Kingdom Hotel Investments ('KHI') preliminary results for the twelve months to December 31, 2006

Notes and media contacts

Enquiries
Brunswick Group
Kate Holgate / Laura Cummings / Sophie Brand
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About Kingdom Hotel Investments

KHI, headquartered in Dubai (UAE), is a leading international hotel and resort acquisition and development company focused on high growth emerging markets such as the Middle East, Asia, Africa and Europe.

The company has ownership interests in 33 properties in 16 countries including 19 operational hotels and resorts and 12 hotels and resorts currently under construction or as part of existing hotel expansion. KHI is listed on the Dubai and London stock exchanges.

Financial Performance

KHI's strong revenue and profit growth in the year to December 31, 2006 demonstrate the Company's strong business model and its ability to build on this as it grows its asset base.

• KHI's revenues increased by 68 per cent for the year ended December 31, 2006 to reach US$99.0 million, representing a 61 per cent cumulative average growth rate since 2004
• KHI's EBITDA for the year ended December 31, 2006 increased by 67 per cent to reach US$30.0 million, representing a 85 per cent cumulative average growth rate since 2004
• KHI's net income increased by 248 per cent in 2006 to reach US$42.8 million, representing a 211 per cent cumulative average growth rate since 2004
• KHI's total assets increased by 86 per cent as at December 31, 2006 to reach US$1,477.8 million from US$795.3 million as at December 31, 2005, representing a 72 per cent cumulative average growth rate since 2004
• KHI's total shareholders' equity increased by 107 per cent as at December 31, 2006, to reach US$1,108.0 million from US$536.1 million as at December 31, 2005, representing a 102 per cent cumulative average growth rate since 2004

Portfolio Review - Operating hotels

The portfolio review includes consolidated and associate operating properties but excludes the affiliate property of the Four Seasons Hotel Amman.

1) KHI's effective (direct and indirect) ownership in each individual hotel as of December 31, 2006.
2) Cost of investment includes initial acquisition cost paid to the seller, expenses relating to the acquisition such as legal, financial and technical due diligence. Consultancy fees and other, amount also includes shareholders advances.
3) Debt for consolidated associate investments represent the full value as appearing on the balance sheet of the entities and not KHI share of the indebtedness. Debt includes overdrafts, finance leases and borrowing from non financial institutions.
4) In July 2006 we completed the acquisition of an additional ownership interest of 5.13 per cent in the Four Seasons Hotel Cairo at Nile Plaza to increase our effective ownership to 43.7 per cent from 38.57 per cent.
5) In July 2006 we completed the acquisition of an additional ownership interest of 7.4 per cent in the Four Seasons Resort Sharm El Sheikh to increase our effective ownership to 39.3 per cent from 31.96 per cent. Agreements were signed and share registration is in progress.
6) In July 2006 we completed the acquisition of an additional ownership interest of 56.8 per cent in the Mövenpick Resort El Quseir to increase our effective ownership to 87.3 per cent from 30.5 per cent.
7) The Mövenpick Resort & Spa El Gouna completed a 158-room expansion increasing number of rooms from 418 to 576 rooms.
8) In February 2006, we acquired an interest of 25 per cent in the Four Seasons Hotel George V. We have included the results of this hotel since acquisition only.
9) Although our effective ownership of the Mövenpick Hotel and Resort Beirut is 81.2 per cent, we receive 92 per cent of the profits of this property as the real estate owners of B shares who own 7.25 per cent of this property are not entitled to receive dividends on their shares.
10) In April 2006, we acquired a controlling interest in the Mövenpick Resort and Spa Mauritius. We have included the results of this hotel since acquisition.
11) In May 2006, we acquired a controlling interest in the Mövenpick Karon Beach Resort. We have included the result of this hotel since acquisition.
12) In October 2006, we acquired a controlling interest in the Intercontinental Hotel in Lusaka. We have included the result of this hotel since acquisition.

KHI System portfolio

KHI's System hotel portfolio is defined as operating hotel results that are included in the Group's consolidated financial results or investment in associates as at December 31, 2006, and is used by KHI management to measure and assess the performance of the portfolio of hotels in which it has invested capital, irrespective of the timing irrespective of KHI's ownership or the timing of acquisitions and divestitures. The System portfolio excludes results of any hotels that may have sustained substantial physical damage, experienced material business disruption or undergone large scale disruptive capital improvements or projects.

Of the 17 hotels owned by KHI in 2006, 15 were classified in the System portfolio: 11 consolidated hotels (including 5 hotels Kenya portfolio) and 4 associate hotels. The System portfolio excludes results of the Four Seasons Hotel Damascus and the Mövenpick Karon Beach Resort that were both opened in 2005, as well the Four Seasons Hotel Amman (minority investment) and Four Seasons Hotel Langkawi (acquired in March 2007).

The following information includes System hotel operating results (revenues, gross operating profit and hotel EBITDA) and statistics (exchange rate, number of rooms, occupancy rate, ADR, RevPar, gross operating margin, hotel EBITDA margin) presented on a comparable 12 month or 6 month, like-for-like basis.

Performance Summary

System RevPar for the second half of 2006 increased 17% and hotel EBITDA margins increased 4 percentage points. These increases were driven by robust 19% increases in room rates that were slightly offset by a 1 percentage point decline in occupancy and room inventory, respectively. RevPar expanded at double-digit levels in 9 of the hotels led by Cairo which grew revenue by 50%, and Red Sea resorts also posted strong pricing growth, showing signs of a recovery after the soft start to the year. System revenue grew despite major occupancy-driven setbacks in Beirut Mövenpick (Lebanon summer war and civil strife in Q4) and continued follow-on impacts of Chikungunya virus in Mauritius where these properties experienced RevPar declines of 43% and 36%, respectively. System EBITDA growth of 31% was very strong in the second half of the year due to pricing impacts and lapping 2005 losses at Mauritius Mövenpick.

For the year, RevPar increased 16% driven by pricing increases and a 1 percent change in room inventory, and hotel EBITDA margins expanded by 2 percentage points. RevPar grew in 8 of the hotels led by strong double-digit pricing growth in Cairo that spanned the whole year, while Red Sea resorts were impacted by a soft start in 2006 (carryover of terrorist attacks) and Mauritius Mövenpick's strong start was impacted in the second half by Chikungunya virus, causing both of those respective markets to grow at low single digits for the year. Beirut Mövenpick's full year RevPar decline of 14.5% was driven by the impact of the summer war and civil strife in the back half of the year that combined to more than offset a record 26% RevPar growth achieved in the first half of the year before the abrupt start of the Israel-Lebanon crisis.

