ANNUAL REPORT COMPANY PROFILE 3 LETTER FROM THE CHAIRMAN 9 COMPANY HISTORY 12 MILESTONES IN

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2 ANNUAL REPORT COMPANY PROFILE 3 LETTER FROM THE CHAIRMAN 9 COMPANY HISTORY 12 MILESTONES IN FINANCIAL RESULTS Spain and European capital cities: privileged destinations 1.2 Effects of political instability in Latin America and the collapse in travel to Tunisia 1.3 Effects of international uncertainty 2. WORLD TOURISM: 2002 a year for recognition of the multiplying effect of the travel and tourism industry Influence of travel and tourism on the international economy 2.2 Exceltur: strength through union 3. COMMITMENT TO COMPANY CONSOLIDATION The best people Sol Meliá growth: the secret is in the professional development of our people Training in personalized service: Everything is Possible Serviexpress guarantee: superior quality Alliances with educational centers Decentralized human resources management 3.2 The best product Strengthening brand standards New development and disaffiliation policies A modern, high quality hotel portfolio Cost savings through standardization Strong asset base and asset quality 3.3 The best distribution channels Reorganization of the sales office network Traditional distribution channels Sirius: a revolutionary hospitality system Direct sales: unlimited potential GOOD GOVERNANCE CODE 33 REGULATORY NOTIFICATIONS 44 CORPORATE INFORMATION 48

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4 Company Profile 3 More than 350 hotels in 30 countries ASIA Indonesia 7 Malaysia 1 Thailand 1 Vietnam 1 TOTAL 10 MEDITERRANEAN Egypt 1 Morocco 4 Tunisia 15 TOTAL 20 AMERICAS Argentina 1 Brazil 22 Colombia 7 Costa Rica 4 Cuba 23 Guatemala 1 Mexico 11 Panama 1 Peru 1 Dominican Rep. 4 Uruguay 1 Venezuela 2 TOTAL 78 EUROPE Andorra 1 Belgium 1 Croatia 27 France 8 Germany 12 Italy 4 Malta 1 Portugal 9 Spain 177 Switzerland 1 United Kingdom 1 TOTAL 242 Company Profile Annual Report 2002

5 Sol Meliá Current Positioning City and Resort hotel distribution (by number of hotels) Largest resort hotel company in the world Largest hotel company in Spain in both the city and resort hotel markets. Largest hotel company in Latin America and the Caribbean. Third largest hotel company in Europe. Tenth largest hotel company in the world by room numbers. Presence in 30 countries. More than 36,000 employees. 50% 50% Hotel and Room growth City Hotels Resort Hotels 4 100,000 90,000 80,000 70,000 60,000 50,000 40,000 52,239 65,597 68, ,942 86,554 87, Distribution by type of operation (% of rooms) 30,000 20, % 10, % 29% Rooms Hotels 13% Bednight growth Managed hotels Leased hotels Owned hotels Franchise hotels Year Bednights million million million million Company Profile Annual Report 2002

6 Distribution by hotel category (% of rooms) Rooms by location (% city - % resort) 25% 33% 42% 4% (3%-1%) 7% (0%-7%) 25% (9%-16%) 20% (5%-15%) 43% (19%-24%) 3 star 4 star 5 star and 5 star deluxe Spain Other Europe Latin America & Caribbean North Africa Asia Guest nationality Sol Meliá: Four brands. One World 5 4% 12% 7% 6% 34% LUXURY CITY HOTELS RESORT HOTELS 13% 10% 14% SUPERIOR Spain United Kingdom Germany France Latin America & Caribbean Italy USA & Canada Other Company Profile Annual Report 2002

7 Sol Meliá Current Positioning Sol Meliá Current Positioning Company founded: 1956 Company IPO: 2nd. July, 1996 Initial share price (before split): 5.41 Ticker symbol: SOL Stock market: Continuous market (Spain) Forms part of Madrid stock exchange index Number of shares: 184,776,777 Market capitalization at 31st. Dec., 2002: 696,608,449 Rating BBB (stable) by Fitch IBCA Rating BB+ (stable) by Standard & Poor s Share performance from IPO to 31st. Dec., 2002: -30.3% EBITDA / NET FINANCIAL COST 4.4 x 3.7 x 5.1 x PER X 26.8 X 17.4 X MARKET CAP , , EV / EBITDA 7.8 X 11.6 X 12.0 X NET DEBT 1,132 1,211 1,095 NET DEBT/SHAREHOLDERS EQUITY 107.0% 105.4% 77.6% * share price at 31st. Dec., 2002: 3.77 euros Sol Meliá share performance /1/02 11/1/02 22/1/02 31/1/02 11/2/02 20/2/02 1/3/02 12/3/02 21/3/02 3/4/02 12/4/02 23/4/02 3/5/02 14/5/02 23/5/02 3/6/02 12/6/02 21/6/02 2/7/02 11/7/02 22/7/02 31/7/02 9/8/02 21/8/02 30/8/02 10/9/02 19/9/02 30/9/02 9/10/02 18/10/02 29/10/02 8/11/02 19/11/02 28/11/02 10/12/02 19/12/02 Sol Meliá IBEX-35 Trading volume 2002 Share price at Average daily volume (31/12/2002) % Change IBEX-35 Max. Min Shares (Million) Dividend E.P.S. C.F.P.S % -28.1% , Company Profile Annual Report 2002

8 Sol Meliá Current Positioning Million Euros 2002 % CHANGE 2001 HOTEL REVENUES % European Resort % European City % Americas % MANAGEMENT FEES % 40.1 CASINOS % 15.2 TIMESHARE % 10.7 OTHERS % 47.9 TOTAL REVENUES 1, % 1,016.1 Financial performance C.A.G.R. Million Euros REVENUES ,016 1,011 66% - 18% 596% 35% 14% -1% EBITDA % - 17% 301% 31% -7% -3% EBITDAR % - 17% 323% 38% 3% 1% 7 1, ,016 1, Revenues EBITDA EBITDAR Company Profile Annual Report 2002

9 Letter from the Chairman Dear shareholder, As we approach our fiftieth anniversary as a company, history repeats itself, leaving in its wake, once again, the effects of the economic cycles described last century by Shumpeter. After several years of extraordinary bonanza, during which the growth of the majority of the world s major international hotel chains reached double digits, 11th. September, 2001 stands as a turning point and the beginning of a recession which has affected a large part of the world economy ever since, and particularly the travel industry was a difficult year in which political, financial and social instability was the dominant thread. The expectations of a recovery that existed at the beginning of the year were never confirmed neither by economic growth figures nor company results, and a significant level of uncertainty persisted throughout the year. There were several reasons. On the one hand, a certain fear of traveling generated by the terrorist attack in New York was further exacerbated during the year by other attacks in Djerba (Tunisia), Kenya and Bali (Indonesia). Besides practically paralyzing the travel industry in the destinations themselves, these tragic events also provoked a temporary reduction in business and leisure travel in general. 9 On the other hand, the sluggishness of the economy in key travel markets such as Germany and the United States, together with the political and economic instability seen in several Latin American countries such as Argentina, Brazil and Venezuela, have also had an influence on the decrease in travel. Fortunately it has not all been bad news, and in some cases the crisis has been transformed into an opportunity for progress and improvement. One of the benefits seen has been a greater union in the Spanish travel industry. Traditionally highly fragmented, companies have recognized that the future prosperity of the industry, as well as the maintenance of Spain as the world s second most popular travel destination, requires the promotion of greater bonds and stronger association. This unprecedented movement has come to fruition in the creation of the Alliance for Tourism Excellence, Exceltur. This organization, representing the most important Spanish travel companies, amongst which Sol Meliá was a founder member, has presented a list of recommendations aimed at increasing the competitiveness of Spain as a travel destination before the threat of new emerging destinations that are beginning to attract business and leisure travelers that would previously have chosen Spain. The influence that the crisis in the travel industry has had on the economy in general has also provoked greater international recognition of the multiplying effect that travel has on the economy and of its role as one of the economic activities that generates greatest wealth and employment. Letter from the Chairman Annual Report 2002

10 In this difficult environment, Sol Meliá, the leading hotel company in Spain, Latin America and the Caribbean, third largest chain in Europe and tenth in the world ranking, has been able to match revenues obtained in 2001, closing 2002 with total revenues of 1,010.3 million Euros. Earnings before Interest, Taxes, Depreciation, Amortization and Rentals (EBITDAR) reached million Euros, a 0.5% increase over the previous year, while Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) fell by 3% to million Euros, a figure that was in line with market analysts expectations and above the average of the majority of our competitors who saw results from operations fall by 13%. The positive performance from our city hotels in Europe and our resort hotels in Spain over the summer season were behind the recovery seen in the second half of 2002, a period in which EBITDA and EBITDAR grew by 22% and 20% respectively. Net profits were affected by the cost of the disaffiliation process of several hotels acquired during the purchase of the Tryp hotel chain, especially those in Tunisia, and by the provisions made to cover both the joint venture with AOL and the extraordinary losses and negative exchange rate differences created by the devaluation of Latin American currencies. Excluding these effects, net profits would have decreased by 12% to 53.3 million Euros. 10 At the close of 2002, Sol Meliá has achieved the consolidation objectives set out at the beginning of the year, focusing on product and brand standardization, the strengthening of distribution channels, the disaffiliation of hotels with operating losses or inconsistent with brand standards and the addition of new superior quality properties, a reduction in costs and the strengthening of the group balance sheet. The development of a thorough analysis of our product and service standards based on internal and external benchmarks as well as the recommendations of Infratest, a leading consultancy in brand management, has allowed us to clearly identify the positive aspects perceived and expected by our customers, as well as the differentiating features of each of the chain s four hotel brands: Meliá, Tryp, Sol and Paradisus. After product consolidation, the company turned to the consolidation of our distribution systems, integrating them all within a single multi-channel platform named SIRIUS. This has allowed us to reinforce our centralized sales strategy and increase individual and group sales through our SolRes Central reservations System by 15% and 52% respectively. The launch of the new solmelia.com in Spanish, English and German has also created a basis for what the company expects to become one of our major direct sales channels in a not too distant future, as well as a fundamental tool for achieving a greater knowledge of our customers and greater brand awareness. With standardization as the priority objective, 2002 also saw the implementation of new policies on hotel development and disaffiliation characterized by more selective criteria and the consideration of profitability above all else. Within this framework, during the year Sol Meliá ceased operations in a total of 24 hotels, mainly in Spain and the Middle East and North Africa, in countries such as Lebanon, Morocco, Tunisia and Turkey, while also adding 22 new hotels, ending the year with a total of 350 hotels and 87,717 rooms in 30 countries on 4 continents. In this respect, it is worth noting that thanks to this more selective growth and to the enormous efforts made in recent years to renovate our hotel portfolio, the company may now boast that 75% of our hotels have been thoroughly renovated or added over the last 5 years. With regard to our cost reduction program, the company has made savings of 31.7 Letter from the Chairman Annual Report 2002

11 million Euros. The most noteworthy aspect of this reduction, achieved mainly through standardization, rationalization of functions and the implementation of SAP procurement systems, is that it has had no negative affect on customer satisfaction in questionnaires. The opposite in fact. Our Quality Control program has seen the rating for our product and service quality increase by 8 points on a scale of 15 over the last 3 years. As well as a positive performance with regard to quality and profitability, Sol Meliá is also characterized by its strong asset base and the quality of those assets, with 90 hotels with a total value of 2,700 million Euros, and a total company asset value of 3,300 million Euros. The generation of cash flows, together with the quality of the mentioned assets, of which only 15% are mortgaged, allow the company to feel comfortable about its future financial situation. All of these aspects of company strategy are founded on a corporate culture that includes amongst its values the creation of value for our shareholders, the satisfaction of our customers, the training and development of our more than 36,000 employees and social responsibility. The most noteworthy activities in this last respect, headed by the approval in 2002 of the Sol Meliá Community Involvement Plan, are described in the Community Involvement and Environmental Report that accompanies the Annual Report. For the hotel industry, 2003 also promises to be a difficult year. The development of the economy and of travel will continue to be influenced for some time by uncertainty. Nevertheless, at Sol Meliá we are following events very closely with the confidence, and with the pride, of having done things right. It has been a long but fruitful journey, during which we have modified nearly all of our service and business areas. The development and training of our employees, product improvements both through greater standardization and the disaffiliation of non-profitable hotels, the opening of new niche markets in Eastern Europe and the Mediterranean, the diversification of our sales channels, the development of cost control policies hand in hand with the maintenance of service quality and the firm commitment to new technology as the basis for our future hotel management. 11 The results are already there to be seen: excellent products and highly personalized service, one of the best sales forces in the market, modern and fully-integrated distribution systems and a solid financial structure. To summarize, a company that has been able to increase productivity, and thus competitiveness, above other companies in the business. These factors, together with the experience gained over the long history of the company, allow us to look towards the future with optimism, confident that when the better times announced by Shumpeter inevitably return, we will be the first company to enjoy its positive benefits. Gabriel Escarrer Chairman Sol Meliá Letter from the Chairman Annual Report 2002

12 COMPANY HISTORY

13 Sol Meliá: The story of a dream A dream is born... The embryo of a major company At only 21 years of age, a young and entrepreneurial Gabriel Escarrer Juliá begins to lease and operate his first hotel: the Altair Hotel located in the residential area of Son Armadams (Palma de Majorca, Spain), the first 60 rooms of the future Sol Meliá. 60 s.- The tourism boom of the 1960 s were fundamental to the consolidation of the structure of a growing business. Through reinvestment of profits, increased co-operation with Tour Operators and bank loans, the company began to take shape. The tenacity of Gabriel Escarrer and his team, led by Juan Vives, his charisma and innate flair for sales and marketing would do the rest. 70 s.- This was a time for growth in the Balearic Islands, the most popular destinations on the Spanish mainland and the Canary Islands with the acquisition of the company s first resort hotels. The entrepreneurial vision and spirit of its founder and, once again, a risky but firm commitment to making his name in the hotel business were key to growth Meliá Bali Over a 20 year period, coinciding with the growth of Spain as a travel destination, Escarrer built up a small hotel chain with a strong presence in the Balearic Islands operating as Hoteles Mallorquines until 1976, and also laid the foundations for what is still company philosophy: reinvestment of profits in new hotels, growth through the purchase of other hotel chains and constant renovation of hotel facilities. At the end of the 70 s, Sol Meliá began to consolidate its expansion in Spain with a presence in most of the country s most popular tourism destinations on the mainland and in the Canary Islands, changing its name along the way to Hoteles Sol Time for real growth. In a joint deal with Aresbank (financial representative of the KIO group in Spain), the 32 hotels of the HOTASA chain in Spain were acquired. The purchase meant the beginning of a presence in the city hotel market and the company moved up to number 37 in the world ranking of hotel chains. At the same time, the company also became the largest hotel chain in Spain, a position it has held ever since The company began its international expansion with its first hotel outside Spain: the Bali Sol. The business instincts of Gabriel Escarrer once again led to commercial success as the company became the first international chain to build a hotel in the then-unknown destination of Bali. It seemed like a risky bet. Nowadays all of the major world hotel companies are there, but only one can proudly claim to have been a pioneer Continuing with a policy of growth through acquisition, Hoteles Sol took over Compañía Hotelera del Mediterráneo, including 11 hotels partly owned by the airline British Caledonian. 13 Company Story Annual Report 2002

14 Gran Meliá Cancún 14 and then there was Meliá th. June, 1987 was the date for another milestone in company history. Owned by the Luxembourg-based company Interport, with Giancarlo Parretti at its head, the 22 Meliá hotels were the object of desire of major international hotel groups such as Sheraton or Hilton. Arduous negotiations finally led to Gabriel Escarrer becoming the new Chairman of Hoteles Meliá. Assisted by the international recognition of the Meliá brand, growth continued in Europe, the Americas, the Caribbean, South-east Asia and the Mediterranean. Globalization and diversification became the watchwords of the times. To favor continued growth, the management team was strengthened and changes were made in management procedures and systems (information technology, accounting, quality control, bonus systems, financial management, added values for the 5 key client types, etc...). Faithful to its origins, the company also adopted a management style aimed at encouraging an entrepreneurial and team spirit, with fluid lines of communication and a greater focus on the market and the customer. That same year, the company was named as the recipient of the Príncipe (Prince) Felipe Award for excellence in tourism for its management, growth and contribution to the industry. Going public... New managers arrive The incorporation of Sebastián Escarrer Jaume brought a fresh air and new ways to the company as he began a revolution in Sol Meliá business strategy and implemented the organizational structure that is still in place today Once the new organization and management systems were consolidated, on 2nd. June, 1996, Sol Meliá became the first hotel management company in Europe to be floated on the stock exchange. Prior to the flotation the company had been split into two new entities: Inmotel Inversiones, the owner of hotels, and the new Sol Meliá S.A., a hotel management company and target of the flotation. Company Story Annual Report 2002

