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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q

|(MARK ONE) |  |                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|           |  |                                                                                        
|           |  | For the quarterly period ended June 30, 2003                                           
|           |  |                                                                                        
| ̈          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition
period from _____ to ______



001-13815

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Commission File Number



SUNTERRA CORPORATION

(Exact name of registrant as specified in its charter)



|Maryland                        |  | 95-4582157            
|------------------------------- |  | ----------------------
|(State or other jurisdiction of |  | (I.R.S. Employer      
|Incorporation or organization)  |  | Identification Number)



3865 West Cheyenne
Avenue

North Las Vegas, Nevada 89032

(Address of principal executive offices including zip code)



(702) 804-8600

(Registrants telephone number including area code)



WWW.SUNTERRA.COM

(Registrants Website Address)



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.    x  Yes ̈No



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    x  Yes ̈No



Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a bankruptcy
court.    x  Yes ̈No



Number of shares outstanding of the issuers common stock, par value
$0.01 per share, at August 14, 2003: 18,045,077.

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SUNTERRA CORPORATION



INDEX



|ITEM       |  |                                                                                       |  | PAGE NUMBER
|---------- |  | ------------------------------------------------------------------------------------- |  | -----------
|           |  | Safe Harbor StatementCautionary Notice Regarding Forward Looking Statements          |  | 3          
|           |  |                                                                                      
|           |  | PART I. FINANCIAL INFORMATION                                                         |  |            
|Item 1.    |  | Financial Statements and Notes Thereto                                                |  | 4          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16         
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 23         
|Item 4.    |  | Controls and Procedures                                                               |  | 24         
|           |  |                                                                                      
|           |  | PART II. OTHER INFORMATION                                                            |  |            
|Item 1.    |  | Legal Proceedings                                                                     |  | 24         
|Item 2.    |  | Changes in Securities and Use of Proceeds                                             |  | 24         
|Item 3     |  | Defaults Upon Senior Securities                                                       |  | 24         
|Item 4     |  | Submission of Matters to a Vote of Security Holders                                   |  | 24         
|Item 5     |  | Other Information                                                                     |  | 25         
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  | 25         
|Signatures |  | 28                                                                                   



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Safe Harbor StatementCautionary Notice Regarding Forward-Looking Statements



This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular statements about our plans, objectives,
expectations and prospects under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations. You can identify these statements by forward-looking words such as anticipate,
believe, estimate, expect, intend, plan, seek and similar expressions. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by
our forward-looking statements are reasonable, those statements involve uncertainties and risks, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. Important factors that could cause our actual
results to differ materially from the results anticipated by the forward-looking statements are contained in our Annual Report on Form 10-K for the year ended December 31, 2002 under the headings Business-Risk Factors, and elsewhere in
that report and relate, without limitation, to matters arising from our emergence from proceedings under Chapter 11 of the Bankruptcy Code. Any or all of these factors could cause our actual results and financial or legal status to differ materially
from those expressed or referred to in any forward-looking statement. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Forward-looking statements speak only
as of the date on which they are made.



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PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



SUNTERRA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except share data)

(Unaudited)



|                                                                  |  | Successor                  |            |   | Predecessor              |   |         | Successor |  |   | Predecessor |  
|----------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | - | ------- | --------- |  | - | ----------- | -
|                                                                  |  | Three months EndedJune 30, |            |   | Six months endedJune 30, |  
|                                                                  |  | 2003                       |            |   | 2002                     |   |         | 2003      |  |   | 2002        |  
|Revenues:                                                         |  |                            |            |   |                          |   |         |           |  |   |             |  
|Vacation Interest                                                 |  | $                          | 55,754     |   |                          | $ | 46,692  |           |  | $ | 96,896      |  
|Club Sunterra                                                     |  |                            | 2,112      |   |                          |   | 1,792   |           |  |   | 4,312       |  
|Resort rental                                                     |  |                            | 2,986      |   |                          |   | 3,412   |           |  |   | 5,750       |  
|Management services                                               |  |                            | 6,923      |   |                          |   | 7,714   |           |  |   | 14,010      |  
|Interest                                                          |  |                            | 6,447      |   |                          |   | 7,387   |           |  |   | 12,507      |  
|Other                                                             |  |                            | 4,818      |   |                          |   | 5,631   |           |  |   | 8,874       |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Total revenues                                                    |  |                            | 79,040     |   |                          |   | 72,628  |           |  |   | 142,349     |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Costs and Operating Expenses:                                     |  |                            |            |   |                          |   |         |           |  |   |             |  
|Vacation Interest cost of sales                                   |  |                            | 10,169     |   |                          |   | 9,692   |           |  |   | 17,872      |  
|Advertising, sales and marketing                                  |  |                            | 31,566     |   |                          |   | 29,639  |           |  |   | 57,984      |  
|Maintenance fee and subsidy expenses                              |  |                            | 2,985      |   |                          |   | 2,293   |           |  |   | 5,713       |  
|Provision for doubtful accounts and loan losses                   |  |                            | 1,072      |   |                          |   | 1,617   |           |  |   | 1,706       |  
|Loan portfolio expenses                                           |  |                            | 2,390      |   |                          |   | 3,185   |           |  |   | 5,357       |  
|General and administrative                                        |  |                            | 15,922     |   |                          |   | 19,222  |           |  |   | 34,961      |  
|Depreciation and amortization                                     |  |                            | 2,688      |   |                          |   | 3,436   |           |  |   | 5,660       |  
|Interest expense (a)                                              |  |                            | 5,694      |   |                          |   | 3,655   |           |  |   | 11,654      |  
|Reorganization expenses, net                                      |  |                            | (511       | ) |                          |   | 12,375  |           |  |   | (167        | )
|Restructuring expenses                                            |  |                            | 137        |   |                          |   | 665     |           |  |   | 991         |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Total costs and operating expenses                                |  |                            | 72,112     |   |                          |   | 85,779  |           |  |   | 141,731     |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Income (loss) from operations                                     |  |                            | 6,928      |   |                          |   | (13,151 | )         |  |   | 618         |  
|Income on investment in joint ventures                            |  |                            | 593        |   |                          |   | 1,294   |           |  |   | 1,407       |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Income (loss) before provision for income taxes                   |  |                            | 7,521      |   |                          |   | (11,857 | )         |  |   | 2,025       |  
|Provision for income taxes                                        |  |                            | 1,727      |   |                          |   | 2,096   |           |  |   | 2,392       |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Net income (loss)                                                 |  | $                          | 5,794      |   |                          | $ | (13,953 | )         |  | $ | (367        | )
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Income (loss) per share:                                          |  |                            |            |   |                          |   |         |           |  |   |             |  
|Basic and diluted                                                 |  | $                          | 0.29       |   |                          |   |         |           |  | $ | (0.02       | )
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  
|Weighted average number of common shares outstanding (see Note 1) |  |                            | 20,000,000 |   |                          |   |         |           |  |   | 20,000,000  |  
|                                                                  |  |                            |            |   |                          |   |         |           |  |   |             |  



(a) Interest expense is comprised of
contractual interest of $5,694 and $13,872, net of unaccrued interest of $0 and $10,100 and capitalized interest of $0 and $117 for the three months ended June 30, 2003 and 2002, respectively. Interest expense is comprised of contractual interest of
$11,654 and $28,570, net of unaccrued interest of $0 and $20,200 and capitalized interest of $0 and $234 for the six months ended June 30, 2003 and 2002, respectively.