2006 System hotel EBITDA grew by 25% on the back of pricing increases that more than offset the significant impacts of external events on the System portfolio, notably impacts of war and civil strife on Mövenpick Beirut during the second half despite significant profit protection actions, softness in Red Sea resorts and transition costs of Mövenpick Mauritius during the first half of 2006.

Selected financial & operating information by property

Egyptian hotels
Recent terrorist bombings in the Egyptian resort towns of Dahab (April 2006) and Sharm El Sheikh (July 2005) adversely impacted trading conditions at KHI's three Red Sea resorts during 2006. The Red Sea tourist region was further impacted by the publication (30 September 2005) by a Danish newspaper of a series of Islam-offensive cartoons which caused a major backlash of anti-Danish sentiment throughout the Muslim world and led to heavy tourist cancellations from the important Scandinavian source markets.

The Cairo hotel market remained largely unaffected by these security events, and actually benefited from the Israel-Lebanon crisis (July 2006) which led to many Middle East tourists diverting their travel plans from Beirut to Cairo at the height of the summer season.

The Four Seasons Hotel Nile Plaza had an outstanding 2006 as it firmly established itself as the leading hotel in Cairo in just its second full year of operations while delivering record results. The hotel now enjoys an ADR premium of almost 25% over its nearest competitor and was recently voted the No. 1 hotel in Africa by Conde Nast magazine. For the full year, the hotel achieved record RevPar growth of 49%, driven by robust pricing and occupancy increase in the year. This along with a strong ramp-up in food & beverage outlets' performance led the total revenue increase of 48% for the year. The combination of a strong topline and cost controls saw operating leverage improve as margins expanded 8 percentage points and Hotel EBITDA increased by 82% for the year.

2006 was a challenging year for the overall market in Sharm El Sheikh due to a drop in visitor arrivals caused by the above-mentioned security incidents. Despite lower demand the Four Seasons Resort Sharm El Sheikh successfully increased the annual average daily rate by 10% for the year to maintain revenue levels at prior year levels. Stringent cost controls in the second half of the year allowed the hotel to deliver the same EBITDA of last year. The Four Seasons Resort Sharm El Sheikh continues to be the premier resort in Sharm El Sheikh and in 2006 achieved an ADR premium of over double its closets competitor. The resort was included amongst the Top 50 Resorts worldwide in the 2006 Zagat Survey.

2006 was also a challenging year for this hotel as total revenues declined by 8% for the full year due to the above-mentioned security incidents, recent additions to hotel supply and a decline in business from the traditional European feeder markets of Switzerland, Germany and Italy. In order to diversify its source business the property has adjusted its marketing strategy to attract higher growth markets such as Russia and Britain. The hotel has put in place cost containment initiatives and was able to improve its gross operating margins and maintain its EBITDA margins. KHI acquired a controlling interest in this hotel in July 2006.

Despite the challenging trading conditions along the Red Sea, the hotel was able to grow revenues by 10% and EBITDA by 9% through increased room inventory and aggressive marketing and sales strategy in the latter half of the year.

The hotel had another good year in 2006 benefiting from unabated demand growth in Dubai. Revenue growth of 18% for the year was driven by revenue management plans that saw balanced rate and occupancy increases, resulting in significant 20% RevPar growth for the year. RevPar penetration for this hotel within its competitive set (8 hotels) increased from 5th place to 2nd place as a result of these active revenue management and active asset management initiatives.

For 2007 the hotel has planned an expansion of 24 rooms and new health club and spa, and in September 2006 KHI acquired an adjacent recently completed apartment building for about US$25 million. This 12 storey tower offers 57 apartments, 66 space garage is planned to be renovated and incorporated into the hotel in 2008.

This overall hospitality market in Lebanon has been suffering the consequences of the Israel-Lebanon war last July, the height of the busiest season of the year, and the subsequent domestic repercussions that trailed the assassination of prominent politician Pierre Gemayel in November 2006 and pro-Hizbollah demonstrations in December. Prior to these disturbances the hotel was experiencing record-breaking performance in the first half of 2006 (hotel RevPar and EBITDA grew by 26% and 30% in the first half of the year). The tumultuous events of the second half resulted in RevPar and revenue declines of 43% and 32% respectively during that period, with room revenue shortfalls being slightly offset by non-guest food and beverage revenues (summer resort and a renowned Lebanese restaurant).

Despite major cost containment initiatives in the second half of 2006 to offset increased war related increases in utility, security and provisioning costs this hotel could not overcome the loss of mid-season peak revenues and high margin business. Second half 2006 hotel EBITDA declined by 81%, which more than offset strong first half gains to push down full year hotel EBITDA by 44% as compared with 2005.

The Norfolk Hotel in Nairobi accounted for about one-half of KHI Kenya properties' revenues in 2006 and was the primary driver of Kenya's strong performance in 2006, driven by the Fairmont re-branding strategy that saw RevPar increases of 32% for the year, coupled with strong corporate business demand in the last quarter of the year at the Norfolk. Profitability was diluted by re-branding transition costs in the first half of the year as Fairmont service and quality standards translated into higher transition payroll costs, management fees and other fixed charges. During the year, the scope of the planned refurbishment in Kenya was expanded from the initial US$26 million to about US$34 million to further enhance the revenue potential at the properties.

In August, the hotel operation at the Aberdare Country Club rooms business was closed down without major impacts to KHI's Kenya business as a result of profitability studies that indicated this property was not providing adequate returns. The hotel continues to serve as the check-in facility and luncheon restaurant for The Ark, and the employees were relocated to the other units in Kenya.

This hotel is one of the markets leaders in Dar Es Salam, Tanzania. Last year saw a focus on volume and occupancy growth as the hotel leveraged its position as the hotel of choice for business and diplomat customers to garner MICE business, hosting a number of large conferences including that of the Burundi Peace Agreement in the latter half of 2006. This successful revenue management strategy led to occupancy driven RevPar and revenue growth of 10% for the year despite forex devaluation of 14%. This flowed through to hotel EBITDA growth of 30% primarily as a result of operating leverage and forex impacts.

In October 2006 a soft renovation of the guestrooms and public areas including the lobby, restaurants and meeting space was initiated. These improvements are scheduled to be completed in 2007 and should further strengthen the hotel's market position within its competitive set.

In October 2006, KHI acquired the Intercontinental Hotel Lusaka and KHI extended the existing management agreement with Intercontinental Hotels & Resorts until the end of December 2008. This is the first property in KHI's portfolio that is not operated by Mövenpick, Four Seasons or Fairmont/ Raffles.

