1H09 Results. Highlights Rev, Ebitda and Net Profit down by 11.9%, 30.9% and 96.8% Profit & Loss Account. Operational Ratios. Interest Cover Ratios

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1 1H09 Results Profit & Loss Account (million Euros) Jun 09 Jun 08 % REVENUES % EXPENSES ( ex - Operating leases) % EBITDAR % Rental expenses % EBITDA % Depreciation and amortisation % EBIT % Total financial profit / (loss) (27.4) (35.4) 22.5% Profit/(loss) from equity investments (4.2) (0.1) % Continuing EBT % Discontinuing Operations Profit before taxes and minorities % Net Profit % Net Profit attributable % Operational Ratios RevPAR % EBITDAR MARGIN 22.3% 26.1% -377 bp EBITDA MARGIN 15.8% 20.1% -433 bp EBITDA MARGIN (ex-asset rotation) 15.8% 20.1% -433 bp EBT MARGIN 0.9% 6.6% -567 bp NET PROFIT MARGIN 0.2% 5.9% -572 bp Interest Cover Ratios EBITDA / Net Interest Expense 4.2x 3.7x 13.0% EBIT / Net Interest Expense 1.8x 2.3x -21.5% EBITDA / Net Int. (ex - asset rotation) 4.2x 3.7x 13.0% EBIT / Net Int.( ex - asset rotation) 1.8x 2.3x -13.6% Stock Performance Highlights Rev, Ebitda and Net Profit down by 11.9%, 30.9% and 96.8% The increasing deterioration in the economic environment, the further reduction in business travel activity as a result of corporate travel policies, reductions in capacity by Tour Operators, and the British market still hit by the depreciation of the pound have led to a 17.7% reduction in company RevPAR in H1. On the positive side, renegotiation of lease contracts have led to a 3.8% Rental Expenses decrease, while Financial Results improved by 22.5% as a result of the management of Company debt, the reduction of the 3-month Euribor rate and a more favourable forex situation. Outlook: Still low visibility. Contingency Plan on track Within the current level of uncertainty and low visibility, the Sol Meliá overview for the summer season expects a relatively better performance in Spanish resorts assisted by a preference for short/medium haul destinations in European feeder markets as well as a recovery in last minute demand. Nevertheless, the Company remains cautious and is closely monitoring booking levels. For the rest of 2009, no recovery is expected in business travel activity since companies continue to implement corporate savings policies and reducing their budget for travel and events. The Company expects resort hotels to outperform city hotels across the board. The implementation of the Contingency Plan for 1) Revenues, 2) Cost Optimization, 3) Risk Management and 4) Cash Flow Management and Financial Equilibrium has resulted at June 09 in an increase of 21.5 Mn in revenues meeting the target set for the semester- and cost cuts of 36.6 Mn, fully in line with the 55.6 Mn expected for the full year and probably above that target. Delinquency and average collection periods are under control and are not being affected by insolvencies nor bankruptcies. Total investments at 46.1 Mn Euros mainly in maintenance Capex in line with commitments /01/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/2009 SOL VOLUME SOL LAST IBEX LAST 02/07/ /07/ /07/2009 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Average Daily Volume 2009 ( ) 1,470, Week High, Aug 11th Week Low, March 6th Market cap Aug 6th 09 ( 5.58 ) million 1,031.1 Bloomberg: SOL SM ; Reuters: SOL.MC 0 Sale of the Meliá Madrid Princesa. Future Developments On July 30 th, the Sol Meliá Group reached an agreement with BBVA Renting S.A. materialising the sale of the Hotel Meliá Madrid Princesa (Madrid, Spain) for 87.8 Mn Euros, generating 50.1 Mn Euros of capital gains. The Group will manage the hotel over the next 12 years under a rental contract, maintaining a right of first refusal. The Company has 7,387 rooms (22 hotels) in the pipeline, 18% under lease and 82% under management. 2,552 rooms (8 hotels) will open before year-end.

2 Table of contents 1. Letter from the C.E.O. and Vice-Chairman Information on Operations Hotels Sol Meliá Vacation Club Leisure Real Estate Income Statement Balance Sheet Cash Flow Statement Development

