As filed with the Securities and Exchange Commission on March 30, 2004



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

|o                                                             | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------------
|OR                                                           
|ý                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended December 31, 2003                  
|OR                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the transition period
from                             to

Commission file number 001-04226

KERZNER INTERNATIONAL LIMITED(Exact name of Registrant as specified in its charter)

Commonwealth of The Bahamas(Jurisdiction of incorporation or organization)

Executive Offices
Coral Towers
Paradise Island, The Bahamas
(242) 363-3000(Address and telephone number of principal executive offices)

Securities
registered or to be registered pursuant of Section 12(b) of the Act:

Title of each class

Name of each exchange
on which registeredOrdinary Shares, $.001 par value per share

New York Stock Exchange


Securities
registered or to be registered pursuant to Section 12(g) of the Act.None

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.None

Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. Ordinary Shares, net of
treasury shares: 30,283,689

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

Yes ý                No o

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

Item
17 o                Item 18 ý



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KERZNER INTERNATIONAL LIMITED    FORM 20-F  ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

TABLE OF CONTENTS

|                                                |  |                                                                              |  |   
|----------------------------------------------- |  | ---------------------------------------------------------------------------- |  | --
|Presentation of Financial and Other Information |  | 3                                                                           
|Forward-Looking Statements                      |  | 4                                                                           
|PART I                                          |  |                                                                             
|Item 1.                                         |  | Identity of Directors, Senior Management and Advisers                        |  | 5 
|Item 2.                                         |  | Offer Statistics and Expected Timetable                                      |  | 5 
|Item 3.                                         |  | Key Information                                                              |  | 5 
|Item 4.                                         |  | Information on the Company                                                   |  | 13
|Item 5.                                         |  | Operating and Financial Review and Prospects                                 |  | 41
|Item 6.                                         |  | Directors, Senior Management and Employees                                   |  | 58
|Item 7.                                         |  | Major Shareholders and Related Party Transactions                            |  | 64
|Item 8.                                         |  | Financial Information                                                        |  | 70
|Item 9.                                         |  | The Offer and Listing                                                        |  | 71
|Item 10.                                        |  | Additional Information                                                       |  | 72
|Item 11.                                        |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 80
|Item 12.                                        |  | Description of Securities Other than Equity Securities                       |  | 81
|PART II                                         |  |                                                                             
|Item 13.                                        |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 82
|Item 14.                                        |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 82
|Item 15.                                        |  | Controls and Procedures                                                      |  | 82
|Item 16.                                        |  | Reserved                                                                     |  | 82
|PART III                                        |  |                                                                             
|Item 17.                                        |  | Financial Statements                                                         |  | 84
|Item 18.                                        |  | Financial Statements                                                         |  | 84
|Item 19.                                        |  | Exhibits                                                                     |  | 85

2

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this Annual Report, "Kerzner" or "the Company" refers to Kerzner International Limited, and the terms "we," "us," "our" and similar terms refer to Kerzner and
any or all of its subsidiaries and joint ventures as the context requires.

Our
fiscal year is the calendar year.

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

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FORWARD-LOOKING STATEMENTS

This Annual Report contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to
financial condition, results of operations, business strategies, operating efficiencies or synergies, plans for future expansion and other business development activities as well as other capital
spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition, markets for Kerzner's Ordinary Shares and other matters. Statements in this Annual
Report that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Section 27A of the Securities Act of 1933, as amended (the "Securities Act"). Forward-looking statements, including, without limitation, those relating to our future
business prospects, revenues and income, wherever they occur in this Annual Report, are necessarily estimates reflecting the best judgment of our 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, those relating to development and construction activities, dependence
on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), availability of financing, global economic conditions, foreign currency fluctuations,
pending litigation, the impact of actual or threatened terrorist activity or war on the economy in general and the travel and leisure industries in particular, acts of God, including hurricanes and
other natural disasters (which may result in uninsured losses), changes in tax laws or the administration of such laws and changes in gaming laws or regulations (including the legalization of gaming
in certain jurisdictions) and the risk factors discussed under the heading "Risk Factors" in this Annual Report and our other filings with the SEC.

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

In
compiling the information in this Annual Report, we have also used industry data and projections obtained from industry surveys, market research, publicly available information and
industry publications. Industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such
information is not guaranteed and that the projections they contain are based on a number of significant assumptions. We have not independently verified this data or determined the reasonableness of
such assumptions. We have also indicated where information has come from internal sources. Such information reflects our management's best estimates based upon information obtained from our customers
and from trade and business organizations and other contacts within the businesses in which we compete.

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PART I

Item 1.    Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.    Offer Statistics and Expected Timetable

Not applicable.

Item 3.    Key Information

(A)  Selected Financial Data

The following table sets forth certain historical consolidated financial information of the Company for each of the five years ended December 31, 2003. The
historical financial information as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003, as set forth below, has been derived from our
audited consolidated financial statements, prepared in accordance with U.S. GAAP, included in this Annual Report and audited by our independent auditors. The information set forth below is not
necessarily indicative of future results and should be read in
conjunction with "Item 5. Operating and Financial Review and Prospects" and the consolidated financial statements, related notes and other financial information included elsewhere in this Annual
Report. Amounts are reported in U.S. dollars and have been prepared in accordance with U.S. GAAP.

Subsequent
to the issuance of the December 31, 2002 consolidated financial statements, the Company determined that it was necessary to restate its consolidated financial
statements as of December 31, 2002 and 2001 and for the years then ended. See "Item 5. Operating and Financial Review and Prospects(B) Restatement and Reclassifications" and "Item
18. Financial StatementsNote 2Restatement and Reclassifications" for a discussion of recently restated financial information. All the financial information in this
Annual Report reflects the restatement. In addition, due to the prior years' effect of the restatements for the years ended December 31, 2002 and 2001, the Company has restated previously
audited information presented in the selected financial data tables for the years ended December 31, 2000 and 1999.

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

|                                                                         |                                            | For the Year Ended December 31,
|------------------------------------------------------------------------ | ------------------------------------------ | -------------------------------
|
|
|CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:                              |                                            |                                
|Gross revenues                                                           |                                            | $                              
|Net revenues                                                             |                                            |                                
|Income (loss) from operations                                            |                                            |                                
|Income (loss) from discontinued operations, net of income tax effect (a) |                                            |                                
|Net income (loss)                                                        |                                            |                                
|Basic earnings (loss) per share:                                         |                                            |                                
|                                                                         | Income (loss) from continuing operations   |                                
|                                                                         | Income (loss) from discontinued operations |                                
|                                                                         |                                            |                                
|                                                                         | Net income (loss) per share                |                                
|                                                                         |                                            |                                
|Diluted earnings (loss) per share:                                       |                                            |                                
|                                                                         | Income (loss) from continuing operations   |                                
|                                                                         | Income (loss) from discontinued operations |                                
|                                                                         |                                            |                                
|                                                                         | Net income (loss) per share                |                                
|                                                                         |                                            |                                

|                                          |  | As of December 31,
|----------------------------------------- |  | ------------------
|
|
|CONSOLIDATED BALANCE
SHEET DATA:          |  |                   
|Total assets                              |  | $                 
|Long-term debt, net of current maturities |  |                   
|Shareholders' equity                      |  |                   
|Number of shares outstanding              |  |                   

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(B)  Capitalization and Indebtedness

Not applicable.

(C)  Reasons for the Offer and Use of Proceeds

Not applicable.

(D)  Risk Factors

The resort and casino industries are highly competitive and increases in competition could adversely affect our financial performance.

Our properties compete with other resorts, hotels and casinos, including land-based casinos, riverboat, dockside and cruise ship casinos and other
forms of gaming, as well as other forms of entertainment. If other properties operate more successfully, if existing properties are enhanced or expanded, or if additional hotels or casinos are
established in and around the markets where we
conduct business, we may lose market share. In particular, the expansion, upgrading or construction of competing resort or casino properties in or near any market from which we attract or expect to
attract a significant number of customers could have a significant adverse effect on our business, financial condition and results of operations.

A
number of our competitors are larger and have greater financial and other resources than we do. In addition, a number of jurisdictions have legalized gaming and other jurisdictions are
considering the legalization and/or expansion of gaming. This could open markets in which we currently compete to new entrants and could create new markets that may compete as tourist destinations.
Our gaming operations compete, and will in the future compete, with all forms of existing legalized gaming and with new forms of gaming that may be legalized in the future. Our competitive position
could be materially adversely affected by larger competing companies, new entrants, new markets and new forms of gaming, and our revenues could decline, harming our financial condition.

A
further discussion of competition at our operations by geographic location is included in "Item 4. Information on the Company, (B) Business
OverviewCompetition."

New projects and expansion and renovation efforts are inherently subject to significant development and construction risks.

We regularly evaluate potential development opportunities and engage in expansion, development and renovation projects at properties that we develop or operate,
including expansions, developments and upgrades of our Paradise Island and luxury resort properties. Each of these projects, including the Phase III Expansion on Paradise Island discussed in "Item 4.
Information on the Company, (B) Business OverviewThe PropertiesAtlantis, Paradise Island," and the development of Atlantis, The Palm in Dubai discussed in "Item 4.
Information on the Company, (B) Business OverviewThe PropertiesAtlantis, The Palm," will be subject to the many risks in expanding or renovating an existing enterprise
or developing new projects, including unanticipated design, construction, regulatory, environmental and operating problems, and the significant risks commonly associated with

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implementing
an expansion strategy in new markets. In particular, any such projects are subject to the risks associated with the following:



For
example, many of our projects are subject to regulation at the national, state and local levels in their respective jurisdictions, which could adversely affect the progress of our
projects. In order to proceed with projects, we may need to, among other things, notify authorities of our proposals or submit environmental statements. We could be sanctioned for any failure to
follow any of these procedures, including fines or even temporary closure of our work sites. We cannot guarantee that we will be successful in obtaining required permits and approvals. Delays and
compliance costs associated
with our projects as a result of regulatory obstacles could have a material adverse effect on our business, financial condition or results of operations.

The
anticipated costs and construction period for projects are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with
architects and contractors. The cost of any project may vary from initial expectations, and we, or the owners of the property, may have a limited amount of capital resources to fund cost overruns on
any project. If cost overruns cannot be financed on a timely basis, the completion of one or more projects may be delayed until adequate funding is available. The completion dates of development
projects could also differ significantly from expectations for construction-related or other reasons. We cannot ensure that any project will be completed, if at all, on time or within established
budgets. Significant delays or cost overruns on projects could have a material adverse effect on our business, financial condition or results of operations.

Litigation
may also impede or delay our ability to complete construction or expansion projects. We have on occasion been named as a defendant in lawsuits brought to delay, alter or
enjoin projects in which we have been involved. If litigation is successfully brought against us as a result of our expansion or renovation projects around the world, it could have a material adverse
effect on our business, financial condition or results of operations.

In
addition, although we design our projects for existing facilities to minimize disruption of business operations, expansion and renovation projects require, from time to time, portions
of the existing operations to be closed or disrupted. Any extended disruptions in our operations could have a material adverse effect on our business, financial condition or results of operations.

If we are unable to finance our expansion, development and renovation projects as well as capital expenditures through cash flow and borrowings, our expansion, development and
renovation efforts could be jeopardized.

If we are unable to finance existing or future projects with cash flow from operations or borrowings, we will have to adopt one or more alternatives, such as
reducing or delaying planned

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expansion,
development and renovation projects and other capital expenditures, selling assets, restructuring indebtedness, obtaining equity financing or joint venture partners, or modifying our
Amended Revolving Credit Facility. These sources of funds may not be sufficient to finance existing or future projects, and other financing may not be available on acceptable terms, in a timely manner
or at all. In addition, our Amended Revolving Credit Facility and the indenture governing our outstanding senior subordinated notes contain certain restrictions on our ability to incur additional
indebtedness, and our future indebtedness will likely contain similar restrictions. Effective January 1, 2003, our Amended Revolving Credit Facility was amended in order to calculate borrowings
under that facility based on a borrowing base, such that we can draw the lesser of a borrowing base or the commitment amount. If we are unable to secure additional financing, we could be forced to
limit or cancel expansion, development or renovation projects, which may adversely affect our business, financial condition and results of operations.

We are subject to extensive governmental gaming regulations, which may harm our business.

Our operation of gaming facilities is subject to extensive governmental regulations. Regulatory authorities typically require various registrations, licenses,
findings of suitability and approvals to be held by operators of gaming facilities. The regulatory authorities in these jurisdictions generally have broad discretion in the granting, renewal,
suspension and revocation of licenses and require that such registrations, licenses, findings and approvals be renewed or updated periodically. Our necessary key personnel and we are currently
qualified to do business in all the jurisdictions in which we operate gaming facilities. We cannot assure you that any new or permanent licenses, permits or approvals that may be required by us, our
key employees and our partners, if applicable, in the future will be granted or that our existing licenses, permits and approvals will be renewed or will not be suspended or revoked in the future. The
failure to receive or renew licenses or the suspension or revocation of licenses could harm our reputation and result in a loss of revenue, which could materially adversely affect our business,
financial condition and results of operations.

Our gaming operations are subject to significant taxation and fees that, if increased, could harm our profitability.

Our gaming operations are subject to significant taxation and fees. Such taxes and fees are subject to increase at any time. We pay substantial taxes and fees
with respect to our gaming operations in The Bahamas and will likely incur significant taxes and fees in any other jurisdictions, including the United Kingdom, in which we conduct gaming operations in
the future. Any material increase in existing taxes and fees, the adoption of new taxes or fees, or the loss or reduction of any existing or future tax incentives, could have a material adverse effect
on our profitability.

Our business is seasonal and severe weather conditions could adversely affect our business, results of operations or financial condition, or further increase our insurance
premiums and deductibles.

Historically, our revenues and operating profits in The Bahamas have been higher during the first quarter, the prime tourist season, than in successive quarters.
Higher revenues and earnings are typically realized from the Mauritius properties during the fourth quarter of the year and from Mohegan Sun during the second and third quarters of the year. If any of
these properties were unable to accommodate guests during such periods for any reason, including disruptions caused by weather, our revenues and profits could be adversely affected.

The
Bahamas and Mauritius are subject to tropical weather and storms, which, if severe, could adversely affect our operations and tourism. Similarly, inclement weather can adversely
affect the revenues that we derive from Mohegan Sun, as the principal means of transportation to this property is by automobile or bus. In September 1999, Hurricane Floyd, a hurricane rated by
the United States National Weather Service as a category five, its highest rating, passed within 60 miles of Paradise Island. Our Paradise Island properties suffered approximately $45.0 million
of property damage that

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took
three months to repair. This property damage was covered by our insurance policies in place at that time. In November 2001, Hurricane Michelle impacted our Paradise Island properties.
Although minimal disruption in our operations was caused by the storm, our properties (other than Harborside at Atlantis ("Harborside at Atlantis"), which was closed from August 2002 through
December 2002 due to water damage resulting primarily from Hurricane Michellesee "Item 4. Information on the Company, (B) Business OverviewThe
PropertiesDestination ResortsAtlantis, Paradise Island") suffered approximately $28.3 million in damage that was substantially covered by our insurance policies. The
approximate $28.3 million in property damage at our Paradise Island properties excluded our $6.9 million share of construction remediation costs at Harborside in 2002 and our
$1.8 million share in 2003. During 2002, we recorded equity losses of $5.2 million resulting from the $6.9 million remediation charge offset by $1.7 million equity earnings
from Harborside at Atlantis' operations. During the fourth quarter of 2003, our portion of insurance recovery related to the remediation costs was $1.5 million and therefore the loss for the
year ended December 31, 2003 has been reduced by that amount. Representatives of Harborside at Atlantis are still in negotiation with the insurers and Harborside at Atlantis may receive an
additional recovery during 2004.

We
cannot assure you that our business and, consequently, our results of operations or financial condition, will not be adversely affected by severe weather conditions in the future,
which could cause significant damage and suspension in service provided to our patrons, further increases in our insurance premiums and per occurrence deductibles or cancellations of, or decreases in,
our coverage, and harm to our business.

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

In The Bahamas, a union represents approximately 3,700 of our approximately 5,900 employees. We participate in an employer association whose existing contract
with the union will expire on January 7, 2008. Labor relations in The Bahamas have been unstable at times over the last few years and there have been occasional work stoppages. As the country's
largest private employer, we are sometimes the target of labor disputes. Any protracted labor disputes or work stoppages affecting any of the properties that we own or operate could reduce our
revenues. In addition, many of the public sector industries in The Bahamas, such as electricity, telecommunication and airport facilities, are unionized. The Bahamian government's labor relations with
these unions have been unstable at times and there have been work stoppages on occasion that have been disruptive to our business.

Lack of sufficient air service could adversely affect our revenues and profits.

Most patrons of our Paradise Island, One&Only and other hotel operations arrive by air. Although we consider the current level of air service to our properties in
The Bahamas, Mauritius, Mexico, Dubai and the Maldives to be adequate, any interruption or reduction of air service to any such locations could restrict the growth of our businesses, negatively affect
our competitive position and adversely affect our revenues and profits.

We are subject to environmental, health and safety laws and regulations and our noncompliance or a significant regulatory change could adversely affect our business, results of
operations or financial condition.

Our operations are regulated under a number of federal, provincial, state and local laws and regulations that govern, among other things, the handling of waste
materials, some of which are classified as hazardous materials, and the discharge of hazardous materials into the environment. Our operations are subject to stringent regulations relating to
protection of the environment and waste handling. In addition to liability for our own noncompliance, these laws and regulations may expose us to liability for the noncompliance of other parties,
without regard to whether we were negligent. Sanctions for noncompliance with applicable environmental laws and regulations may include administrative, civil and criminal penalties, revocation of
permits and corrective action orders. Furthermore, we may be liable for costs for environmental cleanup at currently or previously owned or operated properties or off-site locations. Our
failure to comply with existing laws or regulations, the adoption of new laws or regulations with additional or more rigorous compliance standards, or the more vigorous enforcement of environmental
laws or regulations could significantly harm our business by increasing our expenses and limiting our future opportunities.

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We do not own, manage or control Mohegan Sun and the revenues that we derive from the Mohegan Sun are therefore outside of our control.

In 2003, we earned $35.7 million, or approximately 37% of our income from operations, from TCA, which is party to a relinquishment agreement with the
Mohegan Tribal Gaming Authority. Pursuant to the agreement, in exchange for relinquishing its right to manage Mohegan Sun, TCA is entitled to receive 5% of Mohegan Sun's gross revenues through
December 2014. As a result, decisions that affect Mohegan Sun's business or operations, and therefore the revenues that TCA earns under the agreement, are outside of our control.

A small number of our shareholders control a significant percentage of our Ordinary Shares and are able to control decisions affecting our company.

As of December 31, 2003, Caledonia Investments PLC ("Caledonia") had the right to vote approximately 21.7% of our issued and outstanding ordinary shares
("Ordinary Shares"). In addition, Cement Merchants SA ("CMS"), Baron Capital Group, Inc. ("Baron") and FMR Corp. ("FMR") beneficially owned approximately 12.0%, 18.4% and 10.0%, respectively,
of our issued and outstanding shares as of December 31, 2003. As of December 31, 2003, The Kerzner Family Trust, which is an indirect parent of World Leisure Group ("WLG"), both of which
are controlled by Mr. Solomon Kerzner, beneficially owned approximately 21.1% of our issued and outstanding Ordinary Shares. See "Item 7. Major Shareholders and Related Party Transactions,
(A) Major Shareholders" for more information as to how the foregoing ownership percentages were determined. If any combination of these principal shareholders act together, they may be able to
effectively control the outcome of substantially all matters requiring shareholder approval, including the election of our directors, thereby controlling our management, policies and business
operations. For example, WLG, Caledonia, CMS, Baron and FMR, or combinations thereof, could combine to use this voting power to block our ability to obtain certain types of financing for development
plans, renovations or expansions, which could materially adversely affect our ability to develop our business and pursue our strategies.

You may have difficulty enforcing judgments against us or our directors or management that reside outside the United States.

Kerzner is an international business company incorporated under the laws of the Commonwealth of The Bahamas. Certain of our directors and executive officers
reside outside the United States. In addition, a substantial portion of the assets of our directors and officers and of our assets are located outside the United States. As a result, it may be
difficult or impossible to:



It
is unlikely that Bahamian courts would entertain original actions against Bahamian companies, their directors or officers predicated solely upon U.S. federal securities laws.
Furthermore, judgments based upon any civil liability provisions of the U.S. federal securities laws are not directly enforceable in The Bahamas. Rather, a lawsuit must be brought in The Bahamas on
any such judgment. Subject to consideration of private international law, in general, a judgment obtained after due trial by a court of competent jurisdiction, which is final and conclusive as to the
issues in connection, is actionable in Bahamian courts and is impeachable only upon the grounds of fraud, public policy and natural justice.

We may have difficulty enforcing gaming debts in certain foreign jurisdictions or in certain jurisdictions within the U.S., which could negatively affect our operating results.

Gaming debts may not be legally enforced in certain foreign jurisdictions or in certain jurisdictions within the U.S. A substantial portion of the customers at
Atlantis reside in the U.S. As a result, we

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may
be unable to collect gaming debts from our patrons who reside in such jurisdictions, which could negatively affect our operating results.

Reassessments of and changes to our business plans could hinder our development and result in charges or fees that could harm our financial condition and results of operations.

We are regularly reviewing our business plans in light of a variety of factors, including the availability of financing, regulatory and political considerations,
competition and other business and strategic concerns. As a result of such assessments, our management may choose to change such plans, which could result in failure to expand and could also cause us
to incur fees or charges. We cannot assure you that we will carry forward and complete any proposed business plans.

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

Resorts use significant amounts of electricity, natural gas and other forms of energy. Although we have not experienced shortages of energy, substantial increases
in the cost of electricity or natural gas may negatively affect our operating results. The extent of any impact is subject to the magnitude and duration of the energy price increases and could be
material. In addition, energy price increases in locations that constitute a significant source of customers for our properties could result in a decline in disposable income of potential customers
and a decrease in visitation and spending at our properties, which could negatively impact revenues.

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

Due to changes in the insurance market arising prior to the September 11, 2001 terrorist attacks and the effects of such attacks, it has become more
difficult and more expensive to obtain insurance. We may encounter difficulty in obtaining or renewing property or casualty insurance on our properties primarily due to the fact that we have a
concentration of assets in one market which is subject to the potential negative impact of hurricanes. In addition, such insurance may be more limited and may not cover catastrophic risks or terrorist
acts at current levels or at all. Even if we are able to renew our policies or to obtain new policies at levels and with limitations consistent with our current policies, we cannot be sure that we
will be able to obtain such insurance at premium rates that are commercially reasonable. In addition to the "all risks" coverage described below, we have insured Atlantis, Paradise Island for up to
$300.0 million per occurrence (and in an annual aggregate amount) from damages directly resulting from certain terrorist acts to cover property damage and related business interruption losses.
If any such event were to affect all or part of one or more of our properties, it is possible that we would suffer a substantial loss beyond what is covered by our insurance policies.

In
2002, with regard to our Paradise Island property insurance, our "all risk" premiums increased from approximately $4.6 million in the 2001 Policy Year ("Policy Years" are
defined as June 1 of that year through May 31 of the following year) to a total of approximately $14.1 million in the 2002 Policy Year and our deductibles also increased from
$4.0 million per occurrence in 2001 to $15.0 million per occurrence with an annual aggregate deductible of $30.0 million. For the 2003 Policy Year, our premiums for Paradise
Island property insurance have decreased to $13.6 million with the deductibles remaining the same as the 2002 Policy Year. The amount of our "all risk" property and business interruption
insurance (inclusive of our per occurrence deductible) in the 2003 Policy Year commencing June 1, 2003 is $175.0 million, as compared to $150.0 million in the 2002 Policy Year and
$1.0 billion in the 2001 Policy Year. In addition, our "all risk" insurance policies now exclude from coverage certain losses and damages that were covered under our prior insurance policies.
If we are forced to reduce, or prevented from obtaining or renewing, insurance coverage with respect to the occurrence of certain casualties, we could be exposed to heavy losses in the event that
severe damage results from any such occurrence.

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

The terrorist attacks of September 11, 2001 had a significant impact on the travel and tourism industries in which we operate. The significant reduction in
both business and leisure air travel following that date significantly reduced visitation to all our properties, including our Paradise Island properties, during the fourth quarter of 2001 resulting
in a significant decline in our operating results during this period. On March 19, 2003, the U.S. and coalition forces commenced a war with Iraq. Although the official combat in the war with
Iraq ceased in May 2003, the U.S. and coalition forces still maintain a presence in Iraq and terrorist activities still remain a threat. These events, the potential for future terrorist
attacks, the national and international responses to terrorist attacks and other acts of war or hostility have created many economic and political uncertainties, which could adversely affect our
business and results of operations. Future acts of terror, anti-terrorist efforts, war or other armed conflicts involving the United States or other countries may again reduce our guests'
willingness to travel, which could have a material adverse effect on the U.S. and global economies and on our business, results of operations and financial condition.

Deterioration in general economic and market conditions could adversely affect our business.

Our business is affected by general economic and market conditions, particularly in the United States and Europe. A large portion of our business at Atlantis,
Paradise Island is generated by group convention sales and individual tour and travel. A recession or economic slowdown could cause a reduction in group sales bookings or the willingness or ability of
tourists to book vacations at Atlantis, Paradise Island, which could materially adversely affect our operating results.

Item 4.    Information on the Company

(A)  History and Development of the Company

Kerzner was incorporated in The Bahamas in 1993 under the name "Sun International Hotels Limited," and is an international business company under the
International Business Companies Act, 2000 of the Commonwealth of The Bahamas. The Company is registered under number 46,600B at the Companies Registry of The Bahamas. Our executive offices are
located at Executive Offices, Coral Towers, Paradise Island, The Bahamas, and the telephone number is 242-363-3000. Our agent for service of process in the United States is
Corporation Services Company, 1013 Centre Road, Wilmington, Delaware 19805. On March 1, 1996, we listed our Ordinary Shares for trading on The New York Stock Exchange ("NYSE"). On
July 1, 2002, we changed our corporate name from Sun International Hotels Limited to Kerzner International Limited and our stock, which was trading on the NYSE under the symbol "SIH," was
listed under the new ticker symbol "KZL." The name change was implemented in accordance with agreements related to the restructuring of Sun International Investments Limited ("SIIL"), which was
formerly our majority shareholder. See "Item 7. Major Shareholder and Related Party Transactions." There was no change in our management or worldwide operations as a result of the name change.

The
Company was established in order to acquire the Paradise Island Resort and Casino and related operations from Resorts International, Inc. The acquisition was completed in
May 1994.

In
June 1994, we established Sun Cove Limited, which is now known as Kerzner Investments Connecticut, Inc. ("Kerzner Connecticut"). Kerzner Connecticut owns a 50% interest
in, and is a managing partner of, 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 ("MTGA"), 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 addition, in August 1995, TCA entered into a
gaming management agreement (the "Management Agreement") with the Mohegan Tribe pursuant to

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which
TCA provided certain management, marketing and administrative services to the Mohegan Tribe upon the opening of Mohegan Sun in October 1996. In February 1998, TCA and the Mohegan
Tribe entered into an agreement (the "Relinquishment Agreement") pursuant to which the Management Agreement was terminated effective January 1, 2000 and the Mohegan Tribe assumed full
management responsibility for Mohegan Sun. Pursuant to the Relinquishment Agreement, TCA receives annual payments of five percent of the gross revenues of Mohegan Sun for the 15-year
period that commenced January 1, 2000. In addition to the Relinquishment Agreement, in February 1998 the Mohegan Tribe appointed TCA to develop its $1.0 billion expansion of
Mohegan Sun. See below "(B) Business OverviewThe PropertiesMohegan Sun" for a further description of the Relinquishment Agreement and the $1.0 billion expansion.

In
December 1996, we acquired Sun International North America, Inc. (formerly Griffin Gaming & Entertainment, Inc.), which is now known as Kerzner
International North America, Inc. ("KINA"). KINA is a holding company, which, through an indirect wholly owned subsidiary, formerly owned and operated a 644-room casino hotel
property in Atlantic City, New Jersey ("Resorts Atlantic City").

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 $144.0 million,
including accrued interest (the "Resorts Atlantic City Sale"). The proceeds received from Colony consisted of approximately $123.5 million in cash, net of costs incurred subsequent to closing,
and an unsecured $17.5 million note which was paid in full in March 2002. The net cash proceeds received from this transaction were used to reduce the amount of borrowings outstanding on
our Amended Revolving Credit Facility.

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 $40.0 million in the form of a promissory note. In February 2004, we and Colony agreed to terminate the Atlantic City
Option and entered into a new agreement pursuant to which we sold the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary (the "Purchaser") of Colony RIH
Holdings, Inc. for a purchase price of $40.0 million. See "Recent DevelopmentsColony Option" below for more information on this sale.

In
1999, we formed a joint venture with Starwood Vacation Ownership, Inc. ("SVO") (formerly Vistana, Inc.), a subsidiary of Starwood Hotels and Resorts
Worldwide, Inc. ("Starwood"), to develop Harborside at Atlantis, a time-share project on Paradise Island. We and SVO each hold a 50% interest in Harborside at Atlantis. As part of
the joint venture, we contributed land and SVO contributed cash based on the number of timeshare units to be developed.

In
January 2000, we received a proposal from SIIL, at that time the majority shareholder of Kerzner, to acquire in a merger transaction all of our Ordinary Shares not already
owned by SIIL or its shareholders for $24 per share in cash. To consider the proposal, we formed a committee of independent members of the Board of Directors (the "Special Committee"), which retained
its own financial and legal advisers. The proposed transaction was subject to various conditions, including approval by the Special Committee. On June 16, 2000, we announced that SIIL was not
able to negotiate a mutually satisfactory transaction with the Special Committee and that SIIL advised us that its proposal had been withdrawn.

In
order to allow our shareholders to sell at least a portion of their Ordinary Shares at the price formerly proposed by SIIL, our Board of Directors approved a self-tender
offer for up to 5,000,000 Ordinary Shares at a $24 per share cash price. In August 2000, we announced the completion of the self-tender, pursuant to which we purchased 5,000,000
Ordinary Shares at $24 per share. The self-tender offer was financed with borrowings under our then-existing Revolving Bank Credit Agreement.

In
August 2000, we established Kerzner Interactive Limited our Internet gaming subsidiary. In September 2001, we received a license to operate in the Isle of Man and
commenced live gaming

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operations
in January 2002. The Company discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003. See below "(B) Business OverviewInternet
Gaming" for more information.

On
July 3, 2001, we announced the restructuring of our former majority shareholder, SIIL. In connection with this restructuring, among other things, the shareholders agreement
governing SIIL was terminated and SIIL was dissolved. In November 2002, we reached a further settlement with Kersaf Investments Limited ("Kersaf") related to the restructuring agreement and
certain other matters. See "Item 7. Major Shareholders and Related Party Transactions."

Effective
August 2001, we acquired a 25% interest in the Kanuhura Sun Resort & Spa Limited ("One&Only Kanuhura") for approximately $3.8 million. As of
December 31, 2003, we had provided debt financing to the One&Only Kanuhura of $3.6 million, excluding accrued interest. The One&Only Kanuhura is a 100-room luxury resort
located on Kanuhura Island in the Maldives,
which is located approximately 600 miles southwest of the southern tip of India. Our management contract with the One&Only Kanuhura expires in 2026. Our agreement with Sun Resorts Limited (see below)
also included the sale of 20% of our debt and equity interests in the One&Only Kanuhura to Sun Resorts Limited and the transfer to One&Only Management (as defined below) of the Kanuhura management
agreement. As a result of the sale, we currently own a 20% equity interest in the One&Only Kanuhura.

In
June 2002, we entered into management and development agreements for a 130-room luxury resort in Kaafu Atoll, the Maldives that we expect to open in 2005. This new
five-star resort will occupy the site where a small resort had previously been located. The management and development agreements related to this property are co-terminus with
the owner's lease, which expires in 2020. As part of this development, we have committed to provide certain financing arrangements to the current owner of the resort in an aggregate principal amount
of up to $50.0 million to ensure completion of the new resort and provide for working capital on a standby basis. As of December 31, 2003, we have funded $15.4 million pursuant to
this agreement.

On
September 12, 2002, we purchased a 50% ownership interest in the 115-room Palmilla Resort ("One&Only Palmilla"), a deluxe five-star property located
near Cabo San Lucas in Baja, Mexico for approximately $40.8 million, including transaction costs. In connection with the purchase, we entered into long-term management and
development agreements related to the property that will expire in 2022. The acquisition was funded through a combination of cash on hand and drawings under our Amended Revolving Credit Facility. The
One&Only Palmilla was recently renovated and expanded and re-opened in January 2004 after a refurbishment that expanded the room count to 172 rooms, all of which are oceanfront, and
added a new Charlie Trotter restaurant, a 12 unit spa with open air villas, a new meeting space, a new pool and a new poolside restaurant. In addition, in February 2004, the One&Only Palmilla had a
grand opening event. The expansion was financed by the One&Only Palmilla through local project financing that is supported by a $46.5 million guarantee from Kerzner, and by a
$3.0 million loan from Kerzner that was advanced in 2004. Kerzner expects to provide additional advances that will total approximately $11.0 million. The total cost of the One&Only
Palmilla renovation is approximately $102.0 million.

In
December 2002, we began to operate and market certain of our managed and/or owned luxury resort hotels under the "One&Only" brand in connection with our corporate name change.
One&Only emphasizes the uniqueness of each of the respective properties in the luxury resort market. We are now marketing six of our properties under our One&Only brand.

We
currently have a 20.4% ownership interest in Sun Resorts Limited ("SRL"), a publicly traded company on the Mauritian Stock Exchange, which owns the One&Only Le Saint
Géran, the One&Only Le Touessrok, Sugar Beach Resort, La Pirogue Hotel and Le Coco Beach Hotel, which are all located in Mauritius. In December 2002, we entered into an agreement
with SRL to form One&Only (Indian Ocean) Management Limited ("One&Only Management"), a new management company, for the purpose of, among other things, managing the five properties owned by SRL in
Mauritius and the

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One&Only
Kanuhura in the Maldives, and securing an extension to our management contracts in Mauritius from 2008 until 2023. Effective January 1, 2003 through December 31, 2004, SRL owns
20% of One&Only Management and we own the remaining 80%. Subject to certain conditions, SRL's ownership interest will increase incrementally through 2009 for no consideration, at which
time it will own 50% of One&Only Management. The purpose of One&Only Management is to be a joint venture growth vehicle for expansion in the islands of the Indian Ocean. In connection with this
transaction, we transferred to One&Only Management all of our Mauritius management agreements and the Kanuhura management agreement, and SRL purchased 20% of our debt and equity interests in the
One&Only Kanuhura. In addition, pursuant to a subcontract arrangement with One&Only Management, we provide the comprehensive management services to the five Mauritius resorts and receive a management
fee.

In
April 2003, we agreed to acquire from London Clubs International ("LCI") for $2.1 million a gaming license and property located in the town center of Northampton,
England. We have submitted an application for a certificate of consent to the Gaming Board of Great Britain in order to transfer of the gaming license and expect this process to be completed during
the second quarter of 2004. We ultimately expect to develop and operate a new casino facility on an approximate 30,000 square foot site, which is expected to cost approximately $15 million and
open in 2005. The development of this facility is subject to the approval of local planning authorities. See "Item 5. Operating and Financial Review and Prospects, (D) Trend Information" for
more information regarding LCI.

In
May 2003, we entered into a new "Heads of Agreement" with the Bahamian Government with respect to the Phase III Expansion (the "Phase III Expansion") on Paradise Island. The
Phase III Expansion, which includes a new hotel and facilities, expanded attractions and an addition to Harborside, is discussed more fully below in "(B) The PropertiesAtlantis, Paradise
Island."

In
September 2003, we entered into agreements to form a joint venture with Nakheel LLC, a government-owned entity ("Nakheel"), in Dubai to develop Atlantis, The Palm, the
first phase of which we estimate will cost at least $650 million development and will include a 1,000-room resort and an extensive water theme park situated on 1.5 miles of
beachfront. Atlantis, The Palm will be located on The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai. Kerzner and Nakheel have each agreed to invest $60 million in the
form of equity financing to the project, with the balance of the financing, which may include an equity component, expected to be raised at the project level. As part of Kerzner's equity commitment to
the project, it expects to invest approximately $21 million in 2004 and $39 million in 2005. As part of the transaction, Kerzner has agreed to enter into a development services
agreement and a long-term management agreement with the
joint venture company. The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the necessary financing.

In
September 2003, we entered into an agreement with a commercial entity that provides for Kerzner to participate in the development of a new project in the greater London area
(the "UK Project"). The UK Project is planned to include retail, entertainment and leisure components and it is expected to also include a casino and hotel. Kerzner estimates that its portion of the
UK Project would cost in the range of $350 million, and a majority of this cost is expected to be financed on a non-recourse project basis. Kerzner made an initial payment of
$4.0 million upon execution of the agreement as partial consideration for the transaction. This transaction remains subject to numerous conditions. The UK Project is discussed more fully below
in "(B) The PropertiesEngland."

In
September 2003, we entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited on Paradise Island for approximately
$38.5 million. The approximate 20-acre site is adjacent to the proposed site of the new 1,200 room hotel that is part of the Phase III Expansion, and is therefore ideally positioned
for future expansion of Kerzner's investments on Paradise Island. In the short term, it is expected that the existing hotel on the property will be used to house construction workers during the
construction of the planned 1,200-room hotel. During the year ended December 31,

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2003,
we paid $20.0 million in connection with the acquisition. The remaining balance to be paid of $18.5 million is included as an accrued liability as of December 31, 2003, of
which $15.0 million is secured by a letter of credit. The remaining balance of $3.5 million represents a stamp tax of 10% of the purchase price, which is required to be paid upon the
recording of the transaction in The Bahamas. In addition, Kerzner obtained an option to purchase certain adjacent land lots for an option price of $5.0 million. The option term is for three
years and expires on October 29, 2006. The purchase price allocation has not been finalized as we are awaiting an independent valuation of the assets acquired.

In
November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop a new luxury hotel, subject to various conditions, at the highest
end of the market in Cape Town, South Africa. We intend to form a joint venture in which we will own a minority interest to develop and operate a new 150-room One&Only luxury hotel
on the waterfront.

In
November 2003, we entered into agreements to develop and manage Hotel Saratoga, a 100-room hotel currently under renovation in Havana, Cuba, which we anticipate
will open in early 2005. Kerzner is assisting in the design and renovation of the hotel and will manage the completed hotel for a term of 10 years with an option for a further 10 years.
Pursuant to the terms of our agreements, certain out-of-pocket expenses associated with our development of the hotel will be reimbursed to us from revenues from the hotel's
operations. Upon completion, this hotel will be a One&Only property.

Reorganization of Capital Structure

Issuances of 87/8% Senior Subordinated Notes

In August 2001, Kerzner along with KINA (together, the "Companies") issued $200.0 million principal amount of 87/8% senior
subordinated notes due 2011 (the "87/8% 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 87/8% Senior Subordinated Notes were advanced to one of our wholly owned subsidiaries, Kerzner International Bahamas Limited ("KIB"), to repay amounts
outstanding under our Amended Revolving Credit Facility.

In
May 2002, the Companies issued an additional $200.0 million of 87/8% 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 described below.

The
87/8% Senior Subordinated Notes, which are unsecured obligations, are unconditionally guaranteed by substantially all of the wholly-owned subsidiaries of Kerzner and
KINA. Interest on the 87/8% Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002. The indenture for the 87/8% Senior
Subordinated Notes contains various restrictive covenants, including limitations on the ability of the issuers and the guarantors to, among other things: (a) incur additional indebtedness,
(b) incur certain liens, (c) engage in certain transactions with affiliates and (d) pay dividends and make certain other payments. We believe we are in compliance with all such
covenants as of December 31, 2003. All of our outstanding 87/8% Senior Subordinated Notes are subordinated to the borrowings under our Amended Revolving Credit Facility.

Derivative Financial Instruments

In August and December 2001, we entered into fixed-to-variable rate interest rate swap agreements (the "Swap Agreements")
designated as fair value hedges on $200 million principal amount of our 87/8% Senior Subordinated Notes. In September 2003, we canceled $25.0 million of our
$200.0 million Swap Agreements, resulting in $175.0 million of fair value hedges on our 87/8% Senior Subordinated Notes as of December 31, 2003. The Swap Agreements
have rates of 6-month LIBOR plus 291 to 302 basis points.

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Amended Revolving Credit Facility

On November 13, 2001, Kerzner, 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, were paid in full by KIB.
Under the Amended Revolving Credit Facility, the maximum amount of borrowings that may be outstanding is $253.5 million, subject to the borrowing base discussed below and certain other
conditions. This amount reflects the permanent reduction in commitments of $46.5 million effective August 14, 2003 related to our guarantee of the same amount in connection with the
local project financing at the One&Only Palmilla.

The
Lenders have agreed that up to an additional $50.0 million of borrowings may be available under certain circumstances. Effective January 1, 2003, the lenders agreed
that borrowings under our Amended Revolving Credit Facility are based on a borrowing base calculation, such that we can draw the lesser of a borrowing base or the commitment amount. See "Item 10.
Additional Information, (C) Material ContractsThird Amendment dated May 15, 2003 to the Amended Revolving Credit Facility" for a description of the borrowing base.

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 EBITDA ratio during the period, as defined (the "Leverage Ratio") or (ii) the London Interbank Offered Rate
("LIBOR") rate plus 1.25% to 2.75% based on the Leverage Ratio. For loans based on the LIBOR 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, 2003, the weighted average interest rate on amounts outstanding
under the Amended Revolving Credit Facility, excluding ongoing commitment, agency and letter of credit fees related to the maintenance of the facility, was 3.50%. 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 affirmative and restrictive covenants that Kerzner 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. As of December 31, 2003, Kerzner believes that it was in compliance with all of such covenants.

There
were no borrowings outstanding as of December 31, 2003 under the Amended Revolving Credit Facility. Under the borrowing base calculation as of December 31, 2003, our
borrowing limit was $253.5 million (after giving effect to the Palmilla guarantee referenced above), as the borrowing base calculation exceeded the commitment amount. Our availability as of
December 31, 2003 was $237.0 million, due to the $16.5 million in outstanding letters of credit. All amounts outstanding are unconditionally guaranteed by all significant
subsidiaries that are a party to the Amended Revolving Credit Facility.

Tender Offer, Consent Solicitation and Redemption

On May 8, 2002, we commenced a cash tender offer to purchase any and all of our outstanding 9% Senior Subordinated Notes. In conjunction with the tender
offer, we solicited consents to proposed amendments to the indenture governing the 9% Senior Subordinated Notes. The tender offer expired on June 5, 2002. At the expiration, a total of
$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

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June 21,
2002, we 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. We used the net proceeds from the issuance of $200.0 million of our
87/8% Senior Subordinated Notes on May 20, 2002 to retire our outstanding 9% Senior Subordinated Notes pursuant to the tender offer and redemption.

Shelf Registration

In May 2002, Kerzner and KINA filed a universal shelf registration statement on Form F-3 (the "Universal Shelf") with the SEC relating
to the sale of up to $500.0 million in securities. The Universal Shelf allows us flexibility as to the type of security we could choose to sell in the future, including various types of debt
securities, Ordinary Shares, preference shares and warrants, and replaces the 1997 Shelf Registration. We may also utilize the Universal Shelf to register secondary sales of Ordinary Shares by selling
shareholders. In connection with a settlement agreement with Kersaf, a major shareholder of Kerzner, on December 18, 2002, an indirect subsidiary of Kersaf sold 2.3 million Ordinary
Shares of Kerzner (the "Kersaf Offering") in a registered public offering, using securities registered under the Universal Shelf. Securities registered under the Universal Shelf may be offered from
time to time directly by us or through underwriters at amounts, prices, interest rates and other terms to be determined at the time of the offering.

In
November 2003, pursuant to Rule 12h-3 of the Exchange Act, KINA suspended its obligation to file periodic reports under the Exchange Act. Accordingly, KINA
will no longer issue or co-issue any securities registered pursuant to the Universal Shelf.

Redemption of 85/8% Senior Subordinated Notes

On November 27, 2002, we called for the redemption of the entire outstanding principal amount of our 85/8% senior subordinated notes due
2007 (the "85/8% Senior Subordinated Notes") pursuant to the terms of the indenture governing these notes. We purchased $25.8 million of the 85/8% 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.

Kersaf Offering

On December 18, 2002, Royale Resorts International Limited, an indirect subsidiary of Kersaf, completed the Kersaf Offering. We received approximately
$32.1 million of the proceeds from the sale of 2.3 million Ordinary Shares pursuant to the terms of the settlement agreement entered into by Kerzner, Kersaf and certain of its affiliates
and certain other parties. See "Item 7. Major Shareholders and Related Party Transactions, (B) Related Party TransactionsGlobal Settlement."

Recent Developments

Wembley Investment

On March 10, 2004, we announced that we entered into a joint venture, BLB Investors, L.L.C. ("BLB"), with an affiliate of Starwood Capital Group Global,
L.L.C. and an affiliate of Waterford Group, L.L.C. for the purpose of acquiring an interest in Wembley plc ("Wembley"), which owns gaming and track operations in the United States and race tracks in
the United Kingdom. Wembley's United States operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack with 2,272 video lottery terminals.

BLB,
which is 25% owned by us, 25% owned by Waterford, and 50% owned by Starwood, acquired on March 10, 2004 from funds managed by Active Value Fund Managers Limited ("Active

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Value")
2,811,108 shares of Wembley's issued share capital (representing approximately 8% of Wembley), at a price of £8.00 per share. BLB also entered into other arrangements with Active
Value on March 10th and March 18th relating to the purchase of Active Value's remaining 4,921,392 shares of Wembley's issued share capital (representing approximately 14% of Wembley),
which could increase its total holdings in Wembley up to approximately 22% (subject in all cases to necessary notifications and filings and waiting periods expiring under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976).

BLB
has an option to purchase 2,391,178 of Active Value's remaining shares (representing approximately 6.9% of Wembley) at £8.00 per share if it announces a firm offer for
Wembley on or before March 30, 2004. If there is such an announcement, BLB has agreed to purchase all 4,921,392 of Active Value's remaining shares (representing approximately 14% of Wembley) at
the offer price (which may be £8.00 per share or greater). If BLB has not announced a firm offer for Wembley on or before March 30, 2004, Active Value may put 520,576 Wembley shares
(representing 1.5% of Wembley) to BLB at a price of £8.00 per share. There can be no certainty that BLB will make an offer for Wembley, and, if an offer is made, whether it would be
successful.

On
January 27, 2004, MGM Mirage announced that it had made an offer for all of Wembley's outstanding shares at £7.50 per share. The boards of MGM Mirage and Wembley
have announced that they have reached agreement to recommend the terms of MGM Mirage's bid to its shareholders. Approval of MGM Mirage's bid is dependent on its receiving the affirmative vote of
three-fourths in value of the holders of Wembley's shares.

Kersaf Share Ownership

On March 29, 2004, Kersaf filed with the SEC an amendment to its Schedule 13D filed on July 19, 2001, in which it disclosed that Kersaf and
certain of its affiliates sold 498,900 Ordinary Shares between October 10, 2003 and March 26, 2004. The share ownership information provided in this document does not reflect the updated
information disclosed in Kersaf's latest amendment to its Schedule 13D.

Colony Option

In February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we agreed to sell the
undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary of Colony RIH Holdings, Inc. (the "Purchaser") for a sale price of $40.0 million. The sale was
completed on March 18, 2004. The sale price was paid in the form of a promissory note which will mature on March 16, 2009 (the "NJ Note"). The NJ Note will begin accruing interest on
September 30, 2004 at a rate of 4.0%, which will increase at various intervals from the closing date of the transaction. All principal and interest due under the NJ Note will be due on
March 16, 2009, which date may be accelerated by us in certain circumstances. The NJ Note is secured by a first mortgage on the property sold and will be guaranteed by Colony RIH
Holdings, Inc. (the direct parent company of the Purchaser) initially in an amount limited to $20.0 million, which will generally increase in increments of $5.0 million annually.
The NJ Note will also be guaranteed by Resorts International Hotel and Casino, Inc. This guarantee will go into effect when that company's outstanding public indebtedness, which is due on
March 9, 2009, has been paid.

(B)  Business Overview

We are the developer, owner and operator of Atlantis, Paradise Island, a 2,317-room island destination resort and casino complex in The Bahamas, and a
leading developer and operator of gaming entertainment properties and luxury resort hotels worldwide. Atlantis, Paradise Island, our flagship property, is a premier destination resort property that we
believe has strong brand recognition. We recently have entered into an agreement to form a joint venture to develop and manage a second Atlantis resort, Atlantis, The Palm in Dubai, United Arab
Emirates.

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Our
gaming business is focused on owning, developing or managing casino properties in attractive markets where we can capitalize on our development and operating expertise. We developed
and earn revenues from Mohegan Sun in Uncasville, Connecticut, which is owned and operated by the MTGA. Following the completion of a major expansion in June 2002, we believe Mohegan Sun is
among the largest and most profitable casinos in the U.S.

Our
luxury resort hotel business consists of a collection of owned and/or managed premier properties that primarily operate in the five-star, deluxe end of the resort market
in The Bahamas, Mauritius, Dubai, the Maldives and Mexico under the One&Only brand. We also expect to develop additional properties in Cape Town, South Africa, the Maldives and Havana, Cuba.

