) over the previous year. We have a 50% interest
in TCA and earnings from our investment in TCA are included in Relinquishment and
development fees in the accompanying consolidated statements of operations. We recorded
equity earnings from TCA in 2002 of $30.1 million compared to $25.1 million in 2001, an
increase of $5.0 million. This increase resulted from TCAs recognition of revenue
pursuant to the Relinquishment Agreement. Additionally, during 2002, we recorded
development fees from TCA of $1.3 million as compared to $2.0 million in 2001 based on a
percentage of completion basis, as previously described.

# Management and Other Fees

Management fees earned for services
we provide to our unconsolidated affiliates in The Bahamas amounted to approximately $16.8
million in 2002, as compared to $15.1 million in 2001. These fees equal three percent of
gross revenues, as defined, and therefore are largely dependent on occupancy levels at
Kerzner Internationals properties in The Bahamas. The increase in these management
fees resulted from the strong results of Kerzner Internationals properties in The
Bahamas during 2002.

In 2002, we received $1.2 million, as
compared to $0.8 million in 2001, of lease payments from Colony with respect to land in
Atlantic City that they lease from us effective April 25, 2001. The lease payment is
$100,000 per month, and the lease terms are concurrent with the Atlantic City Option.

# Selling, General and
Administrative

Selling, general and administrative
expenses decreased by $7.1 million as compared to the previous year. This decrease
resulted primarily from $10.5 million of selling, general and administrative expenses
related to Resorts Atlantic City incurred from January 1, 2001 to April 24, 2001.
Effective April 25, 2001, the results of Resorts Atlantic City are no longer included in
our consolidated financial statements. The remaining $3.4 million increase resulted
primarily from $1.2 million of lease termination costs related to the relocation of
KINAs main offices to Plantation, Florida and a $2.2 million increase in performance
bonuses due to improved operating results and costs related to the retention of senior
development personnel in anticipation of future projects. These increases were offset by
decreases in new project costs incurred in connection with the research of new investment
and/or development opportunities and various other items.

# Restructuring Expense

Restructuring costs in 2001 were
comprised of severance payments made to employees who were terminated due to lower
occupancy levels at Kerzner Internationals properties in The Bahamas subsequent to
the terrorist attacks on September 11, 2001.

# Other Income (Expense)

Interest income in 2002 decreased by
$1.4 million as compared to 2001. In 2001, interest income included $1.5 million (as
compared to $0.5 million in 2002) of interest earned on the $17.5 million Promissory Note
from Colony.

Interest income from affiliates is
comprised of amounts due from KIB (which is a wholly owned subsidiary of Kerzner
International outside of KINAs consolidated group) and Kerzner International. As
described above in Item 1. Business (A) General Development of
BusinessIssuances of 8-7/8% Senior Subordinated Notes, on August 14, 2001,
Kerzner International and KINA, as co-issuers, issued $200.0 million principal amount of
8-7/8% Senior Subordinated Notes. The proceeds were advanced to KIB and were used to pay
down borrowings by KIB under the Revolving Credit Facility, under which Kerzner
International, KINA and KIB were co-borrowers.

Also, as discussed in Item
7-Restatement, on December 15, 1997, Kerzner International and the Company, as
co-issuers, issued $100.0 million principal amount of 8-5/8% Senior Subordinated Notes due
2007. All of the proceeds received from the issuance of these notes were advanced to
entities outside of the KINA consolidated group and were used for general corporate and
working capital purposes, as well as to help fund capital expenditures projects for these
entities.

The advance of proceeds to these
affiliated entities is reflected as due from affiliate non-current in the accompanying
consolidated balance sheets. We earn interest income from these affiliated entities on
these advances equal to the interest expense we incur on the 8-7/8% and the 8-5/8% Senior
Subordinated Notes including amortization of debt issuance costs.

During 2002, the 8-5/8% Senior
Subordinated Notes were repurchased and redeemed by Kerzner International, resulting in a
loss on early extinguishment of debt which consisted of the premium paid on the repurchase
and redemption of the notes, the write-off of related debt issuance costs, the remaining
unamortized discount on the notes and other direct costs. However, given that the proceeds
of the original debt issuance were not used for KINA purposes and that the redemption was
made by entities outside of the KINA consolidated group, the loss on the related debt
extinguishment was reimbursed to KINA by these entities, resulting in no impact to the
Companys operating results in 2002.

# Equity in Losses of
Associated Company

During 2002, we recorded equity in
losses of associated company of $1.0 million representing our proportionate share of loss
in our 50% investment in TCNY, as compared to a loss of $0.9 million in 2001.

# Income Taxes

We recorded a net tax provision of
$0.1 million in the year 2002 as compared to an income tax benefit of $2.8 million in the
prior year. Realization of future tax benefits to deferred tax assets is dependent on many
factors, including our ability to generate future taxable income. The valuation allowance
is adjusted in the period we determine it is more likely than not that deferred tax assets
will or will not be realized.

See Note 17 to the accompanying
consolidated financial statements for a further discussion of our income taxes.

# Loss on Early
Extinguishment of Debt

During 2002, Kerzner International
and KINA repurchased or redeemed the entire outstanding balance of $200.0 million
principal amount of our 9% Senior Subordinated Notes, resulting in the recognition of a
loss on early extinguishment of debt of $14.6 million. The applicable net income tax
effect was $0. The loss consists of the premium paid on the repurchase and redemption of
the 9% Senior Subordinated Notes, the non-cash charge to write-off the balance of the
related debt issuance costs and the remaining unamortized discount on the notes.

During 2002, Kerzner International
and KINA also repurchased or redeemed the entire outstanding balance of $100.0 million
principal amount of our 8-5/8% Senior Subordinated Notes, resulting in a loss on early
extinguishment of debt of $5.9 million which consisted of the premium paid on the repurchase and
redemption of the notes, the write-off of related debt issuance costs, and other direct
costs. However, given that the proceeds of the original debt issuance were not used for
KINA purposes and that the redemption was made by entities outside of the KINA
consolidated group, the loss on the related debt extinguishment was reimbursed to KINA by
these entities, resulting in no impact to the Companys operating results in 2002.

# Other

Casino and resort revenues and
expenses for the year 2000 reflect the operations of Resorts Atlantic City. As described
previously, we sold Resorts Atlantic City on April 25, 2001. Expenses in 2000 included a
write-down of assets related to the Resorts Atlantic City Sale and Atlantic City Option to
their realizable value. As a result of entering into the agreement to sell Resorts
Atlantic City at a purchase price less than its carrying value, the Company recorded a
loss of $229.2 million in the fourth quarter of 2000. An additional loss of $0.2 million
was recorded in 2001, resulting from direct costs related to the sale in excess of those
estimated at December 31, 2000. As of April 25, 2001, the operations of Resorts Atlantic
City are no longer included in our consolidated financial statements.

Purchase termination costs of $11.2
million in 2000 related to the cancellation of the Companys agreement to acquire the
Desert Inn Hotel and Casino in Las Vegas. These costs included $7.2 million paid to
Starwood Hotels and Resorts Worldwide Inc. pursuant to a termination agreement.

# LIQUIDITY, CAPITAL
RESOURCES AND CAPITAL SPENDING

# Liquidity

At December 31, 2002, our working
capital deficit was $21.5 million due to the fact that certain receivables that are due
from affiliated companies to satisfy current liabilities are classified as due from
affiliates-non-current in the accompanying consolidated balance sheets as the affiliated
companies are not contractually obligated to pay the amounts owed to the Company within
one year. However, the affiliated companies generally pay the amounts owed to the company
on a timely basis in order to satisfy the Companys current liability obligations.

# Capital Resources and
Other Sources and Uses of Funds

# Sale of Resorts Atlantic
City and Settlement of Related Note

On April 25, 2001, we sold Resorts
Atlantic City and certain related assets to Colony for a purchase price of approximately
$144 million, including accrued interest. The proceeds received from Colony consisted of
approximately $127 million in cash and an unsecured $17.5 million Promissory Note. Of the
cash proceeds, $79.0 million was used to pay in full the borrowings outstanding by Resorts
Atlantic City under the Revolving Credit Facility. The remaining $48.0 million of cash
proceeds was advanced to KIB and was used to permanently reduce borrowings outstanding by
KIB under the Revolving Credit Facility. The cash proceeds received from Colony were
offset by costs paid by us after closing, which included employee termination costs and
legal fees.

In March 2002, we received
approximately $18.0 million from Colony as payment in full of the Promissory Note and all
outstanding accrued interest.

# Amended Revolving Credit
Facility

Under the Amended Revolving Credit
Facility, as discussed more fully in Item 1. Business (A) General Development of
BusinessFourth Amended and Restated Credit Facility, the maximum amount of
borrowings that may be outstanding is $300.0 million, subject to the borrowing base
discussed below and certain other conditions. The Lenders have agreed that up to an
additional $50.0 million of borrowings may be available under the facility if we are able
to arrange additional commitments in that amount. Effective February 7, 2003, the
co-borrowers obtained approval from the required Lenders under our Amended Revolving
Credit Facility to, among other things, calculate borrowings available using a borrowing
base calculation, such that we can draw the lesser of the borrowing base or the commitment
amount. If for any reason the co-borrowers are unable to meet those conditions or
negotiate new conditions for effectiveness of the borrowing base, our borrowings as of
July 1, 2003 will be limited by the total amount of per occurrence all risks
insurance that KIB maintains on its properties on Paradise Island of $150.0 million per
occurrence. Under the borrowing base calculation as of the year ended December 31, 2002,
our borrowing limit would have been $300.0 million, as the anticipated borrowing base
calculation would have exceeded the commitment amount.

Loans under the Amended Revolving
Credit Facility bear interest at (i) the higher of (a) CIBCs base rate or (b) the
Federal Funds rate plus one-half of one percent, in either case plus an additional 0.25%
to 1.75% based on the Leverage Ratio or (ii) LIBOR rate plus 1.25% to 2.75% based on the
Leverage Ratio. For loans based on the LIBO Rate, interest is payable on the last day of
each applicable interest period, or the date of any payment or prepayment of such loans.
For loans based on the Alternate Base Rate (as defined), interest is payable quarterly. At
December 31, 2002, the weighted average interest rate on amounts outstanding under the
Amended Revolving Credit Facility was 3.40%. Loans under the Amended Revolving Credit
Facility may be prepaid and re-borrowed at any time and are due in full in November 2006.
Commitment fees are calculated at per annum rates ranging from 0.25% to 0.50% based on the
Leverage Ratio, applied to the undrawn amount of the Amended Revolving Credit Facility and
are payable quarterly.

The amount of borrowings outstanding
as of December 31, 2002 on the Amended Revolving Credit Facility was $72.0 million, all of
which was drawn by KIB and is reflected on KIBs balance sheet. This amount is
unconditionally guaranteed by KINA.

# Issuance and Redemption
of Debt

Cash received during the year
included $206.0 million from the issuance of our 8-7/8% Senior Subordinated Notes before
costs associated with the issuance of this debt. We used these proceeds together with cash
on hand to redeem our 9% Senior Subordinated Notes for $209.0 million. This refinancing
resulted in the extension of the maturity of our public debt and decreased our average
borrowing rate. (See Note 12 to the Consolidated Financial Statements.)

On November 27, 2002, we called for
the redemption of the entire outstanding principal amount of our 8-5/8% Senior
Subordinated Notes due 2007 pursuant to the terms of the indenture governing these Notes.
We purchased $25.8 million of the 8-5/8% Senior Subordinated Notes through transactions on
the open market. On December 27, 2002, we redeemed the remaining $74.2 million aggregate
principal amount outstanding at the redemption price of 104.313%, or $1,043.13 for each
$1,000.00 of principal amount outstanding, plus accrued interest.

# Other Sources and Uses
of Funds for 2003

During the next twelve months, we
expect the primary source of funds from operations to be payments received from TCA
pursuant to the Relinquishment Agreement. In addition, we will continue to earn management
fees for services provided to certain of our unconsolidated affiliates. With respect to
our long-term debt at December 31, 2002, we are required to make cash interest payments
each year amounting to approximately $35.5 million. Included in this amount is $17.8
million of interest related to the 8-7/8% Senior Subordinated Notes which was paid by KIB
and $7.8 million of interest related to the 8-5/8% Senior Subordinated Notes which was
paid by affiliates of the Company. We currently do not have any immediate plans for
significant capital expenditures during the next twelve months. In addition, we do not
expect to raise any capital through the issuance of KINA securities that are required to
be registered with the SEC until we are able to comply with the requirements of Regulation
S-X regarding audited financial statements. As described in the Prefatory Note to this
report, our consolidated financial statements for the year ended December 31, 2000 are
unaudited, and as such we will be unable to comply with Regulation S-X until the audit for
the year ending December 31, 2003 is complete.

We believe that available cash on
hand at December 31, 2002, combined with funds generated from operations and, if required,
funds available under the Amended Revolving Credit Facility, will be sufficient to finance
our cash needs for at least the next twelve months.

# Future Commitments and
Funding Sources

At December 31, 2002, our contractual
obligations including contingencies, with initial or remaining terms in excess of one
year, were as follows (in thousands)(a):

`2003        2004        2005        2006       2007      Thereafter      Total
Long-term debt on KINA's
   consolidated balance sheet   $        -  $        -  $       -   $       -  $        -  $   400,000   $ 400,000
Amended Revolving Credit
   Facility on KIB's
   consolidated balance sheet
   (b)                                   -           -          -      72,000           -            -      72,000
Operating leases                     1,642       1,544      1,604       2,020       1,795       19,807      28,412
Capital leases                         135         170        130           -           -            -         435
                               ------------ ----------- ---------- ----------- ----------- ------------ -----------
Total                           $    1,777  $    1,714  $   1,734   $  74,020  $    1,795  $   419,807   $ 500,847
                               ============ =========== ========== =========== =========== ============ ===========

(a)      See Note 12 of Notes to Consolidated  Financial  Statements  herein for a further  description of our debt
         commitments.
(b)      KINA is a co-borrower and guarantor of borrowings  outstanding on the Amended  Revolving  Credit Facility.
         At December 31, 2002, all of the  outstanding  borrowings on this  facility,  which totaled $72.0 million,
         were drawn by KIB and are reflected on Kerzner International's balance sheet.`

# Off-Balance Sheet
Arrangements and Other Commitments

At December 31, 2002, we had no
off-balance sheet arrangements or other commitments, except as disclosed in Note 19 in the
accompanying consolidated financial statements.

In connection with the Palmilla
Resort operating agreement, we agreed that in the event that Palmilla Resort obtains
third-party debt financing for its planned redevelopment, we, along with Kerzner
International, would guarantee up to $38.0 million of such financing. In March 2003, we
entered into a guaranty agreement with respect to certain interim financing for the
redevelopment, whereby we have guaranteed $20.0 million of such financing. During the
quarter ended June 30, 2003, we guaranteed an additional $10.0 million of such financing.
We have agreed to provide these guarantees for a period ending no later than the later of
(i) the date of repayment at maturity of the underlying obligations or (ii) three years
from the date of the guarantee. The purpose of these guarantees is to assist Palmilla
Resort in obtaining financing for its planned redevelopment on commercially reasonable
terms. As of June 30, 2003, we have recorded the fair value of these guarantees of $0.1
million. The planned redevelopment will require the resort to be closed from April 2003 to
early 2004. The redevelopment is expected to cost $80.0 million at the property level and
will increase the room count to 172 rooms and significantly upgrade the amenities and
public areas offered by the resort.

# OTHER MATTERS

# Critical Accounting
Policies

Our critical accounting policies
include those, which require our most subjective or complex judgments as a result of the
need to make estimates when there is uncertainty as to their financial effects. We prepare
our consolidated financial statements in conformity with US GAAP. We provide allowances
for doubtful accounts arising from casino, hotel, and other services, which are based upon
a specific review of outstanding receivables. In determining the amounts of the
allowances, we are required to make certain estimates and assumptions. Accruals for
potential liabilities related to any lawsuits or claims brought against us, calculations
of income tax liabilities, valuation allowances on deferred tax assets and other
liabilities require that we apply significant judgment in determining the appropriate
assumptions for use in the calculations of financial estimates. Actual results may differ
from these estimates and assumptions. We periodically assess the potential liabilities
related to any lawsuits or claims brought against us. While it is typically very difficult
to determine the timing and ultimate outcome of these actions, we use our best judgment to
determine if it is probable that we will incur an expense related to the settlement or
final adjudication of such matters and whether a reasonable estimation of such probable
loss, if any can be made. There can be no assurance that actual results will not differ
from our estimates. To provide an understanding of the methodology we apply, our
significant accounting policies are discussed where appropriate and in the Notes to our
Consolidated Financial Statements.