3 1. Letter from the C.E.O. and Vice-Chairman Dear friend, Sol Meliá is releasing its first half results within a framework of severe GDP contraction, causing international organisations such as the International Monetary Fund to revise downwards its 2009 estimates for the Company s feeder markets US: -2.6%, Euro Zone: -4.8%; Spain: -4.0%-, and leading Travel and Tourism indicators to further deteriorate. In Spain, the number of passengers visiting our country fell by 13.0% in the first half of the year, while Tourism s share of GDP has dropped to 6.6%. No clear signs of recovery on the horizon but resorts will outperform cities Contingency Plan as reckoned On the other hand, some recent macroeconomic leading indicators point to a reduced rate of deterioration in most OECD economies. On the 8th of July the International Monetary Fund echoed this view of stabilization in the worldwide economy in its World Economic Outlook update, although recognizing that recovery might be uneven and is likely to be sluggish. According to the IMF, advanced economies do not seem likely to show a sustainable pick up until 2H At our company, the signs of stabilization are reflected in a monthly improvement of the performance of Company-owned sales channels throughout the semester. For the near future, the current level of uncertainty and low visibility does not allow us to give clear guidance for the summer season, although we share the perception of major European tour operators that a recovery in last minute demand is being witnessed in the Company s main feeder markets: UK, Spain, Germany and Scandinavian markets. According to Exceltur a lobby group of 25 of Spain's main travel groups and companies- tourism GDP for Q3 is expected to slightly recover. The consequence is a relatively better performance of Spanish resorts in Q3. Nevertheless, Sol Meliá is cautious about the summer and is closely monitoring the booking situation. Resorts are going to clearly outperform cities across the board. The business segment is being sharply affected by companies business travel policies, particularly the restrictions on business class flights and lodging expenses. Business travel continues to be considered an important issue for corporations but it remains true that this trend is not expected to change in the second half of This also applies to business groups and to the celebration of events this year, although the Company is seeing a progressive increase in event requests for 2010, especially those related with sales activities. Once again, regardless of whether the pick-up in demand is ongoing, we believe the Company is responding with the right set of measures included in its Contingency Plan to manage through the current environment. As advanced in previous reports, these measures pursue these key objectives: 1) Revenues, 2) Cost Optimization, 3) Risk Management and 4) Cash Flow management and Financial Equilibrium. As far as Revenues are concerned, the measures implemented are mainly related to a) a response to customer needs through Brand Unique Selling Points and Strategy by offering additional benefits with a clear value for money proposition, b) growing relationships with Online Travel Agencies (OTAs) through the generation of greater synergies, c) the implementation of CRM tools with a solid performance in terms of the number of personalized campaigns and loyal customers, leading to a current total of 5.3 million registered customers, representing 38% growth over the previous year, d) the implementation of the a Cash Incentive campaign to strengthen the relationship with Spanish travel agents, with nearly 2,000 agents already signed up, e) the implementation of aggressive campaigns through own channels specially solmelia.com with added value propositions leading to an average decrease in revenues cut by half when compared with traditional channels and f) the empowerment of family and friends domestic programmes. All in all, the direct effect of these measures implemented has had a total impact on revenues of 21.5 million Euros in the first semester of 2009, meeting the target set for the semester. The Company has performed better than its compset in major world cities such as Madrid, Barcelona, Seville, Berlin, Milan, Paris, Caracas and Mexico DF. We understand the higher resistance in overall consumption but it is our goal to keep on growing Sol Melia s market penetration index in its core markets. 3

4 Regarding the Cost Optimisation Programme, the main actions implemented at both Headquarters and Business Unit levels have led the Company to save 36.6 million euros as of June 30 th, entirely aligned with the 55.6 million Euros commitment. This figure suggests that we could exceed 60 million Euros in savings at the end of the year....quality standards not being affected...no affection by insolvencies nor bankruptcies At the Headquarters level, the departmental synergies created in all corporate areas, the renegotiation of commissions, the overall reduction of other operating expenses as well as the centralization of processes, improving the efficiency by business units, have led to total savings of 10.6 million Euros in H1, without affecting our strategic plan. This figure is fully aligned with the target of 24.2 million Euros for the full year, even considering the fact that certain measures - such as those related with advertising and marketing - for timing reasons will not materialize their impact until the second half of the year. At the Hotel level, the level of personnel commitment and their awareness of the current economic situation has resulted in a more versatile and flexible personnel structure. Actions implemented related to the management of personnel according to the opening periods of seasonal hotels and overall occupancy as well as the redesign of processes and multi-tasking, renegotiation of third-party services, providers and raw material suppliers and increased energy efficiency achieved through the full implementation of energy saving measures have resulted in savings of 26.0 million Euros, allowing Sol Meliá to fulfil its cost savings commitments for It is important to highlight that the measures implemented have not affected our quality standards in any way. As far as Risk Management is concerned, the Company has continued to maintain the same positive results as during the first quarter, with no changes occurring in neither delinquency rate nor the impact of insolvencies or bankruptcies of any company. The efforts made have resulted in a similar average collection period to last year (61.2 days), considered a fairly good figure in the current market. Within the uncertain environment in which we find ourselves, the Company does not want to leave anything to chance and has updated its corporate risk map. On the other hand, since the World Health Organization declared the Influenza A H1N1 at pandemic level 6, Sol Meliá, as a sensible and responsible Company and thanks to our previous experience with avian flu in Asia, has defined an Action Protocol at all levels, developing an action plan for each hotel. This action plan envisages implementing all preventive measures and actions necessary to ensure the protection of both employees and customers and to guarantee the continuity of the business. To date, no cases of infection have been detected among employees nor customers. On the Cash Flow Management and Financial Equilibrium level, Sol Meliá has continued to work to reinforce its financial strength. Over recent months, the Company has obtained additional funding of 25 Million Euros. As part of this figure, on July 14 th the Spanish Instituto de Credito Oficial (ICO) joined the 3- year maturity syndicated loan signed last April 30 th, with an additional 15 million Euros. The adhesion was made on the same terms and conditions as before....financials still in good shape The renewal of 100% of the credit lines that expired in H1, and the additional 45 million Euros signed during this quarter, has enabled us to maintain them at the 235 million Euros level, although with a higher spread. Average interest cost has decreased during the semester, reaching 3.85% on the back of a more favourable 3-month Euribor. This latter figure also takes into consideration the efforts made to move to a more 50/ 50 floating fixed debt structure, being the current floating / fixed debt figure at 58 / 42. Sol Meliá continues to work to maintain financials and liquidity levels in good shape. Regarding the latter, on July 30th the Company agreed the sale of the hotel Meliá Madrid Princesa for 87.8 Million Euros, generating total capital gains of 50.1 Million Euros. Within the sale agreement, Sol Meliá will manage the hotel over the next 12 years under a lease contract and maintain a right of first refusal on repurchase. Following this transaction, total liquidity rises to million euros which compares with 305 million debt maturities for July to December 2009 and Taking into consideration the liquidity situation, Sol Meliá rules out any capital increase. 4