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



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SUNTERRA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except share data)



|                                                                   |  | SuccessorJune 30,2003 |         |   | SuccessorDecember 31,2002 |  
|------------------------------------------------------------------ |  | --------------------- | ------- | - | ------------------------- | -
|                                                                   |  | (unaudited)           |         |   |                           |  
|ASSETS                                                             |  |                       |         |   |                           |  
|Cash and cash equivalents                                          |  | $                     | 15,425  |   |                           | $
|Cash in escrow and restricted cash                                 |  |                       | 59,415  |   |                           |  
|Mortgages and contracts receivable, net of an allowance of $28,886 |  |                       |         |   |                           |  
|and $32,394 at June 30, 2003 and December 31, 2002, respectively   |  |                       | 174,706 |   |                           |  
|Retained interests in mortgages receivable sold                    |  |                       | 18,840  |   |                           |  
|Due from related parties .                                         |  |                       | 7,084   |   |                           |  
|Other receivables, net                                             |  |                       | 23,474  |   |                           |  
|Prepaid expenses and other assets                                  |  |                       | 35,797  |   |                           |  
|Assets held for sale                                               |  |                       | 8,254   |   |                           |  
|Investment in joint ventures                                       |  |                       | 20,491  |   |                           |  
|Real estate and development costs, net                             |  |                       | 127,099 |   |                           |  
|Property and equipment, net                                        |  |                       | 71,026  |   |                           |  
|Intangible assets, net                                             |  |                       | 155,248 |   |                           |  
|                                                                   |  |                       |         |   |                           |  
|Total assets                                                       |  | $                     | 716,859 |   |                           | $
|                                                                   |  |                       |         |   |                           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                               |  |                       |         |   |                           |  
|Borrowings under line of credit agreements                         |  | $                     | 220,742 |   |                           | $
|Accounts payable                                                   |  |                       | 10,851  |   |                           |  
|Accrued liabilities                                                |  |                       | 89,095  |   |                           |  
|Income taxes payable                                               |  |                       | 3,723   |   |                           |  
|Deferred revenue                                                   |  |                       | 101,271 |   |                           |  
|Notes payable                                                      |  |                       | 5,136   |   |                           |  
|                                                                   |  |                       |         |   |                           |  
|Total liabilities                                                  |  |                       | 430,818 |   |                           |  
|                                                                   |  |                       |         |   |                           |  
|Commitments and contingencies                                      |  |                       |         |   |                           |  
|Stockholders equity                                               |  |                       |         |   |                           |  
|Common stock ($0.01 par value, 30,000,000 shares authorized;       |  |                       |         |   |                           |  
|18,045,077 outstanding at June 30, 2003 and December 31, 2002)     |  |                       | 180     |   |                           |  
|Additional paid-in capital                                         |  |                       | 296,714 |   |                           |  
|Accumulated deficit                                                |  |                       | (14,689 | ) |                           |  
|Accumulated other comprehensive income                             |  |                       | 3,836   |   |                           |  
|                                                                   |  |                       |         |   |                           |  
|Total stockholders equity                                         |  |                       | 286,041 |   |                           |  
|                                                                   |  |                       |         |   |                           |  
|Total liabilities and stockholders equity                         |  | $                     | 716,859 |   |                           | $
|                                                                   |  |                       |         |   |                           |  



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



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SUNTERRA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



|                                                                                |  | Successor                |         |   | Predecessor |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ----------- | -
|                                                                                |  | Six Months Ended June30, |        
|                                                                                |  | 2003                     |         |   | 2002        |  
|Operating activities:                                                           |  |                          |         |   |             |  
|Net loss                                                                        |  | $                        | (367    | ) |             | $
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                          |         |   |             |  
|Depreciation and amortization                                                   |  |                          | 5,660   |   |             |  
|Provision for doubtful accounts and loan losses                                 |  |                          | 1,706   |   |             |  
|Amortization of capitalized loan origination costs and portfolio premium        |  |                          | 1,406   |   |             |  
|Amortization of capitalized financing costs                                     |  |                          | 4,450   |   |             |  
|Discount on settlement of debt                                                  |  |                          |        |   |             |  
|Income on investment in joint ventures                                          |  |                          | (1,407  | ) |             |  
|Gain on disposals of property and equipment                                     |  |                          | (53     | ) |             |  
|Deferred income taxes                                                           |  |                          | (22     | ) |             |  
|Changes in retained interests in mortgages receivable sold                      |  |                          | (751    | ) |             |  
|Changes in operating assets and liabilities:                                    |  |                          |         |   |             |  
|Cash in escrow and restricted cash                                              |  |                          | (7,324  | ) |             |  
|Mortgages and contracts receivable                                              |  |                          | 3,265   |   |             |  
|Due from related parties                                                        |  |                          | (5,244  | ) |             |  
|Other receivables, net                                                          |  |                          | (3,648  | ) |             |  
|Prepaid expenses and other assets                                               |  |                          | (3,863  | ) |             |  
|Real estate and development costs                                               |  |                          | 9,787   |   |             |  
|Accounts payable                                                                |  |                          | (1,757  | ) |             |  
|Accrued liabilities                                                             |  |                          | (1,144  | ) |             |  
|Deferred revenue                                                                |  |                          | 1,687   |   |             |  
|Liabilities subject to compromise                                               |  |                          |        |   |             |  
|                                                                                |  |                          |         |   |             |  
|Net cash provided by operating activities                                       |  |                          | 2,381   |   |             |  
|                                                                                |  |                          |         |   |             |  
|Investing activities:                                                           |  |                          |         |   |             |  
|Proceeds from sale of assets                                                    |  |                          | 270     |   |             |  
|Capital expenditures                                                            |  |                          | (4,553  | ) |             |  
|Change in intangible assets                                                     |  |                          | (1,062  | ) |             |  
|Investment in joint ventures                                                    |  |                          | 11,419  |   |             |  
|                                                                                |  |                          |         |   |             |  
|Net cash provided by (used in) investing activities                             |  |                          | 6,074   |   |             |  
|                                                                                |  |                          |         |   |             |  
|Financing activities:                                                           |  |                          |         |   |             |  
|Borrowings under line of credit facilities                                      |  |                          | 475     |   |             |  
|Borrowings under debtor-in-possession financing agreement                       |  |                          |        |   |             |  
|Debt issuance costs                                                             |  |                          |        |   |             |  
|Proceeds from notes payable                                                     |  |                          | 5,091   |   |             |  
|Payments on line of credit facilities                                           |  |                          | (19,798 | ) |             |  
|Payments on debtor-in-possession financing agreement                            |  |                          |        |   |             |  
|Payments on notes payable and mortgage-backed securities                        |  |                          | (3,365  | ) |             |  
|Payments of accrued interest on settlement of debt                              |  |                          |        |   |             |  
|                                                                                |  |                          |         |   |             |  
|Net cash used in financing activities                                           |  |                          | (17,597 | ) |             |  
|Effect of changes in exchange rates on cash and cash equivalents                |  |                          | 1,607   |   |             |  
|                                                                                |  |                          |         |   |             |  
|Net (decrease) increase in cash and cash equivalents                            |  |                          | (7,535  | ) |             |  
|Cash and cash equivalents, beginning of period                                  |  |                          | 22,960  |   |             |  
|                                                                                |  |                          |         |   |             |  
|Cash and cash equivalents, end of period                                        |  | $                        | 15,425  |   |             | $
|                                                                                |  |                          |         |   |             |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                              |  |                          |         |   |             |  
|Cash paid for interest, net of capitalized interest                             |  | $                        | 7,193   |   |             | $
|Cash paid for taxes, net of tax refunds                                         |  | $                        | 4,788   |   |             | $

(Continued)



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|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:    |  |   |       |  |  
|----------------------------------------------------------------------- |  | - | ----- |  | -
|Real Estate and Development Costs transferred from Assets Held For Sale |  | $ | 2,354 |  | 
|Property and Equipment transferred from Assets Held For Sale            |  | $ | 3,146 |  | 



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



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SUNTERRA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share amounts)

(Unaudited)



1.    BASIS OF PRESENTATION AND ACCOUNTING POLICIES



Business



The operations of Sunterra Corporation (Sunterra or the Company) and its wholly owned subsidiaries consist of (i) marketing and selling vacation ownership interests at its locations and
off-site sales centers, which entitle the buyer to use a fully-furnished vacation residence, generally for a one-week period each year in perpetuity (Vacation Intervals), and vacation points which may be redeemed for occupancy rights,
for varying lengths of stay, at participating resort locations (Vacation Points, and together with Vacation Intervals, Vacation Interests), both of which generally include a deeded, fee-simple interest in a particular unit,
(ii) marketing and selling vacation points representing a beneficial interest in a trust which holds title to vacation property real estate for the benefit of purchasers of those points, (iii) leasing Vacation Intervals at certain Caribbean
locations, (iv) acquiring, developing, and operating vacation ownership resorts, (v) providing consumer financing to individual purchasers for the purchase of Vacation Interests at its resort locations and off-site sales centers, and (vi) providing
resort rental management and maintenance services for which the Company receives fees paid by the resorts homeowners associations. The Company is headquartered in North Las Vegas, Nevada, and has vacation ownership resorts in the United
States, Canada, the Caribbean, Mexico and Europe.



Principals of
Consolidation



The consolidated financial statements include the accounts
of Sunterra Corporation and its majority-owned subsidiaries. The equity method of accounting is used when the Company has a 20% to 50% interest in other companies. Under the equity method, original investments are recorded at cost and adjusted by
the Companys share of undistributed earnings or losses of these entities.