15 On 30th. December 1996, the value of the company s shares had increased by 72% and had been incorporated into the IBEX 35 index along with all other major Spanish public companies. Just six months later, the US agency Standard & Poor s granted a credit rating of BBB+, rating Sol Meliá as the most solvent hotel company in Europe and allowing much greater capacity to obtain financing on capital markets. Time for integration: the new Sol Meliá Due to the situation of the international travel industry at the time, characterized by major vertical and horizontal mergers, a strategic decision was made to reintegrate the hotel management and property businesses. The integration ended in 1999 with the take-over of Meliá Inversiones Americanas (MIA) and the merger with Inmotel Inversiones. Meliá Sitges Thanks to these investments, the company established a presence in Europe s foremost capital cities and business and leisure tourism destinations: Rome, Paris and London. The operation provided a strong spur for company growth, and also laid the basis for the company s technological transformation The new Sol Meliá became the 12th. largest hotel group in the world with more than 260 hotels in 27 countries and a market capitalization of 2,300 million euros. After the creation of the new Sol Meliá, another of the Chairman s sons, Gabriel Esca-rrer Jaume, joined the company as Chief Executive Officer. He had held the same position with Inmotel Inversiones, a period during which he brought about an important modernization and adaptation of the company to prepare for merger with Sol Meliá, while also initiating an ambitious and highly successful plan for the renovation of the hotel portfolio In 1999, the company added 27 hotels and purchased 34, further reinforcing and developing its presence in its three Meliá Sitges key natural markets: Latin America, the Mediterranean and major European cities. The investment made in purchases reached 605 million euros. Adapting to a new age: E-Transformation... One of the pillars on which the international growth and development of Sol Meliá has been based has been the company s use at different times in its history of leading technologies. First came the creation of a pioneering Central Reser-vations System (SolRes) and connection with the world s leading GDS systems, followed by the launch of the first website and the incorporation of broadband connections in many hotels. In 1999 there was a further revolution. In 1999, at the height of the new economy, Sol Meliá began to prepare to face the twenty-first century, adapting all of its internal and external operations to the latest modern technology and carrying out a significant technology transformation in 3 specific areas named the Inside, the Sell Side and the Buy Side. 15 Company Story Annual Report 2002

16 Tryp Hoteles, the latest major deal On 21st August, 2000, Sol Meliá sealed its purchase of TRYP Hoteles. With the incorporation of the 60 hotels of the company led by Antonio Briones, Sol Meliá has consolidated its leadership position in both the business and leisure hotel markets in Spain, Latin America and the Caribbean, and its ranking as number 3 in Europe. At the same time, Sol Meliá has achieved a place in the Top Ten hotel companies in the world by number of rooms and has become the undisputed leader of the Spanish city hotel market. Tryp Barcelona Aeropuerto travel industry. The sudden halt and later slow-down in the world travel business was reflected in the annual results of a large number of companies, amongst them Sol Meliá was a difficult year in which political, financial and social instability was the dominant thread. Fortunately it has not all been bad news, and in some cases the crisis has been transformed into an opportunity for progress and improvement. Sol Meliá used the year to consolidate achievements to date and the fruits of its labors are excellent products, one of the best sales forces in the market, modern and fully-integrated distribution systems and a solid financial structure. Years that have left their mark The new year dawned with the optimism created by the launch of a new product based on brand innovation and the focus of the company on 4 major hotel brands: Meliá, Tryp, Sol and Paradisus. An ambitious project aimed at strengthening brand image and awareness and standardization. Then, near the end of the summer there was a tragic event. 11th. September created a new panorama for the planet and severely affected the A dream come true... Sol Meliá ended 2002 with 350 hotels in 30 countries on 4 continents, and with over 36,000 employees. Sol Meliá is the largest hotel company in Spain, Latin America and the Caribbean, the third largest in Europe and number ten in the world ranking. Sol Meliá is also the largest resort hotel chain in the world. Gran Meliá Fénix Company Story Annual Report 2002

17 MILESTONES IN was a difficult year. The expectations of a recovery that existed at the beginning of the year were never confirmed neither by economic growth figures nor company results, and a significant level of uncertainty persisted throughout the year. In this difficult environment, Sol Meliá decided to focus on taking a pause in its exceptional growth to dedicate efforts to the consolidation of company achievements. The fruits of this labor are a more solid and global company, providing more personalized service and superior quality products based on rigorous and specific standards.

18 1 Financial results 18 In spite of the slow-down in the economy, Sol Meliá achieved revenues similar to those of 2001 and ended 2002 with revenues of 1,010.3 million Euros. Funds from hotel operations reached million Euros, a 7% increase over the previous year. Earnings before Interest, Taxes, Depreciation, Amortization and Rentals (EBITDAR) reached million Euros, a 0.5% increase over the previous year, while Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) fell by 3% to million Euros, a figure that was above the average of the majority of competitors who saw results from operations fall by 13%. Average RevPar (revenue per available room) for Sol Meliá hotels reached 45.4 Euros, a 4% decrease over 2001, and RevPar for comparable hotels fell by 1.9%. Average occupancy for hotels in 2002 stood at 66.5%. 1.1 Spain and European capital cities: privileged destinations The positive performance of resort hotels in Spain and city hotels in Europe over the summer period were behind the recovery in the second half of 2002, a period in which EBITDA and EBITDAR increased by 22% and 20%, respectively. At the close of 2002, RevPar for resort hotels in Spain increased by 1% influenced by the excellent results from hotels on the Spanish mainland coast (RevPar + 4%), which compensated the poorer results from hotels on Spanish islands (RevPar 2%). RevPar in the European City Division decreased by 2%, a satisfactory result when compared with the decrease of 7% seen in the first nine months of the year. The incre- Balance Sheet 2001 Dec 2002 Dec 2001 Dec 2000 Million Euros CASH SHORT TERM INVESTMENTS DEBTORS INVENTORY OTHER CURRENT ASSETS CURRENT ASSETS 412, GROSS FIXED ASSETS 2, , ,903.8 ACCUMULATED DEPRECIATION (652.3) (630.0) (550.9) NET FIXED ASSETS 2, , ,352.9 FINANCIAL INVESTMENTS OTHER FIXED ASSETS TOTAL ASSETS 2, , ,945.1 Dec 2002 Dec 2001 Dec 2000 Million Euros TRADE ACCOUNTS PAYABLE SHORT TERM LOANS OTHER SHORT TERM LIABIL CURRENT LIABILITIES LONG TERM LOANS 1, , ,020.1 OTHER LONG TERM LIABIL TOTAL LIABILITIES 1, , ,202.7 MINORITY INTEREST TOTAL COMMON EQUITY , ,352.0 SHAREHOLDERS EQUITY 1, , ,410.9 TOTAL LIABILITIES & EQUITY 2, , ,945.1 Milestones in Financial Results Annual Report 2002

19 ase was largely explained by the positive performance of the Meliá White House in London (United Kingdom) and the positive trends in Madrid over the fourth quarter, where RevPar grew by 26% and 15% respectively. 1.2 Effects of political instability in Latin America and the collapse in travel to Tunisia Net profits were affected by the cost of the disaffiliation process of several hotels acquired during the purchase of the Tryp hotel chain, especially those in Tunisia, and by the provisions made to cover both the joint venture with AOL and the extraordinary losses and negative exchange rate differences created by the devaluation of Latin American currencies. Excluding these effects, net profits would have decreased by 12% to 53.3 million Euros. In this regard, it must be noted that RevPar in hotels in Tunisia fell by 40% in 2002, while the Americas Division saw RevPar fall by 15%. This latter figure was ITEM FIGURES INCR Million Euros Consolidated Sales 1, % EBITDA % Net Profit % Profits to Mother Company % strongly influenced by the Gran Meliá Caracas, a hotel which saw its RevPar decrease by 32% due to the political instability in Venezuela, the net effect of which on results for the Division could not be compensated by the increase of 12% in RevPar from hotels in the Dominican Republic. 1.3 Effects of international uncertainty The uncertainty which dominated 2002 affected the growth of the international economy and, particularly, the travel industry. There were several reasons for this Ratios 19 INTEREST COVERAGE FFO/ NET DEBT 14.8% 14.5% 18.5% NET DEBT / EBITDA 4.9 x 5.0 x 4.2 x EPS SHARE PRICE EBITDA/ NET INTEREST EXPENSE 4.4 x 3.7 x 5.1 x PER X 26.8 X 17.4 X MARKET CAP , , EV/ EBITDA 7.8 X 11.6 X 12.0 X LIQUIDITY CURRENT ASSETS/ CURRENT LIABILITIES 99% 110% 109% FFO/ CURRENT LIABILITIES 40% 40% 61% FFO/ TOTAL DEBT 13% 13% 17% LEVERAGE AVERAGE COST OF DEBT 4.8% 5.5% 5.7% NET DEBT/ TOTAL ASSETS 42.2% 41.3% 37.2% NET DEBT/ MARKET CAP % 76.7% 53.8% NET DEBT 1,132 1,211 1,095 NET DEBT/ TOTAL SHAREHOLDERS' EQUITY 107.0% 105.4% 77.6% * Share price at 31/12/2002: 3.77 euros Milestones in Financial Results Annual Report 2002

20 uncertainty. On the one hand, a certain fear of traveling generated by the terrorist attack in New York was further exacerbated during the year by other attacks in Djerba (Tunisia), Kenya and Bali (Indonesia). Besides practically paralyzing the travel industry in the destinations themselves, these tragic events also provoked a temporary reduction in business and leisure travel in general. On the other hand, the sluggishness of the economy in key travel markets such as Germany and the United States, together with the political and economic instability seen in several Latin American countries such as Argentina, Brazil and Venezuela, also had an influence on the decrease in travel. Income Statement 20 Dec 2002 Dec 2001 Dec 2000 Million Euros Total revenues 1, , Total operating expenses (777.2) (774.8) (631.2) EBITDA EBITDAR Profit/Loss from equity invest. (5.0) (2.7) 1.0 Net interests (53.4) (65.9) (50.9) Exchange rate differences (19.7) 0.7 (0.3) Financial Results (73.1) (65.3) (51.1) Depreciation & amortization (105.8) (94.9) (84.0) Consolidation goodwill amort. (3.0) (2.6) (2.7) Profit/Loss from ordinary activities Extraordinary Results (29.5) Results before taxes and minorities Tax expenses (3.2) (16.0) (26.0) Net result before extraordinaries Group net result Minorities (9.5) (5.7) (6.0) Profit(Loss) to parent company CASH FLOW FROM OPERATIONS Milestones in Financial Results Annual Report 2002

21 Cash Flow Statement CASH FLOW FROM OPERATIONS Dec 2002 Thousand Euro TOTAL FUNDS FROM OPERATIONS 167,450 CHANGE IN WORKING CAPITAL LESS: Incr. Short-term investments (12,336) Incr. Holding of own shares (10,754) Incr. Current accounts with equity affiliates (31) Incr. Trade payable (11,476) Incr. Other payable (12,604) PLUS: Decr. Inventory 11,692 Decr. Receivable 25,586 Decr. Prepaid expenses 764 CHANGE IN WORKING CAPITAL (9,159) CASH FLOW FROM INVESTING LESS: Incr.Start-up expenses (14,195) Increases of Tangible Assets (142,082) Increases of Intangible Assets (24,457) PLUS: Decreases of tangible assets 11,721 Decrease of financial assets 1, TOTAL DIVESTMENTS (167,070) CASH FLOW FROM FINANCING BANK DEBT LESS: Decr. Debenture Bonds Payable S/T (35,288) Decr. Bank loans L/T (130,846) PLUS: Incr. Bank loans S/T 37,163 Incr.Bond Issued L/T 4,803 SUBTOTAL BANK DEBT (124,168) CAPITAL Preferred stock issue 106,886 SUBTOTAL OTHER FINANCING 106,886 OTHER FINANCING Other L/T Debt (6,073) SUBTOTAL OTHER FINANCING (6,073) TOTAL FINANCING (23,356) DIVIDENDS PAID (12,848) INCREASE IN CASH (44,984) BEGINNING CASH 175,832 ENDING CASH 130,849 INCREASE IN NET DEBT (BANK DEBT) (79,185) Milestones in Financial Results Annual Report 2002

22 2 World Tourism: 2002, a year for recognition of the multiplying effect of the travel and tourism industry 22 Fortunately it has not all been bad news, and in some cases the crisis has been transformed into an opportunity for progress and improvement. 2.1 Influence of travel and tourism on the international economy We have spent years, if not decades, lauding the virtues of the travel and tourism industry and its multiplying effects on the economy, especially in developing countries. Thanks to travel and tourism, many previously underdeveloped nations have been able to reduce the poverty of their people. Nations such as the Dominican Republic, Mexico, Brazil or Spain have made travel and tourism their major source of revenue, wealth and employment. Nevertheless, in spite of all of the literature generated on the subject, the industry has had to wait until 2002 to gain official international recognition of its major contribution. Never have so many pages been written in the press nor reports broadcast on TV about tourism as in current times. It began with articles speculating on the effects of the terrorist attacks on the Twin Towers on travel to New York, later on the reduction in transatlantic flights and, after a few months when things seemed to have begun to settle down, on subjects much more positive and enriching as the emergence of new destinations, the contribution of travel and tourism to GNP or the efforts made to improve the quality of products and services. Quantity and quality have merged to locate the travel and tourism industry in the position it has deserved to be for such a long time, at the same time converting the image of an industry at leisure into the image that merits being one of the leading industries in the global economy. According to the World Travel & Tourism Council (WTTC), in 2002 the travel and tourism industry generated direct revenues of 1.2 billion dollars, and indirect Paradisus Riviera Cancún Milestones in Financial Results Annual Report 2002

23 Sol Vielha revenues of 3.3 billion dollars, contributing 3.6% and 10% respectively of global GNP. 2.2 Exceltur: strength through union In parallel, the crisis affecting the travel and tourism industry has also thrown more light on some of the weaknesses in the industry, such as a lack of unity, a need for product quality improvements and insufficient professionalism, deficiencies which, once noted, led to the creation of an unprecedented association, the Alliance for Tourism Excellence, Exceltur. This organization, representing the most important Spanish travel companies, amongst which Sol Meliá was a founder member, has presented a list of recommendations aimed at increasing the competitiveness of Spain as a travel destination before the threat of new emerging destinations that are beginning to attract business and leisure travelers that would previously have chosen Spain. The renovation of accommodations, of complementary services and infrastructures of all kinds, the increase in tourism promotion, both in traditional and alternative markets, the development of specific Research and Development projects for the industry, and the creation of new information systems that allow greater knowledge of customers, amongst others, are just a few of the initiatives proposed by Exceltur. Now that the pillars that have sealed the union are in place, the foundations need to be reinforced before building upon them, little by little, to make Spain not just number two in the ranking of world travel destinations, but number one. Milestones in Financial Results Annual Report 2002

24 3 Commitment to company consolidation At the end of 2002, Sol Meliá successfully achieved its objective of consolidation over the period. The areas for improvement identified at the beginning of the year given their importance to the company and their effects over the short, medium and long term, were service, product and distribution channels. 3.1 The best people At the end of 2002, more than 200 people have been promoted to Head of Department, both in hotels and corporate offices, and more than 100 have begun individual Development Plans to prepare them to take up management positions. 40 managers have also been promoted to the position of Hotel General Manager and another 40 have begun specialist training courses to prepare them to assume the same role. These human resources policies, based on personalized Internal Development Programs, allow Sol Meliá to cover 97% of its Hotel General Manager appointments and 60% of its Head of Department vacancies through internal promotion. 24 In a services company, the people that form part of that company is one of the key factors in its success. An indication of their importance is that one of the objectives included in the bonuses of hotel and corporate managers for 2002 was employee satisfaction. The more than 36,000 people that work for Sol Meliá are, in large part, the base upon which the company has been able to grow worldwide, as well as the people responsible for ensuring the satisfaction of the millions of guests that stay in company hotels each year. According to the research by infratest, a leading brand consultancy, the friendliness and attention to detail of our staff is one of the aspects most appreciated by our guests. Andrés Encinas Executive Vice President European Division These activities have favored the globalization of the company s workforce. Traditionally almost all of the company s Hotel General Managers, both in Spain and abroad, were Spanish. Those positions are now covered by people from all over the world. The evolution of society and the growing importance of women in the workforce has also seen its reflection in Sol Meliá, with an increasing number of women promoted to senior and middle management positions in company hotels Sol Meliá growth: the secret is in the professional development of our people Meliá Sitges Thanks to all of this, Sol Meliá has been able to successfully absorb the significant growth seen in recent years, with the number of hotels more than doubling from the 173 hotels in 1995 to 350 hotels at the end of The secret of this success has been to prepare for tomorrow today. With this in mind, and with an eye to the future, the human resources objectives set for 2002 and 2003 Milestones in Financial Results Annual Report 2002

25 Gran Meliá Salinas have focused on investment in employee development ready to face the new growth objectives of the company Training in personalized service: Everything is Possible The quality and personalization of the service provided to increasingly discerning guests has always been one of the priority concerns of Sol Meliá. Compliance with this premise depends, to a large degree, on the training received by all of our employees. In 2002 the Human Resources Department directly invested 3.5 million Euros in training. The Department also implemented the Everything is Possible campaign in all of the company s hotels, including a 3-day intensive course based around service quality and customer service given to all hotel staff. In Spain alone, more than 6,000 people attended the courses. The Everything is Possible project also included the implementation in all hotels of a Quality Improvement Program which, amongst other measures, included the creation of a new figure in the hotel organization: the Quality Manager Serviexpress Guarantee: superior quality Sol Meliá, a company that has always been a pioneer in product development, has created a new Serviexpress Guarantee which aims to achieve even higher levels of personalized service to increasingly experienced travelers. Guests in the hotels providing the service can use a new phone hotline to report any problems with their room and are guaranteed to get a response from hotel management within fifteen minutes. The hotel guarantees that within the space of one hour it will resolve the problem or, if not, offer a one night stay free of charge. The service is currently available in several Meliá hotels in Spain, amongst which are the Gran Meliá Fénix, the Meliá Madrid Princesa and the Meliá Galgos, all three in Madrid Alliances with educational centers The consolidation and maintenance of Spain as one of the leading travel destinations in the world depends in part on an ability to increase tourism quality through improvements in training. In this respect, Sol Meliá has reached several agreements with different educational and training centers, including the Instituto de Empresa (Business Institute) and the University of the Balearic Islands (UIB). The hotel chain has signed an agreement with the UIB which founded the Sol Meliá Chair in Tourism Research to promote the development of training activities to favor the publication of research on the travel and tourism industry from the economic, geographic, legal and social perspectives, and will also provide an annual Gabriel Escarrer Tourism Research Award, with annual funding of 60,000 Euros provided by Sol Meliá. 25 Milestones in Financial Results Annual Report 2002