5 Total investments remain limited. In this sense Sol Meliá has invested in H1 46 million Euros mainly in maintenance Capex, entirely in line with its commitment for 2009, expected to remain below 90 million Euros. Expansion remains on track, focused on very low capital intensive developments. Fostering growth, aligned with brand standards Year to date, the Company has signed the incorporation of 10 hotels (2,452 rooms), of which 69 % are under management, 26% under lease and 5% under franchise. Within these 10 establishments, we would like to highlight the incorporation under a lease contract of the former hotels Sheraton Bilbao (211 rooms) in Bilbao (Spain) and the Hotel Urbem (262 rooms) in Valencia (Spain). Both hotels have a prime location in business and cultural areas. Sol Meliá will begin to manage these hotels in 2H09 under the Meliá brand. Also under a lease contract, in 2011 the Innside Copenhagen will open with 177 rooms. This hotel also enjoys a prime location in the middle of the business area with easy access to the city centre and will be the first Innside hotel located outside Germany and the first property in Denmark. To end this letter, we would like to emphasize that Sol Meliá is very much aware of the gravity of the current economic situation, perhaps one of the worst crisis ever. In our opinion, the Company has demonstrated its ability to react by implementing timely and appropriate measures. 1) The capacity to generate cash flow by making optimal use of its assets, 2) human capital, professional and talented people continue taking the right decisions, 3) the strength of our brands, 4) the business diversification, providing us stability in this environment and 5) the Contingency Plan, fully aligned with the commitments made, has placed Sol Meliá in an optimal position to face the crisis, even though this may be extended over time. Gabriel Escarrer Vice Chairman & CEO 5

6 2. Information on Operations 2.1. Hotels RevPAR for owned and leased hotels has decreased by 17.7% during the first half of the year, due to decreases in Occupancy and ARR by 10.4% and 8.2% respectively. RevPAR for Sol brand (100% resort, 100% Spain) decreased by 15.7% for the semester, mainly due to decreases in Occupancy by 14.0%. The performance of the Balearic Islands, where RevPAR decreased by 20.4% and hotels in the Canary Islands with a 21.4% decrease are behind these figures. These results are a mainly a consequence of the capacity reduction carried out by the tour operators and launched last year, as well as the performance of British feeder market. RevPAR decreased by 14.3% during the second quarter of the year, also primarily explained by occupancies rather than prices. These figures show a better performance when compared with Q1 derived from the timing of the Easter holidays and a set of combined sales actions to encourage bookings during the mid-season. As announced, a set of corrective measures has already been implemented that include Sol s Brand Unique Selling Message and Strategy through the Family Fun Programme, which includes the implementation of all-inclusive service in all the Spanish resort areas though the 1) All Inclusive Plan along with additional packages such as the 2) Kids Plan (first kid free / 50% discount for the second kid) or the 3) Flintstones Plan (varied entertainment activities with the cartoon characters). Besides these programmes responding to the needs of guests, at the sales level there has been a balanced approach between the Early Booking Bonus during the winter and last minute sales policies. Difficulties in the UK feeder market are also expected, still affected by the depreciation of the pound. On the other hand, the reluctance of the Spanish feeder market to travel abroad due to economic conditions Spaniards are expected to be slightly below last year s figures in our resorts along with a preference for the short/medium haul in European feeder markets is expected to help the performance of the Spanish resorts in Q3, such as those located on the Costa del Sol. In any case, the Company expects the evolution of resorts to be significantly better than cities. During the first semester, Operating Expenses (excluding rental expenses) decreased by 15%. This is explained primarily by the rationalization of personnel management according to the opening periods of seasonal hotels and overall occupancy levels that allow the brand to decrease Personnel Expenses by 13%. Renegotiations of raw material costs in Food and Beverage along with the adaptation of menus also permit the brand to decrease the F&B cost by 24% or 7% per stay. Decrease in Available Rooms is related to the late opening of 3 seasonal hotels: Sol Costa Blanca (Alicante), Sol Antillas-Barbados and Sol Trinidad (both in the Balearic Islands). 6