Interim Statements



The accompanying unaudited consolidated
financial statements have been prepared by the Companys management in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and applicable rules and regulations of
the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal
and recurring adjustments) considered necessary for a fair presentation have been included. The reported operating results for the six months ended June 30, 2003, are not necessarily indicative of the results that may be expected for the year ending
December 31, 2003.



These statements should be read in conjunction with the
audited financial statements and footnotes included in the Companys 2002 Annual Report on Form 10-K. Accounting policies used in preparing these financial statements are the same as those described in such Form 10-K, unless otherwise noted
herein. .



Fresh-Start Basis of Presentation



The accompanying unaudited consolidated financial statements have been presented in
accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, as amended. From May
31, 2000 to July 29, 2002, the Company and certain of its



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subsidiaries (the Debtor Entities) operated as debtors-in-possession, having filed a petition for relief
under Chapter 11 of the Bankruptcy Code on May 31, 2000.



A disclosure
statement for a proposed plan of reorganization (the Plan of Reorganization or Plan) was approved by order of the Bankruptcy Court entered on April 25, 2002, and the Plan of Reorganization and disclosure statement were mailed
to creditors on or about May 14, 2002. The Plan received the requisite votes of creditor interests, and the Bankruptcy Court confirmed the Plan by an order entered on June 21, 2002. According to the terms of the Plan, it became effective when
certain conditions, as set forth in the Plan, were either satisfied or waived by the Official Committee of Unsecured Creditors. The conditions to the effectiveness of the Plan were fulfilled on July 29, 2002 and the Debtor Entities emerged from
their Chapter 11 proceedings on that date.



In conjunction with emergence from
bankruptcy, the Company recognized $154.0 million as reorganization value in excess of amounts allocable to identifiable assetsgoodwill. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, the excess reorganization value is assumed to have an indefinite useful life and will not be amortized. The excess reorganization value will be tested for impairment at least annually as specified in SFAS
No. 142. As a result of adopting fresh-start reporting upon emerging from Chapter 11 status, the Companys financial statements are not comparable with those prepared before August 1, 2002 (the date of emergence for accounting purposes),
including the historical consolidated financial statements included herein. References to Predecessor refer to the Company through July 31, 2002. References to Successor refer to the Company on and after August 1, 2002.



Income (Loss) per ShareBasic income (loss) per share is
calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. For the three and six months ended June 30, 2003, 1,790,147 shares attributable to the exercise of outstanding warrants and 822,812 shares attributable to the exercise of awarded stock options were
excluded from the calculation of diluted loss per share because the effect was anti-dilutive. The shares were anti-dilutive because their exercise price was greater than the average share price during the respective periods. As of July 31, 2002, the
effective date of the Plan for accounting purposes, all previously outstanding equity securities of the Company were cancelled.



In connection with implementation of the Plan, 18,045,077 shares of the Successor Companys common stock were issued during 2002. Additionally, a distribution of
1,954,923 shares of the Successor Companys common stock will be made to pre-petition general unsecured creditors on a pro rata basis for no cash consideration. In accordance with the provisions of SFAS No. 128, Earnings per Share,
shares of common stock to be issued to the pre-petition general unsecured creditors were considered to be outstanding as of the date of emergence from bankruptcy and included in the computation of income (loss) per share of the Successor Company. No
earnings per share calculations are shown for periods prior to the distribution of the Successor Companys common stock, since the information is not comparable with the Successor Company.



Stock-Based CompensationThe Company has adopted the disclosure provisions of
SFAS No. 148,Accounting for Stock-Based CompensationTransition and Disclosure, an amendment of FASB Statement No. 123. This pronouncement requires prominent disclosures in both annual and interim financial statements regarding
the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for stock compensation awards under the intrinsic value method of Accounting Principles Board
(APB) Opinion No. 25, which requires compensation cost to be recognized based on the excess, if any, between the quoted market price of the stock at the date of grant and the amount an employee must pay to acquire the stock. All options
awarded under all of the Companys plans are granted with an exercise price equal to



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the fair market value on the date of the grant. The following table presents the effect on the Companys net income
(loss) and income (loss) per share had the Company adopted the fair value method of accounting for stock-based compensation under SFAS No. 123, Accounting for Stock-Based Compensation (in thousands, except for per share amounts). No earnings
per share calculations are shown for periods prior to the distribution of the Successor Companys common stock, since the information is not comparable with the Successor Company.



|                                                                                                                                      |  | Successor                  |       |   | Predecessor              |   |         | Successor |  |   | Predecessor |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------ | - | ------- | --------- |  | - | ----------- | -
|                                                                                                                                      |  | Three months EndedJune 30, |       |   | Six months EndedJune 30, |  
|                                                                                                                                      |  | 2003                       |       |   | 2002                     |   |         | 2003      |  |   | 2002        |  
|Net income (loss), as reported                                                                                                        |  | $                          | 5,794 |   |                          | $ | (13,953 | )         |  | $ | (367        | )
|Add: Stock-based employee compensation cost, included in reported net income (loss), net of related tax effects                       |  |                            |      |   |                          |   |        |           |  |   |            |  
|Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                            | (819  | ) |                          |   |        |           |  |   | (819        | )
|                                                                                                                                      |  |                            |       |   |                          |   |         |           |  |   |             |  
|Pro forma net income (loss)                                                                                                           |  | $                          | 4,975 |   |                          | $ | (13,953 | )         |  | $ | (1,186      | )
|                                                                                                                                      |  |                            |       |   |                          |   |         |           |  |   |             |  
|Basic and diluted net income (loss) per share, as reported                                                                            |  | $                          | 0.29  |   |                          |   |         |           |  | $ | (0.02       | )
|Basic and diluted net income (loss) per share, pro forma                                                                              |  | $                          | 0.25  |   |                          |   |         |           |  | $ | (0.06       | )



ReclassificationsCertain
reclassifications were made to the 2002 consolidated financial statements to conform to the 2003 presentation, including but not limited to the reclassifications described below.



In previously issued financial statements, the consolidated statements of operations included the line items Vacation Interest
revenues, representing sales of Vacation Interests on an accrual basis, and Vacation Interest lease revenue which was comprised of two primary components: transactions involving Vacation Interests in certain Caribbean properties,
and transactions of the Company acting in its capacity as the homeowners association for these Caribbean resorts. The line item Vacation Interest lease revenue has been removed and the components thereof reclassified as described
below.



Transactions involving Vacation Interests in certain Caribbean
locations are legally structured as long-term lease arrangements for either 99 years or a term expiring in 2050. The Vacation Interests subject to such leases currently revert to us at the end of the lease terms. These transactions are accordingly
accounted for as operating leases, with the sales value of the intervals recorded as deferred revenue at the date of execution of the transactions. Revenue deferred under these arrangements is amortized on a straight-line method over the term of the
lease agreements. The direct marketing costs of the lease contracts are also deferred and amortized over the term of the leases. In the accompanying consolidated statements of operations, revenue recognized under these leases is classified as
Vacation Interest revenue.



In our capacity as the homeowners association
for these resorts, we collect maintenance fees from the lessees on these properties, which are accrued as earned, generally a twelve-month period. In the accompanying consolidated statements of operations, revenue earned in such capacity is
classified as management services revenue.



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The table below shows the dollar amounts of these components for the periods reported in the accompanying consolidated
statements of operations:



|                                                               |  | Successor                  |       | Predecessor              |   | Successor |  | Predecessor
|-------------------------------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | --------- |  | -----------
|                                                               |  | Three months endedJune 30, |       | Six months endedJune 30,
|                                                               |  | 2003                       |       | 2002                     |   | 2003      |  | 2002       
|Long-term lease revenue                                        |  | $                          | 735   |                          | $ | 354       |  | $          
|Homeowners association revenue                                |  |                            | 2,030 |                          |   | 1,900     |  |            
|                                                               |  |                            |       |                          |   |           |  |            
|Total (formerly classified as Vacation Interest lease revenue) |  | $                          | 2,765 |                          | $ | 2,254     |  | $          
|                                                               |  |                            |       |                          |   |           |  |            



2.    NEW
ACCOUNTING STANDARDS



In January 2003, the Financial Accounting Standards
Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities, which addresses consolidation by business enterprises of variable interest entities. Consolidation by a primary beneficiary of the assets,
liabilities and results of activities of variable interest entities will provide more complete information about the resources, obligations, risks and opportunities of the consolidated company. The Interpretation also requires disclosures about
variable interest entities that the Company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of Interpretation No. 46 apply immediately to variable interest entities created after
January 31, 2003 and apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company adopted Interpretation No. 46 as of January 1, 2003. The adoption of Interpretation No. 46 did not have a material impact on the accompanying consolidated financial statements.