26 Meliá Bali

27 3.1.5 Decentralized human resources management The growing international presence of Sol Meliá and the different cultures of new locations has led the company to opt for decentralization in its Human Resources functions, creating regional Human Resources Departments in each of the areas in which the company has hotels. This decentralization has allowed greater speed and flexibility in the selection of candidates and the adaptation of training and development policies to the people and the needs of each country. 3.2 The best product: one of the factors that has the greatest influence on customer loyalty. After the approval in 2001 of a new brand structure, in 2002 Sol Meliá carried out a thorough analysis of our product and service standards based on internal and external benchmarks as well as the recommendations of Infratest, a leading consultancy in brand management. This has allowed us to clearly identify the positive aspects perceived and expected by our customers, as well as the differentiating features of each of the chain s four hotel brands: Meliá, Tryp, Sol and Paradisus. According to the research, the friendliness and attention to detail of our staff is one of the aspects most appreciated by our guests. Since its creation in 1956, Sol Meliá has been able to achieve an enviable position with respect to the vast majority of international hotel companies: leader of both the city and resort hotel markets in Spain, leading hotel chain in Latin America and the Caribbean, third largest chain in Europe and tenth largest in the world. Furthermore, the origins of the company and the experience gained in the sun and sand hotel business have allowed it to become, over many years, the leading resort hotel company on the planet. A large part of this success is due to the excellent hotels the company operates, formed at the end of 2002 by 350 hotels and 87,717 rooms in 30 countries on 4 continents Strengthening brand standards When a customer chooses a hotel chain over an independent hotel, they generally do so due to the confidence they have that the hotel chain will provide them with certain standards that can be expected in all of the company s hotels. This brand recognition is Paradisus Río de Oro One of our achievements in 2002 was the consolidation of our product and service standards. A thorough analysis helped us to identify the positive attributes perceived and expected by our customers, as well as the differentiating factors of each of our four brands: Meliá. Tryp, Sol and Paradisus. Luis del Olmo Executive Vice President Sales & Marketing Another of the consequences of the analysis was the repositioning of some of the company s flagship properties, for example, the Hotel Fénix (Madrid, Spain), which after a thorough renovation and refurbishment has been added to the prestigious Gran Meliá category, a brand which has also seen the incorporation of the previously named Meliá Cancun (Mexico), also the subject of an ambitious renovation program. The company s commitment to the growth of the Paradisus brand also led it to rebrand two properties that previously flew the Meliá flag: the new Paradisus Río de Oro (Holguín, Cuba) and the Paradisus Playa Conchal (Costa Rica). In 2003, the company will continue to develop brand standardization and consistency by promoting those attributes most appreciated by guests and their implementation in all company hotels. The efforts made in branding saw Sol Meliá receive the Leading brand in the Travel and Tourism industry in Spain from the leading economics magazine Actualidad 27 Milestones in Financial Results Annual Report 2002

28 Económica. The magazine also indicated that Sol Meliá is the 12th best-known Spanish brand in the country New development and disaffiliation policies With standardization as the priority objective, 2002 also saw the implementation of new policies on hotel development and disaffiliation characterized by more selective criteria and the consideration of profitability above all else Was a year for the consolidation of our hotel portfolio and the beginning of the process of disaffiliation of hotels with weak profitability or poor compliance with brand standards. The beginning of more selective growth. Ángel A. Palomino Executive Vice President Hotel Development & Owner Relations With regard to disaffiliations, the hotels affected were those located in non-strategic or problematic destinations or those that did not comply with brand standards. The disaffiliations have reduced the company s exposure to certain destinations such as Tunisia and have improved general quality levels and brand consistency in the hotel portfolio. With regard to hotel development strategy, Sol Meliá has already signed agreements to add close to 30 hotels over the next two years. The regions selected are those in which Sol Meliá is already a market leader, such as in Europe, especially in Spain, and Latin America and the Caribbean, aiming to further consolidate our leadership position. 28 Within this framework, during the year Sol Meliá ceased operations in a total of 24 hotels, mainly in Spain and the Middle East and North Africa, in countries such as Lebanon, Morocco, Tunisia and Turkey, while also adding 22 new hotels A modern, high quality hotel portfolio Thanks to more selective growth and to the enormous efforts made in recent years to renovate our hotel portfolio, the company may now boast that 75% of our hotels have been thoroughly renovated or added over the last 5 years. Milestones in Financial Results Annual Report 2002

29 The improvements included aspects of design and decoration, and also aspects related to technology, an area in which Sol Meliá has been a pioneer and market leader in the use of the latest generation Customer Relationship Management systems from Siebel to integrate sales forces with hotels, and with the implementation of SAP, firstly in Spain and then in Europe and the Americas. Sol Meliá is now one of the most modern hotel companies in the world. This fact has also been recognized by the award of major prizes and certifications to company hotels, especially those adjudicated by the outstanding tour operators in the UK and Germany. Sol Meliá also reached an agreement with the Spanish Secretary General for Tourism for the implementation of the Q for Quality insignia granted by the Spanish Hotel Quality Institute, an initiative contained within the Spanish Tourism Quality Plan which aims to increase the competitiveness of the Spanish travel and tourism industry Cost savings through standardization Standardization has been one of the elements used by Sol Meliá to achieve its cost reduction objectives set for 2002 given the situation in the industry. Thanks to standardization and other factors such as the rationalization of functions and the implementation of SAP procurement systems, the company has made savings of 31.7 million Euros Was the second year for implementation of new administration systems and a year which saw the consolidation of the significant transformation carried out in hotels and corporate offices in 2001, as well as extending the application of the systems to the majority of owned and managed hotels in Europe and Latin america. Mark Hoddinott Executive Vice President Administration Strong asset base and asset quality As well as a positive performance with regard to quality and profitability, Sol Meliá is also characterized by its strong asset base and the quality of those assets, with 90 hotels with a total value of 2,700 million Euros, and a total company asset value of 3,300 million Euros. The generation of cash flows, together with the quality of the mentioned assets, of which only 15% are mortgaged, allow the company to feel comfortable about its future financial situation. 3.3 The best distribution channels: The word that best defines Sol Meliá is diversification. This applies both to the geographical distribution of the company, in 30 countries on 4 continents, and to the type of hotels it operates, city and resort hotels from 3 stars to 5 star deluxe. But it also applies to distribution, an area in which the company continues to work closely with traditional channels while also opening up new direct sales channels online. All companies have to sell, and to do so they need a solid sales network and reliable and flexible distribution channels. In a difficult market such as was seen in 2002, Sol Meliá has focused heavily on its sales and distribution efforts and systems, reorganizing some and innovating in others. 29 One of the most noteworthy aspects of the cost reduction program is that it has had no negative affect on customer satisfaction in questionnaires. The opposite in fact. Our Quality Control program has seen the rating for our product and service quality increase by 8 points on a scale of 15 over the last 3 years. Meliá Colbert Boutique Hotel Reorganization of the sales office network Over the year 2002, Sol Meliá has designed a new sales network, reinforcing the International Sales Offices in feeder markets. The sales force has grown by 19% and now consists of 24 sales people in a European sales force focused mainly Milestones in Financial Results Annual Report 2002

30 30 Meliá Trujillo Boutique Hotel on the UK, France, Italy and Germany, and a further 110 people based in Spain. In the Americas, we now have 55 sales people focused on all major US cities Traditional distribution channels One of the characteristics of sol meliá is its solid asset base and the quality of those assets, with a total value of 3,300 million euros. The generation of cash flows, together with the quality of those assets allow the company to feel comfortable about its future financial situation. Onofre Servera Chief Financial Officer Sol Meliá has written many pages in its history thanks to the close cooperation with both tour operators and travel agencies, loyal allies with which the company aims to continue to work in close co-operation for many years to come. Highlights in 2002 included positive developments in the Spanish vacation market due in large part to increased sales through the country s major tour operators such as Iberojet, TravelPlan or El Corte Inglés- Tourmundial, amongst others. With regard to travel agencies, 2002 also witnessed international agreements being signed with major travel groups such as Carlson Wagonlit and American Express, amongst others Sirius: a revolutionary hospitality system 2002 was also witness to the implementation of a new technology platform which marked a major change in hotel management systems. The platform was baptized Sirius, an integrated multi-channel distribution system which allows direct connections with hotels and with distribution systems: Central Reservations Systems, solmelia.com, GDS s, Pegasus and extranets. This innovative system allows online distribution of hotel availability to the mentioned systems and real-time reser- Milestones in Financial Results Annual Report 2002

31 Hotel Hotel Hotel Hotel Hotel Hotel Hotel Hotel Hotel Hotel Hotel SIRIUS Sistemas de Distribución Voice solmelia.com GDS Pegasus Extranets Europe Miami Mexico Brazil More than 6,000 calls per day More than 25,000 visitors per day Amadeus Galileo Sabre Worldspan Expedia Lastminute Travelocity 500,000 terminals Travel Webs More than 40 travel webs Hotels.com Orbitz Travelweb 2002 Saw the release of the new solmelia.com, the launch of the new crm system and the consolidation of the use of sap throughout the organization after implementation in Europe and America. The technological advances made by Sol Meliá in 2002 have been astounding. Antonio Díaz Director Information Systems vations, allowing the company to provide better service to customers, implement yield management systems and increase direct sales Direct sales: unlimited potential Although the relationship Sol Meliá maintains with travel agencies and tour operators has always been extremely close, and still is, the company is aware that social changes have created a new type of customer: experienced travelers that prefer to make their bookings directly, with no help from intermediaries. To attend to the needs of this important niche market, Sol Meliá has decided to continue to focus on direct sales channels. With regard to telephone reservations, at the end of 2002 direct sales to individuals and groups made through the SolRes Central Reservations Service grew by 15% and 52%, respectively. Over the year, the three call centers in Madrid, Mexico and Miami attended to 1,298,000 calls, with an average of 6,000 calls a day. The revenues generated by bookings through SolRes and the GDS systems Amadeus, Galileo, Sabre and Worldspan grew to 158 million Euros. The website offers services in Spanish, English and German and includes microsites for each of the company brands and hotels, allowing hotels to provide full descriptions of their products, services and special offers. At the close of 2002, the Sol Meliá website was getting an average of 25,000 visits a day and had achieved growth in sales of 184% with respect to the previous year. 31 One of the most important achievements in 2002 in the field of direct sales was the launch of the new solmelia.com. With a much more sales-oriented design and a focus on personalization, the company expects the new website to become a major direct sales channel, as well as a fundamental tool for achieving a greater knowledge of our customers and greater brand awareness. Milestones in Financial Results Annual Report 2002

32 Good Governance Code Report In 1996, coinciding with the company IPO, in a pioneering move in Spain, Sol Meliá began a profound reform of its company Articles of Association to adapt them to the recommended criteria of corporate governance. On 22nd. January, 1999, the company Board of Directors approved regulations that govern the rules for internal organization and internal control of corporate governance, adapting them to the recommendations of the Good Governance Code for Public Companies published in February 1998 by the Special Commission for the study of an Ethical Code for Company Board of Directors, as well as the Standard Regulations for the Board of Directors adjusted to meet requirements of the Good Governance Code, published in May 1998 by the Spanish Stock Exchange Commission (CNMV). The mentioned Regulations for the Board of Directors may be viewed in on the website of the CNMV and are also available to shareholders at company headquarters. As a consequence of the approval of Law 44/2002 of the 22nd. November regarding the Reform of the Financial System ( Law 44/02 ), the company has begun a process of adaptation to the new legal framework contained in the Law. The present section thus describes, on the one hand, the way in which, at 31st. December, 2002, the company Articles of Association, Regulations for the Board of Directors and practices comply with the recommendations in the Good Governance Code for Public Companies and, on the other hand, the situation after that date, with particular detail on the adjustments made by the company to adapt to the requirements of the mentioned Law. 33 Good Governance Code Report Annual Report 2002

33 I Corporate governance report at 31st. December, Functions of the Board of Directors. That the Board of Directors should explicitly assume as the nucleus of their mission the general function of supervision; exercise without delegation the responsibilities this implies; and establish a formal record of the items reserved for their knowledge. Article 34 of the company Articles of Association states that the Board of Directors is responsible for the representation, direction and administration of the company with respect to all of the activities undertaken within the objectives of the company as limited by the company Articles of Association, as well as those activities required by Law and the company Articles of Association, and without prejudice to those activities specifically reserved for them at the General Shareholders Meeting. The mentioned Article details the legal acts or business which are within the competence of the Board of Directors. f) The definition of policies on the communication of information to shareholders, markets and the public. g) The policies that require the availability of substantial company assets and major transactions. Article 6 of the Regulations for the Board of Directors establishes the maximization of the value of the company as the priority criteria for the Board, indicating the guidelines to be followed by the Board to define and review company business and financial strategies. The same Article also establishes the responsibility of the Board to adopt appropriate measures to ensure that company management pursues the creation of value for shareholders and provides appropriate incentives to achieve this end, under the effective supervision of the Board, as well as that no person or small group of people acquire a level of decision-making authority that is not subject to appropriate control, and that no shareholder receives preferential treatment above any other. 2. Independent Directors. Article 5 of the Regulations for the Board of Directors clearly defines the general supervision function of the Board of Directors, specifying as matters within their competence: "That the Board of Directors includes a reasonable number of independent Directors that are persons of professional prestige unrelated to the company management team nor significant shareholders". a) The approval of general company strategy. b) The appointment, compensation and, if appropriate, dismissal of senior company managers. c) The approval of policies on holding of company shares. d) The control of senior management performance and evaluation. e) The identification of risk factors, especially those that are generated by operations involving financial derivatives, and the implementation and monitoring of appropriate internal control and information systems. Article 31 of the company Articles of Association specifies the requirements for Independent Directors. The same Article states that, without prejudice to the stipulations of Company Law, and to guarantee the independent criteria of the Board and the defense of the best interests of the company and its minority shareholders, at least one third (1/3) of the members of the Board of Directors must be Independent Directors. The Board of Directors of the company on 31st. December, 2002 consisted of seven non-independent Directors and five Independent Directors. The Good Governance Code Report Annual Report 2002

34 Independent Directors were designated bearing in mind their significant professional qualifications and prestige and their lack of relations with the management team and controlling shareholders. 3. Composition of the Board of Directors. "That external Directors (representatives of majority shareholders and independents) should represent a large majority of the members of the Board of Directors with respect to company executives and that the proportion between representatives of majority shareholders and independents should be established bearing in mind the relation that exists between majority and minority shareholders". 4. Number of Directors "That the Board of Directors adjusts its size in order to achieve more efficient and participative operations. In principal, the appropriate size may oscillate between five and fifteen members ". According to the company Articles of Association, Article 31.2, The Board of Directors should consist of a minimum of five and a maximum of twenty members chosen by the General Shareholders Meeting. On 31st. December, 2002, the Board of Directors comprised 12 members in compliance with the Good Governance Code. The Sol Meliá, S.A. Board of Directors at 31st. December, 2002 comprised: 5. The Chairman of the Board of Directors Executive Chairman D.Gabriel Escarrer Juliá Non-Executive Vice Chairman D.Juan Vives Cerdá Executive Director Non-Independent Director (Representative) Executive Vice Chairman and Chief Executive Officer D. Sebastián Escarrer Jaume Executive Director Chief Executive Officer D. Gabriel Escarrer Jaume Executive Director Members of the Board D. Oscar Ruiz del Río External Director AILEMLOS S.L., represented by D. Ariel Mazín Mor Non-Independent Director (Representative) Hoteles Mallorquines Consolidados S.A., represented by Dña. María Antonia Escarrer Jaume Non-Independent Director (Representative) D. Eduardo Punset Casal Independent Director D. Alfredo Pastor Bodmer Independent Director D. José Joaquín Puig de la Bellacasa Urdampilleta Independent Director D. Emilio Cuatrecasas Figueras Independent Director Secretary of the Board D. José María Lafuente López Independent Director "That, should the Board opt to combine the roles of Chairman and Chief Executive in one person, the Board should adopt all necessary cautionary measures to reduce the risks of concentration of power in one person". Sol Meliá S.A. has also adopted this recommendation given that the Chairman of the Board of Directors has not been delegated all of the faculties of the Board of Directors. At the same time a number of additional measures are in place to ensure compliance: appointment of two Vice Chairmen, two Chief Executive Officers, and creation of two delegate commissions (Audit and Compliance Commission and Appointments and Remuneration Commission), as described in a later section of this report. 6. The Secretary of the Board of Directors "That the figure of Secretary of the Board be given far greater relevance, reinforcing their independence and stability and highlighting their function to ensure the formal and material legality of the actions of the Board ". Article 33 of the company Articles of Association, as well as the Regulations of the Board of Directors, in its 35 Good Governance Code Report Annual Report 2002