7 RevPAR for the Tryp brand (100% City; 79% Spain) has decreased by 21.4% due to both decreases in Occupancy and ARR by 9.6% and 13.1% respectively. This has been the brand most affected due to its city locations and positioning (3 and 4 star hotels). During Q2, there has been a further deterioration of RevPAR when comparing with the first quarter, declining by 23.4% versus 18.9% in Q1 partly explained by shift in the Easter vacation calendar to April 2009 from March As in the first quarter, the evolution of the brand in Q2 is due primarily to business travel activity. As reflects the segmentation of the brand, room revenues from business individuals (close to 50% of brand s room revenues) decreased in Spain by 29.1%, largely explained by the performance in Madrid. Corporate travel cost reductions are largely behind these figures. The individual leisure segment and, specifically, international tour operators (especially from the US, UK and France) that together represent some 30% of the segmentation of the brand, has also resulted in a decrease in revenues. Tour operators are very price sensitive and the aggressive offers made by independent hotels is having an impact on the brand. Within the Tryp brand, the corrective measures implemented include Tryp s Brand Unique Selling Message and Strategy through the launching of City Business Plan and City Weekend Plan involving both corporate and weekend travellers, through a package of additional benefits. Among these benefits are the buffet breakfast, press service and late check out for both corporate and weekend travellers. Additionally for 1) corporate travellers: room free wireless, free mini-bar and a free breakfast for the next week-end stay and for 2) weekend travellers: free stay, breakfast and Children s kit for kids. This weekend travel programme has enabled the brand to partially offset the negative effect of reduced business activity. Even though the Brand Unique Selling Message measures have not had the same strong impact as at the Sol brand, since the implementation took place in June, a recovery is expected in this sense over the next months. Course of action to soften the impact of the crisis in the business travel includes also the increment of weighting of negotiated key account (both companies and travel consortia), proven to be more loyal than the transient traveller, higher involvement with preferred partners as far as e-commerce is concerned and further development of own programs and campaigns to labelled company customers primarily via solmelia.com. Although there are no clear signs of recovery in the coming months for the city hotels, the Company is maintaining a high degree of flexibility and adaptation to current market conditions. Operating expenses (excluding rental expenses) decreased during the first semester by 14%, while total cost per stay decreased by 1%. Flexibility in personnel management as well as negotiations with raw material suppliers and commissions are behind these figures. Mention that this has been the brand that has best performed in terms of cost reduction, though this has not been seen at the Ebitda level due to the rental expenses. Decrease of the Available Rooms item is explained by the sale of the hotel Tryp Los Bracos (Spain) during 4Q08 and the termination of 2 hotel lease contracts, the Tryp Langenselbold and the Tryp Potsdam Michendorf, both in Germany. Tryp brand is where more incorporations under franchises have been produced in recent months. Two hotels have been signed and another one will be incorporated in the near future 7

8 In H1, RevPAR for the Meliá brand (43% Spain, 21% LatAm, 36% EMEA) decreased by 18.3%, affected by the performance of the city hotels (-22.7%) offset by the Meliá resorts where RevPAR goes down by 0.6%. Apart from the decrease of business travel, as in the case of Tryp hotels, the large Meliá city hotels have been affected by the decrease in business group activity. During the second quarter, this business group segment (some 30% of rooms) has gone down by 43% in Spain has also affected the brand properties that typically provide meeting rooms and congress and convention facilities. The decrease in the number of events such as trade fairs, conventions, incentives and meetings by companies are behind these figures. Sectors that have traditionally held a larger number of events such as finance, construction, insurance and automobile, are being sharply affected by the current crisis and affecting Meliá hotels in Madrid, Barcelona and Seville. The events that are maintained attract fewer people for less days and with less spending. Regarding Meliá resorts, Q2 RevPAR has gone up by 4.9% explained by the progressive better performance of the Spanish resorts month of June: +3.2%, the timing of the Easter holidays and, to a lesser extent, the evolution of the ski resorts. As announced in the Q1 results, corrective measures have been implemented include Meliá s Brand Unique Selling Message and Strategy through the All in One programmes for 1) City Break: room upgrade, late check out and press service, 2) Business: room free wireless, late check out, one daily meal and press service and 3) Holidays: additional meal, late check out and press service. During H1, Operational Expenses (excluding rental expenses) decreased by 8%. Decreases in personnel expenses by 4%, through the implementation of personnel management actions such as the promotion of early retirements, reduction in overtime, encouraging staff holidays without carrying out substitutions during those periods as well as the outsourcing of other services allowing the reduction of other costs, (i.e. laundry: -8%) has enabled the brand to retain the most versatile and flexible personnel structure. The renegotiation of raw material contracts and commissions are also behind this figure. In terms of Available Rooms, the increase is explained by the incorporation of the Meliá Athens (Greece) in June 2008, the reopening of some floors at the Meliá Madrid Princesa (Spain) previously closed for refurbishment, the extension of 60 additional rooms and the late closing of the Meliá Sol y Nieve (Sierra Nevada Spain) due to the good snow season and the disaffiliation of the Meliá Trujillo in July Due to the investments performed in product standards in recent years, emblematic hotels have been incorporated (i.e. Meliá Reconquista, ) providing prestige to the brand. 8