# Income Taxes

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

# Recent Accounting
Pronouncements

# Classification of Extraordinary
Items

In April 2002, the FASB issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS 145). SFAS 145
rescinds FASB Statement No.4, Reporting Gains and Losses from Extinguishment of
Debt (Statement 4), and an amendment of Statement 4, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking Fund Requirements
(Statement 64). SFAS 145 also rescinds FASB Statement No. 44, and amends FASB
Statement No. 13. SFAS 145 also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe their applicability under
changed conditions. The provisions of SFAS 145 related to the rescission of Statement 4
shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior periods
presented that does not meet the criteria in APB Opinion 30 for classification as an
extraordinary item shall be reclassified.

Under Statement 4, all gains and
losses from extinguishment of debt were required to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. SFAS 145 eliminates
Statement 4 and, thus, the exception to applying APB Opinion 30 to all gains and losses
related to extinguishments of debt (other than extinguishments of debt to satisfy sinking
fund requirements-the exception to application of Statement 4 noted in Statement 64). As a
result, gains and losses from the extinguishment of debt should be classified as
extraordinary items only if they meet the criteria in APB Opinion 30. Applying the
provisions of APB Opinion 30 will distinguish transactions that are part of an
entitys recurring operations from those that are unusual or infrequent or that meet
the criteria for classification as an extraordinary item.

The adoption of SFAS 145 required us
to reclassify the $14.6 million extraordinary loss on early extinguishment of our 9%
Senior Subordinated Notes recognized during the year ended December 31, 2002 to other
expense in the consolidated statement of operations.

# Exit or Disposal
Activities

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146) effective for exit or disposal activities initiated after December
31, 2002. SFAS 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is incurred.
Adoption of SFAS 146 is not expected to have a significant impact on our financial
position or results of operations.

# Guarantees

In November 2002, the FASB issued
FASB Interpretation (FIN) No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation clarifies that a guarantor is required to disclose (a)
the nature of the guarantee, including the approximate term of the guarantee, how the
guarantee arose and the events or circumstances that would require the guarantor to
perform under the guarantee; (b) the maximum potential amount of future payments under the
guarantee; (c) the carrying amount of the liability, if any, for the guarantors
obligations under the guarantee; and (d) the nature and extent of any recourse provisions
or available collateral that would enable the guarantor to recover the amounts paid under
the guarantee. This interpretation also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the obligations it has
undertaken in issuing the guarantee, including its ongoing obligations to stand ready to
perform over the term of the guarantee in the event that the specified triggering events
or conditions occur.

The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. The disclosure requirements in this interpretation are
effective for financial statements of interim or annual periods ending after December 15,
2002. We are one of the guarantors under the Amended Revolving Credit Facility. The amount
outstanding on this facility as of December 31, 2002 was $72.0 million. See
Off-Balance Sheet Arrangements and Other Commitments.

Kerzner International closed Palmilla
Resort, its 50% owned luxury resort in Los Cabos, Mexico, in April 2003 in order to
commence the previously announced $80.0 million expansion project that will increase the
room count from 115 rooms to 172 rooms and will significantly upgrade the amenities and
public areas offered by the resort. The expansion is expected to be completed by early
2004 and will be financed through local project financing. In connection with the Palmilla
Resort operating agreement, we agreed that in the event that Palmilla Resort obtains
third-party debt financing for its planned redevelopment, we, along with Kerzner
International, would guarantee up to a total of $38.0 million of such financing. In March
2003, we entered into a guaranty agreement with respect to certain interim financing for
the redevelopment, whereby we guaranteed $20.0 million of such financing. In June 2003, we
guaranteed an additional $10.0 million of such financing. We have agreed to provide these
guarantees for a period ending no later than the later of (i) the date of repayment at
maturity of the underlying obligations or (ii) three years from the date of the guarantee.
The purpose of these guarantees is to assist Palmilla Resort in obtaining financing for
its planned redevelopment on commercially reasonable terms. In 2003, we will record the
fair value of these and any other future guarantees, or modify any guarantees that were
issued by the Company prior to December 31, 2002, in accordance with the provisions of FIN
45.

# Consolidation of
Variable Interest Entities

In January 2003, the FASB issued
Interpretation No. 46 Consolidation of Variable Interest Entities (FIN
46). This interpretation of Accounting Research Bulletin 51, Consolidated
Financial Statements, addresses consolidation by business enterprises of variable
interest entities which have one or both of the following characteristics: (i) the equity
investment at risk is not sufficient to permit the entity to finance its activities
without additional subordinated financial support from other parties, which is provided
through other interests that will absorb some or all of the expected losses of the entity,
or (ii) the equity investors lack one or more of the following characteristics of a
controlling financial interest: (a) the direct or indirect ability to make decisions about
the entitys activities through voting rights or similar rights, (b) the obligation
to absorb the expected losses of the entity if they occur, which makes it possible for the
entity to finance its activities, or (c) the right to receive the expected residual
returns of the entity if they occur, which is the compensation of the risk of absorbing
the expected losses.

The provisions of FIN 46 are required
to be applied to an interest held in a variable interest entity or potential variable
interest entity for the first interim or annual period ending after December 15, 2003 if
both of the following two conditions apply: (1) the variable interest entity was created
before February 1, 2003; and (2) the public entity has not issued financial statements
reporting that variable interest in accordance with FIN 46. FIN 46 applies immediately to
variable interest entities created after January 31, 2003 and to variable interest
entities in which an enterprise obtains an interest after that date. We have not yet
assessed the impact that FIN 46 will have on our financial position or results of
operations.

# Derivative Instruments

In April 2003, FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities (SFAS 149) that amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under Statement 133. With certain exceptions, SFAS
149 is effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designed after June 30, 2003. We do not believe adoption of this
standard will have a material impact on our financial position or results of operations.

# Financial Instruments
with Characteristics of both Liabilities and Equity

In May 2003, FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150) that improves the accounting for
certain financial instruments that, under previous guidance, issuers could account for as
equity. SFAS 150 requires that those instruments be classified as liabilities in the
statement of financial position. This statement will be effective for the Companys
fiscal quarter ended September 30, 2003. We do not believe adoption of this standard will
have a material impact on our financial position or results of operations.

# ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our major market risk exposure is
interest rate risk associated with our long-term debt. As previously noted, we are part of
a consolidated group for which Kerzner International is the parent corporation. Kerzner
International attempts to limit the exposure of the consolidated group to interest rate
risk by managing the mix of fixed and floating rate debt and by entering into variable
rate swap agreements to hedge certain of its fixed rate debt. KINA does not have any
derivative instruments.

As of December 31, 2002, the carrying
value of long-term debt reflected on our balance sheet includes $405.7 million of 8-7/8%
Senior Subordinated Notes.

We are a co-borrower on the Amended
Revolving Credit Facility, and therefore, have future borrowing capacity comprised of
variable rate debt based on LIBOR. As of December 31, 2002, KINA had not drawn any amounts
on this facility.

# ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Companys consolidated
financial statements are presented on the following pages:

|Index to Financial Statements                                                                                                                                                                                  | Page Reference
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|Independent Auditors' Report                                                                                                                                                                                   | 33            
|Consolidated Balance Sheets
            at December 31, 2002 and 2001 (as restated)                                                                                                                            | 36            
|Consolidated Statements of Operations
            for the years ended December 31, 2002, 2001 and 2000
            as restated for all periods presented and unaudited for 2000                                | 37            
|Consolidated Statements of Changes in Shareholder's Equity
            (Deficit) for the years ended December 31, 2002, 2001 and 2000
            as restated for all periods presented and unaudited for 2000 | 38            
|Consolidated Statements of Cash Flows
            for the years ended December 2002, 2001 and 2000
            as restated for all periods presented and unaudited for 2000                                    | 39            
|Notes to Consolidated Financial Statements
            as restated for all periods presented and unaudited for 2000                                                                                            | 40            
|Financial Statement Schedule:                                                                                                                                                                                  |               
|Schedule II:  Consolidated Valuation and Qualifying Accounts
            for the years ended December 31, 2002, 2001 and 2000                                                                                  | 78            



---

# INDEPENDENT AUDITORS REPORT

To the Board of Directors and shareholder of 
  Kerzner International North America, Inc.:

We have audited the accompanying
consolidated balance sheets of Kerzner International North America, Inc. (formerly Sun
International North America, Inc. - see Note 1) and subsidiaries (the Company),
as of December 31, 2002 and 2001 and the related consolidated statements of operations,
changes in shareholders equity (deficit) and cash flows for the years then ended.
Our audits also included the financial statement schedule, as it relates to 2002 and 2001,
listed in the index to the financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits.

We did not audit the financial
statements of Trading Cove Associates (TCA), the Companys investment in
which is accounted for by use of the equity method. The Companys equity of $8.9
million and $7.2 million in TCAs net assets at December 31, 2002 and 2001,
respectively, and of $30.0 million and $25.1 million in that companys net income for
the respective years then ended are included in the accompanying financial statements. The
financial statements of TCA were audited by other auditors whose report (which expresses
an unqualified opinion and includes an explanatory paragraph relating to the restatement
of those financial statements) has been furnished to us, and our opinion, insofar as it
relates to the amounts included for such company, is based solely on the report of such
other auditors. We also did not audit the financial statements of Resorts International
Hotel, Inc. (a consolidated subsidiary during the period from January 1, 2001 to April 24,
2001), which statements reflect total revenues constituting 49% of consolidated total
revenues for the year ended December 31, 2001. Those statements were audited by other
auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Resorts International
Hotel, Inc. for 2001, is based solely on the report of such other auditors.

We conducted our audits in accordance
with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of the other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits
and the reports of the other auditors, the 2002 and 2001 consolidated financial statements
 present fairly, in all
material respects, the financial position of Kerzner International North America, Inc. and
subsidiaries, as of December 31, 2002 and 2001 and the results of their operations
and their cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such financial
statement schedule, as it relates to 2002 and 2001, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

As discussed in Note 3 to the
consolidated financial statements, the Company changed its method of accounting for
goodwill and other intangible assets effective January 1, 2002 to conform with Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

As discussed in Note 2, the
accompanying 2002 and 2001 consolidated financial statements have been restated.

The accompanying consolidated
financial statements and financial statement schedule of the Company, as they relate to
2000, including the restatement adjustments described in Note 2 are the responsibility of
the Companys management. We were not engaged to, and we did not, audit or review the
accompanying 2000 consolidated financial statements, the financial statement schedule as
it relates to 2000, or perform any procedures on the application of the restatement
adjustments to these consolidated financial statements or the financial statement schedule
and, accordingly, we do not express an opinion or any other form of assurance on the 2000
financial statements taken as a whole, on the related restatement adjustments, or the
financial statement schedule as it relates to 2000.

/s/ Deloitte & Touche LLP
Parsippany, New Jersey
November 13, 2003



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Report of Independent
Auditors

The Board of Directors
Resorts International Hotel, Inc.

We have audited the
statements of operations and accumulated deficit and cash flows of Resorts International
Hotel, Inc., a wholly owned subsidiary of Kerzner International North America, Inc.
(formerly Sun International North America, Inc.) for the period from January 1, 2001 to
April 24, 2001. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance
with auditing standards generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the results of
operations and cash flows of Resorts International Hotel, Inc., a wholly owned subsidiary
of Kerzner International North America, Inc. (formerly Sun International North America,
Inc.) for the period from January 1, 2001 to April 24, 2001, in conformity with accounting
principles generally accepted in the United States.

| |                      
| | ---------------------
| | /s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 1, 2002, except for 
Note 9, as to which the date 
is January 31, 2003



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|KERZNER INTERNATIONAL NORTH AMERICA, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (In Thousands of US Dollars, except share data) | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

`December 31,
                                                          ----------------------------------
                                                               2002                2001
                                                          --------------      --------------
                                                              (As restated, see Note 2)

ASSETS
Current assets:
    Cash and cash equivalents                              $      5,018        $      3,603
    Restricted cash                                                  95                  95
    Receivables, net                                              1,229                 861
    Inventories                                                      45                  91
    Prepaid expenses                                              2,651                 712
    Due from affiliates                                           6,449               5,336
                                                          --------------      --------------
        Total current assets                                     15,487              10,698
Property and equipment, net                                      63,150              63,151
Due from affiliate - non-current                                256,508             335,201
Subordinated notes receivable                                         -              18,018
Deferred tax asset, net                                           6,119               3,874
Deferred charges and other assets, net                           11,898              12,595
Investments in associated companies                              10,639               8,808
                                                          --------------      --------------
        Total assets                                       $    363,801        $    452,345
                                                          ==============      ==============

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
    Current maturities of long-term debt                   $        135        $         70
    Accounts payable and accrued liabilities                     36,812              32,436
                                                           -------------      --------------
        Total current liabilities                                36,947              32,506
Other long-term liabilities                                       2,696                   -
Long-term debt, net of current maturities                       406,026             499,438
                                                           -------------      --------------
        Total liabilities                                       445,669             531,944
                                                           -------------      --------------
Commitments and contingencies (see Notes 12 and 19)
Shareholder's deficit:
    Common stock - 100 shares
      outstanding, $.01 par value                                     -                   -
    Capital in excess of par                                    192,635             192,635
    Accumulated deficit                                        (274,503)           (272,234)
                                                           -------------      --------------
        Total shareholder's deficit                             (81,868)            (79,599)
                                                           -------------      --------------
            Total liabilities and shareholder's deficit    $    363,801        $    452,345
                                                           =============      ==============

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



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|KERZNER INTERNATIONAL NORTH AMERICA, INC.
          CONSOLIDATED STATEMENTS OF OPERATIONS
          (In Thousands of US Dollars) | 
|-------------------------------------------------------------------------------------------------------------------------------- | 

`For the Year Ended December 31,
                                               ------------------------------------------------
                                                    2002              2001             2000
                                               --------------  ---------------  ---------------
                                                                                      (unaudited)
                                                              (As restated, see Note 2)

Revenues:
    Casino and resort revenues                  $          -    $      84,913    $     283,251
        Less: promotional allowances                       -          (17,995)         (25,288)
                                               --------------  ---------------  ---------------
    Net casino and resort revenues                         -           66,918          257,963
    Tour operations                                   29,026           26,091           25,048
    Relinquishment and development fees               31,369           27,135           26,753
    Management and other fees                         18,209           15,980           15,311
                                               --------------  ---------------  ---------------
                                                      78,604          136,124          325,075
                                               --------------  ---------------  ---------------
Expenses:
    Casino and resort expenses                             -           48,831          203,695
    Tour operations                                   24,526           22,241           21,815
    Selling, general and administrative               18,393           25,526           47,899
    Depreciation and amortization                      4,376            3,567           18,633
    Restructuring expense                                  -              217                -
    Purchase termination costs                             -                -           11,202
    Write-down of net assets held for sale                 -              214          229,208
    Gain on net assets held for sale                       -           (2,232)               -
                                               --------------  ---------------  ---------------
                                                      47,295           98,364          532,452
                                               --------------  ---------------  ---------------

Operating income (loss)                               31,309           37,760         (207,377)
Other income (expenses):
    Interest income                                      831            2,201            1,945
    Interest income from affiliates                   26,068           15,818            8,810
    Interest expense                                 (44,477)         (44,288)         (33,514)
    Equity in losses of associated company            (1,041)            (899)            (194)
    Loss on early extinguishment of debt             (14,624)               -                -
    Other, net                                          (239)            (684)            (687)
                                               --------------  ---------------  ---------------
Income (loss) before benefit (provision) for
    income taxes                                      (2,173)           9,908         (231,017)
Benefit (provision) for income taxes                     (96)           2,844           (1,080)
                                               --------------  ---------------  ---------------
Net income (loss)                               $     (2,269)   $      12,752    $    (232,097)
                                               ==============  ===============  ===============

