28NOV200902355264

Offering memorandum

Grupo Posadas, S.A.B. de C.V.$200,000,000$9.250% Senior Notes Due 2015Interest Payable January 15 and July 15Issue Price: 99.023%

We are offering $200,000,000 aggregate principal amount of our 9.250% Senior Notes due 2015.

The notes will mature on January 15, 2015. We will pay interest on the notes on January 15 and July 15,commencing on July 15, 2010. The notes will bear interest at a rate equal to 9.250% per annum.

We may redeem the notes, in whole or in part, at a redemption price based on a ‘‘make-whole’’ premium.Until January 15, 2013, we may redeem up to 35% of the notes with the net proceeds of qualified equityofferings (as defined under ‘‘Description of the Notes’’). If we undergo a change of control or sell certain ofour assets, we may be required to offer to purchase notes from holders.

The notes will be our senior unsecured obligations and will rank equally with all of our other unsecuredsenior indebtedness, except for our obligations that are preferred by statute, and senior to all of oursubordinated indebtedness. The notes will be unconditionally guaranteed by certain of our existing andfuture wholly-owned direct and indirect subsidiaries. The guarantees will be the senior unsecured obligationsof the guarantors and will rank equally with all of the guarantors’ other senior unsecured indebtedness,except for their obligations that are preferred by statute, and senior to all of the guarantors’ subordinatedindebtedness. The notes and the guarantees will be effectively subordinated in right of payment to all of ourand the guarantors’ secured indebtedness, and the notes and the guarantees will also be effectivelysubordinated in right of payment to all liabilities, including trade payables, of our subsidiaries that are notguarantors.

We have applied to list the notes on the official list of the Luxembourg Stock Exchange and to trade on theEuro MTF Market. However, we cannot assure you that the listing application will be approved. This offeringcircular constitutes a prospectus for the purpose of Luxembourg law dated July 10, 2005 on Prospectuses forSecurities.

Investing in the notes involves risks that are described in the ‘‘Risk Factors’’ section beginning on page 13 ofthis offering memorandum.

The notes have not been registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’), orthe securities laws of any other jurisdiction. We are offering the notes only to qualified institutional buyersunder Rule 144A promulgated under the Securities Act and to persons outside the United States underRegulation S promulgated under the Securities Act. See ‘‘Transfer Restrictions.’’

THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE REGISTRO NACIONAL DE VALORES(NATIONAL SECURITIES REGISTRY) MAINTAINED BY COMISION NACIONAL BANCARIA Y DE VALORES (NATIONALBANKING AND SECURITIES COMMISSION), OR CNBV, AND MAY NOT BE OFFERED OR SOLD PUBLICLY, OROTHERWISE BE THE SUBJECT OF BROKERAGE ACTIVITIES IN MEXICO, EXCEPT PURSUANT TO THE PRIVATEPLACEMENT EXEMPTION SET FORTH UNDER ARTICLE 8 OF THE LEY DEL MERCADO DE VALORES (MEXICANSECURITIES MARKET LAW). AS REQUIRED UNDER THE MEXICAN SECURITIES MARKET LAW, WE WILL NOTIFY THECNBV OF THE OFFERING OF THE NOTES OUTSIDE OF MEXICO. SUCH NOTICE WILL BE DELIVERED TO THE CNBV TOCOMPLY WITH A LEGAL REQUIREMENT AND FOR INFORMATION PURPOSES ONLY, AND THE DELIVERY TO ANDTHE RECEIPT BY THE CNBV OF SUCH NOTICE DOES NOT IMPLY ANY CERTIFICATION AS TO THE INVESTMENTQUALITY OF THE NOTES OR OF OUR SOLVENCY, LIQUIDITY OR CREDIT QUALITY OR THE ACCURACY ORCOMPLETENESS OF THE INFORMATION SET FORTH HEREIN. THE INFORMATION CONTAINED IN THIS OFFERINGMEMORANDUM IS SOLELY THE RESPONSIBILITY OF GRUPO POSADAS, S.A.B. DE C.V. AND HAS NOT BEENREVIEWED OR AUTHORIZED BY THE CNBV. IN MAKING AN INVESTMENT DECISION, ALL INVESTORS, INCLUDINGANY MEXICAN INVESTORS WHO MAY ACQUIRE NOTES FROM TIME TO TIME, MUST RELY ON THEIR OWN REVIEWAND EXAMINATION OF GRUPO POSADAS, S.A.B. DE C.V.