9 Premium hotels have seen RevPAR going down by 15.5%. The decrease is primarily explained by the Gran Meliá brand where hotels and resorts have decreased RevPAR by 18.1%. The evolution of company s properties in Spain and Puerto Rico is behind such evolution. During the second quarter, RevPAR decreased by 20.0%. In this quarter, ME by Meliá and Gran Meliá hotels located in Mexico - which RevPAR has gone down by 30.9% in Q2 - have been affected by the Influenza A (H1N1), specially in May. The facilities in the Dominican Republic have partially offset such effect, acting as an alternative destination. Corrective measures have been implemented engineered under the umbrella of the Premium brands Luxe-clusive offers which are defined by the needs of each brand s target consumer based on valueadded promotions versus price discounting and focusing on each of the brand s unique attributes. That applies for both families and business travellers. As occurred with the rest of Sol Meliá s brands, the rationalization of personnel management as well as the renegotiation of raw material contracts, coupled with a reduction of energy cost has derived during the first semester in a decrease of the Operational Expenses (excluding rental expenses) by 7%. In local currency, cost per stay in Mexico and the Dominican Republic changes by +1% and -2% respectively. Decrease of the Available Rooms item is explained by the ME Cancun, closed during 1 month affected by the Influenza A (H1N1) and the disaffiliation of the hotel Gran Meliá Mofarreij (Brazil) Last July, the Hotel ME Barcelona was named one of the best hotels in the world in 2009 by the Travel and Leisure magazine, in part due to the high brand standards that characterize Premium brands, and in particular the ME by Meliá brand. 9

10 Table 1: Hotel statistics Owned and Leased hotels 09 / 08 (RevPAR & A.R.R. in Euros) % Occupancy RevPAR A.R.R. Available rooms ( 000 units) SOL 2, % ,447.6 % o/ % -15.7% -2.0% -4.0% 2, % ,507.2 TRYP 2, % ,421.7 % o/ % -21.4% -13.1% -6.1% 2, % ,513.9 MELIÁ 2, % ,935.3 % o/ % -18.3% -10.8% 1.9% 2, % ,899.8 PREMIUM 2, % % o/ % -15.5% -5.2% -3.4% 2, % TOTAL 2, % ,643.7 % o/ % -17.7% -8.2% -2.5% 2, % ,789.8 Table 2: Hotel revenues split 09 / 08 for owned/leased hotels Room Revenues F&B and Other Total Revenues Total Expenses (*) Ebitda SOL 2, % o/ % -19.0% -19.0% -14.4% -60.8% 2, TRYP 2, % o/ % -17.4% -23.9% -12.5% -93.9% 2, MELIÁ 2, % o/ % -10.4% -14.2% -6.5% -33.2% 2, PREMIUM 2, % o/ % -1.2% -9.6% -8.5% -13.0% 2, TOTAL 2, (*) Includes rental expenses % o/ % -9.6% -15.7% -9.6% -36.6% 2,

11 Table 3: Third parties management fees (included in Other Businesses and Overheads ) Management fees have decreased by -17.7%. On a comparable hotel basis, this figure decreases by 19.2%, mainly due to the incorporation of the hotels Gran Meliá Palacio de Isora (Tenerife Spain) and Me Barcelona (Barcelona Spain). The Sol brand have seen its management fees decrease by 22.5% as a consequence of the performance of Cuban and Spanish resorts, where management fees went down by 31.6% and 42.4% respectively. These figures where partially offset by Bulgarian (-0.8%) and Croatian resorts (-6.6%) Meliá brand decreased its management fees by 18.6% due to a 39.2% decrease in the performance of the Spanish hotels, specially the urban segment, where management fees went down by 43.0%. This fact could not be compensated with the good performance of the Dominican Republic Resorts, where management fees increased by 82.7% and the incorporation of two hotels, the Meliá Sharm in Egypt and the Meliá la Reconquista in Spain. Tryp management fees have gone down by 30.9% affected by the trend of hotels in Spain (-47.9%) and Cuba (-35.8%) Management fees for Premium brand decreased by 1.2% due to two opposite effects: 1) the incorporation of the Gran Meliá Palacio de Isora in and Me Barcelona both in 2008, and the re-opening of the Gran Meliá Colón also in 08 closed due to refurbishment, and 2) the results achieved by Cuban hotels, where management fees decreased by 31.4% MANAGEMENT FEES REVENUES (million Euros) Jun 09 Var. 09 / 08 Jun 09 SOL Basic % 2.7 Incentive % % 3.5 MELIÁ Basic % 8.4 Incentive % % 11.3 TRYP Basic % 2.1 Incentive % % 3.9 PREMIUM Basic % 2.9 Incentive % % 4.8 TOTAL BASIC % 16.2 TOTAL INCENTIVE % 7.4 TOTAL %