The Properties

Destination Resorts

Atlantis, Paradise Island

Our flagship property is Atlantis, Paradise Island, a 2,317-room ocean-themed resort and casino located on Paradise Island, The Bahamas. Since
acquiring the property in 1994, we have invested approximately $1.0 billion to create a unique destination casino resort that caters to multiple segments of the resort and casino gaming
markets. The property features a 100,000 square foot entertainment complex that includes the largest casino in the Caribbean market, an 88,000 square-foot convention facility and 30,000
square feet of retail space. Atlantis, Paradise Island celebrates the wonders of the sea and is inspired by the myth of the lost continent of Atlantis. The ocean-themed environment of Atlantis,
Paradise Island includes:



We
acquired the property in May 1994 for $125.0 million and redeveloped the property into an ocean-themed destination resort through an initial $140.0 million
capital expenditure program. The property achieved an average occupancy and average daily room rate of 85% and $122, respectively, in 1995, a substantial increase from the 62% and $95, respectively,
achieved in 1993 under previous management. Seeking to capitalize on the early success of Atlantis, Paradise Island, we began construction of an approximate $640.0 million expansion of the
property in 1997. This major expansion was completed in December 1998 and effectively doubled the size of Atlantis, Paradise Island. The 1998 expansion included a 1,200-room hotel,
a new 100,000 square foot entertainment complex that includes a casino containing approximately 900 slot machines and 80 table games, a new marina, and an expansion of the ocean-themed environment.
During 1999, we completed several additional development projects at Atlantis, Paradise Island, including the addition of 30,000 square feet of new

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retail
and restaurant space, the conversion of a previously existing 30,000 square foot casino space into a convention center and the construction of a sports center, including an 18-hole
Tom Fazio-designed putting course and a tennis center.

During
the second half of 2000, we completed an extensive capital expenditure program of approximately $20.0 million at Atlantis, Paradise Island's Beach Tower. This program
included the renovation of all of the Beach Tower's 425 rooms and improvements to certain public spaces. During 2001, we completed a major capital expenditure program of approximately
$20.0 million to complete renovations at the Ocean Wing of Atlantis, Paradise Island's Coral Towers. This included the renovation of approximately 400 rooms, including improvements to certain
public spaces.

To
add to our product mix at Atlantis, Paradise Island, we developed Harborside at Atlantis, a timeshare project adjacent to Atlantis, Paradise Island, through a joint venture with a
subsidiary of Starwood. As part of the joint venture agreement, Starwood contributed cash and we contributed land, based on the number of units to be developed. The first phase of the project was
completed in February 2001 and consisted of 82 two-bedroom units. We began selling the units in May 2000 and have sold approximately 89% of the units through
December 31, 2003. In August 2002, Harborside at Atlantis was closed to repair water damage primarily resulting from 2001's Hurricane Michelle. During the fourth quarter of 2002, these
repairs were completed and the resort reopened in December 2002. During the temporary closure, Harborside at Atlantis' guests were moved to Atlantis, Paradise Island. Our share of construction
remediation costs from Harborside at Atlantis was $6.9 million in 2002 and $1.8 million in 2003. During 2002, we recorded equity losses of $5.2 million, resulting from the
$6.9 million remediation charge offset by $1.7 million equity earnings from Harborside at Atlantis' operations. During 2003, we recognized $3.3 million in equity earnings from
Harborside at Atlantis. During the fourth quarter of 2003, our portion of insurance recovery related to the remediation was $1.5 million and therefore the earnings for the year ended
December 31, 2003 have been increased by that amount. Representatives of Harborside at Atlantis are still in negotiation with the insurers and Harborside at Atlantis may receive an additional
recovery during 2004. We intend to commence our second phase of timeshare development at the end of the second quarter of 2004 with an expected completion by 2005. This expansion is subject to
approval by the board of directors of Starwood.

In
May 2003, we announced that we had entered into an agreement with the Bahamian Government with respect to the Phase III Expansion on Paradise Island in order to continue to
expand the Atlantis, Paradise Island resort to capitalize on the demand for rooms and the strength of Atlantis' brand. Our new Heads of Agreement with the Bahamian Government relates to the following
projects, which collectively constitute the Phase III Expansion:



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The
Phase III Expansion is divided into two parts. Phase III-A, as to which the Company was committed to (and did in fact) commence initial construction on certain aspects by
December 31, 2003, is comprised of the Ocean Club Villas, Marina Village, the Fire and Ambulance Station and Harborside Phase II. Phase III-B, as to which the Company has the option
to commence initial construction by December 31, 2004 or determine not to proceed with this part of the expansion, is comprised of the New Hotel and Facilities, the Athol Golf Course, the
Expanded Attractions and the Utilities and Infrastructure Expansion. The Company is permitted to move any elements of the expansion from Phase III-B to Phase III-A at its
discretion, without prejudice to any eventual decision not to proceed with the remaining elements of Phase III-B.

The
Company has commenced construction of Ocean Club Villas, as well as the addition of several new amenities, including a boardroom, gift shop, kids pool and expanding exercise room to
the One&Only Ocean Club. This expansion is expected to be completed by the summer of 2004. During 2004, the Company expects to commence development on Marina Village and Harborside Phase II, both of
which are expected to be completed in 2005. Harborside Phase II is subject to approval by the board of directors of Starwood. Our share of the total cost of the Ocean Club Villas, Marina Village, the
Fire and Ambulance Station and Harborside Phase II is approximately $110 million. If we elect to
proceed with Phase III-B, construction of Phase III-B, which constitutes the largest portion of the Phase III Expansion and includes the New Hotel and Facilities, the Athol
Golf Course, the Expanded Attractions and the Utilities and Infrastructure Expansion, is expected to commence in late 2004 and be completed by Christmas 2006. The elements of Phase III-B
are in the architectural planning stage and, if completed, are expected to cost approximately $600 million, exclusive of pre-opening costs.

A
complete description of the Heads of Agreement can be found in "Item 4. Information on the Company, (B) Business OverviewCertain Matters Affecting Our Bahamian
OperationsHeads of Agreement."

On
September 19, 2003, we announced that we had entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited on Paradise
Island for approximately $40 million. The approximate 20-acre site is adjacent to the proposed site of the New Hotel and Facilities. Through certain Bahamian subsidiaries (the
"Bahamian Operations"), we now own approximately 514 acres (exclusive of the Club Méditerranée property) on Paradise Island (or almost 70% of Paradise Island), including
approximately 95 acres of undeveloped land. The Phase III Expansion will use approximately 50 acres of currently undeveloped land. In connection with this acquisition, the Company obtained an option
to purchase certain adjacent land lots for an option price of $5.0 million. The option term is for three years and expires on October 29, 2006.

We
also own and operate the One&Only Ocean Club, a high-end luxury resort hotel, as well as the Ocean Club Golf Course. Through our Bahamian Operations, we also own and
operate shops, restaurants, bars and lounges, tennis courts and other resort facilities on Paradise Island, as well as roads and other land improvements on Paradise Island and a water and sewage
system which serves, at stated charges, substantially all facilities on Paradise Island, including non-affiliated customers.

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Paradise Island is easily accessible by air from London and the eastern U.S. and has an extensive infrastructure. The majority of patrons at our resorts on Paradise Island arrive through
Nassau International Airport located on New Providence Island. This airport is served by several carriers offering scheduled jet service from London, New York, Atlanta, Charlotte, Toronto, Miami,
Washington D.C. and other cities. Ground transportation is facilitated by two bridges linking Paradise Island and New Providence Island.

Atlantis, The Palm

In September 2003, we announced that we had agreed to form a joint venture with Nakheel LLC, a government-owned entity in Dubai, to develop
Atlantis, The Palm. We currently estimate that the first phase of the project will cost at least $650 million and will include a 1,000-room resort and an extensive water theme park
situated on 1.5 miles of beachfront. Atlantis, The Palm will be located on The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai. We and Nakheel have each agreed to invest
$60 million in the form of equity financing to the project, with the balance of the financing, which may include an equity component, expected to be raised at the project level. As part of
Kerzner's equity commitment to the project, it expects to invest approximately $21 million in 2004. As part of the transaction, Kerzner has agreed to enter into a development services agreement
and a long-term management agreement with the joint venture company. The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents
and binding commitments for the necessary financing.

Gaming

Mohegan Sun

Our gaming business is focused on owning, developing or managing casino properties in attractive markets where we believe we can capitalize on our development and
operating expertise. We own a 50% interest in, and are a managing partner of, Trading Cove Associates, a Connecticut general partnership that developed and initially managed Mohegan Sun, a casino and
entertainment complex in
Uncasville, Connecticut. TCA managed Mohegan Sun from its opening in October 1996 to December 31, 1999 pursuant to a Management Agreement from which TCA earned management fees based on a
percentage of Mohegan Sun's earnings after depreciation and interest.

In
1998, the MTGA, appointed TCA to develop the $1.0 billion "Project Sunburst" expansion of Mohegan Sun pursuant to a development services agreement (the "TCA Development
Agreement") for a development fee of $14.0 million. In turn, TCA subcontracted with an affiliate of the Company pursuant to a subcontract development services agreement, which was later
assigned to the Company. In consideration for the services to be provided under the subcontract, TCA paid a fee to the Company.

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 and TCA receives annual payments of five percent of the gross revenues of Mohegan Sun for
the 15-year period that commenced January 1, 2000. The relinquishment fees pursuant to the Relinquishment Agreement ("Relinquishment Fees") are divided into senior and junior
relinquishment payments, which equal 5.0% of revenues. Revenues are generally defined as gross gaming revenues (other than Class II gaming revenue, i.e. bingo) and all other facility revenues,
including hotel revenues, food and beverage sales, parking, ticket revenues and other fees or receipts from the convention/events center generated by Mohegan Sun, including the Project Sunburst
expansion described below. Revenues will exclude any revenues generated by any other future expansion of the Mohegan Sun. TCA's right to receive the Relinquishment Fees is junior to certain payments
by the MTGA to the Mohegan Tribe and holders of its indebtedness. The senior and junior Relinquishment

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Fees
from the MTGA to TCA rank behind all of the MTGA's obligations to pay certain minimum priority distributions to the Mohegan Tribe and all of the MTGA's existing and future senior secured
indebtedness. The junior fees also rank behind all unsecured indebtedness.

For
seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the Relinquishment Fees it receives each year (after the return of certain expenses and
capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.

We
are one of two managing partners of TCA. All decisions of the managing partners require the concurrence of us and the other managing partner, Waterford Gaming, L.L.C. In the event of
deadlock there are mutual buy-out provisions. TCA's partnership agreement will terminate on December 31, 2040, or earlier in certain circumstances, in accordance with its terms.

Mohegan
Sun incorporates its historical Native American theme through unique architectural features and the use of natural design elements such as timber, stone and water. Mohegan Sun is
located on 240 acres and currently features the 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 and various other amenities, and a recently opened 34-story, 1,200-room luxury hotel.

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

We
oversaw the $1.0 billion "Project Sunburst" expansion of Mohegan Sun through TCA, which was completed in June 2002. 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, 1,200-room luxury hotel that opened with 734 rooms in April 2002. Mohegan Sun opened the remaining rooms in phases through
June 2002 and also added an additional 2,700 parking spaces in June 2002.

We
believe the Connecticut gaming market has been extremely strong and that Mohegan Sun's unique design and superior location have helped it to become one of the most profitable casinos
in the U.S. Since opening, gross revenues at the property have grown to $1.28 billion for the twelve months ended September 30, 2003, a 14.2% increase over the twelve month period ended
September 30, 2002.

United Kingdom

In April 2003, we agreed to acquire from LCI for $2.1 million a gaming license and property located in the city of Northampton, England. The city of
Northampton is approximately 70 miles north of London and approximately 1.3 million people live within 25 miles of the city. We have submitted an application for a certificate of consent to the
Gaming Board of Great Britain in order to transfer the gaming license and expect this process to be completed during the second quarter of 2004. We ultimately expect to develop and operate a new
casino facility on an approximate 30,000 square foot site, which is expected to cost approximately $15 million and open in 2005. The development of this facility is still subject to the
approval of local planning authorities.

In
September 2003, we announced that we had entered into an agreement with a commercial entity that provides for Kerzner to participate in the development of the UK Project. The
UK Project is planned to include retail, entertainment and leisure components and it is expected to also include a casino and hotel. Kerzner's role in the UK Project would consist of a first phase to
develop and operate a large scale casino and a second phase to develop and operate a new hotel. Subject to any changes in the expected scope of the UK Project related to United Kingdom gaming laws or
other factors, Kerzner estimates that the UK Project would cost in the range of $350 million, and that a majority of this cost is expected to be financed on a non-recourse project
basis. Kerzner made an initial

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payment
of $4.0 million upon execution of the agreement as partial consideration for the transaction. This transaction is subject to numerous conditions, including the enactment of appropriate
gaming legislation in the United Kingdom that would allow for the proposed casino, the granting of applicable gaming board, licensing, planning and council permissions under local laws and agreement
between the parties on various aspects of the design and construction of the UK Project. If the UK Project goes forward, construction of the casino is expected to commence as soon as practicable after
the passage of appropriate gaming legislation and the receipt of local approvals, while the development of the hotel is expected to commence after the construction of the casino is completed.

One&Only

Our One&Only business consists of a collection of managed and/or owned premier luxury resort properties that primarily operate in the five-star,
deluxe end of the market. In December 2002, we introduced our One&Only brand for certain of our luxury resort properties. We are now marketing six of our properties under our One&Only brand. We
expect that our new managed property under development on Kaafu Atoll in the Maldives ("Kaafu Atoll"), a 130-room luxury resort that we expect to open in 2005, Hotel Saratoga, a
100-room luxury resort in Havana that we expect to open in early 2005, together with other similar luxury resorts we develop or acquire in the future, will operate under our One&Only
brand. In addition, we have agreed to acquire a minority interest in a joint venture that expects to develop and manage a new property in Cape Town, South Africa. We do not currently plan on using the
brand for Sugar Beach Resort, La Pirogue Hotel or Le Coco Beach Hotel. We value outstanding design, unusual locations and genuine hospitality at our resorts and do not believe in applying simple
"formulas." We believe that all of our properties, most of which have been constructed or renovated within the last four years, offer guests a singularly distinctive experience.

Located
on what we believe to be some of the leading beach locations in the world, these resorts are architecturally unique and have been developed to blend into their natural
environment. Our luxury resort business currently consists of five properties in Mauritius (two of which, Le Saint Géran and Le Touessrok, are One&Only properties), the One&Only Royal
Mirage in Dubai, the One&Only Kanuhura in the Maldives, the One&Only Ocean Club on Paradise Island, The Bahamas and the One&Only Palmilla, near Cabo San Lucas, Mexico. We expect to leverage our
existing management expertise and business infrastructure and continue to grow this segment of our business in the Caribbean, the Indian Ocean, The Bahamas, the Middle East, Africa and Southeast Asia
to obtain
additional management contracts, which may also include strategic equity investments and debt financing.

As
of December 31, 2003, we were managing approximately 2,000 rooms. As part of our strategy, we sometimes take ownership positions in the properties that we operate. As of
December 31, 2003, the properties we operate are as follows:

Property

Location

Percentage
Ownership

Number of
RoomsOne&Only Ocean Club

The Bahamas

100.0%

106One&Only Palmilla

Mexico

50.0%

172One&Only Le Saint Géran(1)

Mauritius

20.4%

163One&Only Le Touessrok(1)

Mauritius

20.4%

200One&Only Kanuhura

Maldives

20.0%

100One&Only Royal Mirage

Dubai



466Sugar Beach Resort(1)

Mauritius

20.4%

238La Pirogue Hotel (1)

Mauritius

20.4%

248Le Coco Beach Hotel(1)

Mauritius

20.4%

333


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The
following properties are currently under development and will be marketed under the One&Only brand:

Property

Location

Percentage
Ownership

Number of
RoomsCape Town

South Africa

(1)

150Kaafu Atoll

Maldives



130Hotel Saratoga

Cuba



100


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One&Only Ocean Club

We own and operate the One&Only Ocean Club, a high-end luxury resort hotel with 106 rooms and suites located on Paradise Island, The Bahamas. In
October 2000, we completed an addition to the One&Only Ocean Club that comprised 50 rooms, including 10 deluxe suites, a gourmet beachfront restaurant, Dune, operated by Jean-Georges
Vongerichten and significant enhancements to the existing pool and garden areas. The One&Only Ocean Club also
features a 7,159 yard championship golf course designed by Tom Weiskopf and a clubhouse with 120 luxury oceanfront home sites situated around the golf course. The golf course is included in the
destination resorts segment within Atlantis, Paradise Island. During May 2003, the One&Only Ocean Club was named best luxury resort in the Atlantic/Caribbean region by Departures, the luxury
lifestyle magazine published exclusively for American Express Platinum and Centurion card members. The property achieved an
average occupancy of 79% and an average daily room rate of $722 during 2003, compared to 68% and $695 in 2002.

As
part of the Phase III Expansion discussed above, we have commenced construction on the development of three high-end luxury rental villas adjacent to the One&Only Ocean
Club, as well as the addition of a high-end boardroom meeting facility. This expansion is expected to be completed by the summer of 2004.

As
of December 31, 2003, we have closed on 112 of the 120 home sites available for sale and received approximately $118.4 million in gross proceeds from such sales. Of the
eight remaining properties, we are developing four homes for resale on lots owned by us and have received deposits for three of the four additional remaining properties.

Mexico

In September 2002, we purchased a 50% ownership interest in the One&Only Palmilla, a deluxe five-star property located near Cabo San Lucas in
Baja, Mexico for approximately $40.8 million, including transaction costs. The One&Only Palmilla is located on what we believe is an outstanding site with the most extensive beach coverage of
any of the leading hotels in the destination. In connection with the purchase, we entered into long-term management and development agreements related to the property that will expire in
2022. The acquisition was funded through a combination of cash on hand and drawings under our Amended Revolving Credit Facility. The One&Only Palmilla was recently renovated and expanded and
re-opened in January 2004 after refurbishment that expanded the room count to 172 rooms and significantly upgraded the amenities and public areas offered by the resort. The
expansion was financed by One&Only Palmilla Resort through local project financing that is supported by a $46.5 million guarantee from Kerzner. In addition, we have agreed to provide completion
loans to the One&Only Palmilla since it incurred expenditures in excess of budgeted amounts and it was unable to obtain third-party financing. During 2004, we expect to fund the One&Only Palmilla
approximately $14.0 million in completion loans, $3.0 million of which has already been advanced. The total cost of the One&Only Palmilla renovation is approximately
$102.0 million.

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Indian Ocean

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



The
Mauritius properties cater primarily to luxury and middle-market tourists from Europe and southern Africa. The One&Only Le Saint Géran and the One&Only Le Touessrok
offer deluxe five-star accommodations and we believe that such properties are among the finest beach resorts in the world. The One&Only Le Saint Géran and the One&Only Le
Touessrok have been rated among the world's finest leisure hotels byCondé Nast Travelermagazine. The One&Only Le Saint
Géran, which is classical in style, also was voted "Hotel of the Year 2002" byTatlermagazine in the United Kingdom. In
December 2002, we completed a major redevelopment of the One&Only Le Touessrok. The architecture of the new resort is a blend of a natural island-style and contemporary design. The resort
includes new restaurants, a new spa, a new championship golf course (which opened in November 2003) and other amenities to enhance its position in the luxury resort market.

Mauritius'
tourist industry is mainly comprised of visitors from Great Britain, Germany, France, Italy and South Africa. Scheduled air service to and from Mauritius is provided through
scheduled flights on numerous airlines, including Air France, British Airways, Cathay Pacific, Singapore Airlines, Air India, Air Mauritius, Condor and South African Airlines.

In
the Maldives, located 600 miles southwest of the southern tip of India, we manage and own an interest in the One&Only Kanuhura, a 100-room luxury resort located on
Kanuhura Island. In August 2001, we acquired 25% of the equity of the One&Only Kanuhura for approximately $3.8 million. Effective January 1, 2003, we sold 20% of this equity
interest to SRL. As of December 31, 2003, we had provided debt financing to the One&Only Kanuhura of $3.6 million, excluding accrued interest. The One&Only Kanuhura was selected as
"Hideaway of the Year 2001" by readers ofHideawaymagazine. See Note 16Related Party Transactions to the consolidated financial
statements.

We
have also entered into management and development agreements for a 130-room luxury resort on Kaafu Atoll, the Maldives that we expect to open in 2005. The management and
development agreements related to this property are co-terminus with the owner's lease, which expires in 2020. This new five-star resort will occupy the site where a small
resort was previously located. As part of this development, we have committed to provide certain financing arrangements to the current owner of the resort in an aggregate principal amount of up to
$50.0 million to ensure completion of the new resort and provide for working capital on a standby basis.

We
manage these resorts under long-term management contracts and receive management fees based upon a percentage of the revenues and gross operating profits of these
properties. In December 2002, we entered into an agreement with SRL to form One&Only Management for the purpose of, among other things, managing the five properties owned by SRL in Mauritius
and the One&Only Kanuhura in the Maldives and securing an extension to our management contracts in Mauritius from 2008 until 2023. Effective January 1, 2003, SRL owns 20% of One&Only
Management, and we own the remaining 80%. Subject to certain conditions, SRL's ownership interest will increase incrementally through 2009 for no consideration, at which time it will
own 50% of One&Only Management. In connection with this transaction, we transferred to One&Only Management all of our Mauritius management agreements and the Kanuhura management agreement, and SRL
purchased

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20%
of our debt and equity interests in the One&Only Kanuhura. In addition, pursuant to a subcontract arrangement with One&Only Management, we provide the comprehensive management services to the five
Mauritius resorts and receive a management fee. Subject to certain conditions, SRL has a right of first refusal to participate equally with us in any new hotels developed by us in specified Indian
Ocean territories. If SRL elects to participate in the equity or other funding of any such project, then the management agreement for that property will be held by One&Only Management.
SRL's board of directors has approved the exercise of its right to participate on a proportionate basis (currently 20%) with us in connection with the Kaafu Atoll project.

Middle East

In the Middle East, we currently manage the One&Only Royal Mirage in Dubai, a luxury 466-room hotel, the first phase of which opened in
August 1999. Under the terms of the management agreement, which expires in 2019, we receive management fees based on a percentage of the revenues and gross operating profits of the property. We
assisted in the expansion of the One&Only Royal Mirage, which opened at the end of 2002. The expansion of the property features 225 new luxury rooms, including a new 50-room ultra
high-end boutique hotel.

Cuba

In November 2003, we entered into agreements to manage and develop Hotel Saratoga, a 100-room hotel currently under renovation in Havana, Cuba,
which we expect to open in early 2005. Kerzner is assisting in the design and renovation of the hotel and will manage the completed hotel for a term of 10 years with an option for a further
10 years. Pursuant to the terms of our agreements, certain out-of-pocket expenses associated with our development of the hotel will be reimbursed to us from revenues
from the hotel's operations. Upon completion, this hotel will be a One&Only property.

South Africa

On November 14, 2003, we announced that we had entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited ("V&A Waterfront") to
develop a new luxury hotel at the highest end of the market in Cape Town, South Africa. We intend to form a joint venture with a local entity with limited financial resources in which we will
own a minority interest to develop and operate a new 150-room One&Only luxury hotel to be located in The Victoria & Albert Waterfront, which is part of Cape Town's waterfront and
harbor. In addition to an equity investment, we expect to provide financing assistance in the form of loans and/or guarantees. We expect to enter into a long-term land lease agreement with
the V&A Waterfront which will permit the development, in conjunction with our local partner, to proceed. Architectural design work for the new hotel has commenced and construction is expected to start
in 2005 and be completed by the end of 2006.

Internet Gaming

We previously owned and operated Kerzner Interactive Limited, an online Internet gaming site. During 2002, several countries made it increasingly difficult for
their citizens to gamble on-line. Further, as a licensed operator in the Isle of Man, we imposed numerous restrictions and controls on how we operated this business, which had the effect
of making it difficult for us to compete against companies operating in a less rigorous manner. As a result, we concluded that this business would not be economically viable in the short to medium
term. We discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003.

In
February 2002, we agreed to sell 50% of Kerzner Interactive Limited to Station Casinos, Inc. ("Station"), who paid us a non-refundable deposit of
$4.5 million in July 2002. Subsequently, this agreement was restructured and Station received an option through early January 2003 to purchase

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50%
of the operation in consideration for the $4.5 million previously received. During the first quarter of 2003, the Company and Station mutually agreed to terminate this transaction. Losses
and closure costs in 2003 were more than offset by the recognition of income of the $4.5 million option consideration, which resulted in $1.3 million in income from discontinued
operations, net of income tax effect for the year ended December 31, 2003. The losses from operations of Kerzner Interactive Limited of $8.1 million and $4.6 million for the years
ended December 31, 2002 and 2001, respectively, have been reclassified to loss from discontinued operations, net of income tax effect.

Trading Cove New York

Through a wholly owned subsidiary, we own a 50% interest in, and are a managing member of, Trading Cove New York, LLC ("TCNY"), a Delaware limited liability
company. 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 "Catskill Project") in the Catskill region of the State of New York (for purposes of this section, the "State"). The TCNY Development Agreement was
amended and restated in February 2002. The Stockbridge-Munsee Tribe does not currently have reservation land in the State, but is federally recognized and operates a casino on its reservation
in Wisconsin. The Stockbridge-Munsee Tribe has land claim litigation pending in the U.S. District Court for the Northern District of New York (the "Court") against the State, the counties of Madison
and Oneida and several municipalities to recover lands within the state that it alleges were wrongfully taken from the tribe. The Court had stayed the litigation for a number of years but in the
fourth quarter of 2003, the Court lifted the stay in an effort to advance the litigation. Presently, there are cross motions for summary judgment filed by the parties concerning procedural
jurisdictional issues, which motions are being considered by the Court.

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 Catskill Project. If the Catskill 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 TCNY Development Agreement, beginning with the opening of the Catskill 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 Catskill 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 Catskill Project site properties. Should the
BIA approve the Land to Trust Application and the Stockbridge-Munsee Tribe obtains 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. The plaintiffs have appealed that decision to the Appellate Division of the New York
Supreme Court.

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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 Catskill 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
Catskill Project.

The
Catskill 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 Catskill Project will be completed.

We
are one of two managing members of TCNY. All decisions of the managing members require the concurrence of us and Waterford Development New York, LLC, the other managing member. In the
event of deadlock there are mutual buy-out provisions.

The
Company's investment in TCNY is reflected within investments in associated companies in the accompanying consolidated balance sheets. As of December 31, 2003, we have funded
$5.0 million to TCNY.

Florida

Our indirect wholly-owned subsidiary, Kerzner International Resorts, Inc., a Florida corporation, together with its subsidiaries based in Florida, provides
general and administrative support services, marketing services, travel reservations and wholesale tour services for our Atlantis, Paradise Island and certain One&Only operations. To a much lesser
extent, they also provide travel reservation services for Harborside and other unaffiliated resort properties in The Bahamas.

France

Through an indirect wholly owned subsidiary, we own a tour operator company in France, Solea Vacances SA. Solea Vacances SA primarily services patrons in France,
and, among other things, offers reservations services for travel to the five resorts in Mauritius, the One&Only Royal Mirage Hotel in Dubai and the One&Only Kanuhura in the Maldives.

Seasonality and Weather

Our business has historically been seasonal, with the largest number of patrons visiting The Bahamas during late December and the first three months of the
calendar year. Accordingly, our revenues and operating profits have historically been higher during the first quarter than in successive quarters. In addition, The Bahamas, Mauritius and Mexico are
subject to tropical weather and storms, which, if severe, can interrupt the normal operations and affect tourism. Similarly, inclement weather can adversely affect the revenues that we derive from
Mohegan Sun 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.

In
September 1999, Paradise Island was affected by Hurricane Floyd, a hurricane rated by the United States National Weather Service as a category five, its highest rating. The
Paradise Island properties suffered approximately $45.0 million of property damage, for which remedial work was completed by year-end 1999, and we received a number of customer
cancellations. At Atlantis, Paradise Island, 230 rooms were taken out of service for three months and the One&Only Ocean Club was closed for approximately three and one half months. We were fully
insured for property loss and business interruption. Hurricane Floyd was the first significant hurricane to negatively impact Paradise Island in over thirty years.

31

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In
November 2001, Hurricane Michelle moved through The Bahamas. Although minimal disruption in our operations was caused by the storm, our properties (other than Harborside, which
was closed from August 2002 through December 2002 due to water damage resulting primarily from Hurricane Michelle, see "Item 4. Information on the Company, (B) Business Overview")
suffered approximately $28.3 million in damage that was substantially covered by our insurance policies. See "Item 3. Key Information, (D) Risk FactorsOur business is
seasonal and severe weather conditions can adversely affect our business, results of operations or financial condition, or further increase our insurance premiums."

As
a result of a more difficult insurance market, the fact that we have a concentration of assets in one location and that our properties are subject to the impact of hurricanes, we have
experienced substantial increases in our insurance premiums and deductibles. See "Item 3. Key Information, (D) Risk FactorsOur insurance premiums and deductibles have increased."

Insurance Arrangements

In May 2002, we formed Aberdeen Insurance (Bermuda) Ltd. ("Aberdeen"), a wholly owned captive insurance company located in Bermuda. Aberdeen has
been registered by the Bermuda Monetary Authority under The Insurance Act of 1978 as a Class 1 Insurer, and is utilized by the Company as a vehicle through which the Company places "all risk"
property and business interruption insurance policy, including windstorm, for the Atlantis, Paradise Island and Ocean Club properties. Harborside at Atlantis is covered under a Starwood insurance
policy. Although Aberdeen provides the Company with access to the reinsurance market at reduced administrative costs, all risks in excess of the Company's $15.0 million per
occurrence/$30.0 million annual aggregate deductible (which is in turn in excess of an underlying operating company deductible of $50,000 for each and every loss) will continue to be 100%
reinsured through the reinsurance market, thereby leaving Aberdeen with zero retained risk.

We
believe our current insurance coverage represents optimum market availability at commercially available pricing.

Competition

General

The resort and casino industries are highly competitive. Our destination casino resorts compete with other resorts, hotels and casinos, including
land-based casinos, riverboat, dockside and cruise ship on-board casinos and other forms of gaming as well as with other forms of entertainment. Our luxury resort hotels
compete with other resorts and hotels in markets in which we conduct business. We believe the ability to compete effectively in these industries is based on a number of factors, including the scope,
quality, location and accessibility of facilities, the effectiveness of marketing efforts, customer service, the relative convenience and costs of available transportation, service and the quality and
price of rooms, food and beverages, convention facilities and entertainment.

Paradise Island

Our Paradise Island operations primarily compete with warm weather resort destinations, including Walt Disney World and other Orlando area attractions, as well as
cruise ships and other hotels and resorts on Paradise Island, New Providence, Grand Bahama Island and the neighboring Caribbean islands. We estimate that there are approximately 8,500 hotel rooms on
Paradise Island and New Providence combined, of which approximately 3,500 are located on Paradise Island, including 2,423 in hotels owned and operated by us. The Wyndham Nassau Resort, our primary
competitor in The Bahamas, is an 850-room resort and casino. The One&Only Ocean Club also competes with a new Four Seasons property which opened on Great Exuma Island in The Bahamas in
November 2003.

32

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We
also compete with The Resort and Casino at Bahamia (formerly the Princess Casino and Hotel) and Our Lucaya, both located on Grand Bahama Island, approximately 40 minutes by air from
Paradise Island. The Resort and Casino at Bahamia includes a 20,000 square foot casino, a 965-room hotel, restaurants and other leisure facilities. Our Lucaya consists of a
749-room Westin and a 511-room Sheraton, and it recently opened a new 30,000 square foot casino.

Mohegan Sun

The Connecticut market is the fourth largest gaming market in the U.S., 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 6,700 slot machines and, for the twelve months ended September 30,
2003, reported gross revenues of approximately $1.28 billion. 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 U.S.

In
Connecticut, under the tribal-state compacts between the State of Connecticut (for purposes of this section, the "State") and the Mohegan Tribe and Foxwoods Resort and Casino, Mohegan
Sun is subject to a 25% gaming fee on slot revenues payable to the State so long as the State does not issue any further licenses for gaming operations with slot machines or other commercial casino
games (other than to a Native American tribe on Native American land). In June 2002, the Federal Bureau of Indian
Affairs ("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 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, on January 29, 2004, the BIA granted federal
recognition to a second group in Kent, Connecticut, the Schaghticoke Tribal Nation. The State of Connecticut is expected to appeal that decision just as it did the decision in the Historic Eastern
Pequot case. Three other Indian groups in the Connecticut gaming market have filed applications with the BIA for federal recognition as Indian tribes, the Golden Hill Paugusett of Trumbull and two
bands of Nipmuc Indians of Massachusetts that border Connecticut: the Hassanamisco Band of Sutton, and the Chaubunagungamaug Band of Dudley/Webster. The Sutton group has indicated an interest in
gaming in Connecticut as have the Paugusett group, the Historic Eastern Pequot and the Schaghticoke. Each of these groups has expressed interest in obtaining trust lands for the purpose of conducting
gaming in Connecticut.

Indian Ocean

In the Indian Ocean market, we primarily compete with other resorts on the islands in which we operate as well as other locations offering vacations to tourists
from Europe, southern Africa and parts of Asia. SRL owns five major hotels in Mauritius. In the luxury end of the Mauritian hotels market, SRL owns two of the seven luxury hotels and offers a total of
363 of the approximately 1,000 luxury rooms in Mauritius. SRL faces more competition with the middle-market La Pirogue, Sugar Beach and Le Coco Beach hotels.

Maldives

The One&Only Kanuhura, a five-star resort, competes with other resorts in the Maldives as well as other locations offering vacations to tourists from
Europe, southern Africa, and parts of Asia. The One&Only Kanuhura primarily competes with the five other five-star resorts in the Maldives. In this high-end market, the
One&Only Kanuhura offers about 17% of the 577 available rooms.

33

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Dubai

The premium leisure market in Dubai is mainly centered on the exclusive Jumeirah Beach "golden mile," which currently is host to nine competing
five-star hotels, each with its own theme. The One&Only Royal Mirage, which has a distinctive local Arabian architecture and theme, focuses on the higher spending leisure traveler, the
620-room Jumeirah Beach Hotel focuses on the family and group incentive market, and the 500-room Royal Meridien focuses on the middle spending leisure holiday market. The
One&Only Royal Mirage's 466 rooms account for over 12% of the beach rooms in Dubai. In addition, Medinat Jumeirah is a new property that will be built in two phases. The first phase, which was
completed during the third quarter of 2003, consists of 300 rooms. The Medinat Jumeirah is expected to increase to 900 rooms following the completion of the second phase. This hotel will be at the
five star level and it will compete directly with the One&Only Royal Mirage.

Dubai
is creating the two largest man made islands in the world known as The Palm, Jumeirah and The Palm, Jebel Ali, which are designed to attract resort as well as residential
developments and to substantially grow Dubai's tourism industry. These islands will be located adjacent to the Dubai coastline and will be connected by bridges to the mainland. Atlantis, The Palm will
be situated on The Palm, Jumeriah. The two islands are expected to add over 50 new luxury hotels, as well as shoreline apartments and villas.

Mexico

In Mexico, we entered the luxury end of the market with our ownership interest in and management of the One&Only Palmilla, a deluxe five-star resort
located near Cabo San Lucas in Baja, Mexico. The upscale four- and five-star resorts in Los Cabos, the tourism corridor between San Jose Del Cabo and Cabo San Lucas, account
for approximately 2,500 rooms out of the total inventory of approximately 8,500 rooms. The market is mainly composed of incentive group travelers, golfers, romance, family and high-end
vacationers. Three resorts cater to the five-star market, the One&Only Palmilla, Las Ventanas al Paraiso and Esperanza. Of these, only the One&Only Palmilla offers its own golf course,
which we believe gives us a competitive advantage. The One&Only Palmilla was recently renovated and expanded and re-opened in January 2004 after a refurbishment that expanded the
room count to 172 rooms and significantly upgraded the amenities and public areas offered by the resort. Currently, Las Ventanas al Paraiso, with 61 rooms, leads the market in average occupancy (in
the 85% range) and average daily room rates (in excess of $700).

Outside
of Los Cabos, domestic competition comes from the Four Seasons Punta Mita Resort in the Puerto Vallarta area of Mexico, which offers a similar resort and golf experience.
Internationally, the Los Cabos resort area competes with Hawaii, California and Arizona.

Sales and Marketing

Our marketing goal is to drive demand direct from the consumer through high profile public relations, publications and special events promotions and advertising.
To support our operations in The Bahamas, we maintain an inventory of rooms for distribution through our tour operator, PIV, Inc., an indirect wholly owned subsidiary. For the year ended
December 31, 2003, PIV, Inc. generated tour operations revenues of approximately $28.9 million as compared to $29.0 million in 2002. Similarly, our operations in Mauritius,
the Maldives and Dubai are supported primarily through our own European marketing offices. In addition, we channel distribution for all of our operations through primary wholesalers in the travel
agent community with a favorable commission structure.

We
spent approximately $24.9 million in 2003 on sales and marketing for our operations in The Bahamas. Pursuant to the Heads of Agreement described above under "Certain Matters
Affecting Our Bahamian OperationsHeads of Agreement," we receive $4.0 million per year from the Bahamian Government toward the direct costs related to certain marketing events,
public relations activities and the production and placement of advertisement in media through December 2007.

34

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Certain Matters Affecting Our Bahamian Operations

Airline Arrangements

The majority of patrons at our resorts on Paradise Island arrive through Nassau International Airport located on New Providence Island. This airport is served by
several carriers offering scheduled jet service from New York, Atlanta, Charlotte, Toronto, Miami, Washington D.C., London and other cities. Ground transportation is facilitated by two bridges linking
Paradise Island and New Providence Island.

Union Contract Arrangements

In The Bahamas, as of December 31, 2003, approximately 3,680 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.
Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area. The
association has signed a new contract with the union that will expire on January 7, 2008. Labor relations in The Bahamas have been unstable at times with occasional work slowdowns occurring,
not only at Atlantis, but also at publicly run entities such as the Bahamian Electric Corporation and Bahamas Telephone Company. As the country's largest private employer, we are sometimes the target
of labor disputes. See "Item 3. Key Information, (D) Risk FactorsWork stoppages and other labor disputes could harm our financial condition and results of operations."

Casino License

Paradise Enterprises Limited ("PEL"), a subsidiary that is part of our Bahamian operations, is currently licensed to operate the Atlantis Casino
under the Bahamian Gaming Act (the "Gaming Act"). In accordance with Bahamian casino licensing requirements, PEL is obligated to have its casino license renewed annually by the Gaming Board. In
addition, other than an existing contingent obligation to grant two casino licenses, the Bahamian Government has agreed that it will grant no new casino licenses with respect to gaming operations on
Paradise Island or New Providence Island for a period expiring 20 years after the earlier of the date of the substantial completion of the Phase III Expansion or December 31, 2007. See
"Item 4. Information on the Company, (B) Business OverviewThe PropertiesDestination ResortsAtlantis, Paradise Island."

Basic License Fee

Currently, the Gaming Act provides for taxes on casino revenues consisting of an annual basic license fee of $200,000.

Taxes and Fees

The following table summarizes for the periods shown the taxes and fees paid or accrued by our Bahamian operations under the Gaming Act and certain agreements
with the Bahamian Government, as described below under "Heads of Agreement" (in thousands of U.S. dollars):

Year Ended December 31,2003

2002

2001Casino license fees and win taxes

$
11,295

$
12,040

$
10,749Basic license fees


200


200


200Total

$
11,495

$
12,240

$
10,949


35

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Heads of Agreement

We have an agreement with the Bahamian Government, which is titled Heads of Agreement. This agreement provides us with certain tax incentives in exchange for the
Company investing in the expansion of Atlantis, Paradise Island. The most significant of these incentives are the casino fee and tax incentives.

We
restated our agreement with the Bahamian Government on May 26, 2003, in anticipation of the Phase III Expansion on Paradise Island. The restated Heads of Agreement maintains
the current basic
casino tax and fee structure which calls for an annual license fee of $100,000 per thousand square feet of casino space, a minimum annual casino tax of $4.3 million on all gaming win up to
$20.0 million, a 12.5% win tax on gaming win between $20.0 million and $120 million and a 10% win tax on gaming win in excess of $120.0 million. Against this, the Company
is entitled to a credit of $5.0 million in relation to the annual license fee and a 45% credit against all win tax on gaming win between $20.0 million and $120.0 million. With the
commencement of construction of Phase III-A described in "Item 4. Information on the Company, (B) Business OverviewThe PropertiesDestination
ResortsAtlantis, Paradise Island," the basic tax and fee structure was amended so that all gaming win in excess of $20.0 million is subject to a win tax of 10%, and is effective
for a period of 20 years after the earlier of the date of the substantial completion of the Phase III Expansion and December 31, 2007 (such date, the "Relevant Date"). In addition, the
$5.0 million credit against the annual license fee shall remain, and the credit against win tax shall become 50% against all win tax on gaming win over $20.0 million. However, the 50%
credit will not apply to gaming win in excess of $175 million in any year through 2010 and $200 million in each succeeding year. These credits shall also apply from the commencement of
construction of Phase III-A and extend for a period of 11 years from the Relevant Date.

In
order to secure the tax incentives described in the preceding paragraph, we were obligated to commence construction on aspects of Phase III-A by December 31, 2003
and commence construction on the balance of Phase III-A by June 30, 2004. We notified the Bahamian Government on August 11, 2003 that we had commenced construction on aspects
of Phase III-A and were therefore entitled to the accrual of the tax incentives described above as of such date. In the event that we do not proceed with Phase III-B, there
will be a proportionate scaling back of the casino fee and tax incentives.

The
Company has agreed to create a minimum of 2,000 new permanent jobs for Bahamians assuming completion of all elements of the Phase III Expansion. The Bahamian Government has also
agreed to extend the expiration of the Company's casino license to the date that is 20 years after the Relevant Date. In addition, other than an existing contingent obligation to grant two
casino licenses, the Bahamian Government has agreed that it will grant no new casino licenses with respect to gaming operations on Paradise Island or New Providence Island until 20 years after
the Relevant Date. Finally, the Company has also provided certain undertakings that include skills training, community development programs, and to the extent possible, a local stock ownership program
for Bahamians.

The
Heads of Agreement also provides for an extension of the Company's joint marketing agreement with the Bahamian Government pursuant to which the Bahamian Government will match the
Company's contribution, up to $4.0 million annually, toward the direct costs related to staging certain marketing events, public relations activities and the production and placement of
advertisements in all media to promote the destination and the Company's Paradise Island properties, including the Phase III Expansion. This joint marketing agreement will expire on
December 31, 2007.

This
summary is qualified in its entirety by reference to the particular provisions of the Heads of Agreement, which can be found as Exhibit 99(2) to our
Form 6-K filed on May 28, 2003.

36

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The Commonwealth of The Bahamas

The Commonwealth of The Bahamas had a population of approximately 300,000 in 2003. The Bahamas includes approximately 700 islands, 29 of which are inhabited, and
extends from east of the Florida coast to just north of Cuba and Hispañola. Over 60% of the population lives on New Providence Island, where Nassau, the capital of The Bahamas, is
located. The Bahamas first obtained internal self-government in 1964 and became an independent nation within the British Commonwealth in 1973. The first elections under universal adult
suffrage were held in November 1962. The former government was first elected in 1992 and re-elected in March 1997, having succeeded a government that was in power for over
20 years. On May 2, 2002, general elections were held and a new government elected, including a new Prime Minister and Deputy Prime Minister. The official language is English.

The
currency of The Bahamas has been tied to the U.S. dollar since 1970 with an official exchange rate of U.S. $1.00 equal to 1.00 Bahamian dollar.

The
Ministry of Tourism has historically spent over $60.0 million annually to promote The Bahamas.

Certain Matters Affecting Our Connecticut Operations

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.

Priority Payments

For seven years beginning January 1, 2000, TCA pays us the first $5.0 million of the Relinquishment Fees it receives each year (after the return of
certain expenses and capital contributions) pursuant to the Relinquishment Agreement as a priority payment prior to making pro rata distributions to its partners.

Waiver of Sovereign Immunity

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

37

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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.

New Jersey Gaming Regulation

As a result of the Resorts Atlantic City Sale, effective April 25, 2001, we no longer operate a casino in Atlantic City. However, as the lessor of real
estate in Atlantic City to Colony, KINA has been required to maintain a casino service industry license. As a result of the exercise by Colony of its option to purchase the real estate which we owned,
KINA has been qualified by the New Jersey Casino Control Commission as a financial source of Colony due to its financing of the transaction with Colony, and KINA will maintain its casino service
industry license. The sale was completed on March 18, 2004. See "Item 4. Information on the Company, (A) History and Development of the CompanyRecent
DevelopmentsColony Option."

Environmental Matters

We are subject to federal, state and local laws and regulations that:



From
time to time, our operations have resulted or may result in noncompliance with applicable environmental laws. However, past noncompliance has not had, and we believe that future
noncompliance, if any, would not have, a material adverse effect on our financial conditions or results of operations.

The
Mohegan Sun site was formerly occupied by UNC, a naval products manufacturer of, among other things, nuclear reactor fuel components. UNC's facility was officially decommissioned on
June 8, 1994, when the Nuclear Regulatory Commission confirmed that all licensable quantities of special nuclear material had been removed from the Mohegan Sun site and that any residual
special nuclear material contamination was remediated in accordance with the Nuclear Regulatory Commission-approved decommissioning plan.

From
1991 through 1993, UNC commissioned an environmental consultant to perform a series of environmental assessments on the Mohegan Sun site, including extensive soil investigations and
groundwater monitoring. The environmental assessments detected, among other things, volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater. Extensive remediation of
contaminated soils and additional investigations were then completed. Although the Mohegan Sun site currently meets applicable remediation requirements, no assurance can be given that the various
environmental assessments with respect to the Mohegan Sun site revealed all existing environmental conditions, that any prior owners or tenants of the Mohegan Sun site did not create any material
environmental condition not known to the MTGA, that future laws, ordinances or regulations will not impose any material environmental liability or that a material environmental condition does not
otherwise exist on Mohegan Sun. Future remediation may be necessary if excavation and construction exposes contaminated soil, which has otherwise been deemed isolated and not subject to cleanup
requirements. Such remediation could adversely impact the results of operations and financial condition of Mohegan Sun and therefore our results of operations and financial condition.

In
addition, the Environmental Protection Agency has named a predecessor to KINA as a potentially responsible party, or a PRP, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, or CERCLA, for the cleanup of contamination resulting from past disposals of hazardous waste at the Bay Drum site in Florida, to which the predecessor, among

38

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others,
sent waste in the past. CERCLA requires PRPs to pay for cleanup of sites at which there has been a release or threatened release of hazardous substances. Courts have interpreted CERCLA to
impose strict, joint and several liability upon all persons liable for cleanup costs. As a practical matter, however, at sites where there are multiple PRPs, the costs of cleanup typically are
allocated among the parties according to a volumetric or other standard. Because we have only limited information at this time regarding this site and the wastes sent to it by the predecessor, we are
unable to determine the extent of our potential liability, if any, at this site.

(C)  Organizational Structure

Set forth below is a table listing our significant subsidiaries:

Name of Company

Country of IncorporationAberdeen Management Limited(1)

Channel IslandsKerzner Hotels International (Bermuda), Limited(1)

BermudaKerzner International Bahamas Limited(2)

The BahamasKerzner International Management Limited(3)

British Virgin IslandsKerzner International North America, Inc.(4)

United StatesKerzner International Timeshare Limited(5)

The BahamasKerzner Investments Palmilla, Inc.(6)

The BahamasOne&Only (Indian Ocean) Management Limited(7)

British Virgin Islands


---

(D)  Property, Plant and Equipment

Our headquarters and registered office are located at Executive Offices, Coral Towers, Paradise Island, The Bahamas.

39

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We
own or lease properties in The Bahamas, the United States, the United Kingdom and France. Set forth below is a table listing our principal properties as of December 31, 2003:

|Name and Location                                                 |  | Owned or
Leased |  | Principal Use                       |  | Size               |  | Capacity     
|----------------------------------------------------------------- |  | --------------- |  | ----------------------------------- |  | ------------------ |  | -------------
|Atlantis
Paradise Island,
The Bahamas(1)                          |  | Owned           |  | Hotel/Casino                        |  | 123 acres          |  | 2,317 Rooms  
|One&Only Ocean Club
Paradise Island,
The Bahamas(1)               |  | Owned           |  | Hotel                               |  | 35 acres           |  | 106 Rooms    
|Ocean Club Golf Course and Clubhouse
Paradise Island,
The Bahamas |  | Owned           |  | Golf Course                         |  | 209 acres          |  | N/A          
|Roads and Utility Sites
Paradise Island,
The Bahamas(1)           |  | Owned           |  | Infrastructure                      |  | 52 acres           |  | N/A          
|Undeveloped Land
Paradise Island,
The Bahamas(1)                  |  | Owned           |  | Future Development                  |  | 115 acres          |  | N/A          
|Undeveloped Land
Atlantic City,
New Jersey                        |  | Owned           |  | (2)                                 |  | 23 acres           |  | N/A          
|Land Holding
Northampton, UK                                      |  | Owned           |  | Future Development                  |  | 1.32 acres         |  | N/A          
|Kerzner International
North America, Inc.
Plantation, Florida     |  | Leased          |  | Administrative and Marketing Office |  | 65,000 square feet |  | 425 Employees

---

In addition to the properties listed above, we lease several small administrative offices in various locations throughout the U.S. that we use for
marketing purposes. The number of employees at each of these offices is less than ten. We lease a small administrative office in Buckinghamshire, United Kingdom, as well as two offices in Paris,
France, one of which Solea Vacances SA, our wholly owned European tour operator subsidiary, uses as a travel agency, while the other is a marketing office. We also lease an office outside of
Frankfurt, Germany, which we use as a marketing office.