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



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|KERZNER INTERNATIONAL NORTH AMERICA, INC.
       CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (DEFICIT)
               For the Years Ended December 31, 2002, 2001 and 2000
                           (In Thousands of US Dollars)                                                                                                         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|Balance at January 1, 2000, as reported                                                                                                                                                                                                                                                                                                                   | 
|Prior period adjustments                                                                                                                                                                                                                                                                                                                                  | 
|                                                                                                                                                                                                                                                                                                                                                          | 
|Balance at January 1, 2000, as restated *                                                                                                                                                                                                                                                                                                                 | 
|Net loss for year 2000                                                                                                                                                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                                                                                                          | 
|Balance at December 31, 2000 *                                                                                                                                                                                                                                                                                                                            | 
|Net income for year 2001                                                                                                                                                                                                                                                                                                                                  | 
|                                                                                                                                                                                                                                                                                                                                                          | 
|Balance at December 31, 2001 *                                                                                                                                                                                                                                                                                                                            | 
|Net loss for year 2002                                                                                                                                                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                                                                                                          | 
|Balance at December 31, 2002 *                                                                                                                                                                                                                                                                                                                            | 
|                                                                                                                                                                                                                                                                                                                                                          | 
|* Activity for the years ended December 31, 2000, 2001 and 2002 and balances as of January 1
   2000 and December 31, 2000, 2001, and 2002 have been restated.  See Note 2 - Restatement for
   further discussion of this restatement.  Balances and activity as of January 1, 2000 and as
   of and for the year ended December 31, 2000 are unaudited. | 
|The accompanying notes are an integral part of these consolidated financial statements                                                                                                                                                                                                                                                                    | 



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|KERZNER INTERNATIONAL NORTH AMERICA, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In Thousands of US Dollars) | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

`For the Year Ended December 31,
                                                                          -------------------------------------------------
                                                                               2002              2001             2000
                                                                            -----------       -----------     -------------
                                                                                                              (unaudited)
                                                                                     (As restated, see Note 2)
Cash flows from operating activities:
    Net income (loss)                                                     $     (2,269)     $     12,752      $   (232,097)
        Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
        Loss on early extinguishment of debt                                    14,624                 -                 -
        Depreciation and amortization                                            4,376             3,567            18,633
        Amortization of debt discount, debt premium and issuance costs           1,216             1,265               791
        (Gain) write-down of net assets held for sale                                -           (2,018)           229,208
        Write-off of Desert Inn purchase termination costs                           -                 -            11,202
        Deferred income tax benefit                                             (6,119)           (3,874)                -
        Equity in losses of associated company                                   1,041               899               194
        Investment in Trading Cove Associates                                   (1,772)          (18,443)          (15,235)
        Loss on sale of investments                                                158                 -                 -
        Loss on disposition of assets                                               81               684               687
        Provision for doubtful receivables                                         194                84             1,250
        Provision for discount on CRDA obligations, net                              -                 -               799
        Net change in deferred tax liability                                         -                 -               205
        Net change in working capital accounts:
            Receivables                                                             54              (645)           (5,386)
            Due from affiliates                                                 (1,113)            3,130               503
            Inventories and prepaid expenses                                    (1,892)              140               359
            Accounts payable and accrued liabilities                             8,060             5,392              (429)
        Net change in deferred charges and other assets                         (3,409)              146            (1,096)
        Net change in other liabilities                                          2,865                 -                 -
                                                                          -------------     -------------     -------------
            Net cash provided by operating activities                           16,095             3,079             9,588
                                                                          -------------     -------------     -------------

Cash flows from investing activities:
    Payments for property and equipment                                         (4,223)           (1,393)          (19,407)
    Proceeds received from the sale of Resorts Atlantic City, net                    -           123,514                 -
    Proceeds received for repayment of note receivable                          18,018                 -                 -
    Proceeds received from sale of investments                                   4,726                 -                 -
    Purchase of investments                                                     (4,884)                -                 -
    Advances to associated company                                              (1,100)           (2,275)             (450)
    Deposit refunded for proposed Desert Inn acquisition                             -                 -             7,750
    Proceeds from sale of assets                                                     2             2,196               395
    Reclassification of cash to assets held for sale                                 -                 -           (21,453)
    Other                                                                            -             (432)            (2,695)
                                                                          -------------     -------------     -------------
        Net cash provided by (used in) investing activities                     12,539           121,610           (35,860)
                                                                          -------------     -------------     -------------

Cash flows from financing activities:
    Proceeds from issuance of debt                                             206,000           200,000             6,000
    Early redemption of debt                                                  (313,135)                -                 -
    Repayment of borrowings                                                        (92)          (79,063)           (1,908)
    Advances from (repayments to) affiliates                                    84,309          (236,454)              787
    Debt issue and modification costs                                           (4,301)           (6,750)                -
                                                                          -------------     -------------     -------------
        Net cash provided by (used in) financing activities                    (27,219)         (122,267)            4,879
                                                                          -------------     -------------     -------------

Net increase (decrease) in cash and cash equivalents                             1,415             2,422           (21,393)
Cash and cash equivalents at beginning of period                                 3,603             1,181            22,574
                                                                          -------------     -------------     -------------
Cash and cash equivalents at end of period                                $      5,018      $      3,603      $      1,181
                                                                          =============     =============     =============
See Note 18 for supplemental cash flow disclosures
                   The accompanying notes are an integral part of these consolidated financial statements`

KERZNER INTERNATIONAL NORTH AMERICA, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Tables are in Thousands of US Dollars)
(Data relating to the year ended December 31, 2000 is unaudited)

# NOTE 1 
Organization and Basis of Presentation

# Organization and Name
Change

Kerzner International North America,
Inc. (KINA) was incorporated in the state of Delaware in 1958. As a result of
a merger transaction, KINA has been a wholly owned subsidiary of Kerzner International
Limited (Kerzner International or Kerzner International) (formerly
Sun International Hotels Limited) since December 1996. Kerzner International, an
international resort and gaming company, is a corporation organized and existing under the
laws of the Commonwealth of The Bahamas. KINA is a holding company through which Kerzner
International owns and operates its properties and investments in the United States. In
these Notes to Consolidated Financial Statements, the words Company,
we, our and us refer to KINA, together with its
subsidiaries as the context may require.

On July 1, 2002, we changed our
corporate name from Sun International North America, Inc. to Kerzner International North
America, Inc.. The name change was implemented in accordance with agreements related to
the restructuring of Kerzner Internationals former majority shareholder, Sun
International Investments Limited (SIIL). There was no change in our
management or operations as a result of the name change. Any references to Sun
or KINA herein relate to the entities currently known as Kerzner
International and KINA, respectively.

We earn relinquishment fee income
based on the gross revenues of a casino operated by an unaffiliated entity in Connecticut.
In addition, we provide management services to certain of our affiliated companies and we
own a tour operator, which wholesales tour packages and provides reservation services.
Prior to April 25, 2001, we owned a resort and casino property in Atlantic City, New
Jersey (Resorts Atlantic City), which we sold to an unaffiliated entity on
April 25, 2001.

# Connecticut

We own a 50% interest in, and are a
managing partner of, Trading Cove Associates (TCA), a Connecticut general
partnership that developed and, until January 1, 2000, managed Mohegan Sun, a casino and
entertainment complex in Uncasville, Connecticut. TCA managed Mohegan Sun from its opening
in October 1996 to December 31, 1999 pursuant to a management agreement (the
Management Agreement) from which TCA earned management fees based on a
percentage of Mohegan Suns earnings after depreciation and interest.

In 1998, the Mohegan Tribe of Indians
of Connecticut (the Mohegan Tribe) appointed TCA to develop a $1.0 billion
expansion of Mohegan Sun for a development fee of $14.0 million. In addition, TCA and the
Mohegan Tribe entered into an agreement (the Relinquishment Agreement) whereby
it was agreed that effective January 1, 2000, TCA would turn over management of Mohegan
Sun to the Mohegan Tribe. Pursuant to the Relinquishment Agreement, the Management
Agreement was terminated and, commencing January 1, 2000, TCA receives payments of five
percent of the gross revenues of Mohegan Sun for a 15-year period. For seven years
beginning January 1, 2000, TCA pays us the first $5.0 million of the profits it receives
each year pursuant to the Relinquishment Agreement as a priority payment prior to making
pro rata distributions to its partners.

In 1998, the Mohegan Tribe appointed
TCA to develop its proposed expansion of the Mohegan Sun Casino pursuant to a development
services agreement (the TCA Development Agreement). In turn, TCA subcontracted
with an affiliate of the Company pursuant to a subcontract development services agreement
(the Subcontract Agreement), which was later assigned to the Company. In
consideration for the services to be provided under the Subcontract Agreement, TCA pays a
fee to the Company. See further discussion at Note 3  Summary of Significant
Accounting Policies  Development Fee Recognition.

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

The Companys investment in TCA
is reflected within investments in associated companies in the accompanying consolidated
balance sheets.

# Tour Operations

Through our wholly owned subsidiary
Kerzner International Resorts, Inc., we provide general and administrative support
services, marketing services, travel reservations and wholesale tour services for Kerzner
Internationals properties in The Bahamas. To a much lesser extent, we also provide
travel reservation services for unconsolidated affiliated properties in The Bahamas.

# New York

Through Kerzner Investments New York,
Inc. (KINY) a wholly owned subsidiary, we own 50% of Trading Cove New York,
LLC (TCNY), a Delaware limited liability company. TCNY is managed by KINY and
Waterford Development New York, LLC. In March 2001, TCNY entered into a development
services agreement (the TCNY Development Agreement) with the
Stockbridge-Munsee Band of Mohican Indians (the Stockbridge-Munsee Tribe) for
the development of a casino project (the Project) in the Catskill region of
the State of New York (the State). The TCNY Development Agreement was amended
and restated in February 2002. The Stockbridge-Munsee Tribe does not currently have
reservation land in the State, but is federally recognized and operates a casino on its
reservation in Wisconsin. The Stockbridge-Munsee Tribe has land claim litigation pending
in the US District Court for the Northern District of New York (the Court)
against the State, the counties of Madison and Oneida and several municipalities to
recover lands within the state that it alleges were wrongfully taken from the tribe. The
Court has stayed the litigation, but the Stockbridge-Munsee Tribe has requested that the
Court partially lift the stay in an effort to advance the litigation.

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

In October 2001, the State enacted
legislation authorizing up to three Class III Native American casinos in the counties of
Sullivan and Ulster and three Native American casinos in western New York pursuant to
Tribal State Gaming Compacts to be entered into by the State and applicable Native
American tribes.

In January 2002, the
Stockbridge-Munsee Tribe entered into an agreement with the County pursuant to which the
Stockbridge-Munsee Tribe would make certain payments to the County to mitigate any
potential impacts the Project may have on the County and other local government
subdivisions within the County. The payments would not commence until after the opening of
the Project.

The Project is contingent upon the
receipt of numerous federal, state and local approvals to be obtained by the
Stockbridge-Munsee Tribe, including the execution of a Class III Gaming Compact with the
State, which approvals are beyond the control of TCNY. As of January 31, 2003, the State
has yet to enter into negotiations with the Stockbridge-Munsee Tribe to settle the
tribes land claim nor has the State engaged in compact negotiations with the tribe
to establish a casino in the State. We can make no representation as to whether any of the
required approvals will be obtained by the Stockbridge-Munsee Tribe or whether the Project
will be completed.

The Companys investment in TCNY
is reflected within investments in associated companies in the accompanying consolidated
balance sheets.

# NOTE 2  Restatement

Subsequent to the issuance of the
December 31, 2002 consolidated financial statements, the Company has determined it
necessary to restate its consolidated financial statements as of December 31, 2002 and2001
and for each of the three years in the period ended December 31, 2002.

On May 21, 2003, Kerzner
International announced that Trading Cove Associates (TCA), a Connecticut
general partnership in which the Company is a 50% partner, restated its historically
reported financial results. The primary effect of the restatement to TCAs financial
statements is to recognize as an expense certain contractual liabilities owed to its
partners and their affiliates for prior services performed under contract when their
payment became probable pursuant to Statement of Financial Accounting Standard No. 5, as
opposed to when such expenses were paid or payable. Additionally, TCA changed the manner
in which it recognized losses in connection with the development of Phase II of the
Mohegan Sun. Although the accounting for the development fee remained in accordance with
SOP 81-1, the timing of recognition changed such that losses were recognized at the time
they were known, as compared to the time in which the costs which created the losses
became payable.

The Company accounts for its
investment in TCA under the equity method of accounting. Based on the restatement by TCA,
the Company determined that it was necessary to restate its historical consolidated
financial statements.

The adjustments to the Companys
consolidated financial statements arising from the restatement by TCA primarily relate to
the change in equity income or loss resulting from the change in TCAs revenue and
expense recognition policies, as the Companys net income is affected by its
proportionate share of TCAs restated income or loss under the equity method of
accounting. We record equity income from TCA in Relinquishment and development
fees in the accompanying consolidated financial statements.

As previously described, the primary
effect of the restatement on the Company is to change the timing of recognition of certain
partnership revenue and expense items. This timing resulted in the Companys income
being increased in the years presented, while income as reported in prior years not
presented was reduced. Although not as significant, the Company also reversed certain
amortization deductions related to its initial investment in TCA.

In connection with the TCA
restatement, TCA recognized an additional loss under its agreement with the Mohegan Tribal
Gaming Authority, which caused the Company to re-evaluate its own revenue recognition
related to this fee under a related development agreement between an affiliate of the
Company and TCA (the TCA Development Agreement), an agreement which was
assigned to the Company by its affiliate. As part of the restatement, the Company has
determined that its accounting under the percentage of completion method for development
fee revenue received under the TCA Development Agreement would be more properly reflected
if it utilized the costs incurred by TCA as the basis to determine the percent complete
and the amount earned at the end of each period. The Company believes that this basis of
measurement provides the most accurate reflection of the level of service performed. The
development fee earned by TCA is fixed while the Company earns its development fee
based on a percentage of the development costs of the project. As of December 31, 2002,
the Company earned substantially all of its development fee under the TCA Development
Agreement.

The effect of the TCA related
adjustments, which include the adjustments resulting from TCAs restated results and
the Companys proportionate share thereof, the reversal of certain amortization
deductions related to the Companys initial investment in TCA, and the Companys
correction in the manner of recognizing development fee revenue, for the years ended
December 31, 2002, 2001 and 2000, was to decrease our net loss or increase net income, as
applicable, by $0.9 million, $12.0 million and $17.5 million, respectively. As of January
1, 2000 the accumulated deficit increased by $24.3 million, approximately $5.3 million of
which pertains to revenue earned by the Company but recognized by an entity outside of the
KINA consolidated group and the remainder of which pertains to the adjustments discussed
above.

The Company has also made certain
other adjustments and reclassifications to its historically reported consolidated
financial statements. These adjustments include reclassifying the Companys
investment in Trading Cove New York, LLC from deferred charges to investment in associated
companies in the accompanying consolidated balance sheets and reclassifying the related
equity loss from selling, general and administrative expenses to equity in losses of
associated company in the accompanying consolidated statements of operations; adjusting
accounts payable and accrued expenses to correct for certain over and under accrued
expenses, reclassifying certain current receivables to other long-term assets and
reclassifying deferred tax asset and certain due from affiliates from current to
non-current. The effect of these other adjustments for the years ended December 31, 2002
and 2001 was to increase the net loss or decrease net income, as applicable, by
approximately $0.8 million and $0.4 million, respectively, and to decrease the accumulated
deficit by $0.7 million as of January 1, 2000. These adjustments had an insignificant
impact on the consolidated statement of operations for the year ended December 31, 2000.

The components of the adjustments
related to the restatement, as they relate to net income (loss), for the years ended
December 31, are as follows:

|                               | 2002 |  | 2001 |        | 2000 |  
|------------------------------ | ---- |  | ---- | ------ | ---- | -
|Net income (loss), as reported |      |  | $    | (2,372 | )    | $
|Equity in earnings adjustment  |      |  |      | 4,132  |      |  
|Development fee adjustment     |      |  |      | (3,673 | )    |  
|Amortization                   |      |  |      | 480    |      |  
|Other adjustments              |      |  |      | (836   | )    |  
|                               |      |  |      |        |      |  
|Net income (loss), as restated |      |  | $    | (2,269 | )    | $
|                               |      |  |      |        |      |  

On December 15, 1997, Kerzner
International and the Company, as co-issuers, issued $100.0 million principal amount of
8-5/8% Senior Subordinated Notes due 2007. All of the proceeds received from the issuance
of these notes were advanced to entities outside of the KINA consolidated group and were
used for general corporate and working capital purposes, as well as to help fund capital
expenditure projects for these entities. As a result, any interest expense we incur on the
8-5/8% Senior Subordinated Notes including amortization of debt issuance costs, would be
offset by affiliated interest income from Kerzner International, resulting in no impact to
net income or loss in any of the periods presented. These notes were previously not
reflected within the Companys consolidated financial statements, but instead were
recorded in the consolidated financial statements of an affiliate of the Company, within
Kerzner Internationals consolidated group.