Delivery of the notes has been made to investors in book-entry form through The Depository Trust Companyon January 15, 2010.

Sole book-running manager

J.P. MorganFebruary 5, 2010

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6010

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This map shows the number and brand of our hotels in the countries in which we operate as of September 30, 2009.

Source: Grupo Posadas

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You should rely only on the information contained in this offering memorandum. We have not, and the initial purchaser has not, authorized any other person to provide you with different information. If any person provides you with different or inconsistent information, you should not rely on it. We are not, and the initial purchaser is not, making an offer to sell, or seeking offers to buy, the notes in any jurisdiction where the offer or sale is not permitted. This offering memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. You should assume that the information contained in this offering memorandum is accurate only as of any date on the front of this offering memorandum. Our business, financial condition, results of operations and prospects may have changed since that date.

This offering memorandum has been prepared by us solely for use in connection with the placement of the notes. We and the initial purchaser reserve the right to reject any offer to purchase for any reason.

TABLE OF CONTENTS ENFORCEMENT OF CIVIL LIABILITIES ................................................................................................... iii WHERE YOU CAN FIND MORE INFORMATION...................................................................................... iii PRESENTATION OF FINANCIAL AND OPERATING INFORMATION ..................................................... iv FORWARD-LOOKING STATEMENTS...................................................................................................... vii SUMMARY...................................................................................................................................................1 SUMMARY OF THE OFFERING.................................................................................................................7 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION ......................................10 RISK FACTORS.........................................................................................................................................13 EXCHANGE RATES..................................................................................................................................34 USE OF PROCEEDS.................................................................................................................................35 CAPITALIZATION ......................................................................................................................................36 SELECTED FINANCIAL AND OPERATING INFORMATION...................................................................37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS...............................................................................................................................40 BUSINESS .................................................................................................................................................66 MANAGEMENT .........................................................................................................................................87 PRINCIPAL SHAREHOLDERS .................................................................................................................93 RELATED PARTY TRANSACTIONS ........................................................................................................94 DESCRIPTION OF OTHER INDEBTEDNESS..........................................................................................95 DESCRIPTION OF THE NOTES...............................................................................................................99 BOOK-ENTRY; DELIVERY AND FORM .................................................................................................139 TAXATION ...............................................................................................................................................143 PLAN OF DISTRIBUTION .......................................................................................................................148 TRANSFER RESTRICTIONS..................................................................................................................151 LEGAL MATTERS ...................................................................................................................................153 INDEPENDENT AUDITORS....................................................................................................................154 GENERAL LISTING INFORMATION.......................................................................................................155 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ......................................................................F-1 APPENDIX A – SUMMARY OF CERTAIN DIFFERENCES BETWEEN MEXICAN FRS AND U.S.

GAAP................................................................................................................................................. A-1

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Neither the Securities and Exchange Commission, or SEC, any state securities commission nor any other regulatory authority has approved or disapproved the notes; nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this offering memorandum. Any representation to the contrary is a criminal offense.

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The initial purchaser makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this offering memorandum. Nothing contained in this offering memorandum is, or shall be relied upon as, a promise or representation by the initial purchaser as to the past or future. We have furnished the information contained in this offering memorandum. The initial purchaser has not independently verified any of the information contained herein (financial, legal or otherwise) and assumes no responsibility for the accuracy or completeness of any such information.

The notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable securities laws of any state or other jurisdiction pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. Please refer to the sections in this offering memorandum entitled “Plan of Distribution” and “Transfer Restrictions.”