Performance in the second half of 2006 was notably better than during the first six months. During the first half of 2006, the hotel saw a drop in occupancy due to a decrease in the travel budgets for local NGOs and Embassies. A comparison of the financial results of the Intercontinental Lusaka between 2005 and 2006 is significantly influenced by the change in the exchange rate. In local currency, the hotel saw a decline during 2006 in total revenue by 3 per cent, in gross operating profit by 2.7 per cent and in Hotel EBITDA by 6.5 per cent. Prior to the acquisition of the property by KHI, many expenses relating to sales and marketing as well as the re-hiring of senior management that had left the property were put on hold, which resulted in higher GOP and EBITDA levels during the second half of the year.

2006 was a transitional year for the Mövenpick Mauritius. KHI acquired the property in April 2006 and immediately identified significant opportunities to improve the performance and profitability of the resort. The greatest challenge faced by the resort in 2006 was a lack of occupancy caused by the failure of the previous management to sign enough tour operator contracts for the 2006 year; almost all business in this market is originated by tour operators. The hotel strengthened and reinforced its marketing strategy by increasing the number of the feeder markets, signing contracts with new tour operators and creating attractive new packages.

Total revenue at the Mövenpick Mauritius during 2006 was 12 per cent higher than in 2005 as a result of a 32 per cent higher occupancy. On the expense side, the operation was burdened with high overhead costs, which result in a Gross Operating Loss. Management is working on cost saving measures in order to significantly improve the profitability of the resort. Results of these initiatives were already visible in the second half of 2006, where the hotel achieved a positive hotel EBITDA of US$409,160.

In order to create additional revenue generating opportunities, a US$1.5 million renovation started during the second half of 2006. This enhancement program will allow the operator to generate additional revenue in particular from corporate meetings business. An aggressive strategy has been created to develop the special packages and MICE business in order to alleviate the seasonality effect at the resort. The renovation is expected to be completed in early 2007.

Consolidated and associated hotel 2006 results not included in KHI System

KHI System portfolio excludes results of the Four Seasons Hotel Damascus and the Mövenpick Karon Beach Resort as these were opened in December and August 2005, respectively, and therefore are not considered as comparable in line with KHI's System definition.

This new hotel opened in December 2005 and is the premier property in Damascus with daily rates that are significantly above its competitors. Occupancy was lower than planned in the critical summer season as a consequence of the Lebanon war and civil disturbances as Gulf based holidaymakers and other market segments curtailed their travel plans to Syria. This, together with the ramp-up effects of its first year of operation that involved staffing, refining performance and adjustments to rates, menus, hours of operation, staffing, menu pricing and so on (specifically in food and beverage operations) resulted in lower than expected EBITDA and profit margins for the year. Despite this, the hotel did deliver US$4.9 million in EBITDA in its first full year of operation while establishing pole position in that market.

KHI acquired an operating hotel (Crown Plaza Karon Beach) in May 2006 and re-branded it to the Mövenpick Resort & Spa Karon Beach, Phuket. Prior to acquisition by KHI the hotel was closed and fully refurbished during 2004/05 and reopened in August 2005. At that time the Phuket market was still feeling the after-effects of the December 2004 Tsunami although there had been relatively small physical damage to the island, and was struggling to attract international visitors to the region. 2006 saw a return of tourist arrivals to Phuket, and these were not materially impacted by the political coup.

It is a slightly challenging to compare the hotel's performance in 2006 with results of 2005, where the hotel was only open since August and still suffered from the aftermath of the Tsunami. The results of 2006 reflect a good recovery of demand, which is in line with the market. The main strategy in 2006 for the property was to gain confidence from tour operators and educate the market about the new hotel brand, as the Mövenpick brand is relatively new in Asia. However, due to strong marketing initiatives, Mövenpick is attracting many European guests to the resort and increasing the brand awareness in the region. Profitability of the resort is showing healthy levels, though there is scope with further room for improvements as the property grows occupancy and rate going forward.

Definitions of KHI hotel financial and statistical terms

The following KHI and hotel industry definitions and statistics are part of the indicators used by the Company to manage its business and may or may not be included in this release or other announcements by KHI.

'Rooms' refers to the number of permanent rooms or villas owned by the hotel and available for rent during the reporting period, and don't include any ancillary real estate rooms, villas or apartments for sale. Rooms available under rental pool arrangements are included in room count.

'Occupancy or Occupancy Rate' is a measure of the percentage of daily rooms occupied for the reporting period.

'Occupied Rooms' is the total rooms sold including complementary rooms.

'ADR or Average Daily Rate' is the total room revenue generated by paying guests divided by the number of rooms occupied during the reporting period.

'RevPar or Revenue Per Available Room' is the product of ADR and Occupancy for the reporting period, but does not reflect any food and beverage or other hotel operations such as telephone, parking, laundry or other guest services.

'Total RevPar or Total Revenue Per Available Room' is RevPar in addition to food and beverage and other hotel revenue per room for the reporting period;

'Hotel Revenue' consists of (i) Rooms revenue (revenue generated by hotel guests paying for rooms), (ii) Food and beverage revenue (revenue generated from food and beverage sales from hotel restaurants and for group meetings and social affairs- primarily driven by occupancy and non-guest customers), and (iii) Operating services revenue (ancillary hotel revenue such as telephone, parking, laundry, golf course, spa, entertainment and other guest services- primarily driven by occupancy).

'Gross Operating Profit or GOP' which is the Hotel Revenue less (i) Hotel Departmental Expenses which is the sum of Rooms cost (payroll expenses and costs of rooms linens and other consumables), Food and beverage cost (payroll expenses and costs related to food and beverage provided at hotel restaurants and related outlets and for group meetings and social affairs), and Other operating costs (costs related to telephones, health club, spa, laundry, etc) and (ii) Undistributed Operating Expenses which is the sum of Hotel General & Administrative costs (payroll expenses, audit, consultancy fees, cost of supplies, travel, etc), Sales and Marketing costs (payroll expenses and costs of promotions, events and advertising), Property Operation & Maintenance (payroll expenses, cost of maintenance contracts and expenses for air conditioning, pool, telephone and others) and Utilities cost (Fuel, Water and Electricity cost).

'Income Before Fixed Charges' is GOP less Management fees (base and incentive fees paid to hotel management companies).

'Net Operating Income or NOI' is Income Before Fixed Charges less Other property expenses (lease costs, insurance and property taxes).