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

40

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Item 5.    Operating and Financial Review and Prospects

(A)  Overview

Business of Kerzner International

We develop and operate premier resort casinos and other properties throughout the world and manage our business in three segments: Destination Resorts, Gaming and
One&Only. Our Destination Resorts segment is currently our largest and most important segment from both a gross revenue and net income perspective. Management previously viewed the Company as
operating solely in one business segmentthe resort and casino businesswhich was conducted in various geographical areas. However, in 2003, as our businesses grew and evolved,
management began to view the Company as operating in three distinct segments. In addition, management expects that our future growth will further define and reinforce these segments. Accordingly,
commencing with our full year 2003 financial statements, we will report our business in three segments: the Destination Resorts segment, the Gaming segment, and the One&Only segment.

The
Destination Resorts segment is comprised of our larger destination resorts, including our flagship property, Atlantis, Paradise Island, but also includes marketing fees and equity in
earnings (losses) from our jointly owned timeshare, Harborside at Atlantis and our wholly owned tour operator, PIV, Inc. In addition, once we begin development and finalize a joint venture with
Nakheel LLC, an entity owned by the government of Dubai, this segment will include Atlantis, The Palm, which is expected to include a 1,000-room resort and an extensive water theme park
located on The Palm, Jumeirah, a $1.5 billion land reclamation project in Dubai, United Arab Emirates.

Our
Gaming segment is comprised of our interests in properties that are primarily casinos, such as our indirect interest in the Mohegan Sun in Uncasville, Connecticut. We receive fees
pursuant to relinquishment and development agreements through our investment in TCA. We believe the Mohegan Sun is one of the largest and most profitable casinos in the world today. We are also
pursuing gaming opportunities in certain jurisdictions throughout the world, including the United Kingdom.

Our
One&Only segment is comprised of our ownership and management interests in a portfolio of smaller (when compared to our destination resorts) luxury resorts and hotels. We currently
operate nine resort properties in Mauritius, the Maldives, Dubai, Mexico and The Bahamas, six of which are operated under the One&Only brand. We have also entered into agreements to develop and manage
a second property in the Maldives, a property on the Victoria & Alfred Waterfront in Cape Town, South Africa through our future minority interest in a joint venture, and a property in Havana,
Cuba, all of which will be operated under the One&Only brand. The earnings contribution from our One&Only segment includes management and development fees, equity in earnings (losses) and direct
expenses associated with such properties. In order to acquire management contracts, we often participate in the equity of managed properties, usually in a supplementary role, or we may provide project
financing or guarantees in order to complete the development of a new property.

Management
reviews the performance of our business based on the three segments discussed above. Where applicable, reference is made to the other items affecting earnings for unusual or
infrequent items that affect the contribution from these segments. Each segment includes the revenues, direct operating expenses and depreciation and amortization related to that business. Corporate
expenses, interest expense, interest income and certain other items are evaluated separately, and are not included in amounts presented in our separate segments.

During
2003, 2002 and 2001, after direct operating expenses and depreciation and amortization attributable to each segment, each of our businesses contributed the following percentages
to income

41

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(dollars
in millions). For a reconciliation of the segment contribution to GAAP net income, see Note 24Segment Information in the accompanying notes to the consolidated financial
statements:

2003

2002

2001$

%

$

%

$

%Destination Resorts

$
93.8

73%

$
77.5

68%

$
66.1

60%Gaming

$
35.4

27%

$
31.4

27%

$
34.7

31%One&Only

$
0.3



$
5.7

5%

$
10.1

9%


For
the purposes of the table above, income, as defined does not include corporate expense, interest income and expense, income taxes, other income and expenses. The
amounts presented below with respect to each of our segments also do not include any of these items.

(B)  Restatement and Reclassifications

Subsequent to the issuance of the December 31, 2002 consolidated financial statements, the Company determined that it was necessary to restate its
consolidated financial statements as of December 31, 2002 and for the two years then ended. For further discussion of recently restated financial information, see "Item 18. Financial
StatementsNote 2Restatements and Reclassifications."

During
2003, the Company reviewed the accounting treatment with respect to the disposition of Resorts Atlantic City in 2001. The Company completed the sale of Resorts Atlantic City on
April 25, 2001 (see Note 4Business Acquisitions and Dispositions, Sale of Resorts Atlantic City in the accompanying notes to consolidated financial statements). The
financial results of Resorts Atlantic City from the period January 1, 2001 to April 24, 2001 were excluded from our reported consolidated statement of operations for the year ended
December 31, 2001. In connection with the restatement, the accompanying consolidated statement of operations for the year ended 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 for the period from January 1, 2001 to April 24, 2001 of
$4.9 million is included within the accompanying consolidated statement of operations together with a 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
Company has also made certain reclassifications and adjustments related to its investment in TCA. As the Company accounts for its investment in TCA under the equity method of
accounting, the Company has reclassified amounts related to its investment in TCA as of December 31, 2002 and 2001 that had previously been included in deferred charges and other assets and due
from affiliates-current to investment in associated companies in the accompanying consolidated balance sheets in order to properly state our investment in TCA. We record equity earnings from TCA in
"relinquishment feesequity earnings in TCA" in the accompanying consolidated financial statements. Amounts earned under the TCA Development Agreement are included in "TCA development and
other fees" in the accompanying consolidated financial statements. The Company has reclassified such amounts previously reported within management and other fees to relinquishment
feesequity earnings in TCA and TCA development and other fees in the accompanying consolidated financial statements due to the significance of the amounts earned from TCA and to
reclassify the equity in earnings from TCA from revenues to a component of operating income. (See "Item 4. Information on the Company, (B) Business OverviewThe
PropertiesGamingMohegan Sun" for a discussion of the TCA Development Agreement). In addition, during the years ended December 31, 2002 and 2001, we made adjustments to
fees in order to properly state the amount of equity earnings from TCA as a result of the impact on our consolidated financial statements from the restatement of TCA's financial statements. The
restatement of TCA's financial statements was announced on May 21, 2003 and the primary effect of the restatement was to recognize as an expense certain contractual obligations owed to its
partners and their affiliates for prior services performed under contract. Such adjustments included the elimination of amortization expense in order to properly state our earnings from TCA.

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The Company has also made certain other adjustments and reclassifications to its historically reported consolidated balance sheets and statements of operations. With respect to the
consolidated statements of operations, these other adjustments include reclassifying the Company's equity loss from TCNY from selling, general and administrative expenses to equity in earnings
(losses) of associated companies in the accompanying consolidated statements of operations for the year ended December 31, 2001, and adjustments made to selling, general and administrative
expenses and corporate expenses in order to correct for the understatement of operating expenses, partially offset by a correction of bad debt expense.

Certain
other balance sheet adjustments and reclassifications as of December 31, 2002 and 2001 include the reclassification of certain employee notes receivable from trade
receivables to deferred charges and other assets, the reclassification of certain affiliated receivables from trade receivables to due from affiliates, an adjustment to correct for the overstatement
of the allowance for doubtful accounts, an adjustment to land to correct the carrying value of certain land improperly recorded at the time of land acquisition in 1996 and adjustments to accounts
payable and accrued liabilities primarily related to the elimination of certain liabilities improperly established at the time of land acquisition in 1996.

The
Company has made other reclassifications to its consolidated financial statements in addition to those resulting from the restatement. Other reclassifications include the
reclassification of certain expenses from corporate expenses to selling, general and administrative expenses in order to conform to our 2003 presentation. Further, pursuant to the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections", the
Company has reclassified the $20.5 million extraordinary loss related to the early extinguishment of our 85/8% Senior Subordinated Notes and our 9% Senior Subordinated Notes
recognized during the year ended December 31, 2002 to other expense in the accompanying consolidated statements of operations.

Also,
we have made certain changes with respect to our presentation of the operating results for Kerzner Interactive. During the first quarter of 2003, the Company discontinued the
operations of its online gaming subsidiary, Kerzner Interactive. The operating results of Kerzner Interactive for the years ended December 31, 2002 and 2001 have been reclassified to loss from
discontinued operations, net of income tax effect in the accompanying consolidated statements of operations based on the decision in the first quarter of 2003 to discontinue that business. For further
discussion of the discontinuation of Kerzner Interactive, see "Item 4. Information on the Company, (B) Business OverviewInternet Gaming."

(C)  Operating Results

Consolidated Results

2003 vs. 2002.Over the past two and a half years, as the overall travel industry has been struggling, we have improved our
profitability. In 2003, Atlantis, Paradise Island achieved record gross revenue of $520.4 million, its second consecutive year of growth and its highest ever contribution to income of
$93.8 million as compared to $77.5 million in 2002. Equity earnings and fees earned from Mohegan Sun of $35.7 million represented the third consecutive year of growth and a 13.9%
increase over last year as Mohegan Sun continues to increase its share of the growing Connecticut slots market. These strong results allowed us to strengthen our balance sheet by reducing interest
bearing debt by $72.3 million, resulting in a reduction of interest expense of $9.8 million in 2003. During the year, these factors contributed to income and diluted earnings per share
from continuing operations in 2003 of $70.3 million and $2.39, respectively, as compared to $47.7 million and $1.67, respectively, in 2002. (See "Other Factors Affecting Earnings" for a
comparison and explanation of certain items affecting 2003 and 2002 results.)

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2002 vs. 2001.2002 was a good year for us despite the general downturn in the worldwide travel market. Income and diluted
earnings per share from continuing operations in 2002 were $47.7 million and $1.67, respectively, as compared to $37.3 million and $1.34, respectively, in 2001. (See "Other Factors
Affecting Earnings" for a comparison and explanation of certain items affecting 2002 and 2001 results.) This resulted primarily from the strong results of Atlantis, Paradise Island, which achieved
gross revenues of $507.7 million in 2002 as compared to $470.3 million in 2001. In 2002, we also refinanced our debt structure thereby reducing our interest bearing debt by
$51.8 million, which lowered our effective interest rate and which helped to reduce interest expense by $21.3 million or $13.6 million (excluding interest expense related to
Resorts Atlantic City) as compared with 2001.

Destination Resorts

Atlantis, Paradise Island, The Bahamas

2003 vs. 2002.During 2003, despite the war in Iraq and terrorist threats in the U.S., Atlantis, Paradise Island had its
strongest year ever. This property contributed $93.8 million to income, as compared to $77.5 million in 2002. This increase was primarily the result of the strong performance of the
Atlantis casino and was achieved despite a $6.0 million increase in the cost of our "all risks" insurance in 2003. In 2002, we incurred a $6.9 million charge due to remediation work done
at Harborside at Atlantis.

Atlantis,
Paradise Island offers a variety of amenities resulting in a diverse stream of revenue. This limits our dependence on any particular operation and helps maximize revenue per
occupied room night. Gross revenues for Atlantis, Paradise Island of $520.4 million in 2003 exceeded 2002 by $12.7 million (2.5%). These revenues were composed of 32.3% from rooms, 26.6%
from gaming, 22.8% from food and beverage and 18.3% from other sources.

Room
revenues in 2003 were $168.0 million as compared to $166.4 million in 2002. Gross profit from rooms of $141.5 million increased over 2002 by
$2.0 million, or 1.5%, due primarily to an increase in revenue per available room ("RevPAR") and a slight reduction in expenses. Atlantis, Paradise Island achieved RevPAR of $201 in 2003, which
was a 1.0% increase over 2002. The average daily room rate ("ADR") at Atlantis, Paradise Island in 2003 and 2002 was $251 and $245, respectively, and occupancy was 80% and 81%, respectively.

Gross
profit from gaming was $75.3 million in 2003 as compared to $66.2 million in 2002. The $9.1 million increase in gross profit from gaming over 2002 resulted
from a more favorable table hold percentage (which represents the ratio of table game win to dollar amount of chips purchased), and increases in both table game drop (the dollar amounts of chips
purchased) and slot coin in. During 2003, there was a 6.4% increase in the table game drop from $490.2 million to $521.7 million and an increase in the table hold percentage (from 15.6%
to 16.3%) as compared to 2002, resulting in table game win of $84.9 million in 2003 compared to $76.5 million in 2002. In addition, slot win slightly increased in 2003 to
$53.5 million, as compared to $53.3 million in 2002. During September 2003, we opened Pegasus Race and Sports Book. Although we do not anticipate significant profits from Pegasus,
we anticipate that patrons will be more likely to stay at Atlantis, Paradise Island during periods when significant sporting events such as the Super Bowl and the NCAA Final Four Tournament are taking
place.

Food
and beverage gross profit was $39.2 million in 2003 as compared to $40.3 million in 2002. Food and beverage gross profit was down slightly (2.5%) as the $2.04 increase
in food and beverage revenue per occupied room did not completely offset the slight decrease in occupancy in 2003.

Selling,
general and administrative expenses were $84.5 million in 2003 as compared to $80.8 million in 2002. Contributing to this increase was a $6.0 million
increase in the cost of our "all risks" insurance premiums, as 2002 included five months of favorable pre-September 11 rates (our

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policy
year runs from June 1 to May 31). Additionally, in 2003 there were increases of $1.8 million in information technology and human resources costs, $1.3 million in our
provision for legal settlements, and various other costs, none of which are individually significant. Sales and marketing costs decreased in 2003 by $2.1 million as part of our strategy during
2002 was to expand marketing efforts following September 11th rather than reducing room rates. We also reduced our provision for doubtful receivables by $1.8 million and experienced a
$1.7 million reduction related to property taxes. Also in 2002, we incurred $1.2 million of lease termination costs related to the relocation of one of our offices from Fort Lauderdale,
Florida to Plantation, Florida. Depreciation and amortization for Atlantis, Paradise Island was $51.0 million in 2003 and $50.7 million in 2002.

Harborside
at Atlantis, our 50% owned timeshare joint venture on Paradise Island, performed well during 2003, resulting in the recognition of $3.3 million in equity earnings and
$1.8 million in marketing fees. Harborside at Atlantis was closed from August through December of 2002 to repair water damage primarily resulting from 2001's Hurricane Michelle. During 2003 and
2002, our share of these remediation costs were $1.8 million and $6.9 million, which excluded any insurance recovery. During the fourth quarter of 2003, our portion of insurance recovery
related to the remediation costs was $1.5 million. Representatives of Harborside at Atlantis are still in negotiation with the insurers and Harborside at Atlantis may receive an additional
recovery during 2004. During 2002, we recorded equity losses of $5.2 million resulting from the $6.9 million remediation charge offset by $1.7 million equity earnings from
Harborside at Atlantis' operations. In 2002, we recognized $1.6 million in marketing fees. See "Other Items Affecting Earnings" below for further discussion.

Sales
at Harborside at Atlantis are on pace with original projections with approximately 89% of the existing units sold as of December 31, 2003 from the original development. As
part of the overall Phase III expansion of Paradise Island, an additional 116 two and three bedroom lock-off units are expected to be completed in 2005. Because the existing development,
sales and marketing infrastructure are already in place, we anticipate higher margins from this phase of Harborside as compared to the original phase of construction.

2002 vs. 2001.Atlantis, Paradise Island contributed $77.5 million to income, which included a $6.9 million
charge at Harborside at Atlantis for remediation costs, as compared to $66.1 million in 2001, which included $2.3 million of pre-opening expenses related to the Ocean Club
Golf course. This increase was due to improved business levels combined with certain cost-saving measures. As much of the industry continued to suffer from a decline in travel following
September 11th and responded by decreasing room rates, our strategy was to expand marketing efforts rather than embark on a discounting policy. This approach proved successful as Atlantis,
Paradise Island demonstrated its strength and resilience during these difficult times.

Gross
revenues from Atlantis, Paradise Island of $507.7 million exceeded 2001 by $37.5 million (8.0%). These revenues were composed of 32.8% from rooms, 25.6% from gaming,
23.4% from food and beverage and 18.2% from other sources.

The
$5.1 million increase in room revenue (from $161.3 million to $166.4 million) over 2001 resulted from the recovery of business levels that had been adversely
affected by September 11th. Gross profit from rooms increased by $1.8 million (from $137.6 million to $139.4 million), or 1.3%. Atlantis, Paradise Island achieved RevPAR of
$199 for the year, which was a 2.4% increase over 2001 and marginally below that of 2000. ADR at Atlantis, Paradise Island in 2002 was $245 (as compared to $252 in 2001) and occupancy was 81% (as
compared to 77% in 2001).

The
$10.1 million increase in gross profits from gaming over the $56.0 million recognized in 2001 mainly resulted from a more favorable table hold percentage. During 2002,
there was a 6.3% decrease in table game drop from $522.9 million to $490.2 million and an increase in table hold percentage (from 13.1% to 15.6%) as compared to 2001, resulting in table
game win of $76.5 million in 2002

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compared
to $68.5 million in 2001. In addition, slot win of $53.3 million in 2002 increased by $4.8 million over 2001.

Food
and beverage gross profit was $40.3 million in 2002 as compared to $37.2 in 2001. The increase of $3.1 million was also primarily due to the business recovery
achieved.

Selling,
general and administrative expenses were higher by $5.5 million compared to 2001. This resulted from a $3.4 million increase in our "all risks" insurance premiums
as well as a $2.7 million increase in advertising costs. Additionally, incentive bonuses to management and employees, which are based on operating results, increased by $3.7 million, and
we incurred $1.2 million of lease termination costs related to the relocation of one of our offices from Fort Lauderdale, Florida to Plantation, Florida. These increases were offset by a
$3.2 million decrease in provision for doubtful receivables and by various other costs, none of which is individually significant, which resulted primarily from the cost reduction program we
implemented following September 11th.

Depreciation
and amortization for Atlantis, Paradise Island was $50.7 million in 2002 and $46.5 million in 2001. This increase was due primarily from the renovation of
approximately 400 rooms in the Coral Towers and the completion of various other capital projects at Atlantis, Paradise Island.

Harborside
at Atlantis was closed from August through December 2002 to repair water damage primarily resulting from 2001's Hurricane Michelle, which resulted in a
$6.9 million charge against our
share of earnings. During 2002, we recorded equity losses of $5.2 million from Harborside at Atlantis, as the $6.9 million charge was partially offset by $1.7 million of our share
of earnings from Harborside at Atlantis' operations. Equity in earnings from Harborside at Atlantis were $0.5 million in 2001. During 2002 and 2001, we earned marketing fees from Harborside at
Atlantis of $1.6 million and $1.4 million, respectively. See "Other Items Affecting Earnings" below for further discussion.

Atlantis, The Palm, Dubai

The Company and Nakheel LLC ("Nakheel") have each agreed to invest $60 million in equity financing to the Atlantis, The Palm project, with the balance of
the financing, which may include an equity component, expected to be raised at the project level. As part of the Company's equity commitment to the project, it expects to invest approximately
$21 million in 2004. As part of this transaction, Kerzner has agreed to enter into a development services agreement and a long-term management agreement with the joint venture
company. The development services agreement provides for Kerzner to receive a $15.0 million fee for development.

Gaming

Mohegan Sun

2003 vs. 2002.We recognized $35.7 million in 2003 as compared to $31.4 million in 2002 from TCA under the
Relinquishment Agreement and the Development Agreement. Mohegan Sun continued to increase its share of the growing Connecticut slots market resulting in an increase in gross revenues, which were
$1.3 billion during calendar year 2003 as compared to $1.2 billion during calendar year 2002. In addition, during 2002, TCA incurred costs of approximately $1.8 million related to
the grand opening of the Mohegan Sun "Project Sunburst" expansion, which reduced TCA's income and our share of such income during this period.

2002 vs. 2001.Mohegan Sun generated gross revenues of $1.2 billion during calendar year 2002, compared to
$914.3 million in calendar year 2001. We recorded income from TCA under the Relinquishment Agreement and the Development Agreement of $31.4 million for 2002 compared to
$27.1 million in 2001.

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United Kingdom

One of our goals for 2003 was to grow the Gaming business in the medium term by investing in one or more gaming projects in the United Kingdom. We made
significant progress in this area through our planned projects in Northampton and in the greater London area. One significant uncertainty that will affect the expansion of our gaming segment in the
United Kingdom is whether appropriate gaming legislation will be enacted in the United Kingdom. Should this not occur, we would have to re-evaluate the size and scope of these anticipated
projects. (see "Item 4. Information on the Company, (B) Business OverviewThe PropertiesGamingUnited Kingdom" for a discussion of these opportunities).

One&Only

During 2003, we began to build the management team and sales and marketing structure for our One&Only business. In December 2002, we launched the One&Only
brand with an emphasis on the European market, focusing on our properties in Mauritius, the Maldives and Dubai. We also implemented training programs for management and employees at all of the
One&Only resorts. Additionally, in February 2004, One&Only had the grand opening of the One&Only Palmilla, one of the flagship properties of the collection.

We
also expect to develop additional One&Only properties in Cape Town, South Africa, the Maldives and Havana, Cuba. Our three to five year goal in this segment is to increase our
existing portfolio so that we manage approximately 20 properties.

2003 vs. 2002.The One&Only segment contributed $0.3 million to income in 2003 compared to $5.7 million in
2002, due primarily to our $4.8 million share of the equity losses of the One&Only Palmilla related to pre-opening expenses as the resort was closed for the majority of 2003 during
its redevelopment. In addition, the marketing brand launch of One&Only to the European market resulted in increased advertising costs over 2002 of $3.0 million.

The
One&Only Ocean Club contributed $4.7 million to income in 2003 compared to $4.0 million in 2002, which resulted primarily from a $1.4 million, or 9.9%, increase
in gross profit from rooms offset by an $0.9 million increase in selling, general and administrative costs. Occupancy and ADR were up during 2003 compared to 2002, 79% versus 68% and $722
versus $695, respectively. Depreciation and amortization for the One&Only Ocean Club was $3.7 million in 2003 and $4.0 million in 2002.

In
Mauritius we earned management fees and equity earnings, net of minority interest in 2003, of $5.9 million and $2.3 million compared to $5.6 million and
$1.7 million in 2003 and 2002 respectively, with respect to our five properties. During 2002, the One&Only Le Touessrok went through a major renovation for which we earned $1.5 million
in development fees. From the One&Only Kanuhura we earned management fees, net of minority interest and equity losses, of $0.6 million and $0.1 million in 2003 and $0.4 million
and $0.7 million in 2002, respectively. In 2003, we earned management fees from the One&Only Royal Mirage of $1.3 million, compared to $1.2 million in 2002. Additionally, we
earned $0.4 million in development fees in 2003 related to our new project in Kaafu Atoll, the Maldives. Also during 2003, we earned $1.3 million in development fees in connection with
the redevelopment of the One&Only Palmilla.

2002 vs. 2001.The One&Only segment contributed $5.7 million to income in 2002 compared to $10.1 million in
2001, due primarily to increased marketing costs and other administrative costs.

The
One&Only Ocean Club contributed $4.0 million to income in 2002 compared to $1.4 million in 2001, which resulted primarily from improved business levels combined with
certain cost-savings measures. Occupancy and ADR were up during 2002 compared to 2001, 68% and 64% and $695 and $610, respectively. Depreciation and amortization for the One&Only Ocean
Club was $4.0 million in 2002 and $3.6 million in 2001.

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In
Mauritius, we earned management fees and equity earnings, of $5.6 million and $1.7 million, respectively, compared to $6.8 million and $3.3 million in 2002
and 2001, respectively, with respect to our five properties. During 2002, the One&Only Le Touessrok went through a major renovation for which we earned $1.5 million in development fees and
which resulted in lower levels of management fees and equity earnings in 2002 compared to 2001. From the One&Only Kanuhura we earned management fees and equity losses of $0.4 million and
$0.7 million, respectively, in 2002 and an insignificant amount and $0.7 million for the five months ended 2001 following our acquisition of a 25% equity interest in the property. In
2002, we earned management fees from the One&Only Royal Mirage of $1.2 million, compared to $1.1 million in 2001.

Corporate Expense

2003 vs. 2002.Corporate expenses increased by $7.8 million in 2003 compared with 2002 (from $26.1 million to
$33.9 million) due primarily to an incremental increase of $3.0 million incurred for new business development projects potentially related to all of our three segments (and therefore not
allocated to any segment), payroll and related costs of $1.9 million, increased legal, audit, and other professional fees of $1.9 million and an increase of $0.6 million in
insurance premiums for directors and officers policies.

2002 vs. 2001.Corporate expenses increased by $5.3 million in 2002 as compared to 2001 (from $20.8 million to
$26.1 million). This increase was primarily due to $5.6 million in management and employee bonuses paid as a result of our strong results offset by a decrease in legal, audit and other
professional fees of $0.3 million.

Interest Income

2003 vs. 2002.Interest income in 2003 and 2002 was $3.4 million. For both 2003 and 2002, interest income consisted
primarily of interest earned from advances to affiliates for development projects, bank interest and interest earned on the $15.0 million face amount of debt securities of London Club
International ("LCI") that we purchased in 2002 and sold during 2003.

2002 vs. 2001.Interest income in 2002 was $3.4 million, as compared to $5.3 million in 2001. In 2001, we
earned interest on a $17.5 million note issued to us in connection with the Resorts Atlantic City sale. The promissory note and accrued interest was repaid in full in March 2002 and the
proceeds were used to repay debt. In addition, interest on advances to Harborside at Atlantis decreased by $0.9 million in 2002 due to lower rates.

Interest Expense

2003 vs. 2002.Interest expense decreased by $9.8 million, or 25.2%, due to our interest-bearing debt decreasing
$72.3 million during 2003 compared with 2002 and paying lower LIBOR rates on our interest rate swaps. We reduced our interest bearing debt in 2003 primarily from excess cash generated from
operations. For all of 2002 and through September 2003, we swapped $200 million of our 87/8% notes for variable debt at LIBOR plus approximately 300 basis points. The LIBOR
average was lower during 2003 compared to 2002 resulting in additional reduction to interest expense.

In
September 2003, we cancelled $25.0 million notional amount of our then $200.0 million of interest rate swaps in order to manage the amount of variable to fixed
rate debt. After payment of interest due us, we received $1.4 million from this cancellation and will accrete this amount to interest expense over the term of the underlying debt. At
December 31, 2003 and 2002, our variable rate debt, including the effect of interest rate swaps, and fixed rate debt was 44% and 56% and 58% and 42%, respectively. The average cost of debt,
including the effect of interest rate swaps, during 2003 was 6.4% compared to 7.4% in 2002.

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In connection with our $175 million of interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense correspondingly changes by
$1.75 million per annum.

2002 vs. 2001.During 2002, interest expense decreased by $21.3 million or 35.2%, as compared to 2001, as a result of
the reduction of interest-bearing debt totaling $51.8 million during 2002 and lower effective interest rates. The lower effective interest rates were achieved by swapping fixed rate debt at
87/8% for variable debt at LIBOR plus approximately 300 basis points and due to a larger portion of our debt being financed with borrowings under our revolving credit facility bearing
interest at LIBOR plus 200 basis points. Also, in 2001 we incurred $3.4 million in refinancing costs, which were written off and charged to interest expense when we cancelled our old interest
rate swap agreements. The average cost of debt, including the effect of interest rate swaps, during 2002 was 7.4% compared to 8.8% in 2001.

Other Factors Affecting Earnings

2003 vs. 2002

One&Only Palmilla Pre-Opening Expenses

In April 2003, the One&Only Palmilla was temporarily closed in order to commence an expansion project that cost approximately $102.0 million. As a
result, the Company has recorded a $4.8 million loss within equity earnings (losses) of associated companies for its 50% share of the pre-opening expenses and other expansion or
renovation costs incurred subsequent to the closing of the resort.

Insurance Recovery and Replacement of Damaged Assets

During 2003 and 2002, we received $2.8 million and $1.1 million of insurance recovery which represents a business interruption settlement related to
Hurricane Michelle at Atlantis, Paradise Island. Also during 2003, we recognized a $2.5 million gain on replacement of damaged assets due to the insurance proceeds received in excess of the net
book value of assets damaged during Hurricane Michelle.

Settlement of Territorial and Other Disputes2003

During the fourth quarter of 2003, we recognized a final $1.5 million of income related to a shareholder dispute. See "Settlement of Territorial and Other
Disputes2002" below for further discussion.

Kerzner Interactive Limited2003

On January 1, 2002, Kerzner Interactive Limited, our Internet gaming subsidiary, commenced operations. In February 2002, we agreed to sell 50% of
Kerzner Interactive Limited to Station Casinos, Inc. who paid us at that time a non-refundable deposit of $4.5 million. Subsequently, this agreement was renegotiated and
Station received an option through early January 2003 to purchase 50% of the operation in consideration for the $4.5 million previously received. During 2002, several countries made it
increasingly difficult for their citizens to gamble on-line. Further, as a licensed operator in the Isle of Man, we were subject to numerous restrictions and controls on how we operated
this business, which made it difficult for us to compete against companies operating under less rigorous regimes. As a result, we concluded that this business would not be economically viable in the
short to medium term. We discontinued the operations of Kerzner Interactive Limited during the first quarter of 2003 and the Company and Station mutually agreed to terminate their relationship in this
regard. Losses and closure costs in 2003 were more than offset by the recognition of income of the $4.5 million option consideration, which resulted in $1.3 million in income from
discontinued operations, net of income tax effect for the year ended December 31, 2003.

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2002 vs. 2001

Kerzner Interactive Limited2002

During 2002, included in our consolidated results is a net loss from Kerzner Interactive Limited of $8.1 million. During 2001, we incurred
$4.6 million in pre-opening expenses in connection with Kerzner Interactive Limited.

Debt Retirement

During 2002, we incurred a $20.5 million loss on the early extinguishment of debt, in connection with the refinancing of our debt structure. Of this
amount, $14.6 million related to our 9% Senior Subordinated Notes and $5.9 million related to our 85/8% Senior Subordinated Notes. The loss included premiums paid on the
repurchases and redemption of the notes, the write-off of related discounts and unamortized debt issuance costs.

Settlement of Territorial and Other Disputes2002

During 2002, we recognized a $14.5 million gain on the settlement of territorial and other disputes with a major shareholder. Of the $32.1 million
received, $21.3 million, which related to certain contractual obligations that the major shareholder had to us, was classified as deferred revenue as of the end of 2002 and is being recognized
as other revenues over the term of the original underlying agreements, or approximately $3.5 million of income each year until 2008. The remaining amount of $9.4 million, net of
$1.4 million of direct legal expenses was recognized as income during 2002, along with a $5.1 million net gain on the settlement of a previous territorial dispute with the same major
shareholder.

Construction Remediation Costs at Harborside at Atlantis

Harborside at Atlantis was closed between the end of August 2002 and December 2002 in order to repair water damage resulting primarily from Hurricane
Michelle. Our share of the construction
remediation costs was $6.9 million. This loss was not reduced by any insurance recovery as of December 31, 2002.

Restructuring Costs

In 2001, we provided $5.7 million related to the termination of certain employees following September 11. In 2002, we reversed $1.0 million
of this provision as it remained unused due to the release of fewer employees and the amounts being settled for less than originally planned.

Other

Other items during 2001 included a $6.9 million gain from the sale of luxury home sites at Ocean Club Estates and $2.3 million of
pre-opening expenses related to the opening of the Ocean Club Golf Course.

Other Matters

Foreign Currencies

We prepare our financial statements in U.S. dollars. Our most significant non-U.S. operations are in The Bahamas. Due to current governmental policies
in The Bahamas that equate one Bahamian dollar to one U.S. dollar, and due to the large portion of our cash and cash equivalents being held in U.S. dollars, we believe that we do not have material
market risk exposures in this jurisdiction relative to changes in foreign exchange rates. Due to the stability of the other markets in which we operate, we also believe that we do not have material
market risk exposures in these jurisdictions relative to changes in foreign exchange rates.

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(D)  Liquidity and Capital Resources

During the last two calendar years, cash generated from operations allowed us to reduce our interest bearing debt by $124.1 million ($72.3 million
in 2003 and $51.8 million in 2002) and our cash and cash equivalents balance during 2003 increased by $26.2 million, resulting in a $98.5 million decrease in our net debt position
in 2003 (interest bearing debt minus cash and cash equivalents). We have no significant short-term debt and our long-term debt is comprised of the Amended Revolving Credit
Facility that terminates in 2006, which was undrawn at December 31, 2003, and $400.0 million of 87/8% Senior Subordinated Notes due 2011. Previously under the Amended
Revolving Credit Facility, the maximum amount of borrowings that could be outstanding was $300.0 million. During the year ended December 31, 2003, there was a permanent reduction to our
$300.0 million of outstanding commitments in the amount of $46.5 million related to the guarantee provided in connection with local project financing at the One&Only Palmilla. As of
December 31, 2003, we have $237.0 million of borrowings available under the Amended Revolving Credit Facility after giving effect to the $46.5 million permanent reduction and the
$16.5 million in letters of credit outstanding. Our borrowings under the Amended Revolving Credit Facility are subject to a borrowing base calculation, as discussed under "Item 10. Additional
Information, (C) Material ContractsThird Amendment dated May 15, 2003 to the Amended Revolving Credit Facility." In addition, at December 31, 2003, we held
$61.7 million in cash and cash equivalents, including $1.4 million in restricted cash.

We
believe our operating cash flows, as a percentage of operating income, were higher than many of our competitors due primarily to the management fee nature of a portion of our income
(which requires minimal investment), the lack of any corporate income tax in The Bahamas and net operating loss carryforwards that offset our U.S.-sourced income. We believe that available cash on
hand, combined with funds generated from operations and availability under our bank credit facility will be sufficient to finance our cash requirements over the next twelve months, excluding the
capital necessary for Phase III-B, if we determine to pursue this phase. From time to time, we evaluate our need of capital for major development projects and the various options available
to us in the capital markets. If we elect to proceed with Phase III-B, we anticipate that we will raise capital within the next twelve months to fund a portion of the Phase
III-B expansion at Atlantis, Paradise Island and possibly other significant potential projects. We expect that we will fund a significant portion of our capital expenditures with cash
generated from operations.

Operating Activities

During 2003, we generated $132.7 million of cash flow from operating activities compared to $127.3 million in 2002 and $94.7 million during
2001. This increase was primarily due to Atlantis, Paradise Island improved operating performance and decreased interest payments on debt. During 2003 and 2002, deferred income tax benefit of
$11.7 million and $8.2 million, respectively, were reductions to cash provided from operating activities, as these amounts represent the release of valuation allowance related to
deferred tax assets. Additionally, increases in accounts payable and accrued liabilities contributed to an increase in cash provided by operating activities of $17.0 million and $13.8 million
in
2003 and 2002, respectively. Cash provided by Kerzner Interactive in 2003 was $0.5 million in 2003 as compared to cash used of $7.6 million in 2002. Additionally in 2002, we received
$32.1 million from the settlement of a territorial dispute and had $20.5 million related to the loss on the early extinguishment of debt.

Investing Activities

During 2003, net cash outflows used in investing activities (acquisitions and capital expenditures) were $72.6 million compared to $72.1 million in
2002. During 2002, we invested $40.8 million for the acquisition of a 50% equity interest in the One&Only Palmilla. During 2004, we expect to fund the One&Only Palmilla approximately
$14.0 million in completion loans, $3.0 million of which has already

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been
advanced, related to the $102.0 million expansion. During 2003, we entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited for
approximately $38.5 million, of which we funded $20.0 million during 2003. We expect to pay the balance during the third quarter of 2004. Additionally in 2003, we funded
$15.4 million of completion loans to the development project in Kaafu Atoll, the Maldives.

Our
business requires capital to both develop and maintain our properties, which consists of items such as new slot machines, improvements to the resorts including carpeting and
computers and similar equipment. During 2003, we used $50.8 million for capital expenditures, which includes $27.1 million on several development and renovation projects on Paradise
Island with the balance primarily used for ongoing capital projects on Paradise Island. During 2003, these expenditures were funded through internally generated funds. During 2004, we anticipate our
capital expenditures to be approximately $100.0 million, including approximately $60.0 million relating to certain components of the Phase III Expansion, including the Marina Village,
the villas at the One&Only Ocean Club and design costs for the new 1,200 room hotel, with the remaining portion to be used for maintenance capital expenditures.

During
2004, in addition to the capital expenditures noted above, we anticipate making advances and/or guarantees of approximately $25.0 million to $30.0 million to new
One&Only Projects, $20.0 million to Atlantis, The Palm and $1.0 million to the UK Project. In connection with BLB's acquisition of 2,811,108 shares of Wembley's issued share capital from
Active Value on March 10, 2004, Kerzner's share of the investment was approximately $10.2 million. In connection with the operating agreement related to the One&Only Palmilla, the owner
of the other remaining 50% interest has the right to require us to acquire the remaining 50% interest from the owner for a price of $36.3 million, plus 50% of One&Only Palmilla's working
capital, with the price subject to adjustment, as defined in the purchase agreement, during the first year of the option period. The purchase price during the second year of the option period is based
on a formula, as defined. The option period begins on September 12, 2005 and expires on September 12, 2007.

Financing Activities

During the year, we used $33.8 million in net financing activities. Cash received during the year consisted of $39.0 million from the proceeds
received from the exercise of share options. We also made $72.3 million in net payments on our Amended Revolving Credit Facility during 2003.

As
shown in Tabular Disclosure of Contractual Obligations below, as of December 31, 2003, we do not have any significant scheduled debt repayments due until 2011, when the
principal of our 87/8% Senior Subordinated Notes mature. Any drawings on our Amended Revolving Credit Facility are not due until November 2006. We anticipate that prior to
maturity, interest payments will be provided from cash flows from operations. At December 31, 2003, we had approximately $237.0 million available under our Amended Revolving Credit
Facility as we are in compliance with the applicable debt covenants as of December 31, 2003. During 2003, our average cost of debt was approximately 6.4%.

Interest Rate Swap Agreements

We attempt to limit our exposure to interest rate risk by managing the mix of fixed and variable rate debt, and by entering into variable interest rate swap
agreements to hedge a portion of our fixed rate debt. These interest rate swap agreements are entered into with a group of financial institutions with investment grade credit ratings, thereby
minimizing counterparty credit risk.

In
August and December 2001, we entered into fixed-to-variable rate swap agreements with respect to our 87/8% Senior Subordinated Notes due
2011, which were issued in August 2001. We do not anticipate the covenants related to our 87/8 Senior Subordinated Notes to restrict our ability to use the funds available in
2004. As of December 31, 2003, the aggregate notional amount of the swap agreements was $175.0 million and they mature in August 2011 concurrent with our 87/8%
Senior Subordinated Notes. Under the terms of the swap agreements, we make payments based on specific

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spreads
over six-month LIBOR and receive payments equal to the interest payments due on the notes. The spreads in excess of six-month LIBOR are 3.02% for $125.0 million,
2.95% for $25.0 million and 2.91% for the remaining $25.0 million. During the years ended December 31, 2003 and 2002, the weighted average variable rate on the swap agreements was
4.18% and 5.49%, respectively. Giving effect to these swap agreements, our fixed and variable rate debt represented approximately 56% and 44% as of December 31, 2003 and 42% and 58% as of
December 31, 2002, respectively.

In
connection with our interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense correspondingly changes by $1.75 million per
annum.

Other Matters

Critical Accounting Policies

Our critical accounting policies include those which require our most subjective or complex judgments as a result of the need to make certain estimates and
assumptions when there is uncertainty as to their financial effects. Although all of the policies identified in the notes accompanying the consolidated financial statements are important to an
understanding of such financial statements, the policies discussed below are considered by management to be central to their understanding because of (i) the higher level of measurement
uncertainties involved in their application and (ii) the effect that changes in these estimates and assumptions could have on the consolidated financial statements.

We
base our estimates on, among other things, currently available information, our historical experience and on various assumptions, the results of which form the basis of making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although we believe that that these assumptions are reasonable under the circumstances,
estimates would differ if different assumptions were utilized and these estimates may prove in the future to have been inaccurate. There can be no assurance that actual results will not differ from
these estimates.

Stock-Based Compensation.We have elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for our employee stock options as allowed pursuant to FASB Statement No. 123, as amended by FASB Statement No. 148
("SFAS 123"). Accordingly, no compensation expense related to stock options has been recognized for the years ended December 31, 2003, 2002 and 2001.

Had
compensation cost for our stock option plans been determined on the basis of the fair value at the grant date for awards under those plans, consistent with SFAS 123, and our
existing valuation method for our employee stock options, the Black-Scholes option-pricing model, we estimate that our net income for the years ended December 31, 2003, 2002 and 2001 would have
been reduced by $3.7 million, $6.4 million and $10.0 million or 5%, 16% and 31%, respectively. However, SFAS 123 requires the use of option valuation models that require
the input of highly subjective assumptions, including expected stock price volatility, and to date, a uniform standard for calculating the fair value of employee stock options in accordance with
SFAS 123 has not been adopted. Because our stock options have
characteristics significantly different from traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable measure of the fair value of our employee stock options. In addition, the effect of applying the fair value method of accounting for stock options on
reported net income for 2003, 2002 and 2001 may not be representative of the effects for future years because outstanding options vest over a period of several years and additional awards are
generally made each year.

Income Taxes.We are subject to income taxes in certain jurisdictions. Accordingly, the accompanying consolidated statements
of operations include a provision for income taxes based on the prevailing tax laws of those jurisdictions.

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We
account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Realization of future tax benefits related to deferred tax assets is dependent on many
factors, including our ability to generate future taxable income. We adjust the valuation allowance related to our deferred tax assets to the amount that is more likely than not to be realized. As of
December 31, 2003, we had deferred tax assets, net of valuation allowance, totaling $10.5 million. In determining our net realizable tax assets, we consider our ability to carry back
certain net operating losses, future taxable income and ongoing prudent and feasible tax planning strategies. We have determined that, as of December 31, 2003, a valuation allowance of
$188.8 million was necessary to offset our deferred tax assets. In the event that we were to determine that we would not be able to realize all or part of our deferred tax assets in the future,
or that the realization of additional deferred tax assets is more likely than not, an adjustment to the valuation allowance would occur in the period such determination was made.

Despite
our belief that our tax return positions are supportable, our policy is to establish reserves for taxes that may become payable in future years as a result of examination by tax
authorities. We believe our tax reserves provide an adequate allowance for such contingencies. The tax reserves are analyzed periodically and adjustments are made to the tax reserves, as events occur
to warrant such adjustment.

Long-Lived Assets.We review our long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If changes in circumstances indicate that the carrying amount of an
asset that we expect to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition are estimated. If the undiscounted value of the future
cash flows is less than the carrying value of the asset, the carrying value of the long-lived asset will be reduced by the amount which the carrying value exceeds fair value. We do not
believe that any such changes in circumstances have occurred which would require our long-lived assets to be tested for recoverability.

Allowance for Doubtful Trade Receivables.We maintain an allowance for doubtful trade receivables arising from casino, hotel
and other services which is based upon a specific review of outstanding receivables for estimated losses resulting from our inability to collect from customers. As of December 31, 2003, our
trade receivables, net totaled $38.4 million, including an allowance for doubtful trade receivables of $7.6 million.

In
extending credit, we attempt to assess our ability to collect by, among other things, evaluating the customer's financial condition, both initially and on an ongoing basis. In
evaluating the adequacy of our allowance for doubtful trade receivables, we primarily analyze trade receivable balances, the percentage by aging category and historical bad debts, among other things.

Should
the likelihood of collection on accounts or our ability to collect were to deteriorate, an increase to the allowance may be required. Also, should actual collections of trade
receivables be different than our estimates included in the determination of our allowance, the allowance would be increased or decreased through charges or credits to selling, general and
administrative expenses in the consolidated statements of operations in the period in which such changes in collection become known. If conditions change in future periods, additional allowances or
reversals may be required. Such additional allowances could be significant.

Guarantees.In connection with Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"), we recognize, at the inception of a guarantee, a liability at an estimate of the guarantee's fair value for the
obligations we have undertaken in issuing a guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or
conditions occur.

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Recent Accounting Pronouncements

Consolidation of Variable Interest Entities

In December 2003, the FASB issued revised Interpretation No. 46R, "Consolidation of Variable Interest Entities" ("FIN 46R"). This interpretation of
Accounting Research Bulletin 51, "Consolidated Financial
Statements," addresses consolidation by business enterprises of variable interest entities which have one or both of the following characteristics: (i) the equity investment at risk is not
sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties which is provided through other interests that will absorb some or all of
the expected losses of the entity, or (ii) the equity investors lack one or more of the following characteristics of a controlling financial interest: (a) the direct or indirect ability
to make decisions about the entity's activities through voting rights or similar rights, (b) the obligation to absorb the expected losses of the entity if they occur, which makes it possible
for the entity to finance its activities, or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation of the risk of absorbing the expected
losses. This interpretation applies immediately to variable interest entities created after December 31, 2003, and to variable interest entities in which an enterprise obtains an interest after
that date.

The
provisions of FIN 46R are required to be applied to an interest held in a variable interest entity, commonly referred to as a special purpose entity, at the end of the first
reporting period ending after December 15, 2003. Application to all other types of entities is required in financial statements for periods ending after March 15, 2004. We have
determined that the One&Only Palmilla, in which we have a 50% equity interest, constitutes a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R as
the related operating agreement contains a put option that, if exercised, would obligate us to purchase the remaining 50% of the entity, resulting in Kerzner being the primary beneficiary of the
entity. We expect to consolidate the results of operations of the One&Only Palmilla into our consolidated financial statements for the quarter ended March 31, 2004, which will result in a
significant increase in the assets, liabilities and revenues and cost and expenses of Kerzner. The consolidation of the One&Only Palmilla will not change the contribution to both the One&Only
segment's results and Kerzner's consolidated results as compared to the previously used equity method accounting. See the Notes to the accompanying consolidated financial statements for summarized
financial information of the One&Only Palmilla.

(E)  Research and Development, Patents and Licenses

Not applicable.

(F)   Trend Information

During the first two months of 2004, Atlantis, Paradise Island's results were slightly ahead of results for the same period last year. Atlantis achieved an
average occupancy of 80% at an ADR of $277, which compares to average occupancy of 79% and ADR of $267 in 2002.

For
the first two months of 2004, Atlantis casino contribution to net income was $13.2 million compared to $8.9 million for the same period in 2003 and slot drop was up
38.6% over the same period in 2003. Table hold was 15.8% for the first two months of 2004 compared to 14.7% for the first two months of
2003. For the two months ended February 29, 2004 as compared to the first two months ended February 28, 2003, slot coin in was 10.7% higher while slot win was slightly down. We do not
anticipate that this level of growth will be sustained in the Atlantis casino during the remainder of 2004. Atlantis, Paradise, Island's RevPAR of approximately $220 was $10 higher then the same
period last year.

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Relinquishment fees and development fees earned by us from TCA were $35.7 million for the year ended December 31, 2003. We anticipate that relinquishment fees will be
relatively flat for the year ending December 31, 2004 due to the increase in Mohegan Sun revenues offset by certain anticipated expenses at TCA and there will be no receipt of development fees
in 2004 because Project Sunburst has been completed.

In
connection with $175 million of our 87/8% Senior Subordinated Notes, we have entered into interest rate swap agreements to hedge this portion of our fixed rate
debt, in which the rates paid by us are at six-month LIBOR plus 291 to 302 basis points. In connection with our interest rate swap agreements, for every 100 basis points that LIBOR
increases or decreases, correspondingly, interest expense changes by $1.8 million per annum.

Corporate
expenses were $37.3 million for the year ended December 31, 2003. We anticipate that these expenses will be slightly lower in 2004.

(G)  Off-Balance Sheet Arrangements

At December 31, 2003, our off-balance sheet arrangements and other commitments were as follows (in thousands):

Other Commitments

Total Amount of
CommitmentKaafu AtollFinancings(a)

$
34,650GuaranteeOne&Only Kanuhura(b)


10,712One&Only Palmilla Resort Completion Guarantee(c)


46,450Total other commitments

$
91,812


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(H)  Tabular Disclosure of Contractual Obligations

At December 31, 2003, we believe our contractual obligations, other than the guarantees described above, were as follows (in thousands):

|                                     |  | Payments Due by Year
|------------------------------------ |  | --------------------
|
|
|87/8% Senior Subordinated Notes(a)   |  | $                   
|Amended Revolving Credit facility(b) |  |                     
|Operating leases(c)                  |  |                     
|Capital leases                       |  |                     
|Purchase obligations(d)              |  |                     
|Atlantis, The Palm                   |  |                     
|Club Med Acquisition                 |  |                     
|                                     |  |                     
|Total contractual cash obligations   |  | $                   
|                                     |  |                     

---

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In
addition, the following contingent contractual obligation, the amount of which can not accurately be estimated, is not included in the table above:



Item 6.    Directors, Senior Management and Employees

(A)  Directors and Senior Management

The current directors of the Company are:

Name

Country of
Citizenship

Director
SinceSolomon Kerzner

South Africa

1993Peter Buckley

United Kingdom

1994Howard Marks

United States

1994Eric Siegel

United States

1994Heinrich von Rantzau

Germany

2001


The
current executive officers of the Company are:

Name

Title

Age

Executive
Officer
SinceSolomon Kerzner

Chairman of the Board of Directors

68

1993Howard B. Kerzner

Chief Executive Officer

40

1995John R. Allison

Executive Vice PresidentChief Financial Officer

57

1994


The
executive officers serve indefinitely at the pleasure of the Board of Directors.

Solomon Kerzner, Chairman of the Board of Directors:Mr. Kerzner has been our Chairman since October 1993. From
October 1993 to June 1996, Mr. Kerzner served as our President and from October 1993 until December 2003, he served as our Chief Executive Officer.
Mr. Kerzner is the Chairman of WLG, which, together with its affiliates, as of December 31, 2003 owned approximately 21.1% of our outstanding Ordinary Shares. Mr. Kerzner is one
of the visionary leaders of the resort and gaming industries. Prior to founding Kerzner, Mr. Kerzner pioneered the concept of an entertainment and gaming destination resort designed and managed
to appeal to multiple market

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segments
by developing Sun City, located near Johannesburg, South Africa. Sun City features four hotels with approximately 1,300 rooms, an entertainment center that includes a 6,000-seat
indoor superbowl, a 46-acre man-made lake for water sports and approximately 55,000 square feet of gaming space. In 1992, Sun City was expanded to include The Lost City, a
themed resort that features a 350-room luxury hotel and a man-made jungle in which over one million trees were transplanted. Mr. Kerzner has been responsible for the
development of 21 hotels and founded both of southern Africa's largest hotel groups, Southern Sun Hotels and Sun International South Africa. We do not have any interest in any of the southern African
properties developed by Mr. Kerzner. Mr. Kerzner is the father of Mr. Howard B. Kerzner.