In making an investment decision, prospective investors must rely on their own examination of our business and the terms of the offering, including the merits and risks involved. Prospective investors should not construe anything in this offering memorandum, as legal, business or tax advice. Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the securities under applicable legal investment or similar laws or regulations.

In this offering memorandum, we rely on and refer to information and statistics regarding our industry and the economic condition of the countries where we operate. We have obtained this data from either our internal studies or publicly available sources such as independent industry publications and government sources. Although we believe that these publicly available sources are reliable, we have not independently verified and do not guarantee the accuracy and completeness of this information.

This offering memorandum contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to us or the initial purchaser.

We accept responsibility for the information contained in this offering circular. To the best of our knowledge and belief (and we have taken all reasonable care to ensure that), the information contained in this offering circular is in accordance with the facts and does not omit any material information. You should assume that the information contained in this offering circular is accurate only as of the date on the front cover of this offering circular.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED (THE “RSA”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B OF THE RSA IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

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ENFORCEMENT OF CIVIL LIABILITIES

Grupo Posadas S.A.B. de C.V., or Posadas, is a sociedad anónima bursátil de capital variable (listed corporation with variable capital) organized under the laws of the United Mexican States, or Mexico. All of our directors and substantially all of our officers and certain of the experts named herein are non-U.S. residents, and all or a significant portion of the assets of those persons may be, and the most significant portion of our assets are, located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon those persons or to enforce against them or against us in U.S. courts judgments predicated upon civil liability provisions of the U.S. federal or state securities laws. We have been advised by our Mexican counsel, Romo, Paillés y Guzmán, S.C., that there is doubt as to the enforceability, in original actions in Mexican courts, of liabilities predicated solely on the U.S. federal securities laws and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of the U.S. federal securities laws.

WHERE YOU CAN FIND MORE INFORMATION

So long as any notes remain outstanding, we will make available, upon request, to any holder and any prospective purchaser of notes the information required pursuant to Rule 144(A)(d)(4)(i) under the Securities Act, during any period in which we are not subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.

You may obtain a copy of the indenture that governs the notes by requesting it in writing or by telephone at the address and phone number below.

Grupo Posadas, S.A.B. de C.V.

Attention: Corporate Finance Department Paseo de la Reforma No. 155

Colonia Lomas de Chapultepec 11000, México, D.F.

México Telephone number: (52 55) 5326 6757

We have applied to list the notes on the Official List of the Luxembourg Stock Exchange and to trade the notes on the Euro MTF Market. See “General Listing Information.” We will comply with any undertakings assumed or undertaken by us from time to time to the Euro MTF Market in connection with the notes, and we will furnish to them all such information as the rules of the Luxembourg Stock Exchange may require in connection with the listing of the notes.

Our principal executive offices are located at Paseo de la Reforma 155, Colonia Lomas de Chapultepec, Mexico City, Mexico 11000, and our telephone number is (52 55) 5326-6700. Additional information about our company and our operations can be found at our website at http://www.posadas.com. Information available on our website is not a part of, nor is it incorporated by reference into, this offering memorandum.

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PRESENTATION OF FINANCIAL AND OPERATING INFORMATION

Grupo Posadas, S.A.B. de C.V. is a corporation with variable capital organized under the laws of Mexico and is a holding company that conducts a substantial amount of business through subsidiaries. In this offering memorandum, except when indicated or the context otherwise requires, the words “Posadas,” “Grupo Posadas,” “we,” “us,” “our” and “ours” refer to Grupo Posadas, S.A.B. de C.V. together with its consolidated subsidiaries.

For purposes of this offering memorandum, we refer to hotels we operate in which we have an equity interest of 50% or greater as our “owned hotels,” hotels we operate in which we have a leasehold interest as our “leased hotels” and hotels we operate for unrelated third parties (i.e., hotels in which we do not have an equity interest of 50% or greater or a leaseholder interest) as our “managed hotels.”