During 2002, the 8-5/8% Senior
Subordinated Notes were repurchased and redeemed by Kerzner International, resulting in a
loss on early extinguishment of debt of $5.9 million which consisted of the premium paid on the repurchase
and redemption of the notes, the write-off of related debt issuance costs and other direct
costs. However, given that the proceeds of the original debt issuance were not used for
KINA purposes and that the redemption was made by entities outside of the KINA
consolidated group, the loss on the related debt extinguishment was reimbursed to KINA by
these entities, resulting in no impact to the Companys operating results in 2002.

The Company sold Resorts Atlantic
City on April 25, 2001. See Note 4  Business Acquisitions and Dispositions, Sale of
Resorts Atlantic City. The financial results of Resorts Atlantic City from the period
January 1, 2001 to April 24, 2001 were previously excluded from the consolidated statement
of operations for the year ended December 31, 2001. As part of the restatement, the
accompanying consolidated statement of operations as of December 31, 2001 now includes
Resorts Atlantic Citys financial results from January 1, 2001 to April 24, 2001. The
net loss incurred by Resorts Atlantic City from the period January 1, 2001 to April 24,
2001 of $4.9 million is included within the accompanying consolidated statement of
operations together with an offsetting gain on net assets held for sale, resulting in no
impact on net income for the year ended December 31, 2001 from this adjustment. The
following table summarizes the components of the gain on net assets held for sale:

`Net loss of Resorts Atlantic City (a)       $   (4,893)
         Depreciation and amortization (b)                5,325
         Interest income (c)                             (2,664)
                                                    ------------
         Gain on net assets held for sale           $    (2,232)
                                                    ============`

|(a) | Net loss of Resorts Atlantic City from the period January 1, 2001 to April 24,
          2001.
|--- | ----------------------------------------------------------------------------------------------

|(b) | As Resorts Atlantic City was classified as an asset held for sale, the Company
          ceased depreciation and amortization and accordingly, the expense is offset
          against the net loss incurred from the period January 1, 2001 to April 24, 2001.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | During the period January 1, 2001 to April 24, 2001, the Company recognized $2.7
          million of interest income paid to the Company by Colony on the proceeds of the
          sale. This amount is offset against the net loss incurred from the period
          January 1, 2001 to April 24, 2001 and has reduced interest income as previously
          reported by Kerzner.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The consolidated financial statements
for the years ended December 31, 2002, 2001 and 2000 have been restated to incorporate
these adjustments. The following tables are comparisons of the Companys accumulated
deficit as of January 1, 2000, consolidated balance sheets as of December 31, 2002 and 2001
and consolidated statements of operations for each of the three years in the period ended December 31, 2002, as previously reported and as restated.

Reconciliation of Accumulated Deficit  (in thousands of US dollars)

|                                                    | (unaudited) | 
|--------------------------------------------------- | ----------- | 
|Accumulated deficit at January 1, 2000              |             | 
|as previously reported                              |             | 
|Prior period adjustment                             |             | 
|                                                    |             | 
|Accumulated deficit at January 1, 2000, as restated |             | 
|                                                    |             | 



---

`Consolidated Balance Sheet as of December 31, 2002

                                                   As Previously
                                                     Reported         As Restated
                                                 ------------------ ----------------
                                                    (in thousands of US dollars)
ASSETS
Current assets:
    Cash and cash equivalents                      $         5,113   $        5,018
    Restricted cash                                              -               95
    Receivables, net                                         1,792            1,229
    Inventories                                                 45               45
    Prepaid expenses                                         2,651            2,651
    Due from affiliates                                     65,857            6,449
                                                 ------------------ ----------------
        Total current assets                                75,458           15,487
Property and equipment, net                                 63,150           63,150
Due from affiliate - non-current                           200,000          256,508
Deferred tax asset, net                                      6,119            6,119
Deferred charges and other assets, net                      11,634           11,898
Investments in associated companies                          1,692           10,639
                                                 ------------------ ----------------
        Total assets                               $       358,053   $      363,801
                                                 ================== ================

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
    Current maturities of long-term debt           $           135   $          135
    Accounts payable and accrued liabilities                36,812           36,812
                                                 ------------------ ----------------
        Total current liabilities                           36,947           36,947
Other long-term liabilities                                  2,696            2,696
Long-term debt, net of current maturities                  406,026          406,026
                                                 ------------------ ----------------
        Total liabilities                                  445,669          445,669
                                                 ------------------ ----------------
Commitments and contingencies
Shareholder's deficit:
    Common stock - 100 shares
      outstanding, $.01 par value                                -                -
    Capital in excess of par                               192,635          192,635
    Accumulated deficit                                   (280,251)        (274,503)
                                                 ------------------ ----------------
        Total shareholder's deficit                        (87,616)         (81,868)
                                                 ------------------ ----------------
    Total liabilities and shareholder's deficit    $       358,053   $      363,801
                                                 ================== ================








Consolidated Balance Sheet as of December 31, 2001

                                                   As Previously        As Restated
                                                      Reported
                                                  -----------------   -----------------
                                                      (in thousands of US dollars)
ASSETS
Current assets:
    Cash and cash equivalents                      $         3,084     $         3,603
    Restricted cash                                              -                  95
    Receivables, net                                         1,477                 861
    Inventories                                                 91                  91
    Prepaid expenses                                           712                 712
    Due from affiliates                                     43,542               5,336
    Deferred tax asset, net                                  3,874                   -
                                                  -----------------   -----------------
        Total current assets                                52,780              10,698
Property and equipment, net                                 63,151              63,151
Due from affiliate - non-current                           200,000             335,201
Subordinated notes receivable                               18,018              18,018
Deferred tax asset, net                                          -               3,874
Deferred charges and other assets, net                      12,750              12,595
Investments in associated companies                              -               8,808
                                                  -----------------   -----------------
        Total assets                               $       346,699     $       452,345
                                                  =================   =================

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
    Current maturities of long-term debt           $            70     $            70
    Accounts payable and accrued liabilities                32,435              32,436
                                                  -----------------   -----------------
        Total current liabilities                           32,505              32,506
Long-term debt, net of current maturities                  399,438             499,438
                                                  -----------------   -----------------
        Total liabilities                                  431,943             531,944
                                                  -----------------   -----------------
Commitments and contingencies
Shareholder's deficit:
    Common stock - 100 shares
      outstanding, $.01 par value                                -                   -
    Capital in excess of par                               192,635             192,635
    Accumulated deficit                                   (277,879)           (272,234)
                                                  -----------------   -----------------
        Total shareholder's deficit                        (85,244)            (79,599)
                                                  -----------------   -----------------
    Total liabilities and shareholder's deficit    $       346,699     $       452,345
                                                  =================   =================






Consolidated Statement of Operations for the Year Ended December 31, 2002

                                                       As Previously        As Restated
                                                         Reported
                                                     ------------------  ------------------
                                                         (in thousands of US dollars)
Revenues:
    Tour operations                                  $          29,026    $         29,026
    Relinquishment and development fees                              -              31,369
    Management and other fees                                   49,118              18,209
                                                     ------------------  ------------------
                                                                78,144              78,604
                                                     ------------------  ------------------
Expenses:
    Tour operations                                             24,526              24,526
    Selling, general and administrative                         17,681              18,393
    Depreciation and amortization                                4,856               4,376
                                                     ------------------  ------------------
                                                                47,063              47,295
                                                     ------------------  ------------------

Operating income                                                31,081              31,309
Other income (expenses):
    Interest income                                                831                 831
    Interest income from affiliates                             18,249              26,068
    Interest expense                                           (36,643)            (44,477)
    Equity in losses of associated company                        (931)             (1,041)
    Loss on early extinguishment of debt                             -             (14,624)
    Other, net                                                    (239)               (239)
                                                     ------------------  ------------------
Income before provision for
     income taxes and extraordinary item                        12,348              (2,173)
Provision for income taxes                                         (96)                (96)
                                                     ------------------  ------------------
Income before extraordinary item                                12,252              (2,269)
Extraordinary loss on early extinguishment of debt,
     net of income tax effect                                  (14,624)                  -
                                                     ------------------  ------------------
Net loss                                             $          (2,372)   $         (2,269)
                                                     ==================  ==================





Consolidated Statement of Operations for the Year Ended December 31, 2001


                                                  As Previously        As Restated
                                                    Reported
                                                ------------------  ------------------
                                                    (in thousands of US dollars)
Revenues:
    Casino and resort revenues                  $               -    $         84,913
        Less: promotional allowances                            -             (17,995)
                                                ------------------  ------------------
    Net casino and resort revenues                              -              66,918
    Tour operations                                        26,091              26,091
    Relinquishment and development fees                         -              27,135
    Management and other fees                              31,565              15,980
                                                ------------------  ------------------
                                                           57,656             136,124
                                                ------------------  ------------------
Expenses:
    Casino and resort expenses                                  -              48,831
    Tour operations                                        22,241              22,241
    Selling, general and administrative                    15,275              25,526
    Depreciation and amortization                           4,445               3,567
    Restructuring expense                                     300                 217
    Write-down of assets to be sold                             -                 214
    Gain on net assets held for sale                            -              (2,232)
                                                ------------------  ------------------
                                                           42,261              98,364
                                                ------------------  ------------------

Operating income                                           15,395              37,760
Other income (expenses):
    Interest income                                         4,355               2,201
    Interest income from affiliates                         6,930              15,818
    Interest expense                                      (27,742)            (44,288)
    Equity in losses of associated company                      -                (899)
    Other, net                                               (684)               (684)
                                                ------------------  ------------------
Income (loss) before benefit for
    income taxes                                           (1,746)              9,908
Benefit for income taxes                                    2,844               2,844
                                                ------------------  ------------------
Net income                                      $           1,098    $         12,752
                                                ==================  ==================












Consolidated Statement of Operations for the Year Ended December 31, 2000


                                                  As Previously        As Restated
                                                    Reported
                                                ------------------  ------------------
                                                              (unaudited)
                                                     (in thousands of US dollars)
Revenues:
    Casino and resort revenues                   $        283,251    $        283,251
        Less: promotional allowances                      (25,288)            (25,288)
                                                ------------------  ------------------
    Net casino and resort revenues                        257,963             257,963
    Tour operations                                        25,048              25,048
    Relinquishment and development fees                         -              26,753
    Management and other fees                              25,007              15,311
                                                ------------------  ------------------
                                                          308,018             325,075
                                                ------------------  ------------------
Expenses:
    Casino and resort expenses                            203,695             203,695
    Tour operations                                        21,815              21,815
    Selling, general and administrative                    48,514              47,899
    Depreciation and amortization                          18,714              18,633
    Purchase termination costs                             11,202              11,202
    Write-down of assets to be sold                       229,208             229,208
                                                ------------------  ------------------
                                                          533,148             532,452
                                                ------------------  ------------------

Operating loss                                           (225,130)           (207,377)
Other income (expenses):
    Interest income                                         1,945               1,945
    Interest income from affiliates                             -               8,810
    Interest expense                                      (24,704)            (33,514)
    Equity in losses of associated company                      -                (194)
    Other, net                                               (687)               (687)
                                                ------------------  ------------------
Loss before provision for income taxes                   (248,576)           (231,017)
Provision for income taxes                                 (1,080)             (1,080)
                                                ------------------  ------------------
Net loss                                         $       (249,656)   $       (232,097)
                                                ==================  ==================`

---

# NOTE 3  Summary of
Significant Accounting Policies

# Principles of
Consolidation

The consolidated financial statements
include the accounts of KINA and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

# Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States of America requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

During the period in which we owned
Resorts Atlantic City, we provided allowances for doubtful accounts arising from casino,
hotel and other services, which are based upon a specific review of outstanding
receivables. In determining the amounts of the allowances, we are required to make certain
estimates and assumptions and actual results may differ from those estimates and
assumptions. Accruals for potential liabilities related to any lawsuits or claims brought
against us, calculation of income tax liabilities, valuation allowance on deferred tax
assets and other liabilities require that we apply significant judgment in determining the
appropriate assumptions for use in the calculation of financial estimates. We also must
estimate the useful lives assigned to our assets. Actual results may differ from these
estimates and assumptions.

# Revenue Recognition

During the period in which we owned
Resorts Atlantic City, we recognized the net win from casino gaming activities (the
difference between gaming wins and losses) as gaming revenues, and revenues from hotel and
related services are recognized at the time the related service is performed.

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

Management fees and other operating
revenues include fees charged to unconsolidated affiliates for casino and hotel
management, executive management and project consulting and include fees charged to
unconsolidated affiliates primarily for executive management services. These fees equal
three percent of gross revenues, as defined, of the Companys affiliates in The
Bahamas.

Relinquishment and development fees
include amounts earned from our investment in TCA and from the TCA Development Agreement.
Relinquishment fees represent our net earnings from TCA pursuant to the Relinquishment
Agreement. In accordance with such agreement, TCA earns a fee, equal to 5% of revenues, as
defined in the Relinquishment Agreement, generated by the Mohegan Sun during the 15-year
period commencing on January 1, 2000, including revenue generated by the Project Sunburst
expansion. Revenues are defined in the Relinquishment Agreement as gross gaming revenues
(other than Class II gaming revenue, i.e. bingo) and all other facility revenues. Such
revenue includes hotel revenues, food and beverage sales, parking revenues, ticket
revenues and other fees or receipts from the convention/events center in the Project
Sunburst expansion and all rental or other receipts from lessees, licensees and
concessionaires operating in the facility, but not the gross receipts of such lessees,
licensees and concessionaires. Such revenues exclude revenues generated by any other
expansion of the Mohegan Sun.

Based upon the nature and function of
TCA as an entity existing for the purpose of collecting fees and remitting such fees to
its partners, the Company includes relinquishment fees within relinquishment and
development fees in the accompanying consolidated statements of operations.

Revenue generated from services
performed pursuant to the terms of the TCA Development Agreement is recognized on the
percentage-of-completion basis in accordance with SOP 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts. The percent
complete and the amount earned at the end of each accounting period is determined by the
percentage of costs incurred by TCA at the end of each period pursuant to estimated total
costs to complete the contract.

# Promotional Allowances

In 2001, the Company changed its
method of accounting for customer incentives to conform to Emerging Issues Task Force
Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (EITF
01-9). As permitted by the transition guidance in EITF 01-9, the 2000 financial
statements were not reclassified to comply with the income statement display requirements
of EITF 01-9. The Company believes that it is impractical to obtain the related records to
perform this reclass as Resorts Atlantic City has been sold. The impact of this adoption
in 2001 was $6.2 million of customer incentives being reclassified from casino and resort
expenses to promotional allowances and $4.2 million of customer incentives being
reclassified from net casino and resort revenues to promotional allowances.

Prior to the sale of Resorts Atlantic
City the retail value of accommodations, food, beverage and other services provided to
customers without charge was included in gross revenues and deducted as promotional
allowances. The estimated departmental costs of providing such promotional allowances for
the years ended December 31, 2001 and 2000 are included in casino and resort expenses as
follows:

`For the year ended
                                          December 31,
                                  ------------------------------
                                     2001              2000
                                  ------------     -------------
         Rooms                    $     2,760       $     8,407
         Food and beverage              4,823            15,502
         Other                            949             3,201
                                  ------------     -------------
                                  $     8,532       $    27,110
                                  ============     =============`

# Cash Equivalents

We consider all of our short-term
money market securities purchased with original maturities of three months or less to be
cash equivalents. Restricted cash relates to letters of credit for all periods presented.

# Inventories

Inventories of provisions and
supplies are carried at the lower of cost (first-in, first-out) or market value.

# Property and Equipment

Property and equipment are stated at
cost and lease lives are depreciated over the estimated useful lives reported below using
the straight-line method. Leasehold improvements are amortized over the shorter of the
lease term or estimated useful lives of the improvements.

`Buildings and leasehold improvements                3-15 years
         Furniture, machinery and equipment                   2-5 years`

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

# Deferred Charges and
Other Assets

Deferred charges and other assets
primarily consist of debt issuance costs, which are being amortized to interest expense
over the terms of the related indebtedness and are being amortized on a straight-line
basis, which approximates the interest method. This balance also includes long-term
prepaid rent amounts relating to a lease entered into during 2002 in connection with the
relocation of our corporate headquarters.