Howard B. Kerzner, Chief Executive Officer:Mr. Kerzner has been our Chief Executive Officer since January 1,
2004. Mr. Kerzner joined Kerzner in May 1995 as Executive Vice PresidentCorporate Development and was President from June 1996 until December 2003. Prior to
that time, he was DirectorCorporate Development of SIIL from September 1992. Previously, Mr. Kerzner was an Associate of Lazard Frères & Co. LLC from
September 1991. Prior to that Mr. Kerzner worked for the First Boston Corporation. Mr. Kerzner is the son of Mr. Solomon Kerzner.

John R. Allison, Executive Vice PresidentChief Financial Officer:Mr. Allison joined Kerzner in
May 1995 as Chief Financial Officer. Mr. Allison joined SIIL in March 1994 as Group Financial Director. From December 1987 until February 1994, Mr. Allison
was Financial Director of Sun
International Inc., a resort and management holding company with interests in approximately 27 hotels in southern Africa. Prior to that time, he was the Group Financial Director of
Kimberly-Clark (South Africa) Limited for four years. He is a fellow of the Institute of Chartered Accountants in England and Wales and a member of the South African Institute of Chartered
Accountants.

Peter N. Buckley, Director:Mr. Buckley has been a Director since April 1994. Mr. Buckley is Chairman of
Caledonia, which as of December 31, 2003 beneficially owned approximately 21.7% of our Ordinary Shares and had the right to vote an additional 2.5% of our Ordinary Shares. In 1994 he was
appointed Chairman of Caledonia having been Deputy Chairman and Chief Executive since 1987. He is also Chairman of Bristow Helicopter Group Limited. He is a non-executive Director of Close
Brothers Group PLC and Offshore Logistics, Inc. (a NYSE listed company).

Howard S. Marks, Director:Mr. Marks has been a Director since April 1994. Mr. Marks is Chairman of
Oaktree Capital Management, LLC, which manages funds in excess of $20.0 billion for institutional investors. Previously, Mr. Marks was employed by The TCW Group, Inc. where he
became Chief Investment Officer for Domestic Fixed Income and President of its largest affiliate, TCW Asset Management Company.

Eric B. Siegel, Director:Mr. Siegel has been a Director since April 1994. Mr. Siegel is a retired
limited partner of Apollo Advisors, L.P. Mr. Siegel is also a Director and Chairman of the Executive Committee of El Paso Electric Company (a NYSE listed company).

Heinrich von Rantzau, Director:Mr. von Rantzau has been a Director since July 2001. Mr. von Rantzau is
a principal of Cement Merchants SA, which as of December 31, 2003 beneficially owned approximately 12.0% of our Ordinary Shares, and an executive of Deutsche Afrika-Linien GmbH, Reederei John
T. Essberger and VORA Schiffahrts-und Beteiligungsgesellschaft GmbH. Mr. von Rantzau is a board member of The United Kingdom Mutual Steam Ship Assurance Association (Bermuda)
Limited and a member of the Trade Advisory Board of Germanischer Lloyd, Lloyd's Register of Shipping and German National Committee.

Charles D. Adamoserved as Executive Vice PresidentCorporate Development and General Counsel until December 31, 2003.
From the period January 1, 2004 through April 30, 2004, Mr. Adamo's employment with the Company is in the capacity of "Of Counsel" and he is no longer an executive of the Company.
From the period of May 1, 2004 through December 31, 2005, Mr. Adamo has been retained by the Company as a consultant.

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We agreed to include in the slate of directors submitted by us to our shareholders for election one individual designated by each of WLG, Caledonia and CMS, subject to their retaining a
minimum beneficial ownership of our Ordinary Shares. See "Item 7. Major Shareholders and Related Party Transactions, (B) Related Party TransactionsRegistration Rights and
Governance Agreement."

(B)  Compensation

The aggregate cash compensation for our directors and officers, including salaries, bonuses and benefits in kind granted, for the year ended December 31,
2003 was $6.9 million. None of the directors or officers participates in our pension plan. We do not set aside any amounts for pension or retirement benefits for any of our directors or
officers.

Effective
from January 1, 2001, we have a bonus plan whereby our employees, including officers, will qualify for bonuses if we attain either certain levels of earnings or EPS, 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 80% of the respective employee's base salary in 2003. Bonuses ranging from 41% to 54% were granted in 2003.

We
have adopted stock option plans for our employees, officers and directors in 1995 (the "1995 Plan"), in 1997 (the "1997 Plan"), and in 2000 (the "2000 Plan") that provide for the
issuance of options to acquire an aggregate of 7,500,000 Ordinary Shares. As of December 31, 2003, all available options under those plans had been granted. Accordingly, on December 11,
2003, we adopted a new stock incentive plan (the "2003 Plan" and, together with the 1995 Plan, the 1997 Plan and the 2000 Plan, the "Plans") which provides for the issuance of an aggregate of
3,000,000 Ordinary Shares in connection with awards of stock options, restricted stock and other stock-based awards.

The
1995 Plan provides for the options to become exercisable, unless otherwise specified by the Board of Directors and subject to certain acceleration and termination provisions, after
two years from the date of grant in respect of 20% of such options and thereafter in installments of 20% per year over a four-year period. Options issued under the 1997 Plan become
exercisable one year from the date of grant with respect to 20% of such options and thereafter in installments of 20% per year over a four-year period. The 2000 Plan provides for the
vesting period to begin one year after the grant date in respect of one third of such options, and thereafter in installments of one third
per year over a two-year period. The 2003 Plan provides generally for options to become exercisable 25% per year on each of the first four anniversaries of the date of grant, and for
restricted stock to become vested in three equal installments on each of the second, third and fourth anniversary of the date of grant. Options granted under the Plans have a term of 10 years
from the date of grant (except that options granted under the 2003 Plan generally have a term of 7 years from the date of grant) and, unless otherwise specifically provided by the Board of
Directors, the option prices are equal to the market values per share on the date of grant. Consultants may also be granted awards under the 2003 Plan. Nonqualified stock options may be transferred to
trusts with respect to which any such participants are beneficiaries and corporations or to other entities controlled by such participants.

During
2003, we granted 1,512,000 stock options and 1,000 restricted Ordinary Shares to our directors and officers pursuant to the Plans. The options were granted at exercise prices
ranging from $36.86 to $35.80, and the expiration date for these options is December 11, 2010.

As
of December 31, 2003, total options to acquire 5,059,000 Ordinary Shares were outstanding, of which 2,266,000 were exercisable as of that date. As of December 31, 2003,
our officers and directors, as a group, held options to acquire approximately 2,028,077 Ordinary Shares (excluding exercisable options held by The Kerzner Family Trust), of which approximately 369,410
are currently exercisable, and held approximately 1,000 restricted Ordinary Shares (excluding restricted Ordinary Shares held by

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The
Kerzner Family Trust that are vested), of which none is currently vested. The options outstanding held by the officers and directors as of December 31, 2003 (excluding options held by The
Kerzner Family Trust) were granted at exercise prices ranging from $20.07 to $41.63. The expiration dates for these options range from 2006 to 2012.

(C)  Board Practices

Pursuant to our Articles of Association, as amended, our maximum number of directors is fixed at five. At our September 24, 2001, annual meeting of
shareholders, our existing directors, consisting of Mr. S. Kerzner, Mr. Buckley, Mr. Marks, Mr. Siegel and Mr. von Rantzau were elected to terms set to expire at our
annual general meeting to be held in 2004.

Our
Board of Directors has appointed an audit committee of the board consisting of Mr. Buckley, Mr. Marks and Mr. Siegel. Deloitte & Touche LLP, the Company's
independent auditor, has full and free access to meet with the audit committee, without management representatives present, to discuss the results of the audit, the adequacy of internal controls and
the quality of financial reporting. The primary function of the audit committee is to assist our Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information
that will be provided to the stockholders and others, the systems of internal controls that our management and Board of Directors have established
and the audit process. The audit committee of our Board of Directors reviews the selection of our independent certified public accountants each year. The audit committee convenes at least eight times
per year. The audit committee's charter has been filed as Exhibit 11.1 to this Annual Report.

We
also have a Compensation Committee consisting of Mr. Siegel, Mr. Buckley, Mr. Marks and Mr. von Rantzau. The Compensation Committee is mandated to review
and adopt our executive compensation plans and policies, including the adoption of stock incentive plans and the granting of options and restricted stock to senior executives thereunder.

We
do not have service contracts with any of our directors.

Corporate Governance Standards

Pursuant to home country practices exemptions granted to us by the New York Stock Exchange, we are permitted to follow certain corporate governance practices
complying with relevant Bahamian laws, which are different from those required by U.S. domestic companies under the New York Stock Exchange's listing standards. The New York Stock Exchange rules and
our current practices relating to corporate governance have the following significant differences:

Independent Directors.The New York Stock Exchange requires that domestic listed companies have at
least a majority of independent directors on their boards, make affirmative determinations of independence and have regularly-scheduled meetings of non-management directors without
management participation. As a foreign private issuer, we are not required to satisfy this listing standard. We have not made any determination as to whether a majority of our directors meet the
independence requirements set forth in the New York Stock Exchange listing standards and we do not have regularly-scheduled meetings of non-management directors.

Audit Committee.The New York Stock Exchange requires that a listed company have an audit committee
consisting of at least three independent directors, and that the audit committee be charged with the responsibility of selecting, monitoring and communicating with the outside auditor of the company.
We have not made any determination as to whether all of the directors on our audit committee meet the independence requirements set forth in the New York Stock Exchange listing standards. The Company
is currently reviewing its corporate governance structure to ensure that it is in

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compliance
with these new corporate governance standards of the New York Stock Exchange when they become applicable to foreign private issuers on July 31, 2005.

Nominating/Corporate Governance and Compensation Committees.The New York Stock Exchange requires
that domestic listed companies must have a board committee composed of at least one independent director that performs certain nominating and corporate governance functions. We do not have a
nominating and corporate governance committee. The New York Stock Exchange also requires that domestic listed companies must have a board committee composed of at least one independent director that
performs certain compensation-related functions. As a foreign private issuer, we are not required to satisfy these listing standards. We have a compensation committee, but have not made any
determination as to whether the directors who constitute the committee meet the independence requirements set forth in the New York Stock Exchange listing standards.

Certifications.The New York Stock Exchange requires that a listed company's chief executive officer
must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. As a foreign private issuer, our chief executive officer
is not required to make this certification.

Corporate Governance Guidelines.The New York Stock Exchange requires that domestic listed companies
adopt detailed corporate governance guidelines. As a foreign private issuer, we are not required to adopt, and have not adopted, such guidelines.

Shareholder Approval Policy.Pursuant to the amendment to the corporate governance standards that was
approved by the Securities and Exchange Commission on June 30, 2003, the New York Stock Exchange requires, with limited exceptions, that shareholder approval be obtained with respect to any
equity-compensation plan, which is generally defined as a plan or other arrangement that provides for the delivery of equity securities (either newly issued or treasury shares) of the listed company
to any employee, director or other service provider as compensation for services. We follow Bahamian laws that do not apply specific rules to equity compensation plans; they are considered an issue of
shares which does not require shareholder approval.

The
New York Stock Exchange also requires that, with certain exceptions specified in its rules, shareholder approval be obtained prior to issuance of common stock or securities
convertible into or exercisable for common stock (1) to a director, an officer, a substantial security holder or a party related to any of them if the number of shares of common stock which are
to be issued or are issuable upon conversion exceeds 1% of the number of shares of common stock or voting power outstanding before the issuance, (2) in any transaction or series of
transactions, if the voting power of the common stock is equal to or exceeds 20% of the voting power outstanding before the issuance or if the number of shares of the common stock is equal to or
exceeds 20% of the number of shares outstanding before the issuance, and (3) that will result in a change of control of the issuer. We follow Bahamian laws which do not require shareholder
approval with respect to the issuance of common stock or securities convertible into or exercisable for common stock. Under Bahamian laws, these are considered an issuance of shares which does not
require shareholder approval.

On
June 6, 2002, the Corporate Accountability and Listing Standards Committee of the New York Stock Exchange issued a report recommending that the Exchange adopt significant
changes to its corporate governance listing standards. On August 16, 2002, the New York Stock Exchange filed with the Securities and Exchange Commission proposed changes to its corporate
governance standards which reflect the findings of the Committee. The areas of corporate governance covered by the proposed changes include the definition and role of independent directors, committees
under the board of directors, corporate governance guidelines, codes of business conduct and ethics, shareholder approval of equity-compensation plans, and annual certifications by chief executive
officers. On June 30, 2003, the Securities and Exchange Commission approved the portion of the proposed

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corporate
governance standards relating to shareholder approval of equity-compensation plans, which is described under "Shareholder Approval Policy" above. Also, in light of the promulgation by the
Securities and Exchange Commission of Rule 10A-3 pursuant to Section 301 of the Sarbanes-Oxley Act, on April 4, 2003, the New York Stock Exchange filed with the
Securities and Exchange Commission an amendment to the remainder of its proposed rule changes in order to reflect the requirements of Rule 10A-3. That portion of the proposed rule
changes, as amended, became effective upon the Securities and Exchange Commission's approval on November 4, 2003.

The
rules will generally continue to grant home country practices exemptions to foreign private issuers listed on the New York Stock Exchange, including us, but, pursuant to the
requirements of Rule 10A-3, those provisions of the amended corporate governance standards that implement the requirements of Rule 10A-3 will be applicable to
listed foreign private issuers. Among such requirements, a foreign private issuer listed on the New York Stock Exchange will be required to have an audit committee consisting of at least three
directors all of whom must be independent under the standards set forth in paragraph (b) of Rule 10A-3, and the audit committee will be required to be directly responsible
for the appointment, compensation, retention and oversight of the work of the accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the issuer, unless one or more of the exemptions set forth in
Rule 10A-3 apply. These new corporate governance standards of the New York Stock Exchange will become applicable to foreign private issuers listed on the New York Stock Exchange on
July 31, 2005. The Company plans to take appropriate steps with respect to its corporate governance system by July 31, 2005 so that its audit committee satisfies the requirements set
forth in Rule 10A-3.

(D)  Employees

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

|            |  | At December 31,
|----------- |  | ---------------
|
|The Bahamas |  | 5,785          
|U.S.        |  | 425            
|Other       |  | 75             
|            |  |                
|Total:      |  | 6,285          
|            |  |                

In
addition to the above, as of December 31, 2003, we had approximately 5,200 employees under management at our One&Only properties in Mauritius, Dubai, the Maldives and Mexico.
We do not employ a significant number of temporary workers.

Union Contract ArrangementsThe Bahamas

In The Bahamas, as of December 31, 2003, approximately 3,700 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.
Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area. The
association has signed a new contract with the union that will expire on January 7, 2008. Labor relations in The Bahamas have been unstable at times with occasional work stoppages occurring,
not only at Atlantis, but also at publicly run entities such as the Bahamian Electric Corporation and Bahamas Telephone Company. As the country's largest private employer, we are sometimes the target
of labor disputes. See "Item 3. Key Information, (D) Risk FactorsWork stoppages and other labor disputes could harm our financial condition and results of operations."

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(E)  Share Ownership

The Kerzner Family Trust, which is a trust controlled by Mr. S. Kerzner, beneficially owns 6,379,747 Ordinary Shares (which includes 1,096,836
Ordinary Shares subject to currently exercisable options and 20,074 restricted Ordinary Shares that are vested, all of which were granted pursuant to the Plans and transferred to The Kerzner Family
Trust by Mr. S. Kerzner, as well as 4,495,794 Ordinary Shares held by WLG, a subsidiary of The Kerzner Family Trust), which represents approximately 21.1% of the outstanding Ordinary
Shares. The options held by The Kerzner Family Trust have exercise prices ranging from $18.125 to $35.00 and expiration dates ranging from January 31, 2007 to August 4, 2010. Of the
6,379,747 Ordinary Shares beneficially owned by The Kerzner Family Trust, 767,043 represent Ordinary Shares over which WLG has the right to vote through certain proxy arrangements with Kersaf. See
table in "Item 7. Major Shareholders and Related Party Transactions, (A) Major ShareholdersRestructuring of Relationship with Majority Shareholder."
Mr. S. Kerzner has sole dispositive power over the Ordinary Shares held by WLG as Mr. S. Kerzner controls WLG. Familienstiftung Von Rantzau-Essberger, a family trust of
Heinrich von Rantzau (and also the sole shareholder of CMS), owns 36,500 Ordinary Shares, and CMS beneficially owns an additional 3,608,393 Ordinary Shares. See table in "Item 7. Major
Shareholders and Related Party Transactions, (A) Major Shareholders." Each of our other directors and officers beneficially owns less than 1% of outstanding Ordinary Shares.

For
a description of options granted to our directors, executive officers and other key employees, see "(B) Compensation" above.

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Item 7.    Major Shareholders and Related Party Transactions

(A)  Major Shareholders

As of December 31, 2003, we had 30,283,689 Ordinary Shares outstanding. The following table sets forth certain information as of December 31, 2003
(or certain other dates, to the extent indicated below), regarding the beneficial ownership of our Ordinary Shares by: (i) any person who is known to us to be the owner of more than five
percent of any class of our voting securities and (ii) our directors and officers as a group. Due to the arrangements described below, certain of our Ordinary Shares are beneficially owned by
several parties.

|Beneficial Owner                                                                              |  | Number of Shares |         | Percent of Shares
|--------------------------------------------------------------------------------------------- |  | ---------------- | ------- | -----------------
|Caledonia Investments plc ("Caledonia")                                                       |  | 6,575,336        | (1)     | 21.7             
|World Leisure Group Limited ("WLG") and its affiliates                                        |  | 6,379,747        | (2)     | 21.1             
|Kersaf Investments Limited ("Kersaf")                                                         |  | 1,983,679        | (3),(5) | 6.6              
|Baron Capital Group, Inc. ("Baron")                                                           |  | 5,562,232        | (4)     | 18.4             
|Cement Merchants SA ("CMS")                                                                   |  | 3,644,893        | (5),(6) | 12.0             
|FMR Corp.                                                                                     |  | 3,031,400        | (7)     | 10.0             
|Directors and officers as a group (excluding shares beneficially owned by Solomon Kerzner)(8) |  | *                |         | *                
|*  Less than five percent of outstanding voting securities.                                  

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65

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As
of December 31, 2003, we had approximately 707 holders of record of approximately 30,283,689 Ordinary Shares, excluding 7,072,000 Ordinary Shares held as treasury stock. As of
December 31, 2003, there were an estimated 688 U.S. holders of record holding approximately 48.4% of our issued and outstanding Ordinary Shares.

All
of our Ordinary Shares have the same voting rights.

The
amounts reflected in this "Major Shareholders" section are compiled and derived from SEC filings by each of Caledonia, WLG, Kersaf, Baron, CMS and FMR and other sources.

(B)  Related Party Transactions

Set forth below is a summary of certain agreements that have been entered into or transactions that have occurred involving us and any of our subsidiaries,
affiliates or key management.

Restructuring of Relationship with Majority Shareholder

On July 3, 2001, we announced the restructuring of our majority shareholder, SIIL, and the resolution of certain matters with SIIL and certain of its
shareholders. Pursuant to the restructuring, SIIL was dissolved and its shareholders received interests in us directly proportionate to their interests in SIIL. The former shareholders of SIIL
currently beneficially own approximately 39.2% of our issued and outstanding shares. SIIL was owned in equal thirds by Kersaf, Caledonia and WLG, a company controlled by a Kerzner family trust. SIIL
previously was governed by a shareholders agreement pursuant to which all major decisions of SIIL required the unanimous consent of its shareholders. Kersaf operates a number of hotel, casino and
resort properties in southern Africa under the "Sun International" name and there had been some confusion regarding the use of the "Sun International" name by both Kersaf and us. In
October 2001, we commenced a lawsuit against Kersaf and certain of its subsidiaries. See "Item 8. Financial Information, (A) Consolidated Statements and Other Financial
InformationLegal ProceedingsKersaf Litigation." In November 2002, we reached a further settlement with SIIL's former shareholders to resolve certain
outstanding issues. See below "Global Settlement." As part of the July 2001 restructuring:



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Global Settlement

In November 2002, we entered into a settlement agreement with Kersaf and certain of our other principal shareholders that, among other things, settled
certain outstanding claims that we had with Kersaf and amended certain provisions of the July 2001 restructuring agreements relating to our former majority shareholder described in
"Restructuring of Relationship with Majority Shareholder" above. As part of the July 2001 restructuring agreements, Kersaf agreed to, among other things, sell at least 2.0 million of our
Ordinary Shares in a registered public offering, adhere to a certain non-compete agreement, continue to make an annual payment to us pursuant to a long-term contract, which
payment was approximately $3.3 million in 2003 and 2002, and grant us an interest in a proposed project in Port Ghalib, Egypt. In October 2001, we filed a lawsuit in New York against
Kersaf and certain of its affiliates alleging, among other things, that Kersaf had breached its non-compete obligation under the July 2001 restructuring agreements. As part of the
November 2002 settlement agreement:



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Registration Rights and Governance Agreement

As part of the SIIL reorganization, we entered into a registration rights and governance agreement with Kersaf, WLG, Caledonia, CMS and certain of their
respective affiliates, which was amended as part of the November 2002 settlement. This agreement, and a related proxy, governs the voting of Kersaf's Ordinary Shares that are subject to a proxy
discussed above in "(A) Major Shareholders." Among other things, under this agreement, as amended:



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This
summary is qualified in its entirety by reference to the particular provisions of the registration rights and governance agreement, which can be found as Exhibit 10.8 to our
registration statement on Form F-4 filed on September 21, 2001, and the settlement agreement, which can be found as Exhibit 99.2 to our Form 6-K
filed on November 8, 2002, both of which you should review carefully.

Harborside at Atlantis

We entered into a series of promissory notes with Harborside at Atlantis to fund 50% of the construction cost of the timeshare units on Paradise Island in The
Bahamas. These notes amounted to $15.0 million at December 31, 2003. We earn interest on these advances at a rate equal to one-month LIBOR plus 250 basis points, which was
3.62% at December 31, 2003. The loans were made simultaneously with loans from Starwood, which mirror the amounts, terms and conditions of our loans. Our loans and the Starwood loans are pari passuwith respect to payments of principal and accrued interest and such payments will be made in cash, as it is available from the sale of
timeshare units. Of the amount advanced to Harborside at Atlantis, the Company does not anticipate repayment within the next twelve months.

Harborside
at Atlantis was closed from the end of August 2002 through early December 2002 in order to repair significant damage resulting from adverse weather primarily due
to Hurricane Michelle. The approximate $28.3 million in property damage at our Paradise Island properties excluded our $6.9 million share of construction remediation costs at Harborside
at Atlantis in 2002 and our $1.8 million share in 2003. During 2002, we recorded equity losses of $5.2 million resulting from the $6.9 million remediation charge offset by
$1.7 million equity earnings from Harborside at Atlantis' operations. During the fourth quarter of 2003, our portion of insurance recovery related to the remediation costs was
$1.5 million and therefore the loss for the year ended December 31, 2003 has been reduced by that amount. Harborside at Atlantis is still in negotiation with its insurers and may receive
additional recovery during 2004.

We
provide marketing, administrative and development services to Harborside at Atlantis from which we earned fees of $1.8 million, $1.6 million and $1.4 million for
the years ended December 31, 2003, 2002 and 2001 respectively.

Management Services and Fees

We provide development, management and marketing services to SRL, a Mauritius company in which we own a 20.4% equity interest, and to all resorts owned by SRL,
through 2023. The management services we provide to SRL are sub-contracted by One&Only (Indian Ocean) Management Limited ("One&Only Management"), a company owned 80% by us and 20% by SRL,
to Kerzner. We provide all development and marketing services to SRL and receive fees for providing such services.

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Pursuant
to an assignment from us, One&Only Management provides management services to the One&Only Kanuhura, a Maldives company, in which we currently own a 20% equity interest. The
terms of the management agreement run concurrent with the terms of a lease between the One&Only Kanuhura and the government of the Maldives to lease the One&Only Kanuhura. That lease expires in 2026
and is subject to extension. Similar to our agreements in Mauritius, we provide all development and marketing services to the One&Only Kanuhura.

We
provide management services to Harborside, a joint venture in which we own a 50% equity interest.

We
provide management services to the One&Only Palmilla, a deluxe, five-star property located near Cabo San Lucas. In connection with the purchase, we entered into
long-term management and development agreements related to the property that will expire in 2022.

In
June 2002, we entered into management and development agreements for a 130-room luxury resort in Kaafu Atoll, the Maldives that we expect to open in 2005. The
management and development agreements related to this property are co-terminus with the owner's lease, which expires in 2020. SRL's board of directors has approved the
exercise of its right to participate on a proportionate basis (currently 20%) with us in connection with the Kaafu Atoll project and therefore the management agreement for that property will be held
by One&Only Management.

We
also have management, development and/or marketing agreements with respect to each of our projects in Dubai (see "Item 4. Information on the Company, (B) Business
OverviewThe PropertiesOne&OnlyMiddle East"), Havana, Cuba (see "Item 4. Information on the Company, (B) Business OverviewThe
PropertiesOne&OnlyCuba") and Cape Town, South Africa (see "Item 4. Information on the Company, (B) Business OverviewThe
PropertiesOne&OnlySouth Africa"). As of December 31, 2003, we had not received any management, development or marketing fees associated with these projects.

Office Lease

Effective February 2002, we entered into a lease agreement with Tennyson Properties Limited, which we believe was an arm's length transaction, whereby we
are leasing office space in Buckinghamshire in the United Kingdom for a period of 15 years. The annual rent is approximately £205,000 (which is the equivalent of approximately
$365,000 at December 31, 2003) and is subject to increase every five years to the current fair market value. Tennyson Properties Limited is owned by a family trust established by Solomon
Kerzner.

Long-Term Contract Fees

As part of the restructuring of our then majority shareholder, SIIL, Kersaf agreed to pay us $32.1 million in December 2002. Of this amount,
$21.3 million (which represents the future payments that were to be received over the term of the underlying agreements) is classified as deferred revenue. This long-term contract
fee payment was established at $2.4 million in 1994 and increased at a rate of 3.3% per year and has been paid annually. We received our last payment on December 2, 2002, and pursuant to
the settlement agreement with Kersaf, described above in "Global Settlement," Kersaf's obligation to make payments was terminated effective as of that date. See Note 20Gain on
Settlement of Territorial and Other Disputes in the accompanying consolidated financial statements.

(C)  Interests of Experts and Counsel

Not applicable.

Item 8.    Financial Information

(A)  Consolidated Statements and Other Financial Information

Please refer to Item 18 for our consolidated financial statements and the independent auditors' report.

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Legal Proceedings

Other Litigation

The Company is involved in certain litigation and claims incidental to its business. The Company does not believe, based on currently available information, that
these matters will have a material adverse effect on the accompanying consolidated financial statements.

Enforceability Of Civil Liabilities

We are a Bahamian international business company incorporated under the International Business Companies Act, 2000 of the Commonwealth of The Bahamas. Certain of
our directors and executive officers reside outside the U.S. A substantial portion of the assets of such persons and a certain portion of our assets are located outside the U.S. As a result, in the
opinion of Harry B. Sands and Company, our Bahamian counsel, it may be difficult or impossible to effect service of process within the U.S. upon such persons, to bring suit in the U.S. or to enforce,
in the U.S. courts, any judgment obtained there against such persons predicated upon any civil liability provisions of the U.S. federal securities laws. It is unlikely that Bahamian courts would
entertain original actions against Bahamian companies, their directors or officers predicated solely upon U.S. federal securities laws. Furthermore, judgments predicated upon any civil liability
provisions of the U.S. federal securities laws are not directly enforceable in The Bahamas. Rather, a lawsuit must be brought in The Bahamas on any such judgment. Subject to consideration of private
international law, in general, a judgment obtained after due trial by a court of competent jurisdiction, which is final and conclusive as to the issues in connection, is actionable in Bahamian courts
and is impeachable only upon the grounds of (i) fraud, (ii) public policy and (iii) natural justice.

Gaming
debts may not be legally enforced in certain foreign jurisdictions or in certain jurisdictions within the U.S. As a result, we may be unable to collect gaming debts from patrons
of our casinos who reside in such jurisdictions.

Dividend Policy

Pursuant to our Articles of Association, the Board of Directors may from time to time declare dividends. We historically have not paid dividends and there are
currently no plans to declare any dividends.

(B)  Significant Changes

Except as otherwise disclosed in this Annual Report, there has been no significant change in our financial position since December 31, 2003.

Item 9.    The Offer and Listing

(A)  Offer and Listing Details

The Ordinary Shares do not trade on any foreign exchange. The Ordinary Shares have been listed and traded on the NYSE since March 1, 1996. On
March 29, 2004, the closing price of our Ordinary Shares on the NYSE was $46.18.

The
following tables set forth the range of high and low closing sale prices of the Ordinary Shares as reported on the NYSE during the periods shown.

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For
the year:

High

Low2003

$
39.02

$
19.372002


31.20


18.802001


28.50


17.132000


23.75


15.881999


47.49


17.31


For
the quarter:

High

Low2003: 4th quarter

$
39.02

$
34.783rd quarter


37.60


30.112nd quarter


32.21


22.251st quarter


23.45


19.372002: 4th quarter


24.74


18.803rd quarter


25.13


22.252nd quarter


31.20


24.241st quarter


27.21


22.95


For
the month:

High

Low2004 February

$
42.30

$
38.472004 January


43.00


39.22


(B)  Plan of Distribution

Not applicable.

(C)  Markets

Since March 1, 1996, our Ordinary Shares have been listed and traded on the NYSE. Our Ordinary Shares are not listed on and do not trade on any other
exchange.

(D)  Selling Shareholders

Not applicable.

(E)  Dilution

Not applicable.

(F)   Expenses of the Issue

Not applicable.

Item 10.    Additional Information

(A)  Share Capital

Not applicable.

(B)  Memorandum and Articles of Association

The Restated Articles of Association of Kerzner, dated as of June 26, 2001, were filed with the SEC as an exhibit to our Form 20-F
Annual Report for the year ended December 31, 2000 in file

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number
1-04226. Subsequent amendments, dated as of September 24, 2001, to these Restated Articles of Association were filed with the SEC with our proxy statement for the annual
general meeting held on September 24, 2001.

The
Amended and Restated Memorandum of Association of Kerzner was filed with the SEC as an exhibit to our Registration Statement on Form F-4, filed on
November 1, 1996 in file number 333-15409. A subsequent amendment, dated as of May 17, 2002, to this Amended and Restated Memorandum of Association was filed with the SEC as
an exhibit to our Registration Statement on Form F-4/A, filed on August 12, 2002 in file number 333-96705.

A
description of certain provisions of the Company's Amended and Restated Memorandum of Association and Restated Articles of Association is incorporated by reference to the "Description
of Capital Stock" section of the Company's Form F-3 filed with the SEC on May 23, 2002 in file number 333-88854.

Kerzner
is registered under number 46,600B at the Companies Registry of The Bahamas. Kerzner's purpose, as stated in the Memorandum, is "to engage in any act or activity that is not
prohibited under any law for the time being in force in the Commonwealth of The Bahamas."

(C)  Material Contracts

The following is a summary of each material contract in which we or any of our subsidiaries have been a party to for the past two years.

Heads of Agreement

On May 26, 2003, Kerzner entered into a new Heads of Agreement with the Government of The Bahamas. A complete description of the Heads of Agreement and the
Phase III Expansion can be found at "Item 4. Information on the Company, (B) Business OverviewCertain Matters Affecting Our Bahamian OperationsHeads of Agreement" and
"Item 4. Information on the Company, (B) Business OverviewThe PropertiesDestination ResortsAtlantis, Paradise Island."

Indenture

On August 14, 2001, Kerzner and KINA (together, the "Companies") issued $200.0 million principal amount of 87/8% 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 87/8% Senior Subordinated Notes
were advanced to Kerzner International Bahamas Limited ("KIB") to repay amounts outstanding under the Revolving Credit Facility. Therefore, interest expense related to the 87/8% Senior
Subordinated Notes is offset by affiliated interest income from KIB.

In
May 2002, the Companies issued an additional $200.0 million of 87/8% 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
87/8% Senior Subordinated Notes, which are unsecured obligations, are unconditionally guaranteed by substantially all of the wholly-owned subsidiaries of Kerzner and
KINA. Interest on the 87/8% Senior Subordinated Notes is payable semi-annually and commenced on February 15, 2002. The indenture for the 87/8% 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.

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Fourth Amended and Restated Revolving Credit Facility

On November 13, 2001, Kerzner, KINA and KIB, as co-borrowers, entered into an amended and restated revolving credit facility with a syndicate
of lenders. This facility is described in "Item 4. Information on the Company, (A) History and Development of the CompanyReorganization of Capital StructureAmended
Revolving Credit Facility."

Letter Agreement dated December 14, 2001 to the Amended Revolving Credit Facility

On December 14, 2001, we entered into a letter agreement relating to the Amended Revolving Credit Facility which increased the amount of foreign currency
letters of credit available to us from an aggregate principal amount of $3,000,000 to an aggregate principal amount of $30,000,000.

First Amendment dated May 8, 2002 to the Amended Revolving Credit Facility

On May 8, 2002, we entered into an amendment to the Amended Revolving Credit Facility (the "First Amendment"). The First Amendment was entered into in
order to permit us to purchase or redeem all of the outstanding $200.0 million aggregate principal amount of our 9% Senior Subordinated Notes. On May 8, 2002, we commenced a tender offer
and consent solicitation related to the 9% Senior Subordinated Notes and purchased substantially all of such notes on June 5, 2002. All 9% Senior Subordinated Notes that remained outstanding
after the tender offer was completed were redeemed on June 21, 2002. See "Item 4. Information on the Company, (A) History and Development of the CompanyReorganization of
Capital Structure."

Letter Agreement dated May 22, 2002 to the Amended Revolving Credit Facility

On May 22, 2002, we entered into a letter agreement relating to the Amended Revolving Credit Facility pursuant to which we requested and were granted a
$100.0 million increase in the aggregate amount of borrowings that could be outstanding at any one time under the revolving credit facility. After giving effect to such increase, the aggregate
amount of borrowings that could be outstanding at any one time was $300.0 million. We and the lenders have since agreed, effective January 1, 2003, to calculate borrowings available
under our Amended Revolving Credit Facility using a borrowing base, such that we can draw the lesser of a borrowing base or the commitment amount. See below "Third Amendment dated May 15, 2003
to the Amended Revolving Credit Facility." We and the lenders have also since agreed to a permanent reduction in commitments such that the maximum amount of borrowings that
may be outstanding is $253.5 million less the amount of any letters of credit outstanding. This amount reflects the permanent reduction in commitments of $46.5 million related to our
guarantee of the same amount in connection with the local project financing at the One&Only Palmilla.

As
of December 31, 2003, the Company had $237.0 million of borrowings available under the Amended Revolving Credit Facility.

Letter Agreement dated August 30, 2002 to the Amended Revolving Credit Facility

On August 30, 2002, we entered into a letter agreement relating to the Amended Revolving Credit Facility that amended the amount of per occurrence "all
risks" insurance that we were required to maintain on our properties. Prior to the execution of the letter agreement, we were required to maintain insurance in amounts not less than the replacement
value of our properties. The letter agreement provided that (a) from July 1, 2002, to June 30, 2003, the required level of per occurrence "all risks" insurance on our properties
be equal to the lesser of the full replacement value of such property or the amount of such insurance reasonably available to us on commercially reasonable terms and (b) after July 1,
2003, the amount of any deductible related to our per occurrence "all risks" insurance will not be permitted to exceed $15.0 million and the sum of the aggregate principal amount

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of
all of our outstanding borrowings under the revolving credit facility will not be permitted to exceed the amount of per occurrence "all risks" insurance we maintain from time to time on our
properties. The limitation on the aggregate principal amount of all of our outstanding borrowings was replaced with a borrowing base calculation pursuant to the Third Amendment dated May 15,
2003 discussed below. See "Third Amendment dated May 15, 2003 to the Amended Revolving Credit Facility."

Second Amendment dated November 20, 2002 to the Amended Revolving Credit Facility

On November 20, 2002, we entered into a second amendment to the Amended Revolving Credit Facility (the "Second Amendment"). The Second Amendment was
entered into in order to permit us to purchase or redeem all of our outstanding 85/8% Senior Subordinated Notes. On November 27, 2002, we called for redemption the entire
outstanding principal amount of such notes and on December 27, 2002, we redeemed them at a redemption price of $1,043.13 per $1,000 of principal amount outstanding plus accrued interest. See
"Item 4. Information on the Company, (B) History and Development of the CompanyReorganization of Capital Structure."

Third Amendment dated May 15, 2003 to the Amended Revolving Credit Facility

On May 15, 2003, we entered into a Third Amendment to the Amended Revolving Credit Facility (the "Third Amendment"). The Third Amendment was entered into
in order to, among other things, calculate borrowings available under the Amended Revolving Credit Facility using a borrowing base calculation, such that we can draw the lesser of the borrowing base
or the commitment amount. The borrowing base is generally the sum of: (i) the amount of "all risks" insurance maintained from time to time on the Bahamas Property, as defined, and on the
buildings situated thereon; (ii) the value of undeveloped land owned by the Company under the Amended Revolving Credit Facility on Paradise Island, which for purposes thereof is deemed to be
$150.0 million; (iii) the cost basis of the Company's investment in luxury resort hotels (defined to include the One&Only Palmilla and any luxury resort properties in which the Company
make an investment in after January 1, 2003 that enables the Company to control management of such properties); (iv) the product of six times the consolidated EBITDA, as defined,
attributable to the management contracts of the Company and those under One&Only (Indian Ocean) Management Limited and their significant subsidiaries; and (v) the estimated net present value of
the payments due to the Company pursuant to the Relinquishment Agreement for purposes thereof is deemed to be $185.0 million.

Mohegan Sun Agreements

In February 1998, TCA and the Mohegan Tribe entered into the Relinquishment Agreement pursuant to which TCA receives the Relinquishment Fees and a
development services agreement pursuant to which TCA agreed to develop the Project Sunburst expansion for a $14.0 million development fee. These agreements are described in "Item 4. Information
on the Company, (A) History and Development of the Company."

Atlantis, The Palm

In September 2003, we entered into agreements to form a joint venture with Nakheel LLC, a government-owned entity in Dubai, to develop Atlantis, The
Palm. The Company and Nakheel have each agreed to invest $60 million in equity financing to the Atlantis, The Palm project, with the balance of the financing, which may include an equity
component, expected to be raised at the local level. As part of the Company's equity commitment to the project, it expects to invest approximately $20 million in 2004. As part of this
transaction, Kerzner has agreed to enter into a development services agreement and a long-term management agreement with the joint venture company. The development services agreement
provides for Kerzner to receive a $15.0 million fee for development, (exclusive of our equity investment in the venture). As of December 31, 2003, we have $1.2 million of deferred
costs related to Atlantis, The Palm. The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the necessary
financing.

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Management Agreements

In November 2003, we entered into agreements to manage and develop Hotel Saratoga, a 100-room hotel currently under renovation in Havana, Cuba.
Kerzner is assisting in the design and renovation of the hotel and will manage the completed hotel for a term of 10 years with an option for a further 10 years. Pursuant to the terms of
our agreements, we receive a base management fee and marketing fee, each calculated as a percentage of gross revenue. We will also be entitled to incentive fees if certain profit levels are achieved
by the hotel. In addition, certain out-of-pocket expenses associated with our development of the hotel will be reimbursed to us from revenues from the hotel's operations.

In
November 2003, we entered into an agreement with Victoria & Alfred Waterfront (Pty) Limited to develop a new luxury hotel at the highest end of the market in Cape Town,
South Africa. We intend to form a joint venture in which we will own a minority interest to develop and operate a new 150-room One&Only luxury hotel.

In
September 2003, we agreed to form a joint venture with a government-owned entity in Dubai to develop Atlantis, The Palm. See "Item 4. Information on the Company,
(B) Business OverviewThe PropertiesDestination ResortsAtlantis, The Palm." As part of the transaction, Kerzner has agreed to enter into a development
services agreement and a long-term management agreement with the joint venture company. The transaction remains subject to various closing conditions, including obtaining all requisite
governmental consents and binding commitments for the necessary financing.

In
September 2002, we purchased a 50% ownership interest in the 115-room the One&Only Palmilla, a deluxe, five-star property located near Cabo San Lucas in
Baja, Mexico for approximately $40.8 million, including transaction costs. In connection with the purchase, we entered into long-term management and development agreements related
to the property that will expire in 2022. In connection with the recently-completed expansion of the resort, we guaranteed $46.5 million of the debt-financing that the One&Only
Palmilla obtained from third-parties. In addition, we agreed to provide One&Only Palmilla with $14.0 million of completion loans in 2004, $3.0 million of which has already been advanced.
See "Item 5. Operating and Financial Review and Prospects, (C) Operating ResultsOff-Balance Sheet Arrangements." As part of the Palmilla joint venture's operating
agreement, the owner has the right to require us to acquire the remaining 50% interest from the owner for a price of $36.3 million, plus 50% of Palmilla's working capital, with the price
subject to adjustment, during the first year of the option
period. See "Item 5. Operating and Financial Review and Prospects, (F) Tabular Disclosure of Contractual Obligations."

In
June 2002, we entered into management and development agreements for a 130-room luxury resort on Kaafu Atoll, the Maldives that we expect to open in 2005. The
management and development agreements related to this property are co-terminus with the owner's lease, which expires in 2020. SRL's board of directors has approved the
exercise of its right to participate on a proportionate basis (currently 20%) with us in connection with the Kaafu Atoll project and therefore the management agreement for that property will be held
by One&Only Management. As part of this development, we have committed to provide certain financing arrangements to the current owner of the resort in an aggregate principal amount of up to
$50.0 million to ensure completion of the new resort and provide for working capital on a standby basis. See "Item 5. Operating and Financial Review and Prospects, (B) Liquidity and
Capital ResourcesOff-Balance Sheet Arrangements."

We
have long-term management contracts with each of five hotels in Mauritius that are owned by SRL: the One&Only Le Saint Géran, the One&Only Le Touessrok, La
Pirogue, Le Coco Beach and Sugar Beach. The term of each of these management agreements was extended from 2008 until 2023 in December 2002 when we entered into an agreement with SRL to form
One&Only Management for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives. Effective January 1, 2003, SRL owns
20% of One&Only Management, and we own the remaining 80%. Subject to certain conditions, SRL's ownership interest

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will
increase incrementally through 2009 for no consideration, at which time it will own 50% of the new management company. In connection with the formation of One&Only Management, we transferred to
it all of our Mauritius management agreements and the Kanuhura management agreement, and SRL purchased 20% of our debt and equity interests in the One&Only Kanuhura. Pursuant to a subcontract
arrangement with One&Only Management, we provide the comprehensive management services to the five Mauritius resorts and receive a management fee calculated as a percentage of revenues and adjusted
EBITDA, as defined. One&Only Management also is entitled to a marketing fee calculated as a percentage of revenues, although it has subcontracted to us all marketing services and benefits thereof with
respect to the five Mauritius resorts.

In
July 2001, we entered into a management agreement to provide comprehensive management services to the One&Only Kanuhura Sun Resort and Spa in the Maldives. Pursuant to an
assignment from us in connection with the formation of One&Only Management, One&Only Management now provides management services to the One&Only Kanuhura. The management fee is calculated as
percentages of revenue and adjusted EBITDA and it expires in 2026. One&Only Management also receives a marketing fee calculated as a percentage of revenues, although it has subcontracted to us all
marketing services, and related benefits with respect to the One&Only Kanuhura.

We
have a management agreement to manage the recently expanded One&Only Royal Mirage Hotel in Dubai, which originally opened in August 1999. Pursuant to this agreement, we receive
a management fee calculated as a percentage of revenues and gross operating profits, as defined. The management fee schedule may be renegotiated after 10 years. This management agreement
expires in 2019.

Harborside at Atlantis Joint Venture

In 1999, we formed a joint venture with Starwood Vacation Ownership, Inc. ("SVO") (formerly Vistana, Inc.) a subsidiary of Starwood, to develop a
timeshare project on Paradise Island adjacent to Atlantis, Paradise Island called Harborside at Atlantis. We and SVO each hold a 50% interest in Harborside at Atlantis. As part of the joint venture,
we contributed land and Vistana contributed cash based on the number of timeshare units to be developed.

Purchase Agreement between the Company and Colony

The Purchase Agreement among KINA, as parent, GGRI, Inc., as Seller and Colony as Buyer (the "Purchase Agreement") was dated October 30, 2000. The
contract was entered into between the parties to effect the Resorts Atlantic City Sale described in "Item 4. Information on the Company, (A) History and Development of the Company." The Resorts
Atlantic City Sale was completed on April 25, 2001, for a purchase price of approximately $144.5 million, including accrued interest (the "Resorts Atlantic City Sale"). The proceeds
received from Colony consisted of approximately $127.0 million in cash and an unsecured $17.5 million note which was paid in full in March 2002. Pursuant to the Purchase
Agreement, the sale was conditioned on the approval by the New Jersey Casino Control Commission and on Colony receiving financing.

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 $40.0 million. In February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new
agreement pursuant to which we will sell the undeveloped real estate adjacent to Resorts Atlantic City to a wholly owned subsidiary (the "Purchaser") of Colony RIH Holdings, Inc. for a purchase
price of $40.0 million. The purchase price will be paid in the form of a promissory note which will mature on March 10, 2009 (the "NJ Note"). The NJ Note will begin accruing interest on
September 30, 2004 at a rate of 4.0%, which such rate will step up at various intervals from the closing date of the transaction. All principal and interest due under the NJ Note will be due on
March 10, 2009, which date may be accelerated by us upon certain events. The NJ Note will be secured by a first mortgage on the property sold and will be guaranteed by

77

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Colony
RIH Holdings, Inc. (the direct parent company of the Purchaser) initially in an amount limited to $20 million, which will generally increase in increments of $5 million
annually. The NJ Note will also be guaranteed by Resorts International Hotel and Casino, Inc. This guarantee will go into effect when that company's outstanding public indebtedness, which is
due on March 9, 2009, has been paid. The sale was completed on March 18, 2004.

NY Project Development Services Agreement

In March 2001, TCNY entered into a Development Services Agreement with the Stockbridge-Munsee Tribe for the development of a casino project in the Catskill
region of the State of New York. The Development Agreement was amended and restated in February 2002. Pursuant to the Development Agreement, as amended, TCNY will provide preliminary funding,
certain financing and exclusive development services to the Stockbridge-Munsee Tribe in conjunction with the Catskill Project. If the development takes place, TCNY will earn a fee of 5% of revenues
(as defined in the Development Agreement) as compensation for its services (subject to certain priorities), beginning with the opening of the Catskill Project and continuing for a period of twenty
years.

Internet Gaming Agreement

In February 2002, we agreed to sell 50% of Kerzner Interactive Limited to Station, who paid us a non-refundable deposit of $4.5 million
in July 2002. Subsequently, this agreement was restructured and Station received an option through early January 2003 to purchase 50% of the operation in consideration for the
$4.5 million previously received. Since that time, we concluded that this business would not be economically viable in the short to medium term. We discontinued the operations of Kerzner
Interactive Limited during the first quarter of 2003 and the Company and Station mutually agreed to terminate this transaction. See "Item 4. Information on the Company, (B) Business
OverviewInternet Gaming" for more information.

Northampton, England Gaming License

On April 9, 2003 we announced that we had agreed to acquire from LCI for $2.1 million a gaming license and property located in the city center of
Northampton, England. We have submitted an application for a certificate of consent to the Gaming Board of Great Britain in order to transfer of the gaming license and expect this process to be
completed by during the second quarter of 2004. We ultimately expect to develop and operate a new casino facility on an approximate 30,000 square foot site. The development of this facility is subject
to the approval of local planning authorities.

Bahamas Union Contract Arrangements

In the Bahamas, as of December 31, 2003, approximately 3,700 of our employees were represented by The Bahamas Hotel, Catering and Allied Workers Union.
Kerzner International Bahamas Limited participates in The Bahamas Hotel Employers Association, which represents resort operators in the Paradise Island-New Providence Island area. The
association has signed a new contract with the union that will expire on January 7, 2008.

(D)    Exchange Controls

The Central Bank of The Bahamas (the "Central Bank") must approve any payments made to companies, including us, which are non-resident companies for
exchange control purposes. The Central Bank has granted approved investment status in respect of our holding of the capital stock of our Bahamian subsidiaries. The granting of such status will mean
that all payments of a current nature, including the repatriation of dividends or other distributions to us out of the revenues of our Bahamian subsidiaries and any proceeds received on the sale of
such subsidiaries will be routinely approved by the Central Bank following proper application. Any other payments to us by our Bahamian subsidiaries will require standard approval by the Central Bank.

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There
currently are no limitations on the right of nonresident or foreign owners to hold or vote the Ordinary Shares imposed by foreign law or by our Articles of Association.

(E)    Taxation

Certain U.S. Federal Income Tax Considerations

The following is a general discussion of certain U.S. federal income tax consequences to the acquisition, ownership and disposition of Ordinary Shares. For
purposes of this discussion, a "U.S. Holder" means an individual citizen or resident of the U.S., a corporation or entity treated as a corporation organized under the laws of the U.S. or of any state
or political subdivision thereof, or an estate or trust the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

Rules
regarding partnerships are complex. Partners in partnerships should consult their tax advisers regarding the implications of owning Ordinary Shares.