35 36 Article 12, highlight the figure of the Secretary of the of the Board of Directors placing amongst his functions to support the Chairman in his labors and to provide directors with the advice and information they require as well as conserving all documentation and maintaining minutes on the development of the sessions and agreements reached. Directors are also formally committed to appointing a person that is capable of performing the role appropriately as Secretary. The current Secretary of the Board of Directors is an Independent Director. 7. The Executive Commission "That the Executive Commission, wherever such exists, should reflect the same balance as the Board between different types of Directors and that the relations between both bodies is based on principals of transparency, in such a way that the Board is fully aware of the matters dealt with and decisions made by the Commission ". Article 39 of the company Articles of Association foresees the possibility of the constitution of such a commission, although it has not been deemed necessary to date given that a full meeting of the Board has always been called whenever it has been required. accountancy principles and the provision of financial information adapted to those principles, as well as examining compliance with the internal regulations governing compliance with Stock Markets, the Regulations of the Board of Directors and the governance rules of the company. On 31st. March, 2003, the Board of Directors of Sol Meliá S.A. approved a proposal to modify company Articles of Association, incorporating a new Article 39 bis. which will be presented for approval at the Annual General Shareholders Meeting on 6th. May, The new Article regulates the Audit Commission of the Board of Directors in company Articles of Association as required by Law 44/ Appointments and Remuneration Commission, which includes amongst its basic functions the formulation and revision of the criteria that must be followed to form the Board of Directors and the selection of candidates, the proposal to the Board of appointments of Directors and of members that should form part of Commissions, the periodic review of remuneration policies, the supervision of the transparency of remuneration and information on transactions that may imply conflicts of interests and, in general, for the items included in Chapter VIII of the Regulations of the Board of Directors regarding the Duties of Directors. 8. Delegate Control Commissions "That the Board of Directors creates within its ranks delegate control commissions, made up exclusively of external Directors, to monitor accounts information and control (Audits); selection of Directors and senior management (Appointments); remuneration policies and reviews (Remuneration); and the evaluation of governance (Compliance)". On 23rd. February, 1999, the Board of Directors agreed to create, in line with Article 14 of the Regulations of the Board, the following delegate commissions: 1. Audit and Compliance Commission, which includes amongst its functions the proposal of Auditors, the review of annual accounts and of compliance with legal requirements, correct application of The Commissions are currently formed by the following members. Audit and Compliance Commission José María Lafuente López (Independent Director), Chairman Eduardo Punset Casal (Independent Director) Sebastián Escarrer Jaume (Executive Director) Mark Hoddinott (Executive Vice President Administration), Secretary, non-member of the Commission Appointments and Remuneration Commission Gabriel Escarrer Jaume (Executive Director) Sebastián Escarrer Jaume (Executive Director) José Joaquín Puig de la Bellacasa Urdampilleta (Independent Director) Good Governance Code Report Annual Report 2002

36 9. Information to the Directors "That all necessary measures are taken to ensure that Directors are provided sufficiently in advance with the information they require, specifically prepared to assist in the duties of the Board without prejudice, except in exceptional circumstances, to the importance or reserved nature of the information ". 11. Selection and re-election of Directors "Que la intervención del Consejo en la selección y reelección de sus miembros se atenga a un procedimiento formal y transparente, a partir de una propuesta razonada de la Comisión de Nombramientos". The Regulations of the Board of Directors in its Article 19 foresees that Board meetings are convened by letter, fax, telegram or authorized by the signature of the Chairman or the Secretary on behalf of the Chairman. They also foresee the possibility that extraordinary sessions of the Board are convened by telephone whenever the Chairman may feel that circumstances make this appropriate. In compliance with Article of the company Articles of Association, this communication must include the agenda for the session along with a summary of the information required. Under normal circumstances the information will be provided to Directors fifteen days in advance. Article 16 of the Regulations states that the Appointments and Remuneration Commission should formulate and revise the criteria to be applied to the composition of the Board of Directors and the selection of candidates. The Commission must thus propose the appointment of Directors so that the Board may directly approve them or submit such a decision to the General Shareholders Meeting. According to Article 31.3 of the company Articles of Association, at least one third of the members of the Board must be Independent Directors. These should be persons of acknowledged prestige with no relation to the executive team or Major Shareholders (as defined in Royal Decree 377/1991, of 15th. March) Functions of the Board of Directors "That, to ensure the appropriate performance of the duties of the Board, meetings should be held with the frequency required to allow achievement of objectives; that the Chairman should encourage the intervention and independence of mind of all Directors; that special care should be taken with the taking of minutes and that an assessment of the quality and efficiency of the work of the Board should be carried out at least once per year ". The Board of Directors, as stated in Article 35.1 of the company Articles of Association, must meet at least five times per year and whenever the interests of the company require, whenever decided by the Chairman or by his substitute, or on request of at least one third of the members of the Board, in which case the Chairman should convene a Meeting of the Board within a period of ten days from such a request. During the year 2002, a total of six Meetings of the Board were held. 12. Resignation of Directors "That companies include in their regulations an obligation that Directors resign in circumstances which might have a negative effect of the functioning of the Board or the credit or reputation of the company ". The company Articles of Association state that the absence of any Director at three consecutive meeting of the Board or at any four meetings within the same financial year, without appropriate justification, will give ground to the Board to declare that Directors automatic release from his position and to then designate a provisional successor until such may be submitted to the next General Shareholders Meeting for ratification. Chapter VIII of the Regulations of the Board of Directors also establishes the general duties and obligations of Directors, as described in Recommendation 16 later in this section. Good Governance Code Report Annual Report 2002

37 Age of the Directors "That a maximum age is set for the position of Director, that may be between sixty five and seventy for Executive Directors and the Chairman, and more flexible for other members of the Board". Neither the Regulations of the Board nor the company Articles of Association include maximum limits on the age of Directors. 14. Information for Directors "That there is formal recognition of the right of all Directors to gather and obtain the information and advice required to perform their supervisory duties, and that appropriate means are established to allow this right to be exercised, including the use of external experts in special circumstances ". As stated in Article 35.8 of the company Articles of Association, in the performance of their duties Directors have the right to request the professional assistance of company executives and internal advisors. They must also have free and direct access either personally or through others delegated by them to all of the company s books and files, unless the Chairman refuses such right in defense of the interests of the company. Such a refusal will not be permitted whenever the Director in question has requested and obtained a favorable vote of at least twenty five per cent (25%) of the shareholders with voting rights, as expressed in the General Shareholders Meeting. This right is also detailed in Chapter VI of the Regulations of the Board of Directors. 15. Remuneration of Directors "That the remuneration policy applied to Directors, the proposal, evaluation and revision of which should be carried out by the Remuneration Committee, should reflect moderation and company performance with detailed and personalized information". As stated in Article 37 of the company Articles of Association, Independent Directors receive an amount of one million five hundred thousand pesetas (9,015 Euros) for their attendance at each session. This amount may be increased on agreement by the Board in proportion with any increase in the consolidated profits of the company, without prejudice to its posterior ratification by the General Shareholders Meeting, either explicitly or through approval of the Annual Accounts. The remuneration of Non-independent Directors will consist of a fixed annual amount, the same for all of them, to be defined or ratified by the General Shareholders Meeting, without prejudice to the payment of fees or other amounts that may be due from the company for the provision of professional services or derived from their private work as may be the case. Remuneration will be paid out after the end of the month in which it may have been earned to ensure that it is proportional to the time that the Director may have served on the Board during the year. The amounts paid by the company to members of the Board of Directors in 2002 were as follows: CONCEPT (Thousands of Euros) 16. General duties of Directors and conflicts of interest "That the internal regulations of the company detail the obligations derived from the general duties of diligence and loyalty expected of Directors, including, specifically, matters relating to conflicts of interest, confidentiality requirements, the exploitation of business opportunities and the use of company assets ". Article 26 of the Regulations of the Board of Directors and others indicate the obligations of Directors. The most relevant obligations are: AMOUNT Meeting Attendance 367 Civil Liability Insurance 54 Remuneration 665 TOTAL 1,086 Good Governance Code Report Annual Report 2002

38 1. The Director must maintain confidentiality regarding the deliberations of the Board and the delegate Commissions of which they may form part and, in general, must abstain from revealing information to which they have had access due to their position. The aforementioned confidentiality must be maintained even after such person ceases to be a Director. 2. The Director may not occupy management positions in companies whose mission or nature is partially analogous with that of the company, with the exception of other companies controlled by the group. Before accepting any management position with another company, the Director must consult the Appointments and Remuneration Commission. 3. The Director may abstain from attending or intervening in deliberations that may affect matters in which they may be personally involved. Personal involvement is also understood to include matters which may affect a member of their family or a company in which they may perform an executive function or has a significant shareholding. 4. The Director may not carry out, neither directly nor indirectly, commercial transactions with the company, except when the Board of Directors, after a report from the Appointments and Remuneration Committee, authorizes such a transaction. 5. In the performance of their duties, the Independent Directors must declare any developments in their relations with the company, controlling shareholders or companies associated with controlling shareholders. Such declarations will be noted in the Register of Declarations of members of the Board of Directors. The Auditors Report will expressly refer to the relevant relations declared and registered by Independent Directors. 6. Directors may not make use of company assets nor their position to obtain private advantage other than when there is an appropriate corresponding advantage for the company. 7. The private use by a Director of company information that is not public information will only be permitted whenever such information is not used in connection with the purchase or sale of company shares, its use does not cause any damage to the company, and that the company does not hold a right to exclusivity or similar right on such information. 8. The Director may not use a company business opportunity for their private benefit or benefit of associates, unless the opportunity is first offered to the company and then rejected by the company and its use authorized by the Board after a Report by the Appointments and Remuneration Committee. 9. The Director infringes his duties of loyalty to the company if, in his knowledge, they allow or do not reveal transactions or operations by family members or companies in which he performs an executive function or has a significant shareholding. 10. The Director must inform the company about the shares in the company which they hold personally or through companies in which they have a significant shareholding. He must also inform about any shareholdings directly or indirectly held by close family members. He must also inform the company about all of the positions held and activities carried out in other companies whenever relevant. 17. Transactions with major shareholders "That the Board of Directors should promote the adoption of appropriate measures to extend the duties of loyalty to major shareholders, establishing, specifically, cautionary procedures relating to any transactions carried out between such shareholders and the company ". This recommendation is in place and regulated in Articles 35 and 36 of the Regulations of the Board concerning hypothetical relevant transactions that may occur between major shareholders. Specifically, the Board of Directors will not authorize any transactions that are not the subject of a report by the Appointments and Remuneration Commission, evaluating the transaction from the point of view of the equality of treatment of shareholders and market conditions. The Board of Directors must also summarize in its annual public communications any transactions carried out by the company with Directors and major shareholders. 18. Communication with shareholders "That measures are taken to make mechanisms for delegating votes more transparent and to reinforce communications between the company and its shareholders, particularly with institutional investors". 39 Good Governance Code Report Annual Report 2002

39 40 As established in Article of the company Articles of Association, the Board of Directors may demand that in the convening of the General Shareholders Meeting the company is in possession of the delegation of representation by shareholders at least two days before the day on which the General Shareholders Meeting is to be held, specifically indicating the name of the corresponding representative. This representation must be assigned in writing for each General Shareholders Meeting within the terms established by Company Law. During 2002, the company Investor Relations Department has carried out a number of activities focused on communication with company shareholders. As is becoming customary, road shows have been held in major European cities including Madrid, London and Paris. The road shows in 2002 have served to inform on company performance and also the consequences of the terrorist attacks of September 11th., 2001 and the affect of the build-up to the conflict in Iraq on the travel industry and company results. The most important road shows were those held in April, July and December with visits to investors in London and Paris. The visits to London were organized by UBS Warburg en April and Cazenove in July, while the visit to Paris in December was organized by Credit Lyonais. The main events attended by the company were: Credit Suisse First Boston Lodging Conference in Paris in January. Small and Mid Caps organized by BSCH in Madrid in February In the month of May the company took part as speaker in the conferences: Fixed Income & Credit Derivatives organized by JP Morgan and Company Entry in Capital Markets organized by ABN Amro and the Global Borrower & Investor Forum in London in June. Schroder Salomon Smith Barney Hotels Conference in London in November. Amongst the specific communications on non-recurrent company events, the most noteworthy are the communication in the second quarter during the subscription period for the issue of Preferential Shares made by a company subsidiary in April and the creation of a shareholder hotline. Solmelia.com also provides shareholders with easy and comfortable access to company financial information, including all of the information made available to the market: financial results, share price, etc. All of the activities described in this section are carried out in observance of the regulations of the stock market and after providing, if required, the corresponding reports to the Spanish Stock Exchange Commission (CNMV) for publication. Sol Meliá also operates an Investors Club to provide regular financial information to those shareholders that request such information, as well as other benefits including an investors Hotline, regular information bulletins and other relevant company information. 19. General information "That the Board of Directors, over and above the requirements of existing legislation, should assume responsibility for providing the markets with rapid, precise and reliable information, particularly regarding the shareholder structure, substantial modifications to the rules of governance, particularly relevant deals or operations and company shareholdings". As indicated in Article 38 of the Regulations of the Board, the company has provided information considered to be of sufficient detail and through the appropriate channels (Statements to CMNV, regular published information, communications regarding majority shareholders, other communications, etc.), on matters regarding the share price and any other matter considered relevant, as well as regular information on the company rules of governance. 20. Financial information "That all of the regular financial information as well as the annual information offered to the markets is generated using the same professional principles and practices as the annual accounts and that, before being published, are verified by the Audit Commission". Good Governance Code Report Annual Report 2002

40 Amongst their duties, the Board of Directors, along with the Audit and Compliance Commission are entrusted with the duty of providing financial information to the markets following the same professional principles, criteria and practices as those employed in the production of the annual accounts. Financial analysts have also been kept informed through conference calls on quarterly results after their presentation and registration with the CNMV. 21. External Auditors 23. Information on Governance rules That the Board of Directors include in their Annual Report information on their Governance rules, providing explanations for any that do not comply with the recommendations contained within this Code. This report aims to clearly and precisely reflect the degree to which the recommendations of the Code of Good Governance has been implemented in the company, and particularly in regard to the obligations, duties and procedures followed by the Sol Meliá, S.A. Board of Directors so as to comply with said recommendations. "That the Board of Directors and the Audit Commission supervise situations that may present a risk to the independence of the company s external auditors and, specifically, that they verify the amounts paid to external auditors as a percentage of the total revenues of the auditing firm, and that they make public information on fees paid for services other than audits ". The Board of Directors and Audit and Compliance Commission have made an analysis of the possible risks regarding the independence of external auditors. 41 That total amount paid to the external auditor Ernst & Young reached 999, Euros in Production of the Annual Accounts "That the Board of Directors should avoid presenting accounts to the General Shareholders Meeting that contain exceptions and reservations in the auditors report, and that, whenever this is not possible, both the Board of Directors and the auditors must clearly explain to shareholders and to the market the content and scope of the discrepancies". This recommendation is included in article 39 of the Regulations of the Board, establishing that the Board of Directors and, in particular, the Audit and Compliance Commission, ensure that Auditors have access to all of the documentation and information that may be relevant for the performance of their duties, as well as that the Annual Accounts are drawn up in such a way that exceptions and reservations are not required. Good Governance Code Report Annual Report 2002

41 II Adaptation to Law 44/02 and analysis of recommendations on corporate governance 42 Article 47 of Law 44/02 has introduced additional amendments to the regulations of Law 24/1988, of 28th. July, regarding the Stock Market ( Law 24/88 ), in relation to the regulation, composition and minimum competences of the Audit Committee. As a consequence of the new regulations, the company Board of Directors will propose to the Ordinary and Extraordinary Annual General Meeting to be held on 6th. May, 2003, or 7th. May, 2003 if required due to lack of quorum in the first instance, the modification of the company Articles of Association to include a new Article (39 bis) which will regulate the Audit Commission as specified in Law 24/88. As mentioned, the said Commission (currently named Audit and Compliance Commission ) is regulated by the Regulations of the Board of Directors, which will be modified to adapt them to the new requirements of the Law. The regulation of the Audit Commission in the new Article of the company Articles of Association will adapt and complete as appropriate the regulations that currently apply to the Audit and Compliance Commission in the company Regulations of the Board of Directors. Law 44/02, in its Article 38, has also modified certain Articles of Law 24/88 relating to permitted conduct. In line with the fourth amendment to Law 44/02, the company will send an up-to-date copy of the Internal Conduct Regulations of Sol Meliá, S.A. and its group companies to the Spanish Stock Exchange Commission, including, fundamentally, the regulations contained in Article 38 of Law 44/02 which are relevant for application to the company (in particular, those related to privileged information, relevant information and the management of significant transactions). The company will analyze and comply with any and all legal regulations approved in regard to corporate governance and applicable to the company. The company will also analyze the reports or recommendations that relevant organizations and entities publish in relation to corporate governance, adjusting when necessary its principles of corporate governance to the recommendations as has been the case up to the present. In particular, bearing in mind the publication of the Report by the Special Commission for the Promotion of Transparency and Security in Financial Markets and Public Companies (the Aldama Report ) after the close of 2002, Sol Meliá, S.A. intends to incorporate the criteria and guidelines recommended by the Special Commission to its Corporate Governance Code during 2003 to further increase, where applicable, the transparency of corporate governance. Good Governance Code Report Annual Report 2002