'Hotel EBITDA, Adjusted Net Operating Income or Adjusted NOI' is Net Operating Income less FF&E reserves (Furniture, Fixtures and Equipment Reserves are contractual deductions as a percentage of revenue that are set aside to accumulate funds required for future replacements of furniture, fixtures and equipment).

Ancillary Real Estate

Ancillary real estate is a significant part of KHI's business model. Thirteen of the existing and future hotel portfolio have exposure to ancillary real estate sales or leases. The following is a description and progress of our ancillary real estate portfolio for the twelve months ended December 31, 2006, as well as subsequent acquisitions announced in 2007.

Four Seasons Nile Plaza Cairo (Egypt)
The property includes leased retail space and residential and commercial real estate for sale. The property has 131 apartments with a total built up area of 44,644 square meters, 241 parking spaces and 6,096 square meters of office and commercial space. As at December 31, 2005 a total of 46 apartments, 21 parking spaces and 4,989 square meters of available commercial space had been sold. During 2006, the operation sold an additional 25 apartments (8,443 square meters at an average of US$4,031/sq. m), 10 parking spaces (at an average of US$43 thousand per space) for US$34.5 million. Sales and marketing efforts will continue in 2007 and the property will assess options to accelerate disposition of the remaining real estate during 2007 and 2008.

The property also includes a leased area comprising of 6,780 square meters of retail space that is leased to one tenant on a long-term basis at an annual average revenue of US$350 per square meter (2006 retail lease revenues: US$2.3 million)

Four Seasons Sharm El Sheikh (Egypt)
The property includes 112 chalets and 34 villas. Of this total 57 chalets and 22 villas had been sold by December 31 2005, with an additional 3 chalets and 2 villas sold in 2006 at an average price of US$1.8 million and US$5.8 million, respectively. The impact of softer tourism arrivals in Red Sea resorts affected the marketability of these units in 2006. Of the 112 chalets, 64 chalets are included in the hotel's rental pool of 200 rooms (52 of the 64 chalets were not sold as of December 31, 2006). Sales and marketing efforts will continue in 2007 and the property will assess options to accelerate disposition of the remaining real estate during 2007 and 2008.

Mövenpick Resort & Spa Phuket (Thailand)
This property includes 30 two-bedroom residential apartments available to be sold with a total built up area of 3,857 square meters. The Company was initially targeting a sale of half the units in the second half of 2006 and the remainder in 2007. This was not achieved as a result of licensing delays that impacted sales execution and registration contracts. All remaining issues are expected to be resolved in the first half of 2007 and all 30 units will be offered for sale during 2007 and managed by Mövenpick. Owners of these apartments may elect to participate in the hotel's rental pool program. This program provides the prospective owners of the apartments with a right of use for a specified number of days each year, and for the apartments to be included as part of the Hotel's room inventory under a contractual revenue sharing arrangement with the management company (Mövenpick).

Four Seasons Marrakech (Morocco)
This property currently under construction includes 40 residential villas for sale with a total built up area of 12,913 square meters. Of the total number of villas 10 are 2-bedroom, 21 are 3-bedroom and 9 are 4-bedroom villas. The sales and marketing program of these villas was initiated in May 2006 as the Four Season Private Residences Marrakech, with 34 villas (11,328 square meters) sold by year end under a preliminary sales contract with buyers at an average gross sales price of US$4,360 per square meter. As of December 31, 2006 a total amount of US$5.3 million was received from buyers representing 10% of the total purchase price. Remaining amounts due are subject to the conditions of the preliminary sales contract and expected to be received in full upon completion of pre-agreed development milestones, with the final milestone expected in second half of 2008. As of March 7, 2007 11 remaining villas have been sold.

Owners of these villas may elect to participate in the hotel's rental pool program. This program provides the prospective owners of the villas with a right of use for a specified number of days each year, and for the villas to be included as part of the Hotel's room inventory under a contractual revenue sharing arrangement with the management company (Four Seasons).

Four Seasons Mauritius
This property currently under construction includes 46 villas with a total built up area of 15,472 square meters. Of the total number of villas 24 are 2-bedroom, 12 are 3-bedroom and 10 are 5-bedroom villas. This total includes an additional 7 villas that were added to the scope of the development in 2006 as a result of strong market demand. Of the total, 36 villas will be managed by Four Seasons under a mandatory rental pool program while the owners of the remaining villas may elect, but are not required, to participate in the hotel's rental pool program.

The sales and marketing program of these villas as the Four Seasons Private Residences Mauritius started in December under a 2 phase program of 23 villas each, and by the end of December most of the first phase villas had been reserved at an average gross sales price of over US$7,500 per square meter. The second marketing phase is expected to commence in 2007. All the villas are expected to be delivered by 2008. Buyers will be required to pay for the villas in full upon completion.

Four Seasons Damascus (Syria)
This property includes 13 residential units (1,449 square meters) that have been converted into office leases and an adjacent retail commercial area of 16 retail units (2,504 square meters). 11 office and 14 retail unit leases (2,192 square meters) were signed in 2006, subsequent to the opening of the hotel in December 2005. The annual lease revenue of retail units and office leases is US$1.4 million and US$0.3 million, respectively.

Mövenpick Beirut (Lebanon)
This property includes 75 cabanas, 25 marina mooring spaces and 864 square meters of retail commercial area available for lease. Cabanas and marina spaces are leased on short term/ seasonal basis by the hotel management company and 7% of the retail area was leased. Total lease revenues in 2006 were US$0.15million.

Mövenpick Bur Dubai/ Residences (UAE)
This 12 floor residential building adjacent to the hotel encapsulates 57 apartments and a 66 space garage, and was acquired in the second half of 2006 for US$25.5 million with the objective of conversion in the second half of 2008 into serviced apartments linked to, and managed by the hotel. In the meantime, all apartments have been leased on a limited 1 year contract at an annualized total net annualized rental income of US$1.5 million.

Portfolio Review - Projects under construction

The following projects under construction includes future or existing consolidated and associate properties and development but excludes the future affiliate developments.

Material changes to previously announced budgets and completion dates

Four Seasons Hotel Beirut (Lebanon)
As a result of recent hostilities and civil strife in Lebanon, specifically their impacts on the availability of materials and labor in the country, this project is now expected to be completed in the second half of 2008.

Mövenpick Ambassador, Accra (Ghana)
The hotel is the first of a 3 phase development that includes commercial and residential ancillary real estate. The first phase is for the hotel only and is scheduled for completion in 2008. Based on growing market demand for office and residential units in Accra the Company is at the advanced planning stages to combine the initial 2 phases with tentative completion date of 2009.