12 2.2 Sol Meliá Vacation Club Total Vacation Club Revenues decreased by -26.0% compared to previous year. These revenues include Vacation Club unit sales (70% of the total) as well as the revenues derived from Interest Income, Maintenance and Management fees as well as Network fees. As of June, the number of weeks sold went down by 26.3%. The overall performance is explained by the decrease in occupancy levels at the hotels where we operate Vacation Club sales, in addition to a significant change in the mix of clientele, decreasing transients and increasing groups. These groups are not typically qualified prospects and in many cases do not include other family members, which makes the purchase of a Vacation Club product less likely. Additionally, in Mexico, the decrease in occupancy rates has been deeper in the second quarter of the year because of the Influenza A (H1N1) virus. The depreciation of the Mexican peso has also affected the volume of club sales to Mexican nationals due to concerns regarding dollar denominated commitments. On the positive side, in the Canary Islands, the Gran Meliá Palacio de Isora (Canary Islands, Spain) initiated the sale of Vacation Club units at good pace thanks to the efforts made locally as well as the marketing and sales efforts made in Mainland Spain offices. In Puerto Rico, the number of weeks sold increased thanks to the diversification in marketing programs with external agencies, designed to improve the tour flow and ultimately increase Vacation Club sales. From a risk management perspective, Sol Meliá Vacation Club is still working on an array of actions to reduce delinquency. These include increasing of minimum qualifications for prospective buyers, focus and incentives for the sales force for higher average down-payments as well as payments in cash and various internal measures designed to improve the collection process. Table 4: Sol Meliá Vacation Club 09 / 08 NUMBER OF WEEKS SOLD NUMBER OF EQUIVALENT CLUB UNITS VACATION CLUB SALES (IN 000 ) 2009 %o/ %o/ %o/ Premium % 1, % 26 20, % 24,609 Meliá % % 14 6, % 7,673 Total 1, % 2, % 40 27, % 32, Leisure Real Estate As occurred during the first quarter, no revenues have been generated in the asset rotation activity or by the sale of plots of land in the Dominican Republic during the Q2. Income generated by the this division is mainly due to the exploitation of golf courses and the good results achieved by the commercial premises in the Dominican Republic and rentals of shopping areas in the basement of the GM Caracas, which have entirely achieved their budgets. 12

13 3. Income Statement Revenues Total Operating Revenues decreased by 11.9% (-73.6 Million Euros). Revenues from Hotels and Sol Meliá Vacation Club decreased by 15.7% (-78.5 Million Euros) and 26.0% (-13.2 Million Euros) respectively, while Leisure Real Estate increased by 25.8% (1.3 Million Euros). The increase in Other revenues is derived from the increase in revenues of Sol Caribe Tours (Tour Operator in Cuba), latent capital gains and the increase in services to third parties provided by Hospitality Business Services (HBS). Operating Expenses Total Operating Expenses decreased by 7.4% (-33.8 Million Euros). Personnel Expenses have decreased by 5.6% (11.5 Million Euros) as a consequence of the implementation of the Operational Contingency Plan launched during At the Hotel Level, personnel expenses decreased by 6.8% (-10.7 Million Euros), while at Central Headquarters this figure decreased by 1.3% (0.8 Million Euros). The evolution of the Other Operating Expenses is fully disclosed in the chapter Information from Operations. Worth mentioning that all measures implemented have had a more evident effect in the second quarter P&L account. Rental expenses has decreased by 3.8% (-1.4 Million Euros). This figure is affected by some changes in the perimeter. On one hand the disaffiliation of the hotel Gran Meliá Mofarrej (Brazil), and on the other hand the incorporation of 3 hotels: an Innside hotel in Düsseldorf (Germany) within the Meliá brand in March 2008, the Meliá Athens (Greece) and the Meliá Luxemburg (Benelux) in June 2008 and May 2009 respectively. Excluding changes in the perimeter, rental expenses have decreased by 4.5%, derived from negotiations being carried out with hotel owners and the decline in hotel performance, since many of the leasing contracts have a variable part linked to the result obtained by the hotel. Ordinary Profit / Net Profit Depreciations and amortizations increased by 2.6% (1.3 Million Euros), as a result of investments made during 2008 in 1) Paradisus Palma Real (Dominican Republic), adding 190 Vacation club units (11.6 Million Euros invested), and 2) in Paradisus Punta Cana (Dominican Republic), adding 192 Vacation club units (15.0 Million Euros invested). In H1, Financial results increased by 22.5% (-8.0 Mn Euros). This is explained by the decrease of the Net Interest Expense by 7.2 Million Euros due to a) the management of the overall Company debt and b) the decrease of 3 month Euribor average by 301 basis points and c) the decrease of the Exchange Rate Differences by 0.8 Million Euros, on the back of a more favourable forex during the first half of the year. Losses from equity investments are explained by Altavista Hotelera S.L., Colon Verona S.A. and Comunidad de Propietarios Meliá Castilla S.A., owners of the hotels ME Barcelona, Gran Meliá Colón and Meliá Castilla respectively, all of them in Spain. At these hotels, a combination of circumstances has occurred. On one hand, all three are city hotels, and therefore are being affected by the deterioration of the urban segment, and on the other hand, the ME Barcelona and Gran Meliá Colón, additionally, have recently began their operations, this latest after 1.5-years refurbishment process, and are currently under a process of positioning in their respective markets. 13