# Goodwill

Effective January 1, 2002, the
Company adopted SFAS 142, Goodwill and Other Intangible Assets which resulted
in the cessation of the amortization of goodwill. Prior to this date, our goodwill was
amortized on a straight-line basis over 40 years. Amortization expense related to goodwill
for Resorts Atlantic City included in the accompanying consolidated statements of
operations related to goodwill was $2.6 million for the year ended December 31, 2000. The
table below illustrates what the impact to the consolidated statements of operations would
have been, if the provisions of SFAS 142 were applied to all periods presented.

`For the Year Ended December 31,
                                                  -----------------------------------------------------------
                                                       2002                 2001                   2000
                                                  --------------       --------------        ----------------
                                                                                               (unaudited)
         Net income (loss), as restated           $      (2,269)       $      12,752          $     (232,097)
         Amortization of goodwill relating
             to Resorts Atlantic City                         -                    -                   2,600
                                                  --------------       --------------        ----------------
         Adjusted net income (loss)               $      (2,269)       $      12,752          $     (229,497)
                                                  ==============       ==============        ================`

# Investments in
Associated Companies

Investments in associated companies
represent the Companys 50% investment in TCA and TCNY, respectively, entities in
which the Company has significant influence over the investees. These investments are
accounted for in accordance with the equity method of accounting under which each such
investment is reported at cost plus the Companys proportionate share of the income
or loss, less dividends received, of such investee since its acquisition.

Earnings from our 50% investment in
TCA are included in relinquishment and development fees in the accompanying consolidated
statements of operations. See Note 9  Investments in and Equity Losses of Associated
Companies.

# Casino Reinvestment
Development Authority (CRDA) Obligations

In 2000 under the New Jersey Casino
Control Act, we were obligated to purchase CRDA bonds based on gross revenues earned at
Resorts Atlantic City that bore a below-market interest rate, or make an alternative
qualifying investment. We charged to expense an estimated discount related to CRDA
investment obligations as of the date the obligation arose based on fair market interest
rates of similar quality bonds in existence as of that date.

The discount on CRDA bonds purchased
was amortized to interest income over the life of the bonds using the effective interest
rate method. All of our CRDA bonds were disposed of as part of the Resorts Atlantic City
Sale.

# Long Lived Assets

We review our long-lived assets and
certain related intangibles for impairment whenever changes in circumstances indicate that
the carrying amount of an asset may not be fully recoverable. If changes in circumstances
indicate that the carrying amount of an asset that we expect to hold and use may not be
recoverable, future cash flows expected to result from the use of the asset and its
disposition are estimated. If the undiscounted value of the future cash flows is less than
the carrying value of the asset, the carrying value of the long-lived asset will be
reduced by the amount which the carrying value exceeds fair value. We do not believe that
any such changes have occurred except as previously described as a result of the Resorts
Atlantic City Sale and the Atlantic City Option, as discussed in Note 4.

# Long-Term Debt

Under the Companys co-borrowing
arrangements, the related debt is reflected on the financial statements of the entity
which borrowed the funds. With respect to co-issued debt arrangements, such debt is
reflected on the financial statements of each of the co-issuers. See further discussion at
Note 12.

# Income Taxes

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

# Comprehensive Income
(Loss)

Comprehensive income (loss) is equal
to net income (loss) for all periods presented.

# Recent Accounting
Pronouncements

# Classification of Extraordinary
Items

In April 2002, the FASB issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections (SFAS 145). SFAS 145
rescinds FASB Statement No.4, Reporting Gains and Losses from Extinguishment of
Debt (Statement 4), and an amendment of Statement 4, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking Fund Requirements
(Statement 64). SFAS 145 also rescinds FASB Statement No. 44, and amends FASB
Statement No. 13. SFAS 145 also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe their applicability under
changed conditions. The provisions of SFAS 145 related to the rescission of Statement 4
shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior periods
presented that does not meet the criteria in APB Opinion 30 for classification as an
extraordinary item shall be reclassified.

Under Statement 4, all gains and
losses from extinguishment of debt were required to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. SFAS 145 eliminates
Statement 4 and, thus, the exception to applying APB Opinion 30 to all gains and losses
related to extinguishments of debt (other than extinguishments of debt to satisfy sinking
fund requirements-the exception to application of Statement 4 noted in Statement 64). As a
result, gains and losses from the extinguishment of debt should be classified as
extraordinary items only if they meet the criteria in APB Opinion 30. Applying the
provisions of APB Opinion 30 will distinguish transactions that are part of an
entitys recurring operations from those that are unusual or infrequent or that meet
the criteria for classification as an extraordinary item.

The adoption of SFAS 145 required us
to reclassify the $14.6 million extraordinary losses on early extinguishment of our 9%
Senior Subordinated Notes recognized during the year ended December 31, 2002 to other
expense in the consolidated statements of operations.

# Exit or Disposal
Activities

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146) effective for exit or disposal activities initiated after December
31, 2002. SFAS 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is incurred.
Adoption of SFAS 146 is not expected to have a significant impact on our financial
position or results of operations.

# Guarantees

In November 2002, the FASB issued
FASB Interpretation (FIN) No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation clarifies that a guarantor is required to disclose (a)
the nature of the guarantee, including the approximate term of the guarantee, how the
guarantee arose and the events or circumstances that would require the guarantor to
perform under the guarantee; (b) the maximum potential amount of future payments under the
guarantee; (c) the carrying amount of the liability, if any, for the guarantors
obligations under the guarantee; and (d) the nature and extent of any recourse provisions
or available collateral that would enable the guarantor to recover the amounts paid under
the guarantee. This interpretation also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the obligations it has
undertaken in issuing the guarantee, including its ongoing obligations to stand ready to
perform over the term of the guarantee in the event that the specified triggering events
or conditions occur.

The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. The disclosure requirements in this interpretation are
effective for financial statements of interim or annual periods ending after December 15,
2002. We are one of the guarantors under the Fourth Amended and Restated Revolving Credit
Facility (the Amended Revolving Credit Facility). The Company is a co-borrower
under this debt arrangement, along with Kerzner International and certain subsidiaries of
Kerzner International which are outside of the KINA consolidated group. The amount
outstanding on this facility as of December 31, 2002 was $72.0 million. However, as such
amounts were not drawn from the facility by KINA, such debt is not reflected in the
consolidated financial statements of the Company. We have not recognized a liability for
this guarantee as it was issued prior to December 31, 2002. If in the future we modify
this guarantee or issue new guarantees, we may be required to recognize a liability at an
estimate of the guarantees fair value.

Kerzner International closed Palmilla
Resort, its 50% owned luxury resort in Los Cabos, Mexico, in April 2003 in order to
commence its previously announced $80.0 million expansion project that will increase the
room count from 115 rooms to 172 rooms and will significantly upgrade the amenities and
public areas offered by the resort. The expansion is expected to be completed by early
2004 and will be financed through local project financing. In connection with the Palmilla
Resort operating agreement, we agreed that in the event that Palmilla Resort obtains
third-party debt financing for its planned redevelopment, we, along with Kerzner
International, would guarantee up to a total of $38.0 million of such financing. In March
2003, we entered into a guaranty agreement with respect to certain interim financing for
the redevelopment, whereby we guaranteed $20.0 million of such financing. In June 2003, we
guaranteed an additional $10.0 million of such financing. We have agreed to provide these
guarantees for a period ending no later than the later of (i) the date of repayment at
maturity of the underlying obligations or (ii) three years from the date of the guarantee.
The purpose of these guarantees is to assist Palmilla Resort in obtaining financing for
its planned redevelopment on commercially reasonable terms. In 2003, we will record the
fair value of these and any other future guarantees in accordance with the provisions of
FIN 45.

# Consolidation of
Variable Interest Entities

In January 2003, the FASB issued
Interpretation No. 46 Consolidation of Variable Interest Entities (FIN
46). This interpretation of Accounting Research Bulletin 51, Consolidated
Financial Statements, addresses consolidation by business enterprises of variable
interest entities which have one or both of the following characteristics: (i) the equity
investment at risk is not sufficient to permit the entity to finance its activities
without additional subordinated financial support from other parties, which is provided
through other interests that will absorb some or all of the expected losses of the entity,
or (ii) the equity investors lack one or more of the following characteristics of a
controlling financial interest: (a) the direct or indirect ability to make decisions about
the entitys activities through voting rights or similar rights, (b) the obligation
to absorb the expected losses of the entity if they occur, which makes it possible for the
entity to finance its activities, or (c) the right to receive the expected residual
returns of the entity if they occur, which is the compensation of the risk of absorbing
the expected losses.

FIN 46 applies immediately to
variable interest entities created after January 31, 2003 and to variable interest
entities in which an enterprise obtains an interest after that date. The provisions of FIN
46 are required to be applied to an interest held in a variable interest entity or
potential variable interest entity for the first interim or annual period ending after
December 15, 2003 if both of the following two conditions apply: (1) the variable interest
entity was created before February 1, 2003; and (2) the public entity has not issued
financial statements reporting that variable interest in accordance with FIN 46.

# Derivative Instruments

In April 2003, FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities (SFAS 149) that amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under Statement 133. With certain exceptions, SFAS
149 is effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designed after June 30, 2003. We do not believe adoption of this
standard will have a material impact on our financial position or results of operations.

# Financial Instruments
with Characteristics of both Liabilities and Equity

In May 2003, FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150) that improves the accounting for
certain financial instruments that, under previous guidance, issuers could account for as
equity. SFAS 150 requires that those instruments be classified as liabilities in the
statement of financial position. This statement will be effective for the Companys
fiscal quarter ended September 30, 2003. We do not believe adoption of this standard will
have a material impact on our financial position or results of operations.

# NOTE 4  Business
Acquisitions and Dispositions

# Palmilla Management
Contract

On September 12, 2002, Kerzner
International acquired a 50% ownership interest in the 115-room Palmilla Resort, a deluxe,
five-star property located near Cabo San Lucas in Baja, Mexico.

In connection with the purchase, we
entered into long-term management and development agreements related to the property that
will expire in 2022. Fees for management services to Palmilla Resort during the period
from September 12, 2002 through December 31, 2002 were $128,000 and are included in
management and other fees in the accompanying 2002 consolidated statement of operations.

# Sale of Resorts Atlantic
City

We previously owned and operated
Resorts Atlantic City, a 644-room casino and hotel property. On April 25, 2001, we
completed the sale of Resorts Atlantic City to an affiliate of Colony Capital LLC
(Colony) for a purchase price of approximately $144 million, including accrued
interest (the Resorts Atlantic City Sale). The proceeds received from Colony
consisted of approximately $127 million in cash and an unsecured $17.5 million note (the
Promissory Note), bearing interest at a rate of 12.5% per annum payable
semi-annually. In March 2002, we received $18.0 million from Colony as payment in full of
the Promissory Note and all outstanding accrued interest. Of the cash proceeds from the
Resorts Atlantic City sale, $79 million was used to pay in full the borrowings outstanding
by Resorts Atlantic City under a bank credit facility dated November 1, 1999 (as amended,
the Revolving Credit Facility). Resorts Atlantic City, along with Kerzner
International, Kerzner International Bahamas Limited (formerly Sun International Bahamas
Limited) (KIB), a wholly owned subsidiary of Kerzner International outside of
KINAs consolidated group, and Kerzner International Nevada, Inc. (formerly Sun
International Nevada, Inc.), a wholly-owned subsidiary of KINA, were co-borrowers under
the Revolving Credit Facility. The remaining $48 million of cash proceeds from the Resorts
Atlantic City Sale was advanced to KIB and was used to permanently reduce borrowings
outstanding by KIB under the Revolving Credit Facility.

We entered into an agreement to sell
Resorts Atlantic City in the fourth quarter of 2000, and as of December 31, 2000, we
accounted for Resorts Atlantic City as an investment held for sale. The carrying value of
the net assets to be disposed of was reclassified to net assets held for sale on our
consolidated balance sheets and, in the fourth quarter of 2000, we recorded a loss of
$229.2 million resulting from the write-down of net assets held for sale to their
realizable value. The net proceeds received at closing equaled the carrying value of the
net assets disposed of. The consolidated financial statements as of December 31, 2001
include the results of operations of Resorts Atlantic City from January 1, 2001 to April
24, 2001. These results included a net loss attributable to Resorts Atlantic City of $4.9
million, which is included as a component of and an offsetting gain on net assets held for
sale, which resulted in no change in net income from this adjustment.

If this transaction had been
consummated on January 1, 2000, on a pro forma basis, our results of operations for the
year ended December 31, 2000 would be as follows (unaudited): Revenues  $46.2
million, net loss  $22.0 million. The pro forma information is not necessarily
indicative of future results or what our results of operation would actually have been had
the Resorts Atlantic City Sale occurred at the beginning of the year.

Pursuant to the terms of the Resorts
Atlantic City Sale, we granted Colony a two-year option (the Atlantic City
Option) to acquire certain undeveloped real estate which we own, adjacent to Resorts
Atlantic City, for a purchase price of $40 million, which option can be extended by Colony
for two additional one-year periods upon 45 days notice to us prior to the expiration of
the then-current option period and payment to us of a $2.5 million extension payment for
each renewal period. In July 2003 and through various extensions thereafter, we and Colony
agreed to extend the initial option period through September 12, 2003 in exchange for an
option extension payment of $1,250,000, which was paid on July 9, 2003. Our agreement with
Colony also provides for an additional payment of $1,250,000 in the event we are not able
to reach an agreement to sell the undeveloped real estate. The additional
$1,250,000 has not yet been received as we and Colony are currently in negotiations to
reach an agreement to sell the undeveloped real estate. The net carrying value of the
undeveloped real estate included in the Atlantic City Option is $40.0 million and is
included in property and equipment in the accompanying consolidated balance sheets.
Effective April 25, 2001, the closing date of the Resorts Atlantic City Sale, Colony
leases from us certain of the property included in the Atlantic City Option for $100,000
per month. At that time the lease can be terminated by either Colony or us with thirty
days notice, subject to certain conditions. The rental income resulting from this lease
was $1.2 million for the year ended December 31, 2002 and is included in management and
other fees in the accompanying consolidated statement of operations.

# Termination of Desert
Inn Acquisition Agreement

On March 2, 2000, Kerzner
International and Starwood Hotels and Resorts Worldwide Inc. (Starwood)
announced that they had agreed to terminate their agreement (the Termination
Agreement) under which Kerzner International was to acquire the Desert Inn Hotel and
Casino in Las Vegas (the Desert Inn) for $275 million. In connection with the
proposed acquisition of the Desert Inn, we had previously placed a $15 million deposit
with Starwood (the Deposit). Pursuant to the Termination Agreement, the
amount, if any, that we would be required to pay from the Deposit was based on the
ultimate sales price of the Desert Inn to another party.

In June 2000, Starwood closed on the
sale of the Desert Inn for approximately $270 million, subject to certain post-closing
adjustments, to an unrelated party. As a result, we were required to pay to Starwood $7.2
million from the Deposit. The remaining $7.8 million of the Deposit was refunded to us in
August 2000. Purchase termination costs in the accompanying consolidated statement of
operations included the $7.2 million paid to Starwood and $4.0 million of further costs
related to the Desert Inn transaction.

# NOTE 5  Receivables

Components of receivables were as
follows:

`December 31,
                                                     ------------------------------
                                                         2002              2001
                                                     -----------      -------------

         Interest receivable                          $       -        $       481
         Trade receivable                                   227                372
         Escrow receivable                                  616                  -
         Other                                              482                130
                                                     -----------      -------------
                                                          1,325                983
         Less: allowance for doubtful accounts              (96)              (122)
                                                     -----------      -------------
                                                      $   1,229        $       861
                                                     ===========      =============`

# NOTE 6  Prepaid
Expenses

Components of prepaid expenses as of
December 31, 2002 included $1.2 million of rent, $0.8 million for expenses relating to
tour operations and various other items. At December 31, 2001, prepaid expenses included
$0.3 million relating to tour operations and various other items.

# NOTE 7  Property
and Equipment

Components of property and equipment
were as follows:

`December 31,
                                          --------------------------------
                                               2002               2001
                                          -------------      -------------

Land                                      $     53,605             53,575
Buildings and leasehold improvements             3,635              3,743
Furniture, machinery and equipment              12,767             14,478
Construction in progress                           920                160
                                          -------------      -------------
                                                70,927             71,956
Less: accumulated depreciation                  (7,777)            (8,805)
                                          -------------      -------------
                                          $     63,150       $     63,151
                                          =============      =============`

Construction in progress at December 31,
2002 primarily relates to software costs pertaining to the implementation of a new
reservations system. Such costs are capitalized in accordance with Statement of Position
98-1,Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. There were no capitalized interest costs in any of the periods
presented. The cost basis of the land related to the Atlantic City Option was $40 million
as of December 31, 2002 and 2001.