The Fairmont Palm Hotel & Resort, Dubai (UAE)
The project is now expected to be completed during the second half of 2009 primarily as a result of late site delivery by the master developer, and value enhancing re-scoping that includes the addition of penthouses to the rooftop of the hotel. The Company's share of the increased budget is expected to be funded through ancillary real estate income from the project.

Mövenpick Hotel Tripoli (Libya)
In September 2006 the Company announced its intention to re-scope the project to capture demand for branded residential and commercial real estate in Tripoli. Subsequently, in early 2007 KHI received notice of the Libyan authorities' intention to relocate the hotel to an alternative site. Unless resolved amicably, these material changes may result in a significant delay or termination of the project.

Acquisitions and Business Development

KHI continued to extend and diversify its investments with its focus on premium properties in high growth and emerging markets as well as stepped-up acquisitions to existing minority holdings, in line with the Company's stated strategy.

During 2006 KHI signed agreements to acquire, develop or invest in a total of 11 properties with a total enterprise value / project cost of approximately US$1.4 billion and additions to room inventory of about 2,000 rooms. Of this total, 6 were new developments; 4 were newly added operating hotels, one was a step-up acquisition into a majority ownership position and one was an apartment building that is planned to be incorporated into an existing KHI hotel. KHI also withdrew from its acquisition of the Radisson SAS Resort in El-Quseir due to the emergence of new pricing considerations.

Also during the year, and in line with its strategy, KHI increased its minority shareholdings in (i) the Four Seasons Hotel Cairo at Nile Plaza from 29.25% to 43.70%, (ii) the owning company of the Fairmont Palm Hotel and Resort from 14.29% to 20.1%, (iii), the Damascus Four Seasons Hotel from 35.75% to 49.50%, and (iv) the Four Seasons Resort Sharm El Sheikh from 31.96% to 39.30%.

The following are summary descriptions of the acquisitions and/or developments executed by KHI during 2006 and subsequent transactions, ordered by date of acquisition:

1. Four Seasons Resort, Mauritius
Acquired: January 2006
KHI acquired a 50% equity interest in this luxury resort development that encompasses 90 suites and ancillary real estate of 46 villas for sale. The total project cost is expected to be US$169 million, with KHI equity commitment before proceeds from ancillary real estate sales of about US$52 million. Expected completion is in 2008.

2. Mövenpick Beach & Spa Resort, Zanzibar (Tanzania)
Acquired: January 2006
KHI acquired a 30% equity interest in this beachfront resort development that encompasses 190 rooms. The total project cost is expected to be US$32 million, with KHI equity commitment of about US$5 million. Expected completion is in 2007.

3. Mövenpick Ambassador, Accra (Ghana)
Acquired: January 2006
KHI acquired a 100% equity stake in this phased mixed-use development project. The initial phase is expected to conclude in 2008 and includes 250 hotel rooms at an expected cost of US$60 million, with KHI equity commitment before proceeds from ancillary real estate sales of about US$30 million.

4. Four Seasons George V, Paris (France)
Acquired: January 2006
KHI acquired a 25% equity interest in this 245 room award-winning, landmark hotel for US$95.5 million in KHI stock.

5. Mövenpick Resort & Spa, Mauritius
Acquired: April 2006
KHI acquired a 100% equity interest in this 2 year old operating beachfront resort that encompasses 181 rooms. Total acquisition cost was US$45.9 million of which KHI's equity was US$25.6 million.

6. Mövenpick Kampala (Uganda)
Acquired: April 2006
KHI signed a memorandum of understanding for a long-term peppercorn lease with the Government of Uganda for the development of a new mixed-use development that is expected to comprise a 120-room hotel, 50 serviced apartments as well as offices and a shopping center. The total project cost is expected to be US$58 million with KHI equity of US$30 million. This agreement was signed and closed in 2007 (see 'Definition of transactions' below)

7. Mövenpick Karon Beach, Phuket (Thailand)
Acquired: May 2006
KHI acquired a 100% equity interest in this operating beachfront resort that encompasses 339 rooms and ancillary real estate of 30 apartments for sale. Total acquisition cost was US$101.2 million of which KHI's equity was US$71.2 million (before proceeds from ancillary real estate sales).

8. Mövenpick Resort, El Quseir (Egypt)
Acquired: July 2006
KHI increased its ownership in the 250-room operating beachfront resort from 30.5% to 87.3% for a total cost of US$19.6 million. Total KHI investment in this hotel was US$22.8 million at December 31st 2006.

9. Intercontinental Lusaka (Zambia)
Acquired: October 2006
KHI acquired a 100% equity interest in this operating city hotel that encompasses 221 rooms and a total capacity of 402 rooms. Total acquisition cost was US$28.5 million, all of which was for KHI's equity.

10. Raffles Resort and Residences, Phang Na (Thailand)
Acquired: September 2006
KHI acquired an 80% equity interest in this luxury resort development that encompasses 120 rooms and ancillary real estate of 25 villas for sale. The total project cost is expected to be US$115 million, with KHI equity commitment before proceeds from ancillary real estate sales of about US$57 million. Expected completion is in 2009.

11. Mövenpick Bur Dubai Residences, Dubai (UAE)
Acquired: November 2006
KHI acquired 100% of this operating apartment building that has 57 apartments with spa and gym, with the intention of incorporating this into the existing Mövenpick Hotel Bur Dubai in 2007. The total acquisition cost was US$25.5 million and KHI is in the process of renovating and converting the building at a total expected cost of US$5.0 million. The acquisition and development cost will be financed mostly through a committed US$27.0 million secured non-recourse bank loan that has not yet been disbursed.

Withdrawal from announced transactions in 2006
KHI has exercised its option of withdrawing from the acquisition of the Radisson SAS Resort prior to closing, following the emergence of new pricing considerations.

Acquisitions in Group associated companies
The Company also closed 3 step-up acquisitions and one new minority acquisition during 2006:

1. Four Seasons Hotel Cairo at Nile Plaza (Egypt)
In January 2006 KHI acquired Salam Investment Company's 23.9% share in [Kingdom 5-KR-30] for the sum of US$14.8 million, thus increasing its effective ownership in the hotel from 29.25% to 38.42% (partial payment for was made in shares at KHI's initial offering in March). In July 2006 KHI completed the acquisition of an additional ownership interest of 5.27% hotel to increase its effective ownership to 43.70% from 38.57% for a total consideration of US$13.4 million.