This
discussion is not intended to be exhaustive and is based on statutes, regulations, rulings and judicial decisions currently in effect. This discussion does not consider any specific
circumstances of any particular U.S. Holder and applies only to U.S. Holders that hold Ordinary Shares as a capital asset. Investors are urged to consult their tax advisers regarding the U.S. federal
tax consequences of acquiring, holding and disposing of Ordinary Shares, as well as any tax consequences that may arise under the laws of any foreign, state, local or other taxing jurisdiction.

Ownership of Ordinary Shares

Dividends on Ordinary Shares paid to U.S. Holders will be treated as dividend income for U.S. federal income tax purposes to the extent of our undistributed
current or accumulated earnings and profits as computed for U.S. federal income tax purposes. In the case of an individual U.S. Holder, such dividend income will be eligible for a maximum tax rate of
15% for dividends received before January 1, 2009, provided that such holder holds the Ordinary Shares for at least 60 days and certain other conditions are satisfied. Furthermore, such
dividends will generally not be eligible for the dividends received deduction available to certain U.S. corporations under Section 243 of the Internal Revenue Code of 1986, as amended.

We
are not a "passive foreign investment company" (a "PFIC"), a "foreign personal holding company" (an "FPHC") or a "controlled foreign corporation" (a "CFC") for U.S. federal income tax
purposes.
We are not a CFC, since U.S. persons each owning (directly, indirectly or by attribution) 10% or more of the voting power or of our stock ("10% Shareholders") do not collectively own more than 50% of
the voting power or value of our stock, or an FPHC, since it is not the case that five or fewer individuals who are U.S. citizens or residents own (directly, indirectly, or by attribution) more than
50% of the voting power or value of our stock. If more than 50% of the voting power or value of our stock were owned (directly, indirectly or by attribution) by 10% Shareholders, we would become a CFC
and each such 10% Shareholder would be required to include in its taxable income as a constructive dividend an amount equal to its share of a portion of our undistributed income. If more than 50% of
the voting power or value of our stock were owned (directly, indirectly or by attribution) by five or fewer individuals who are citizens or residents of the U.S. and if at least 60% of our income
consisted of certain interest, dividend or other enumerated types of income, we would be an FPHC. If we were an FPHC, each U.S. Holder (regardless of the amount of stock owned by such U.S. Holder)
would be required to include in its taxable income as a constructive dividend its share of our undistributed income of specified types. If our foreign ownership interests were to decrease, or if U.S.
persons were to acquire a greater ownership interest in our foreign stock holders, then it is possible that we could become a CFC or FPHC if we otherwise satisfied the tests set forth above.

We
are not a PFIC because we do not anticipate that more than 75% of our annual gross income will consist of certain "passive" income or more than 50% of the average value of our assets
in any

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year
will consist of assets that produce, or are held for the production of, such passive income. If such income and asset tests were not met and we were to become a PFIC, U.S. Holders would, in
certain circumstances, be required to pay an interest charge together with tax calculated at maximum rates on certain "excess distributions" (defined to include any gain on the sale of stock).

If
we were a FPHC or a PFIC, an individual U.S. Holder would not be eligible for the 15% tax rate on dividends discussed in the first paragraph of this section.

Any
gain or loss on the sale or exchange of Ordinary Shares by a U.S. Holder will be a capital gain or loss. If the U.S. Holder has held such Ordinary Shares for more than one year, such
gain or loss will be a long-term capital gain or loss.

Annual
filings of Form 5471 may be required from certain U.S. persons owning 10% or more of our stock.

Certain Bahamian Tax Considerations

The following is a brief and general summary of certain Bahamian tax matters as they may relate to the Company and the holders of the Ordinary Shares of the
Company. The discussion is not exhaustive and is based on Bahamian law currently in effect.

The
Bahamas does not impose any income, capital gains or withholding taxes. Therefore, the Company will not be subject to income tax in The Bahamas on an ongoing basis and dividends paid
on Ordinary Shares to holders thereof will not be subject to a Bahamian withholding tax. The Company, however, is subject to gaming taxes and other governmental fees and charges. There are no
reciprocal tax treaties with The Bahamas.

(F)    Dividends and Paying Agents

Not applicable.

(G)    Statement by Experts

Not applicable.

(H)    Documents on Display

Kerzner is subject to the informational requirements of the Exchange Act and files reports and other information with the SEC. You may read and copy all or any
portion of the Annual Report and its exhibits at the public reference facilities maintained by the SEC, 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at its regional
office at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may request copies of all or any portion of these documents, upon payment of a duplication
fee, by writing to the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain more information about the public reference room by calling the SEC at
1-800-SEC-0330. Our reports and other information filed with the SEC are also available to the public from commercial document retrieval services and the website
maintained by the SEC at www.sec.gov.

(I)    Subsidiary Information

Please refer to "Item 4. Information on the Company, (C) Organizational Structure" for a list of our significant subsidiaries. A list of our significant
subsidiaries is filed with this Annual Report as Exhibit 8. See "Item 19. Exhibits."

Item 11.    Quantitative and Qualitative Disclosures About Market Risk

Our major market risk exposure is interest rate risk directly related to our bank debt and interest rate swaps on our fixed rate debt. For the nine months ended
September 30, 2003, we had interest rate swaps on $200.0 million of our fixed rate debt. At the end of September 2003 we cancelled

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$25.0 million
notional amount of our interest rate swaps and accordingly, as of December 31, 2003 we had interest rate swaps on $175.0 million of our fixed rate debt. We attempt
to limit our exposure to interest rate risk by managing the mix of fixed and variable rate debt, and by entering into variable interest rate swap agreements to hedge a portion of our fixed rate debt.
See "Item 5. Operating and Financial Review and Prospects, (B) Liquidity and Capital ResourcesInterest Rate Swap Agreements" for further discussion. These interest rate swap
agreements are entered into with a number of financial institutions with investment grade credit ratings, thereby minimizing the risk of credit loss.

We
prepare our financial statements in U.S. dollars. Our most significant non-U.S. operations are in The Bahamas. Due to current governmental policies in The Bahamas that
equate one Bahamian dollar to one U.S. dollar, we believe that we do not have material market risk exposures in this jurisdiction relative to changes in foreign exchange rates. Due to the stability of
the other markets in which we operate, we also believe that we do not have material market risk exposures in these jurisdictions relative to changes in foreign exchange rates.

Fair
value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment. The fair value of fixed rate debt is based on the market value on the balance sheet date plus accrued interest to the last payment date. The fair
value of interest rate swaps is determined from representations of financial institutions and represents the discounted future cash flows through maturity or expiration using current rates, and is
effectively the amount we would pay or receive to terminate the agreements.

Interest Rate Sensitivity

The table below provides information about the Company's derivative instruments that are sensitive to changes in interest rates, including interest rate swaps and
debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents
notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract.
Weighted average variable rates are based on implied forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting
currency.

|December 31, 2003
(In Thousands of Dollars)
Asset (Liability) |                      | Expected Maturity Date |   |       |   |   |       |   |  
|------------------------------------------------------------- | -------------------- | ---------------------- | - | ----- | - | - | ----- | - | -
|
|
|Fixed rate debt:                                              |                      |                        |   |       |   |   |       |   |  
|                                                              | 87/8% Notes          |                        | $ |      |   | $ |      |   | $
|Interest rate swaps:                                          |                      |                        |   |       |   |   |       |   |  
|                                                              | Notional amount      |                        | $ |      |   | $ |      |   | $
|                                                              | Average pay rate (a) |                        |   |       |   |   |       |   |  
|                                                              | Average receive rate |                        |   | 8.875 | % |   | 8.875 | % |  

---

In connection with our interest rate swap agreements, for every 100 basis points that LIBOR increases or decreases, interest expense
correspondingly changes by $1.75 million per annum.

Item 12.    Description of Securities Other than Equity Securities

Not applicable.

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PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15.    Controls and Procedures

As of the end of the period covered by this report, the Company's management (with the participation of its chief executive officer and chief financial officer)
conducted an evaluation pursuant to Rule 13a-15 promulgated under the Exchange Act, of the effectiveness of the design and operation of the Company's disclosure controls and
procedures. 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, the
Company's chief executive officer and chief financial officer concluded that as of the end of the period covered by this report such disclosure controls and procedures were reasonably designed to
ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC.

No
change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the year ended
December 31,
2003 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 16.    Reserved

Item 16A.    Audit Committee Financial Expert

Our audit committee consists of Messrs. Buckley, Marks and Siegel. The Board of Directors has determined that our audit committee does not have an "audit
committee financial expert," as defined in new rules promulgated by the SEC. Although a person with such qualifications does not serve on the audit committee, the Board of Directors believes that the
members of the audit committee collectively possess the knowledge and experience to oversee and assess the performance of our management and auditors, the quality of our disclosure controls, the
preparation and evaluation of our financial statements and our financial reporting. Our Board of Directors also believes that the members of the audit committee collectively possess the understanding
of audit committee functions necessary to diligently execute their responsibilities. Biographical information for each member of the audit committee is available in Item 6 of this Annual Report.

Item 16B.    Code of Ethics

We have a Code of Business Conduct and Ethics applicable to all of our employees, officers and directors (including our principal executive officer and our
principal financial and accounting officer). A copy of this Code of Business Conduct and Ethics is attached as Exhibit 11.2 to this Annual Report and is available in print on request. Since its
adoption in 2003, there have been no amendments or waivers to this Code of Business Conduct and Ethics.

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Item 16C.    Principal Accountant Fees and Services

The following table sets forth the aggregate fees billed or to be billed to us by Deloitte & Touche LLP, our principal accountants, for the following
categories of fees from each of the last two years:

2003

2002(in thousands)Audit fees

$
1,025

$
500Audit-related fees (1)


982


573Tax fees (2)


125


107Total fees

$
2,132

$
1,180


---

The
audit committee has concluded that the provision of the non-audit services listed above is compatible with maintaining the independence of our principal
accountants.

The
audit committee is responsible for making a recommendation to shareholders for appointing and removing the independent auditor, setting their compensation and overseeing their work.
The audit committee has a policy for the pre-approval of all audit and permissible non-audit services provided by the independent auditor. The audit committee
pre-approved 100% of the fees for 2003.

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

Not applicable.

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PART III

Item 17.    Financial Statements

Not applicable.

Item 18.    Financial Statements

(A)  List of Financial Statements and Financial Statement Schedules

|Independent Auditors' Report                             |  | F-2
|-------------------------------------------------------- |  | ---
|Consolidated Balance Sheets                              |  | F-3
|Consolidated Statements of Income                        |  | F-4
|Consolidated Statements of Changes in Shareholder Equity |  | F-5
|Consolidated Statements of Cash Flows                    |  | F-6
|Notes to Consolidated Financial Statements               |  | F-7

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Item 19.    Exhibits

EXHIBITS

|Exhibit
Numbers |  | Description                                                                                                                                                                                                                                                                                                                                                 |  | Incorporation by Reference to                                                                                                                 
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|               
|1.1             |  | Restated Articles of Association of Kerzner dated as of June 26, 2001                                                                                                                                                                                                                                                                                       |  | Exhibit 1 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2000, filed on July 2, 2001, File No. 001-04226               
|1.2             |  | Amendment to Restated Articles of Association of Kerzner dated as of September 24, 2001                                                                                                                                                                                                                                                                     |  | Exhibit 3.3 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36                                              
|1.3             |  | Amended and Restated Memorandum of Association of Kerzner                                                                                                                                                                                                                                                                                                   |  | Exhibit 3.1 to Registration Statement on Form F-4, filed on November 7, 1996, File No. 333-15409                                              
|1.4             |  | Amendment to Memorandum of Association of Kerzner                                                                                                                                                                                                                                                                                                           |  | Exhibit 3.6 to Registration Statement on Form F-4/A, filed on August 12, 2002, File No. 333-96705-36                                          
|1.5             |  | Restated Certificate of Incorporation, as amended, of Kerzner International North America, Inc.                                                                                                                                                                                                                                                             |  | Exhibit 3.3 to Registration Statement on Form F-4, filed on March 20, 1997, File No. 333-23665-01                                             
|1.6             |  | Certificate of Amendment of Restated Certificate of Incorporation of Kerzner International North America, Inc.                                                                                                                                                                                                                                              |  | Exhibit 3(a)(2) to Form 10-K405 Annual Report of KINA for the fiscal year ended December 31, 1996, filed on March 20, 1997, File No. 001-04748
|1.7             |  | Certificate of Amendment of Restated Certificate of Incorporation of Kerzner International North America, Inc.                                                                                                                                                                                                                                              |  | Exhibit 3.7 to Registration Statement on Form F-4/A dated August 12, 2002, in File No. 333-96705-36                                           
|1.8             |  | Amended and Restated By-Laws of Kerzner International North America, Inc.                                                                                                                                                                                                                                                                                   |  | Exhibit 3(b) to Form 10-Q Quarterly Report of KINA for the quarter ended June 30, 1996, filed on August 7, 1996, File No. 001-04748           
|2.1             |  | Form of Inter-Borrower Agreement dated as of March 10, 1997, between Kerzner and KINA                                                                                                                                                                                                                                                                       |  | Exhibit 4(e)(4) to Form 10-K405 Annual Report of KINA for the fiscal year ended December 31, 1996, filed on March 20, 1997, File No. 001-04748
|2.2(a)          |  | Purchase Agreement dated August 9, 2001, among Kerzner and KINA, as issuers, the subsidiary guarantors party thereto, and Deutsche Banc Alex. Brown Inc., Bear Stearns & Co. Inc., CIBC World Markets Corp., Banc of
America Securities LLC, Wells Fargo Brokerage Services, LLC, Fleet Securities, Inc., and The Royal Bank of Scotland PLC, as purchasers |  | Exhibit 2.3(a) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226          
|                |  |                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                               

85

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|2.2(b) |  | Purchase Agreement dated May 9, 2002, among Kerzner and KINA, as issuers, the subsidiary guarantors party thereto, and Bear Stearns & Co. Inc., Deutsche Bank Securities Inc., CIBC World Markets Corp., Banc of America
Securities LLC, Wells Fargo Brokerage Services, LLC, J.P. Morgan Securities Inc., as initial purchasers                                           |  | Exhibit 2.3(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No.001-04226      
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|2.2(c) |  | Indenture dated as of August 14, 2001, among Kerzner and KINA, as issuers, the Guarantors party thereto, and The Bank of New York, as trustee                                                                                                                                                                                                                              |  | Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226                                                        
|2.2(d) |  | Supplemental Indenture dated as of September 19, 2001 to Indenture dated as of August 14, 2001                                                                                                                                                                                                                                                                             |  | Exhibit 99(a) to Form 6-K of Kerzner, filed on September 20, 2001, File No. 001-04226                                                    
|2.2(e) |  | Second Supplemental Indenture dated as of May 20, 2002 to Indenture dated as of August 14, 2001                                                                                                                                                                                                                                                                            |  | Exhibit 4.3 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36                                         
|2.2(f) |  | Third Supplemental Indenture dated as of November 18, 2002 to Indenture dated as of August 14, 2001                                                                                                                                                                                                                                                                        |  | Exhibit 99.2 to Form 6-K of Kerzner, filed on November 21, 2002, File No. 001-04226                                                      
|2.2(g) |  | Fourth Supplemental Indenture dated as of May 7, 2003 to Indenture dated as of August 14, 2001                                                                                                                                                                                                                                                                             |  | Exhibit 99(1) to Form 6-K of Kerzner, filed on June 4, 2003, File No. 001-04226                                                          
|2.2(h) |  | Form of 87/8% Senior Subordinated Note due 2011                                                                                                                                                                                                                                                                                                                            |  | Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226                                                        
|2.2(i) |  | Form of Guarantee with respect to 87/8% Senior Subordinated Note due 2011                                                                                                                                                                                                                                                                                                  |  | Exhibit 2(c) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226                                                        
|2.2(j) |  | Registration Rights Agreement dated as of August 14, 2001, among Kerzner and KINA, as issuers, the Guarantors party thereto, and Deutsche Banc Alex. Brown Inc., Bear Stearns & Co. Inc., CIBC World Markets Corp., Banc
of America Securities LLC, Wells Fargo Brokerage Services, LLC, Fleet Securities, Inc., and The Royal Bank of Scotland PLC, as initial purchasers |  | Exhibit 2(b) to Form 6-K of Kerzner, filed on August 24, 2001, File No. 001-04226                                                        
|2.2(k) |  | Registration Rights Agreement dated as of May 20, 2002, among Kerzner and KINA, as issuers, the Guarantors party thereto, and Bear Stearns & Co. Inc., Deutsche Bank Securities Inc., CIBC World Markets Corp., Banc of
America Securities LLC, Wells Fargo Brokerage Services, LLC, J.P. Morgan Securities Inc., as initial purchasers                                    |  | Exhibit 2.3(f) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226     
|4.1    |  | Purchase Agreement among KINA, as Parent, GGRI, as Seller and Colony as Buyer dated as of October 30, 2000                                                                                                                                                                                                                                                                 |  | Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended September 30, 2000, filed on November 14, 2000, File No. 001-04748
|       |  |                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                          

86

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|4.2    |  | Promissory Note between Colony and KINA dated as of April 25, 2001                                                                                                                                                                                            |  | Exhibit 2 to Form 6-K of Kerzner, filed on May 8, 2001, File No. 001-04226                                                               
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|4.3(a) |  | Fourth Amended and Restated Revolving Credit Facility dated as of November 13, 2001 among Kerzner, KINA and Kerzner International Bahamas Limited, various financial institutions as Lenders, and Canadian Imperial Bank of
Commerce, as administrative agent |  | Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended September 30, 2001, filed on November 14, 2001, File No. 001-04748
|4.3(b) |  | Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of December 14, 2001                                                                                                                                                  |  | Exhibit 4.3(b) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226    
|4.3(c) |  | First Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 8, 2002                                                                                                                                                         |  | Exhibit 4.21 to Registration Statement on Form F-4, filed on July 18, 2002, File No. 333-96705-36                                        
|4.3(d) |  | Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 22, 2002                                                                                                                                                       |  | Exhibit 4.3(d) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226    
|4.3(e) |  | Letter Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of August 30, 2002                                                                                                                                                    |  | Exhibit 99.1 to Form 6-K of Kerzner, filed on December 6, 2002, File No. 001-04226                                                       
|4.3(f) |  | Second Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of November 20, 2002                                                                                                                                                  |  | Exhibit 99.2 to Form 6-K of Kerzner, filed on December 6, 2002, File No. 001-04226                                                       
|4.3(g) |  | Third Amendment to the Fourth Amended and Restated Revolving Credit Agreement dated as of May 15, 2003                                                                                                                                                        |  | Exhibit 4.3(g) to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226    
|4.4    |  | Heads of Agreement dated May 26, 2003, between Kerzner and the Government of the Commonwealth of The Bahamas                                                                                                                                                  |  | Exhibit 99(2) to Form 6-K of Kerzner, filed on May 28, 2003, File No. 001-04226                                                          
|4.5    |  | Second Amended and Restated Development Services Agreement dated as of February 6, 2002 among the Stockbridge-Munsee Tribe, the Stockbridge-Munsee Tribal Gaming Authority, Trading Cove New York, LLC, KINA and Waterford
Gaming Group, LLC                  |  | Exhibit 10 to Form 10-Q Quarterly Report of KINA for the quarter ended March 31, 2002, filed on May 15, 2002, File No. 001-04748         
|4.6    |  | Development Services Agreement dated February 7, 1998 between the Mohegan Tribal Gaming Authority and Trading Cove Associates                                                                                                                                 |  | Exhibit 2.1 to Form 20-F/A of Kerzner for the year ended December 31, 1997, filed on September 3, 1998, File No. 001-04226               
|4.7    |  | Relinquishment Agreement dated February 7, 1998, between the Mohegan Tribal Gaming Authority and Trading Cove Associates                                                                                                                                      |  | Exhibit 2.2 to Form 20-F/A of Kerzner for the year ended December 31, 1997, filed on September 3, 1998, File No. 001-04226               
|       |  |                                                                                                                                                                                                                                                               |  |                                                                                                                                          

87

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|4.8  |  | Agreement in Principle between Kerzner International Limited and Nakheel LLC, dated September 22, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Filed herewith as Exhibit 4.8                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|4.9  |  | Stock Purchase Agreement dated as of February 14, 2002, by and among Station Casinos, Inc., Station Online, Inc., Kerzner and Kerzner Interactive Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 4.8 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2001, filed on May 30, 2002, File No. 001-04226
|4.10 |  | Registration Rights and Governance Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC,
Mangalitsa Limited, Cement Merchants SA, Rosegrove Limited, Royale Resorts Holdings Limited and Sun International Inc.                                                                                                                                                                                                                                                                                                                                                           |  | Exhibit C to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645             
|4.11 |  | Omnibus Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC, Rosegrove Limited, Royale
Resorts Holdings Limited, Royale Resorts International Limited, Sun International Inc., Sun Hotels International, Sun Hotels Limited, World Leisure Investments Limited, Solomon Kerzner, Peter Buckley, Derek Aubrey Hawton, Sun International Management
Limited (a British Virgin Islands company), Cement Merchants SA, Sun International Management Limited (a Swiss company), Sun International Management (UK) Limited, Hog Island Holdings Limited and Mangalitsa Limited |  | Exhibit 10.9 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780                              
|4.12 |  | Supplemental Agreement to the Original Shareholders' Agreement and to the Rosegrove Shareholders Agreement dated as of July 3, 2001, by and among Kersaf Investments Limited, Sun International Inc., Kerzner, Royale Resorts
Holdings Limited, World Leisure Investments Limited, Sun Hotels Limited, World Leisure Group Limited, Royale Resorts International Limited, Caledonia Investments PLC, Solomon Kerzner, Sun International Management Limited (a British Virgin Islands
company), Rosegrove Limited, Sun International Management Limited (a Swiss company), Mangalitsa Limited and Hog Island Holdings Limited                                                                             |  | Exhibit A to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645             
|4.13 |  | Irrevocable Proxy Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited, World Leisure Group Limited, Kersaf Investments Limited, Caledonia Investments PLC, Mangalitsa Limited,
Cement Merchants SA, Rosegrove Limited, Royale Resorts Holdings Limited and Sun International Inc.                                                                                                                                                                                                                                                                                                                                                                            |  | Exhibit B to Schedule 13-D of Mangalitsa Limited with respect to Kerzner, filed on July 13, 2001, File No. 005-48645             
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                  

88

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|4.14 |  | Trade Name and Trademark Agreement dated as of July 3, 2001, by and among Kerzner, Sun International Investments Limited and World Leisure Group Limited, as Assignors, and Sun International Management Limited, as
Assignee                                                        |  | Exhibit 10.12 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------
|4.15 |  | Promissory Note dated July 3, 2001 between Royale Resorts Holdings Limited, as Maker, and Kerzner, as Payee                                                                                                                                                                          |  | Exhibit 10.13 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780                               
|4.16 |  | Stock Pledge Agreement dated as of July 3, 2001, between Royale Resorts Holdings Limited, as Pledgor, and Kerzner                                                                                                                                                                    |  | Exhibit 10.14 to Registration Statement on Form F-4, filed on September 21, 2001, File No. 333-69780                               
|4.17 |  | Settlement Agreement dated as of November 1, 2002, by and among Kerzner, Kersaf Investments Limited, Royale Resorts Holdings Limited, Sun International Management Limited, World Leisure Group Limited, Caledonia
Investments PLC, Mangalitsa Limited and Cement Merchants SA       |  | Exhibit 99.2 to Form 6-K of Kerzner, filed on November 8, 2002, File No. 001-04226                                                 
|4.18 |  | Kerzner Deferred Compensation Plan                                                                                                                                                                                                                                                   |  | Exhibit 99.1 to Registration Statement on Form S-8, filed on October 11, 2002, File No. 333-100522                                 
|4.19 |  | 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 
|4.20 |  | Plantation, Florida Lease Agreement                                                                                                                                                                                                                                                  |  | Exhibit 4.19 to Form 20-F Annual Report of Kerzner for the year ended December 31, 2002, filed on June 30, 2003, File No. 001-04226
|4.21 |  | Kerzner International Limited 2003 Stock Incentive Plan                                                                                                                                                                                                                              |  | Filed herewith as Exhibit 4.21                                                                                                     
|4.22 |  | Master Agreement among Kerzner International North America, Inc., Colony RIH Holdings, Inc., Resorts International Hotel and Casino, Inc., Resorts Real Estate Holdings, Inc., Resorts International Hotel, Inc. and New Pier
Operating Company, Inc., dated as of February 1, 2004. |  | Filed herewith as Exhibit 4.22                                                                                                     
|4.23 |  | Purchase and Sale Agreement by and between Kerzner International North America, Inc., as Seller, and Resorts Real Estate Holdings, Inc., as Purchaser, dated as of February 1, 2004.                                                                                                 |  | Filed herewith as Exhibit 4.23                                                                                                     
|6    |  | Computation of earnings per share                                                                                                                                                                                                                                                    |  | Incorporated by reference to Note 2 of the Notes to the Consolidated Financial Statements                                          
|8    |  | Subsidiaries of Kerzner                                                                                                                                                                                                                                                              |  | Filed herewith as Exhibit 8                                                                                                        
|11.1 |  | Kerzner Audit Committee Charter                                                                                                                                                                                                                                                      |  | Filed herewith as Exhibit 11.1                                                                                                     
|11.2 |  | Kerzner Code of Business Conduct and Ethics                                                                                                                                                                                                                                          |  | Filed herewith as Exhibit 11.2                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                      |  |                                                                                                                                    

89

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|12.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                     |  | Filed herewith as Exhibit 12.1
|---- |  | ---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------
|12.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                     |  | Filed herewith as Exhibit 12.2
|13.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | Filed herewith as Exhibit 13.1
|14.1 |  | Consent of Deloitte & Touche LLP                                                                                       |  | Filed herewith as Exhibit 14.1
|14.2 |  | Consent of PricewaterhouseCoopers LLP                                                                                  |  | Filed herewith as Exhibit 14.2
|14.3 |  | Consent of Ernst & Young LLP                                                                                           |  | Filed herewith as Exhibit 14.3
|14.4 |  | Trading Cove Associates financial statements December 31, 2003, 2002 and 2001                                          |  | Filed herewith as Exhibit 14.4

90

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the
undersigned to sign this Annual Report on its behalf.

|                     |  | KERZNER INTERNATIONAL LIMITED
|-------------------- |  | -----------------------------
|Date: March 30, 2004 |  | By:                          
|                     |  | Name:                        
|                     |  | Title:                       

91

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KERZNER INTERNATIONAL LIMITED

Consolidated Financial Statements as of December 31, 2003 and 2002  and for the Three Years Ended December 31, 2003

F-1

---



INDEPENDENT AUDITORS' REPORT

To
the Board of Directors and Shareholders of Kerzner International Limited:

We
have audited the accompanying consolidated balance sheets of Kerzner International Limited and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related
consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
did not audit the financial statements of Trading Cove Associates ("TCA"), the Company's investment in which is accounted for by use of the equity method, for the years ended
December 31, 2003, 2002 and 2001. The Company's equity of $14.4 million and $8.9 million in TCA's net assets at December 31, 2003 and 2002, respectively, and of
$34.0 million, $30.1 million and $24.3 million in TCA's net income for the years ended December 31, 2003, 2002, and 2001 are included in the accompanying consolidated
financial statements. The financial statements of TCA were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such
company, is based solely on the report of such other auditors. We 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 11% of consolidated net 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 consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Kerzner International Limited and subsidiaries, as of December 31, 2003 and 2002 and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

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.

DELOITTE &
TOUCHE LLP

Parsippany,
New Jersey
March 29, 2004

F-2

---



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.), which is a wholly owned subsidiary of Kerzner International Limited, 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.



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

F-3

---



KERZNER INTERNATIONAL LIMITED  CONSOLIDATED BALANCE SHEETS  (In thousands of US dollars, except per share data)

|                                          |                                            | December 31,              |          
|----------------------------------------- | ------------------------------------------ | ------------------------- | ---------
|
|
|ASSETS                                    |                                            |                           |          
|Current assets:                           |                                            |                           |          
|                                          | Cash and cash equivalents                  |                           | $        
|                                          | Restricted cash                            |                           |          
|                                          | Trade receivables, net                     |                           |          
|                                          | Due from affiliates                        |                           |          
|                                          | Inventories                                |                           |          
|                                          | Prepaid expenses and other assets          |                           |          
|                                          |                                            |                           |          
|                                          |                                            | Total current assets      |          
|Property and equipment, net               |                                            |                           | 1,154,004
|Notes receivable                          |                                            |                           |         
|Due from affiliatesnon-current           |                                            |                           | 34,842   
|Deferred tax asset, net                   |                                            |                           | 10,473   
|Deferred charges and other assets, net    |                                            |                           | 33,656   
|Investments in associated companies       |                                            |                           | 83,152   
|                                          |                                            |                           |          
|                                          |                                            | Total assets              |          
|                                          |                                            |                           |          
|LIABILITIES AND SHAREHOLDERS' EQUITY      |                                            |                           |          
|Current liabilities:                      |                                            |                           |          
|                                          | Current maturities of long-term debt       |                           | $        
|                                          | Accounts payable and accrued liabilities   |                           |          
|                                          | Capital creditors                          |                           |          
|                                          |                                            |                           |          
|                                          |                                            | Total current liabilities |          
|Deferred revenue                          |                                            |                           | 14,652   
|Other long-term liabilities               |                                            |                           | 7,290    
|Long-term debt, net of current maturities |                                            |                           | 417,220  
|                                          |                                            |                           |          
|                                          |                                            | Total liabilities         |          
|                                          |                                            |                           |          
|Commitments and contingencies (Note 23)   |                                            |                           |          
|Shareholders' equity:                     |                                            |                           |          
|                                          | Ordinary shares, $.001 par value           |                           |          
|                                          | Capital in excess of par                   |                           |          
|                                          | Retained earnings                          |                           |          
|                                          | Accumulated other comprehensive loss       |                           |          
|                                          | Deferred compensation                      |                           |          
|                                          |                                            |                           |          
|                                          |                                            |                           | 1,002,359
|Treasury stock                            |                                            |                           | (162,769 
|                                          |                                            |                           |          
|                                          | Total shareholders' equity                 |                           |          
|                                          |                                            |                           |          
|                                          | Total liabilities and shareholders' equity |                           | $        
|                                          |                                            |                           |          

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

F-4

---



KERZNER INTERNATIONAL LIMITED        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands of US dollars, except per share data)

|                                                                                          |                                                                      | For the Year Ended December 31, |       
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------- | ------
|
|
|Revenues:                                                                                 |                                                                      |                                 |       
|                                                                                          | Gaming                                                               |                                 | $     
|                                                                                          | Rooms                                                                |                                 |       
|                                                                                          | Food and beverage                                                    |                                 |       
|                                                                                          | Tour operations                                                      |                                 |       
|                                                                                          | Real estate related                                                  |                                 |       
|                                                                                          | TCA development and other fees                                       |                                 |       
|                                                                                          | Management, development and other fees                               |                                 |       
|                                                                                          | Other revenues                                                       |                                 |       
|                                                                                          | Insurance recovery                                                   |                                 |       
|                                                                                          |                                                                      |                                 |       
|                                                                                          |                                                                      | Gross revenues                  |       
|                                                                                          | Less: promotional allowances                                         |                                 |       
|                                                                                          |                                                                      |                                 |       
|                                                                                          |                                                                      | Net revenues                    |       
|                                                                                          |                                                                      |                                 |       
|Cost and expenses:                                                                        |                                                                      |                                 |       
|                                                                                          | Gaming                                                               |                                 |       
|                                                                                          | Rooms                                                                |                                 |       
|                                                                                          | Food and beverage                                                    |                                 |       
|                                                                                          | Tour operations                                                      |                                 |       
|                                                                                          | Other operating expenses                                             |                                 |       
|                                                                                          | Real estate related                                                  |                                 |       
|                                                                                          | Selling, general and administrative                                  |                                 |       
|                                                                                          | Corporate expenses                                                   |                                 |       
|                                                                                          | Depreciation and amortization                                        |                                 |       
|                                                                                          | Gain on replacement of damaged assets                                |                                 |       
|                                                                                          | Restructuring costs (reversal)                                       |                                 |       
|                                                                                          | Pre-opening expenses                                                 |                                 |       
|                                                                                          | Gain on net assets held for sale                                     |                                 |       
|                                                                                          |                                                                      |                                 |       
|                                                                                          |                                                                      | Cost and expenses               |       
|Relinquishment feesequity earnings in TCA                                                |                                                                      |                                 | 33,960
|                                                                                          |                                                                      |                                 |       
|Income from operations                                                                    |                                                                      |                                 | 97,166
|                                                                                          |                                                                      |                                 |       
|Other income (expense):                                                                   |                                                                      |                                 |       
|                                                                                          | Interest income                                                      |                                 |       
|                                                                                          | Interest expense, net of capitalization                              |                                 |       
|                                                                                          | Equity in earnings (losses) of associated companies                  |                                 |       
|                                                                                          | Gain on settlement of territorial and other disputes                 |                                 |       
|                                                                                          | Loss on early extinguishment of debt                                 |                                 |       
|                                                                                          | Other, net                                                           |                                 |       
|                                                                                          |                                                                      |                                 |       
|                                                                                          |                                                                      | Other expense, net              |       
|                                                                                          |                                                                      |                                 |       
|Income from continuing operations before provision for income taxes and minority interest |                                                                      |                                 | 71,769
|Provision for income taxes                                                                |                                                                      |                                 | (162  
|Minority interest                                                                         |                                                                      |                                 | (1,340
|                                                                                          |                                                                      |                                 |       
|                                                                                          | Income from continuing operations                                    |                                 |       
|                                                                                          | Income (loss) from discontinued operations, net of income tax effect |                                 |       
|                                                                                          |                                                                      |                                 |       
|                                                                                          | Net income                                                           |                                 | $     
|                                                                                          |                                                                      |                                 |       
|                                                                                          |                                                                      |                                 |       

F-5

---

|Basic earnings per share:   |                                                       |  |   |        |  |   |        |   |   |       
|--------------------------- | ----------------------------------------------------- |  | - | ------ |  | - | ------ | - | - | ------
|                            | Income from continuing operations                     |  | $ | 2.46   |  | $ | 1.71   |   | $ | 1.39  
|                            | Income (loss) from discontinued operations            |  |   | 0.04   |  |   | (0.29  | ) |   | (0.18 
|                            |                                                       |  |   |        |  |   |       
|                            | Earnings per sharebasic                              |  | $ | 2.50   |  | $ | 1.42   |   | $ | 1.21  
|                            |                                                       |  |   |        |  |   |       
|                            | Weighted average number of shares outstanding-basic   |  |   | 28,575 |  |   | 27,891 |   |   | 26,885
|Diluted earnings per share: |                                                       |  |   |        |  |   |        |   |   |       
|                            | Income from continuing operations                     |  | $ | 2.39   |  | $ | 1.67   |   | $ | 1.34  
|                            | Income (loss) from discontinued operations            |  |   | 0.05   |  |   | (0.28  | ) |   | (0.17 
|                            |                                                       |  |   |        |  |   |       
|                            | Earnings per sharediluted                            |  | $ | 2.44   |  | $ | 1.39   |   | $ | 1.17  
|                            |                                                       |  |   |        |  |   |       
|                            | Weighted average number of shares outstanding-diluted |  |   | 29,377 |  |   | 28,544 |   |   | 27,826

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

F-6

---



KERZNER INTERNATIONAL LIMITED    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY    For the Years Ended December 31, 2003, 2002 and 2001    (In thousands of US dollars)

|                                                     |                               | Ordinary Shares |        |   |    |    |   | Accumulated
Other
Comprehensive
Income (Loss) |         |   |         |         |   |        |        |   |         
|---------------------------------------------------- | ----------------------------- | --------------- | ------ | - | -- | -- | - | --------------------------------------------- | ------- | - | ------- | ------- | - | ------ | ------ | - | --------
|
|
|Balance at December 31, 2000, as originally reported |                               | 33,874          |        | $ | 34 |    | $ | 680,784                                       |         | $ | 129,321 |         | $ | (5,543 | )      | $ | (162,769
|Prior period adjustment                              |                               |                |        |   |   |    |   |                                              |         |   | (4,746  | )       |   |       |        |   |        
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|Balance at December 31, 2000*                        |                               | 33,874          |        |   | 34 |    |   | 680,784                                       |         |   | 124,575 |         |   | (5,543 | )      |   | (162,769
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|Translation reserves                                 |                               |                |        |   |   |    |   |                                              |         |   |        |         |   | (3,010 | )      |   |        
|Exercise of share options                            |                               | 556             |        |   |   |    |   | 7,930                                         |         |   |        |         |   |       |        |   |        
|Net income                                           |                               |                |        |   |   |    |   |                                              |         |   | 32,661  |         |   |       |        |   |        
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|                                                     | Balance at December 31, 2001* |                 | 34,430 |   |    | 34 |   |                                               | 688,714 |   |         | 157,236 |   |        | (8,553 | ) |         
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|Translation reserves                                 |                               |                |        |   |   |    |   |                                              |         |   |        |         |   | 419    |        |   |        
|Exercise of share options                            |                               | 808             |        |   | 1  |    |   | 14,701                                        |         |   |        |         |   |       |        |   |        
|Repurchase of ordinary shares                        |                               | (16             | )      |   |   |    |   | (365                                          | )       |   |        |         |   |       |        |   |        
|Net income                                           |                               |                |        |   |   |    |   |                                              |         |   | 39,603  |         |   |       |        |   |        
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|                                                     | Balance at December 31, 2002* |                 | 35,222 |   |    | 35 |   |                                               | 703,050 |   |         | 196,839 |   |        | (8,134 | ) |         
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|Translation reserves                                 |                               |                |        |   |   |    |   |                                              |         |   |        |         |   | 398    |        |   |        
|Exercise of share options                            |                               | 2,074           |        |   | 2  |    |   | 39,005                                        |         |   |        |         |   |       |        |   |        
|Repurchase of ordinary shares                        |                               | (13             | )      |   |   |    |   | (408                                          | )       |   |        |         |   |       |        |   |        
|Issuance of Restricted Share Awards                  |                               | 73              |        |   |   |    |   | 2,599                                         |         |   |        |         |   |       |        |   |        
|Net income                                           |                               |                |        |   |   |    |   |                                              |         |   | 71,572  |         |   |       |        |   |        
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         
|                                                     | Balance at December 31, 2003  |                 | 37,356 |   | $  | 37 |   | $                                             | 744,246 |   | $       | 268,411 |   | $      | (7,736 | ) | $       
|                                                     |                               |                 |        |   |    |    |   |                                               |         |   |         |         |   |        |        |   |         

---

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

F-7

---



KERZNER INTERNATIONAL LIMITED        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands of US dollars)

|                                                 |                                                                         | For the Year Ended
December 31,                                                |                                                  
|------------------------------------------------ | ----------------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------
|
|
|Cash flows from operating activities:            |                                                                         |                                                                                |                                                  
|                                                 | Net income                                                              |                                                                                | $                                                
|                                                 |                                                                         | (Income) loss on discontinued operations, net of income tax effect             |                                                  
|                                                 |                                                                         | Loss on early extinguishment of debt                                           |                                                  
|                                                 |                                                                         | Depreciation and amortization                                                  |                                                  
|                                                 |                                                                         | Amortization of debt issuance costs, premiums and discounts                    |                                                  
|                                                 |                                                                         | Gain on net assets held for sale                                               |                                                  
|                                                 |                                                                         | Gain on insurance proceeds received for replaced assets                        |                                                  
|                                                 |                                                                         | Loss on disposition of other assets                                            |                                                  
|                                                 |                                                                         | Equity in (earnings) losses of associated companies, net of dividends received |                                                  
|                                                 |                                                                         | Provision for doubtful receivables                                             |                                                  
|                                                 |                                                                         | Deferred income tax benefit                                                    |                                                  
|                                                 |                                                                         | Net change in working capital accounts:                                        |                                                  
|                                                 |                                                                         |                                                                                | Restricted cash                                  
|                                                 |                                                                         |                                                                                | Trade receivables                                
|                                                 |                                                                         |                                                                                | Due from affiliates                              
|                                                 |                                                                         |                                                                                | Inventories and prepaid expenses and other assets
|                                                 |                                                                         |                                                                                | Accounts payable and accrued liabilities         
|                                                 |                                                                         | Net change in other balance sheet accounts:                                    |                                                  
|                                                 |                                                                         |                                                                                | Deferred revenue                                 
|                                                 |                                                                         |                                                                                | Deferred charges and other assets                
|                                                 |                                                                         |                                                                                | Long-term liabilities                            
|                                                 |                                                                         | Other                                                                          |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|                                                 |                                                                         | Net cash provided by continuing operations                                     |                                                  
|                                                 |                                                                         | Cash provided by (used in) discontinued operations                             |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|                                                 |                                                                         |                                                                                | Net cash provided by operating activities        
|                                                 |                                                                         |                                                                                |                                                  
|Cash flows from investing activities:            |                                                                         |                                                                                |                                                  
|                                                 | Payments for property and equipment, net of insurance proceeds received |                                                                                |                                                  
|                                                 | Net proceeds from the sale of other assets                              |                                                                                |                                                  
|                                                 | Acquisition of tour operator, net of cash acquired                      |                                                                                |                                                  
|                                                 | Acquisition of assets from Club Méditerranée (Bahamas) Limited          |                                                                                |                                                  
|                                                 | Deposit and purchase of land and casino license                         |                                                                                |                                                  
|                                                 | Purchase of notes receivable                                            |                                                                                |                                                  
|                                                 | Proceeds received from sale of Resorts Atlantic City, net               |                                                                                |                                                  
|                                                 | Proceeds received for repayment of notes receivable                     |                                                                                |                                                  
|                                                 | Deposits received                                                       |                                                                                |                                                  
|                                                 | Advances to affiliates, net of repayments                               |                                                                                |                                                  
|                                                 | Acquisition of equity interest in associated companies                  |                                                                                |                                                  
|                                                 | Deferred contract acquisition costs                                     |                                                                                |                                                  
|                                                 | Sale of debt and equity interest in the One&Only Kanuhura               |                                                                                |                                                  
|                                                 | Other                                                                   |                                                                                |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|                                                 |                                                                         | Net cash (used in) provided by investing activities                            |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|Cash flows from financing activities:            |                                                                         |                                                                                |                                                  
|                                                 | Proceeds from exercise of share options                                 |                                                                                |                                                  
|                                                 | Proceeds from issuance of debt                                          |                                                                                |                                                  
|                                                 | Borrowings                                                              |                                                                                |                                                  
|                                                 | Repurchase of ordinary shares                                           |                                                                                |                                                  
|                                                 | Debt issuance and modification costs                                    |                                                                                |                                                  
|                                                 | Early redemption of debt                                                |                                                                                |                                                  
|                                                 | Repayment of borrowings                                                 |                                                                                |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|                                                 |                                                                         | Net cash used in financing activities                                          |                                                  
|                                                 |                                                                         |                                                                                |                                                  
|Increase in cash and cash equivalents            |                                                                         |                                                                                | 26,220                                           
|Cash and cash equivalents at beginning of period |                                                                         |                                                                                | 34,012                                           
|                                                 |                                                                         |                                                                                |                                                  
|Cash and cash equivalents at end of period       |                                                                         | $                                                                              | 60,232                                           
|                                                 |                                                                         |                                                                                |                                                  

F-8

---



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

|                                                              |                                              | For the Year Ended December 31,
|------------------------------------------------------------- | -------------------------------------------- | -------------------------------
|
|
|Interest paid                                                 |                                              | $                              
|Income taxes paid                                             |                                              |                                
|Promissory Note issued by Colony in connection with the       |                                              |                                
|                                                              | Resorts Atlantic City Sale                   |                                
|Change in fair value of interest rate swap agreements         |                                              |                                
|Equipment acquired under capital lease obligations            |                                              |                                
|Note payable and taxes related to Club Méditerranée (Bahamas) |                                              |                                
|                                                              | Limited in connection with asset acquisition |                                

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

F-9

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KERZNER INTERNATIONAL LIMITED        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Organization and Basis of Presentation

Organization

Kerzner International Limited ("Kerzner") an international resort and gaming company, was incorporated in 1993 under the laws of the Commonwealth of The Bahamas.
In these notes to consolidated financial statements, the words "Company," "we," "our" and "us" refer to Kerzner together with its subsidiaries as the context may require.

We
are a leading developer and operator of premier destination resorts, luxury resort hotels and gaming properties worldwide. In our destination resort business, we own and operate the
Atlantis, Paradise Island resort and casino complex ("Atlantis, Paradise Island") located in The Bahamas. In our gaming business, we developed and earn revenue from the Mohegan Sun Casino located in
Uncasville, Connecticut. Our gaming business also includes the costs associated with the potential development of a casino complex located in the greater London area and in Northampton, United
Kingdom. In our luxury resort hotel business, we operate nine beach resorts at locations in Mauritius, the Maldives, Dubai, Mexico, and The Bahamas.

Prior
to April 25, 2001, we owned a resort and casino property in Atlantic City, New Jersey ("Resorts Atlantic City"), and we completed the sale of Resorts Atlantic City to an
unaffiliated entity on April 25, 2001. During 2002, we operated an Internet gaming venture through a subsidiary, Kerzner Interactive Limited ("Kerzner Interactive"). The operations of Kerzner
Interactive were discontinued during the
first quarter of 2003. As a result, the operating results of Kerzner Interactive for the years ended December 31, 2002 and 2001 have been reclassified to loss from discontinued operations, net
of income tax effect in the accompanying consolidated statements of operations.

Destination Resorts

The Bahamas

Through certain of our Bahamian subsidiaries, we own and operate Atlantis, Paradise Island, our flagship property. Atlantis, Paradise Island is an ocean-themed
destination casino resort located on Paradise Island, The Bahamas. Atlantis, Paradise Island features three interconnected hotel towers, the Royal Tower, the Coral Tower and the Beach Tower. Atlantis,
Paradise Island also has a full service marina and an extensive marine environment that includes the world's largest open-air aquarium. We also own and operate a water plant and other
improvements on Paradise Island.

In
1999, through one of our Bahamian subsidiaries, we formed a joint venture with Vistana, Inc., now known as Starwood Vacation Ownership ("Starwood Vacation"), a subsidiary of
Starwood Hotels and Resorts Worldwide Inc. ("Starwood"), to develop a timeshare project on Paradise Island adjacent to Atlantis, Paradise Island ("Harborside at Atlantis"). Starwood Vacation
and the Company each own a 50% interest in the joint venture. Construction was completed by February 2001 and sales of the timeshare units began in May 2000. Our share of earnings
(losses) from Harborside at Atlantis is included in equity in earnings (losses) of associated companies in the accompanying consolidated statements of operations. In addition, we earn fees for
marketing, administrative and development services provided to Harborside at Atlantis, which are included in management and other fees in the accompanying consolidated statements of operations.

On
May 27, 2003, we announced that we had reached a new Heads of Agreement with the Bahamian Government with respect to the Atlantis, Paradise Island expansion on Paradise Island
(the "Phase III Expansion"). The Phase III Expansion is divided into two parts, ("Phase III-A and Phase

F-10

---

III-B").
Phase III-A began in late 2003 and is expected to be completed in 2005. Phase III-B, if we determine to pursue this phase, would commence in late 2004 and
would be expected to be completed in late 2006.

Dubai

On September 22, 2003, we announced that we have agreed to form a joint venture with Nakheel LLC, an entity owned by the Government of Dubai, to
develop Atlantis, The Palm. The first phase is to include a resort and an extensive water theme park situated on prime beachfront. Atlantis, The Palm will be located on The Palm, Jumeirah, land
reclamation project in Dubai, United Arab Emirates. The agreement provides for additional land available for future development.

Gaming

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"). 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") pursuant to which effective
January 1, 2000, TCA turned 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.

As
noted above, 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. These fees are included within TCA development and other fees in the
accompanying consolidated statement of operations. See Note 3Summary of Significant Accounting PoliciesRevenue Recognition for further discussion.

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. Equity earnings from TCA are reflected within
relinquishment feesequity earnings in TCA as a component of operating income in the accompanying consolidated statement of operations.

F-11

---

One&Only

In December 2002, we began to operate and market certain of our luxury resort hotels which are managed and/or owned under the "One&Only" brand in
connection with our corporate name change. One&Only emphasizes the uniqueness of each of the respective properties in the luxury resort market and consists of a collection of premier properties that
primarily operate in the five-star, deluxe end of the resort market. These One&Only managed properties are located in The Bahamas, Mauritius, Dubai, Mexico and the Maldives. We also have
three properties under development or renovation, which will be managed as One&Only properties, located in the Victoria & Alfred Waterfront in Cape Town, South Africa, the Kaafu Atoll in the
Maldives and in Havana, Cuba. We currently market six of our nine luxury resorts under the One&Only brand.

We
manage the resorts in Mauritius, Dubai, the Maldives and Mexico, under long-term management contracts and receive management fees based upon a percentage of the revenues
and adjusted gross operating profits of these properties. Such amounts are included in management and other fees in the accompanying consolidated statements of operations. Our share of earnings or
losses from the properties resulting from our ownership interests in Mauritius, the Maldives, and Mexico are included in equity in earnings (losses) of associated companies in the accompanying
consolidated statements of operations.

The Bahamas

In Paradise Island, The Bahamas, we own and operate the One&Only Ocean Club, a high end luxury resort hotel. In 2000, we completed construction of an addition to
the One&Only Ocean Club, as well as Dune, a beachfront restaurant operated by well-known restaurateur
Jean-Georges Vongerichten. In addition, we completed the Tom Weiskopf-designed championship Ocean Club Golf Course and Clubhouse, which opened to the public in January 2001. In
connection with the Phase III Expansion, we are currently constructing three luxury villas which we expect to be completed by the summer of 2004.