In February 2003, a proposed SOP, Accounting for Real Estate Time-Sharing
Transactions, and a proposedSFAS,Accounting for Real Estate Time-Sharing Transactionsan amendment of FASB Statements No. 66 and 67, were issued simultaneously for public comment. The proposed SFAS would amend other
authoritative pronouncements should the proposed SOP be issued as final. The proposed SOP would eliminate inconsistencies in existing authoritative literature and accepted practices and fill voids that have emerged in revenue recognition guidance in
recent years by providing guidance on a sellers accounting for real estate time-sharing transactions including criteria for and methods of revenue recognition, accounting for selling costs, accounting for credit losses, accounting for
repossession of vacation ownership intervals, accounting for operations during interval holding periods, accounting for developer subsidies to interval homeowners associations and accounting for upgrade transactions. The comment periods for
both the proposed SOP and the proposed SFAS concluded on April 30, 2003. The provisions of this proposed SOP would be effective for financial statements issued for fiscal years beginning after June 15, 2004. It is not possible to determine at this
time the impact that the conclusions of the SOP, when and if it is finalized, may have on the consolidated financial statements of the Company.



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3.    MORTGAGES AND CONTRACTS RECEIVABLE, NET



The following summarizes the Companys total mortgages and contracts receivable:



|                                                   |  | Successor June 30, 2003 |         |   | Successor December 31, 2002 |  
|-------------------------------------------------- |  | ----------------------- | ------- | - | --------------------------- | -
|Mortgages and contracts receivable                 |  | $                       | 191,209 |   |                             | $
|Deferred loan origination costs, net               |  |                         | 4,254   |   |                             |  
|Premium on mortgages and contracts receivable, net |  |                         | 8,129   |   |                             |  
|                                                   |  |                         |         |   |                             |  
|Mortgages and contracts receivable, gross          |  |                         | 203,592 |   |                             |  
|Less allowance for loan and contract losses        |  |                         | (28,886 | ) |                             |  
|                                                   |  |                         |         |   |                             |  
|Mortgages and contracts receivable, net            |  | $                       | 174,706 |   |                             | $
|                                                   |  |                         |         |   |                             |  



Activity in the allowance for loan and
contract losses associated with mortgages and contracts receivable is as follows:



|                                       |  | Successor                  |        |   | Predecessor              |   |        | Successor |  |   | Predecessor |  
|-------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | --------- |  | - | ----------- | -
|                                       |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                       |  | 2003                       |        |   | 2002                     |   |        | 2003      |  |   | 2002        |  
|Balance, beginning of period           |  | $                          | 30,916 |   |                          | $ | 33,888 |           |  | $ | 32,394      |  
|Provision for loan and contract losses |  |                            | 1,086  |   |                          |   | 1,458  |           |  |   | 1,559       |  
|Receivables charged off, net           |  |                            | (3,116 | ) |                          |   | (2,609 | )         |  |   | (5,067      | )
|                                       |  |                            |        |   |                          |   |        |           |  |   |             |  
|Balance, end of period                 |  | $                          | 28,886 |   |                          | $ | 32,737 |           |  | $ | 28,886      |  
|                                       |  |                            |        |   |                          |   |        |           |  |   |             |  



4.    REAL
ESTATE AND DEVELOPMENT COSTS, NET



Real estate and development costs
consist of the following:



|                                                |  | Successor June 30, 2003 |         | Successor December 31,2002
|----------------------------------------------- |  | ----------------------- | ------- | --------------------------
|Development costs of Vacation Interests, net    |  | $                       | 123,373 |                           
|Interests recoverable under defaulted mortgages |  |                         | 3,726   |                           
|                                                |  |                         |         |                           
|Net real estate and development costs           |  | $                       | 127,099 |                           
|                                                |  |                         |         |                           



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5.    REORGANIZATION AND RESTRUCTURING EXPENSES, NET



Reorganization expenses, net. These amounts comprised of expenses and losses offset
by income and gains that were realized or incurred by the Company as a result of reorganization under Chapter 11 and are expensed as incurred. These items have been segregated from normal operating costs and consist of the following:



|                                          |  | Successor                  |      |   | Predecessor              |   |        | Successor |  |   | Predecessor |  
|----------------------------------------- |  | -------------------------- | ---- | - | ------------------------ | - | ------ | --------- |  | - | ----------- | -
|                                          |  | Three months endedJune 30, |      |   | Six months endedJune 30, |  
|                                          |  | 2003                       |      |   | 2002                     |   |        | 2003      |  |   | 2002        |  
|Professional fees                         |  | $                          | 216  |   |                          | $ | 9,738  |           |  | $ | 543         |  
|Employee retention and severance programs |  |                            |     |   |                          |   | 210    |           |  |   |            |  
|Net gains on asset sales                  |  |                            | (72  | ) |                          |   | (2,756 | )         |  |   | (71         | )
|Other                                     |  |                            | (655 | ) |                          |   | 6,354  |           |  |   | (639        | )
|Gain on settlement of debt                |  |                            |     |   |                          |   | (1,142 | )         |  |   |            |  
|Interest income                           |  |                            |     |   |                          |   | (29    | )         |  |   |            |  
|                                          |  |                            |      |   |                          |   |        |           |  |   |             |  
|                                          |  | $                          | (511 | ) |                          | $ | 12,375 |           |  | $ | (167        | )
|                                          |  |                            |      |   |                          |   |        |           |  |   |             |  



In January 2002, pursuant to an order
of the Bankruptcy Court, the Company entered into an agreement (the Finova Agreement) with Finova Capital Corporation (Finova) that provided for payment by the Company of various loans and financing facilities (Finova
Loans) from Finova or its affiliates. Pursuant to the Finova Agreement, the Company paid, in cash and by application of other funds, $100 million (determined after giving effect to a prior release to Finova of $5 million held by Finova as cash
collateral) and Finova returned collateral securing the Finova Loans. The payment to Finova represented a discount of $27.0 million from the principal amount of the Finova Loans. Pursuant to the Finova Agreement, the Company and Finova each released
the other parties from liabilities and obligations relating to the Finova Loans and certain other matters, including those that were the subject of pending litigation between the parties. The Company obtained a portion of the funds to pay the Finova
Loans from term loans under its debtor-in-possession (DIP) financing facility and paid a brokerage fee of $13.4 million to its DIP lender for negotiating the settlement with Finova. The Company recorded a net gain on settlement of debt
of $13.6 million, which is included as an offset to reorganization costs.



In
May 2002, the Company executed amendments to lease agreements relating to a 1999 sale-leaseback transaction, payments on which were suspended as a result of the bankruptcy proceedings. As a result of the amendments, the minimum lease terms were
extended from November 2002 to April 2004, and the Companys payment obligations were reduced by $1.1 million, which is recorded as an offset to reorganization expenses as a gain on settlement of debt.



Restructuring expenses, net.    During the three months ended June
30, 2003 and 2002, the Company recorded $0.1 million and $0.7 million, respectively, in restructuring expenses. During the six months ended June 30, 2003 and 2002, the Company recorded $1.0 million and $0.7 million, respectively, in restructuring
charges. These expenses related to the implementation of a new strategic plan, which included streamlining of the legal structure, relocation of the Companys headquarters and expenditures related to our proposed unified global club.



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6.    COMPREHENSIVE INCOME (LOSS)



Comprehensive income (loss) includes all changes in equity (net assets) during a period from
non-owner sources. The reconciliation of net income (loss) to comprehensive net income (loss) is as follows:



|                                                        |  | Successor                  |       | Predecessor |                          |         | Successor |  |   | Predecessor |  
|------------------------------------------------------- |  | -------------------------- | ----- | ----------- | ------------------------ | ------- | --------- |  | - | ----------- | -
|                                                        |  | Three months endedJune 30, |       |             | Six months ended June30, |        
|                                                        |  | 2003                       |       | 2002        |                          |         | 2003      |  |   | 2002        |  
|Net income (loss)                                       |  | $                          | 5,794 |             | $                        | (13,953 | )         |  | $ | (367        | )
|Unrealized gain (loss) on available for sale securities |  |                            |      |             |                          |        |           |  |   |            |  
|Foreign currency translation adjustments                |  |                            | 3,062 |             |                          | 5,103   |           |  |   | 2,081       |  
|                                                        |  |                            |       |             |                          |         |           |  |   |             |  
|Total comprehensive income (loss)                       |  | $                          | 8,856 |             | $                        | (8,850  | )         |  | $ | 1,714       |  
|                                                        |  |                            |       |             |                          |         |           |  |   |             |  