# NOTE 8  Deferred
Charges and Other Assets

Components of deferred charges and
other assets were as follows:

`December 31,
                                                     --------------------------------
                                                          2002               2001
                                                     -------------      -------------

         Debt issue costs, net                        $     8,474        $    11,979
         Prepaid rent                                       2,720                  -
         Employee note receivable                             563                  -
         Other                                                141                616
                                                     -------------      -------------
                                                      $    11,898        $    12,595
                                                     =============      =============`

Prepaid rent relates to the long-term
portion of prepaid rent related to our leased offices in Plantation, Florida for 2004 and
2005. Employee note receivables of $0.6 million relates to a compensation advance made to
an employee. Such advance is being amortized through December 2004.

# Note 9 
Investments in and Equity in Earnings and Losses of Associated Companies

Components of investments in
associated companies were as follows:

`December 31,
                                                     --------------------------------
                                                          2002               2001
                                                     -------------      -------------

         Trading Cove Associates                      $     8,947        $     7,175
         Trading Cove New York                              1,692              1,633
                                                     -------------      -------------
                                                      $    10,639        $     8,808
                                                     =============      =============`

The accompanying consolidated
statements of operations include equity in earnings and losses of associated companies as
a result of our equity method investments, comprised of our 50% interest in TCA and our
50% interest in TCNY. Our proportionate share of losses from TCNY is reflected in equity
in losses of associated company in the accompanying consolidated statements of operations.
Equity earnings related to our investment in TCA are included in relinquishment and
development fees in the accompanying consolidated statements of operations.

# Trading Cove Associates

Through a wholly owned subsidiary, we
own a 50% interest in TCA and are a managing partner along with Waterford Gaming L.L.C.
TCA and the Mohegan Tribe have entered into the Development Agreement and the
Relinquishment Agreement in connection with the Mohegan Sun. In accordance with the
Relinquishment Agreement, the Company receives the first $5 million of profits TCA
receives each year and receives certain guaranteed payments. The following summarized
information of TCA has been prepared in accordance with accounting principles generally
accepted in the United States of America as of and for the years ended December 31, 2002,
2001 and 2000.

`For the Year Ended December 31,
                                       -----------------------------------------------------------
                                            2002                 2001                   2000
                                       --------------       --------------        ----------------

         Revenues                      $      59,066        $      46,970          $       44,516
         Total expenses                        3,996                3,476                  10,534
         Interest and dividend income             13                   33                      34
                                       --------------       --------------        ----------------
         Net income                    $      55,083        $      43,527          $       34,016
                                       ==============       ==============        ================


                                              As of December 31,
                                       --------------------------------
                                            2002               2001
                                       -------------      -------------

Current assets                          $    24,502        $    20,629
Non-current assets                            2,665              2,894
                                       -------------      -------------
Total assets                            $    27,167        $    23,523
Current liabilities                          10,521             10,423
Non-current liabilities                           -                  -
                                       -------------      -------------
Partners' capital                       $    16,646        $    13,100
                                       =============      =============`

Our equity in earnings from TCA
totaled $30.1 million, $25.1 million and $20.4 million for the years ended December 31,
2002, 2001 and 2000, respectively. Such amounts do not equal 50% of the reported net
income of TCA, primarily as a result of the priority distributions and guaranteed payments
discussed above.

# Trading Cove New York

Through a wholly owned subsidiary, we
own a 50% interest in, and are a managing member along with the Stockbridge-Munsee Tribe,
of TCNY. The following summarized information of TCNY has been prepared in accordance with
accounting principles generally accepted in the United States of America as of and for the
years ended December 31, 2002, 2001 and 2000.

The company increased its equity in
losses of TCNY by expensing certain costs that TCNY capitalized due to the Companys
evaluation of the uncertainty of the recoverability of such costs.

`For the Year Ended December 31,
                                           -----------------------------------------------------------
                                                2002                 2001                   2000
                                           --------------       --------------        ----------------
         Total revenues, and other income  $          11        $          13          $            3
         Total expenses                                6                   15                       5
                                           --------------       --------------        ----------------
         Net income (loss)                 $           5        $         (2)          $          (2)
                                           ==============       ==============        ================

                                                   As of December 31,
                                             --------------------------------
                                                  2002               2001
                                             -------------      -------------
        Current assets                        $       436        $     1,820
        Non-current assets                          7,353              3,931
                                             -------------      -------------
        Total assets                                7,789              5,751
        Current liabilities                           137                305
        Non-current liabilities                         -                  -
                                             -------------      -------------
        Members' equity                       $     7,652        $     5,446
                                             =============      =============`

# NOTE 10  Accounts
Payable and Accrued Liabilities

Components of accounts payable and
accrued liabilities were as follows:

`December 31,
                                                           --------------------------------
                                                                2002               2001
                                                           -------------      -------------

         Accrued payroll and related taxes and benefits     $     8,046        $     4,590
         Trade payables                                           2,515              2,623
         Customer deposits and unearned revenues                  5,959              5,338
         Accrued interest                                        13,411             12,388
         Other accrued liabilities                                6,881              7,497
                                                           -------------      -------------
                                                            $    36,812        $    32,436
                                                           =============      =============`

# NOTE 11  Other
Long Term Liabilities

As of December 31, 2002, other
long-term liabilities primarily consisted of deferred rent credits related to a building
lease entered into during 2002 for our office in Plantation, Florida.

# NOTE 12  Long-Term
Debt

Components of long-term debt were as
follows:

`December 31,
                                                              -----------------------------------
                                                                      2002               2001
                                                              ----------------       ------------
         $400 million ($200 million at December 31, 2001)
            8-7/8% Senior Subordinated Notes due 2011
            ("8-7/8% Senior Subordinated Notes")                  $   405,726        $   200,000
         $200 million 9% Senior Subordinated Notes
            due 2007 ("9% Senior Subordinated Notes")                       -            199,419
         $100 million 8-5/8% Senior Subordinated Notes
            due 2007 ("8-5/8% Senior Subordinated Notes")                   -            100,000
         Capital leases                                                   435                 89
                                                              ----------------       ------------
                                                                      406,161            499,508
         Less: amounts due within one year                               (135)               (70)
                                                              ----------------       ------------
                                                                  $   406,026        $   499,438
                                                              ================       ============`

# Consent Solicitation of
Noteholders

On July 10, 2001, KINA along with
Kerzner International (together, the Companies), commenced a consent
solicitation with holders of the Companies $200 million principal amount of 9.0%
senior subordinated notes due 2007. The Companies sought proposed amendments of certain
provisions of the indentures pursuant to which the 9% Senior Subordinated Notes were
issued.

The proposed amendments effectively
eliminate (as of December 31, 2000, the date the charge was recorded) the impact of $199.2
million of the total $229.4 million loss recorded by KINA in connection with the Resorts
Atlantic City Sale, for purposes of determining the ability of Kerzner International and
its affiliates to make certain investments, such as certain minority investment in joint
ventures. In addition, the amendments increased, from 2.0:1 to 2.5:1, the consolidated
coverage ratio required in order for the Companies to incur additional indebtedness. The
consolidated coverage ratio is defined as consolidated earnings before interest expense,
income taxes, depreciation and amortization (EBITDA) to fixed payments, as
defined in the indentures. The consent solicitation, as amended and extended, was
finalized on July 23, 2001.

On July 24, 2001, the Companies
announced that they had received the requisite consents from the holders of their 9%
Senior Subordinated Notes. Accordingly, the Companies and the trustee under the indentures
executed and delivered supplemental indentures containing the amendments described in the
amended consent solicitation. Pursuant to the consent solicitation, we paid $1.0 million
to holders of the 9% Senior Subordinated Notes. These debt issuance costs are included
within deferred charges and other assets in the accompanying consolidated balance sheets.

# Issuance and Redemption
of 8- 5/8% Senior Subordinated Notes

On
December 15, 1997, Kerzner International and the Company, as co-issuers, issued $100.0
million principal amount of 8-5/8% Senior Subordinated Notes due 2007. All of the proceeds
received from the issuance of these notes were advanced to entities outside of the KINA
consolidated group and were used for general corporate and working capital purposes, as
well as to help fund capital expenditure projects for these entities. As a result, any
interest expense we incur on the 8-5/8% Senior Subordinated Notes, including amortization
of debt issuance costs, is offset by affiliated interest income from Kerzner
International, resulting in no impact to net income or loss in any of the periods
presented.

On November 27, 2002, the Companies
called for the redemption of the entire outstanding principal amount of the 8-5/8% Senior
Subordinated Notes due 2007 pursuant to the terms of the indenture governing these Notes.
The Companies had purchased $25.8 million of the 8-5/8% Senior Subordinated Notes through
transactions on the open market. On December 27, 2002, the Companies redeemed the
remaining $74.2 million aggregate principal amount outstanding at the redemption price of
104.313%, or $1,043.13 for each $1,000.00 of principal amount outstanding, plus accrued
interest.

# Issuances of 8-7/8%
Senior Subordinated Notes

In August 2001, the Companies issued
$200.0 million principal amount of 8-7/8% senior subordinated notes due 2011, which, after
costs, resulted in net proceeds of approximately $194.0 million. All of proceeds received
from the issuance of the 8-7/8% Senior Subordinated Notes were advanced to KIB to repay
amounts outstanding under the Revolving Credit Facility. Therefore, interest expense
related to the 8-7/8% Senior Subordinated Notes is offset by affiliated interest income
from KIB.

In May 2002, the Companies issued an
additional $200.0 million of 8-7/8% Senior Subordinated Notes and used the proceeds to
repay the Companies outstanding 9% Senior Subordinated Notes pursuant to the Tender Offer,
Consent Solicitation and Redemption of such notes described below.

In connection with the issuance of
the $200.0 million Senior Subordinated Notes in May 2002 and August 2001, the Company paid
$4.3 million and $6.8 million, respectively, of debt issuance and modification costs
during the years ended December 31, 2002 and 2001 related to the aforementioned debt
issuances and modification of the Amended Revolving Credit Facility.

The 8-7/8% Senior Subordinated Notes,
which are unsecured obligations, are unconditionally guaranteed by substantially all of
the wholly owned subsidiaries of Kerzner International and KINA. Interest on the 8-7/8%
Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002. The
indenture for the 8-7/8% Senior Subordinated Notes contains certain covenants, including
limitations on the ability of the Companies to, among other things: (i) incur additional
indebtedness, (ii) incur certain liens, and (iii) make certain other restricted payments.

# Fourth Amended and
Restated Credit Facility (the Amended Revolving Credit Facility)

On November 13, 2001, Kerzner
International, KINA and KIB, as co-borrowers, entered into the Amended Revolving Credit
Facility with a syndicate of banks (the Lenders), with Canadian Imperial Bank
of Commerce (CIBC) acting as administrative agent. The borrowings then
outstanding under the previous Revolving Credit Facility, all of which were reflected on
the balance sheet of KIB, were paid in full. Under the Amended Revolving Credit Facility,
the maximum amount of borrowings that may be outstanding is $300.0 million, subject to the
borrowing base discussed below and certain other conditions. The Lenders have agreed that
up to an additional $50.0 million of borrowings may be available under the facility if we
are able to arrange additional commitments in that amount.

Effective February 7, 2003, the
co-borrowers obtained approval from the required Lenders under our Amended Revolving
Credit Facility to, among other things, calculate borrowings available using a borrowing
base calculation, such that we can draw the lesser of the borrowing base or the commitment
amount. If for any reason the co-borrowers are unable to meet those conditions or
negotiate new conditions for effectiveness of the borrowing base, our borrowings as of
July 1, 2003 will be limited by the total amount of per occurrence all risks
insurance that KIB maintains on its properties on Paradise Island of $150.0 million per
occurrence. Under the borrowing base calculation as of the year ended December 31, 2002,
our borrowing limit would have been $300.0 million, as the anticipated borrowing base
calculation would have exceeded the commitment amount.

Loans under the Amended Revolving
Credit Facility bear interest at (i) the higher of (a) CIBCs base rate or (b) the
Federal Funds rate plus one-half of one percent, in either case plus an additional 0.25%
to 1.75% based on a debt to earnings ratio during the period, as defined (the
Leverage Ratio) or (ii) London Interbank Offered Rate (LIBOR) plus
1.25% to 2.75% based on the Leverage Ratio. For loans based on the LIBOR, interest is
payable on the last day of each applicable interest period, or the date of any payment or
prepayment of such loans. For loans based on the Alternate Base Rate (as defined),
interest is payable quarterly. At December 31, 2002, the weighted average interest rate on
amounts outstanding under the Amended Revolving Credit Facility was 3.40%. Loans under the
Amended Revolving Credit Facility may be prepaid and re-borrowed at any time and are due
in full in November 2006. Commitment fees are calculated at per annum rates ranging from
0.25% to 0.50% based on the Leverage Ratio, applied to the undrawn amount of the Amended
Revolving Credit Facility and are payable quarterly.

The Amended Revolving Credit Facility
contains restrictive covenants that Kerzner International must comply with, which among
other things: (a) require periodic financial reporting, (b) require meeting certain
financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the
incurrence of indebtedness and (e) limit asset expenditures and dispositions outside the
ordinary course of business.

The amount of borrowings outstanding
as of December 31, 2002 on the Amended Revolving Credit Facility was $72.0 million, all of
which was drawn by KIB and is reflected on KIBs balance sheet. This amount is
unconditionally guaranteed by KINA.

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

On May 8, 2002, the Companies
commenced a cash tender offer to purchase any and all of their outstanding 9% Senior
Subordinated Notes. The tender offer was made pursuant to an Offer to Purchase, Consent
Solicitation Statement and a related Letter of Transmittal and Consent, dated May 8, 2002.
In conjunction with the tender offer, the Companies solicited consents to proposed
amendments to the indenture governing the 9% Senior Subordinated Notes. The proposed
amendments eliminated substantially all of the restrictive covenants and certain events of
default from the indenture governing the notes. Holders that tendered their notes were
required to consent to the proposed amendments and holders that consented to the proposed
amendments were required to tender their notes. At the expiration time, a total of
approximately $177.5 million of the outstanding $200.0 million aggregate principal amount
of the notes were tendered and accepted for purchase in the tender offer. On June 21,
2002, the Companies redeemed, in accordance with the terms of the indenture governing the
notes, all of the 9% Senior Subordinated Notes that remained outstanding at the time, at
the applicable redemption price of $1,045 per $1,000 of principal amount thereof, plus
interest accrued to the redemption date. The Companies used the proceeds from the issuance
of their $200.0 million of 8-7/8% Senior Subordinated Notes on May 20, 2002 to retire
their outstanding 9% Senior Subordinated Notes pursuant to the tender offer and
redemption.

# Debt Maturity

Aggregate annual maturities of
long-term debt as of December 31, 2002 for each of the next five years and thereafter are
as follows:

`2003               $     135
         2004                     170
         2005                     130
         2006                       -
         2007                       -
         Thereafter           400,000
                            ----------
                              400,435
         Debt Premium           5,726
                            ----------
                            $ 406,161
                            ==========`

# Supplemental Condensed
Consolidating Financial Statements

As described in Note 12 
Long-Term Debt, the Company and Kerzner International have co-issued certain debt. This
co-issued debt is guaranteed by other entities outside of the KINA consolidated group who
are subsidiaries of Kerzner International. Such guarantees are full and unconditional and
joint and several among the guarantors. Supplemental condensed consolidating financial
statements of Kerzner International as the parent company and other guarantor
subsidiaries, as required under Rule 3-10 of Regulation S-X, have been be filed with the
SEC as part of Kerzner Internationals Form 20-F.

# NOTE 13 
Accumulated Deficit

KINA is authorized to issue 100
million shares of KINA common stock, 120,000 shares of Class B Stock and 10 million shares
of preferred stock. The only shares of KINA stock outstanding as of the periods presented
are 100 shares of KINA common stock, all of which are owned by Kerzner International.

# NOTE 14  Related
Party Transactions

# Due from Affiliates

At December 31, 2002 and 2001, due
from affiliates primarily includes amounts due from TCA pursuant to the TCA Development
Agreement of $6.5 million and $5.3 million, respectively.