Mauritius

In Mauritius, we manage and own interests in five beach resorts ("Mauritius Resorts") including the One&Only Le Saint Géran Hotel, the One&Only Le
Touessrok Hotel, La Pirogue, Le CoCo Beach and Sugar Beach Resort Hotel. Through June 16, 2000, we owned a 22.8% interest in Sun Resorts Limited ("SRL"), the company that owns
the Mauritius Resorts. Effective June 16, 2000, SRL issued additional shares of stock under a rights issue in which we did not exercise our rights, effectively reducing our ownership interest
to 20.4%. Additionally, during 2003 and 2002, La Pirogue and the One&Only Le Touessrok, respectively, went through a major redevelopment.

The Maldives

In the Maldives, located approximately 600 miles southwest of the southern tip of India, we manage the One&Only Kanuhura Resort & Spa (the "One&Only
Kanuhura"), a luxury resort located on Kanuhura Island. Effective August 1, 2001, we acquired a 25% ownership interest in Kanuhura for approximately $3.8 million. Effective
January 1, 2003, we own a 20% interest in Kanuhura as we sold 20% of our interest in the One&Only Kanuhura to SRL. During 2002, we entered into management and development agreements for a
luxury resort hotel to be constructed in The Maldives, on Medhufinolhu Island in the North Malé Atoll ("Kaafu Atoll"), that we expect to open in 2005.

F-12

---

See
Note 16Related Party TransactionsExtension of Mauritius Management Contracts, for discussion of an agreement with SRL entered into in connection with
the management of resorts in Mauritius and the Maldives.

Dubai

In Dubai, we manage the One&Only Royal Mirage. In December 2002, we completed a major expansion of the One&Only Royal Mirage.

Mexico

In Mexico, we manage and own a 50% interest in the One&Only Palmilla Resort, a luxury resort located in Baja, Mexico near Cabo San Lucas. During 2002, we acquired
our interest in the resort and entered into long-term management and development agreements for the property. In April 2003, the One&Only Palmilla Resort commenced an expansion
project that increased the room count and significantly upgraded the amenities and public areas offered by the resort. The expansion was completed in early 2004 and was financed by the One&Only
Palmilla Resort through local project financing, which is supported by a $46.5 million guarantee from Kerzner, and, to a lesser extent, through subordinated advances from Kerzner. See
Note 23Commitments and Contingencies.

New York

Through Kerzner New York, Inc. ("KNY"), a wholly owned subsidiary, we own 50% of Trading Cove New York, LLC ("TCNY"), a Delaware limited liability company.
TCNY is managed by KNY and Waterford Development New York, LLC. In March 2001, TCNY entered into a development services agreement (the "TCNY Development Agreement") with the Stockbridge-Munsee
band of Mohican Indians ("Stockbridge-Munsee Tribe") for the development of a casino project (the "Catskill 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 to
recover lands within the state that it alleges were wrongfully taken from the tribe. The Court had stayed the litigation since April 1995, but in July 2003, the Court lifted the stay in
an effort to advance the litigation. Presently, there are cross motions for summary judgment filed by the parties concerning procedural jurisdictional issues, which motions are being considered by the
Court.

Pursuant
to the TCNY Development Agreement, as amended, TCNY will provide preliminary funding, certain financing and exclusive development services to the Stockbridge-Munsee Tribe in
conjunction with the Catskill Project. If the Catskill Project is approved, TCNY will earn a fee of 5% of revenues as compensation for these services, as defined in the Development Agreement,
beginning with the opening of the Catskill Project and continuing for a period of twenty 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 Catskill Project. In February 2002, the Tribe filed a Land to Trust Application with the US
Department of the Interior, Bureau of Indian Affairs (the "BIA"), for the Catskill 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.

F-13

---

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. The plaintiffs have 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 Catskill
Project.

The
Catskill Project is contingent upon the receipt of numerous federal, state and local approvals 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. 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 and Reclassifications

Subsequent to the issuance of its December 31, 2002 consolidated financial statements, the Company determined that it was necessary to restate its
consolidated financial statements as of December 31, 2002 and for the two years then ended.

During
2003, the Company reviewed the accounting treatment with respect to the disposition of Resorts Atlantic City in 2001. The Company completed the sale of Resorts Atlantic City on
April 25, 2001 (see Note 4Business Acquisitions and Dispositions, Sale of Resorts Atlantic City in the accompanying notes to consolidated financial statements). The
financial results of Resorts Atlantic City from the period January 1, 2001 to April 24, 2001 were previously excluded from our reported consolidated statement of operations for the year
ended December 31, 2001. In connection with the restatement, the accompanying consolidated statement of operations for the year ended 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 for the period from January 1, 2001 to April 24, 2001 of
$4.9 million is included within the accompanying consolidated statement of operations together with a gain on net assets held for sale, resulting in no impact on consolidated net income for the
year ended December 31, 2001 from this adjustment.

The
Company has also made certain reclassifications and adjustments related to its investment in TCA. As the Company accounts for its investment in TCA under the equity method of
accounting, the Company has reclassified amounts related to its investment in TCA as of December 31, 2002 and 2001 that had previously been included in deferred charges and other assets and due
from affiliates-current

F-14

---

to
investment in associated companies in the accompanying consolidated balance sheets in order to properly state our investment in TCA. We record equity income from TCA in "relinquishment
feesequity earnings in TCA" as a component of operating income in the accompanying consolidated statements of operations. Amounts earned under the TCA Development Agreement are included
in "TCA development and other fees" in the accompanying consolidated statements of operations. The Company has reclassified such amounts previously reported within management and other fees to
relinquishment feesequity earnings in TCA and TCA development and other fees due to the significance of the amounts earned from TCA and to reclassify the equity earnings from TCA from
revenues to a component of operating income. In addition, during the years ended December 31, 2002 and 2001, we made adjustments to relinquishment fees in order to properly state the amount of
equity earnings from TCA as a result of the impact on our consolidated financial statements from the restatement of TCA's financial statements. The restatement of TCA's financial statements was
announced on May 21, 2003 and the primary effect of the restatement was to recognize as an expense certain contractual liabilities owed to its partners and their affiliates for prior services
performed under contract. Such adjustments included a reclassification from amortization expense in order to properly state our earnings from TCA.

The
Company has also made certain other adjustments and reclassifications to its historically reported consolidated balance sheets and statements of operations. With respect to the
consolidated statements of operations, these other adjustments include reclassifying the Company's equity loss from TCNY from selling, general and administrative expenses to equity in earnings
(losses) of associated companies in the accompanying consolidated statements of operations for the year ended December 31, 2001, adjustments made to selling, general and administrative expenses
and corporate expenses in order to correct for the understatement of operating expenses, partially offset by a correction of bad debt expense.

Certain
other balance sheet adjustments and reclassifications as of December 31, 2002 and 2001 include the reclassification of certain employee notes receivable from trade
receivables to deferred charges and other assets, the reclassification of certain affiliated receivables from trade receivables to due from affiliates, an adjustment to correct for the overstatement
of the allowance for doubtful accounts, an adjustment to land to correct the carrying value of certain land improperly recorded at the time of land acquisition in 1996 and adjustments to accounts
payable and accrued liabilities primarily related to the elimination of certain liabilities originally established at the time of land acquisition in 1996.

The
following table details the prior period cumulative effect on retained earnings, that was primarily a result of the under recording of depreciation expense and the effect of the
adjustments on our consolidated financial statements from the TCA restatement.

Reconciliation of Accumulated Deficit

(in thousands of US dollars)

|Beginning retained earnings December 31, 2000, as previously reported |  | $ | 129,321 |  
|--------------------------------------------------------------------- |  | - | ------- | -
|Prior period adjustment                                               |  |   | (4,746  | )
|                                                                      |  |   |        
|Beginning retained earnings at December 31, 2000, as restated         |  | $ | 124,575 |  
|                                                                      |  |   |        

The
Company has made other reclassifications to its consolidated financial statements in addition to those resulting from the restatement. Other reclassifications include the
reclassification of certain

F-15

---

expenses
from corporate expenses to selling, general and administrative expenses in order to conform to our 2003 presentation. Further, pursuant to the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections", the Company has reclassified the
$20.5 million extraordinary loss related to the early extinguishment of our 85/8% Senior Subordinated Notes and our 9% Senior Subordinated Notes recognized during the year ended
December 31, 2002 to other expense in the accompanying consolidated statements of operations.

Also,
we have made certain changes with respect to our presentation of the operating results for Kerzner Interactive. During the first quarter of 2003, the Company discontinued the
operations of its online gaming subsidiary, Kerzner Interactive. The operating results of Kerzner Interactive for the years ended December 31, 2002 and 2001 have been reclassified to loss from
discontinued operations, net of income tax effect in the accompanying consolidated statements of operations based on the decision in the first quarter of 2003 to discontinue that business.

The
consolidated financial statements for the years ended December 31, 2002 and 2001 have been restated to incorporate these adjustments and reclassifications. The following
tables are comparisons of the Company's consolidated balance sheet as of December 31, 2002 and the consolidated statements of operations for the years ended December 31, 2002 and 2001,
as previously reported and as restated.

F-16

---



|                                          |                                          | As
Previously
Reported                     |           | Adjustments |           | As Restated |        
|----------------------------------------- | ---------------------------------------- | ------------------------------------------ | --------- | ----------- | --------- | ----------- | -------
|ASSETS                                    |                                          |                                            |           |             |           |             |        
|Current assets:                           |                                          |                                            |           |             |           |             |        
|                                          | Cash and cash equivalents                |                                            | $         | 34,012      |           | $           |       
|                                          | Restricted cash                          |                                            |           | 4,842       |           |             |       
|                                          | Trade receivables, net                   |                                            |           | 44,971      |           |             | (1,857 
|                                          | Due from affiliates                      |                                            |           | 28,042      |           |             | (7,029 
|                                          | Inventories                              |                                            |           | 8,969       |           |             |       
|                                          | Prepaid expenses and other assets        |                                            |           | 14,312      |           |             |       
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total current assets                       |           |             | 135,148   |             |        
|Property and equipment, net               |                                          |                                            | 1,128,375 |             |           | (16,000     | )(c)   
|Notes receivable                          |                                          |                                            | 13,720    |             |           |            |        
|Due from affiliatesnon-current           |                                          |                                            | 24,379    |             |           |            |        
|Deferred tax asset, net                   |                                          |                                            | 6,119     |             |           |            |        
|Deferred charges and other assets, net    |                                          |                                            | 35,098    |             |           | 1,200       | (d)    
|Investment in associated companies        |                                          |                                            | 66,939    |             |           | 8,947       | (e)    
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total assets                               |           | $           | 1,409,778 |             | $      
|                                          |                                          |                                            |           |             |           |             |        
|LIABILITIES AND SHAREHOLDERS' EQUITY      |                                          |                                            |           |             |           |             |        
|Current liabilities:                      |                                          |                                            |           |             |           |             |        
|                                          | Current maturities of long-term debt     |                                            | $         | 275         |           | $           |       
|                                          | Accounts payable and accrued liabilities |                                            |           | 156,171     |           |             | (10,447
|                                          | Capital creditors                        |                                            |           | 1,538       |           |             |       
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total current liabilities                  |           |             | 157,984   |             |        
|                                          |                                          |                                            |           |             |           |             |        
|Deferred revenue                          |                                          |                                            | 18,028    |             |           |            |        
|Other long-term liabilities               |                                          |                                            | 2,697     |             |           |            |        
|Long-term debt, net of current maturities |                                          |                                            | 497,756   |             |           |            |        
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total liabilities                          |           |             | 676,465   |             |        
|                                          |                                          |                                            |           |             |           |             |        
|Shareholders' equity:                     |                                          |                                            |           |             |           |             |        
|                                          | Ordinary shares, $.001 par value         |                                            |           | 35          |           |             |       
|                                          | Capital in excess of par                 |                                            |           | 703,050     |           |             |       
|                                          | Retained earnings                        |                                            |           | 201,131     |           |             | (4,292 
|                                          | Accumulated other comprehensive loss     |                                            |           | (8,134      | )         |             |       
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          |                                            |           | 896,082     |           |             | (4,292 
|                                          | Treasury stock                           |                                            |           | (162,769    | )         |             |       
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total shareholders' equity                 |           |             | 733,313   |             |        
|                                          |                                          |                                            |           |             |           |             |        
|                                          |                                          | Total liabilities and shareholders' equity |           | $           | 1,409,778 |             | $      
|                                          |                                          |                                            |           |             |           |             |        

---

F-17

---

Cumulative beginning retained earnings adjustment at January 1, 2001

$
(4,746
)2001 net income adjustments


1,0052002 net income adjustments


(551
)$
(4,292
)


F-18

---



|                                                                             |                                                      | As Previously
Reported |         | Restatement
Adjustments |   | Discontinued
Operations,
SFAS 145 and
Reclassifications |       | As Restated |        
|---------------------------------------------------------------------------- | ---------------------------------------------------- | ---------------------- | ------- | ----------------------- | - | ------------------------------------------------------- | ----- | ----------- | -------
|Revenues:                                                                    |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Gaming                                               |                        | $       | 130,669                 |   | $                                                       |      |             | $      
|                                                                             | Rooms                                                |                        |         | 184,776                 |   |                                                         |      |             |        
|                                                                             | Food and beverage                                    |                        |         | 131,377                 |   |                                                         |      |             |        
|                                                                             | Tour operations                                      |                        |         | 41,063                  |   |                                                         |      |             |        
|                                                                             | TCA development and other fees                       |                        |         |                        |   |                                                         |      |             |        
|                                                                             | Management and other fees                            |                        |         | 41,305                  |   |                                                         |      |             |        
|                                                                             | Other revenues                                       |                        |         | 65,618                  |   |                                                         |      |             |        
|                                                                             | Insurance recovery                                   |                        |         | 1,100                   |   |                                                         |      |             |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Gross revenues                                       |                        |         | 595,908                 |   |                                                         |      |             |        
|                                                                             | Less: promotional allowances                         |                        |         | (22,210                 | ) |                                                         |      |             |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Net revenues                                         |                        |         | 573,698                 |   |                                                         |      |             |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|Cost and expenses:                                                           |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Gaming                                               |                        |         | 65,644                  |   |                                                         |      |             |        
|                                                                             | Rooms                                                |                        |         | 33,381                  |   |                                                         |      |             |        
|                                                                             | Food and beverage                                    |                        |         | 88,560                  |   |                                                         |      |             |        
|                                                                             | Tour operations                                      |                        |         | 36,767                  |   |                                                         |      |             |        
|                                                                             | Other operating expenses                             |                        |         | 80,888                  |   |                                                         | 228   | (e)         |        
|                                                                             | Selling, general and administrative                  |                        |         | 92,916                  |   |                                                         | 1,176 | (c)         |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             | (6,682 
|                                                                             | Corporate expenses                                   |                        |         | 32,964                  |   |                                                         | 313   | (c)         |        
|                                                                             | Depreciation and amortization                        |                        |         | 56,306                  |   |                                                         | (480  | )(d)        |        
|                                                                             | Restructuring reversal                               |                        |         | (1,000                  | ) |                                                         |      |             |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Cost and expenses                                    |                        |         | 486,426                 |   |                                                         | 1,237 |             |        
|Relinquishment feesequity earnings in TCA                                   |                                                      |                        |        |                         |   | 458                                                     | (b)   |             | 29,583 
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|Income (loss) from operations                                                |                                                      |                        | 87,272  |                         |   | (779                                                    | )     |             | 8,167  
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|Other income (expense):                                                      |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Interest income                                      |                        |         | 3,525                   |   |                                                         |      |             |        
|                                                                             | Interest expense, net of capitalization              |                        |         | (39,104                 | ) |                                                         |      |             |        
|                                                                             | Equity in losses of associated companies             |                        |         | (5,209                  | ) |                                                         |      |             |        
|                                                                             | Gain on settlement of territorial and other disputes |                        |         | 14,459                  |   |                                                         |      |             |        
|                                                                             | Loss on early extinguishment of debt                 |                        |         |                        |   |                                                         |      |             |        
|                                                                             | Other, net                                           |                        |         | (168                    | ) |                                                         | 228   | (e)         |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Other expense, net                                   |                        |         | (26,497                 | ) |                                                         | 228   |             |        
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|Income (loss) from continuing operations before provision for income taxes   |                                                      |                        | 60,775  |                         |   | (551                                                    | )     |             | (12,464
|Provision for income taxes                                                   |                                                      |                        | (96     | )                       |   |                                                        | (h)   |             |       
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|Income (loss) from continuing operations                                     |                                                      |                        | 60,679  |                         |   | (551                                                    | )     |             | (12,464
|Extraordinary loss on early extinguishment of debt, net of income tax Effect |                                                      |                        | (20,525 | )                       |   |                                                        |       |             | 20,525 
|Loss from discontinued operations, net of income tax effect                  |                                                      |                        |        |                         |   |                                                        |       |             | (8,061 
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        
|                                                                             | Net income (loss)                                    |                        | $       | 40,154                  |   | $                                                       | (551  | )           | $      
|                                                                             |                                                      |                        |         |                         |   |                                                         |       |             |        

F-19

---

|                                  |                                                       | As Previously
Reported |   |        |   |  |  | As Restated | 
|--------------------------------- | ----------------------------------------------------- | ---------------------- | - | ------ | - |  |  | ----------- | 
|Basic earnings per share          |                                                       |                        |   |        |   |  |  |             | 
|                                  | Income from continuing operations                     |                        | $ | 2.18   |   |  |  |             | 
|                                  | Extraordinary loss on early extinguishment of debt    |                        |   | (0.74  | ) |  |  |             | 
|                                  | Loss from discontinued operations                     |                        |   |       |   |  |  |             | 
|                                  |                                                       |                        |   |        |   |  |  |             | 
|                                  | Earnings per sharebasic                              |                        | $ | 1.44   |   |  |  |             | 
|                                  |                                                       |                        |   |        |   |  |  |             | 
|                                  | Weighted average number of shares outstandingbasic   |                        |   | 27,891 |   |  |  |             | 
|Diluted earnings (loss) per share |                                                       |                        |   |        |   |  |  |             | 
|                                  | Income (loss) from continuing operations              |                        | $ | 2.13   |   |  |  |             | 
|                                  | Extraordinary loss on early extinguishment of debt    |                        |   | (0.72  | ) |  |  |             | 
|                                  | Loss from discontinued operations                     |                        |   |       |   |  |  |             | 
|                                  |                                                       |                        |   |        |   |  |  |             | 
|                                  | Earnings per sharediluted                            |                        | $ | 1.41   |   |  |  |             | 
|                                  |                                                       |                        |   |        |   |  |  |             | 
|                                  | Weighted average number of shares outstandingdiluted |                        |   | 28,544 |   |  |  |             | 

---

F-20

---



KERZNER INTERNATIONAL LIMITED        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Amounts in table are in thousands of US dollars, except per share data)

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

|                                           |                                                     | As Previously
Reported |        | Resorts
International
Hotel, Inc. Results
Jan 1, 2001 to
April 24, 2001(a) |         | Restatement
Adjustments |         | Discontinued
Operations and
Reclassifications |       | As Restated |       
|------------------------------------------ | --------------------------------------------------- | ---------------------- | ------ | -------------------------------------------------------------------------- | ------- | ----------------------- | ------- | --------------------------------------------- | ----- | ----------- | ------
|Revenues:                                  |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           | Gaming                                              |                        | $      | 116,490                                                                    |         | $                       | 72,417  |                                               | $     |            |       
|                                           | Rooms                                               |                        |        | 176,573                                                                    |         |                         | 3,996   |                                               |       |            |       
|                                           | Food and beverage                                   |                        |        | 121,415                                                                    |         |                         | 6,977   |                                               |       |            |       
|                                           | Tour operations                                     |                        |        | 36,348                                                                     |         |                         |        |                                               |       |            |       
|                                           | Real estate related                                 |                        |        | 9,771                                                                      |         |                         |        |                                               |       |            |       
|                                           | TCA development and other fees                      |                        |        |                                                                           |         |                         |        |                                               |       |            |       
|                                           | Management and other fees                           |                        |        | 36,806                                                                     |         |                         |        |                                               |       |            |       
|                                           | Other revenues                                      |                        |        | 56,416                                                                     |         |                         | 1,523   |                                               |       |            |       
|                                           | Insurance recovery                                  |                        |        | 2,000                                                                      |         |                         |        |                                               |       |            |       
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           |                                                     | Gross revenues         |        |                                                                            | 555,819 |                         |         | 84,913                                        |       |             |      
|                                           | Less: promotional allowances                        |                        |        | (22,778                                                                    | )       |                         | (17,995 | )                                             |       |            |       
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           |                                                     | Net revenues           |        |                                                                            | 533,041 |                         |         | 66,918                                        |       |             |      
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|Cost and expenses:                         |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           | Gaming                                              |                        |        | 60,444                                                                     |         |                         | 35,987  |                                               |       |            |       
|                                           | Rooms                                               |                        |        | 29,625                                                                     |         |                         | 913     |                                               |       |            |       
|                                           | Food and beverage                                   |                        |        | 82,856                                                                     |         |                         | 3,639   |                                               |       |            |       
|                                           | Tour operations                                     |                        |        | 32,041                                                                     |         |                         |        |                                               |       |            |       
|                                           | Other operating expenses                            |                        |        | 80,094                                                                     |         |                         | 8,292   |                                               |       | 760         | (e)   
|                                           | Real estate related                                 |                        |        | 2,865                                                                      |         |                         |        |                                               |       |            |       
|                                           | Selling, general and administrative                 |                        |        | 80,206                                                                     |         |                         | 10,492  |                                               |       | (785)       | (c)   
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       | (849)       | (i)   
|                                           | Corporate expenses                                  |                        |        | 25,106                                                                     |         |                         |        |                                               |       |            |       
|                                           | Depreciation and amortization                       |                        |        | 51,490                                                                     |         |                         | 5,325   |                                               |       | (5,805)     | (d)   
|                                           | Restructuring costs                                 |                        |        | 5,732                                                                      |         |                         |        |                                               |       |            |       
|                                           | Pre-opening expenses                                |                        |        | 6,904                                                                      |         |                         |        |                                               |       |            |       
|                                           | Gain on net assets held for sale                    |                        |        |                                                                           |         |                         |        |                                               |       | (2,232)     | (g)   
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           |                                                     | Cost and expenses      |        |                                                                            | 457,363 |                         |         | 64,648                                        |       |             | (8,911
|Relinquishment feesequity earnings in TCA |                                                     |                        |       |                                                                            |         |                        |         |                                               | (260) | (b)         |       
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|Income from operations                     |                                                     |                        | 75,678 |                                                                            |         | 2,270                   |         |                                               | 8,651 |             |       
|Other income (expense):                    |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           | Interest income                                     |                        |        | 7,471                                                                      |         |                         | 510     |                                               |       | (2,664)     | (h)   
|                                           | Interest expense, net of capitalization             |                        |        | (52,702                                                                    | )       |                         | (7,673  | )                                             |       |            |       
|                                           | Equity in earnings (losses) of associated companies |                        |        | 3,059                                                                      |         |                         |        |                                               |       | (849)       | (i)   
|                                           | Other, net                                          |                        |        | (760                                                                       | )       |                         |        |                                               |       | 760         | (e)   
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           | Other expense, net                                  |                        |        | (42,932                                                                    | )       |                         | (7,163  | )                                             |       | (2,753      | )     
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       
|                                           |                                                     |                        |        |                                                                            |         |                         |         |                                               |       |             |       

F-21

---

|Income (loss) from continuing operations before provision for income taxes |                                                             |  | 32,746 |        |  | (4,893 | )       |     | 5,898 |       |  | 4,608   |     |  | 38,359 |       
|-------------------------------------------------------------------------- | ----------------------------------------------------------- |  | ------ | ------ |  | ------ | ------- | --- | ----- | ----- |  | ------- | --- |  | ------ | ------
|Provision for income taxes                                                 |                                                             |  | (1,090 | )      |  |       |         |     |      | (k)   |  |        |     |  | (1,090 | )     
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       | 
|Income from continuing operations                                          |                                                             |  | 31,656 |        |  | (4,893 | )       |     | 5,898 |       |  | 4,608   |     |  | 37,269 |       
|Loss from discontinued operations, net of income tax effect                |                                                             |  |       |        |  |       |         |     |      |       |  | (4,608) | (f) |  | (4,608 | )     
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       | 
|                                                                           | Net income (loss)                                           |  | $      | 31,656 |  | $      | (4,893) | (j) | $     | 5,898 |  |         |    |  | $      | 32,661
|Basic earnings per share:                                                  |                                                             |  |        |        |  |        |         |     |       |       |  |         |     |  |        |       
|                                                                           | Income from continuing operations                           |  | $      | 1.18   |  |        |         |     |       |       |  |         |     |  | $      | 1.39  
|                                                                           | Loss from discontinued operations, net of income tax effect |  |        |       |  |        |         |     |       |       |  |         |     |  |        | (0.18 
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       |  |         |     | 
|                                                                           | Earnings per sharebasic                                    |  | $      | 1.18   |  |        |         |     |       |       |  |         |     |  | $      | 1.21  
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       |  |         |     | 
|                                                                           | Weighted average number of shares outstandingbasic         |  |        | 26,885 |  |        |         |     |       |       |  |         |     |  |        | 26,885
|Diluted earnings per share:                                                |                                                             |  |        |        |  |        |         |     |       |       |  |         |     |  |        |       
|                                                                           | Income from continuing operations                           |  | $      | 1.14   |  |        |         |     |       |       |  |         |     |  | $      | 1.34  
|                                                                           | Loss from discontinued operations, net of income tax effect |  |        |       |  |        |         |     |       |       |  |         |     |  |        | (0.17 
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       |  |         |     | 
|                                                                           | Earnings per sharediluted                                  |  | $      | 1.14   |  |        |         |     |       |       |  |         |     |  | $      | 1.17  
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       |  |         |     | 
|                                                                           | Weighted average number of shares outstandingdiluted       |  |        | 27,826 |  |        |         |     |       |       |  |         |     |  |        | 27,826
|                                                                           |                                                             |  |        |        |  |        |         |     |       |       |  |         |     | 

---

F-22

---



Net loss of Resorts (j)

$
(4,893
)Depreciation and amortization (d)


5,325Interest income (h)


(2,664
)Gain on net assets held for sale

$
(2,232
)


Note 3Summary of Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements. These estimates and assumptions also affect the reported amounts of revenues and costs and expenses during the reporting period. On a regular basis, management evaluates its estimates.
Actual results could differ from those estimates.

We
provide allowances for doubtful accounts arising from casino, hotel and other services, which are based upon a specific review of certain outstanding receivables. In determining the
amounts of the allowances, we are required to make certain estimates and assumptions. Accruals for potential liabilities related to any lawsuits or claims brought against us, calculation of inventory
reserves, fair values of

F-23

---

financial
instruments and guarantees, calculation of income tax liabilities and contingencies, 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.

Cash Equivalents and Restricted Cash

We consider all of our short-term money market securities purchased with original maturities of three months or less at the time of purchase to be
cash equivalents. For all periods presented, restricted cash primarily relates to letters of credit for one of our tour operators and a certificate of deposit associated with our revolving credit
facility.

Trade receivable and credit risk.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues
markers to approved casino customers following background checks and investigations of creditworthiness. At December 31, 2003, a substantial portion of the Company's receivables were due from
customers residing in foreign countries. Business or economic conditions or other significant events in these countries could affect the collectibility of such receivables.

Trade
receivables, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the
account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Company's receivables to
their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as historical collection experience and current economic and
business conditions. Management believes that as of December 31, 2003, no significant concentrations of credit risk existed for which an allowance had not already been recorded.

Inventories

Inventories are carried at the lower of cost (on a first-in, first-out basis) or market value. Inventories consist primarily of food and
beverages, operating supplies, retail and other items. Provisions are made, as necessary, to reduce excess or obsolete inventories to their estimated net realizable value.

Property and Equipment and Depreciation

Property and equipment are stated at cost and 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

40 yearsLand improvements

14 yearsFurniture, machinery and equipment

310 years


F-24

---

Expenditures
for renewals and betterments which increase the estimated useful life or capacity of the assets are capitalized; expenditures for repairs and maintenance are expensed when
incurred. Gains or losses on dispositions of property and equipment are included in other operating expenses in the accompanying consolidated statements of operations.

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

Long-Lived Assets

We review our long-lived assets and certain identifiable 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 a result of the Resorts
Atlantic City Sale and the Atlantic City Option, as discussed in Note 4Business Acquisitions and Dispositions.

Deferred Charges and Other Assets

Deferred charges and other assets primarily consist of the fair value of our interest rate swaps, as discussed in Note 25Fair Value of
Financial Instruments, and debt issuance costs, as discussed in Note 10Deferred Charges and Other Assets. The Company incurs discounts, structuring fees and other costs in
connection with its issuance of debt and in connection with its amended credit facility. Debt issuance costs are capitalized when incurred and amortized to interest expense based on the anticipated
debt maturities using the straight-line method, which approximates the effective interest method. Deferred compensation plan investments relate to assets held in a rabbi trust for our
deferred compensation plan. This balance also includes long-term prepaid rent amounts relating to a lease entered into during 2002 in connection with the relocation of our office in
Plantation, Florida and a deposit and direct costs incurred in connection with the acquisition of a casino license related to development projects in the United Kingdom ("UK").

Investments in Associated Companies

Investments in associated companies represent investments in which the Company maintains an interest in excess of 20% but less than or equal to 50% and 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. Equity in earnings (losses) of associated companies include such proportionate
share of income or loss.

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. Goodwill related to certain investments in associated companies is included in
the accompanying consolidated balance sheets and was $7.9 million

F-25

---

as
of December 31, 2003 and 2002. Equity in earnings of associated companies for the year ended December 31, 2001 is net of $0.3 million of amortization expense related to such
goodwill. 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,
|------------------------------------------------------------------------ |  | -------------------------------
|
|Net income, as reported                                                  |  | $                              
|Amortization of goodwill relating to investments in associated companies |  |                                
|                                                                         |  |                                
|Adjusted net income                                                      |  | $                              
|                                                                         |  |                                

|                                                                         |  | For the Year Ended December 31,
|------------------------------------------------------------------------ |  | -------------------------------
|
|Earnings per share, as reported                                          |  | $                              
|Amortization of goodwill relating to investments in associated companies |  |                                
|                                                                         |  |                                
|Adjusted earnings per share                                              |  | $                              
|                                                                         |  |                                

|                                                                         |  | For the Year Ended December 31,
|------------------------------------------------------------------------ |  | -------------------------------
|
|Earnings per share, as reported                                          |  | $                              
|Amortization of goodwill relating to investments in associated companies |  |                                
|                                                                         |  |                                
|Adjusted earnings per share                                              |  | $                              
|                                                                         |  |                                

Capital Creditors

Capital creditors represents amounts due to vendors for capital improvement and construction related projects.

Fair Value of Guarantees

In connection with the adoption of Financial Accounting Standards Board ("FASB") Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"), on January 1, 2002 we recognize, at the inception of a guarantee, a liability equal to an estimate of the
guarantee's fair value for the obligations we have undertaken in issuing a guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. See Note 23Commitments and ContingenciesGuarantees for fair value of guarantees recognized.

Accumulated Other Comprehensive Loss

Financial statements of foreign entities in which the Company maintains an investment are prepared in their respective local currencies and translated into US
dollars at the current exchange rates for assets and liabilities and an average rate for the year for revenues and expenses. Net gains or losses resulting from the translation of foreign financial
statements are charged or credited to the currency translation adjustment component of accumulated other comprehensive loss. Other comprehensive income (loss) have no tax impact as they relate to
translation reserves on investments owned by foreign entities that are not subject to taxation.

Treasury Stock

Ordinary shares, which were repurchased and held in treasury, are stated at cost in the accompanying consolidated balance sheets.

F-26

---



Revenue Recognition

We recognize the net win from casino gaming activities (the difference between gaming wins and losses) as gaming revenues.

Hotel,
food and beverage, and other operating revenues are recognized as services are performed. Advance deposits on rooms are deferred and included in customer deposits and unearned
revenues within accounts payable and accrued liabilities until services are provided to the customer. The retail value of accommodations, food and beverage, and other services furnished to
hotel/casino guests without charge is included in gross revenue and then deducted as promotional allowances. (See "Promotional Allowances" below for further discussion.)

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.

Real
estate related revenues from the sale of luxury home sites at Ocean Club Estates on Paradise Island are recognized upon delivery of the completed lots to the purchasers at closing.
Deposits collected in advance of closing are deferred and included in customer deposits and unearned revenues within accounts payable and accrued liabilities.

TCA
development and other fees include amounts earned from the TCA Development Agreement and certain guaranteed payments earned from TCA.

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
feesequity earnings in TCA as a component of operating income in the accompanying consolidated statements of operations.

Revenue
generated from construction services performed pursuant to the terms of the TCA Development Agreement and other development agreements 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 at the end of each period pursuant to estimated total
costs to complete the contract.

Management,
development and other fees include amounts charged to unconsolidated affiliates for hotel management, executive management and project consulting and are recorded when
earned.

Other
revenues primarily represent incidental revenues generated from hotel operations at Atlantis, Paradise Island including the marina, the golf course, retail shops, and rental income
from retail establishments located within the hotel. Other revenues also include the annual contribution payment related to a settlement with a majority shareholder. For additional information see
Note 20-Gain on Settlement of Territorial and Other Disputes.

Insurance
recovery represents proceeds received for business interruption amounts relating to Hurricane Michelle, which are recorded when realized.

F-27

---

Promotional Allowances

On January 1, 2001, the Company changed its method of accounting for customer incentives at Resorts Atlantic City to conform to Emerging Issues Task Force
Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer ("EITF 01-9"). The impact of this adoption in 2001 was $6.3 million of Resorts
Atlantic City customer incentives being reclassified from gaming cost and expenses to promotional allowances and $4.2 million of such customer incentives being reclassified from net gaming
revenues to promotional allowances.

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

For the Year Ended December 31,2003

2002

2001Rooms

$
2,363

$
2,373

$
5,209Food and beverage


6,727


6,428


11,066Other


441


426


1,359$
9,531

$
9,227

$
17,634


Advertising Expense

We expense advertising costs as incurred. Advertising expense was $16.1 million, $15.8 million, and $12.2 million for the years ended
December 31, 2003, 2002 and 2001, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Pre-Opening Expenses

Pre-opening expenses are charged to expense as incurred. For the year ended December 31, 2001, pre-opening expenses were
$2.3 million and related to the expansion
of the Ocean Club Golf Course on Paradise Island. During the years ended December 31, 2003 and 2002, we did not incur any pre-opening expenses.

Foreign Currency

Transactions denominated in foreign currencies are recorded in local currency at actual exchange rates at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet dates are reported at the rates of exchange prevailing at those dates. Any gains or losses arising on monetary assets and liabilities
from a change in exchange rates subsequent to the date of the transaction have been included in corporate expenses in the accompanying consolidated financial statements. These amounts were not
significant for the years ended December 31, 2003, 2002 and 2001.

The
financial statements of our equity method investees and certain subsidiaries are translated from their local currencies into US dollars using current and historical exchange rates.
Translation adjustments resulting from this process are reported separately and accumulated as a component of accumulated other comprehensive income (loss) in shareholders' equity in the accompanying
consolidated balance sheets. Upon sale or liquidation of our investments, the translation adjustment would be reported as part of the gain or loss on sale or liquidation.

F-28

---

Costs of Management and Development Agreements

The Company expenses any costs incurred relating to the pursuit of business acquisitions while the potential acquisition process is ongoing. Whenever the Company
enters into a definitive agreement in connection with a management or development agreement, any direct incremental costs are deferred and amortized to expense over the period of the underlying
agreements. Such costs are deferred only when the income on such contracts is expected to exceed the related costs incurred. Deferred contract acquisition costs are included in deferred charges and
other assets in the accompanying consolidated balance sheets.

Capitalized Interest

The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When debt is not specifically identified as
being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company's average cost of borrowed capital. Capitalization of
interest ceases when a project is substantially complete or construction activities are no longer underway. The amounts capitalized during the years ended December 31, 2003, 2002 and 2001 were
$0.4 million, $0.2 million and $1.1 million, respectively.

Gain on Replacement of Damaged Assets

Gain on replacement of damaged assets represents insurance proceeds received in excess of the net book value of assets damaged during Hurricane Michelle.

Minority Interest

Effective January 1, 2003, we entered into an agreement with SRL to form a new company for the purpose of, among other things, managing the five
properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives. SRL initially will own 20% of the new entity, to be known as One&Only (Indian Ocean) Management Limited ("One&Only
Management"), and we will own the remaining 80%. Subject to certain conditions, SRL's ownership interest will increase incrementally through 2009 for no consideration, at which time SRL will own 50%
of One&Only Management. As of and for the year ended December 31, 2003, we have consolidated One&Only Management, with SRL's 20% interest in the operations of One&Only Management
reflected as a minority interest in the accompanying consolidated statement of operations and a minority interest liability reflected within the accompanying 2003 consolidated balance sheet.

Income Taxes

We are subject to income taxes in certain jurisdictions in which we conduct business. Accordingly, the accompanying consolidated statements of operations include
a provision for income taxes based on prevailing tax laws of those jurisdictions.

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

F-29

---

Earnings Per Share Data

The following is a reconciliation of the shares used in our earnings per share computations (shares in thousands):

For the Year Ended December 31,2003

2002

2001Weighted average shares used in basic computations

28,575

27,891

26,885Dilutive stock options and restricted shares outstanding

802

653

941Weighted average shares used in diluted computations

29,377

28,544

27,826


The
net income amount used as the numerator in calculating basic and diluted earnings per share is the net income in the accompanying consolidated statements of operations. The effect of
certain options and restricted shares was not included in the computation of diluted earnings per share in 2003, 2002 and 2001 because their effect would have been anti-dilutive. The
number of
options not included in the computation for the years 2003, 2002 and 2001 were 2.2 million, 1.3 million, and 2.0 million, respectively.

Stock-Based Compensation

We have elected to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" as interpreted in FASB Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation" in accounting for compensation under our stock option plans in lieu of the alternative fair value accounting provided
for under SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No. 148 ("SFAS 123").

Accordingly,
we have not recognized any compensation expense for those stock options granted at option prices equal to the fair market value of the common stock at the date of grant. The
fair value of options granted during 2003, 2002 and 2001 was estimated as of the respective dates of grant using the Black-Scholes option-pricing model with the following weighted average assumptions.
The weighted average fair value of options granted in 2003, 2002 and 2001 was $12.44, $7.53, and $9.64, respectively.

For the Year Ended December 31,2003

2002

2001Risk-free interest rate

3.2
%
4.7
%
4.7
%Expected volatility

37.2
%
37.3
%
37.3
%Expected life of options in years

4-5

4-5

4-5Expected dividend yield








F-30

---

The
following table illustrates the effect on net income and earnings per share if Kerzner had applied the fair value recognition provisions of SFAS 123 to stock-based employee
compensation.

For the Year Ended December 31,2003

2002

2001Net income, as reported

$
71,572

$
39,603

$
32,661Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


3,699


6,448


10,051Pro forma net income

$
67,873

$
33,155

$
22,610Earnings per share:Basicas reported

$
2.50

$
1.42

$
1.21Basicpro forma

$
2.38

$
1.19

$
0.84Dilutedas reported

$
2.44

$
1.39

$
1.17Dilutedpro forma

$
2.31

$
1.16

$
0.81


Derivative Financial Instruments

The Company's derivatives consist of interest rate swap agreements used to manage the impact of interest rate changes on our long-term debt
obligations and have been accounted for as fair value hedges in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").

Reclassifications

Certain amounts included in the prior years consolidated financial statements have been reclassified to conform with the current year's presentation. See
Note 2Restatement and Reclassifications for further discussion.

Recent Accounting Pronouncements

Consolidation of Variable Interest Entities

In December 2003, the FASB issued revised Interpretation No. 46R, "Consolidation of Variable Interest Entities" ("FIN 46R"). This interpretation of
Accounting Research Bulletin 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities which have one or both of the following
characteristics: (i) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties which is
provided through other interests that will absorb some or all of the expected losses of the entity, or
(ii) the equity investors lack one or more of the following characteristics of a controlling financial interest: (a) the direct or indirect ability to make decisions about the entity's
activities through voting rights or similar rights, (b) the obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its
activities, or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation of the risk of absorbing the expected losses. This interpretation
applies immediately to variable interest entities created after December 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.

F-31

---



The provisions of FIN 46R are required to be applied to an interest held in a variable interest entity, commonly referred to as a special purpose entity, at the
end of the first reporting period ending after December 15, 2003. Application to all entities is required in financial statements for periods ending after March 15, 2004. We have
determined that the One&Only Palmilla, in which we have a 50% equity interest, constitutes a variable interest entity that is subject to consolidation in accordance with the provisions of FIN 46R as
the related operating agreement contains a put option that, if exercised, would obligate us to purchase the remaining 50% of the entity, resulting in us being the primary beneficiary of the entity. We
expect to consolidate the results of operations of the One&Only Palmilla into our consolidated statements of operations for the quarter ended March 31, 2004.

See
Note 4Business Acquisitions and Dispositions and Note 19Investments In and Equity in Earnings (Losses) in Associated Companies for more
information on the One&Only Palmilla.

Note 4Business Acquisitions and Dispositions

Kerzner Interactive Disposition

Through a wholly owned subsidiary, the Company previously owned and operated Kerzner Interactive, an online Internet gaming site. Kerzner Interactive allowed play
only in jurisdictions that permitted online gaming and, as these jurisdictions have become more restrictive in their acceptance of play, the market size has been reduced and competition has
intensified. Without the potential for expansion into other markets, including the United States, the outlook for new business substantially decreased. As a result, during the first quarter of 2003,
the Company discontinued the operations of Kerzner Interactive.

On
February 15, 2002, the Company entered into an agreement with Station Casinos, Inc. ("Station"), pursuant to which Station agreed to purchase a 50% interest in Kerzner
Interactive. The companies later renegotiated the original agreement such that Station purchased an option from us in July 2002 for $4.5 million to buy a 50% interest in Kerzner
Interactive. As of December 31, 2002, the option payment is included within accounts payable and accrued liabilities in the accompanying consolidated financial statements. The Company and
Station mutually agreed to terminate this transaction in January 2003. As a result, the $4.5 million non-refundable deposit was recognized as income during the first quarter
of 2003 and was offset by net losses incurred while winding down the operations of the business, including the write-down of net assets and other associated costs.

The
operating results of Kerzner Interactive for the years ended December 31, 2002 and 2001 are as follows and have been reclassified to loss from discontinued operations, net of
income tax effect in the accompanying consolidated statements of operations:

For the Years Ended December 31,2003

2002

2001Revenues

$


$
753

$
Expenses


(3,195
)

(8,921
)

(4,624
)Other income


4,500


107


16Net income (loss)

$
1,305

$
(8,061
)
$
(4,608
)


F-32

---

As
of December 31, 2003 and 2002, the assets and liabilities of Kerzner Interactive were as follows:

December 31,2003

2002Cash and cash equivalents

$
260

$
6,043Restricted cash





3,322Other current assets





427Non-current assets





963Current liabilities


78


8,838


World Leisure Holidays Acquisition

Effective January 1, 2003, we acquired 100% of the voting equity interests of World Leisure Holidays, Inc. ("WLH"), a tour operator located in South
Africa to support our One&Only business, particularly the SRL properties and the One&Only Kanuhura. We paid $0.6 million to SRL to acquire WLH, which amount approximated both its fair value and
net book value at the date of acquisition, resulting in the recognition of no goodwill. WLH results for the year ended December 31, 2003 are included in the consolidated statement of
operations. The pro-forma effect of this acquisition to the results of operations as of December 31, 2003, 2002 and 2001 was insignificant. There were no contingent payments,
options or commitments and there was no purchased research and development assets with this acquisition.

As
of January 1, 2003, the assets and liabilities of WLH were as follows:

Cash and cash equivalents

$
1,990Other current assets


416Non-current assets


55Current liabilities


1,813Non-current liabilities





UK Development Project and Acquisition of Casino License

In April 2003, we made a $4.0 million payment as consideration for the potential development of a casino and hotel in the greater London area which
is subject to numerous conditions, including the enactment of appropriate gaming legislation in the UK and the granting of applicable gaming board, licensing, planning and council permissions. We also
made a $1.3 million and $0.8 million payment for the acquisition of a casino license and land, respectively, in Northampton, England.

Palmilla Acquisition

On September 12, 2002, we acquired a 50% ownership interest in the 115-room Palmilla Resort, a deluxe, five-star property located
near Cabo San Lucas in Baja, Mexico, for approximately $40.8 million, including direct acquisition costs. This acquisition was funded through a combination of cash on hand and borrowings under
our revolving credit facility as part of our strategy to expand our luxury resort business. In connection with the purchase, we entered into long-term management and development contracts
related to the property that will expire in 2022. As part of the operating agreement, the owner has the right to require us to acquire the remaining 50% interest from the owner for a price of
$36.3 million, plus 50% of Palmilla's working capital, with the price subject to adjustment,

F-33

---

as
defined in the purchase agreement, during the first year of the option period. The purchase price during the second year of the option period is based on a formula, as defined. This option period
begins on September 12, 2005 and expires on September 12, 2007.

In
February 2004, the One&Only Palmilla Resort completed an expansion project, which began in April 2003 and increased the room count to 172 rooms and significantly
upgraded the amenities and public areas offered by the resort. The expansion was financed primarily through local project financing, which is supported by a Kerzner guarantee of $46.5 million,
and, to a lesser extent, through subordinated advances from Kerzner. See further discussion of guarantee at Note 23Commitments and Contingencies.

Kanuhura Acquisition

On August 1, 2001, we acquired a 25% ownership interest in the Kanuhura Resort & Spa, a luxury resort located on Kanuhura Island in the Maldives,
which is approximately 600 miles southwest of the southern tip of India, for $3.8 million. In connection with the purchase, we entered into a long-term management contract related
to the property that will expire in 2023. On January 1, 2003, we sold 20% of our equity interest in the One&Only Kanuhura to SRL at our net book value of $1.5 million, resulting in no
gain or loss on the transaction. As a result, we now have a 20% ownership interest in the One&Only Kanuhura.

Sale of Resorts Atlantic City

Through a wholly owned subsidiary, 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 sale price of approximately $144.0 million, including accrued interest (the "Resorts
Atlantic City Sale"). The proceeds received from Colony consisted of approximately $123.5 million in cash, net of costs incurred subsequent to closing, and an unsecured $17.5 million
note (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, $79.0 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"). The remaining $48.0 million of cash proceeds from the Resorts Atlantic
City Sale was used to permanently reduce borrowings outstanding by us under a bank credit facility.

If
this transaction had been consummated on January 1, 2001, on a pro forma basis, our results of operations for the year ended December 31, 2001 would have been:

December 31,
2001Net revenues

$
532,781Net income

$
32,661Basic EPS

$
1.21Diluted EPS

$
1.17


The
above pro forma information is not necessarily indicative of what our results of operations would actually have been had the Resorts Atlantic City Sale occurred at the beginning of
the year.

F-34

---

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 sale price of $40.0 million, which option could 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 in exchange for an option extension payment of $1.3 million which was paid on July 9, 2003 and is being
accounted for as a deposit in accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2003. The Atlantic City Option has since contractually
expired and in February 2004, we and Colony agreed to terminate the Atlantic City Option and entered into a new agreement pursuant to which we agreed to sell the undeveloped real estate
adjacent to Resorts Atlantic City to a wholly owned subsidiary of Colony for a sale price of $40.0 million, effectively honoring the original option price. This transaction was completed on
March 18, 2004. The sale price was paid in the form of a promissory note which will mature on March 10, 2009. The net carrying value of the undeveloped real estate included in the
Atlantic City Option is $40.0 million, and is included in land within property and equipment, net in the accompanying consolidated balance sheets.

Effective
April 25, 2001, the closing date of the Resorts Atlantic City Sale, Colony leased from us certain of the property included in the Atlantic City Option for $100,000 per
month. At that time, the lease could 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 both of the years ended December 31, 2003 and 2002, and $0.8 million for the year ended December 31, 2001, and is included in other revenues in the accompanying consolidated
statement of operations. This lease terminated upon the sale of the related real estate.

Note 5Cash Equivalents and Restricted Cash

Cash equivalents at December 31, 2003 and 2002 included reverse repurchase agreements (federal government securities purchased under agreements to resell
those securities) under which we had not taken delivery of the underlying securities and investments in a money market fund that invests exclusively in U.S. Treasury obligations. At
December 31, 2003, we held reverse repurchase agreements of $17.2 million, all of which matured in the first week of January 2004.

At
December 31, 2003 and 2002, restricted cash included $1.0 million of a certificate of deposit held as security on a bank credit facility and $0.4 million of
customer deposits related to the sale of home sites at Ocean Club Estates. At December 31, 2002, restricted cash also included $3.3 million on deposit in the Isle of Man related to our
internet gaming operation which became unrestricted during the first quarter of 2003 in connection with the discontinuation of the operations of Kerzner Interactive.

Note 6Trade Receivables, net

The Company extends credit to approved casino customers. These receivables are the principal financial instruments that potentially subject the Company to
concentration of credit risk. The Company maintains an allowance for doubtful accounts to reduce the receivables to their estimated collectible amount, which approximates fair value. The
collectibility of foreign and domestic receivables could be affected by future business or economic conditions or other significant events in the United States or in the countries in which foreign
customers reside.