7.    SEGMENT
AND GEOGRAPHIC INFORMATION



The Company currently operates in two
geographic segments, the North America and foreign segments. During the Chapter 11 proceedings, the Company operated in three segments, North American Debtor Entities, North American Non-Debtor Entities and foreign entities. All of these segments
operate in one industry segment that includes the development, marketing, sales, financing and management of vacation ownership resorts. The Companys areas of operation outside of North America include the United Kingdom, Italy, Spain,
Portugal, Austria, Germany and France. The Companys management evaluates performance of each segment based on profit or loss from operations before income taxes not including extraordinary items and the cumulative effect of change in
accounting principles. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 4). No single customer accounts for a significant amount of the Companys sales.
Information about the Companys operations in different geographic locations is shown below:



|                                          |  | NorthAmerica |         |   | Foreign |   | Eliminations |  |   | Total  
|----------------------------------------- |  | ------------ | ------- | - | ------- | - | ------------ |  | - | -------
|Three Months Ended June 30, 2003          |  |              |         |   |         |   |              |  |   |        
|Revenues from external customers          |  | $            | 49,272  |   |         | $ | 29,768       |  | $ |       
|Income before income tax provision        |  | $            | 1,502   |   |         | $ | 6,019        |  | $ |       
|Segment assets                            |  | $            | 608,810 |   |         | $ | 147,340      |  | $ | (39,291
|Six Months Ended June 30, 2003            |  |              |         |   |         |   |              |  |   |        
|Revenues from external customers          |  | $            | 91,515  |   |         | $ | 50,834       |  | $ |       
|(Loss) income before income tax provision |  | $            | (6,418  | ) |         | $ | 8,443        |  | $ |       



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|                                                    |  | NorthAmericaDebtors |         |   | NorthAmericaNon-Debtors |   | Foreign Non-Debtors |  | Total Non-Debtors |        | Total |  
|--------------------------------------------------- |  | ------------------- | ------- | - | ----------------------- | - | ------------------- |  | ----------------- | ------ | ----- | -
|Three months ended June 30, 2002:                   |  |                     |         |   |                         |   |                     |  |                   |        |       |  
|Revenues from external customers                    |  | $                   | 33,939  |   |                         | $ | 11,585              |  | $                 | 27,104 |       | $
|(Loss) income before income tax (benefit) provision |  | $                   | (21,214 | ) |                         | $ | 2,698               |  | $                 | 6,659  |       | $
|Segment assets                                      |  | $                   | 514,869 |   |                         | $ | 27,820              |  | $                 | 77,073 |       | $
|Six months ended June 30, 2002:                     |  |                     |         |   |                         |   |                     |  |                   |        |       |  
|Revenues from external customers                    |  | $                   | 63,361  |   |                         | $ | 22,536              |  | $                 | 45,507 |       | $
|(Loss) income before income tax (benefit) provision |  | $                   | (23,305 | ) |                         | $ | 4,124               |  | $                 | 8,721  |       | $



8.    COMMITMENTS AND CONTINGENCIE



Sunterra Pacific, as Manager of the VTS Program (Sunterra Pacifics points program), filed an arbitration proceeding against the VTS Owners Association Board of Directors because it declined to renew the Management
Agreement without reasonable cause. The Board filed a counter petition alleging cause. The parties have agreed to an indefinite stay of the arbitration proceedings, which the Arbitrators confirmed February 26, 2003, so that the parties may pursue
settlement negotiations. This action is in the early stages of arbitration; however, management believes that the ultimate outcome of this matter will not have a material adverse impact on the Companys financial position or results of
operations.



Sunterra licensed certain computer software under a software
license granted by RCI Technology Corp., formerly known as Resort Computer Corporation. That software was the foundation for Sunterras integrated computer system, which manages a wide range of hospitality functions, such as reservations,
inventory control, sales commissions, Club Sunterra operations, housekeeping and marketing. RCI Technology filed a motion in the Chapter 11 proceedings alleging that the license agreement should be deemed rejected, which RCI Technology asserts would
have the effect of terminating the license. Sunterra opposed the motion, and the Bankruptcy Court ruled in favor of Sunterra and denied RCI Technologys motion. On June 14, 2002, RCI Technology filed a notice of appeal of the Courts
decision. On January 10, 2003, the United States District Court of Maryland affirmed the order of the Bankruptcy Court, denying the motion of RCI Technology. RCI Technology has further appealed that decision to the United States Court of Appeals,
4thCircuit, and that appeal is expected to be heard in the second half of 2003. Although Sunterras new
ATLAS computer system, when fully implemented, is intended to fully replace any software based on the RCI Technology system, a victory by RCI Technology in this litigation prior to full implementation of ATLAS could have a material
adverse effect on the Company



The Company holds a 23.3% interest in West Maui
Resort Partners, LP (Kaanapali) that operates a vacation ownership resort in Hawaii. This limited partnership refinanced existing debt in March 2003 (see note below). In connection with the refinancing, the Company (as well as its
partners on a pro rata basis) provided limited guarantees in the event the lenders suffer losses for a number of specific reasons including fraud, misrepresentation, environmental conditions and certain zoning and property-specific matters. These
guarantees are limited to the specified items of risk, and do not generally guarantee repayment of the refinanced obligations, and expire with the repayment of the debt. The Company is unable to develop an estimate of the maximum potential amount of



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future payments under guarantees for fraud or misrepresentation, and does not believe that it will be required to perform under the guarantee as it relates
to environmental conditions, certain zoning and property-specific matters. Accordingly, the Company has not recorded a liability for any potential obligations under the guaranties.



The Company is also currently subject to litigation and claims regarding employment, tort, contract, construction, sales taxes and
commission disputes, among others. Many of such litigation and claims were pre-petition and were treated as general unsecured creditors under the plan of reorganization. In our judgment, none of such litigation or claims against the Company is
likely to have a material adverse effect on the Companys financial statements or its business.



9.    RELATED PARTY TRANSACTIONS



The Company owns a 30% interest in Poipu Resort Partners, L.P. (Poipu) and as noted above, a 23% interest in Kaanapali, and accounts for its investments in joint ventures under the equity method. In
March 2003, the Company received a $9,768 cash distribution from Kaanapali in connection with Kaanapalis refinancing, and in May 2003, received additional distributions from Kaanapali totaling $790. The Company also received
cash distributions totaling $860 from Poipu in the first quarter 2003.



Under
contracts approved by Board of Trustees of the homeowners association for certain resorts, the Company serves as the property manager for these resorts. Additionally, the Company has contractual agreements with the homeowners
associations of certain resorts to provide telephone services to the property. The Company also periodically advances funds to the two joint venture entities in which the Company maintains a minority interest. The following table show the balances
outstanding from related parties as of the specified reporting dates.



|                                         |  | Successor   
|---------------------------------------- |  | ------------
|                                         |  | June 30,2003
|Receivable from homeowners associations |  | $           
|Advances to joint ventures               |  |             
|                                         |  |             
|Total                                    |  | $           
|                                         |  |             



The Company has a contract with
Westpac Resort Group LLC (Westpac), an entity owned by the Chief Executive Officer of Sunterra USA. Westpac arranges tours of vacation residences for potential customers. Management believes that the terms of the agreement are comparable
to that of an arms-length transaction. Total payments to Westpac under this agreement were $1.0 million and $0.1 million for the six months ended June 30, 2003 and 2002, respectively.



The Company sells Vacation Points under a franchising agreement with a company that is 50% owned by the spouse of the former director of
franchise operations for Sunterra Europe. The former director of franchise operations left the Company in May 2002, and the Company is still selling Vacation Points under the franchising agreement. Management believes that terms of the franchising
agreement are comparable to those of an agreement with an unrelated third party. Sales through June 2002 under the franchising agreement, were approximately $0.5 million.



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The Companys December 31, 2002 Annual Report on Form 10-K and the accompanying unaudited consolidated financial statements set forth certain data with respect to
the financial position, results of operation, and cash flows of the Company which should



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be read in conjunction with the following discussion and analysis. The terms Company, we, our, and us refer
to Sunterra Corporation and its subsidiaries. The following discussion and analysis contains statements regarding historical information, as well as forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to those contained in our Annual Report on Form 10-K for the year ended December 31, 2002 under the headings
Business-Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in that report. See the Safe Harbor Statement at the beginning of this report.