2. Fairmont Palm Hotel & Resort, Dubai (U.A.E)
In January 2006, KHI increased its effective equity ownership in this hotel development from 14.29% to 20.1%. As of December 31st, 2006 the total amount of equity paid was US$14.9 million.

3. Damascus Four Seasons Hotel Damascus (Syria)
In March KHI acquired Majed Al Futtaim Trust's ('MAFT') 25% in [Kingdom 5-KR-71] for the sum of US$15.0 million, thus increasing its effective ownership in the hotel from 35.75% to 49.50%.

4. Four Seasons Resort Sharm El-Sheikh (Egypt)
In July 2006 KHI completed the acquisition of an additional ownership interest of 7.4% hotel to increase its effective ownership to 39.30% from 31.96% for a total consideration of US$10.5 million. Agreements were signed and share registration is in progress.

Subsequent events

The Company has undertaken the following additional acquisitions since December 31, 2006:

1. Raffles Da Nang Resort and Residences, Da Nang (Vietnam)
January 2007
KHI acquired an 80% equity interest in this resort development close to Da Nang on the South China Sea that is planned to encompass 150 suites and ancillary real estate of 15 villas for sale, (negotiations with management companies is underway). The total project cost is expected to be US$65 million, with KHI equity commitment before ancillary real estate proceeds of about US$26 million. Expected completion is in 2011.

2. Four Seasons Hotel, Langkawi (Malaysia)
March 2007
KHI acquired a 90% equity stake in this 35 hectare operating resort of 91 suites, with the intention of adding about 20 additional suites as well as ancillary real estate of 14 villas for sale at an additional cost of US$35 million. The total project cost is expected to be US$138 million (total acquisition cost of US$103 million and an estimated US$35 million of development costs), with KHI equity commitment before ancillary real estate proceeds of about US$64 million Expected completion is in 2008.

3. Fairmont Makati Hotel and Raffles Suites. Makati City, Manila (Philippines)
March 2007
KHI acquired an 80% equity interest in this city development in the heart of Manila's Makati central business district. The development is planned to include a 300 room Fairmont Hotel, a 30 suite Raffles hotel and ancillary real estate for sale of 189 Raffles-branded apartments and residences (negotiations with management company is underway). The total project cost is expected to be US$152 million, with KHI equity commitment before ancillary real estate proceeds of about US$61 million. Expected completion is in 2011.

Executed memorandums of understanding and announcement of acquisitions

KHI policy is to announce specific transaction details upon signature of definitive purchase agreements or closing of transactions. The Company may selectively disclose the total number of executed acquisition memorandums of understanding, (MOU's) or details thereof.

Other developments & considerations

In addition to the above mentioned ancillary real estate portfolio, the Company has announced the following hotel acquisitions and future developments that include ancillary real estate. These ancillary real estate components are provided for guidance only and are subject to material changes that may be driven by future market or other conditions:

Sales and marketing costs to dispose of ancillary real estate are expected to be between 5% and 10% of the gross sales price of each property, depending on the location and property. In some countries additional real estate taxes and duties are also payable as part of disposition costs.

Consolidated Statement of Income

Profit for the year ended December 31, 2006 was US$42.8 million, as compared to US$12.3 million for the year ended December 31, 2005, reflecting an increase of 248 per cent.

Profit is derived principally from revenue less cost of revenue, plus share or results of associates, less general and administrative expenses, less project costs written off, plus gain on sale of investments, financial charges and depreciation, plus financial income, deferred credit, and other income less taxes and plus/less minority interests.

Revenue
Total revenue for the year ended December 31, 2006 was US$99.0 million, as compared to US$58.8 million for the year ended December 31, 2005, reflecting an increase of 68 per cent.

Comparable revenue growth of 4% was driven by Beirut Mövenpick declined as a result war and political disturbance in the second half of 2006. Excluding this hotel for both years, revenue growth would have been 16% for 2006.

Hotel Revenue
Hotel revenue for the year ended December 31, 2006 was US$96.7 million, as compared to US$55.4 million for the year ended December 31, 2005, reflecting an increase of 75 per cent.

Comparable hotel revenue growth of 4% was driven by Beirut impacts. Excluding this hotel from both years revenue growth would have been 15% for 2006.

Room Revenue: Room Revenue for the year ended December 31, 2006 was US$52.6 million, as compared to US$30.6 million for the year ended December 31, 2005, reflecting an increase of 72 per cent. This increase was principally due to the impact of the opening of the Four Seasons hotel Damascus in December 2005, as well as hotel revenue reported by the newly acquired hotels (see below). Additionally, room revenue from the Mövenpick Resort & Spa El Quseir, Egypt is reflected above due to the 56.83 per cent share purchased during 2006 which increased our ownership interest to 87.33 per cent from July 1 to December 31, 2006 and accordingly changing the accounting treatment of the investment from an associate to a subsidiary.

Additionally, RevPar for our consolidated operating hotels was stable at US$74 for the year ended December 31, 2006 as compared to the year ended December 31, 2005. ADR increased to US$127 for the year ended December 31, 2006 from US$107 for the year ended December 31, 2005 while occupancy rates decreased to 57.3 per cent for the year ended December 31, 2006 as compared to 63 per cent for the year ended December 31, 2005.

The consolidated operating hotel figures included above were primarily affected by the following movements at the individual hotel level:-

(i) The inclusion of twelve months of room revenue amounting to US$8.2 million for the year ended December 31, 2006 of the Kenya hotels held through Kingdom Kenya 01 Limited (acquired in May 2005), as compared to eight months room revenue amounting to US$4.5 million from these hotels for the year ended December 31, 2005, an increase of US$3.7 million or 82 per cent.

(ii) The inclusion of twelve months room revenue amounting to US$10.1 million from the Four Seasons Damascus (which opened for business in December 2005) for the year ended December 31, 2006, as compared to US$0.5 million revenue from this property for the one month period ended December 31, 2005, an increase of US$9.6 million. Average revenue during 2006 was US$1.4 million per calendar month some 180 per cent higher on average than the revenue earned in the one month ended December 31, 2005. This increase can be mainly attributed to the fact that December 2005 was the first operational month, in addition to the increase in number of rooms as the hotel gradually opened its rooms to reach 277 available rooms compared to 70 available rooms in December 2005.

(iii) The inclusion of nine months room revenue amounting to US$1.8 million from the Mövenpick Resort & Spa Mauritius (acquired in April 2006), for the year ended December 31, 2006, as compared to no room revenue from this property for the year ended December 31, 2005.