F-35

---

Components
of trade receivables, net were as follows:

December 31,2003

2002Gaming

$
19,224

$
18,857Less: allowance for doubtful accounts


(5,586
)

(6,751
)13,638


12,106Hotel and related


17,806


20,766Other


9,006


12,55926,812


33,325Less: allowance for doubtful accounts


(2,053
)

(2,317
)24,759


31,008$
38,397

$
43,114


Bad
debt expense was $1.3 million, $3.2 million and $6.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Note 7Prepaid Expenses and Other Assets

Components of prepaid expenses and other assets were as follows:

December 31,2003

2002Prepaid windstorm and other insurance

$
8,577

$
7,963Prepaid rent-current


1,551


1,246Prepaid tour operator-related costs


1,808


925Other


3,424


4,178$
15,360

$
14,312


At
December 31, 2003, included in other is a note receivable of $0.6 million relating to a compensation advance made to an employee which is due in April 2004.

Note 8Property and Equipment, net

Components of property and equipment, net were as follows:

December 31,2003

2002Land

$
259,845

$
221,693Land improvements and utilities


228,460


225,005Buildings and leasehold improvements


654,933


631,855Furniture, machinery and equipment


234,798


217,827Construction in progress


53,422


40,0311,431,458


1,336,411Less: accumulated depreciation


(277,454
)

(224,036
)$
1,154,004

$
1,112,375


Depreciation
expense was $55.8 million, $55.5 million and $51.0 million for the years ended 2003, 2002 and 2001, respectively.

F-36

---



On October 29, 2003, we entered into an agreement to acquire the assets of Club Méditerranée (Bahamas) Limited ("Club Med")
on Paradise Island for $38.5 million. The site is adjacent to Atlantis, Paradise Island. The existing Club Med resort will be shut down and the land will be held for potential future
development. During the year ended December 31, 2003, we paid $20.0 million in connection with the acquisition and the remaining balance to be paid of $18.5 million is included
within accounts payable and accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2003, $15.0 million of which is secured by a letter of credit. The
remaining $3.5 million represents a stamp tax of 10% of the purchase price which is required to be paid upon the recording of the transaction in The Bahamas. In connection with this
acquisition, the Company obtained an option to purchase certain adjacent land lots for an option price of $5.0 million. The option term is for three years and expires on October 29,
2006. The purchase price allocation has not been finalized as we are awaiting an independent valuation of the assets acquired.

Included
within land is the cost basis of the land related to the Atlantic City Option, which was $40.0 million as of December 31, 2003 and 2002.

Construction
in progress as of December 31, 2003 primarily included $53.4 million of major capital and other projects in development. Construction in progress at
December 31, 2002 primarily consisted of $15.0 million of the repair and replacement of assets damaged during Hurricane Michelle as well as $25.0 million of capital and other
projects in development.

Note 9Notes Receivable

As of December 31, 2002, notes receivable consisted primarily of $15.0 million principal amount of London Clubs International ("LCI") senior notes
that were purchased at 87.75% of the principal amount. LCI's senior notes bore interest at 7.74% per annum and were due in 2004. As of December 31, 2002, the balance of these notes was
$13.6 million and were classified as held-to-maturity securities and, accordingly, the amortized cost was adjusted for accretion of the discount to maturity. Such
accretion is included in interest income in the accompanying consolidated statements of operations.

During
the year ended December 31, 2003, the Company sold the LCI senior notes. In connection with the sale, the Company received $13.4 million and recorded a loss of
$0.8 million which has been included within other, net in the accompanying consolidated statements of operations.

Note 10Deferred Charges and Other Assets, net

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

December 31,2003

2002Interest rate swap asset, net

$
10,505

$
19,574Debt issuance costs, net


9,561


11,113Deposit and casino license for UK development projects


5,346


Deferred contract acquisition costs


2,115


214Deferred compensation plan investments


1,744


141Prepaid rent


1,324


2,720Employee notes receivable


1,270


1,909Other


1,791


627$
33,656

$
36,298


F-37

---

Interest
rate swap asset is the fair value of these agreements as of December 31, 2003 and 2002 and represents the amount we would have received had they been
terminated on that date. See Note 13Long-Term DebtDerivative Financial Instruments for further discussion. The interest rate swap asset is $11.8 million as of
December 31, 2003. However, in connection with the termination of $25.0 million notional amount of one or our interest rate swap agreements in September 2003, we received
$1.4 million. This amount is classified as a contra asset in deferred charges and other assets, net and is being accreted to interest expense over the term of the underlying debt. The balance
of the contra asset as of December 31, 2003 is $1.3 million. Debt issuance costs, net relates to costs incurred in connection with our senior subordinated notes and are amortized on a
straight-line basis over the term of the underlying debt, which approximates the effective interest method. The amortization of debt issuance costs included in interest expense was
$1.2 million, $1.9 million and $4.2 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Deposit
and casino license for UK development projects includes a $4.0 million initial payment made as consideration for the potential development of a casino and hotel in the
greater London area which is subject to numerous conditions, including the enactment of appropriate gaming legislation in the UK, and the granting of applicable gaming board, licensing, planning and
council permissions and a $1.3 million payment related to the acquisition of a casino license in Northampton, England. The $4.0 million initial payment is refundable if the above
conditions are not met.

Deferred
contract acquisition costs primarily relate to costs incurred in connection with the development or pursuit of management contracts in connection with Atlantis, The Palm and
projects in the UK.

Deferred
compensation plan investments relate to assets held in a rabbi trust for our deferred compensation plan. See Note 17Employee Benefit Plans for further
discussion.

Prepaid
rent relates to the long-term portion of prepaid rent for our leased offices in Plantation, Florida. The current portion is included in prepaid expenses and other
assets.

Employee
notes receivable as of December 31, 2003 and 2002 includes $0.8 million in both years related to a secured housing loan and $0.6 million as of
December 31, 2002 related to a compensation advance made to an employee, which is being amortized through December 2004. Additionally, amounts of $0.4 million and
$0.5 million as of December 31, 2003 and 2002, respectively, relate to funds advanced to an employee for a secured housing loan, which is being amortized through July 2012.

F-38

---

Note 11Accounts Payable and Accrued Liabilities

Components of accounts payable and accrued liabilities were as follows:

December 31,2003

2002Customer deposits and unearned revenues

$
38,557

$
37,227Accrued payroll and related benefits


29,136


29,756Accrued hotel-related costs and expenses


17,252


16,458Note payable and accrued taxes related to Club Méditerranée (Bahamas) Limited


18,500


Trade payables


14,842


12,323Accrued gaming-related costs and expenses


11,321


9,750Accrued interest


10,850


10,686Accrued taxes


9,251


9,029Accrued tour operator-related costs and expenses


5,769


2,063Other


16,755


18,432$
172,233

$
145,724


Note 12Other Long-Term Liabilities

Components of other long-term liabilities were as follows:

December 31,2003

2002Fair value of the One&Only Palmilla guarantee

$
2,761

$
Deferred rent credit


2,269


2,549Deferred compensation obligation


1,800


148Other


460


$
7,290

$
2,697


The
deferred rent credits relates to a building lease entered into during 2002 for our office in Plantation, Florida. For more information on the fair value of the One&Only Palmilla
guarantee see Note 23Commitments and Contingencies. For more information on the deferred compensation obligation see Note 17Employee Benefits Plans.

Note 13Long-Term Debt

Long-term debt consisted of the following:

December 31,2003

2002Amended Revolving Credit Facility (a)

$


$
72,000$400 million 87/8% Senior Subordinated Notes due 2011 ("87/8% Senior Subordinated Notes") (b)


417,090


425,300Other


434


731417,524


498,031Less: amounts due within one year


(304
)

(275
)$
417,220

$
497,756


F-39

---

(a)Amended Revolving Credit Facility

On November 13, 2001, Kerzner entered into an amended revolving credit facility (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 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. As of December 31, 2003,
there is a permanent reduction to our $300.0 million of outstanding commitments in the amount of $46.5 million related to the local project financing at the One&Only Palmilla. See
Note 23Commitment and Contingencies for further discussion regarding the One&Only Palmilla guarantee. The Lenders have agreed that up to an additional $50.0 million of
borrowings may be available under the facility in certain circumstances.

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 1/2 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. After each drawdown on the Amended Revolving Credit Facility, interest is due every three months for
the first six months and is due monthly thereafter. At December 31, 2003 and 2002, the weighted average interest rate on amounts outstanding under the Amended Revolving Credit Facility,
excluding ongoing commitment, agency and letter of credit fees related to the maintenance of the facility, were 3.50% and 3.60%, respectively. 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 affirmative and restrictive covenants which, among other things: (a) require periodic financial reporting, (b) require
meeting certain financial amounts and ratio tests, (c) restrict the payment of dividends, (d) limit the incurrence of indebtedness and (e) limit asset expenditures and
dispositions outside the ordinary course of business. As of December 31, 2003, management believes the Company is in compliance with all of such covenants.

Third Amendment dated May 15, 2003 to the Amended Revolving Credit Facility

On May 15, 2003, we entered into a Third Amendment to the Amended Revolving Credit Facility (the "Third Amendment"). The Third Amendment was entered into
in order to, among other things, calculate borrowings available under the Amended Revolving Credit Facility using a borrowing base calculation, such that we can draw the lesser of the borrowing base
or the commitment amount. The borrowing base is generally the sum of: (i) the amount of "all risks" insurance maintained from time to time on the Bahamas Property, as defined, and on the
buildings situated thereon; (ii) the value of undeveloped land owned by the Company under the Amended Revolving Credit Facility on Paradise Island, which for purposes thereof is deemed to be
$150.0 million; (iii) the cost basis of the Company's investment in luxury resort hotels (defined to include the One&Only Palmilla Resort and any luxury resort properties in which the
Company makes an investment after January 1, 2003 that enables the Company to control management of such properties); (iv) the product of six times the consolidated EBITDA, as defined,
attributable to the Company's management contracts and the Company's share of income of those under One&Only (Indian Ocean) Management Limited and their significant

F-40

---

subsidiaries;
and (v) the estimated net present value of the payments due to the Company pursuant to the Relinquishment Agreement, which for purposes thereof is deemed to be
$185.0 million.

As
of December 31, 2003, the Company had $237.0 million of borrowings available under the Amended Revolving Credit Facility.

(b)Issuances of 87/8% Senior Subordinated Notes

In August 2001, we issued $200.0 million principal amount of 87/8% Senior Subordinated Notes due 2011 (the "87/8%
Senior Subordinated Notes"), which, after costs of $6.0 million, resulted in net proceeds of approximately $194.0 million. All of the proceeds received from the issuance of the
87/8% Senior Subordinated Notes were used to repay amounts outstanding under the Amended Revolving Credit Facility. In May 2002, we issued, at 103%, an additional
$200.0 million of 87/8% Senior Subordinated Notes and used the proceeds of approximately $201.5 million, net of related costs of $4.5 million, to repay the 9%
Senior Subordinated Notes pursuant to the redemption of such notes described below.

In
connection with the issuance of the $200.0 million 87/8% Senior Subordinated Notes issued in May 2002 and August 2001 and modifications of the
Amended Revolving Credit Facility the Company paid $0.1 million, $4.7 million and $8.8 million, respectively, of debt issuance and modification costs during the years ended
December 31, 2003, 2002, and 2001. These costs, net of accumulated amortization, are included in deferred charges and other assets, net in the accompanying consolidated balance sheets.

The
87/8% Senior Subordinated Notes are all unconditionally guaranteed by substantially all of our wholly owned subsidiaries. Interest on each series of the notes is paid
semi-annually on February 15 and August 15. The indenture for the 87/8% Senior Subordinated Notes contains various restrictive covenants, including limitations
on the ability of the issuers and the guarantors to, among other things: (a) incur additional indebtedness, (b) incur certain liens, (c) engage in certain transactions with
affiliates and (d) pay dividends and make certain other payments. We believe we are in compliance with all such covenants as of December 31, 2003.

All
of our outstanding 87/8% Senior Subordinated Notes rankpari passuwith each other and are all subordinated to the
Amended Revolving Credit Facility.

Redemption of 9% Senior Subordinated Notes

On May 8, 2002, we commenced a cash tender offer to purchase any and all of our outstanding 9% Senior Subordinated 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, we 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. We used the proceeds from the issuance of the $200.0 million of 87/8% Senior
Subordinated Notes on May 20, 2002 to retire the outstanding 9% Senior Subordinated Notes pursuant to the tender offer and redemption.

See
Note 21Loss on Early Extinguishment of Debt for disclosure of the related loss incurred in connection with the redemption of our 9% Senior Subordinated Notes.

F-41

---

Issuance and Redemption of 85/8% Senior Subordinated Notes

On December 15, 1997, we issued $100.0 million principal amount of 85/8% senior subordinated notes due 2007 ("85/8
Senior Subordinated Notes"). On November 27, 2002, we called for the redemption of the entire outstanding principal amount of our 85/8% Senior Subordinated Notes pursuant to the
terms of the indenture governing these Notes. We had purchased $25.8 million of the 85/8% 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, with available cash and borrowings under the Amended Revolving Credit Facility.

See
Note 21Loss on Early Extinguishment of Debt for disclosure of the related loss incurred in connection with our redemption of the 85/8% Senior
Subordinated Notes.

Derivative Financial Instruments

Interest Rate Risk Management

We attempt to limit our exposure to interest rate risk by managing our long-term fixed and variable rate borrowings. In August and
December 2001, we entered into fixed-to-variable rate interest rate swap agreements (the "Swap Agreements") designated as fair value hedges of $200 million
principal amount of our 87/8% Senior Subordinated Notes. These Swap Agreements qualify for the "shortcut" method of accounting provided under SFAS 133, which allows for the
assumption of no ineffectiveness in our hedging relationship. Accordingly, there is no income statement impact from changes in the fair value of the Swap Agreements. Instead, the changes in the fair
value of the Swap Agreements are recorded as an asset or
liability on the accompanying consolidated balance sheet with an offsetting adjustment to the carrying value of the related debt.

In
September 2003, we cancelled $25.0 million notional amount of our then $200.0 million of interest rate swaps on our 87/8% Senior Subordinated
Notes. We received $1.4 million from this cancellation, which is being accreted to interest expense over the term of the underlying debt.

Included
in deferred charges and other assets, net in the accompanying consolidated balance sheets at December 31, 2003 and 2002 is $11.8 million and $19.6 million,
respectively, representing the fair value of the Swap Agreements as of that date. This represents the amount we would have received had the Swap Agreements been terminated on that date. This resulted
in a corresponding increase to the carrying value of our 87/8% Senior Subordinated Notes. As of December 31, 2003 and 2002, the aggregate notional principal amount of the Swap
Agreements was $175.0 million and $200.0 million, respectively, and they mature in August 2011 concurrent with the 87/8% Senior Subordinated Notes. For the year
ended December 31, 2003 and 2002, the weighted average variable rate on the Swap Agreements was 4.18% and 5.49%, respectively.

As
of December 31, 2003 and 2002, after giving effect to the Swap Agreements, our fixed rate borrowings represent approximately 56% and 42% and our variable rate borrowings
represent 44% and 58%, respectively, of total borrowings.

During
the first seven months of 2001, we were a party to variable-to-fixed rate interest rate swap agreements (the "Prior Swap Agreements") designated as cash
flow hedges of our Amended Revolving Credit Facility. In July 2001, we terminated the Prior Swap Agreements, which were scheduled to

F-42

---

mature
at the end of 2001. The costs of terminating these agreements early was $3.4 million and is included in interest expense in the accompanying 2001 consolidated statement of operations.

Credit Exposure

We are exposed to credit-related losses in the event of non-performance by counterparties to our Swap Agreements. We monitor the creditworthiness of
the counterparties and presently do not expect default by any of the counterparties. We do not obtain collateral in connection with our derivative financial instruments.

Guarantees

For a description of the Company's guarantees of certain debt of affiliated entities, see Note 23.

Overdraft Loan Facility

Pursuant to a letter of commitment dated September 30, 1994, as amended, between us and The Bank of Nova Scotia, we have a revolving overdraft loan
facility (the "Overdraft Facility") in the amount of Bahamian $5.0 million which was equal to US $5.0 million as of December 31, 2003 and 2002. The Overdraft Facility, if
utilized, would bear interest at The Bank of Nova Scotia's base rate for Bahamian dollar loans plus 1.5% with repayment subject to annual review. The Overdraft Facility is secured by substantially all
of our Bahamian assets and rankspari passuwith the Amended Revolving Credit Facility. This facility has never been utilized.

Debt Maturity

Aggregate annual maturities of long-term debt as of December 31, 2003 for each of the next five years and thereafter are as follows:

Year Ending December 31,2004

$
3042005


1302006


2007


2008


Thereafter


400,000400,434Debt premium


5,251Interest rate swap fair value adjustment


11,839$
417,524


F-43

---



Note 14Shareholders' Equity

Our authorized, issued and outstanding shares were as follows:

December 31,2003

2002Ordinary Shares:Par value per share

$
0.001

$
0.001Authorized


250,000


250,000Issued and outstanding (1)


37,356


35,197Treasury shares


7,072


7,072Preference Shares:Par value per share

$
0.001

$
0.001Authorized


100,000


100,000Issued and outstanding








---

Note 15Stock-Based Compensation

Stock Options

Our shareholders approved stock option plans in 1995 (the "1995 Plan"), 1997 (the "1997 Plan") and in 2000 (the "2000 Plan," and collectively the "Plans") that
provide for the issuance of options to acquire an aggregate of 7,500,000 ordinary shares. Pursuant to the Plans, the option prices are equal to the market value per share of the ordinary shares on the
date of the grant. The 1995 Plan provided for the options to become exercisable, unless otherwise specified by the Board of Directors and subject to certain acceleration and termination provisions,
after two years from the date of grant in respect of 20% of such options, and thereafter in installments of 20% per year over a four-year period. The 1997 Plan provides for the same
vesting schedule except that the vesting period begins one year after the grant date. The 2000 Plan provides for the vesting period to begin one year after the grant date in respect of one third of
such options, and thereafter in installments of one third per year over the remaining two-year period. Options granted under the Plans have a term of 10 years from the date of
grant. The Plans provide for options with respect to ordinary shares to be granted to our directors, officers and employees.

Our
Board of Directors approved a stock option plan in December 2003 (the "2003 Plan") that provides for the issuance of options and restricted share awards to acquire an
aggregate of 3,000,000 ordinary shares. Pursuant to the 2003 Plan, the prices are equal to the market values per share of the ordinary shares on the date of grant, unless otherwise specifically
provided by the compensation committee. Unless otherwise specified by the compensation committee, options and restricted shares shall become vested and exercisable in installments of 25% over a
four-year period. Options and restricted shares granted under the 2003 plan have a term of seven years from the date of grant. The 2003 Plan provides for options with respect to ordinary
shares to be granted to our directors, officers, employees and consultants of the Company. During December 2003, the Company issued 72,600 shares of restricted shares under the 2003 Plan to certain
employees and officers. The stock vesting period ranges from three to four years on either a graduated or cliff vesting basis provided that the recipient is still with the Company. The aggregate
market value of the restricted shares at the date of issuance of

F-44

---

$2.6 million
has been recorded as deferred compensation, as a separate component of shareholders' equity, and is being amortized over the applicable vesting period.

Our
stock option plans provide for the issuance of options to acquire an aggregate of 10,500,000 of our ordinary shares. As of December 31, 2003, options pursuant to these plans
had been granted at exercise prices ranging from $11.69 to $41.63. As of December 31, 2003, options to acquire 5,059,000 ordinary shares were outstanding, of which 2,266,000 were exercisable as
of that date. Of the 1,796,000 stock options granted during 2003, 1,760,000 were granted during December 2003. All of the options under the 1995 Plan, the 1997 Plan and the 2000 Plan have been granted
as of December 31, 2003.

A
summary of our stock option activity for 2003, 2002 and 2001 is as follows (options in thousands, except per share data):

|                                 |  | December 31,
|-------------------------------- |  | ------------
|
|
|Outstanding at beginning of year |  | 5,347       
|Granted                          |  | 1,796       
|Exercised                        |  | (2,074      
|Terminated and other             |  | (10         
|                                 |  |             
|Outstanding at end of year       |  | 5,059       
|                                 |  |             
|Exercisable at end of year       |  | 2,266       
|                                 |  |             
|Available for grant              |  | 1,179       
|                                 |  |             

The weighted average exercise price and weighted average contractual life of stock options outstanding and exercisable at December 31, 2003
is as follows (options in thousands except per share data):

|              |  | Outstanding |  | Exercisable
|------------- |  | ----------- |  | -----------
|
|$11.69$19.99 |  | 961         |  | $          
|$20.00$29.99 |  | 1,876       |  |            
|$30.00$39.99 |  | 2,181       |  |            
|$40.00$41.63 |  | 41          |  |            
|              |  |             |  |            
|              |  | 5,059       |  | $          
|              |  |             |  |            

F-45

---

Stock Option Tender Offer

On May 7, 2002, our Board of Directors resolved, under certain conditions, to make available to employees and directors holding options with an exercise
price higher than $32.00 per share, an offer to surrender all or some of the options granted to them under the Plans. In exchange, such employees and directors would have the possibility, under
certain conditions, to be granted new options giving the right to subscribe for 75% of the number of shares as the surrendered options. The exercise price for the new options would be the fair market
value of the ordinary shares on the new grant date, which would be no sooner than six months and one day after the cancellation date of the old options, subject to the conditions set forth in the
tender offer documents filed with the Securities and Exchange Commission on May 27, 2002, the commencement date of the offer period. The offer to option holders under the exchange program
expired on June 25, 2002. The 1,227,600 eligible options that were properly submitted for exchange were accepted and cancelled effective June 26, 2002. Such options represent
substantially all those that were eligible for exchange. We granted 920,700 new options, which have similar terms to the cancelled options, in exchange for the cancelled options on December 26,
2002, at a price of $20.07.

Note 16Related Party Transactions

In the normal course of business, we undertake transactions with a number of unconsolidated affiliated companies. Certain of our subsidiaries provide construction
funding, project consulting, operating advances and management services to such affiliates. Due from affiliates, management, development and other fees, and TCA development and other fees consisted of
the following:

December 31,

For the year
ended December 31,2003

2002

2003

2002

2001Harborside at Atlantis

$
17,391

$
27,686

$
1,847

$
1,579

$
1,407Trading Cove Associates


227


6,456


1,755


1,326


2,873One&Only Kanuhura


4,807


5,209


787


383


38Mauritius Resorts


6,394


5,164


7,619


7,074


6,841One&Only Royal Mirage


958


389


1,293


1,232


1,124Kaafu Atoll


16,360


313


394





One&Only Palmilla Resort


2,654


175


1,482


128


48,791


45,392


15,177


11,722


12,283Less: amounts due within one year


(13,949
)

(21,013
)







$
34,842

$
24,379

$
15,177

$
11,722

$
12,283


Harborside at Atlantis

In 2000, we entered into a series of promissory notes with Harborside at Atlantis to fund 50% of the construction cost of the timeshare units on Paradise Island
in The Bahamas. The balance of these notes was $15.0 million and $19.5 million at December 31, 2003 and 2002, respectively. These promissory notes are due on December 31,
2005. We earn interest on these advances at a rate equal to one-month LIBOR plus 250 basis points, which was 3.62% at December 31, 2003. Interest due from Harborside at Atlantis on
these advances was $0.1 million and $0.8 million for the years ended December 31, 2003 and 2002, respectively. The loans were made simultaneously with loans from

F-46

---

Starwood,
which mirror the amounts, terms and conditions of our loans. Our loans and the Starwood loans arepari passuwith respect to payments of
principal and accrued interest and such payments will be made in cash, as it is available from the sale of timeshare units.

Harborside
at Atlantis was closed at the end of August 2002 in order to repair significant damage resulting from adverse weather primarily due to Hurricane Michelle. Repairs at
Harborside at Atlantis were completed during December 2002 which is when the resort reopened. Amounts due from Harborside at Atlantis as of December 31, 2002 include $2.9 million
representing the fair value of services provided by Atlantis, Paradise Island to the timeshare owners of Harborside at Atlantis while Harborside at Atlantis was undergoing construction remediation
work and is included within 2002 rooms and food and beverage revenue in the accompanying consolidated statements of operations. As of December 31, 2003, this amount was paid in full by
Harborside at Atlantis.

We
provide marketing, administrative and development services to Harborside at Atlantis from which we earned fees of $1.8 million, $1.6 million, and $1.4 million for
the years ended December 31, 2003, 2002 and 2001, respectively. The amount due from Harborside at Atlantis, related to these services was $1.8 million and $3.5 million as of
December 31, 2003 and 2002, respectively.

Trading Cove Associates

We recorded development and other fees from TCA of $1.8 million, $1.3 million and $2.9 million for the years ended December 31, 2003,
2002 and 2001, respectively.

Mauritius Resorts

We have long-term management contracts with each of five hotels in Mauritius that are owned by SRL: the One&Only Le Saint Géran, the One&Only Le
Touessrok, La Pirogue, Le Coco Beach and Sugar Beach. The term of each of these management agreements was extended from 2008 until 2023 in December 2002 when we entered into an agreement with
SRL to form One&Only Management for the purpose of, among other things, managing the five properties owned by SRL in Mauritius and the One&Only Kanuhura in the Maldives. Effective January 1,
2003, SRL owns 20% of One&Only Management, and we own the remaining 80%. Subject to certain conditions, SRL's ownership interest will increase incrementally through 2009, for no consideration, at
which time it will own 50% of the new management company. Pursuant to a subcontract with One&Only Management, we provide the comprehensive management services to the five Mauritius resorts and receive
a management fee calculated as a percentage of revenues and adjusted EBITDA, as defined. One&Only Management also is entitled to a marketing fee calculated as a percentage of revenues, although it has
subcontracted to us all marketing services and benefits thereof with respect to the five Mauritius resorts. For the years ended December 31, 2003, 2002, and 2001, we have recognized
$7.4 million, $5.6 million, and $6.8 million, respectively, related to these management agreements in Mauritius. Additionally, during 2002, we completed a major redevelopment of
the One&Only Le Touessrok for which the Company earned project fees of $0.2 million and $1.5 million for the years ended December 31, 2003 and 2002, respectively.

As
of and for the year ended December 31, 2003, we have consolidated One&Only Management, with SRL's 20% interest reflected as minority interest in the accompanying
consolidated statement of operations and a minority interest liability reflected within accounts payable and accrued liabilities in the accompanying consolidated balance sheet. We signed an agreement
with SRL that provides for, among other things, the sale of 20% of our debt and equity interests in the One&Only Kanuhura to

F-47

---

SRL
for which we received $1.5 million. Following this sale, which was effective January 1, 2003, we now have a 20% equity interest in the One&Only Kanuhura.

One&Only Kanuhura

As described above, One&Only Management provides management services to the One&Only Kanuhura, a Maldives company. We previously owned a 25% equity interest until
December 31, 2002. Effective January 1, 2003, we now own a 20% equity interest in the One&Only Kanuhura. The terms of the management agreement run concurrent with the terms of a lease
between the One&Only Kanuhura and the government of the Republic of Maldives. That lease expires in 2026 and is subject to extension.

During
the years ended December 31, 2002 and 2001, we advanced funds to the One&Only Kanuhura in the amount of $3.6 million, excluding accrued interest, which represented
our share of funding for operations. In February 2004, we received a $1.1 million repayment of advanced funds from the One&Only Kanuhura. These advances are payable after satisfaction of
certain Kanuhura financial obligations which mature no earlier than December 2007. These loans accrue interest at a rate of LIBOR plus 600 basis points.

Fees
for management services during the years ended December 31, 2003 and 2002 and for the period from August 1, 2001 through December 31, 2001 were
$0.8 million, $0.4 million and $38,000, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

One&Only Royal Mirage

Fees for management services to the One&Only Royal Mirage during the years ended December 31, 2003, 2002 and 2001 were $1.3 million,
$1.2 million, and $1.1 million, respectively, and are included in management, development and other fees in the accompanying consolidated statements of operations.

Kaafu Atoll

As discussed in Note 23Commitments and Contingencies-Commitment with Reethi Rah Pvt. Ltd., on December 4, 2002, we entered into
a senior subordinated credit agreement with Reethi Rah Resort Pvt Ltd. and various other financial institutions (the "Senior Lenders"). The agreement, as amended in 2003, obligates Kerzner to
make completion loans (in an amount not to exceed $35.0 million) and operating loans (in an amount not to exceed $3.0 million per year, for a four-year period). The purpose
of the completion loans is to provide subordinated financing for the building and developing of a new resort on Medhufinolhu, Kaafu Atoll, Republic of Maldives. The loans will be subordinated to all
other loans made to Reethi Rah Resort Pvt. Ltd. by the Senior Lenders and will become immediately due and payable upon termination or cancellation of our management agreement related to the
property.

As
of December 31, 2003, we had entered into a series of completion loans in the amount of $15.4 million, excluding accrued interest, which is included in due from
affiliates-non-current in the accompanying consolidated balance sheet. We earn LIBOR plus 500 basis points on these completion loans.

F-48

---

As
of December 31, 2003 and 2002, other amounts incurred in connection with Kaafu Atoll of $1.0 million and $0.3 million, respectively, represent primarily
development costs that Kerzner has incurred on behalf of the resort, which will be reimbursed after the opening of the resort.

One&Only Palmilla Resort

Fees for management services to the One&Only Palmilla Resort for both the year ended December 31, 2003 and during the period from September 12, 2002
(the date of acquisition) through December 31, 2002 were $0.1 million and are included in management, development and other fees in the accompanying consolidated statements of
operations.

In
April 2003, the One&Only Palmilla Resort commenced its expansion and redevelopment, which was completed in February 2004. In connection with the redevelopment, the
Company earned $1.4 million of development fees for the year ended December 31, 2003 which are included in management, development and other fees in the accompanying consolidated
statements of operations.

As
of December 31, 2003 the $2.7 million due from One&Only Palmilla Resort relates to management services, development fees and other advances.

Office Lease

Effective February 2002, we entered into a lease agreement with Tennyson Properties Limited, whereby we are leasing office space in Buckinghamshire in the
United Kingdom for a period of 15 years. The annual rent is approximately £205,000 (which is the equivalent of approximately $365,000 at December 31, 2003) and is subject to
increase every five years to the current fair market value. Tennyson Properties Limited is owned by a family trust established by Solomon Kerzner, chairman of the Company.

Note 17Employee Benefit Plans

Certain of our subsidiaries participate in a defined contribution plan covering substantially all of their full-time employees. We make contributions
to this plan based on a percentage of eligible employee contributions. Total expenses for this plan were $267,000, $185,000, and $446,000 for
the years ended December 31, 2003, 2002 and 2001, respectively. The period from January 1, 2001 to April 24, 2001 included plan expenses of Resorts Atlantic City.

In
addition to the plan described above, union and certain other employees of our subsidiaries in The Bahamas, and formerly Resorts Atlantic City, are covered by multi-employer defined
benefit pension plans to which employers make contributions. In connection with these plans, we expensed contributions of $7.0 million, $6.7 million and $6.4 million for the years
ended December 31, 2003, 2002 and 2001, respectively.

In
October 2002, the Company established a deferred compensation plan (the "Deferred Compensation Plan") for the purpose of allowing certain management of the Company to defer 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
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

F-49

---

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 cash surrender value with the resulting
change in cash surrender value included in the accompanying consolidated statements of operations. At December 31, 2003 and 2002, the balance of the liability and the corresponding asset each
totaled $1.8 million. During the year ended December 31, 2003, the change in cash surrender value amounted to $0.1 million and the change in fair value of the obligation to
participants resulted in a $0.2 million charge to corporate expense. During the years ended December 31, 2003 and 2002, the Deferred Compensation Plan did not have a significant impact
on our operating results.

Note 18Restructuring Expense

Restructuring costs in 2001 were comprised of severance payments made to employees who were terminated due to lower occupancy levels at Atlantis, Paradise Island
subsequent to the terrorist attacks on September 11, 2001. By the end of 2002, all amounts related to the restructuring had been paid.

There
were a total of 278 employees terminated pursuant to the restructuring which included 57 administrative positions, 198 hotel employees and 23 employees on our development staff. Of
the total $5.7 million expense recorded in 2001, 17 employees were not released and, accordingly, the remaining $4.7 million had been paid out to a total of 261 employees by the end of
2002. The remaining balance of $1.0 million was reversed in 2002 as fewer employees were released and the amounts were settled for less than originally planned.

Note 19Investments in and Equity in Earnings (Losses) of Associated Companies

Components of investments in associated companies were as follows:

December 31,Ownership
Interest2003

2002One&Only Palmilla Resort

$
38,757

$
40,668

50
%Sun Resorts Limited (Mauritius Resorts)


23,598


22,818

20.4
%Trading Cove Associates


14,427


8,947

50
%One&Only Kanuhura


1,864


2,393

20
%Harborside at Atlantis


2,697


(632
)
50
%Trading Cove New York


1,758


1,692

50
%Other


51




50
%$
83,152

$
75,886


Our
proportionate share of earnings or losses from these entities is reflected in equity in earnings (losses) of associated companies in the accompanying consolidated statements of
operations, except for equity earnings related to our investment in TCA, which are included in relinquishment feesequity earnings in TCA as a component of operating income in the
accompanying consolidated statements of operations 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.

In
the normal course of business, we undertake transactions with a number of unconsolidated affiliated companies. See Note 16Related Party Transactions for further
discussion.

F-50

---



One&Only Palmilla Resort

Effective September 12, 2002, we acquired our 50% interest in the One&Only Palmilla Resort. The following represents summarized information of the One&Only
Palmilla Resort as of December 31, 2003 and 2002 and for the year ended December 31, 2003 and the period from September 12, 2002 through December 31, 2002:

For the year
ended
December 31, 2003

For the period from September 12, 2002
through
December 31, 2002Revenues

$
9,521

$
5,467Loss from operations


(9,402
)

(449
)Loss before income taxes


(9,417
)

(443
)Net loss


(9,384
)

(287
)


As of December 31,2003

2002Current assets

$
13,196

$
6,324Non-current assets


145,406


79,171Total assets


158,602


85,495Current liabilities


12,768


4,587Non-current liabilities


85,382


Shareholders' equity


60,452


80,908


During
the year ended December 31, 2003 and for the period from September 12, 2002 through December 31, 2002, we have recognized approximately $4.8 million
and $0.1 million, respectively, in equity losses from associated companies in the accompanying consolidated statements of operations. The equity loss for the year ended December 31, 2003
includes $4.3 million of our 50% share of the pre-opening expenses associated with the redevelopment of the One&Only Palmilla.

Mauritius Resorts

Through June 16, 2000, we owned a 22.8% interest in SRL, or Mauritius Resorts. Effective June 16, 2000, SRL issued additional shares of stock under
a rights issue in which we did not participate, effectively reducing our ownership interest to 20.4%. The following represents summarized

F-51

---

financial
information of SRL as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 (converted to US dollars at the appropriate exchange rate).

For the Year Ended December 31,2003

2002

2001Revenues

$
102,264

$
78,058

$
93,398Income from operations


27,071


19,448


25,277Income before income taxes


17,837


14,331


20,136Net income


10,941


8,510


17,482


As of December 31,2003

2002Current assets

$
24,556

$
23,971Non-current assets


310,171


269,411Total assets


334,727


293,382Current liabilities


49,351


52,186Non-current liabilities


136,016


99,739Shareholders' equity


149,360


141,457


During
the years ended December 31, 2003, 2002 and 2001, we received dividends from SRL of $1.5 million, $2.3 million and $2.9 million, respectively. We
recognized $2.3 million, $1.7 million and $3.3 million of equity earnings from SRL during the years ended December 31, 2003, 2002 and 2001, respectively.

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 TCA Development Agreement and the Relinquishment Agreement in connection with the Mohegan Sun.

Relinquishment
fees represent our share of the net earnings from TCA pursuant to the Relinquishment Agreement. In accordance with such agreement, TCA earns a fee, equal to 5% of gross
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
Mohegan Sun 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 Mohegan Sun expansion and all rental or
other receipts from lessees, licensees and concessionaires operating in the facility, but not the gross receipts of such lessees, licensees and concessionaires. Such revenues exclude revenues
generated by any other expansion of the

F-52

---

Mohegan
Sun. The following represents summarized information of TCA as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001.

For the Year Ended December 31,2003

2002

2001Revenues

$
69,798

$
59,066

$
46,970Total expenses


6,884


3,996


3,476Interest and dividend income


6


13


33Net income


62,920


55,083


43,527


As of December 31,2003

2002Current assets

$
26,143

$
24,502Non-current assets


2,440


2,665Total assets


28,583


27,167Current liabilities


1,071


10,521Non-current liabilities





Partners' capital


27,512


16,646


Our
equity in earnings from TCA totaled $34.0 million, $30.0 million and $24.3 million for the years ended December 31, 2003, 2002 and 2001, respectively.
Such amounts do not equal 50% of the reported net income of TCA, primarily as a result of a priority distribution.

One&Only Kanuhura

The following represents summarized financial information of the One&Only Kanuhura as of December 31, 2003 and 2002 and for the years ended
December 31, 2003 and 2002 and for the period from August 1, 2001 through December 31, 2001.

For the year
ended
December 31, 2003

For the year
ended December 31, 2002

For the period from August 1, 2001
through December 31, 2001Revenues

$
14,796

$
10,595

$
3,809Income (loss) from operations


2,766


(421
)

(1,261
)Income (loss) before income taxes


460


(2,633
)

(2,564
)Net income (loss)


460


(2,633
)

(2,564
)


As of December 31,2003

2002Current assets

$
4,702

$
3,372Non-current assets


28,536


28,249Total assets


33,238


31,621Current liabilities


4,966


6,165Non-current liabilities


29,874


28,596Shareholders' deficiency


(1,602
)

(3,140
)


F-53

---

For
the years ended December 31, 2003 and 2002 and for the period from August 1, 2001 (the date of acquisition) through December 31, 2001, we have
recognized ($0.1) million, $0.7 million, and $0.7 million, respectively, in equity earnings (losses) from the One&Only Kanuhura.

Harborside at Atlantis

Harborside at Atlantis constructs, sells and manages timeshare units on Paradise Island, The Bahamas. Construction was completed in February 2001 and sales
of timeshare units began in May 2000. As of December 31, 2003 and 2002, 89% and 64%, respectively, of the timeshare units were sold. The following represents summarized financial
information of Harborside at Atlantis as of and for the years ended December 31, 2003, 2002 and 2001.

For the Year Ended December 31,2003

2002

2001Revenues

$
43,818

$
37,411

$
35,371Income (loss) from operations


6,136


(11,023
)

1,372Income (loss) before income taxes


6,659


(10,428
)

1,372Net income (loss)

$
6,659

$
(10,428
)
$
1,372


As of December 31,2003

2002Current assets

$
68,487

$
97,469Non-current assets


22,955


9,255Total assets


91,442


106,724Current liabilities


48,739


99,356Non-current liabilities


30,040


1,364Shareholders' equity

$
12,663

$
6,004


For
the years ended December 31, 2003, 2002 and 2001, we have recognized $3.3 million, $(5.2) million, and $0.5 million, respectively in equity
earnings (losses) from Harborside at Atlantis. Included within equity in earnings (losses) from Harborside at Atlantis for the years ended December 31, 2003 and 2002 are $1.8 million and
$6.9 million, respectively, of charges which represent our share of construction remediation costs. The remediation costs for the year ended December 31, 2003 have been reduced by the
amount of insurance recovery realized by Harborside at Atlantis related to the settlement of the remediation claim of $3.0 million, our portion of which is $1.5 million.

Trading Cove New York

Through a wholly owned subsidiary, we own a 50% interest in, and are a managing member of, TCNY, along with Waterford Development New York, LLC. The following
represents summarized information of TCNY as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001.

F-54

---



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 31,2003

2002

2001Total revenues and other income

$
1

$
11

$
13Total expenses


7


6


15Net income (loss)

$
(6
)
$
5

$
(2
)


As of December 31,2003

2002Current assets

$
295

$
436Non-current assets


9,798


7,353Total assets


10,093


7,789Current liabilities


147


137Non-current liabilities





Members' equity

$
9,946

$
7,652


During
the years ended December 31, 2003, 2002 and 2001 we recognized $1.1 million, $1.0 million and $0.9 million, respectively, of equity losses in TCNY.

Note 20Gain on Settlement of Territorial and Other Disputes

Majority Shareholder Reorganization

In July 2001, we announced the restructuring of our then majority shareholder, Sun International Investments Limited ("SIIL"), and the resolution of
certain matters, including a territorial dispute, with SIIL and certain of its shareholders (collectively the "Reorganization"). At the time of the Reorganization, SIIL and its shareholders
beneficially owned approximately 67% of our issued and
outstanding ordinary shares (the "Ordinary Shares"). SIIL was itself owned in equal thirds by Kersaf Investments Limited ("Kersaf"), Caledonia Investments PLC and World Leisure Group Limited, a
company controlled by a Kerzner family trust. SIIL previously was governed by a shareholders' agreement pursuant to which all major decisions of SIIL required the unanimous consent of its
shareholders. In connection with the Reorganization, among other things, SIIL was dissolved and the shareholders' agreement governing SIIL was terminated. Accordingly, SIIL's
shareholders obtained direct ownership of their Ordinary Shares. In addition, SIIL's shareholders agreed to certain standstill provisions in effect through June 2006, pursuant to
which each of them would refrain from proposing or consummating certain extraordinary corporate transactions involving the Company, including any merger or the sale of substantially all of our assets.

Pursuant
to a registration rights and governance agreement executed in connection with the Reorganization, we granted certain registration rights to SIIL's shareholders in
respect of the ordinary shares held by them, in part in order to facilitate the required sale of at least 2,000,000 of Kersaf's Ordinary Shares in a registered public offering, which requirement was
satisfied on December 12, 2002. We agreed that, after a transition period not to exceed one year from June 30, 2001, we would cease, and we have ceased, using the names "Sun" and "Sun
International." In connection with the

F-55

---

Reorganization,
Kersaf agreed to pay us $15.5 million. This was settled by a one-time cash payment of $3.5 million and the issuance of a 5-year,
$12.0 million note, bearing interest at 9% per annum. In December 2001, the principal amount of the note and accrued interest thereon was repaid in full. Of this amount, we recognized a
$1.5 million and $5.1 million net gain on the settlement of this territorial dispute during the years ended December 31, 2003 and 2002, respectively.

Subsequent Disputes and Settlement with Kersaf Investments Limited

As part of the Reorganization, the Company and Kersaf agreed to restructure certain agreements which included, among other things, an obligation for Kersaf to
sell at least 2,000,000 shares of the Company's shares in a registered public offering, certain non-compete agreements, the continuation of an obligation of Kersaf to pay Kerzner an annual
payment of approximately $3.3 million (the "Contribution Payment"), and an agreement pursuant to which Kerzner was granted an interest in a proposed project in Port Ghalib, Egypt (the "Egypt
Project"). In October 2001, the Company filed a lawsuit against Kersaf and certain related entities in New York alleging, among other things, that Kersaf had breached its
non-compete obligation. Kersaf and the Company executed a settlement agreement that resolved all of these outstanding matters on November 1, 2002.

According
to the settlement agreement, among other things, (i) Kersaf was obligated, and on December 18, 2002 satisfied this obligation, to sell at least 2,000,000 shares
in a registered public offering; (ii) Kersaf's obligation to make the Contribution Payment was terminated effective December 1, 2002 and; (iii) Kersaf paid us $32.1 million
in December 2002. Of this amount, $18.0 million and $21.3 million (which represents the future payments that were to be received over the original term of
the underlying Mauritius management contracts) is classified as deferred revenue as of December 31, 2003 and 2002, respectively. The long-term portion of $14.6 million and
$18.0 million as of December 31, 2003 and 2002, respectively, is included within deferred revenue and the current portion of $3.4 million and $3.3 million is included in
accounts payable and accrued liabilities in the accompanying consolidated balance sheets. These amounts will be recognized as other revenues over the term of the original underlying Mauritius
management contracts, which extended through December 2008. The remaining amount of $9.4 million, net of $1.4 million of direct legal expenses, was recognized in the fourth quarter of
2002 as an additional gain on settlement of territorial and other disputes. In exchange for this settlement, we agreed to terminate all existing lawsuits related to Kersaf and have released all
parties from any related claims and we shall no longer have any interest in the Egypt Project.

Note 21Loss on Early Extinguishment of Debt

Pursuant to the adoption of the SFAS 145, we have reclassified the $20.5 million extraordinary loss on early extinguishment of debt recognized
during the year ended December 31, 2002 in connection with the Company's refinancing of its long-term debt from an extraordinary loss to other expense in the accompanying
consolidated statement of operations. Of this amount, $14.6 million related to our repurchase and redemption of the entire outstanding balance of $200 million principal amount of our 9%
Senior Subordinated Notes. The remaining $5.9 million related to the repurchase and redemption of our $100 million principal amount of 85/8% Senior Subordinated Notes.
This loss consisted of the premium paid on the repurchase and redemption of the notes, the non-cash charge to write-off the balance of the related debt issuance costs, the
remaining unamortized discount on the notes and other direct costs. The applicable net income tax effect was insignificant.

F-56

---

Note 22Income Taxes

A significant portion of our operations are located in The Bahamas where there are no income taxes. In 2003, 2002 and 2001, the income tax provisions relating to
U.S. and other non-Bahamian operations were as follows:

For the Year Ended December 31,2003

2002

2001Current:Federal

$
7,917

$
5,939

$
3,502State


3,393


2,341


1,462Foreign


584





11,894


8,280


4,964Deferred:Federal


(11,732
)

(8,184
)

(3,874
)$
162

$
96

$
1,090


The
effective tax rate on income varies from the statutory U.S. federal tax rate as a result of the following factors:

For the Year Ended December 31,2003

2002

2001Statutory U.S. federal income tax rate

35.0
%
35.0
%
35.0
%Non-U.S.-source income

(25.4
)
(37.0
)
(29.2
)State tax cost

4.7

5.8

NOLs, extraordinary item and temporary differences for which a valuation allowance has been provided



12.8

Reduction of valuation allowance relating to prior years' operating loss utilized

(16.4
)
(20.4
)
(14.5
)Branch profit taxes and other taxes on U.S. services





8.8Other

2.3

4.0

3.2Effective tax rate

0.2
%
0.2
%
3.3
%


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.

F-57

---

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

December 31,2003

2002Non-current deferred tax liabilities:Basis differences on property and equipment

$


$
(561
)Total deferred tax liabilities





(561
)Non-current deferred tax assets:NOL carryforwards


183,629


223,709Basis differences on property and equipment


527


Basis differences on land held for investment, development or resale


3,961


4,104Book reserves not yet deductible for tax return purposes


2,954


1,898Tax credit carryforwards


3,216


2,677Other


4,998


3,786Total deferred tax assets


199,285


236,174Valuation allowance for deferred tax assets


(188,812
)

(229,494
)Deferred tax assets, net of valuation allowance


10,473


6,680Non-current net deferred tax assets

$
10,473

$
6,119


Realization
of future tax benefits related to deferred tax assets is dependent on many factors, including our ability to generate future taxable income. The valuation allowance is
adjusted in the period we determine it is more likely than not that deferred tax assets will or will not be realized. We considered these factors in reaching our conclusion to reduce the valuation
allowance during 2003, 2002 and 2001 which resulted in a reduction to our provision for income taxes.

For
federal income tax purposes, Kerzner International North America, Inc. ("KINA"), one of our wholly-owned subsidiaries, had net operating loss ("NOL")
carryforwards of approximately $524.7 million at December 31, 2003, of which $247.2 million are unrestricted as to use. However, due to the change of ownership of KINA in 1996,
$277.5 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, with an additional $7.7 million becoming available in 2009. The
remaining Pre-Change NOLs are expected to expire unutilized, including the $61.0 million of Pre-Change NOLS that expired in 2003.

Our
restricted NOL carryforwards expire as follows: $36.6 million in 2005, $23.5 million in 2006, and $3.9 million in 2007. Our unrestricted NOLs expire as follows:
$26.7 million in 2007, $56.5 million in 2008, $8.0 million in 2011, $57.0 million in 2012, $32.4 million in 2019, $17.7 million in 2020 and
$48.9 million in 2021.

F-58

---

Note 23Commitments and Contingencies

Lease Obligations

We lease office space in numerous locations throughout the United States and Europe for sales and marketing, public relations, tour operations and travel
reservation services and other administrative services. These offices support our operations in The Bahamas. In addition, we have obligations under certain operating leases related to equipment
acquired for our operations in The Bahamas.

Future
minimum lease obligations under various non-cancelable operating leases with terms in excess of one year at December 31, 2003 are as follows (in thousands of US
dollars):

Year Ending December 31,2004

$
2,4132005


1,9122006


2,3242007


1,8192008


1,748Thereafter


18,058$
28,274


Casino License

The operations of casinos in The Bahamas are subject to regulatory controls. The operator must obtain a casino license and the license must be periodically
renewed and is subject to revocation at any time.

Heads of Agreement

We have an agreement with the Bahamian government, which we refer to as the Heads of Agreement, that governs our gaming taxes and fees in The Bahamas and provides
us with certain tax incentives to encourage us to further expand Atlantis, Paradise Island. On May 26, 2003, we restated the Heads of Agreement in anticipation of the Atlantis, Paradise Island
Phase III expansion as previously discussed in Note 1Organization and Basis of Presentation. The restated Heads of Agreement for the year ended December 31, 2003 maintains
the basic casino tax and fee structure, which was effective for the years ended December 31, 2002 and 2001. Under this basic casino tax and fee structure we paid an annual license fee of
$100,000 per thousand square feet of casino space, a minimum annual casino win tax of $4.3 million on all gaming win up to $20.0 million, a 12.5% win tax on gaming win between
$20.0 million and $120.0 million and a 10% gaming tax on all gaming win in excess of $120.0 million. The Company is entitled to a $5.0 million reduction to the annual
casino license fees and a 45% credit against all win tax on gaming win between $20.0 million and $120.0 million. The casino win tax and annual license fee is included in gaming costs and
expenses in the accompanying consolidated statements of operations and was $11.5 million, $12.2 million and $10.9 million for the years ended December 31, 2003, 2002 and
2001, respectively.