Overview



We are a vacation ownership (timeshare) company with resort locations in the United States, Europe, the Caribbean, Hawaii and Mexico and
approximately 315,000 owner families. Our operations consist of:



| |  |  | acquiring, developing and operating vacation ownership resorts;
| | - |  | ---------------------------------------------------------------



| |  |  | marketing and selling vacation interests to the public at our resort locations and off-site sales centers:
| | - |  | ----------------------------------------------------------------------------------------------------------



| | o |  | selling vacation points which may be redeemed for occupancy rights for varying lengths of stay at participating resort locations, which we refer to as Vacation Points;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o |  | selling vacation ownership interests which entitle the buyer to use a fully-furnished vacation residence, generally for a one-week period each year in perpetuity, which we refer to
as Vacation Intervals; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | leasing Vacation Intervals at certain Caribbean locations;
| | - |  | ----------------------------------------------------------



| |  |  | providing consumer financing to individual purchasers of vacation interests;
| | - |  | ----------------------------------------------------------------------------



| |  |  | providing resort rental, management, maintenance and collection services for which we receive fees paid by the resorts homeowners associations; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | operating our Club Sunterra program.
| | - |  | -------------------------------------



RESULTS OF OPERATIONS



Comparison of the Three Months Ended
June 30, 2003 to the Three Months Ended June 30, 2002



We
achieved total revenues of $79.0 million for the three months ended June 30, 2003, compared to $72.6 million for the three months ended June 30, 2002, an increase of 8.8%. Overall revenues for domestic operations increased 8.3% to $49.3 million for
the three months ended June 30, 2003 compared to $45.5 million for the three months ended June 30, 2002, and revenues from foreign operations decreased $2.7 million, or 9.9%, to $29.8 million for the three months ended June 30, 2003.



Vacation Interest revenues were $55.8 million for the three months ended June 30, 2003, an
increase of $9.1 million or 19.4%, compared to $46.7 million for comparable period in 2002. This increase is a reflection of the increased effectiveness of the Companys marketing programs. Domestic Vacation Interest revenues increased $6.8
million, or 26.8%, compared to the three



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months ended June 30, 2002. Foreign Vacation Interest revenues increased $2.3 million to $23.7 million, up from $21.4
million for the second quarter 2002.



Club Sunterra revenues of $2.1 million
for the three months ended June 30, 2003 were $0.3 million, or 17.9%, higher than the $1.8 million recognized in the three months ended June 30, 2002. As in the first quarter, this arises from the Companys success in attracting new owners to
the Club product, and additionally, from retention campaigns aimed at satisfying current members and cross-selling Club Sunterra products.



Resort rental revenues for the three months ended June 30, 2003 and 2002 were $3.0 million and $3.4 million, respectively. The $0.4 million, or 12.5%, decrease is
attributable to the sale of certain resorts in the prior year. Excluding the revenues generated from these resorts, resort rental revenues for the second quarter 2003 increased $0.9 million compared to the second quarter 2002, attributable to
efficiencies gained by centralized operations and programs.



Management
services revenues recognized in the second quarter 2003 were $6.9 million, compared to $7.7 million for the comparable period in 2002. The decrease was driven by the loss of contracts relating to the resorts sold in 2002 noted above, as well as the
non-renewal of one annual contract relating to a non-Sunterra resort.



Interest
income, primarily from financing provided to purchasers and lessees of Vacation Interests, decreased 12.7% to $6.4 million for the three months ended June 30, 2003 from $7.4 million for the three months ended June 30, 2002. The decrease resulted
from continued higher levels of prepayments, as well as amortization of premium recorded in connection with the fresh start accounting fair market value adjustment recorded in 2002.



Other revenues, which mainly consist of sampler vacation program revenues, travel service
revenue, resort amenity income and finance commissions, fell by 14.4% to $4.8 million for the three months ended June 30, 2003 from $5.6 million for the three months ended June 30, 2002. This decrease is primarily due to decreased commissions
realized by the foreign operations, as well as amounts relating to resorts disposed of in 2002.



Vacation Interest cost of sales of $10.2 million for the three months ended June 30, 2003 increased $0.5 million, or 4.9%, from $9.7 million for the three months ended June 30, 2002. As a percentage of Vacation
Interest revenues for the same periods, Vacation Interest cost of sales was 18.2% and 20.8%, respectively. This decrease (as a percentage of Vacation Interest revenues) is due to our fresh start accounting adjustments to real estate and development
costs in the fourth quarter of 2002.



For the three months ended June 30, 2003,
advertising, sales and marketing costs were $31.6 million, or 56.6%, of Vacation Interest revenues compared to $29.6 million, or 63.5%, respectively, for the three months ended June 30, 2002. The $2.0 million increase from the three months ended
June 30, 2002 is attributable to our decision to increase investments in advertising, sales and marketing to stimulate Vacation Interests sales, offset by the higher sales volume.



Maintenance fees and subsidy expense increased by approximately $0.7 million in the second quarter of 2003 to $3.0 million, up from $2.3
million for the second quarter of 2002. This change is reflective of increases in charges and fees at certain of the Companys resorts.



The provision for doubtful accounts and loan losses was $1.1 million for the three months ended June 30, 2003 compared to $1.6 million for the three months ended June 30,
2002. Of these amounts, $0.9 million and $1.5 million for the three months ended June 30, 2003 and 2002, respectively, related to mortgages and contracts receivable. As a percentage of interest income, the provision for doubtful accounts and loan
losses was 16.6% in the second quarter 2003 compared to 21.9% for the prior year comparable period. The allowance for mortgages and contracts receivable at June 30, 2003 was $28.9 million, representing approximately 14.2% of the



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total portfolio outstanding at that date compared to $32.4 million and 15.2%, respectively, at December 31, 2002. The
decrease in the provision for doubtful accounts and loan losses reflect continuing improvements resulting from our various initiatives, including standardization of underwriting procedures (including higher levels of purchasers overall
creditworthiness), more timely correspondence with customers whose mortgages and contracts are delinquent, and higher down payments being obtained upon initial sales and leases. We have also benefited from customers prepaying their receivables at
higher rates than in the past. Additionally, we have placed more emphasis on timely foreclosures and writing-off delinquent receivables. The remainder of the provision for doubtful accounts of $0.2 million for the three months ended June 30, 2003
and $0.1 million for the three months ended June 30, 2002 represents estimated uncollectible amounts due from homeowner associations and other receivables.



Loan portfolio expenses decreased 25.0% to $2.4 million for the three months ended June 30, 2003 from $3.2 million for the three months ended June 30, 2002. Loan
portfolio expenses represented 37.1% of interest income in the second quarter 2003, compared to 43.1% of interest income in the prior year period. This improvement is attributable to stabilization of the collections and underwriting process as a
result of our initiatives noted above and discontinuance of certain programs.



General and administrative expenses decreased $3.3 million, or 17.2%, to $15.9 million for the three months ended June 30, 2003 from $19.2 million for the three months ended June 30, 2002. As a percentage of total revenues, general and
administrative expenses were 20.1% and 26.5% for the three months ended June 30, 2003 and 2002, respectively. This favorable change is a result of multiple initiatives and restructuring activities started in 2002, including the consolidation of the
Companys headquarters in Las Vegas, the hiring of permanent staff in key positions, and reduction of overall staffing levels.



Depreciation and amortization expense decreased 21.8%, or $0.8 million, to $2.7 million for the three months ended June 30, 2003 from $3.4 million for the three months
ended June 30, 2002, resulting from the disposition of resort properties and equipment in 2002, as well as fresh start accounting adjustments to property and equipment in the second half of 2002.



Interest expense for the three months ended June 30, 2003, net of capitalized interest of $0,
was $5.7 million, compared to $3.7 million, net of capitalized interest of $0.1 million, for the three months ended June 30, 2002. The increase was primarily attributable to increased borrowings under our financing facilities in second quarter 2003
($220.7 million as of June 30, 2003) versus borrowings under our debtor-in-possession financing facility during the prior year ($165.6 million at June 30, 2002).



Reorganization costs were ($0.5) million for the three months ended June 30, 2003, compared to $12.4 million for the three months ended June
30, 2002. The decrease in reorganization costs is the result of our emergence from bankruptcy on July 29, 2002, and settlement of claims.



Restructuring costs were $0.1 million for the three months ended June 30, 2003, compared to $0.7 million for the three months ended June 30, 2002. Restructuring costs are
related to the implementation of our new strategic plan, which included streamlining of our legal structure as well as relocation of our headquarters and the related personnel to Las Vegas, Nevada.



Comparison of the Six Months Ended June 30, 2003 to the Six Months Ended June 30,
2002



The Company recognized total revenues of $142.3 million
for the six months ended June 30, 2003, compared to $131.4 million for the six months ended June 30, 2002, an increase of 8.3%. Overall revenues for domestic operations increased 6.6% to $91.5 million for the six months ended June 30, 2003 compared
to $85.9 million for the six months ended June 30, 2002, and revenues from



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foreign operations increased 11.7% to $50.8 million for the six months ended June 30, 2003.