(iv) The inclusion of seven months room revenue amounting to US$3.2 million from the Mövenpick Karon Beach Phuket Thailand (acquired in late May 2006), for the year ended December 31, 2006, as compared to no room revenue from this property for the year ended December 31, 2005.

(v) The Mövenpick Hotel Bur Dubai increased room revenue by US$2.0 million or 19.7 per cent. The RevPar increased to US$142 for the year ended December 31, 2006 from US$118 for the year ended December 31, 2005 as a result of the increase in the ADR from US$152 for the year ended December 31, 2005 to US$161 for the year ended December 31, 2006, and increase in occupancy from 10 per cent for the year ended December 31, 2005 to 87.8 per cent for the year ended December 31, 2006.

(vi) The Mövenpick Hotel Royal Palm increased by US$0.3 million or 10 per cent. The RevPar increased to US$55 for the year ended December 31, 2006 from US$50 for the year ended December 31, 2005 as a result of the increase in the ADR from US$92 for the year ended December 31, 2005 to US$94 for the year ended December 31, 2006, and increase in occupancy from 55.1 per cent for the year ended December 31, 2005 to 58.5 per cent for the year ended December 31, 2006.

(vii) The inclusion of six months room revenue amounting to US$1.8 million from the Mövenpick Resort & Spa El Quseir (treated as a subsidiary in July 2006), for the year ended December 31, 2006, as compared to no room revenue from this property for the year ended December 31, 2005.

(viii)The inclusion of three months room revenue amounting to US$1.2 million from Lusaka (acquired in October 2006), for the year ended December 31, 2006, as compared to no room revenue from this property for the year ended December 31, 2005.

(ix) The decrease in room revenue for the Mövenpick Hotel and Resort Beirut by US$1.6 million or 14.5 per cent for the year ended December 31, 2006 as compared to the year ended December 31, 2005 was due to the decrease in the RevPar for the hotel to US$90 for the year ended December 31 2006 as compared to US$105 for the year ended December 31, 2005, resulting from a decrease in ADR to US$166 for the year ended December 31, 2006 as compared to US$186 for the year ended December 31 2005. Occupancy also decreased to 54.2 per cent for the year ended December 31, 2006 as compared to 56 per cent for the year ended December 31, 2005 ( refer to trading summary section for further details).

Food and Beverage Revenue: Food and beverage revenue for the year ended December 31, 2006 was US$32 million, as compared to US$17.5 million for the year ended December 31, 2005, reflecting an increase of 83 per cent. The increase in food and beverage revenue for the year ended December 31, 2006, as compared to the year ended December 31, 2005, was primarily due to:-

(i) The inclusion of twelve months of food and beverage revenue for the Kenya hotels held through Kingdom Kenya 01 Limited of US$7.7 million for the year ended December 31, 2006 as compared to the inclusion of eight month's revenue of US$4.6 million for the year ended December 31, 2005, an increase of US$3.1 million or 67 per cent.

(ii) The inclusion of twelve months revenue from the Four Seasons Damascus amounting to US$5.2 million, nine months revenue for the Mövenpick Resort & Spa Mauritius amounting to US$1.4 million and seven months revenue for the Mövenpick Karon Beach Phuket, Thailand amounting to US$1.4 million for the year ended December 31, 2006, compared to no food and beverage revenue included for these hotels for the year ended December 31, 2005.

(iii) The increase in food and beverage in Mövenpick Hotel Bur Dubai by US$0.8 million was offset by a decrease US$0.6 million in Mövenpick Hotel and Resort Beirut.

(iv) The inclusion of six months food and beverage revenue amounting to US$1.9 million from the Mövenpick Resort & Spa El Quseir (acquired as a subsidiary in July 2006), for the year ended December 31, 2006, as compared to no food and beverage from this property for the year ended December 31, 2005.

(v) The inclusion of three months food and beverage revenue amounting to US$0.7 million from Lusaka (acquired in October 2006), for the year ended December 31, 2006, as compared to no food and beverage revenue from this property for the year ended December 31, 2005.

Other Operating Revenue: Other operating revenue for the year ended December 31, 2006 was US$12.2 million as compared to US$7.3 million for the year ended December 31, 2005, reflecting an increase of US$4.9 million or 66 per cent. The increase in other operating revenue for the year ended December 31, 2006, as compared to the year ended December 31, 2005, was primarily due to the inclusion of twelve months of other operating revenue for the Kenya hotels held through Kingdom Kenya 01 Limited amounting to US$2.4 million as compared to the inclusion of seven months of operating revenue in the prior year amounting to US$1.6 million, and of twelve months other operating revenue from the Four Seasons Hotel Damascus amounting to US$1.8 million, nine months for the Mövenpick Resort & Spa Mauritius amounting to US$0.5 million, seven months for the Mövenpick Karon Beach, Phuket Thailand amounting to US$0.2 million and three months for Kingdom Lusaka amounting to US$0.3 for the year ended December 31, 2006, as compared to no other operating revenue for these hotels for the year ended December 31, 2005. Other operating revenue consist primary of ancillary revenue such as telephone, parking, entertainment and other guest services.

Other Revenue

Other revenue for the year ended December 31, 2006 was US$2.3 million, as compared to US$3.4 million for the year ended December 31, 2005, reflecting a decrease of US$1.1 million or 31 per cent. The decrease in the other revenue in December 31, 2006, as compared to December 31, 2005, was principally due to the Fairmont Hotels and Resorts Inc. success fees of US$2.0 million in the prior year relating to the branding of certain hotels within the KHI. This was offset by (i) an increase of US$0.5 million principally arising from Business development income received from Mövenpick Hotels and Resorts (ii) increase in asset management fees for non consolidated entities of US$0.1 million (iii) rental revenue from Bur Dubai Residence (acquired in 2006) of US$0.2 million (iv) rental revenue from the commercial and residential unit in the Northern strip (Four Seasons Damascus) of US$0.5 million.

Hotel Operating Costs

Cost of revenue for the year ended December 31, 2006 was US$73.8 million, as compared to US$40.8 million for the year ended December 31, 2005, reflecting an increase of US$33.0 million or 81 per cent.

Hotels' operating costs for the year ended December 31, 2006 was US$73.4 million, as compared to US$40.4 million for the year ended December 31, 2005, reflecting an increase of US$32.9 million or 82 per cent. The increase in hotels operating costs for the year ended December 31, 2006, as compared to the year ended December 31, 2005, was principally due to:

(i) The inclusion of US$16.6 million of hotel operating cost for twelve months in Kenya hotels held through Kingdom Kenya 01 Limited for the year ended December 31, 2006 as compared to US$9.2 million of hotel operating costs for the eight months year ended December 31, 2005 an increase of US$7.4 million or 80 per cent.