14 Table 5: Sol Meliá Consolidated Income Statement Million Euros Jun 09 Jun 08 % Hotels Leisure Real Estate Vacation Club Other Revenues Total revenues % Raw Materials (66.5) (77.6) Personnel expenses (192.7) (204.3) Other operating expenses (163.9) (175.1) Total operating expenses (423.1) (456.9) -7.4% EBITDAR % Rental expenses (35.9) (37.3) EBITDA % Depreciation and amortisation (49.3) (48.0) EBIT % Net Interest Expense (20.6) (27.9) Exchange Rate Differences (0.9) (1.7) Other Interest Expense (5.9) (5.8) Total financial profit/(loss) (27.4) (35.4) -22.5% Profit/(loss) from equity investments (4.2) (0.1) Continuing Earnings Before Taxes % Discontinuing Operations Profit before taxes and minorities % Taxes (0.6) (4.0) Group net profit/(loss) % Minorities (P)/L (3.2) 0.0 Profit/(loss) of the parent company % 14

15 Table 6: Business Segmentation of Sol Meliá s Consolidated Income Statement Mn euros HOTEL BUSINESS SOL TRYP MELIÁ PREMIUM TOTAL HOTELS LEISURE REAL ESTATE AGGREGATED CONSOLIDATED 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % 1H09 1H08 % REVENUES % % % % % % % % % % EXPENSES % % % % % % % % % % EBITDAR % % % % % % % % % % RENTALS % % % % % % % EBITDA % % % % % % % % % % D&A % % % % % % % % % % EBIT % % % % % % % % % % SMVC OTHER BUSINESS & OVERHEAD EXPENSES 15

16 4. Balance Sheet Assets The increase in Trade and other receivables by 46.8 Million Euros is mainly due to the seasonality of sales. Sales at the beginning of the summer season (May and June) caused the natural increase of this entry. Regarding Receivables for associates, the increase (41.7 Million Euros) is mainly due to loans made to the associates Inversiones Hoteleras la Jaquita for the development of the hotel Gran Meliá Palacio de Isora located in Tenerife Spain and to Colon Verona S.A. for the refurbishment of the recently open Gran Meliá Colón in Seville Spain. The decrease of Prepayments and assets in progress and the increase of Constructions are related to the completion of construction and exploitation of 196 Vacation Club units in Paradisus Palma Real (Dominican Republic) and 192 Vacation Club units in Paradisus Punta Cana. Other current financial assets increased by 18.9 Million Euros, due to the increase of entries Receivables form Public Treasury by 5.0 million and accrual adjustments by 7.1 Million Euros. Liabilities & Shareholder s Equity Net debt amounts to 1,055.1 million Euros as of 30th June, Debt maturities for July to December 2009 and 2010 are and million Euros respectively. Total liquidity level rises up to million Euros. 16

17 Table 7: Consolidated Balance Sheet (million Euros) ASSETS Million of Units Dec 2008 ( audited ) Jun 2009 % i INTANGIBLE FIXED ASSETS % Software Goodwill Other Intangibles ii PROPERTY. PLANT AND EQUIPMENT 2, , % Land Constructions 1, ,111.3 Technical plant and machinery Other assets Prepayments and assets in progress iii INVESTMENT PROPERTIES % iv OTHER NON-CURRENT ASSETS % Available-for-sale investments Investments in associates Loans to associates Deferred tax assets Other non-current financial assets TOTAL NON-CURRENT ASSETS 2, , % v NON-CURRENT ASSETS FOR SALE vi CURRENT ASSETS % Inventories % Trade and other receivables % Receivables for associates % Other current assets % Other current financial assets % Cash and short-term deposits % TOTAL CURRENT ASSETS % TOTAL ASSETS 2, , % 17