42 III Curricula Vitae of Independent Directors Emilio Cuatrecasas Emilio Cuatrecasas is Director & Partner of Cuatrecasas Abogados, currently the largest firm of lawyers in Spain with more than 400 lawyers. He is Chairman of Areas and Director of Railways for the Autonomous Government of Catalonia and Sant Bernat Corporation. He is also a member of the Board of the Catalonia Free University, of the Association for Progress in Management and of the Institute for Continuous Education Foundation (Pompeu Fabra University), as well as Director of the Board for the specialist fiscal review Quincena Fiscal, of Dinamia, Chupa Chups and Grupo Recoletos. José María Lafuente With a background in Law and Economics, José María Lafuente has been Professor at the Balearic Islands University. In the field of politics, he has been a Senator in the Spanish Senate and Member of Parliament in the Balearic Islands. From 1986 to 1994 he was a Member of the European Parliament. He is currently Director of the Board for several companies in the Balearic Islands. He is the holder of the Alfonso X The Wise Medal; of the Honor Medal of San Raimundo de Peñafort and the Silver Medal of the Balearic Islands University. Alfredo Pastor In 1972 he obtained a Doctorate in Economics from MIT and also has a Doctorate in Economic Science from the Barcelona Autonomous University. He has worked as an economist for the World Bank ( ), the National Industry Institute ( ) and was Chairman of ENHER ( ). He was a Director of the Board of the Bank of Spain ( ), and between 1993 and 1995 was Undersecretary of the Economy and Councilor for Hydroelectricity of the Cantábrico. Since 1997 he has been Chairman of Scania Hispania, to whose Board of Directors he also belongs. He is currently a Director of Jazztel, Miguel y Costas, and is a member of the Board of the Economics Circle. José Joaquín Puig de la Bellacasa He joined the Spanish Diplomatic Corps in 1959 and has held several of the most important positions in different departments, including Director General for International Technical Cooperation in 1976 and Director General of External Service between 1976 and He was Undersecretary for Foreign Affairs between 1978 and 1980 and Spanish Ambassador to the Vatican ( ), the United Kingdom ( ) and Portugal ( ). In he was Secretary General of the Spanish Royal Family. He has also been a Director of the Spanish Overseas Bank, Iberia and Tecniberia, as well as Chairman of the Superior Board of Foreign Relations. He is currently a Spanish Ambassador, Council of State and Chairman of Intecsa-Inarsa. Eduardo Punset After obtaining a Masters degree in Economics from the London School of Economics and certification from the l École Practique de Hautes Études (Paris), he worked for the BBC as an economics consultant and as Head of Latin America for The Economist. He also provided services for RENFE and the IMF, and until 1977 was Head of Research at the Banco Hispano Americano. Between 1977 and 1987 he was Technical Secretary General for the Ministry of Industry and Ministry of Finance of the Autonomous Government of Catalonia. He has also been Minister of European Relations and Member of the European Parliament. He has been Chairman of ENHER and is currently a Director of Viscofán and Sainco, as well as Director and Producer of the program Redes broadcast on TVE. 43 Good Governance Code Report Annual Report 2002

43 Regulatory Notifications Hechos Relevantes ISO 9001 Quality certification and ISO Environmental Management certification. 44 Date: 16/01/2002 Notification number: Sol Meliá to open in Switzerland with the addition of two new Meliá hotels, the Meliá Carlton (Lausanne) and Meliá Rex (Geneva). Date: 23/04/2002 Notification number: As agreed by the Board of Directors of Sol Meliá, the Ordinary and Extraordinary Annual General Meeting will be held on 29/04/02 in the first instance, or on 30/04/02 in the second instance if required due to lack of quorum. Date: 03/05/2002 Notification number: Sol Meliá communicates the agreements reached by the Annual General Meeting held on 29th. April, Date: 23/05/2002 Notification number: Sol Meliá Finance Limited communicates that the only bearer of ordinary shares in the company agreed on 25/04/02 to modify Article 12(b) of the company Articles of Association to provide a right to the receipt of preferential dividends for bearers of Series A Preferential Shares registered with the SCLV and Associated Entities three days before the date indicated as the date for payment. Date: 28/05/2002 Notification number: The Annual General Meeting of Sol Meliá approved the payment of a gross dividend for 2001 of euros per share, due on 29/05/02. Date: 18/07/2002 Notification number: Sol Meliá and Sogecable sign an agreement to install Canal + in Meliá and Tryp Hotels in Spain. Date: 20/12/2002 Notification number: The Gran Meliá Victoria in Palma de Majorca obtains Road Shows and Seminars During 2002, the company Investor Relations Department has carried out a number of activities focused on communication with company shareholders. As is becoming customary, road shows have been held in major European cities including Madrid, London and Paris. The road shows in 2002 have served to inform on company performance and also the consequences of the major events that have directly affected company results and the measures taken by the company in response to such events. 31st. January, 2002, Sol Meliá took part as a speaker at the Credit Suisse First Boston Lodging Conference, organized in Paris together with other hotel companies such as Accor, Hilton Group and Whitbread. 19th. February, 2002, Sol Meliá took part as a speaker at the Small and Mid Caps seminar organized by BSCH in Madrid for institutional investors. 26th. March, 2002, Sol Meliá took part in a conference organized by Lehman Brothers. 11th. and 12th. April, 2002, a number of visits were made to investors in London promoted by UBS Warburg. 29th. May, 2002, Sol Meliá attended the seminar Fixed Income & Credit Derivatives organized by JP Morgan in Barcelona. Regulatory Notifications Annual Report 2002

44 30th. May, 2002, Sol Meliá took part in the seminar Company Entry in Capital Markets promoted by ABN Amro in Malaga. From 18th. to 20th. June, 2002, Sol Meliá took part in the Global Borrowers and Investors Forum. 2nd. and 3rd. July, 2002, Sol Meliá organized a Road Show in London promoted by Cazenove and including visits to a dozen institutional investors. 28th. November, 2002, Sol Meliá took part as a speaker at the Schroder Salomon Smith Barney Hotels Conference, organized in London together with other hotel companies such as Accor, Hilton Group and Millennium & Copthorne th. December, 2002, Sol Meliá organized a Road Show in Paris promoted by Credit Lyonais and including visits to the most important institutional investors in France. Regulatory Notifications Annual Report 2002

45 SOL MELIÁ ORGANIZATIONAL STRUCTURE CHAIRMANSHIT Chairman: Gabriel Escarrer Juliá Vice Chairman & Chief Executive Officer: Sebastián Escarrer Jaume Chief Executive Officer: Gabriel Escarrer Jaume DEPARTMENTS SERVICE DIVISIONS BUSINESS DIVISIONS Sales & Marketing Luis del Olmo European Division Andrés Encinas 46 Administration Mark Hoddinott Cuban Division Gabriel Cánaves Finance Onofre Servera North & Central American Division André Gerondeau Hotel Development & Owner Relations Ángel Palomino South American Division Rui Manuel Oliveira Communication & Institutional Relations Jaime Puig de la Bellacasa Sol Meliá Organizational Structure Annual Report 2002

46 CHAIRMANSHIT Gabriel Escarrer Juliá Chairman Sebastián Escarrer Jaume Vice Chairman & Chief Executive Officer Gabriel Escarrer Jaume Chief Executive Officer MANAGEMENT COMMITTEE Luis del Olmo EVP Sale & Marketing Onofre Servera Chief Financial Officer Mark Hoddinott EVP Administration Ángel Palomino EVP Hotel Development & Owner Relations Jaime Puig de la Bellacasa EVP Communication & Institutional Relations Andrés Encinas EVP European Division Gabriel Cánaves EVP Cuban Division André Gerondeau EVP North & Central American Division Rui Manuel Oliveira EVP South American Division Antonio Díaz Director Information Systems Antonio Ruiz Director Compensation Delfín Pérez Director Human Resources Antonio Sierra Director Legal Services Juan Ignacio Pardo Director Legal Services Andrés Garau Director Works & Maintenance Juan Moya Director Works & Maintenance Sol Meliá Organizational Structure Annual Report 2002

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48 COMMUNITY INVOLVEMENT AND ENVIRONMENTAL REPORT COMMUNITY INVOLVEMENT 1. SOL MELIÁ COMMUNITY INVOLVEMENT Introduction 1.2 A new stimulus for community involvement 2. COMMUNITY INVOLVEMENT PLAN Design Survey Results 2.2 Principle 2.3 Programs 3. COMMUNITY INVOLVEMENT MANAGEMENT General framework 3.2 Project selection criteria 3.3 Monitoring Group 3.4 Project management in hotels 4. AGREEMENT WITH FOUNDATIONS Business and Society Foundation 4.2 Business and Growth Foundation 5. PROJECTS CARRIED OUT IN Indonesia: Meliá Bali, Gran Meliá Jakarta and Meliá Purosani 5.2 Other projects 5.3 Purchases from Special Employment Centers 5.4 NGO s, foundations and organizations benefited by the Plan 5.5 Community involvement in figures 6. A VISION OF THE FUTURE ANNEXES Community Involvement Plan design surveys 7.2 Some survey responses 8. CONTACT 29 ENVIRONMENTAL REPORT COMMITMENT TO ENVIRONMENTAL PROTECTION PRINCIPAL ACTIVITIES IN CORPORATE ENVIRONMENTAL INITIATIVES CONTACT 36

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50 COMMUNITY INVOLVEMENT

51 1 Sol Meliá Community Involvement 1.1 Introduction Since its foundation in 1956, Sol Meliá has carried out a large number of projects aimed at assisting in promoting development, working together with NGO s, foundations and other organizations that aim to help the disadvantaged. The main driver of these activities is the experience that the company has gained over many years in the tourism industry, generating wealth, values and employment in all of the countries in which it is present. During the early years, initiatives of this type generally came from Hotel General Managers, as they were the people that had the greatest knowledge about the needs in the areas where hotels were located. 4 Over time, the company saw that community involvement was more effective when project management was more systematic and projects were seen as an investment rather than an expense. Community involvement thus became a natural component of the value-creation process, integrated within the concept of a socially responsible company, a key factor for the future success of the company. Sol Meliá therefore defends the idea that community involvement is a duty of the company, and that all companies must strive as best they are able to prevent the enormous inequality that exists in the world. All of the initiatives that Sol Meliá undertakes in this field are framed within the global nature of the business, as a key component of company organization, and as one of the most prominent features of company corporate culture. In almost fifty years in business, the company has achieved a presence in thirty countries. Many of them are developing countries. As well as being a powerful driver of economic development, the tourism industry is also one of the best means of promoting greater tolerance and understanding amongst more and less developed nations. Sol Meliá also assists in creating a multiplier effect of tourism in creating greater wealth and development in many areas. 1.2 A new stimulus for community involvement As a first step in reinforcing its community involvement activities, in 1999 Sol Meliá joined the Board of the Business and Society Foundation in order to share experiences in community involvement with other Spanish companies, promote community involvement in the private sector and enjoy the benefit of the consultancy services offered by the foundation to all of its members. Sol Meliá Community Involvement Sol Meliá Community Involvement and Environmental Report 2002

52 As a second important step in strengthening and improving the management of community involvement projects, in December, 2002 the company approved the Sol Meliá Community Involvement Plan, a document that contains nine specific action programs and which was developed with the assistance of the participation and opinion of more than one thousand company employees through questionnaires. Finally, a Monitoring Group for Community Involvement was created formed by representatives of all of the company Business and Service Divisions. The group meets once a month and, as is the case for all of the company s community involvement activities, is coordinated by the Communication and Institutional Relations Department. 2 Community Involvement Plan 2.1 Design 5 The first aspect that was taken into account when the Community Involvement Plan was designed was the opinion of company employees and the analysis of their preferences, opinions and expectations about the activities that Sol Meliá could or should include in community involvement projects. Survey In August an survey was carried out amongst all corporate employees and sent to the General Managers and Heads of Department of the more than 350 company hotels. A very large number of suggestions on community involvement in general were received from the responses to questionnaires, and also suggestions on community involvement from a company point of view, i.e. ideas about how to best carry out community involvement projects in a tourism company such as Sol Meliá. The result of the survey was that the company approved nine key programs that form the basis of the Community Involvement Plan. Results 99% of the employees that responded to the questionnaire believed it was a good idea to create a specific plan for company community involvement. With regard to the benefits that a Community Involvement Plan could have for the company, the majority (64%) believed that it would generate positive effects in the medium term. 30% believed that it would improve customer relations and 26% that it would improve the internal environment in the company. The willingness of employees to take part in company community involvement projects was extremely high and equally high across all geographic areas (91% on average). The Community Involvement Plan Sol Meliá Community Involvement and Environmental Report 2002

53 majority, 54%, would take part depending on the projects proposed by the company and 35% said that they would be willing to take part in their free time. With regard to the areas considered as priorities by employees for activities, training and employment was the most important (84%), followed by education (76%), social assistance (75%), developing countries (74%) and health (73%). 55% showed a preference for activities based on assistance in emergency situations (32%) or international cooperation (21%). With regard to the groups that should be priority subjects of our actions, the responses were fairly similar across all areas, with a general preference for community involvement projects for children with difficulties (78%), disadvantaged people near company facilities (44%), the disabled (41%), and women with difficulties (35%). 2.2 Principle The Community Involvement Plan was created using a method which involves an analysis of the priorities and possible actions of hotels and corporate offices, the community involvement projects carried out in the past, the environment and the opinion of employees. 6 Community Involvement at Sol Meliá focuses on the principle of supporting local sustainable development activities in the areas around company facilities, both hotels and corporate offices, attending to the assistance needs of individuals and groups. The principle aims to emphasize that Sol Meliá community involvement is mainly carried out in those countries in which the company operates, to reinforce the tourism activity that the company helps to generate in thirty countries on four continents and, above all, with the intention of making the best possible use of the resources, services and infrastructure within the company hotel network. 2.3 Programs The programs in the Community Involvement Plan are divided into five priority programs and four additional programs. All of these programs are also based on the support resources included in the Plan and include such actions as the use of hotel facilities, the donation of used assets and direct sponsorship. A. Priority Programs 1. Training and employment: To promote access to employment for disadvantaged people from the areas around company facilities. Immediate action includes the contracting of disabled people, women that have been victims of violence, as well as offering training around company facilities, preferably to people with educational needs. Community Involvement Plan Sol Meliá Community Involvement and Environmental Report 2002

54 2. Purchasing: To favor purchases from Special Employment Centers (companies whose labor force is made up of at least 70% of disabled people), Inclusion Companies (companies whose labor force is made up of people from disadvantaged groups, with difficulties or at risk of exclusion) and from local suppliers. With regard to the latter, we will have to analyze our supply needs against the capacity of local supply. The use of local suppliers in a given country will focus on purchases of typical handicrafts, products that are difficult to transport and/or typical food and beverage products that are exclusive to the region. 3. Employees: To promote community involvement amongst our employees. To create a record of volunteers from hotels and corporate offices willing to assist in development projects. One of the monthly meetings of the Sol Meliá Community Involvement Monitoring Group. From left to right, Marco Paredes, General Manager of the Gran Meliá Victoria, Aurelio Palmer from IT, Mónica Cerdá, Communications Manager, Jaime Puig de la Bellacasa, EVP Communication & Institutional Relations, Sebastián Escarrer, Vice Chairmen, Mencía Barreiros from Marketing and Felisa Marina from Purchasing. 4. NGO s: To offer services to NGO s at special conditions (discounts, use of meeting rooms, free stays, etc.) 5. Sport: To support charity sports events related to community development. B. Additional programs 1. Customers: To promote community involvement amongst our guests and customers. To create systems by which customers may provide funds to assist in company community involvement projects (% per invoice, coin collection, MaS Program points...). Community involvement projects will be developed in which our guests can take part during their stay, mainly in resort hotels in Caribbean and Asian countries. 2. Accessibility: To improve access to hotel services for people with mobility difficulties when carrying out renovation programs. 3. Business forums: To take part in the most important forums for debate and specialist working groups, defending the idea of tourism as a fundamental source of wealth and development in society. Signature of the approval of the Sol Meliá Community Involvement Plan by the Vice Chairman, Sebastián Escarrer Investors: To attract investors interested in socially responsible companies through the communication of the activities carried out by the company. C. Support resources Defined as means of providing support to programs to complement the time dedicated by company personnel either in project management or volunteer work. They include: 1. To support projects using the general infrastructure of Sol Meliá, analyzing the enormous possibilities that exist for providing meeting rooms and other facilities, guest rooms, catering services or phone help lines for community involvement projects. 2. Donation of used assets: furnishing, computer equipment, linen, cutlery, bathroom amenities, entertainment materials, excess fresh foods and all unneeded office and hotel equipment. 3. To support activities through sponsorship and advertising. To support projects either by directly providing financing or through sponsorship or advertising. To support research, publications and events related with the other programs. Community Involvement Plan Sol Meliá Community Involvement and Environmental Report 2002

55 3 Community Involvement Management 3.1 General framework The majority of the actions carried out by Sol Meliá are initiatives formed by the more than 350 hotels in 30 countries on 4 continents, whose assistance programs for disadvantaged people and communities have been given structure by a Community Involvement Plan which aims to better focus our efforts and plan and coordinate activities. Our previous efforts and this new initiative in relation to community involvement are the result of: 8 The defense and application in Sol Meliá of the concept of a socially responsible company in our day-to-day business and as a key part of our wider Corporate Culture. Our experience as a company that has generated progress in countries in which we operate; experience which we are also able to make use of to ensure our community involvement activities are agile and productive. The professionalism and expertise of those people that coordinate our community involvement activities, including representatives of all departments and all of the company s international divisions. The company s desire that community involvement is something in which all of our employees feel encouraged to take part. To promote participation the company provides regular updates on the activities of hotels and corporate offices in internal newsletters and has created an address for exchanging suggestions and proposals. 3.2 Project selection criteria Community Involvement project selection must comply with all of the requirements described in the Community Involvement Plan, including the definition of objectives and benchmarks, the analysis of NGO s, foundations or organizations with which we carry out projects, the verification, control and economic impact of projects or the final analysis from the point of view of constant improvement. Deciding whether a project may be carried out with the assistance of Sol Meliá depends on two priority selection criteria. The first is to ensure that the NGO, foundation or organization is able to demonstrate transparency and good practice as organizations dedicated to social improvement (professionalism, philosophy and defined Community Involvement Management Sol Meliá Community Involvement and Environmental Report 2002