(ii) The inclusion of US$12 million hotel operating costs for the Four Seasons Damascus for the year since opening in December 2005 as compared to US$0.7 million hotel operating costs for the property for the one month year ended December 31, 2005, an increase of US$11.3 million.

(iii) The inclusion of US$4.0 million of hotel operating costs for the Mövenpick Resort & Spa Mauritius, US$4.5 million of hotel operating costs for the Mövenpick Karon Beach Phuket, US$1.8 million of hotel operating costs for the Mövenpick Resort & Spa El Quseir and US$1.7 million for the Lusaka Hotel, Zambia for the year ended December 31, 2006 as compared to no hotel operating costs for these hotels in December 31, 2005.

(iv) The inclusion of a US$9.5 million of hotel operating costs for the Mövenpick Hotel Bur Dubai for the year ended December 31, 2006, as compared to US$8.1 million for the year ended December 31, 2005, which was mainly due to the increase in the hotel business, an increase of US$1.4 million or 17 per cent.

(v) The inclusion of a US$16.6 million of hotel operating costs for the Mövenpick Hotel and Resort Beirut for the year ended December 31, 2006, as compared tom US$15.9 million for the year ended December 31, 2005, an increase of US$0.7 million or 5 per cent.

Comparable hotel operating costs increased by 7% (excluding Beirut:12%), due to the high employee cost in Mövenpick Hotel Bur Dubai (17% staffing/ housing increase) and Mövenpick Royal Palm (18% hotel cost increase), the increase was partially offset by 10% reduction in hotel operating costs in Beirut in the second half of the year as a result of the implementation of a profit protection plan.

Other Cost

Other costs for the year ended December 31, 2006 were roughly the same for the year ended in 2005 amounting to US$0.4 million, which was principally in 2005 due to the sale of marina rights of the Mövenpick Hotel and Resort Beirut and the non-recurring costs associated therewith. However, the major other costs in 2006 represented the expenses relating to Northern Strip in Four Seasons Damascus of US$0.3 million and expenses relating to the Bur Dubai residence of US$0.1 million.

Share of results of Associates

Share of results of Associates for the year ended December 31, 2006 was US$14.4 million, as compared to US$11.0 million for the year ended December 31, 2005 reflecting an increase of US$3.4 million or 31 per cent. The major changes were principally due to:

(i) Share of results from the Four Seasons Nile Plaza increased to US$11.1 million for the year ended December 31, 2006 as compared to US$7.7 million for the year ended December 31, 2005, reflecting an increase of US$3.4 million or 44 per cent. This was due to the (i) the strong performance of the hotel in 2006 where RevPar increase from US$143 in 2005 to US$215 in 2006 driven by both rate and occupancy growth (ii) rental income from Ancillary real-estate from US$0.9 million in 2005 to US$2.5 million in 2006 (iii) additional 4.4 per cent equity interest in Nova Park Cairo Co.

(ii) The inclusion of US$1.0 million as share of profit from the Four Seasons Hotel George V for the year ended December 31, 2006 as compared to Nil for the year ended December 31, 2005.

(iii) Share of profit from the Four Seasons Resort Sharm El Sheikh decreased to US$0.8 million for the year ended December 31, 2006 from US$1.1 million for the year ended December 31, 2005 the hotel was faced with a drop in demand in 2006 as compared to 2005 where occupancy dropped from 63.8 per cent in 2005 to 57.6 per cent in 2006 this drop was offset by the increase of the rate from US$256 in 2005 to US$282. The main reason for the decrease was the net income from rental villas where it dropped from US$0.4 million in 2005 to US$0.05 million in 2006. This decrease is despite an increase of an additional 7.4 per cent equity interest in Alexandria Saudi Co. for Touristic Projects profit overall decreased in the company by 41 per cent.

(iv) The decrease in our share of profit in the Mövenpick Resort El Quseir to US$0.1 million, for the year ended December 31, 2006, from US$0.7 million for the year ended December 31, 2005 was due to the additional 56.83 per cent interest on July 1, 2006, which increased the effective ownership from 30.5 per cent to 87.33 per cent changing the treatment of interest from an associates to a subsidiary.

General and Administrative Expenses:

General and administrative expenses for the year ended December 31, 2006 was US$14.9 million, as compared to US$7.7 million for the year ended December 31, 2005, reflecting an increase of US$7.3 million or 94 per cent.

(i) The increase in general and administrative expenses was predominantly caused by an increase in salaries and benefits of US$4.6 million related to the increased number of employees on the corporate level and in the consolidated entities from 30 and 11 respectively as of December 31, 2005 to 47 and 21 as of December 31, 2006.

(ii) Municipal taxes during the year ended December 31, 2006 were US$0.3 million as compared to US$0.7 million in December 31, 2005, relating to the Mövenpick Hotel and Resort Beirut. In 2006 and 2005 these taxes consisted of US$0.3 million, imposed on the Mövenpick Hotel and Resort Beirut based on a calculation of the hotel's market rental value while in 2005 an amount of US$0.4 million was paid relating to taxes imposed on the Four Seasons Hotel Beirut by the Investment Development Authority of Lebanon ''IDAL'' as stamp duty relating to its granting of tax exemption status to the hotel.

(iii) Legal and professional fees increased in the year ended December 31, 2006 as compared to the year ended December 31, 2005 due to the expansion and growth of the company. The charges related to head office legal fees of US$0.9 million, professional and consultancy fees of US$0.7 million, and audit fees of US$0.1 million. Those were offset by a decrease of US$0.3 million related to the expenses in other consolidated entities.

(iv) Travel and accommodation decreased from US$0.9 million for the year ended December 31, 2005, to US$0.7 million for the year ended December 31, 2006, this decrease was principally due to the decrease in expensed travel charges (against capitalized as part of project cost ).

(v) Rent expenses is related to the new corporate office in Dubai.

Project Costs Written Off

Projects costs written off for the year ended December 31, 2006 were US$2.0 million as compared to Nil for the year ended December 31, 2005. Amounts written off relate to costs incurred or potential acquisitions which are no longer considered feasible.

Gain from Sale of Investments

Gain from sale of investments for the year ended December 31, 2006 were US$7.3 million as compared to Nil for the year ended December 31, 2005 which arose from the partial disposal of KHI's share of common stock in Fairmont Hotels & Resorts Inc. in October 2006, for a consideration of US$12.6 million or 0.5 per cent of the total shares while KHI retained a 0.37 per cent stake in the sharehold