Vacation Interest revenues of $96.9 million for the six months ended June 30, 2003 increased by $14.7 million, or 17.9%, compared to sales
of $82.2 million for the six months ended June 30, 2002. Domestic operations recognized $55.8 million of Vacation Interest revenues in the six months ended June 30, 2003, a 23.2% increase from the $45.3 million recognized in the prior year period.
The Companys foreign operations produced $41.1 million of Vacation Interest revenues, a $4.2 million, or 11.5%, increase from the $36.9 million recorded in the first half of 2002. The increase reflects the reduced marketing burden from
emergence from Chapter 11, as well as higher investments in and focus on advertising, sales and marketing efforts in late 2002 and in the first half of 2003.



Club Sunterra revenues of $4.3 million for the six months ended June 30, 2003 were $0.7 million higher than the $3.6 million recognized in the six months ended June 30,
2002. This continued trend arises from the Companys success in attracting new owners to the Club product, and additionally, from retention campaigns aimed at satisfying current members and cross-selling Club Sunterra products.



Resort rental revenues for the six months ended June 30, 2003 and 2002 were $5.8 million and
$6.9 million, respectively. The $1.1 million, or 16.1%, decrease is attributable to the sale of certain resorts in 2002. Excluding the revenues generated from these resorts, resort rental revenues increased $1.4 million compared to the prior year
period, attributable to efficiencies gained by centralized operations and programs.



Management services revenues fell by $0.8 million, or 5.52%, to $14.0 million for the six months ended June 30, 2003. This decrease from $14.8 million for the six months ended June 30, 2002 was driven by non-renewals of certain management
contracts, primarily those relating to the resorts sold in the prior years.



Interest income, primarily from financing provided to purchasers and lessees of Vacation Interests, decreased 12.9% to $12.5 million for the six months ended June 30, 2003 from $14.4 million for the six months ended June 30, 2002. The
decrease resulted from continued higher levels of prepayments, as well as amortization of premiums recorded in connection with the fresh start accounting fair market value adjustment recorded in 2002.



Other revenues, which mainly consists of sampler vacation program revenues, travel service
revenue, resort amenity income and finance commissions, fell by 7.8% to $8.9 million for the six months ended June 30, 2003 from $9.6 million for the six months ended June 30, 2002. This decrease is primarily due to decreased commissions realized by
the foreign operations, as well as certain non-repetitive programs ended in the first quarter 2002 and amounts relating to the resorts disposed in 2002.



Vacation Interest cost of sales of $17.9 million for the six months ended June 30, 2003, representing a decrease of $0.3 million, or $1.8%, from $17.6 million for the six
months ended June 30, 2002. As a percentage of Vacation Interest revenues for the six months ended June 30, 2003 and 2002, Vacation Interest cost of sales was 18.4% and 21.4%, respectively. This decrease (as a percentage of Vacation Interest
revenues) is due to our fresh start accounting adjustments to real estate and development costs in the fourth quarter 2002.



For the six months ended June 30, 2003, advertising, sales and marketing costs were $58.0 million, or 59.8% of Vacation Interest revenues compared to $53.1 million, or
64.7% of Vacation Interest revenues, for the six months ended June 30, 2002. The $4.9 million increase from the six months ended June 30, 2002 was driven in part by the increased volume of Vacation Interest revenues, offset by efficiencies resulting
from restructured operations and earlier investments in advertising, sales and marketing to stimulate Vacation Interest revenues.



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The provision for doubtful accounts and loan losses was $1.7 million for the six months ended June 30, 2003 compared to
$2.9 million for the six months ended June 30, 2002. Of these amounts, $1.4 million and $2.6 million for the six months ended June 30, 2003 and 2002, respectively, related to mortgages and contracts receivable. As a percentage of interest income,
the provision for doubtful accounts and loan losses was 13.6% for the six months ended June 30, 2003 compared to 20.5% for the prior year comparable period. The allowance for mortgages and contracts receivable at June 30, 2003 was $28.9 million,
representing approximately 14.2% of the total portfolio outstanding at that date, compared to $32.4 million and 15.2% at December 31, 2002. The decrease in the provision for doubtful accounts and loan losses reflect continuing improvements resulting
from our various initiatives, including standardization of underwriting procedures (including higher levels of purchasers overall creditworthiness), more timely correspondence with customers whose mortgages and contracts are delinquent, and
higher down payments being obtained upon initial sales and leases. We have also benefited from customers prepaying their receivables at higher rates than in the past. Additionally, we have placed more emphasis on timely foreclosures and writing-off
delinquent receivables. The remainder of the provision for doubtful accounts of $0.3 million for the six months ended June 30, 2003 and $0.3 million for the six months ended June 30, 2002 represents estimated uncollectible amounts due from homeowner
associations and other receivables.



Loan portfolio expenses decreased 17.2% to
$5.4 million for the six months ended June 30, 2003 from $6.5 million for the six months ended June 30, 2002. Loan portfolio expenses represented 42.8% of interest income in the second quarter 2003, compared to 45.0% of interest income in the prior
year period. This improvement is attributable to stabilization of the collections and underwriting process as a result of our initiatives noted above.



General and administrative expenses decreased $2.8 million, or 7.5%, to $35.0 million for the six months ended June 30, 2003 from $37.8 million for the six months ended
June 30, 2002. As a percentage of total revenues, general and administrative expenses were 24.6% and 28.8% for the six months ended June 30, 2003 and 2002, respectively. This favorable change is a result of multiple initiatives and restructuring
activities started in 2002, including the consolidation of the Companys headquarters in Las Vegas, the hiring of permanent staff in key positions, and reduction of overall staffing levels.



Depreciation and amortization expense decreased 17.1%, or $1.1 million, to $5.7 million for
the six months ended June 30, 2003 from $6.8 million for the six months ended June 30, 2002, resulting from the disposition of certain resort properties and equipment in 2002, as well as fresh start accounting adjustments to property and equipment
in the second half of 2002.



Interest expense for the six months ended June 30,
2003, net of capitalized interest of $0, was $11.7 million, compared to $8.1 million, net of capitalized interest of $0.2 million, for the six months ended June 30, 2002. The increase was primarily attributable to increased borrowings under our
financing facilities in the first six months of 2003 ($220.7 million as of June 30, 2003) versus borrowings under our debtor-in-possession financing facility during the prior year ($165.6 million at June 30, 2002).



Reorganization costs were ($0.2) million for the six months ended June 30, 2003. Due to a
first quarter 2002 gain on settlement of debt of $14.8 million, offset against reorganization costs of $20.2 million, reorganization costs were $5.4 million in the six months ended June 30, 2002. Excluding the gain on settlement of debt in the first
six months of 2002, reorganization costs decreased $20.4 million, or 101.0%, a direct result of our emergence from bankruptcy on July 29, 2002.



Restructuring costs were $1.0 million for the six months ended June 30, 2003, compared to $0.7 million for the six months ended June 30, 2002. Restructuring costs related
to the implementation of a new strategic plan, which included streamlining our legal



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structure as well as relocation of our headquarters and the related personnel to Las Vegas, Nevada.



LIQUIDITY AND CAPITAL RESOURCES



We generate cash principally from down payments on Vacation Interest revenues and leases
financed, cash sales of Vacation Interests, principal and interest payments on mortgages and contracts receivable and collection of Club Sunterra fees, resort rentals and management fees.



During the six months ended June 30, 2003, net cash provided by operating activities was $2.4 million. Our net loss of $0.4 million was
offset by $11.8 million of non-cash transactions, including $5.7 million in depreciation and amortization, $4.5 million in capitalized financing costs, and a $8.2 million net decrease in operating assets and liabilities.



During the six months ended June 30, 2003, net cash provided by investing activities was $6.0
million, with income from joint ventures of $11.4 million offset by capital expenditures of $4.6 million.



During the six months ended June 30, 2003, net cash used in financing activities was $17.6 million. Cash used in financing activities was primarily the result of payments of $19.8 million on our financing facility
with Merrill Lynch Mortgage Capital, Inc.



We currently anticipate spending
approximately $5.5 million for real estate and development costs at existing resort locations during the remainder of 2003. We plan to fund these expenditures with cash generated from operations and borrowings under our financing facility. We
believe that, with respect to our current operations, cash generated from operations and future borrowings will be sufficient to meet our working capital and capital expenditure needs through the end of 2003. If these are not sufficient, we have the
ability to adjust our spending on real estate and development costs.