# Due from Affiliate
 Non-current

Due from affiliate  non-current
relates to the proceeds received from the 8-7/8% Senior Subordinated Notes issued in
August 2001 and proceeds received from the 8-5/8% Senior Subordinated Notes issued in
December 1997. The proceeds from the issuance of the 8-7/8% Senior Subordinated Notes were
advanced to KIB and were used to pay down borrowings by KIB on its revolving credit
facility. The proceeds from the issuance of the 8-5/8% Senior Subordinated Notes were used
for general corporate and working capital purposes of certain affiliates of the Company
within the Kerzner International consolidated group, as well as to help fund capital
expenditure projects for these entities. The 8-7/8% Senior Subordinated Notes are expected
to be repaid when the notes become due or such notes are refinanced. The 8-5/8% Senior
Subordinated Notes were repurchased and/or redeemed during 2002. In connection therewith,
a loss on early extinguishment of debt of $5.9 million resulted. However, given that the
proceeds of the original debt issuance were not used for KINA purposes and that the
redemption was made by entities outside of the KINA consolidated group, the loss was
reimbursed to KINA by these entities.

At December 31, 2002 and 2001, due
from affiliates-non-current includes non-interest bearing, due on demand advances made to
certain unconsolidated affiliated companies of $56.5 million and $35.2 million,
respectively. KINA makes payments and receives amounts on behalf of affiliates included
within the Kerzner International consolidated group but outside of the KINA consolidated
group. These amounts of due from affiliates-non-current represents the net amounts due to
and from these entities.

# Relinquishment and
Development Fees

We recorded equity earnings from TCA
of $30.1 million, $25.1 million and $20.4 million for the years ended 2002, 2001 and 2000,
respectively. We also earned development fees in 2002, 2001 and 2000 related to Mohegan
Sun of $1.3 million, $2.0 and $6.3 million, respectively.

# Management Fees and Other

We earn fees in accordance with an
agreement to provide management services to certain unconsolidated affiliated companies,
primarily those entities representing Kerzner Internationals properties in The
Bahamas. These services include, but are not limited to, support related to tax,
marketing, legal, accounting, and information technology. The fees are based on three
percent of the gross revenues, as defined, of these entities and are thus largely
dependent on the occupancy levels at Kerzner Internationals properties in The
Bahamas. For the years ended December 31, 2002, 2001 and 2000, such fees amounted to $16.8
million, $15.1 million and $15.3 million, respectively.

# Palmilla Resort

Fees for management services to
Palmilla Resort during the period from September 12, 2002 through December 31, 2002 were
$128,000.

# Interest Income from
Affiliates

Interest income from affiliates is
comprised of amounts due from KIB and other affiliates of the Company and relates to
interest amounts to be reimbursed by these entities for the 8-5/8% and 8-7/8% Senior
Subordinated Notes, as described in Due from Affiliate  Non-current
above.

# NOTE 15  Employee
Benefit Plans

We participate in a defined
contribution plan covering substantially all of our non-union employees. We make
contributions to this plan based on a percentage of eligible employee contributions. Total
expense for this plan was $185,000, $237,000 and $861,000 in 2002, 2001 and 2000,
respectively. The period January 1, 2001 to April 24, 2001 and the full year 2000 included
plan expenses of Resorts Atlantic City.

In addition to the plan described
above, union and certain other employees of Resorts Atlantic City were covered by
multi-employer defined benefit pension plans to which the subsidiaries make, or made,
contributions. Our pension expense for these plans totaled $1.6 million in 2000. As a
result of the Resorts Atlantic City Sale, we no longer have union employees.

In October 2002, the Company
established a deferred compensation plan (the Deferred Compensation Plan) for
the purpose of allowing certain management of the Company to defer a portion of their
compensation and accumulate earnings on a tax-deferred basis. The amount that is elected
to be deferred is withheld from the employees compensation and remitted to the
trustee of the Deferred Compensation Plan. The trustee is responsible for utilizing such
funds to purchase certain investments, which are held in a rabbi trust. The investments
are classified as available-for-sale securities, in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, due to the
nature of the securities and the intended holding period.

The compensation withheld from
management, together with investment income on the Deferred Compensation Plan, is
reflected as a deferred compensation obligation to participants and is classified within
other long-term liabilities in the accompanying consolidated balance sheet. The related
assets which are held in the rabbi trust are classified within deferred charges and other
assets in the accompanying consolidated balance sheet and are reported at fair market
value with the resulting net unrealized holding gains or losses, net of income taxes,
included as a component of equity, within other comprehensive income (loss). At December
31, 2002, the balance of the liability and the corresponding asset each totaled $0.1
million. During 2002, the Deferred Compensation Plan had a minimal impact on our operating
results.

# NOTE 16 
Restructuring Expense

Restructuring costs in 2001 were
comprised of severance payments made to 49 employees who were terminated due to lower
occupancy levels at Kerzner Internationals properties in The Bahamas subsequent to
the terrorist attacks on September 11, 2001. By the end of 2002, all amounts related to
the restructuring had been paid.

# NOTE 17  Income
Taxes

In 2002, 2001 and 2000 the income tax
provision (benefit) was as follows:

`For the Year Ended December 31,
                            ------------------------------------------------
                                2002              2001               2000
                            -----------       -----------        -----------
                                                                 (unaudited)
         Current:
             Federal        $    3,874        $     (432)         $    (303)
             State               2,341             1,462              1,178
                            -----------       -----------        -----------
                                 6,215             1,030                875
         Deferred:
             Federal            (6,119)           (3,874)               205
                            -----------       -----------        -----------
                            $       96        $   (2,844)         $   1,080
                            ===========       ===========        ===========`

Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.

The components of the deferred tax
assets and liabilities were as follows:

`December 31,
                                                           ---------------------------------
                                                                2002               2001
                                                           --------------      -------------
      Non-current deferred tax liabilities:
          Basis differences on property and equipment               (561)              (640)
                                                           --------------      -------------
              Total deferred tax liabilities                        (561)              (640)
                                                           --------------      -------------

      Non-current deferred tax assets:
          NOL carryforwards                                      223,709            220,346
          Basis differences on land held for investment,
            development or resale                                  1,811              2,041
          Book reserves not yet deductible
            for tax return purposes                                1,898              3,104
          Tax credit carryforwards                                 2,677              2,676
          Other                                                    3,786              2,349
                                                           --------------      -------------
             Total deferred tax assets                           233,881            230,516

      Valuation allowance for deferred tax assets               (227,201)          (226,002)
                                                           --------------      -------------
          Deferred tax asset, net of valuation allowance           6,680              4,514
                                                           --------------      -------------
      Non-current net deferred tax assets                   $      6,119       $      3,874
                                                           ==============      =============`

Realization of future tax benefits related
to deferred tax assets is dependent on many factors, including our ability to generate
future taxable income. The valuation allowance is adjusted in the period we determine it
is more likely than not that deferred tax assets will or will not be realized.

The effective income tax rate on net
income (loss) before income taxes varies from the statutory federal income tax rate as a
result of the following factors:

`For the Year Ended December 31,
                                                            -----------------------------------------
                                                               2002          2001           2000
                                                            -----------   -----------    ------------
                                                                                         (unaudited)

      Statutory federal income tax rate                         (35.0%)        35.0%          (35.0%)
      State tax expense                                         103.4%         11.3%            0.5%
      NOLs, debt extinguishment and temporary differences
         for which a valuation allowance has been provided      226.0%             -           34.1%
      Release of valuation allowance relating to
        NOL carryforwards                                      (361.3%)       (73.0%)              -
      Nondeductible expenses and taxable items                   69.5%         (9.9%)           0.3%
      Other                                                       1.6%         14.6%            0.5%
                                                            -----------   -----------    ------------
       Effective income tax rate                                  4.2%        (22.0%)           0.4%
                                                            ===========   ===========    ============`

For federal income tax purposes, KINA
had net operating loss (NOL) carryforwards of approximately $640.0 million at
December 31, 2002, of which $263.6 million are unrestricted as to use. However, due to the
change of ownership of KINA in 1996, $376.4 million of these NOL carryforwards (the
Pre-Change NOLs) are limited in their availability to offset our future
taxable income. As a result of these limitations, approximately $11.3 million of
Pre-Change NOLs will become available for use each year through the year 2008, an
additional $8.5 million will be available in 2009. The remaining Pre-Change NOLs are
expected to expire unutilized.

Our restricted NOL carryforwards
expire as follows: $57.0 million in 2005, $18.3 million in 2006, and $1.0 million in 2009.
Our unrestricted NOLs expire as follows: $12.3 million in 2005, $30.5 million in 2007,
$56.5 million in 2008, $8.0 million in 2011, $57.0 million in 2012, $32.6 million in 2019,
$17.7 million in 2020 and $49.0 million in 2021.

# NOTE 18 
Supplemental Cash Flow Disclosures

Supplemental disclosure of cash flow and
non-cash investing and financing activities:

`For the Year Ended December 31,
                                                 ------------------------------------------------
                                                     2002              2001              2000
                                                 ------------      ------------      ------------
                                                                                     (unaudited)

Interest paid                                     $   34,374        $   20,020        $   24,577
Income taxes paid                                      1,852             1,624               975

Non-cash investing and financing activities:
Promissory note issued to Colony in connection
      with the Resorts Atlantic City Sale                  -            17,500                 -
Accrued interest on promissory note issued
      to Colony                                            -               518                 -
Property and equipment acquired under
      capital lease obligations                          438                16             1,574`

# NOTE 19 
Commitments and Contingencies

# Litigation, Claims and
Assessments

In the ordinary course of business,
we are defendants in certain litigation. In our opinion, based upon advice of counsel and
currently available information, the aggregate liability, if any, arising from such
litigation will not have a material adverse effect on the accompanying consolidated
financial statements.

In September 1989 KINA filed an
action in the US District Court for the Eastern District of Pennsylvania to recover
certain sums paid to the defendant, as trustee for two Individual Retirement Accounts and
the Fred Lowenschuss Associates Pension Plan (the Pension Plan), for KINA
stock in a 1988 merger, in which KINA was acquired by Merv Griffin. This action was
transferred to the NJ Bankruptcy Court in connection with the Companys former
bankruptcy case commenced there in 1989.

In February 1992, the NJ Bankruptcy
Court issued an opinion granting partial summary judgment in favor of KINA on one of its
six causes of action. The NJ Bankruptcy Court reserved the issue of remedies for trial.

In August 1992, Fred Lowenschuss
filed for Chapter 11 reorganization in the US Bankruptcy Court for the District of Nevada
(the Nevada Bankruptcy Court). As a result, the NJ Bankruptcy Court stayed
KINAs action against Lowenschuss.

The Nevada Bankruptcy Court confirmed
Fred Lowenschuss plan of reorganization in October 1993. KINA appealed certain
portions of the confirmation order and other orders of the Nevada Bankruptcy Court. In
June 1994, the US District Court for the District of Nevada (the Nevada District
Court) granted KINAs appeal in all respects. In October 1995, the US Court of
Appeals for the Ninth Circuit affirmed the Nevada District Courts ruling in all
respects, and in November 1995, the Court of Appeals denied Fred Lowenschuss
petition for rehearing. On June 10, 1996, the United States Supreme Court denied Fred
Lowenschuss petition for a writ of certiorari.

All interested parties, including
KINA, filed motions with the Nevada Bankruptcy Court about their respective claims and
priority rights under the US Bankruptcy Code. The Nevada Bankruptcy Court ruled on these
motions, and KINA and other parties appealed, first to the Nevada District Court and then
to the Court of Appeals for the Ninth Circuit. At the time that the United States Supreme
Court denied KINAs petition for a writ of certiorari, on November 29, 1999 (see
discussion below), KINA had three appeals pending, one in the Court of Appeals and two in
the Nevada District Court. KINA voluntarily dismissed all three appeals and simultaneously
withdrew its proofs of claim in Lowenschuss bankruptcy case.

On November 2 and 3, 1995, the NJ
Bankruptcy Court held a trial on the merits of KINAs claims against the trustee of
the Pension Plan. On April 22, 1997, the NJ Bankruptcy Court issued a final opinion in
KINAs favor, and on May 20, 1997 entered a judgment in KINAs favor finding
that the trustee for the two Individual Retirement Accounts and the Pension Plan committed
fraud against KINA and that KINA was entitled to restitution. The NJ Bankruptcy Court
awarded KINA $3.8 million plus prejudgment interest and $250,000 punitive damages, for a
total award of approximately $5.7 million. On July 7, 1997 the NJ Bankruptcy Court amended
the judgment to apportion the damages between the Pension Plan and the Individual
Retirement Accounts. The NJ Bankruptcy Court also denied Defendants request for a
stay of enforcement of the judgment. Subsequently, the Defendants filed an appeal of the
NJ Bankruptcy Courts decision in the US District Court for the District of New
Jersey (the New Jersey District Court). On March 26, 1998, The New Jersey
District Court reversed the judgment of the NJ Bankruptcy Court. KINA filed an appeal of
the New Jersey District Courts decision with the US Court of Appeals for the Third
Circuit (the Circuit Court). On June 30, 1999, the Circuit Court issued an
opinion affirming the New Jersey District Courts decision. KINAs subsequent
petition for a writ of certiorari to the United States Supreme Court was denied on
November 29, 1999, thereby concluding this litigation.

In connection with that litigation,
Laurance Lowenschuss, as trustee for the Pension Plan, and Fred Lowenschuss, as trustee of
the Trusts and as custodian, filed an action in May 1996 against KINA for preliminary and
permanent injunctive relief. The Lowenschusses sought an order from the US Bankruptcy
Court for the District of Delaware (the Delaware Bankruptcy Court) to extend
the post-confirmation bar date of the Plan and to secure the return of certain escrowed
distributions to holders of Old Series Notes (as defined in the Plan).

On May 9, 1996, the Delaware
Bankruptcy Court entered an order, to which the parties had stipulated, extending the
Lowenschuss date of surrender for Old Series Notes through November 10, 1996. By
further stipulations, the date of surrender was further extended through May 12, 2000.

On March 8, 1996, Fred Lowenschuss,
as trustee of various Lowenschuss childrens trusts (the Trusts), and
Laurance Lowenschuss, as trustee for the Pension Plan, filed a counterclaim and a third
party claim against KINA and First Interstate Trust Company in the NJ Bankruptcy Court
alleging that the Pension Plan and the Trusts timely surrendered certain securities for
exchange under the Companys 1990 plan of reorganization and that those securities
were wrongfully dishonored and returned. The Company replied to the counterclaims in April
1996 and denied the allegations. Since 1996, the parties have voluntarily stayed this
litigation, pending the resolution of Lowenschuss bankruptcy case in Nevada.

The foregoing litigation and
bankruptcy proceedings have spawned additional and related litigation, including the
following: (a) an injunction action brought by Fred Lowenschuss, wherein the Nevada
Bankruptcy Court enjoined KINA from proceeding against Fred Lowenschuss individually; the
Nevada District Court dismissed appeals by both KINA and Fred Lowenschuss, and the Ninth
Circuit, on March 6, 1997, affirmed the District Courts dismissal of Fred
Lowenschuss appeal; (b) a malicious prosecution action brought by Fred Lowenschuss
against KINA and its counsel that was dismissed by the Nevada Bankruptcy Court and the
Nevada District Court; on March 6, 1997, the Ninth Circuit affirmed the District
Courts dismissal of Lowenschuss appeal and awarded KINA monetary sanctions,
finding that the Lowenschuss appeal was frivolous; and (c) an action filed by
Laurance Lowenschuss, as trustee of the Pension Plan, in the Nevada District Court against
KINA, which was transferred to the NJ District Court; in January, 1996, the NJ District
Court referred the matter to the NJ Bankruptcy Court. In February 2001, the NJ Bankruptcy
Court granted KINAs motion to dismiss Lowenschuss action for malicious
prosecution in Adversary Proceeding No. 96-2350 and denied KINAs motion to dismiss
certain counterclaims in Adversary Proceeding No. 90-1005 related to the exchange of bonds
in the Delaware Bankruptcy Court proceeding discussed above.

In December 2001, KINA and
Lowenschuss entered into a Stipulation and Settlement Agreement to end all outstanding
disputes between the parties. In July 2002, the New Jersey Bankruptcy Court approved the
Stipulation and Settlement Agreement and the settlement has been finalized. The amounts
paid in connection with the settlement had been fully reserved for in prior years.