In
order to secure the tax incentives described in the preceding paragraph, we are obligated to commence construction on aspects of Phase III-A by December 31, 2003
and commence construction on the balance of Phase III-A by June 30, 2004. In the event that we do not proceed with Phase III-B, there will be a proportionate scaling
back of the casino fee and tax incentives.

F-59

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As we commenced construction of Phase III-A by December 31, 2003 the basic tax and fee structure was amended so that all gaming win in excess
of $20.0 million is subject to win tax of 10% and is effective for a period of 20 years after the earlier of the completion of the Phase III Expansion or December 31, 2007. In
addition, the 45% credit against all win tax shall become 50% against all win tax on gaming win over $20.0 million. However, the 50% credit will not apply to gaming win in excess of
$175 million in any year through 2010 and $200 million in each succeeding year. These credits also apply from the commencement of construction of Phase III-A in 2003, and
shall extend for a period of 11 years from the Relevant Date, as defined.

The
restated Heads of Agreement also provides for an extension of our joint marketing agreement with the Bahamian government pursuant to which the Bahamian government agreed to match our
contribution, up to $4.0 million annually, toward the direct costs related to staging certain marketing events, public relations activities and the production and placement of advertisements in
all media to promote the destination and our Paradise Island properties, including the Phase III expansion. This joint marketing agreement will expire on December 31, 2007.

The
Heads of Agreement also required that Sun International Investment Limited ("SIIL") control a majority of our board of directors until June 30, 2004. As part of the
restructuring of SIIL, we entered into a governance agreement with the shareholders of SIIL that, among other things, required us to submit to our shareholders an amendment to our articles of
association that would set the term of our existing directors to expire at our annual general meeting in 2004. At our annual shareholders meeting in September 2001, the amendment to our
articles of association was adopted and our existing directors were elected to terms expiring in 2004.

Guarantees

As of December 31, 2003, the Company had executed various guarantees. As discussed in Note 3Summary of Significant Accounting Policies,
the Company has adopted the disclosure provisions of FIN 45 and has adopted the recognition and measurement provisions for any guarantees entered into or modifications to existing guarantees after
December 31, 2002. With respect to the Company's existing guarantee related to the One&Only Palmilla Resort, the fair value of $2.8 million has been estimated and recorded as of
December 31, 2003 for our $46.5 million guarantee entered into after
December 31, 2002 with the One&Only Palmilla Resort as discussed below. The fair value of the guarantee is included in other long-term liabilities in the accompanying consolidated 2003 balance
sheet.

In
connection with the One&Only Palmilla Resort operating agreement, we agreed that in the event that the One&Only Palmilla Resort obtained third-party debt financing for its planned
redevelopment, we would guarantee certain amounts of such financing. The purpose of these guarantees was to assist the One&Only Palmilla Resort in obtaining financing for its redevelopment on
commercially reasonable terms. On August 1, 2003, the One&Only Palmilla Resort secured a senior credit facility (the "Senior Credit Facility") in the amount of $88.5 million, of which
Kerzner has guaranteed $46.5 million. In 2003, we have recorded the fair value of these guarantees in accordance with the provisions of FIN 45. 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. As of December 31,
2003, amounts outstanding under the Senior Credit Facility totaled $86.4 million. In addition, to the extent that One&Only Palmilla incurs expenditures that we approve in excess of budgeted
amounts and for which it is otherwise unable to obtain third-party financing, we have agreed to make unsecured subordinated loans to the One&Only Palmilla resort in the amount of such expenditures.

In
connection with our purchase of a 25% initial equity interest in the One&Only Kanuhura, we were required to guarantee certain of its obligations, totaling $10.7 million to its
other shareholders.

F-60

---

We
are not obligated under these guarantees unless the property's senior bank debt agreement prevents available cash flow from being distributed to the shareholders, nor until Kanuhura repays certain
senior debt owed to us. As of December 31, 2003, the amount of senior debt owed to us was $3.6 million, excluding accrued interest. Our obligations under these guarantees expire when the
underlying obligations are repaid. Upon our having to satisfy these guarantees, we shall be deemed to have made a loan to the One&Only Kanuhura on the same terms of the underlying note that was
satisfied.

Commitment with Reethi Rah Resort Pvt. Ltd.

On December 4, 2002, we entered into a senior subordinated credit agreement with Reethi Rah Resort Pvt Ltd and various other financial institutions
(the "Senior Lenders"). The agreement obligates Kerzner to make completion loans (in an amount not to exceed $35.0 million) and operating loans (in an amount not to exceed $3.0 million
per year, for a four-year period). The purpose of the completion loans is to provide subordinated financing for the building and developing of a new resort on Medhufinolhu, Kaafu Atoll,
Republic of Maldives. The purpose of the operating loans is to provide working capital on a standby basis to the new resort once it has opened. Among other conditions, Kerzner is not obligated to make
any completion loan after the resort has opened or until Reethi Rah Resort Pvt Ltd has borrowed a minimum of $20.0 million from the Senior Lenders. Kerzner is not obligated to make any
operating loans unless, among other conditions, the resort has opened for business to the general public. Once made, both the completion loans and the operating loans will be subordinated to all other
loans made to the borrower by the Senior Lenders and will become immediately due and payable upon termination or cancellation of
our management agreement related to the property. As of December 31, 2003 the Company had $15.4 million of completion loans outstanding, excluding accrued interest, to the resort.

As
a condition to entering into the senior subordinated credit agreement, we obtained a personal guarantee from Mohamed Adil, an indirect holder of the majority of outstanding shares in
Reethi Rah Resort Pvt Ltd., pursuant to which Mr. Adil unconditionally guaranteed all of the payment and performance obligations of Reethi Rah Resort Pvt Ltd. to Kerzner under the
senior subordinated credit agreement and certain other agreements relating to the resort. Reethi Rah Resort Pvt Ltd. also granted us a security interest in substantially all of the assets that
will comprise the new resort, including a long-term lease that Reethi Rah Resort Pvt Ltd. has obtained from the government of the Maldives.

Atlantis, The Palm Commitment

In September 2003, we entered into agreements to form a joint venture with Nakheel LLC, a government-owned entity ("Nakheel"), in Dubai to develop
Atlantis, The Palm. The first phase of the project will include a resort and an extensive water theme park situated on beachfront property. Atlantis, The Palm will be located on The Palm, Jumeirah, a
land reclamation project in Dubai. We and Nakheel have each agreed to invest $60 million in the form of equity financing to the project, with the balance of the financing, which may include an
equity component, expected to be raised at the project level. As part of the transaction, Kerzner has agreed to enter into a development services agreement and a long-term management
agreement with the joint venture company. The transaction remains subject to various closing conditions, including obtaining all requisite governmental consents and binding commitments for the
necessary financing.

Executive and Employee Bonus Plans

In 1998, we created a bonus plan for certain of our executives that was payable based upon the attainment of specified earnings per share. A portion of the bonus
was payable in ordinary shares that vested over a three-year period. The compensation expense related to the 1998 bonus plan amounted to $0, $0 and $0.6 million for the years ended
December 31, 2003, 2002 and 2001, respectively. During

F-61

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the
year ended December 31, 2002, 32,000 shares of restricted stock were exercised. The bonus plan in effect for the years 2001 through 2002 does not provide for the issuance of Ordinary
Shares.

Effective
for the years 2003, 2002 and 2001, we have a bonus plan whereby our employees, including officers, will qualify for bonuses if we attain either certain levels of earnings or
earnings per share, and such bonuses are calculated as a percentage of each individual's salary. Such percentage is based on, among other things, each employee's level of responsibility. Bonuses paid
to our officers under this bonus plan could reach a maximum of 80% of the respective employee's base salary. Bonuses ranging from 4% to 54% were granted in 2003 to our officers and employees. The
compensation expense related to this bonus plan amounted to $13.8 million, $17.0 million and $3.2 million for the years ended December 31, 2003, 2002 and 2001,
respectively.

Litigation, Claims and Assessments

The Company is involved in certain litigation and claims incidental to its business. The Company does not believe, based on currently available information, that
these matters will have a material adverse effect on the accompanying consolidated financial statements.

Note 24Segment Information

SFAS No. 131 "Disclosures about Segments of an Enterprise Related Information" requires the disclosure of information regarding our operations based upon
how management makes operating decisions and assesses the performance of such segments and certain information about geographic areas. We develop and operate premier resort casinos and other
properties throughout the world and manage our business in three segments: Destination Resorts, Gaming and One&Only. Our Destination Resorts segment is currently our largest and most important segment
from both a gross revenue and net income perspective. Management previously viewed the Company as operating solely in one business segmentthe resort and casino businesswhich
was conducted in various geographical areas. However, in 2003, as our businesses grew and evolved, management began to view the Company as operating in three distinct segments.

Our
Destination Resorts segment includes our flagship mega-resort property, Atlantis, Paradise Island, our tour operator which supports Atlantis, Paradise Island, PIV, Inc., and our 50%
investment in Harborside at Atlantis. In addition, management expects that our future growth will further define and reinforce these segments. Accordingly, commencing with our 2003 consolidated
financial statements, we will report our business in three segments: the Destination Resorts segment, the Gaming segment, and the One&Only segment. In addition, once we begin development and finalize
a joint venture with Nakheel LLC, an entity owned by the government of Dubai, the Destination Resorts segment will include Atlantis, The Palm, which is expected to include a resort and an extensive
water theme park located on the Palm, Jumeirah, a land reclamation project in Dubai, United Arab Emirates. The Gaming segment consists of relinquishment and development fee income from Mohegan Sun in
Uncasville, Connecticut, Resorts Atlantic City (which we owned until April 25, 2001) and the costs associated with the potential development of a casino complex located in the greater London
area and Northampton. The One&Only segment is comprised of our luxury resort hotel businesses which consist of premier properties that primarily operate in the five-star deluxe end of the
resort market. The One&Only segment includes the One&Only
Ocean Club located on Paradise Island, The Bahamas, and resorts located in Mauritius, the Maldives, Mexico and Dubai. We have also entered into agreements to develop and manage a second property in
the Maldives, a property on the Victoria & Alfred Waterfront in Cape Town, South Africa and a property in Havana, Cuba, all of which will be operated under the One&Only brand. As each segment operates
in various geographic areas, they are delineated within the tables that follow.

We
evaluate the performance of our segments based on their respective revenues generated after direct operating costs, and depreciation and amortization attributable to each segment
which we refer to as their contribution to net income. Corporate expenses, interest income and expense, income taxes and other income and expenses are not allocated to the segments but are separately
evaluated. The accounting policies of these reportable segments are the same as those disclosed in Note 3Summary of Significant Accounting Policies.

F-62

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The
following tables are an analysis of net revenues, contribution to consolidated net income and total assets, depreciation and amortization of goodwill and capital additions by
segment:

Net Revenues

|                                       |                              | For The Year Ended December 31, |        
|-------------------------------------- | ---------------------------- | ------------------------------- | -------
|
|Destination Resorts:                   |                              |                                 |        
|                                       | Atlantis, Paradise Island(1) |                                 |        
|                                       | Hotel and other              |                                 | $      
|                                       | Insurance recovery           |                                 |        
|                                       | Casino                       |                                 |        
|                                       |                              |                                 |        
|                                       |                              |                                 | 491,521
|Tour operations                        |                              |                                 | 28,875 
|                                       |                              |                                 |        
|Gross revenues                         |                              |                                 | 520,396
|Less: promotional allowances           |                              |                                 | (23,579
|                                       |                              |                                 |        
|                                       |                              |                                 | 496,817
|                                       |                              |                                 |        
|Gaming:                                |                              |                                 |        
|                                       | Connecticut(2)               |                                 |        
|                                       | United Kingdom               |                                 |        
|                                       | New Jersey(3)                |                                 |        
|                                       |                              | Casino                          |        
|                                       |                              | Hotel and other                 |        
|                                       |                              |                                 |        
|                                       |                              | Gross Revenue                   |        
|                                       |                              | Less: promotional allowances    |        
|                                       |                              |                                 |        
|                                       |                              |                                 | 1,755  
|                                       |                              |                                 |        
|One&Only:                              |                              |                                 |        
|                                       | Ocean Club                   |                                 |        
|                                       | Other resorts(4)             |                                 |        
|                                       |                              |                                 |        
|                                       |                              |                                 | 45,761 
|                                       |                              |                                 |        
|Real estate relatedOcean Club Estates |                              |                                 |       
|Other segments                         |                              |                                 | 16,999 
|                                       |                              |                                 |        
|Net revenues                           |                              | $                               | 561,332
|                                       |                              |                                 |        

---

F-63

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Contribution to Net Income

|                                                               |                              | For The Year Ended December 31,                     |        
|-------------------------------------------------------------- | ---------------------------- | --------------------------------------------------- | -------
|
|Destination Resorts:                                           |                              |                                                     |        
|                                                               | Atlantis, Paradise Island(1) |                                                     | $      
|                                                               |                              |                                                     |        
|Gaming:                                                        |                              |                                                     |        
|                                                               | Connecticut(2)               |                                                     |        
|                                                               | United Kingdom               |                                                     |        
|                                                               | New Jersey(3)                |                                                     |        
|                                                               |                              |                                                     |        
|                                                               |                              |                                                     | 35,386 
|                                                               |                              |                                                     |        
|One&Only:                                                      |                              |                                                     |        
|                                                               | Ocean Club                   |                                                     |        
|                                                               | Other resorts(4)             |                                                     |        
|                                                               |                              | Management, development and other fees              |        
|                                                               |                              | Direct expenses                                     |        
|                                                               |                              | Equity in earnings (losses) of associated companies |        
|                                                               |                              |                                                     |        
|                                                               |                              |                                                     | 260    
|                                                               |                              |                                                     |        
|General corporate                                              |                              |                                                     | (33,928
|Restructuring (costs) reversal                                 |                              |                                                     |       
|Real estate relatedOcean Club Estates                         |                              |                                                     |       
|Gain on net assets held for sale                               |                              |                                                     |       
|Interest income                                                |                              |                                                     | 3,394  
|Interest expense, net of capitalization                        |                              |                                                     | (29,264
|Gain on settlement of territorial and other disputes           |                              |                                                     | 1,479  
|Loss on early extinguishment of debt, net of income tax effect |                              |                                                     |       
|Other, net                                                     |                              |                                                     | (686   
|Provision for income taxes                                     |                              |                                                     | (162   
|Income (loss) from discontinued operations, net of income tax  |                              |                                                     | 1,305  
|                                                               |                              |                                                     |        
|Net income                                                     |                              | $                                                   | 71,572 
|                                                               |                              |                                                     |        

---

F-64

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Total Assets, Depreciation and Amortization of Goodwill and Capital Additions

|                     |                              | As of
December 31, 2003 |           | Year Ended
December 31, 2003
|-------------------- | ---------------------------- | ----------------------- | --------- | ----------------------------
|
|Destination Resorts: |                              |                         |           |                             
|                     | Atlantis, Paradise Island(1) |                         | $         | 1,129,988                   
|Gaming:              |                              |                         |           |                             
|                     | Connecticut(3)               |                         |           | 14,654                      
|                     | United Kingdom               |                         |           | 1,748                       
|                     |                              |                         |           |                             
|                     |                              |                         | 16,402    |                             
|One&Only:            |                              |                         |           |                             
|                     | One&Only Ocean Club          |                         |           | 63,009                      
|                     | One&Only Other Resorts(2)    |                         |           | 81,077                      
|                     |                              |                         |           |                             
|                     |                              |                         | 144,086   |                             
|General Corporate    |                              |                         | 165,452   |                             
|                     |                              |                         |           |                             
|                     |                              | $                       | 1,455,928 |                             
|                     |                              |                         |           |                             

|                     |                              | As of December 31, 2002 |           | Year Ended
December 31, 2002
|-------------------- | ---------------------------- | ----------------------- | --------- | ----------------------------
|
|Destination Resorts: |                              |                         |           |                             
|                     | Atlantis, Paradise Island(1) |                         | $         | 1,093,203                   
|Gaming:              |                              |                         |           |                             
|                     | Connecticut(3)               |                         |           | 15,398                      
|                     | United Kingdom               |                         |           |                            
|One&Only:            |                              |                         |           |                             
|                     | One&Only Ocean Club          |                         |           | 66,158                      
|                     | One&Only Other Resorts(2)    |                         |           | 69,902                      
|                     |                              |                         |           |                             
|                     |                              |                         | 136,060   |                             
|General Corporate    |                              |                         | 150,378   |                             
|                     |                              |                         |           |                             
|                     |                              | $                       | 1,395,039 |                             
|                     |                              |                         |           |                             

Year Ended
December 31, 2001Depreciation and
Amortization

Capital
AdditionsDestination Resorts:Atlantis, Paradise Island

$
46,477

$
54,003Gaming:Connecticut





United Kingdom





One&Only:One&Only Ocean Club


3,602


11,879One&Only Other Resorts


83


293,685


11,908General Corporate


848


1,679$
51,010

$
67,590


F-65

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---

Note 25Fair Value of Financial Instruments

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

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

We
used the following methods and assumptions in estimating fair value disclosures for financial instruments: (a) cash and cash equivalents, receivables, other current assets,
accounts payable, accrued liabilities and variable rate debt: the amounts reported in the accompanying consolidated balance sheets approximate fair value due to the nature and short-term
maturities of such assets and liabilities; (b) fixed-rate debt: fixed rate debt is valued based upon published market quotations, as applicable (the fair value of our fixed rate
debt at December 31, 2003 was approximately $443.9 million as compared to its carrying value of $417.1 million and the fair value of our fixed rate debt at December 31,
2002 was approximately $421.8 million as compared to its carrying value of $425.3 million); (c) swap agreements: the fair value of our swap agreements was determined from the
representations of financial institutions. The fair value of our swap agreements at December 31, 2003 and 2002 equal their carrying value of $11.8 million and $19.6 million,
respectively, and are included in deferred charges and other assets in the accompanying consolidated balance sheets.

Note 26Supplemental Condensed Consolidating Financial Information

Our 87/8% Senior Subordinated Notes were co-issued by the Company and one of its wholly owned subsidiaries, KINA. The
87/8% Senior Subordinated Notes are guaranteed by substantially all of our wholly owned subsidiaries (the "Subsidiary Guarantors") and are jointly and severally irrevocably and
unconditionally guaranteed. Separate financial statements of the Subsidiary Guarantors are not presented because we have determined that they would not be material to investors. The following
supplemental financial information sets forth condensed consolidating balance sheets,
statements of operations and statements of cash flows for each of the co-issuers of the 87/8% Senior Subordinated Notes, Kerzner and KINA, and, on a combined basis, for the
Subsidiary Guarantors. Kerzner's non-guarantor subsidiaries are minor and, therefore, are not separately presented.

F-66

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Kerzner International Limited        (In thousands of US dollars)

Condensed Consolidating Balance Sheet at December 31, 2003

|                                     |                                           | Kerzner                                    |   | KINA    |         | Guarantor
Subsidiaries |          | Eliminations |   | Consolidated
|------------------------------------ | ----------------------------------------- | ------------------------------------------ | - | ------- | ------- | ---------------------- | -------- | ------------ | - | ------------
|ASSETS                               |                                           |                                            |   |         |         |                        |          |              |   |             
|Current assets:                      |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     | Cash and cash equivalents                 |                                            | $ | 143     |         | $                      | 17,026   |              | $ | 39,207      
|                                     | Restricted cash                           |                                            |   |        |         |                        |         |              |   | 1,445       
|                                     | Trade receivables, net                    |                                            |   | 61      |         |                        | 69       |              |   | 38,084      
|                                     | Due from affiliates                       |                                            |   | 259,366 |         |                        | 21,923   |              |   | (265,790    
|                                     | Inventories                               |                                            |   |        |         |                        |         |              |   | 10,418      
|                                     | Prepaid expenses and other assets         |                                            |   | 125     |         |                        | 657      |              |   | 20,881      
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     |                                           | Total current assets                       |   |         | 259,695 |                        |          | 39,675       |   |             
|                                     | Property and equipment, net               |                                            |   |        |         |                        | 52,862   |              |   | 1,077,231   
|                                     | Due from affiliatesnon- current          |                                            |   | 19,889  |         |                        | 200,000  |              |   | (185,047    
|                                     | Deferred tax asset, net                   |                                            |   |        |         |                        | 10,473   |              |   |            
|                                     | Deferred charges and other assets, net    |                                            |   | 10,971  |         |                        | 9,643    |              |   | 13,042      
|                                     | Investment in subsidiaries                |                                            |   | 566,984 |         |                        | 10       |              |   |            
|                                     | Investment in associated companies        |                                            |   | 1,864   |         |                        |         |              |   | 87,534      
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     |                                           | Total assets                               |   | $       | 859,403 |                        | $        | 312,663      |   | $           
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                           |                                            |   |         |         |                        |          |              |   |             
|Current liabilities:                 |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     | Current maturities of long-term debt      |                                            | $ |        |         | $                      |         |              | $ | 304         
|                                     | Accounts payable and accrued liabilities  |                                            |   | 7,974   |         |                        | 22,603   |              |   | 144,130     
|                                     | Capital creditors                         |                                            |   |        |         |                        |         |              |   | 4,639       
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     |                                           | Total current liabilities                  |   |         | 7,974   |                        |          | 22,603       |   |             
|                                     | Deferred revenue                          |                                            |   |        |         |                        |         |              |   | 14,652      
|                                     | Other long-term liabilities               |                                            |   |        |         |                        | 4,561    |              |   | 2,729       
|                                     | Long-term debt, net of current maturities |                                            |   | 11,839  |         |                        | 405,251  |              |   | 130         
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     |                                           | Total liabilities                          |   |         | 19,813  |                        |          | 432,415      |   |             
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     | Shareholders' equity                      |                                            |   | 839,590 |         |                        | (119,752 | )            |   | 670,421     
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             
|                                     |                                           | Total liabilities and shareholders' equity |   | $       | 859,403 |                        | $        | 312,663      |   | $           
|                                     |                                           |                                            |   |         |         |                        |          |              |   |             

F-67

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Condensed Consolidating Balance Sheet at December 31, 2002

|                                     |                                            | Kerzner                   |   | KINA    |         | Guarantor
Subsidiaries |          | Eliminations |   | Consolidated
|------------------------------------ | ------------------------------------------ | ------------------------- | - | ------- | ------- | ---------------------- | -------- | ------------ | - | ------------
|ASSETS                               |                                            |                           |   |         |         |                        |          |              |   |             
|Current assets:                      |                                            |                           |   |         |         |                        |          |              |   |             
|                                     | Cash and cash equivalents                  |                           | $ | 1,398   |         | $                      | 2,996    |              | $ | 26,475      
|                                     | Restricted cash                            |                           |   |        |         |                        |         |              |   | 4,842       
|                                     | Trade receivables, net                     |                           |   | 61      |         |                        | 1,186    |              |   | 42,024      
|                                     | Due from affiliates                        |                           |   | 239,820 |         |                        | 40,071   |              |   | (258,878    
|                                     | Inventories                                |                           |   |        |         |                        |         |              |   | 8,969       
|                                     | Prepaid expenses and other assets          |                           |   | 57      |         |                        | 73       |              |   | 14,182      
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     |                                            | Total current assets      |   |         | 241,336 |                        |          | 44,326       |   |             
|                                     | Property and equipment, net                |                           |   |        |         |                        | 53,925   |              |   | 1,034,539   
|                                     | Notes receivable                           |                           |   | 13,600  |         |                        |         |              |   | 120         
|                                     | Due from affiliates  non- current         |                           |   | 4,925   |         |                        | 200,000  |              |   | (180,546    
|                                     | Deferred tax asset, net                    |                           |   |        |         |                        | 6,119    |              |   |            
|                                     | Deferred charges and other assets, net     |                           |   | 19,574  |         |                        | 8,614    |              |   | 8,110       
|                                     | Investment in subsidiaries                 |                           |   | 494,756 |         |                        | 10       |              |   |            
|                                     | Investment in associated companies         |                           |   | 2,393   |         |                        |         |              |   | 80,518      
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     |                                            | Total assets              |   | $       | 776,584 |                        | $        | 312,994      |   | $           
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                            |                           |   |         |         |                        |          |              |   |             
|Current liabilities:                 |                                            |                           |   |         |         |                        |          |              |   |             
|                                     | Current maturities of long-term debt       |                           | $ |        |         | $                      | 19       |              | $ | 256         
|                                     | Accounts payable and accrued liabilities   |                           |   | 27,989  |         |                        | 20,246   |              |   | 94,503      
|                                     | Capital creditors                          |                           |   |        |         |                        |         |              |   | 1,538       
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     |                                            | Total current liabilities |   |         | 27,989  |                        |          | 20,265       |   |             
|                                     | Deferred revenue                           |                           |   |        |         |                        |         |              |   | 18,028      
|                                     | Other long-term liabilities                |                           |   |        |         |                        | 148      |              |   | 2,549       
|                                     | Long-term debt, net of current maturities  |                           |   | 19,574  |         |                        | 405,726  |              |   | 72,456      
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     |                                            | Total liabilities         |   |         | 47,563  |                        |          | 426,139      |   |             
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     | Shareholders' equity                       |                           |   | 729,021 |         |                        | (113,145 | )            |   | 591,025     
|                                     |                                            |                           |   |         |         |                        |          |              |   |             
|                                     | Total liabilities and shareholders' equity |                           | $ | 776,584 |         | $                      | 312,994  |              | $ | 780,355     
|                                     |                                            |                           |   |         |         |                        |          |              |   |             

F-68

---



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

|                                                                                   |                                                      | Kerzner |        | KINA   |   | Guarantor
Subsidiaries |         | Eliminations |         | Consolidated |  
|---------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------ | ------ | - | ---------------------- | ------- | ------------ | ------- | ------------ | -
|Revenues:                                                                          |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   | Casino and resort revenues                           |         | $      |       |   | $                      |        |              | $       | 525,773      |  
|                                                                                   | Less: promotional allowances                         |         |        |       |   |                        |        |              |         | (23,579      | )
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   |                                                      |         |        |       |   |                        |        |              |         | 502,194      |  
|                                                                                   | Tour operations                                      |         |        |       |   |                        |        |              |         | 40,790       |  
|                                                                                   | TCA development and other fees                       |         |        |       |   |                        |        |              |         | 1,755        |  
|                                                                                   | Management and other fees                            |         |        |       |   |                        | 17,558  |              |         | (4,136       | )
|                                                                                   | Insurance recovery                                   |         |        |       |   |                        |        |              |         | 2,819        |  
|                                                                                   | Other                                                |         |        |       |   |                        | 1,816   |              |         | 3,268        |  
|                                                                                   | Affiliated sales                                     |         |        |       |   |                        |        |              |         | 10,143       |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   |                                                      |         |       |        |   | 19,374                 |         |              | 556,833 |              |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|Equity in subsidiaries earnings                                                    |                                                      |         | 71,362 |        |   |                       |         |              |        |              |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|Expenses:                                                                          |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   | Casino and resort expenses                           |         |        |       |   |                        | (6      | )            |         | 284,622      |  
|                                                                                   | Tour operations                                      |         |        |       |   |                        |        |              |         | 35,420       |  
|                                                                                   | Selling, general and administrative                  |         |        | (275   | ) |                        | 1,184   |              |         | 102,471      |  
|                                                                                   | Management fee                                       |         |        | 1,400  |   |                        |        |              |         | (1,400       | )
|                                                                                   | Corporate expenses                                   |         |        | 5,401  |   |                        | 11,034  |              |         | 19,882       |  
|                                                                                   | Gain on replacement of damaged assets                |         |        |       |   |                        |        |              |         | (2,514       | )
|                                                                                   | Depreciation and amortization                        |         |        |       |   |                        | 49      |              |         | 55,733       |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   |                                                      |         | 6,526  |        |   | 12,261                 |         |              | 494,214 |              |  
|Relinquishment feesequity earnings in TCA                                         |                                                      |         |       |        |   |                       |         |              | 33,960  |              |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|Income (loss) from operations                                                      |                                                      |         | 64,836 |        |   | 7,113                  |         |              | 96,579  |              |  
|Other income (expenses):                                                           |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   | Interest income                                      |         |        | 1,793  |   |                        | 175     |              |         | 1,426        |  
|                                                                                   | Interest expense, net of capitalization              |         |        | 9,103  |   |                        | (36,009 | )            |         | (2,358       | )
|                                                                                   | Affiliated interest income                           |         |        | (9,103 | ) |                        | 18,278  |              |         | (1           | )
|                                                                                   | Affiliated interest expense                          |         |        |       |   |                        |        |              |         | (9,174       | )
|                                                                                   | Equity in losses of associated companies             |         |        | (51    | ) |                        |        |              |         | (269         | )
|                                                                                   | Gain on settlement of territorial and other disputes |         |        | 1,479  |   |                        |        |              |         |             |  
|                                                                                   | Other, net                                           |         |        | (775   | ) |                        | 104     |              |         | (15          | )
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|Income (loss) from continuing operations before income taxes and minority interest |                                                      |         | 67,282 |        |   | (10,339                | )       |              | 86,188  |              |  
|Benefit (provision) for income taxes                                               |                                                      |         |       |        |   | 3,732                  |         |              | (3,894  | )            |  
|Minority interest                                                                  |                                                      |         |       |        |   |                       |         |              | (1,340  | )            |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|Income (loss) from continuing operations                                           |                                                      |         | 67,282 |        |   | (6,607                 | )       |              | 80,954  |              |  
|Income (loss) from discontinued operations, net of income tax effect               |                                                      |         | 4,290  |        |   |                       |         |              | (2,985  | )            |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  
|                                                                                   | Net income (loss)                                    |         | $      | 71,572 |   | $                      | (6,607  | )            | $       | 77,969       |  
|                                                                                   |                                                      |         |        |        |   |                        |         |              |         |              |  

F-69

---

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2002

|                                                             |                                                      | Kerzner           |        | KINA   |        | Guarantor
Subsidiaries |         | Eliminations |         | Consolidated |       
|------------------------------------------------------------ | ---------------------------------------------------- | ----------------- | ------ | ------ | ------ | ---------------------- | ------- | ------------ | ------- | ------------ | ------
|Revenues:                                                    |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             | Casino and resort revenues                           |                   | $      |       |        | $                      |        |              | $       | 512,025      |       
|                                                             | Less: promotional allowances                         |                   |        |       |        |                        |        |              |         | (22,210      | )     
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             |                                                      |                   |        |       |        |                        |        |              |         | 489,815      |       
|                                                             | Tour operations                                      |                   |        |       |        |                        |        |              |         | 41,063       |       
|                                                             | TCA development and other fees                       |                   |        |       |        |                        |        |              |         | 1,326        |       
|                                                             | Management and other fees                            |                   |        |       |        |                        | 16,801  |              |         | (6,405       | )     
|                                                             | Insurance recovery                                   |                   |        |       |        |                        |        |              |         | 1,100        |       
|                                                             | Other                                                |                   |        |       |        |                        | 1,280   |              |         | 3,163        |       
|                                                             | Affiliated sales                                     |                   |        |       |        |                        |        |              |         | 10,339       |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             |                                                      |                   |       |        |        | 18,081                 |         |              | 540,401 |              |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|Equity in subsidiaries earnings                              |                                                      |                   | 39,262 |        |        |                       |         |              |        |              |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|Expenses:                                                    |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             | Casino and resort expenses                           |                   |        |       |        |                        |        |              |         | 279,646      |       
|                                                             | Tour operations                                      |                   |        |       |        |                        |        |              |         | 36,772       |       
|                                                             | Selling, general and administrative                  |                   |        | 2,361  |        |                        | 1,297   |              |         | 90,074       |       
|                                                             | Management fee                                       |                   |        | 1,100  |        |                        |        |              |         | (1,100       | )     
|                                                             | Corporate expenses                                   |                   |        | 5,771  |        |                        | 9,095   |              |         | 14,361       |       
|                                                             | Depreciation and amortization                        |                   |        |       |        |                        | 75      |              |         | 55,411       |       
|                                                             | Restructuring reversal                               |                   |        |       |        |                        |        |              |         | (1,000       | )     
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             |                                                      |                   | 9,232  |        |        | 10,467                 |         |              | 474,164 |              |       
|Relinquishment feesequity earnings in TCA                   |                                                      |                   |       |        |        |                       |         |              | 30,041  |              |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|Income (loss) from operations                                |                                                      |                   | 30,030 |        |        | 7,614                  |         |              | 96,278  |              |       
|Other income (expenses):                                     |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             | Interest income                                      |                   |        | 1,474  |        |                        | 704     |              |         | 1,241        |       
|                                                             | Interest expense, net of capitalization              |                   |        | (846   | )      |                        | (36,638 | )            |         | (1,620       | )     
|                                                             | Affiliated interest income                           |                   |        | 1,046  |        |                        | 18,249  |              |         |             |       
|                                                             | Affiliated interest expense                          |                   |        |       |        |                        |        |              |         | (19,295      | )     
|                                                             | Equity in losses of associated companies             |                   |        | (658   | )      |                        |        |              |         | (4,551       | )     
|                                                             | Gain on settlement of territorial and other disputes |                   |        | 14,459 |        |                        |        |              |         |             |       
|Loss on early extinguishment of debt                         |                                                      |                   | (5,901 | )      |        | (14,624                | )       |              |        |              |       
|Other, net                                                   |                                                      |                   |       |        |        | (158                   | )       |              | 218     |              |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|Income (loss) from continuing operations before income taxes |                                                      |                   | 39,604 |        |        | (24,853                | )       |              | 72,271  |              |       
|Benefit (provision) for income taxes                         |                                                      |                   | (1     | )      |        | 2,238                  |         |              | (2,333  | )            |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|Income (loss) from continuing operations                     |                                                      |                   | 39,603 |        |        | (22,615                | )       |              | 69,938  |              |       
|Loss from discontinued operations, net of income tax effect  |                                                      |                   |       |        |        |                       |         |              | (8,061  | )            |       
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       
|                                                             |                                                      | Net income (loss) |        | $      | 39,603 |                        | $       | (22,615      | )       | $            | 61,877
|                                                             |                                                      |                   |        |        |        |                        |         |              |         |              |       

F-70

---



Condensed Consolidating Statement of Operations for the Year Ended December 31, 2001

|                                                             |                                                     | Kerzner |        | KINA    |   | Guarantor
Subsidiaries |         | Eliminations |         | Consolidated |  
|------------------------------------------------------------ | --------------------------------------------------- | ------- | ------ | ------- | - | ---------------------- | ------- | ------------ | ------- | ------------ | -
|Revenues:                                                    |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             | Casino and resort revenues                          |         | $      |        |   | $                      |        |              | $       | 558,141      |  
|                                                             | Less: promotional allowances                        |         |        |        |   |                        |        |              |         | (40,773      | )
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             |                                                     |         | -      |         |   |                       |         |              | 517,368 |              |  
|                                                             | Tour operations                                     |         |        |        |   |                        |        |              |         | 36,348       |  
|                                                             | TCA development and other fees                      |         |        |        |   |                        |        |              |         | 2,873        |  
|                                                             | Management and other fees                           |         |        |        |   |                        | 15,087  |              |         | (5,677       | )
|                                                             | Real estate related                                 |         |        |        |   |                        |        |              |         | 9,771        |  
|                                                             | Insurance recovery                                  |         |        |        |   |                        |        |              |         | 2,000        |  
|                                                             | Other                                               |         |        |        |   |                        | 893     |              |         | 3,062        |  
|                                                             | Affiliated sales                                    |         |        |        |   |                        |        |              |         | 9,742        |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             |                                                     |         |       |         |   | 15,980                 |         |              | 575,487 |              |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|Equity in subsidiary earnings                                |                                                     |         | 39,636 |         |   |                       |         |              |        |              |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|Expenses:                                                    |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             | Casino and resort expenses                          |         |        |        |   |                        | 664     |              |         | 316,323      |  
|                                                             | Tour operations                                     |         |        |        |   |                        |        |              |         | 32,061       |  
|                                                             | Selling, general and administrative                 |         |        |        |   |                        | 1,237   |              |         | 89,461       |  
|                                                             | Management fee                                      |         |        | 634     |   |                        |         |              |         | (634         | )
|                                                             | Real estate related                                 |         |        |        |   |                        |        |              |         | 2,865        |  
|                                                             | Corporate expenses                                  |         |        | 3,006   |   |                        | 6,716   |              |         | 15,384       |  
|                                                             | Depreciation and amortization                       |         |        |        |   |                        | 124     |              |         | 50,886       |  
|                                                             | Restructuring costs                                 |         |        |        |   |                        |        |              |         | 5,732        |  
|                                                             | Pre-opening expenses                                |         |        |        |   |                        |        |              |         | 2,280        |  
|                                                             | Gain on net assets held for sale                    |         |        |        |   |                        |        |              |         | (2,232       | )
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             |                                                     |         | 3,640  |         |   | 8,741                  |         |              | 512,126 |              |  
|Relinquishment feesequity earnings in TCA                   |                                                     |         |       |         |   |                       |         |              | 24,263  |              |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|Income (loss) from operations                                |                                                     |         | 35,996 |         |   | 7,239                  |         |              | 87,624  |              |  
|Other income (expense):                                      |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             | Interest income                                     |         |        | 742     |   |                        | 4,296   |              |         | 263          |  
|                                                             | Interest expense, net of capitalization             |         |        | (10,938 | ) |                        | (27,736 | )            |         | (21,701      | )
|                                                             | Affiliated interest income                          |         |        | 7,575   |   |                        | 6,931   |              |         | (1           | )
|                                                             | Affiliated interest expense                         |         |        |        |   |                        |        |              |         | (14,505      | )
|                                                             | Equity in earnings (losses) of associated companies |         |        | (714    | ) |                        |        |              |         | 2,924        |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|Income (loss) from continuing operations before income taxes |                                                     |         | 32,661 |         |   | (9,270                 | )       |              | 54,604  |              |  
|Benefit (provision) for income taxes                         |                                                     |         |       |         |   | 3,095                  |         |              | (4,185  | )            |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|Income (loss) from continuing operations                     |                                                     |         | 32,661 |         |   | (6,175                 | )       |              | 50,419  |              |  
|Loss on discontinued operations, net of income tax effect    |                                                     |         |       |         |   |                       |         |              | (4,608  | )            |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  
|                                                             | Net income (loss)                                   |         | $      | 32,661  |   | $                      | (6,175  | )            | $       | 45,811       |  
|                                                             |                                                     |         |        |         |   |                        |         |              |         |              |  

F-71

---

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

|                                      |                                                                         | Kerzner                                             |   | KINA    |         | Guarantor
Subsidiaries |        | Eliminations |   | Consolidated |        
|------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------- | ---------------------- | ------ | ------------ | - | ------------ | -------
|Cash flows from operating activities: |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      | Net cash provided by (used in) continuing operations                    |                                                     | $ | (17,874 | )       | $                      | (8,776 | )            | $ | 158,080      |        
|                                      | Cash provided by discontinued operations                                |                                                     |   |        |         |                        |       |              |   | 523          |        
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      |                                                                         | Net cash provided by (used in) operating activities |   |         | (17,874 | )                      |        | (8,776       | ) |              | 158,603
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|Cash flows from investing activities: |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      | Payments for property and equipment, net of insurance proceeds received |                                                     |   |        |         |                        | (14    | )            |   | (50,835      | )      
|                                      | Net proceeds from the sale of other assets                              |                                                     |   |        |         |                        | 848    |              |   | 251          |        
|                                      | Acquisition of tour operator, net of cash acquired                      |                                                     |   |        |         |                        |       |              |   | 1,384        |        
|                                      | Acquisition of Club Mediterranee (Bahamas) Limited                      |                                                     |   |        |         |                        |       |              |   | (20,049      | )      
|                                      | Deposit and purchase of land and casino license                         |                                                     |   |        |         |                        |       |              |   | (6,147       | )      
|                                      | Proceeds received for repayment of notes receivable                     |                                                     |   | 13,339  |         |                        |       |              |   | 70           |        
|                                      | Deposit received                                                        |                                                     |   |        |         |                        |       |              |   | 1,250        |        
|                                      | Advances to affiliates, net of repayments                               |                                                     |   | (36,782 | )       |                        | 21,991 |              |   | 2,738        |        
|                                      | Costs of business acquisitions, management and development agreements   |                                                     |   |        |         |                        |       |              |   | (2,115       | )      
|                                      | Sale of debt and equity interest in the One&Only Kanuhura               |                                                     |   | 1,464   |         |                        |       |              |   |             |        
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      |                                                                         | Net cash provided by (used in) investing activities |   |         | (21,979 | )                      |        | 22,825       |   |              | (73,453
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|Cash flows from financing activities: |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      | Proceeds from the exercise of share options                             |                                                     |   | 39,007  |         |                        |       |              |   |             |        
|                                      | Borrowings                                                              |                                                     |   |        |         |                        |       |              |   | 29,600       |        
|                                      | Cancellation of ordinary shares                                         |                                                     |   | (408    | )       |                        |       |              |   |             |        
|                                      | Debt issuance and modification costs                                    |                                                     |   |        |         |                        |       |              |   | (140         | )      
|                                      | Repayment of borrowings                                                 |                                                     |   |        |         |                        | (19    | )            |   | (101,879     | )      
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      |                                                                         | Net cash provided by (used in) financing activities |   |         | 38,599  |                        |        | (19          | ) |              | (72,419
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      | Increase (decrease) in cash and cash equivalents                        |                                                     |   | (1,254  | )       |                        | 14,030 |              |   | 12,731       |        
|                                      | Cash and cash equivalents at beginning of period                        |                                                     |   | 1,398   |         |                        | 2,996  |              |   | 26,475       |        
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        
|                                      | Cash and cash equivalents at end of period                              |                                                     | $ | 144     |         | $                      | 17,026 |              | $ | 39,206       |        
|                                      |                                                                         |                                                     |   |         |         |                        |        |              |   |              |        

F-72

---



Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2002

|                                      |                                                                         | Kerzner |                                                     | KINA     |   | Guarantor
Subsidiaries |          | Eliminations |        | Consolidated |  
|------------------------------------- | ----------------------------------------------------------------------- | ------- | --------------------------------------------------- | -------- | - | ---------------------- | -------- | ------------ | ------ | ------------ | -
|Cash flows from operating activities: |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      | Net cash provided by (used in) continuing operations                    |         | $                                                   | 9,314    |   | $                      | (7,332   | )            | $      | 135,088      |  
|                                      | Cash used in discontinued operations                                    |         |                                                     |         |   |                        |         |              |        | (7,619       | )
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      |                                                                         |         | Net cash provided by (used in) operating activities |          |   | 9,314                  |          |              | (7,332 | )            |  
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|Cash flows from investing activities: |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      | Payments for property and equipment, net of insurance proceeds received |         |                                                     |         |   |                        | (14      | )            |        | (39,510      | )
|                                      | Net proceeds from sale of other assets                                  |         |                                                     |         |   |                        |         |              |        | 126          |  
|                                      | Purchase of notes receivable                                            |         |                                                     | (13,704  | ) |                        |         |              |        |             |  
|                                      | Proceeds received for repayment of notes receivable                     |         |                                                     |         |   |                        | 18,018   |              |        |             |  
|                                      | Deposit received                                                        |         |                                                     | 4,500    |   |                        |         |              |        |             |  
|                                      | Advances to affiliates, net of repayments                               |         |                                                     | 87,021   |   |                        | (1,389   | )            |        | (85,890      | )
|                                      | Acquisition of equity interest in associated company                    |         |                                                     |         |   |                        |         |              |        | (40,812      | )
|                                      | Deferred contract acquisition costs                                     |         |                                                     |         |   |                        |         |              |        | (214         | )
|                                      | Other                                                                   |         |                                                     |         |   |                        | (158     | )            |        | (120         | )
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      |                                                                         |         | Net cash provided by (used in) investing activities |          |   | 77,817                 |          |              | 16,457 |              |  
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|Cash flows from financing activities: |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      | Proceeds from the exercise of share options                             |         |                                                     | 14,702   |   |                        |         |              |        |             |  
|                                      | Proceeds from issuance of debt                                          |         |                                                     |         |   |                        | 206,000  |              |        |             |  
|                                      | Borrowings                                                              |         |                                                     |         |   |                        |         |              |        | 111,000      |  
|                                      | Cancellation of ordinary shares                                         |         |                                                     | (365     | ) |                        |         |              |        |             |  
|                                      | Debt issuance and modification costs                                    |         |                                                     |         |   |                        | (4,301   | )            |        | (364         | )
|                                      | Early redemption of debt                                                |         |                                                     | (104,135 | ) |                        | (209,000 | )            |        |             |  
|                                      | Repayment of borrowings                                                 |         |                                                     |         |   |                        | (70      | )            |        | (63,213      | )
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      |                                                                         |         | Net cash provided by (used in) financing activities |          |   | (89,798                | )        |              | (7,371 | )            |  
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      | Increase (decrease) in cash and cash equivalents                        |         |                                                     | (2,667   | ) |                        | 1,754    |              |        | 8,472        |  
|                                      | Cash and cash equivalents at beginning of period                        |         |                                                     | 4,065    |   |                        | 1,242    |              |        | 18,003       |  
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  
|                                      | Cash and cash equivalents at end of period                              |         | $                                                   | 1,398    |   | $                      | 2,996    |              | $      | 26,475       |  
|                                      |                                                                         |         |                                                     |          |   |                        |          |              |        |              |  

F-73

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Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2001

|                                      |                                                                         | Kerzner |                                                     | KINA    |   | Guarantor
Subsidiaries |          | Eliminations |          | Consolidated |  
|------------------------------------- | ----------------------------------------------------------------------- | ------- | --------------------------------------------------- | ------- | - | ---------------------- | -------- | ------------ | -------- | ------------ | -
|Cash flows from operating activities: |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      | Net cash provided by (used in) continuing operations                    |         | $                                                   | 2,044   |   | $                      | (7,014   | )            | $        | 72,624       |  
|                                      | Cash used in discontinued operations                                    |         |                                                     |        |   |                        |         |              |          | (7,379       | )
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      |                                                                         |         | Net cash provided by (used in) operating activities |         |   | 2,044                  |          |              | (7,014   | )            |  
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|Cash flows from investing activities: |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      | Payments for property and equipment, net of insurance proceeds received |         |                                                     |        |   |                        | (400     | )            |          | (67,190      | )
|                                      | Net proceeds from the sale of other assets                              |         |                                                     |        |   |                        | 2,196    |              |          | 351          |  
|                                      | Proceeds received from the sale of Resorts Atlantic City, net           |         |                                                     |        |   |                        | 120,850  |              |          | 2,664        |  
|                                      | Proceeds received from repayment of note receivable                     |         |                                                     | 12,000  |   |                        |         |              |          |             |  
|                                      | Advances to affiliates, net of repayments                               |         |                                                     | 54,520  |   |                        | (228,352 | )            |          | 179,180      |  
|                                      | Acquisition of equity interest in associated companies                  |         |                                                     | (3,768  | ) |                        |         |              |          |             |  
|                                      | Other                                                                   |         |                                                     |        |   |                        |         |              |          | (432         | )
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      |                                                                         |         | Net cash provided by (used in) investing activities |         |   | 62,752                 |          |              | (105,706 | )            |  
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|Cash flows from financing activities: |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      | Proceeds from the exercise of share options                             |         |                                                     | 7,934   |   |                        |         |              |          |             |  
|                                      | Proceeds from issuance of debt                                          |         |                                                     |        |   |                        | 200,000  |              |          |             |  
|                                      | Borrowings                                                              |         |                                                     |        |   |                        |         |              |          | 103,500      |  
|                                      | Debt issuance and modification costs                                    |         |                                                     | (500    | ) |                        | (6,250   | )            |          | (2,055       | )
|                                      | Repayment of borrowings                                                 |         |                                                     | (68,270 | ) |                        | (79,063  | )            |          | (301,403     | )
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      |                                                                         |         | Net cash used in financing activities               |         |   | (60,836                | )        |              | 114,687  |              |  
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      | Increase (decrease) in cash and cash equivalents                        |         |                                                     | 3,960   |   |                        | 1,967    |              |          | (20,140      | )
|                                      | Cash and cash equivalents at beginning of period                        |         |                                                     | 105     |   |                        | (725     | )            |          | 38,143       |  
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  
|                                      | Cash and cash equivalents at end of period                              |         | $                                                   | 4,065   |   | $                      | 1,242    |              | $        | 18,003       |  
|                                      |                                                                         |         |                                                     |         |   |                        |          |              |          |              |  

Note 27Subsequent Event

Wembley Investment

On March 10, 2004, we announced that we entered into a joint venture, BLB Investors, L.L.C. ("BLB"), with an affiliate of Starwood Capital Group Global,
L.L.C. ("Starwood") and an affiliate of Waterford Group, L.L.C. ("Waterford") for the purpose of acquiring an interest in Wembley plc ("Wembley"), which owns gaming and track operations in the United
States and race tracks in the United Kingdom. Wembley's United States operations include its flagship property, Lincoln Park in Rhode Island, where it owns a greyhound racetrack.

BLB,
which is 25% owned by us, 25% owned by Waterford, and 50% owned by Starwood, acquired on March 10, 2004 from funds managed by Active Value Fund Managers Limited ("Active Value")
2,811,108 shares of Wembley's issued share capital. Our proportionate share of this investment was approximately $10.2 million. BLB also entered into other arrangements with Active Value
on March 10th and March 18th relating to the purchase of Active Value's remaining 4,921,392 shares of Wembley's issued share capital, which could increase its total holdings in Wembley
up to approximately 22% (subject in all cases to necessary notifications and filings and waiting periods expiring under the Hart-Scott-Rodino Antitrust Improvements Act of 1976).

F-74

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