This document summarizes work completed on a project in Montenegro from March to August 2009. It includes an architectural concept and construction phasing sequence, a financial model, a summary of local design requirements, and definitions of the design team roles. Letters of intent were received from three hotel operators - Corinthia Hotels, Nikki Beach, and Banyan Tree. The project budget is estimated at 84.89 million euros. Sales revenues from villas, apartments, hotels, and commercial units are projected to total 172.17 million euros.

1. Bijeil Rat
Budva, Montenegro
September 2012

2. INTRODUCTION
 Summary of work completed on the Project during March-August 2009
 Hotel operator search summary

3. Summary of work completed on the Project during March-August 2009
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 Architectural concept and construction phasing sequence
 Financial model for the assessment of investment feasibility and determination of financial indicators such as NPV and IRR. The
model was put together on the basis of the information provided and confirmed:
‒ during the Montenegro trip to account for local construction rates and material costs in order to create a construction
cost budget
‒ by Knight Frank report – with particular reference to resort market analysis, accommodation product mix, sale prices and
units sale schedule recommendations
‒ by figures provided by hotel operators in their LOI, that reflect hotel operating and other costs as well as operator's
charges
 Summary of local design and submission requirements
 Definition of the design team and preliminary framework for cooperation of UK and MN specialists
 Preliminary pre-contract project program and key milestones
 Soft costs budget that is required to get the construction permit. The budget takes into account design team costs, site surveys,
branding, legal costs etc.
 Knight Frank market analysis report and recommendations (current in July 2009)
 Horwath (hotel consultants) feasibility study report
 Letters of Intent from three hotel operators

4. Hotel operator search summary
4
 13 operator companies have expressed interest in the Project
 To date Letters of Intent (LOI) have been issued by three hotel operators Corinthia Hotels, Nikki Beach and Banyan Tree (Angsana
brand) see operator’s description table below
 Expected LOIs are to be issued by Hyatt, GHM, Interstate and Rixos
 Hyatt, Interstate and Rixos representatives have visited the site
Operator Description Comments
Corinthia Hotels  Hotel company formed in Malta in 1960
 The company manages the following brands
 Corinthia, Wyndham, Ramada Plaza
 Have 7 operating Hotels and 5 under development
 Manage several restaurant brands
such as Rickshaw
 Have own Spa division
Nikki Beach Hotels and Resorts  Brand that manages luxury resorts and exclusive beach clubs, was
formed in Miami in 1997
 Currently have 10 luxury resorts in their portfolio and 9 destinations
are planed to be developed in 2009-2013
 Their clientele base accounts for over 3.5 million people
 Unique party format for wealthy
people
 Ultra VIP service
 Succefully sell properties under their
brand in their resorts
Banyan Tree (Angsana Brand)  Banyan Tree Hotels and Resorts is a leading hotel operator of luxury
resorts and 5-6* hotels
 In 2008 they successfully manage 25 resorts and 68 spas, currently
have 27 more resorts under development
 Angsana Brаnd was formed in 2000 and specializes in management of
exclusive resorts
 Have signed a contract for
management of 6* resort, first in
Europe, on St Marco island in
Montenegro
 Have a strong experience in sales of
Banyan Tree residences – that include
apartments and villas

5. CONCEPT AND PHASING
 The Concept of the Project
 Phasing sequence of the Project

6. Breakdown of Project areas Total Total
UOM units sqm
Villas 20 7 800
Delux apartments 6 1 062
Apartments 224 21 991
Hotel - 23 372
Commercial units 56 7 517
Other - 250
Total 306 61 992
North hillside 38 7 094
South hillside 36 6 464
Hill town and Hotel 97 33 873
Beach village 108 9 865
Tower and Gorge 6 1 296
Rotund 21 3 400
Total 306 61 992
The concept of the Project
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Hill town and HotelTower and Gorge
South Hillside
North Hillside
Beach village
Jetty
The project comprises construction of 5* luxury resort with hotel, villas and apartments

7. Phasing sequence of the Project
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 Construction is sequenced away from the sea therefore reducing the construction effect on hotel visitors and occupants of
already build properties
 Current phasing sequence is tied to the sales schedule that is based on recommended market capacity
Phasing sequence Phase 1 Phase 2 Phase 3 Phase 4
UOM sqm sqm sqm sqm
Villas - 1 950 2 340 3 510
Delux apartments - - - 1 062
Apartments 6 360 2 664 5 418 7 549
Hotel 20 452 2 920 - -
Commercial units 2 220 3 370 817 1 110
Other - - 50 200
Total 29 032 10 904 8 625 13 431
Contruction, years 2 1 1 1

8. BUDGET AND REVENUE
 Project budget
 Sales revenues and operating income
 Knight Frank recommendations

9. Project budget
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Budget (excl. financing costs) Total Phase 1 Phase 2 Phase 3 Phase 4
UOM eur mln eur mln eur mln eur mln eur mln
Soft costs (incl. project) (3,33) (3,33) - - -
Construction costs (64,27) (31,05) (12,00) (7,20) (14,02)
Utility connections (4,27) (3,09) (0,67) - (0,52)
Land improvement (4,85) (4,45) (0,23) - (0,18)
Marketing (2,31) (0,52) (0,35) (0,56) (0,88)
Brokerage (2,88) (0,65) (0,43) (0,70) (1,11)
Project management and cons. (1,84) (0,46) (0,46) (0,46) (0,46)
Land and utilities tax (1,14) (0,07) (0,02) (0,02) (1,03)
Total (84,89) (43,60) (14,15) (8,93) (18,20)
 The budget was created in July 2009 and needs updating
 Despite that we believe it wouldn’t change dramatically and therefore can be used for preliminary calculations

10. Sales revenues and operating income
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 Sales revenues and operating income herein are based on Knight Frank recommendations, hotel operators’ LOIs and other open
sources
Sale revenues Total Phase 1 Phase 2 Phase 3 Phase 4
UOM eur mln eur mln eur mln eur mln eur mln
Villas 32,67 - 8,17 9,80 14,70
Delux apartments 4,99 - - - 4,99
Apartments 77,63 25,94 9,11 18,06 24,53
Hotel 29,31 23,53 5,78 - -
Commercial units 27,56 8,14 12,36 3,00 4,07
Other - - - - -
Total 172,17 57,60 35,42 30,86 48,29
Operating income Total Phase 1 Phase 2 Phase 3 Phase 4
UOM eur mln eur mln eur mln eur mln eur mln
Villas - - - - -
Delux apartments - - - - -
Apartments - - - - -
Hotel 4,99 4,41 0,58 - -
Commercial units 8,27 2,44 3,71 0,90 1,22
Other -
Total 13,26 6,85 4,29 0,90 1,22

11. Knight Frank study
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 According to Knight Frank
recommendations the average
weighted sale price ranges from
3850-4400 Euros per sq m
 Client market – property buyers from
Russia, Western Europe, Serbia and
Montenegro, older than 30, family
holiday orientated
 The current market capacity
(according to July 2009) is 30
apartments and 5 villas per year
 All apartments are sold under the
hotel operator’s brand and the ratio
between the number of
accommodation units and number of
hotel keys is 1:1
 It is recommended to allow between
50-100 apartments for a rental pool
scheme i.e. an apartment is owned
by a client but is managed by the
hotel operator
 Accommodation units planned in the
first phase can be put on market
once construction starts onsite