# Lease Obligations

We lease office space in numerous
locations throughout the United States for administrative, sales and marketing, public
relations, tour operations and travel reservations services and other administrative
services. In addition to serving as our corporate headquarters, these offices also support
KIB operations in The Bahamas.

# Guarantee Obligation

As discussed in Note 3, in March
2003, we, along with Kerzner International, entered into a guaranty agreement with respect
to certain interim financing for the redevelopment of Palmilla Resort, whereby we
guaranteed $20.0 million of such financing. In June 2003, we guaranteed an additional
$10.0 million of such financing. As discussed in Note 12, we have a co-borrowing
arrangement with Kerzner International and KIB, whereby we unconditionally guarantee
amounts outstanding under the Amended Revolving Credit Facility. The amount of borrowings
outstanding on this facility as of December 31, 2002 was $72.0 million, all of which was
drawn by KIB and is reflected on KIBs balance sheet.

Future minimum lease obligations
under various non-cancelable operating leases with terms in excess of one year at December
31, 2002 are as follows:

`2003                    $   1,642
         2004                        1,544
         2005                        1,604
         2006                        2,020
         2007                        1,795
         Thereafter                 19,807
                                 ----------
                                 $  28,412
                                 ==========`

# Executive and Employee
Bonus Plans

We have a bonus plan whereby our
employees, including officers, will qualify for bonuses if certain levels of earnings or
earnings per share are achieved at our parent level, and such bonuses are calculated as a
percentage of each individuals salary. Such percentage is based on, among other
things, each employees level of responsibility. Bonuses paid to our officers under
this bonus plan could reach a maximum of 60% of the respective employees base
salary. The compensation expense related to this bonus plan amounted to $4.6 million and
$1.4 for the years ended December 31, 2002 and 2001, respectively.

# NOTE 20 Fair Value
of Financial Instruments

The fair value of a financial
instrument represents the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced sale or liquidation.

Fair value estimates are made at a
specific point in time, based on relevant market information about the financial
instrument. These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision. The assumptions
used have a significant effect on the estimated amounts reported.

We used the following methods and
assumptions in estimating fair value disclosures for financial instruments: (a) Cash and
cash equivalents, receivables, due from affiliates, accounts payable and accrued
liabilities: The amounts reported in the accompanying consolidated balance sheets
approximate fair value due to the short-term nature of these items; (b) Fixed-rate debt:
Fixed rate debt is valued based upon published market quotations, as applicable. The fair
value of our fixed-rate debt at December 31, 2002 and 2001 was approximately $425.3
million and $482.0 million as compared to its carrying value of $405.7 million and $499.4
million, respectively.

# NOTE 21  Segment
Data

The Company manages and internally
reports its operations in one business segment.

|SCHEDULE II
          KERZNER INTERNATIONAL NORTH AMERICA, INC.
          CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
          (In Thousands of US dollars)                                                 | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|For the year ended December 31, 2002:                                                                                                                                                                           | 
|Allowance for doubtful receivables                                                                                                                                                                              | 
|Other (c)                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|For the year ended December 31, 2001:                                                                                                                                                                           | 
|Allowance for doubtful receivables                                                                                                                                                                              | 
|Other (c)                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|For the year ended December 31, 2000:                                                                                                                                                                           | 
|Allowance for doubtful receivables                                                                                                                                                                              | 
|Gaming                                                                                                                                                                                                          | 
|Other (c)                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|                                                                                                                                                                                                                | 
|(a) Write-off of uncollectible accounts, net of recoveries.
          (b) Reclassification of net assets held for sale related to the Resorts Atlantic City Sale.
          (c) Relates to our tour operations.

# ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 24, 2002, Kerzner
International and KINA removed Arthur Andersen LLP (Andersen) as the
Companys independent public accountants and on June 24, 2002 retained Deloitte &
Touche LLP (D&T) as the Companys new independent public accountants
for the fiscal year 2002. This change was made upon the recommendation of the audit
committee of the Companys board of directors and with the approval of the
Companys board of directors. The decision to change independent public accountants
was based on the continuing uncertainty regarding Andersens future and is not a
reflection of Andersens commitment or the quality of the services it provided to the
Company.

Through the date of their dismissal,
there were no disagreements with Andersen on any matter of accounting principle or
practice, financial statement disclosure, or auditing scope or procedure which, if not
resolved to Andersens satisfaction, would have caused them to make reference to the
subject matter in connection with their report on the Companys consolidated
financial statements for such years; and there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.

The Company provided Andersen with a
copy of the foregoing disclosures and Andersen stated its agreement with such statements.

During the year ended December 31,
2000 and up to the date of their engagement, the Company did not consult D&T with
respect to the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on the
Companys consolidated financial statements, or any other matters or reportable
events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

There were no disagreements with
Andersen on any matter of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure during 2002.

# PART III

The following Items of this Part III
have been omitted pursuant to General Instruction I of Form 10-K: ITEM 10. Directors
and Executive Officers of the Registrant; Item 11. Executive Compensation; Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters and Item 13. Certain Relationships and Related Transactions.

# ITEM 14. CONTROLS AND
PROCEDURES

As of December 31, 2002, management,
including our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the Companys disclosure controls and procedures. As part of this
evaluation, we considered the nature of the adjustments made to the consolidated financial
statements as a result of the restatement. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures
are effective to provide reasonable assurance that material information regarding the
Company, including its subsidiaries, required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is made known to them in a timely
manner. Subsequent to the date of this evaluation, there have not been any significant
changes in our internal controls or, to our knowledge, in other factors that could
significantly affect our internal controls.

# PART IV

# ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

|(a) | Documents Filed as Part of This Report
|--- | --------------------------------------

|1. | The financial statement index required herein is incorporated by reference to
          Item 8. Financial Statements and Supplementary Data.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------

|2. | The index of financial statement schedules required herein is incorporated by
          reference to Item 8.  Financial Statements and Supplementary
          Data. Financial statement schedules not included have been omitted because
          they are either not applicable or the required information is shown in the
          consolidated financial statements or notes thereto.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | The following exhibits are filed herewith or incorporated by reference:
|-- | -----------------------------------------------------------------------

`Exhibit
  Numbers                           Description                              Incorporation by Reference to
---------------- -------------------------------------------------------- -------------------------------------------
    3(a)(1)      Restated  Certificate of Incorporation,  as amended, of  Exhibit 3.3 to  Registration  Statement on
                 Kerzner International North America, Inc.                Form F-4,  filed on March 20,  1997,  File
                                                                          No. 333-23665-01

    3(a)(2)      Certificate  of  Amendment of Restated  Certificate  of  Exhibit  3(a)(2)  to Form  10-K405  Annual
                 Incorporation of Kerzner  International  North America,  Report of KINA for the  fiscal  year ended
                 Inc.                                                     December  31,  1996,  filed on  March  20,
                                                                          1997, File No. 001-04748

    3(a)(3)      Certificate  of  Amendment of Restated  Certificate  of  Exhibit 3.7 to  Registration  Statement on
                 Incorporation of Kerzner  International  North America,  Form F-4/A dated August 12, 2002,  in File
                 Inc.                                                     No. 333-96705-36

     3(b)        Amended and Restated  By-Laws of Kerzner  International  Exhibit   3(b)  to  Form  10-Q   Quarterly
                 North America, Inc.                                      Report of KINA for the quarter  ended June
                                                                          30,  1996,  filed on August 7, 1996,  File
                                                                          No. 001-04748

     4(a)        Rights of holders of KINA's common stock                 See Exhibits 3(a)(1), 3(a)(2) and 3(b)

     4(b)        Form of Inter-Borrower  Agreement dated as of March 10,  Exhibit  4(e)(4)  to Form  10-K405  Annual
                 1997, between Kerzner International and KINA             Report of KINA for the  fiscal  year ended
                                                                          December  31,  1996,  filed on  March  20,
                                                                          1997, File No. 001-04748

    4(c)(1)      Indenture dated as of August 14, 2001,  between Kerzner  Exhibit  4(a) to Form 8-K of  KINA,  filed
                 International  and KINA,  as  issuers,  the  Guarantors  on August 24, 2001, File No. 001-04226
                 party thereto, and The Bank of New York, as trustee

    4(c)(2)      Supplemental  Indenture  dated as of September 19, 2001  Exhibit  99(a) to Form 8-K of KINA,  filed
                 to Indenture dated as of August 14, 2001                 on September 20, 2001, File No. 001-04226

    4(c)(3)      Second Supplemental  Indenture dated as of May 20, 2002  Exhibit 4.3 to  Registration  Statement on
                 to Indenture dated as of August 14, 2001                 Form  F-4,  filed on July 18,  2002,  File
                                                                          No. 333-96705-36

    4(c)(4)      Third  Supplemental  Indenture dated as of November 18,  Exhibit  99.2 to Form 8-K of  KINA,  filed
                 2002 to Indenture dated as of August 14, 2001            on November 22, 2001, File No. 001-04226

    4(c)(5)      Form of 8-7/8% Senior Subordinated Note due 2011         Exhibit  4(a) to Form 8-K of  KINA,  filed
                                                                          on August 24, 2001, File No. 001-04226

   4(c)(6)      Form  of  Guarantee   with  respect  to  8-7/8%  Senior  Exhibit  4(a) to Form 8-K of  KINA,  filed
                 Subordinated Note due 2011                               on August 24, 2001, File No. 001-04226

    4(c)(7)      Registration  Rights  Agreement  dated as of August 14,  Exhibit  4(b) to Form 8-K of  KINA,  filed
                 2001,   among  Kerzner   International   and  KINA,  as  on August 24, 2001, File No. 001-04226
                 issuers,  the Guarantors  party  thereto,  and Deutsche
                 Banc Alex.  Brown Inc.,  Bear Stearns & Co. Inc.,  CIBC
                 World Markets Corp.,  Banc of America  Securities  LLC,
                 Wells Fargo Brokerage Services,  LLC, Fleet Securities,
                 Inc.,  and The Royal Bank of  Scotland  PLC, as initial
                 purchasers

    4(c)(8)      Registration  Rights  Agreement  dated  as of  May  20,  Exhibit  2.3(f) to Form 20-F Annual Report
                 2002,   among  Kerzner   International   and  KINA,  as  of  Kerzner  International  for  the  year
                 issuers,   the  Guarantors  party  thereto,   and  Bear  ended December 31, 2001,  filed on May 30,
                 Stearns & Co.  Inc.,  Deutsche  Bank  Securities  Inc.,  2002, File No. 001-04226
                 CIBC World Markets  Corp.,  Banc of America  Securities
                 LLC, Wells Fargo Brokerage  Services,  LLC, J.P. Morgan
                 Securities Inc., as initial purchasers

     10(a)       Termination  Agreement  dated as of February  29, 2000,  Exhibit   2  to   Form   6-K  of   Kerzner
                 among  Sheraton  Desert  Inn   Corporation,   Starwood,  International,  filed on March  27,  2000,
                 Sheraton Gaming Corporation,  Kerzner International and  in File No. 001-04226
                 Kerzner International Nevada, Inc.

   10(b)(1)      Amended and Restated  Partnership  Agreement of Trading  Exhibit 10.7 to Registration  Statement on
                 Cove Associates  dated as of August 29, 1995, among Sun  Form F-3 of Kerzner  International,  filed
                 Cove,   RJH   Development    Corp.,    Leisure   Resort  on December 15, 1995, File No. 333-80477
                 Technology,   Inc.,   Slavik  Suites,   Inc.,  and  LMW
                 Investments, Inc.

   10(b)(2)      Relinquishment   Agreement   dated  February  7,  1998,  Exhibit  2.2 to  Form  20-F/A  of  Kerzner
                 between  the  Mohegan   Tribal  Gaming   Authority  and  International  for the year ended December
                 Trading Cove Associates                                  31,  1997,  filed on  September  3,  1998,
                                                                          File No. 001-04226

     10(c)       KINA Retirement Savings Plan, dated January 1, 2000      Exhibit  10(c) to Form 10-K Annual  Report
                                                                          of KINA for the year  ended  December  31,
                                                                          2000,  filed on April 17,  2001,  File No.
                                                                          001-04748

     10(d)       Purchase  Agreement  among KINA,  as Parent,  GGRI,  as  Exhibit 10 to Form 10-Q  Quarterly  Report
                 Seller and Colony as Buyer dated as of October 30, 2000  of KINA for the  quarter  ended  September
                                                                          30,  2000,  filed on  November  14,  2000,
                                                                          File No. 001-04748

     10(e)       Promissory  Note  between  Colony  and KINA dated as of  Exhibit   2  to   Form   6-K  of   Kerzner
                 April 25, 2001                                           International,  filed on May 8, 2001, File
                                                                          No. 001-04226

   10(f)(1)      Fourth Amended and Restated  Revolving  Credit Facility  Exhibit 10 to Form 10-Q  Quarterly  Report
                 dated  as  of   November   13,   2001   among   Kerzner  of KINA for the  quarter  ended  September
                 International,  KINA and Kerzner  International Bahamas  30,  2001,  filed on  November  14,  2001,
                 Limited,  various  financial  institutions  as Lenders,  File No. 001-04748
                 and   Canadian   Imperial   Bank   of   Commerce,    as
                 administrative agent

   10(f)(2)      Letter  Amendment  to the Fourth  Amended and  Restated  Filed herewith as Exhibit 10(f)(2)
                 Revolving  Credit  Agreement  dated as of December  14,
                 2001

   10(f)(3)      First  Amendment  to the Fourth  Amended  and  Restated  Exhibit 4.21 to Registration  Statement on
                 Revolving Credit Agreement dated as of May 8, 2002       Form  F-4,  filed on July 18,  2002,  File
                                                                          No. 333-96705-36

   10(f)(4)      Letter  Amendment  to the Fourth  Amended and  Restated  Exhibit   99.1  to  Form  6-K  of  Kerzner
                 Revolving Credit Agreement dated as of August 30, 2002   International,  filed on December 6, 2002,
                                                                          File No. 001-04226

   10(f)(5)      Second  Amendment  to the Fourth  Amended and  Restated  Exhibit   99.2  to  Form  6-K  of  Kerzner
                 Revolving  Credit  Agreement  dated as of November  20,  International,  filed on December 6, 2002,
                 2002                                                     File No. 001-04226

     31(1)       Certification  Pursuant to 18 U.S.C.  Section  1350, as  Filed herewith as Exhibit 31(1)
                 adopted  pursuant to Section 302 of the  Sarbanes-Oxley
                 Act of 2002

     31(2)       Certification  Pursuant to 18 U.S.C.  Section  1350, as  Filed herewith as Exhibit 31(2)
                 adopted  pursuant to Section 302 of the  Sarbanes-Oxley
                 Act of 2002

      32         Certification  Pursuant to 18 U.S.C.  Section  1350, as  Filed herewith as Exhibit 32
                 adopted  pursuant to Section 906 of the  Sarbanes-Oxley
                 Act of 2002

     99(1)       Trading Cove Associates  Financial  Statements December  Filed herewith as Exhibit 99(1)
                 31, 2002, 2001 and 2000


Registrant agrees to file with the SEC, upon request, copies of any instrument defining the rights of the holders
of its consolidated long-term debt.

(b)      Reports on Form 8-K

         A Current Report on Form 8-K was filed with the SEC on November 22, 2002.  This report reported on Item 5 an
         amendment to KINA's indentures and on Item 7 attached the relevant supplemental indentures as exhibits to the filing.


(c)      Exhibits Required by Item 601 of Regulation S-K

         These exhibits are listed in Item 14(a)(3) of this report.

(d)      Financial Statement Schedules Required by Regulation S-X

The financial  statement  schedules  required by Regulation S-X are incorporated by reference to "Item 8. Financial
Statements and Supplementary Data."`

`SIGNATURES




Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities  Exchange Act of 1934,  the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                        KERZNER INTERNATIONAL NORTH AMERICA, INC. (Registrant)


Date: November 14, 2003                 By     /s/ John R. Allison
                                               --------------------------------------------------------------------------
                                               John R. Allison
                                               Chief Executive Officer

Date: November 14, 2003                  By     /s/ Anne Robertson
                                               --------------------------------------------------------------------------
                                               Anne Robertson
                                               Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.


Date: November 14, 2003                 By     /s/ John R. Allison
                                               --------------------------------------------------------------------------
                                               John R. Allison
                                               Director

Date: November 14, 2003                 By     /s/ Charles D. Adamo
                                               --------------------------------------------------------------------------
                                               Charles D. Adamo
                                               Director`