We have entered into management contracts with all of the hotels that we operate, pursuant to which we receive management and other fees. Fees we receive from our owned and leased hotels are paid to us on substantially the same basis as fees we receive from unrelated third parties with respect to our managed hotels. In order to account for all of the revenues generated by our hotel management business, we do not eliminate from our consolidated statements of operations revenues generated by the fees that our owned and leased hotels pay to us. Our consolidated operating income is not affected by this treatment because the expenses relating to the fees paid by our owned and leased hotels are also not eliminated. Other significant intercompany balances are eliminated in consolidation. For additional information relating to the consolidation of our financial statements and the methods of intercompany elimination employed in such consolidation, see note 2(c) to our audited financial statements and to our unaudited interim financial statements, included herein.

Financial information

This offering memorandum includes our audited consolidated financial statements as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008, and our unaudited condensed consolidated interim financial statements as of and for the nine months ended September 30, 2009 and 2008.

Our consolidated financial statements have been prepared in accordance with Mexican Financial Reporting Standards, or Mexican FRS (individually referred to as Normas de Información Financiera, or NIFs), issued by the Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera (Mexican Board for Research and Development of Financial Information Standards), or CINIF, which differ in certain significant respects from accounting principles generally accepted in the United States of America, or U.S. GAAP. For a description of certain significant differences between Mexican FRS and U.S. GAAP, see “Appendix A — Summary of Certain Differences Between Mexican FRS and U.S. GAAP.”

We have not prepared a reconciliation of our consolidated financial statements and related footnotes between Mexican FRS and U.S. GAAP and have not quantified such differences. Accordingly, no assurance is given that the description of certain significant differences between Mexican FRS and U.S. GAAP in Appendix A discusses all material differences between our financial information as prepared in accordance with Mexican FRS as opposed to U.S. GAAP. In making an investment decision, investors must rely upon their own examination of Posadas, the terms of the offering and the financial statements and other information included herein. Potential investors should consult their own advisors for an understanding of the differences between Mexican FRS and U.S. GAAP and how those differences might affect the financial information herein.

Effects of inflation

Pursuant to Bulletin B-10, “Recognition of the Effects of Inflation on Financial Information” issued by the CINIF, through 2007, our consolidated financial statements were reported in constant period-end pesos to adjust for the inter-period effects of inflation. The presentation of financial information in currency units of the most recently ended period, or constant currency units, was intended to eliminate the distorting effect of inflation on the financial statements and to permit comparisons across periods in comparable monetary units.

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In 2007, NIF B-10, “Effects of Inflation” was issued, and became effective on January 1, 2008. This new NIF ceases the recognition of the comprehensive effects of inflation on financial information unless the economic environment in which the entity operates qualifies as inflationary. An environment is considered inflationary if the cumulative inflation rate in the relevant jurisdiction equals or exceeds 26% over the three preceding years. Because of the relatively low level of Mexican inflation in recent years, we have not recognized inflation for our Mexican entities in the financial information beginning January 1, 2008 presented in this offering memorandum. Accordingly, unless otherwise noted, all financial information through December 31, 2007 has been restated in constant pesos as of such date and all other information beginning January 1, 2008 is stated in nominal pesos, considering that non-monetary assets and stockholders’ equity accounts include inflationary effects recognized through December 31, 2007.

The rates of inflation in Mexico, as measured by changes in the Índice Nacional de Precios al Consumidor (Mexican national consumer price index), or INPC, published by Banco de México, were 6.53% for 2008, 3.8% for 2007 and 4.1% for 2006.

Rounding

Certain figures included in this offering memorandum and in our financial statements have been rounded for ease of presentation. Percentage figures included in this offering memorandum have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this offering memorandum may vary from those obtained by performing the same calculations using the figures in our financial statements. Certain numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that preceded them due to rounding.