18 EQUITY AND LIABILITIES (Million of Units) Dec 2008 (audited) Jun 2009 % i EQUITY % Issued capital Share premium Reserves of the parent company Results from prior years Reserves in co. full consolidation method Reserves in associates Exchange differences ii PROFIT AND LOSSES ATT. TO THE GROUP % Consolidated profit and loss Minority interests profit and loss Iii TREASURY SHARES % Iv TOTAL EQUITY % v DIVIDEND DISTRIBUTION Vi MINORITY SHAREHOLDERS % TOTAL NET EQUITY % Vii NON-CURRENT LIABILITIES Issue of debentures and other marketable securities Preference shares Payable to associates Bank debt Capital grants and other deferred income Provisions Deferred tax liabilities Other non-current liabilities TOTAL NON-CURRENT LIABILITIES 1, , % viii CURRENT LIABILITIES Issue of debentures and other marketable securities ! Bank debt Payables to associates Trade payables Other current liabilities Other financial liabilities TOTAL CURRENT LIABILITIES % TOTAL EQUITY AND LIABILITIES 2, , % 18

19 5. Cash Flow Statement Table 8: Cash Flow Statement June 2009 (Million of Units) CASH FLOWS FROM OPERATING ACTIVITIES 17.0 Proceeds from operating activities 20.4 Proceeds / (payments) from profit taxes -4.5 Other proceeds / (payments) from operating activities 1.1 CASH FLOWS FROM INVESTING ACTIVITIES Payments for investing activities: Companies of the Group, associates and business units (loans to subsidiaries) Fixed assets, intangible assets and property investments (Company Gross Capex) Other financial assets -1.3 Other assets 0.0 Proceeds on sale: 6.8 Companies of the Group, associates and business units 6.4 Fixed assets, intangible assets and property investments 0.4 Other financial assets 0.0 Other assets 0.0 Other cash flows from investing activities: 0.1 Proceeds from dividends CASH FLOWS FROM FINANCING ACTIVITIES 27.5 Proceeds and (payments) for equity instruments: 0.0 Issue 0.0 Acquisition 0.0 Proceeds and (payments) for financial liabilities: 58.6 Issue 99.4 Repayment and Amortization Dividends paid and payments for other equity instruments: 0.0 Other cash flows from financing activities: Interest paid Other proceeds and (payments) from financing activities -2.1 EFFECT OF EXCHANGE RATE CHANGES -1.5 NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR PERIOD Payments for investing activities include 46.1 million Euros, of which 6.5 million Euros are due to past cash flows necessary for the completion of the extension of 60 rooms of the Meliá Sol y Nieve. The remainder 39.6 million Euros is mainly related to refurbishment in hotels and resorts such as: Sol Principe, Meliá Sevilla, Meliá Princesa and Meliá Barcelona. 19

20 6. Development The table below shows a description of the progress made in the Sol Meliá hotel portfolio up to June Table 9. Expansion plan. 01/01/2009 ADDITIONS LOSSES CHANGES 30/06/2009 SIGNED TOTAL GROUP H R H R H R H R H R H R H R SOL 88 27, , , ,371 Owned Hotels 34 11, , ,009 Leased hotels 9 2, , ,007 Management & Franchised 45 14, , , ,355 TRYP 94 14, , ,492 Owned Hotels 8 1, , ,072 Leased hotels 49 6, , ,169 Management & Franchised 37 6, , ,251 MELIÁ 99 26, , , ,196 Owned Hotels 25 7, , ,317 Leased hotels 21 3, , ,235 Management & Franchised 53 15, , , ,644 PREMIUM 23 8, , , ,871 Owned Hotels 12 4, , ,499 Leased hotels Management & Franchised 10 3, , ,921 TOTAL OWNED HOTELS 79 23, , ,897 TOTAL LEASED HOTELS 80 12, , , ,862 TOTAL MNGT & FR , , , ,171 TOTAL GROUP , , , ,930 Additions (4 hotels / 678 rooms) During the first half of the year, Sol Meliá added to its portfolio under lease contract the Meliá Luxemburg (161 rooms), located in the city centre of Luxemburg. Under management contract, Sol Meliá incorporated the Meliá Reconquista (142 rooms) in Oviedo, one of the most emblematic hotels in Spain. Also under management contract, the Company added the Hotel Nayade (125 rooms) in Segovia (Spain) and the Tryp Convention Brazil XXI (250 rooms) in Brasilia. The Company has successfully renegotiated the maintenance of two lease contracts in Germany that where to expired in 3Q. The leases contracts, of the Innside Düsseldorf Ratingen (137) and the Innside Munich Neue Messe (134), have been extended in 15 years. This renegotiation of the contracts has enabled the company to reduce the lease payment in these hotels by 45% in the case of Innside Düsseldorf Ratingen and 25% in the case of Innside Munich Neue Messe. Loses (5 hotels / 756 rooms) Throughout 1H09 the Company removed from its portfolio the Tryp Burlada (53 rooms) under lease contract. Under management contract, Sol Meliá disaffiliated the Sol Marbella (300 rooms) in Indonesia and the Tryp Guarulhos (240 rooms) in Brazil. 20