56 objectives and a correct use of funds). The second selection criteria is to analyze whether the project is compatible with the specific programs in the Sol Meliá Community Involvement Plan. Sol Meliá is also proactive in community involvement and makes direct contact with the organizations that it considers appropriate for the development of projects, as well as analyzing in detail all of the proposals that are occasionally received from them to determine whether the requests are compatible with the objectives of the Community Involvement Plan. 3.3 Monitoring Group A Community Involvement Monitoring Group has been set up to coordinate company activities. All of the projects approved are subject to constant supervision to ensure that they meet their objectives and achieve the expected results, regardless of whether they are projects that are the direct responsibility of an NGO or whether they require coordination with the hotel or corporate office. The success of projects carried out at company hotels is the direct responsibility of the Hotel General Manager, as is the presentation of information on subjects such as the type of activity, locations in which it is to be carried out, schedule, beneficiaries, participants, economic impact and any other additional information that is thought relevant. All of this information is drawn up at the hotel and then submitted to the Executive Vice- Presidency of Communication and Institutional Relations at Corporate Headquarters. 9 A dossier is then put together containing the information mentioned above along with a final evaluation of the project made by project coordinators upon its completion. This evaluation is one of the key factors analyzed by the Monitoring Group to assess the quality of the projects carried out and to propose aspects in which improvements might be made. 3.4 Project management in hotels Although Sol Meliá coordinates and supervises the development of the Community Involvement Plan from Corporate Headquarters (from which there also arise numerous projects to help the disadvantaged), the majority of community involvement projects at Sol Meliá involve hotels, their guests and their employees. To ensure appropriate management of community involvement projects in each hotel, the Hotel General Manager is directly responsible for all projects as well as for compliance with any guidelines applied to those projects. In some hotels, if the General Manager considers it appropriate, responsibility for project management is delegated to a Community Involvement Coordinator. The Coordinator maintains constant contact with hotel management, presents project proposals, assesses and responds to all proposals received from hotel employees, from Community Involvement Management Sol Meliá Community Involvement and Environmental Report 2002

57 guests and from Corporate Headquarters, and is also proactive in analyzing initiatives that might be applicable in the hotel. The Community Involvement Coordinator is also responsible for relations with NGO s or other organizations involved in any project that receives support from the hotel. 4 Agreements with Foundations 4.1 Business and Society Foundation (Empresa y Sociedad) 10 The mission of the Business and Society Foundation ( set up in 1995 and supported by independent businesses and professionals, is to promote community involvement amongst Spanish companies and to assist in the process by providing consultancy services and research to the business community and society in general. Both the Business and Society Foundation and Sol Meliá defend the idea that businesses will play a greater role in society providing that they are socially responsible, meaning that their products and services are acceptable to society, that they strictly comply with all regulations, that their managers behave perfectly ethically, that they acknowledge the importance of their employees, that they are respectful of the natural environment and that they provide support to the most disadvantaged people amongst the communities in which they operate. The Foundation board currently consists of more than 30 of the Spanish companies that are most active in community involvement, including Sol Meliá, a member since Business and Growth Foundation (Empresa y Crecimiento) The mission of the Business and Growth Foundation, of which Sol Meliá is a member of the board, is to contribute to economic and social improvements in developing countries in which Spanish companies have investments through the promotion of the creation and growth of small and medium-sized companies. The Foundation promotes the generation, provision and management of funds specifically aimed at the development of small and medium-sized companies in Latin America. Agreements with Foundations Sol Meliá Community Involvement and Environmental Report 2002

58 Founded in February, 2001, the Business and Growth Foundation also focuses on training entrepreneurs in developing countries through private training programs or collaboration with specialist training organizations. 5 Projects carried out in Indonesia MELIÁ BALI Assistance for the victims of the terrorist attack in Kuta The Meliá Bali attended, as best it could, to the different needs of the people affected by the terrorist bombing of 12th. October, 2002 of a discotheque in Kuta which caused almost 200 fatalities, many of them tourists, and more than 300 injured, causing the collapse of hospital services in Bali. The hotel donated 1,176 euros, food, towels, water and cafeteria services. Many employees provided voluntary services during the days after the catastrophe. Special assistance was provided for the Sanglah Hospital in Denpasar. SLBB School for deaf children in Jimabaran, Bali. Since 1998, the hotel has been helping with the children s education and the center s needs. The photo shows the donation of mattresses (Meliá Bali). 11 Staff visits and voluntary services at the SLB-B school for deaf children The Sekolah Luar Biasa B. (SLB-B) School for deaf children is located in Jimabaran, Bali, 7 kilometers from the Meliá Bali, allowing hotel staff to follow closely the development of the residents and students. Since 1997, the hotel has been helping with the children s education through donations, weekly visits to assist with training, entertainment and the development of artistic skills and mobility. Hotel guests also take part, donating money, clothes and games, as well as visiting the school together with staff from the Meliá Bali. In 2002 the hotel paid for the renovation of school kitchens and also donated several mattresses. Donation of medicine by guests The day the guests depart after their stay at the hotel, when they come to pay their bill they are encouraged to donate any medicine they have brought with them and have not used. Guests are informed that the medicines will be distributed to disadvantaged areas all over Bali. The project began in 1999, and forms part of the We need your help campaign, with information and encouragement to get involved being provided to guests using display panels in the hotel. The day guests depart, when they come to pay their bill, they are encouraged to donate any medicine they have brought with them and have not used to be delivered to the areas of Bali in greatest need. The project began in 1999 and forms part of the We need your help campaign, with information also being provided to guests using the displays shown in the photo (Meliá Bali). Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

59 Blood donations The Meliá Bali hotel also organized blood donation days aimed at hotel employees, and also promoted to guests in collaboration with the Blood Bank of the Indonesian Red Cross. More than 40 donations were given per quarter. Visits by hotel employees to the village of Dungkap (Nusa Penida, Bali) to deliver food and clothing (Meliá Bali). Visits to a home for the aged In May, hotel staff visited residents at the home for the aged Panti Social Tresna Werdha Wana Seraya (Tohpati, Denpasar) and provided a donation of euros on the first visit and hygiene products, food and euros on the second visit. The project is supported by the hotel Christian community. Assistance for children with polio Since 2001, the hotel has been providing shoes for Made and Wayan, children living in the Bangli district of Bali. Hotel staff visit the children regularly. The children suffer from polio and are cared for by the Kupu Foundation. Guests at the Meliá Bali are informed about the help the hotel provides to the children through display panels at the hotel and are also encouraged to help with donations for the Foundation. Blood donation days aimed at hotel employees, and also offered to guests in collaboration with the Blood Bank of the Indonesian Red Cross (Meliá Bali). Visits to disadvantaged villages On 6th. October, several hotel employees visited the village of Dungkap (Nusa Penida, Bali) to donate Euros worth of food, water, towels, sheets and clothes. Employees from the hotel Human Resources Department, several secretaries, Heads of Department and union representatives took part. 12 Cooperation with educational institutions On 17th. January books, manuals and magazines were donated to the Education Department in Denpasar, Bali. The cost of the project, carried out by employees under the supervision of the Human Resources Department, was 1,176 euros. GRAN MELIÁ JAKARTA Visits to the home for the aged Panti Social Tresna Werdha Wana Seraya (Tohpati, Denpasar) and donations of money and food (Meliá Bali). Celebration of Ramadan with orphaned children In cooperation with the Al Aqso foundation, on 15th. November the hotel organized a dinner in the hotel and entertainment activities for one hundred children between five and fifteen years of age from various orphanages. Various departments and a total of sixty employees from the Gran Meliá Jakarta took part in the project, most of them in their free time. Shows were held and the children were presented with rucksacks for school and writing materials. In cooperation with the Al Aqso foundation, on 15th. November the hotel organized a dinner in the hotel and entertainment activities for one hundred children from various orphanages. Shows were held and the children were presented with rucksacks for school and writing materials (Gran Meliá Jakarta). Charity concert organized by the Austrian Embassy and BMW On 26th. September a 1,700 meter squared meeting room was provided free of charge for a classical music concert organized by the Austrian Embassy in Indonesia and the company BMW. The objective of the event was to raise funds to assist three foundations: Indonesian Asthma Foundation, Asa Bangsa Foundation and the Asthmatic Children Funding Foundation of Indonesia. A total of 18,000 euros was raised. Assistance for victims of natural catastrophes On 11th. February, the Gran Meliá Jakarta donated 54 towels, 40 sheets and 60 dresses to the people affected by flooding in Kalimalang, Bekasi and Pondok Gede. On 2nd. December, the hotel donated euros, clothing and food to the people affected by Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

60 the fires in Bukit Duri. On 4th. February, the hotel donated euros, 250 pairs of trousers, 250 shirts and 52 dresses to a group of citizens that suffered from the flooding of the River Ciliwung. Project together with the Indonesian Hotel Association To celebrate Ramadan, on 26th. November a breakfast was organized in the hotel for the children from the Al Amin orphanage, with the cooperation of the Indonesian Hotel and Restaurant Association. Cooperation with orphanages On 4th. February the children from the Desa Putra and Pondok Si Boncel orphanages were invited to dinner. The value of the dinner and the school rucksacks given to the children was euros. On 24th. June euros was donated to the Mushallah orphanage for the celebration of the birthday of the Prophet Mohammed. On 28th. July, a group of children from the Al Islam orphanage were invited to dinner in the hotel. The children also received books and writing materials. Finally, during the Ramadan celebrations, on 16th. November, euros was donated to the Mushallah and Karangmojo orphanages. On 26th. September a 1,700 meter squared meeting room was provided free of charge for a classical music concert organized by the Austrian Embassy in Indonesia and the company BMW. The photo shows the representatives of the three charity foundations for which funds were raised along with the Hotel General Manager, Hubert Klemenz (Gran Meliá Jakarta). Assistance for the upkeep of adopted children In the second half of 2002, monthly donations totaling euros went to provide assistance for the upkeep of 14 children adopted by hotel employees. Assistance in the renovation of a school On 27th. July a donation of euros was made for the renovation work on the Haji Imron Muslim School. Visit to the children at an orphanage during Ramadan. The photo shows the Hotel General Manager, Hubert Klemenz, welcoming children, helped in the translation by the Hotel PR Manager, Hana Hoed (Gran Meliá Jakarta). 13 Donation to pay for a cancer operation for an employee The Gran Meliá Jakarta Hotel donated euros to pay for the operation needed by an employee suffering from cancer. Fundraising for the Indonesian Red Cross Since 1997, hotel employees and their families make two collections per year for the Indonesian Red Cross. The campaign is announced on the employee notice board and in the hotel newsletter. Approximately 3,200 euros is collected each year. Since the project began, 560 employees have taken part. Donation of food by the hotel to people affected by the fire in Bukit Duri in December (Gran Meliá Jakarta). Breakfast with employees families and orphaned children On 16th. November, the hotel Human Resources Department organized a breakfast for employees and their families and also invited children from several orphanages. Acquisition of cards from UNICEF The hotel purchased cards from UNICEF for the correspondence sent out to celebrate Ramadan and New Year. Purchase of materials for the shoe shiner Mr. Amin Hotel employees first knew Mr. Amin when he was 21, an orphan with very limited resources in an area near the Gran Meliá Jakarta. To help him and his family, since 1997 the hotel allows him to work as a shoe shiner in the hotel. Every month, the hotel also provides him with three boxes of shoe polish. Today Mr. Amin has two children and is happy to be able to work in a place like the Gran Meliá Jakarta, where he attends to many guests. Hotel employees first knew Mr. Amin when he was 21, an orphan with very limited resources. To help him, the hotel allows him to work as a shoe shiner in the hotel, and he now has two children and is happy to attend hotel guests (Gran Meliá Jakarta). Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

61 The Assistant Director of Food and Beverage, Rudy Mansuyr, delivers presents to the children at the Al Amin orphanage, invited to the hotel to celebrate Ramadan (Gran Meliá Jakarta). To celebrate Ramadan, on 26th. November a breakfast was organized in the hotel for the children from the Al Amin orphanage, with the cooperation of the Indonesian Hotel and Restaurant Association (Gran Meliá Jakarta). 14 On 2nd. December, the hotel donated euros, clothing and food to the people affected by the fires in Bukit Duri. The photo shows the donation being made by a hotel employee (Gran Meliá Jakarta). Muslim and Christian Committees The Gran Meliá Jakarta has a Muslim Committee for employees consisting of 15 employees and 60 other participants and a Christian Committee with 20 employees and 30 other participants. Both committees hold regular meetings in which they may practice their religion and in which they also occasionally prepare community involvement projects such as the visits to orphanages, particularly during the Ramadan and Christmas periods. Visit to the Santa María orphanage attended by Sister Tomasoa in Ganjuran Bantul. During the visit the hotel donated 100 towels, clothing and money (Meliá Purosani). MELIA PUROSANI Visits and assistance for local orphanages In March, visits were made to three orphanages in the area around the hotel. 100 towels and euros were donated to the "Santa María" orphanage in Ganjuran Bantul; euros and the construction of the outer wall of the center to the "Binasiwi" orphanage in Pajangan; 150 towels and euros in December to the "Wiloso Projo" orphanage in Gowongan. On 28th. March a visit was made to the "Budi Bakti" orphanage in Gunung Kidul, to which euros and 150 towels were donated. On 17th. April visits were made to the "Sayap Ibu" orphanage in Pringwulung and the Cacat Ganda orphanage in Kalasan. The first received 150 towels and hygiene products and the second the same number of towels and euros. Finally, on 13th. July and in September visits were made to the Santa Maria orphanage in Ganjuran. During the first visit 100 towels were donated and, during the second, euros. Invitation to a Christmas party for orphaned children On 25th. December, the hotel invited children from several orphanages in the area to celebrate Christmas at the Meliá Purosani. The children sang Christmas carols in the hotel lobby, specially dressed for the occasion by the project organizers. The hotel also donated euros. The hotel financed the construction of the outer wall of the "Binasiwi" orphanage in Pajangan (Meliá Purosani). Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

62 5.2 Other projects BRAZIL Gran Meliá WTC Sao Paulo Training for eleven employees in basic education. Contracting of a teacher and the material required. Donation of food and free use of a meeting room for twenty children from the Frei Luis Amigó Infant School. Collection amongst employees of two hundred kilos of food for the Frei Luis Amigó Infant School for the Christmas holidays. Free stay for one week for ten children with cancer and their families in cooperation with the "Project Happiness" organized by Hospitals of Brazil and the ABIH (Brazilian Hotel Industry Association). Free use of meeting room for two days for the NGO "Live and Let Live". guests. Funds went to the Curumin Project which employs people with limited resources in Atibaia, Sao Paulo. Meliá Office Park Free stay of one week for four children with cancer and their families in cooperation with the "Project Happiness" organized by Hospitals of Brazil and the ABIH (Brazilian Hotel Industry Association). Tryp Barra Donation of fifty baskets of food for shanty towns in Barra de Tijuca. Tryp Iguatemi Free stay of one week for four children with cancer and their families in cooperation with the "Project Happiness" organized by Hospitals of Brazil and the ABIH (Brazilian Hotel Industry Association). Cooperation with APAE (Association of Parents & Friends of the Exceptional), a volunteer group assisting the disadvantaged, particularly in the fields of specialist education, enablement and rehabilitation, health and vocational training. (Meliá Jardim Europa). Meliá Higienópolis Free use of a meeting room for the Catholic League for a meeting in which funds were raised for two orphanages. Free use of a meeting room and lunch for UNIBES (Brazilian-Israeli Union for Social Welfare) to assist the social integration of disadvantaged children. Free use of a meeting room for WIZO (Women s International Zionism Organization), an organization that fights for the welfare of children, women and senior citizens. Meliá Jardim Europa The employees formed three teams to raise funds for APAE (Association of Parents & Friends of the Exceptional). At the end of the fundraising a raffle was held and the winning team received a free trip to visit the Association and to see the work it does in Astorga (Paraná). Environmentally-friendly locally made crayons were purchased for use on the "Green Floor" of the hotel and for sale to Tryp Itaim Free use of five meeting rooms for VIA (Volunteers in Action), a training school. Free stay of one week for two children with cancer and their families in cooperation with the "Project Happiness" organized by Hospitals of Brazil and the ABIH (Brazilian Hotel Industry Association). Tryp Jardins Free use of a meeting room for three weekends, coffee, water and food for the NGO "Your dream, my dream ". Corporate Headquarters in Brazil Ten grants for employees (50% discount) for their graduation and two grants for diplomas. Participants have to have worked for Sol Meliá for one year. In cooperation with UNIBERO (Ibero- American University Center). Collection of food and toys by employees during the Management Convention, for donation to the Dos Meninos Sao Judas Tadeo Institute. The children from the Al Amin orphanage during breakfast in the Mutiara Room, organized with the cooperation of the Indonesian Hotel and Restaurant Association (Gran Meliá Jakarta). Project Happiness saw the donation of free oneweek stays for twenty children with cancer and their families at the Meliá Office Park, Tryp Iguatemi and Tryp Itaim hotels. The project was organized by Brazilian hospitals and the Brazil Hotel Industry Association. 15 Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