The
allowance for loan losses at June 30, 2003 was $28.9 million, or 14.2% of the gross mortgages and contracts receivable outstanding at that date. We believe the allowance is adequate. However, if the amount of mortgages and contracts receivable that
is ultimately written-off materially exceeds the related allowances, our business, results of operations and financial condition could be adversely affected.



Our plan for meeting our liquidity needs may be affected by, but not limited to, the following: demand for our product, our ability to borrow funds under our current
financing arrangements, an increase in prepayment speeds and default rates on our mortgages and contracts receivable, deterioration of economic conditions, war or terrorist activities affecting the travel and tourism industry and limitations on our
ability to conduct marketing activities.



Completed units at various resort
properties are acquired or developed in advance, and we finance a significant portion of the purchase price of Vacation Intervals. Thus, we continually need funds to acquire and develop property, to carry notes receivable contracts and to provide
working capital. We anticipate being able to borrow against our mortgages receivable at terms favorable to us. If we are unable to borrow against or sell our mortgages receivable in the future, particularly if we suffer any significant decline in
the credit quality of our mortgages receivable, our ability to acquire additional resort units will be adversely affected and our profitability from sales of Vacation Interests may be reduced or eliminated.



Recent economic forecasts suggest continued higher level of prepayment rates versus that
evidenced historically. Further, trends in our portfolio in the past eighteen months indicate increased prepayment rates over historical amounts. To the extent that mortgages receivable are paid off prior to their contractual maturity at a rate more
rapid than we have estimated, the fair value of



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our residual interests will be impacted.



At June 30, 2003, our U.S. operations had approximately 21,500 Vacation Intervals available for sale or lease, our Sunterra Pacific operations had approximately 42,800
points available, which are equivalent to approximately 400 Vacation Intervals, and our European operations had approximately 472,000 points available, which are equivalent to approximately 8,400 Vacation Intervals. With the completion of current
projects in progress, the acquisition of new resorts and the expansion of existing resorts, we believe we will have an adequate supply of Vacation Intervals available to meet our planned growth through the early part of 2005.



Corporate Finance



On average, we finance approximately 62% of domestic Vacation Interest revenues. Accordingly, we do not generate sufficient cash from sales
to provide the necessary capital to pay the costs of developing additional resorts and to replenish working capital. We believe that revenues, together with amounts available under our financing facility, will be sufficient to fund operations.



Under the terms of our financing facility, we obtained a two-year senior
asset-based non-amortizing revolving credit facility in the amount of $300 million. The availability of borrowings under our financing facility is based on the amount of eligible mortgages receivable, the value of eligible capitalized Real Estate
and Development Costs (Vacation Interests inventory) and the value of certain real property and other assets. Our financing facility is secured by a first priority lien on the mortgages receivable and capitalized Real Estate and Development Costs
(Vacation Interests inventory), as well as certain real property and other of our assets, subject to certain exceptions. Borrowings under our financing facility bear interest at an annual rate equal to one month LIBOR plus 3%, 5%, or 7%, depending
on the type of assets collateralizing various advances. In addition to the facility fee (2.5% of $300 million) paid in connection with the commitment and the closing of our financing facility, we issued a warrant exercisable for 1,190,148 shares of
our common stock at an exercise price of $15.25 per share, subject to adjustment under certain anti-dilution provisions of the warrant. Also, we will pay an unused commitment fee of 0.25% per annum on the excess availability under the credit
facility. Availability under our financing facility at June 30, 2003 was $52.8 million.



ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Foreign Currency Risk



Our total
revenues denominated in a currency other than U.S. dollars for the six months ended June 30, 2003, primarily revenues derived from the United Kingdom, were approximately $50.8 million, or 35.7% of total revenues. Our net assets maintained in a
functional currency other than U.S. dollars at June 30, 2003, which were primarily assets located in Western Europe, were approximately 15.9% of total net assets. The effects of changes in foreign currency exchange rates have not historically been
significant to our operations or net assets.



Interest Rate Risk



As of June 30, 2003, we had floating interest rate debt of approximately
$220.7 million, comprised of amounts outstanding under the Merrill Lynch Financing Facility. The floating interest rate on our financing facility is based upon the prevailing LIBOR rate and interest rate changes can impact earnings and operating
cash flows. A change in interest rates of one percent on the balance outstanding at June 30, 2003 would cause a change in interest expense of approximately $0.6 million for the quarter.



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ITEM 4CONTROLS AND PROCEDURES



As required by
Rule 13a-15(b), the Companys management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Companys disclosure
controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1933 (the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13a-15(d), the Companys management, including the Chief Executive Officer and Chief Financial Officer, also conducted an
evaluation of the Companys internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial report. Based on that evaluation, there has been no such change during the quarter covered by this report.



PART IIOTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



In the normal course of
business, we are subject to various legal claims and actions. In the opinion of management, taking into account the effect of the plan of reorganization, any liability arising from or relating to these claims, or other claims under the plan, should
not materially and adversely affect us, with the possible exception of the matters described in Part I, Item 3 of the Companys December 31, 2002 Annual Report on Form 10-K, filed with the Securities and Exchange Commission.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



None.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



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



On June 10, 2003, the Company held its Annual Meeting of Shareholders. The matters on which the shareholders voted, in person or by proxy, were:



|1. |  | The election of six directors for terms expiring on the date of the 2004 Annual Shareholders Meeting;
|-- |  | -----------------------------------------------------------------------------------------------------



|2. |  | The ratification of the appointment of Grant Thornton LLP as independent auditors of the Company for the fiscal year ending December 31, 2003; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | The approval of the Sunterra Corporation 2002 Stock Option Plan.
|-- |  | ----------------------------------------------------------------



The six nominees were elected, the ratification of the appointment of the independent auditors was approved, and the Sunterra Corporation 2002 Stock Option Plan was also
approved, all by a majority of the shareholders. The results of the voting were as follows:



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Election of Directors:



|Director Nominee     |  | Votes For  |  | VotesAgainst |  | VotesWithheld
|-------------------- |  | ---------- |  | ------------ |  | -------------
|Nicholas J. Benson   |  | 17,501,831 |  |             |  | 20,237       
|David Gubbay         |  | 16,760,183 |  |             |  | 761,885      
|Joseph Jacobs        |  | 17,501,831 |  |             |  | 20,237       
|Frederick Simon      |  | 17,501,831 |  |             |  | 20,237       
|Bradford T. Whitmore |  | 17,501,831 |  |             |  | 20,237       
|Charles F. Willes    |  | 17,501,831 |  |             |  | 20,237       



Approval of the Sunterra
Corporation 2002 Stock Option Plan:



| |  | Votes For  |  | VotesAgainst |  | VotesWithheld
| |  | ---------- |  | ------------ |  | -------------
| |  | 11,829,577 |  | 1,884,029    |  | 29           



Ratification of Appointment of
Independent Auditors:



| |  | Votes For  |  | VotesAgainst |  | VotesWithheld
| |  | ---------- |  | ------------ |  | -------------
| |  | 17,521,990 |  | 49           |  | 29           



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



a.    Exhibits



The following exhibits are filed
herewith or, where so indicated, incorporated by reference to the documents indicated in parentheses, which have been previously filed with the Securities and Exchange Commission.



|No. |  | Description                                                                                                                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 
|2.1 |  | Third Amended and Restated Joint Plan of Reorganization, dated May 9, 2002, of Sunterra Corporation and its debtor affiliates
under Chapter 11 of the Bankruptcy Code (incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K (date of event: May 9, 2002))
|    | 
|3.1 |  | Articles of Amendment and Restatement of Sunterra Corporation (incorporated by reference to Exhibit 3.1 to the Companys
Current Report on Form 8-K (date of event: July 29, 2002))                                                                                                      
|    | 
|3.2 |  | Amended and Restated Bylaws of Sunterra Corporation (incorporated by reference to Exhibit 3.2 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002)                                                                                                        



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|      | 
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|10.1  | 
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|10.2  | 
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|10.3  | 
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|10.4  | 
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|10.5  | 
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|10.6  | 
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|10.7  | 
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|10.8  | 
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|10.9  | 
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|10.10 | 
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|10.11 | 
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|31.1  | 
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|31.2  | 
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|32.1  | 
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|     | 
|---- | 
|32.2 | 



b.    Reports on
Form 8-K



None.



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



SUNTERRA CORPORATIONBy:

/s/    CORAL M. HANSENCoral M. Hansen Vice President and
Corporate Controller (Chief Accounting Officer)




Dated: August 12, 2003



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