63 16 Attending to the different needs of the people affected by the terrorist bombing of 12th. October, of a discotheque in Kuta which caused almost 200 fatalities and more than 300 injured. The photo shows a donation made to the Sanglah hospital (Meliá Bali). Invitation to one hundred children from various orphanages. Various departments and a total of sixty employees from the hotel took part, most of them in their free time (Gran Meliá Jakarta). On 17th. April a visit was made to the "Sayap Ibu" orphanage and 150 towels, hygiene products and money donated (Meliá Purosani). COSTA RICA Paradisus Playa Conchal Donation of material for the Brasilito School. Invitation to the hotel to the Country Day School in Conchal. The children spent a few hours in the pool and went on an excursion in the area. CUBA Meliá Cohiba, Meliá Habana and Meliá Santiago de Cuba Donation of 33 free stays to volunteers working with the NGO Mediterránea and responsible for the transport of medical products and medicines from Spain to Cuba in April, September and October. SPAIN Gran Meliá Bahía del Duque Fundraising project for the NGO Assistance in Action with funds going to the sponsorship of 32 children and the financing of several different projects, especially in Latin America. Funds were raised by adding one euro per room per night to guests bills. Once a month meals are prepared for fifty people at the Brothers of the White Cross Center for the Disabled. Gran Meliá Don Pepe Financial donations to UNICEF, AECC (Spanish Association Against Cancer), Anti-Aids Association (Marbella), San Carlos Home for Senior Citizens (Malaga) and the "Marbella with Galicia" Association. Financial donation and sixty bathrobes for the Sisters of the Poor in Ronda. Donation of three free stays raffled in a benefit dinner organized in the Century Plaza Hotel, in favor of "The Thalians Mental Health Center" in Los Angeles, California. Donation of three free stays for a charity raffle organized by "The British Legion" during the "Warwickshire Poppy Ball Charity Dinner". Donation of fifty bathrobes and fifty tablecloths to the Center run by the NGO Promi in Coin, Malaga. Donation of two free stays raffled in a benefit "Gold and Silver Ball" dinner in the Ritz Carlton Hotel, in favor of Prevent Child Abuse America, in Chicago. Donation of fifty bath towels to the NGO Lima (Peru). Donation of a free weekend stay and dinner for two people in the "La Farola" Grill for "El Rastrillo" organized by the NGO New Future to raise funds for the Civic Center at the Malaga Provincial City Hall. Financial donation, four giant paellas and thirty blankets for the refuge run by the NGO Project Man - Horizons. Donation of three free stays raffled in a benefit dinner at the Ritz Carlton Hotel, in Laguna Niguel, California, to raise funds for "Le Bal Des Papillons" (assists abused children and women). Donation of 48 mattresses to the Orphaned Children s School in Antequera. Donation of three free stays raffled in an auction at the Historic Waldorf Astoria Hotel, to raise funds for the Heart & Soul Charitable Foundation, New York (assists heart patients). Donation of three free stays raffled in a benefit dinner "Grand Spring Ball " to raise funds for the Paraplegic Research Foundation, Geneva (assists paraplegic children). Donation of three free stays for the Crohn's and Colitis Foundation of America - CC & FA (assists sufferers of Crohn's). Donation of three free stays raffled in a benefit dinner "One more victory, Aral" to raise funds for the Ara Parseghian Medical Research Foundation, Tucson, Arizona (assists children with Niemman Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

64 Picktupe C Disease, a genetic metabolic disorder caused by cholesterol). Donation of four free stays for the American Heart Association. Donation of five free stays raffled at the Golf Tournament at the Royal Golf Society of Neguri, "La Galea", to raise funds for the Vizcaya Multiple Sclerosis Association. Gran Meliá Fénix Free use of the hotel entrance for the fundraising stand set up by the Spanish Association Against Cancer (AECC). Fifty meals per week for the Rotary Club in Madrid to assist the Santa Marca Foundation (home for orphans or children from one-parent families). Donation of hotel linen to the homeless, distributed by hotel employees. Two giant paellas and fifty bread rolls at cost price for the volunteers at "El Rastrillo" held in the Crystal Palace at the Casa de Campo. Free use of a hotel terrace, set up of the tent and security personnel for the Spanish Association Against Colon Cancer. Gran Meliá Victoria Donation of thirteen kilos of fish, two Majorcan cocas and 6 trays of cakes for the benefit night held by the Club Elsa (14th. June). Purchase of a bath seat for disabled guests. Free weekend stay for the Alzheimer Foundation. Donation of food and drinks to the Los Mercedarios Parish over the Christmas holidays. Donation of six Majorcan cocas, six trays of cakes and ten kilos of fish for the benefit nights held by the Club Elsa (7th. and 9th. November). Meliá Barcelona Free use of meeting room and audiovisual equipment, and a donation of 21 free stays and buffet for an auction by the Club Elsa to raise funds for the Missionary Community of Saint Paul the Apostle. Donation of a free stay for a raffle held by the German Catholic Parish. Meliá Castilla Financial donation, twelve paellas and two hundred and fifty meals for "El Rastrillo". Financial donations for the district of Tetuán (Madrid), the Charity Missionaries, the Conceptionist Nuns, the Foundation for the Integration of the Disabled (AFIM) and for the Archbishopric of Madrid. Library for employees (daily newspapers, general reading, modern novels, tourism and F&B publications). Monthly economic assistance for employees with physically or mentally disabled children. Meliá Colón Food is prepared in the hotel and collected by the NGO Solidarity Horizons to be distributed to people in need. Food is donated to Regina Mundi, a religious congregation of nuns that run a center for people with limited resources in Seville. Donation of one hundred portions of stuffed aubergines, for Christmas meals for immigrants to the city, organized by the Costaleros of the Living Christ Association. Donation of Spanish omelets for forty people from the Autistic Association at an event held by the Association in the hotel. Meliá Córdoba Meal at cost price, free waiter service and free use of a meeting room for two hundred and fifty people during the Three Kings celebrations for the children from the Cordoba Down s Syndrome Association. Donation of four free stays for the bullfighters at the Charity Bullfighting Festival organized by the Spanish Association Against Cancer. Visit in March to the Wiloso Projo orphanage run by Mr. Ratri Subiaki. The hotel donated 150 towels, clothing and money (Meliá Purosani). Food, water, towels, sheets and clothes were taken to the village of Dungkap (Nusa Penida, Bali) by employees from various hotel departments (Meliá Bali). Hotel employees form three teams to raise funds for APAE (Association of Parents & Friends of the Exceptional). After the event, members of the winning team take part in a draw in which the prize is a trip for two to visit the APAE base at Astorga, Paraná to see the work they do (Meliá Jardim Europa). 17 Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

65 18 The cooperation with APAE (Association of Parents & Friends of the Exceptional) will continue in the coming years to assist in the education programs run by the center (Meliá Jardim Europa). Visit by children from an orphanage on 15th. November. The photo shows the children washing before prayers (Gran Meliá Jakarta). "BMW Vienna Opera Charity Ball" at the hotel. The photo shows the performance of the maestro Peter Guth. 18,000 euros were raised for three charity organizations (Gran Meliá Jakarta). Financial donation to the NGO Firefighters Without Frontiers. Donation of a free weekend stay in the hotel and dinner in the Tryp Los Gallos Hotel for the raffle held at the First Don Pafeso Charity Golf Tournament, organized by the Humanitarian Business Foundation. Financial donation to the Humanitarian Business Foundation in cooperation with the Tryp Los Gallos Hotel. Meliá Costa del Sol Donation of furniture from two hundred rooms (headboards, TV tables, desks, armchairs, chairs, mirrors, curtains and mattresses) to the "Integrated Village Development - Help Them Live" Foundation to go to the villages of Iquitos and Manaos in Peru. Meliá Galgos Free cocktail for the auction organized by Club Elsa to raise funds for Trinitarias Ayne (Peru). Delivery of forty meals per week to the public dining room for the homeless at the San Alfonso Social Work College in cooperation with the Madrid Hotel Federation and organized by the Madrid Rotary Club. A total of 2,080 meals per year. Meliá Las Palmas Donation of food to the NGO New Future. Financial donations to San Juan de Dios and the NGO Join Hands. Donation of one hundred baguettes for the lunch-bingo party organized to raise funds to finance improvements in the facilities of the Franciscan Brothers of the White Cross in Arucas, to attend to the physically and mentally disabled. Meliá Lebreros Donation of three free stays and a meeting room for a conference on racism in Spain to celebrate the tenth anniversary of Project Man. Donation of buffet meals and three free stays for an auction held by the Club Elsa to raise funds for the Saint Paul Missionaries. Funds were raised for schools and medical centers in Bolivia. Donation of two free stays and a meeting room for a charity event for the New Future Association. Free use of meeting rooms for a charity children s fashion parade organized by the Spanish Association Against Cancer. Menus at the "La Dehesa" Restaurant are printed in Braille for guests with sight deficiencies. In cooperation with the ONCE Group. Meliá Madrid Princesa Financial donation, two cakes, two paellas and bread for an event held by the NGO New Future. Delivery of forty meals per week to the public dining room for the homeless at the San Alfonso Social Work College in cooperation with the Madrid Hotel Federation and organized by the Madrid Rotary Club. Sol Antillas Barbados Contracting of services from the "Always Green" Special Employment Center. Donation of trays of food for two hundred people at the charity event organized by Club Elsa (12th. June). Donation of trays of food and three creates of wine at the charity event organized by Club Elsa (7th. November). Sol Cala Blanca Donation of 5 cribs, 25 bedspreads and 49 mattresses to the NGO Remar. Donation of trays of food for the charity event organized by Club Elsa (14th. June). Free services of two waiters for the charity event organized by Club Elsa (7th. November). Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

66 Sol Pelícanos Ocas Donation of 200 guestroom armchairs, 400 bar chairs and 100 bar tables from the Ocas Hall and 600 restaurant chairs to the NGO EMAUS. Since 1998, employees have sponsored three South American children through the NGO Assistance in Action. Tryp Alameda Training and contracting of women that have suffered abuse. In cooperation with the Andalusia Autonomous Government. Tryp Ambassador Donation of three rooms for six days to the Iuve Foundation for the visit to Spain by a group of children from Brazilian shanty towns as part of a campaign to raise funds and awareness of the situation of children in disadvantaged areas. Tryp Atocha Five free stays and lunch for twenty people organized by Doctors of the World for the authors of the fundraising book "Una grandiosa espina". Funds from sales of the book go to a medical assistance project in the districts of Jocotán and Camotán (Guatemala) aimed at reducing malnutrition amongst the under-fives. Tryp Ceuta Installation of telephones adapted for people with hearing difficulties in cooperation with ACEPAS and the Ceuta City Hall. Tryp Centro Norte Donation of three free stays for the Marfan Syndrome Association. Tryp Coruña Free use of a meeting room for Galicia Marine Rescue for a meeting to coordinate action plans as a consequence of the oil spill caused by the sinking of petrol tanker "Prestige". Tryp Guadalmar Training and contracting of women that have suffered abuse. In cooperation with the Andalusia Autonomous Government. Tryp Palma Donation of three free stays for the German citizen Hans Mügge, who ended up at the Tryp Palma after a bicycle ride from Germany to raise funds for the Balearic Islands Association of Parents of Children with Cancer (ASPA- NOB). Hans Mügge had a daughter that died of cancer when aged only 11. His daughter s greatest dream was to visit Majorca and so he organized his "tour" in solidarity. Central Corporate Headquarters Purchase of 45,685 Christmas cards from the Amadip Esment Special Employment Center. Donation of eighty-five picnics for a group of mentally disabled visitors from Belgium visiting Palma de Majorca in cooperation with the Meliá Palas Atenea and Tryp Bellver Hotels. Transport of medicines and other materials to Cuba during a leisure trip by an employee of Sol Meliá. Donation to the Miramar Orphanage and the Guina de Melena Primary School (medicine, clothing, school materials). Private initiative of the employee in cooperation with the NGO Mediterránea. 45 blood donations by employees (450 ml. per donation) for the Majorca Blood Bank. Collection of points from the MaS Loyalty Program for the Intervida Foundation. Sponsorship of the Congress on Community Involvement "The company of the future " (Meliá Castilla, Madrid). Attendance as s guest speaker at the 13th. Congress on Business and Social Values (Barcelona). Free use of three rooms for six days by the Iuve Foundation for the visit to Spain of a group of children from Brazilian shanty towns, as part of an awareness and fund-raising campaign for underprivileged children in Brazil. The photo shows the children and monitors with the Hotel General Manager, Katja Seelow (Tryp Ambassador). Free use of rooms and lunch for 20 representatives of the NGO Doctors of the World, and for the authors of the fund-raising book Una grandiosa espina. The photo shows the authors, representatives of Doctors of the World and the Hotel General Manager, Ramón Vidal (Tryp Atocha). Photo of the Sekolah Luar Biasa B. (SLB-B) school for deaf children helped by the hotel through volunteer work by employees, donations from guests and the donation of materials (Meliá Bali). 19 Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

67 20 On 28th. March a visit was made to the "Budi Bakti" orphanage, to which money and 150 towels were donated (Meliá Purosani). In November, the hotel Human Resources Department organized a breakfast for employees and their families and also invited children from several orphanages. The photo shows the welcome by the Hotel General Manager, Hubert Klemenz (Gran Meliá Jakarta). On 25th. December, the hotel invited children from several orphanages in the area to celebrate Christmas. The children sang Christmas carols in the hotel lobby, specially dressed for the occasion by the project organizers (Meliá Purosani). Central and Madrid Corporate Headquarters Raffle of ten computers amongst employees at Christmas dinners. Participation required a donation of three euros. The funds raised went to the Special Education College at the San Rafael Hospital in Madrid. INDONESIA Meliá Benoa Visit to the Wanaprasta Sraya senior citizens residence and delivery of two hundred kilos of rice, clothing and towels. Visit to the Yayasan Penderita Anak Cacat Foundation for the disabled and delivery of potatoes, sugar, toothpaste and soap. Visit to the Panti Asuhan orphanage, financial donation and delivery of sheets and soap. Visit to the Sekolah Luar Biasa B. (SLB- B) School for deaf children, financial donation and delivery of sugar, toothpaste and soap. Fundraising project aimed at guests ("Your small change makes a big difference"). The funds raised go to the Sekolah Luar Biasa B. (SLB-B) School for deaf children in Jimabaran, Bali. Sol Lovina Financial donation and delivery of sugar, rice, cooking oil, clothing and medicine for the "Association for Work". Sol Marbella Training for twenty students through an agreement with the Indonesian Government. Contracting of two disabled employees. Donations to twelve different foundations. Lunch for 35 children, clothing and food for the Al Khaeriyah and Al Islah orphanages during the Idul Adha religious celebrations. MÉXICO Gran Meliá Cancún Donation of two bicycles on Three Kings Day for the Benito Juarez Municipal DIF (Integrated Family Development). Donation of food to the Public Safety Department at the Benito Juarez City Hall. Donation of food to the Health Department, twenty lunches on three occasions over the year. Donation of thirty lunches to the Mexican Social Security Institute (16th. February). Financial donation to the delegation of the Mexican Red Cross in Cancun. Donation of twenty lunches to the Mexican Social Security Institute (16th. May). Donation of a box of tuna, four packages of towels, two boxes of vegetables, four boxes of biscuits, two boxes of soup, eleven packages of water, an eiderdown, four cushions, 196 pairs of trousers, 127 uniforms, 87 smocks and two bags of shoes for the victims of Hurricane Isidore in October. Gran Meliá México Reforma Every member of the Executive Committee annually sponsors a child through World View (orphaned children). For every sponsorship, the hotel sponsors an extra child, up to a maximum of five. Contracting of two people from APAC (Integration in the workforce of the physically and mentally disabled). Employees from the Human Resources, General Management and Activities Departments dressed up as clowns and dolls to hand out baskets of food, toys, clothing and shoes in local villages after a collection made amongst all of the hotel employees. Donation of sheets, mattresses and covers to the Máximo Cornejo Residence and to the Old People s Home run by the DIF (Integrated Family Development). Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

68 Donation for the Mexican Red Cross. Donation of free stays and breakfast vouchers for two people from the DIF (Integrated Family Development). Donation of uniforms and sheets to marginalized colonies in Puerto Vallarta. Donation of a four night stay for two people in favor of The Thalians Mental Health Center in Los Ángeles, California. Donation of a three night stay for two people from the Vallertense Women s Association. Banquet for five hundred senior citizens with limited resources for "Senior Citizens Day", organized by the DIF (Integrated Family Development). Donation of food for the Puerto Vallarta Refuge. Meliá Azul Ixtapa Party, donation of clothing, toys, crayons and drawing pads for the children from a school near the hotel. Employees from the Activities Department provided a "Cabaret Circus" show for the children from the village of Zihuatanejo and handed out sweets. Since the 2001 school year, every two weeks the hotel provides 97 children with a full meal at the IAP (Pacific Children s Home), a center that gives classes in elementary education, computing and handicrafts to children with limited resources. Sight tests and donation of lenses for people with limited resources and forty hotel employees. Invitation to dinner for twelve doctors and four coordinators. Organized by the Rotary Club (New Millennium). Meals are provided every day for the Municipal Tourism Police from the José Azueta City Hall that work in the hotel area. Donation of uniforms, sheets and towels for the Zihuatanejo Church. Donation to the Mexican Red Cross. Donation of free dinners for the end of year raffles held by the Municipal Transport Police. Donation of free stays for an event held by the PAS Senior Citizens Residence. Donation of a free two week stay and then a two month stay in the hotel employees residence for a teacher from River College who gives training courses. Organized by the Hotel Association. Donation of free dinners for the end of year raffles held by the employees of the Fire Department. Donation of free stays for three people for four days for the courses given by the Joint Commission on Safety and Hygiene and the Civil Protection Brigades. Donation of clothing and sheets for the disadvantaged. Donation of clothing for the "Lost & Found" program of the DIF (Integrated Family Development). Donation of three hundred lunches for the participants in the conferences organized by the Rotary Club (New Millennium) and attended for three days by around 500 people each day amongst students and employees. Meliá Cozumel Donation of clothing to the IQC School. Invitation to employees to visit the hotel show with their families. Participation of employees in a dance number during the television TELET- HON to raise funds for children in need. Meliá Turquesa Donation of 1,812 sheets, 458 bath towels, 395 hand towels and 263 shirts for the DIF Center (Integrated Family Development). Donation of 260 pairs of trousers, 52 skirts, 30 beach robes, 34 bathrobes and 344 tablecloths for villages with limited resources in the region. Donation of 32 single bed bases for the Institute for Children with Down s Syndrome. Donation of books, manuals and magazines to the Denpasar Education Department (Meliá Bali) Visit in March to the Wiloso Projo orphanage in Gowongan to donate clothing and money (Meliá Purosani). Since 2001, the hotel has been providing shoes for Made and Wayan, children suffering from polio. Staff make regular visits and guests are encouraged to help with donations for the center where they live (Meliá Bali). 21 Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

69 On 13th. July a visit was made to the "Santa María" orphanage to donate 100 towels, and money in a visit made in September (Meliá Purosani). Donation of 200 sheets for the Anti- Hunger Institute. Donation of 500 lunches for DIF (Integrated Family Development). Donation of ten rooms for forty children in one week, 320 breakfasts and 40 lunches (organized by the Occidente General Hospital, Guadalajara, specialized in the treatment of children in terminal stages of cancer). DOMINICAN REPUBLIC 130 uniforms for the Santo Domingo Senior Citizens Home. Paradisus Punta Cana Mattresses, curtains, sheets, computers, cushions and televisions distributed by Cáritas to the Crea Homes, to the Maternal and Children s Center, to the Nuestra Señora del Carmen Refuge, to the Pastoral Social de El Seibo, to the Villa Hortensia Neighbors Association and to the Junta Agropecuaria de la Alta Gracia. Meliá Santo Domingo 1,279 articles, including furniture and hotel operating equipment for the Community of Santo Domingo. Visit to the "Santa María" orphanage in September (Meliá Purosani). 22 Children from the Dos Meninos Sao Judas Tadeo Institute singing at the Sol Meliá Convention in Brazil. The children received food and toys donated by company employees. Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

70 5.3 Purchases from Special Employment Centers Within the Purchasing Program in the Sol Meliá Community Involvement Plan, in 2002 a large number of products and services have been purchased from several Special Employment Centers (companies whose labor force is made up of at least 70% of disabled people). The current unemployment rate in Spain for people with disabilities stands at 70%, a percentage which obviously indicates a severe disadvantage for such people when compared to other citizens. The Special Employment Centers create stable jobs for the disabled, in exchange for a considerable reduction in Social Security expenses. In 2002 Sol Meliá promoted greater cooperation with Special Employment Centers and, in Spain, for example, services were requested from a total of fifteen Special Employment Centers with a total transaction value of 3,763, euros, especially with companies related to the ONCE Group. Special Employment Center Purchases 2002 SEMPRE-VERD 22, AMADIP-ESMENT 197, ATAM CEE LAVANDERIAS 896, ARTESA, S.L. 435, FLISA ELCHE LAVAND. 116, FLISA ALMERIA LAVAND 60, FLISA CADIZ, S.A. 159, FLISA LAS PALMAS LAVAN. 70, FLISA LINCE VALLADOLID 68, FLISA CATALUÑA LAV. 4, FLISA VALENCIA LAV. 102, FUNDOSA LAVANDERIAS INDUSTRIALES S.A. 408, LAV. IND. FLISA SEVILLA, S.A. 148, PILSA (CEEPILSA) 7, SAFIVIC, S.A. 1,066, TOTAL 3,763, Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

71 5.4 NGO s, foundations and organizations benefited by the Plan 24 BRAZIL Association of Parents & Friends of the Exceptional (APAE) Brazilian-Israeli Union for Social Welfare (UNIBES) Catholic League Curumim Project Dos Meninos Sao Judas Tadeo Institute Frei Luis Amigó Infant School Ibero-American University Center (UNIBERO) NGO "Live and let live" NGO "Your dream, my dream" Project Happiness: Hospitals of Brazil in cooperation with the Brazilian Hotel Industry Association (ABIH) Volunteers in Action (VIA) Women s International Zionism Organization (WIZO) COSTA RICA Brasilito School Country Day School in Conchal CUBA NGO Mediterránea SPAIN ACEPAS Always Green (Special Employment Center) Alzheimers Foundation Amadip Esment (Special Employment Center) American Heart Association Anti-Aids Association (Marbella) Ara Parseghian Medical Research Foundation (Arizona) Archbishopric of Madrid Artesa (Special Employment Center) Assistance in Action Atam Laundries (Special Employment Center) Autistic Association (Seville) Autonomous Government of Andalusia (Social Affairs) Balearic Islands Association of Parents of Children with Cancer (ASPANOB) Brothers of the White Cross Center for the Disabled Business and Growth Foundation Business and Society Foundation Charity Missionaries (Madrid) Civic Center at the Malaga Provincial City Hall Club Elsa Conceptionist Nuns (Madrid) Costaleros of the Living Christ Association (Seville) Crohn's and Colitis Foundation of America (CC & FA) District of Tetuán (Madrid) Doctors of the World Down s Syndrome Association (Cordoba) Emaus Firefighters Without Frontiers Flisa Group (Special Employment Center) Foundation for the Integration of the Disabled (AFIM) Franciscan Brothers of the White Cross Galicia Marine Rescue Heart & Soul Charitable Foundation (New York ) Humanitarian Business Foundation "Integrated Village Development - Help Them Live Foundation Intervida Foundation Iuve Foundation Join Hands Le Bal Des Papillons Majorca Blood Bank Marbella with Galicia Association Marfan Syndrome Association Missionary Community of Saint Paul the Apostle New Future NGO Lima (Peru) ONCE Orphaned Children s School (Antequera) Paraplegic Research Foundation (Geneva) Parish Los Mercedarios (Majorca) Prevent Child Abuse America (Chicago) Project Man Promi (Coin) Regina Mundi (Seville) Remar Rotary Club Madrid Safivic (Special Employment Center) San Alfonso Social Work College (Madrid) San Carlos Home for Senior Citizens (Malaga) San Juan de Dios Hospital (Las Palmas) Santa Marca Foundation (Madrid) Sisters of the Poor (Ronda) Solidarity Horizons (Seville) Spanish Association Against Cancer Spanish Association Against Colon Cancer Special Education College at the San Rafael Hospital (Madrid) The Royal British Legion The Thalians Mental Health Center in Los Angeles (California) The Trinitarias - Ayne (Peru) UNICEF Spain Vizcaya Multiple Sclerosis Association Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

72 INDONESIA Al Amin Orphanage Al Aqso Foundation Al Islah Orphanage Al Khaeriyah Orphanage Association for Work Binasiwi Orphanage Budi Bakti Orphanage Cacat Ganda Orphanage Denpasar Department of Education Desa Putra Orphanage Gg. Menur Orphanage Haji Imron Muslim School Indonesian Hotel and Restaurant Association Indonesian Red Cross Karangmojo Orphanage Kupu Foundation Mushallah Orphanage Panti Asuhan Orphanage Panti Social Tresna Werdha Wana Seraya Refuge Pondok Si Boncel Orphanage Sanglash Hospital Santa María Orphanage Sayap Ibu Orphanage Sekolah Luar Biasa B. (SLB-B) School The Asa Bangsa Foundation The Asthmatic Children Funding Foundation The Indonesian Asthma Foundation UNICEF Indonesia Wanaprasta Sraya Refuge Wiloso Projo Orphanage Yayasan Penderita Anak Cacat Foundation MEXICO Puerto Vallarta Refuge Mexico Hotel Association Vallertense Women s Association Máximo Cornejo Senior Citizens Home PAS Senior Citizens Home Rotary Club New Millennium Mexican Red Cross Integrated Family Development (DIF) IQC School Occidente General Hospital (Guadalajara) IAP Church of Zihuatanejo Anti-Hunger Institute Mexican Social Security Institute Institute for Children with Down s Syndrome Integration in the workforce of the physically and mentally disabled (APAC) River College Mexican Secretary of Health The Thalians Mental Health Center in Los Angeles (California) World View DOMINICAN REPUBLIC Cáritas Community of Santo Domingo Crea Homes Junta Agropecuaria de la Alta Gracia Maternal and Children s Center Nuestra Señora del Carmen Refuge Pastoral Social de El Seibo Santo Domingo Senior Citizens Home Villa Hortensia Neighbors Association Community involvement in figures COMMUNITY INVOLVEMENT 2002 Projects carried out: 205 NGO s, foundations and social groups that have benefited: 145 Investment in community involvement projects: 384, euros Purchases from Special Employment Centers: 3,763, euros Projects carried out in 2002 Sol Meliá Community Involvement and Environmental Report 2002

73 6 A vision of the future According to a survey carried out by Demoscopia for the Business and Society Foundation in December, 2002, 86% of the people surveyed believe it is important that companies not only devote greater resources to community involvement, but also that these resources are managed properly, using such tools as a Community Involvement Plan. The survey results were behind the changes seen in community involvement activities at Sol Meliá in 2002, based around the approval of a Community Involvement Plan that aims to manage in a more systematic, rational and rigorous way the type of projects which have been carried out for many years to help the disadvantaged in numerous countries. 26 Sol Meliá community involvement has begun a new era which will ensure that the work that goes into every one of the projects in which the company takes part is more productive, and that the results achieved in each project are even more positive for all of the company s five key clients: our guests, our shareholders, the owners of hotels, our partners and our employees. The Community Involvement Plan will also assist in further increasing the multiplying effect that Sol Meliá exports to many regions as part of a travel and tourism industry which generates greater wealth, especially in developing countries. A vision of the future Sol Meliá Community Involvement and Environmental Report 2002

74 7 Annexes 7.1 Community Involvement Plan design surveys What is your first reaction on hearing that Sol Meliá is designing a Community Involvement Plan? Corp. Corp. Corp. City hotels City hotels City hotels Resorts Resorts Americas Cuba Europe Americas Asia Europe Americas Europe Seems like a good idea 75% 100% 87% 87% 67% 92% 91% 91% 690% It was about time 25% - 13% 12% 33% 5% 9% 8% 105% Which of the following comments do you most agree with? Corp. Corp. Corp. City hotels City hotels City hotels Resorts Resorts Americas Cuba Europe Americas Asia Europe Americas Europe Positive impact in the medium term 57% 100% 71% 7% 58% 70% 50% 74% 487% Improve relations with guests 43% 25% 37% 20% 50% 31% 28% 26% 260% Positive impact in the short term 29% 25% 12% 14% 8% 13% 34% 15% 150% 27 Would you like to take part? Corp. Corp. Corp. City hotels City hotels City hotels Resorts Resorts Americas Cuba Europe Americas Asia Europe Americas Europe Yes 100% 100% 91% 97% 100% 88% 97% 89% 762% No - - 9% 3% - 12% 3% 11% 38% How would you like to take part? Corp. Corp. Corp. City hotels City hotels City hotels Resorts Resorts Americas Cuba Europe Americas Asia Europe Americas Europe Depends on what they propose 32% - 54% 60% 67% 53% 63% 51% 380% Free time 61% 25% 46% 33% 33% 29% 22% 33% 282% Take an active part 25% 100% 16% 24% 33% 13% 31% 15% 257% Donate money 11% - 10% 10% - 11% 6% 10% 58% What should the Sol Meliá Community Involvement Plan focus on? Corp. Corp. Corp. City hotels City hotels City hotels Resorts Resorts Americas Cuba Europe Americas Asia Europe Americas Europe Community involvement in general 50% 75% 44% 71% 92% 56% 47% 54% 489% Emergency relief 46% 25% 38% 41% 25% 41% 47% 48% 311% International cooperation 32% - 30% 17% - 22% 31% 16% 148% Annexes Sol Meliá Community Involvement and Environmental Report 2002

75 7.2 Some survey responses I think that the mere fact that each of us is encouraged to come up with ideas could bring positive results. Personally, I wouldn t mind getting involved, although I don t have a lot of spare time. To get more people involved we will have to make sure we can really transmit to all of the company employees how important community involvement is. People can always find the time, motivation and energy. You can always count on me helping out to the best of my abilities. It will depend on the importance the company wants to give it and on the degree of involvement in projects of managers. project without it having an effect on their work. A Community Involvement Plan should be made to set up projects in which employees can take part. We have to "wake up" a lot of employees to the subject as we all tend to be a bit lazy about it. In general it all seems great to me, providing there is always transparency and news on the results of our activities. In my case I am the founder of an NGO and member of another. As someone that donates both time and money, I would like it if you could contact me for any projects to help drug addicts and the integration of people on the margins of society. 28 I have an adopted child and I think that a lot of people should do more so that children in developing countries can have the same opportunities as our children. I think we should focus on the type of things that are most effective for our surroundings, I mean the cities and countries where we have hotels, especially things that help improve the way of life and the welfare of certain groups of people. I only like helping out NGO s that have specific objectives, are well managed and checked by external auditors. I would love it if my company did this sort of thing. I think that there are enough well-qualified people that could use the knowledge they have to help out in this With all of the infrastructure that the company has, we can help a lot more than we think. As they say... strength through union... working together we could all sow seeds that will bear fruits in the future of which we could all be proud. I think that this new challenge for Sol Meliá is very important for the future. Taking part in community involvement projects gets people together and helps to build a team spirit, as well as making people feel better about themselves. It s important that the company gets involved in community activities so that we are seen not only as a tourism company, but also as a company that is concerned about the communities where we have hotels. Annexes Sol Meliá Community Involvement and Environmental Report 2002

76 8 Contact If you, your company, NGO, foundation or public or private organization would like further information on the projects that Sol Meliá carries out through its Community Involvement Plan, please don t hesitate to get in touch. Community Involvement SOL MELIÁ Executive Vice-Presidency of Communication and Institutional Relations Gremio de Toneleros, Palma de Majorca, Spain Telephone: fax: accion.social@solmelia.com community.involvement@solmelia.com 29 Contact Sol Meliá Community Involvement and Environmental Report 2002

77 ENVIRONMENTAL REPORT 2002

78 1 Commitment to environmental protection Background The commitment of Sol Meliá to social responsibility also includes environmental protection and the running of the company on principles of sustainable development. Sol Meliá s commitment to the environment made it the first Spanish hotel company to create an Environmental Protection Manual back in 1995, the guidelines of which have been implemented gradually in all of the company s hotels. Amongst many other things done by Sol Meliá to protect the environment, many company hotels have taken measures that range from the more rational use of resources (energy, water, toxic substances, etc.), the reduction and separation of waste products to the greatest respect for the flora, fauna and culture of each location in which Sol Meliá has hotels. Incubation area for marine turtles at the Sol Cayo Largo Hotel (Cuba) 31 2 Principal activities in 2002 Protection of marine life in the Caribbean The Gran Meliá Cancun Hotel took part in the Marine Turtle Protection Program organized by the Benito Juarez City Hall in Cancun (Mexico). The Gran Meliá Cancun achieved excellent results, and a survival index for the baby turtles of 80.3%, earning a plaque from the local authorities for the hotel. The Sol Cayo Largo in Cuba inaugurated an area for the incubation of marine turtles in hotel grounds. Guests at the Sol Cayo Largo can also join in this environmental campaign, watching the female turtles arriving on the beach at night, as well as seeing the baby turtles born at the hotel being released back to the wild. Gran Meliá Cancún Commitment to environmental protection / Principal activities in 2002 Sol Meliá Community Involvement and Environmental Report 2002

79 Local environment guide The Meliá de Mar Hotel, located in Palma de Majorca, demonstrated its commitment to its local environment through the publication of a Guide to flora and fauna, the results of a survey the hotel requested from the Balearic Islands University. The guide gives guests at the Meliá de Mar the chance to learn more about the plants and the birds they see in the 14,000 m2 of gardens that surround the hotel or the fish, shellfish and other fauna that can be found on the beach or in the sea alongside the hotel. Meliá De Mar 32 Inauguration of a Green Floor at the Meliá Jardim Europa The Meliá Jardim Europa (Sao Paolo, Brazil) inaugurated a Green Floor specially designed to protect the natural environment and guarantee guests a more pleasant atmosphere. The decoration, based on soothing shades of green and pictures made from recycled paper and natural fibers; the atmosphere, scented with soothing, anti-stress herbs; indoor plants; biodegradable toiletry products; and herb-scented pillows are just a few of the features of the new floor. The hotel has also taken into account energy saving measures through the use of lighting designed to reduce electricity consumption by 60%. The cooling system has also been designed to use an environmentally-friendly gas that does no harm to the ozone layer. Environmentally-friendly room on the Green Floor at the Meliá Jardim Europa Hotel (Brazil) Environmental Management award The tour operator TUI named the Sol Aloha Puerto (Malaga, Spain) in its environmentally-friendly hotel category, a fact which will appear in all of the brochures which TUI will publish for the summer 2003 season. The TUI Environmental Management Department rewarded the efforts made by the Sol Aloha Puerto after an inspection of its policy on the environment and commitment to environmental protection. Tryp Apolo The Tryp Apolo backs sustainability The Citizens Commitment to Sustainability promoted by the Barcelona City Hall (Spain) was backed by the Tryp Apolo Hotel, the first hotel in the Catalan capital which, together with another 112 companies and organizations, decided to support the project in its objectives of conserving natural resources and promoting mobility, community unity and environmental quality. Principal activities in 2002 Sol Meliá Community Involvement and Environmental Report 2002

80 Paradisus Playa Conchal

81 Flora conservation initiative The Sol Milanos Pingüinos Hotel (Menorca, Spain) inaugurated the Son Bou Environmental Center, in collaboration with the GOB environmental group, the Menorca Hotel Association, the Island Council of Minorca and Alaior City Hall. This innovative center houses two exhibitions which explain to visitors the value of local flora and the fresh water reserves in the region, as well as local ecosystems. The center demonstrates the sensitivity to environmental problems at the Sol Milanos Pingüinos and also allows guests to better appreciate the environmental wealth of Menorca. The hotel was also granted a right to use the Menorca, Biosphere Reserve brand after successfully complying with the audit criteria of the tourism authorities in the Balearic Islands. Inauguration on 2nd. October, 2002, of the Son Bou Environmental Center at the Sol Milanos Pingüinos Hotel. The photo shows local authorities accompanied by the Hotel General Manager, Martín Adrover Corporate environmental initiatives Course for hotel entertainment staff The Council of Majorca held a course for hotel entertainment staff on various environmental workshops aimed at children and senior citizens staying in company hotels, focusing on the recycling of paper and its importance in the conservation of trees. Recycling of soap Sol Meliá reached an agreement with Agerul by which company hotels can recycle soap that guests begin to use but do not finish. The leftovers are used to make liquid soap for later use in hotels. Implementation of Environmental Management System Hotels in the Balearic Islands began implementation of quality and environmental management systems as part of a program set up by the Institute for the Promotion of Quality Tourism. Courses at Corporate Headquarters Majorca Recycles (Council of Majorca) offered seminars at Corporate Headquarters on waste management on the island. Corporate environmental initiatives Sol Meliá Community Involvement and Environmental Report 2002