EBITDA

This offering memorandum also includes our EBITDA, or earnings before interest, taxes and depreciation and amortization, which we calculate by adding depreciation and amortization to our consolidated operating income as determined in accordance with Mexican FRS. EBITDA is not a measure recognized under Mexican FRS or under U.S. GAAP, does not have a standardized meaning and may not be comparable to similarly titled measures provided by other companies either in Mexico or in other jurisdictions. In addition, we have not calculated EBITDA in accordance with the guidelines adopted by the SEC on presentation of non-GAAP financial measures. Moreover, our manner of calculating EBITDA in this offering memorandum may not be the same as the way in which we will calculate EBITDA for purposes of compliance with the covenants set forth in the Indenture governing the Notes. We disclose EBITDA because we use it as a measure of our consolidated operating performance. EBITDA should not be considered in isolation or as a substitute for net income or loss or as an indicator of operating performance or cash flow or as a measure of liquidity or our ability to service debt obligations.

Currency information

We publish our financial statements in pesos. Unless otherwise specified or the context otherwise requires, references in this offering memorandum to “pesos” or “Ps.” are to Mexican pesos as of December 31, 2007 for annual periods ended on or prior to such date, and to nominal Mexican pesos thereafter, except for those entities that operate in inflationary environments, as defined by Mexican FRS, and thus continue to recognize the effects of inflation in their financial statements. Also, unless otherwise specified or the context otherwise requires, we present pesos in this offering memorandum in thousands of pesos. Unless otherwise specified or the context otherwise requires, references in this offering memorandum to “U.S. dollars,” “$” or “U.S.$” are to United States dollars, all references to “reais”, “reals” or “R$”, are to Brazilian reais, all references to “P$” are to Argentine pesos and all references to “Ch$” are to Chilean pesos.

Solely for the convenience of the reader, certain amounts presented in Mexican pesos in this offering memorandum as of and for the year ended December 31, 2008 and the nine months ended September 30, 2009 have been converted into U.S. dollars at specified exchange rates. According to the Mexican FRS, Posadas determines the exchange rate applicable for the end of each period from the conversion rate of the transactions executed by Posadas in the open market prior to the end of the dates

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indicated. Unless otherwise indicated, the exchange rate used in converting Mexican pesos into U.S. dollars for amounts presented as of and for the year ended December 31, 2008 and as of and for the nine months ended September 30, 2009 was determined by reference to the exchange rate of Ps.13.5383 per U.S. dollar and Ps.13.4890 per U.S. dollar, respectively. Management does not believe there is a material difference between the rate applied for purposes of our financial reporting and the rates published by the Banco de Mexico in the Federal Official Gazette as the rate for the payment of obligations denominated in non-Mexican currency payable in Mexico. You should not construe our conversions as representations that the Mexican peso amounts actually represent the United States dollar amounts presented, or that they could be converted into U.S. dollars at the rate or at the dates indicated. See “Exchange Rates.”

Industry and market data

Unless otherwise noted, market data and other statistical information used throughout this offering memorandum are based on our estimates, which are derived from our review of internal surveys and independent industry publications, government publications, and reports by market research firms or other published independent sources, including, reports and analyses prepared by Smith Travel Research, the World Tourism Organization and the Secretaría de Turismo (Ministry of Tourism) of the Mexican federal government. Although we believe our sources, including our estimates, are reliable, we have not independently verified the information and cannot guarantee its accuracy or completeness.

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FORWARD-LOOKING STATEMENTS

This offering memorandum includes forward-looking statements within the meaning of the U.S. securities laws. These forward-looking statements include, but are not limited to, statements about our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate and other statements contained in this offering memorandum that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “should” or “will” or the negative of such terms or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements expressed or implied by such forward-looking statements to differ materially from historical results or those anticipated. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. These risks, uncertainties and other factors include, among other things, those listed under “Risk Factors” as well as those included elsewhere in this offering memorandum and include, but are not limited to:

political and economic factors in Mexico, Brazil, Argentina, Chile and the United States;

supply and demand changes for hotel rooms and vacation club memberships in our markets;

the financial condition of the airline industry and its impact on the lodging industry;

the impact of government regulations, including land use, tax, health, safety and environmental laws;

capital market volatility;

risks related to our business, our strategy, our expectations about growth in demand for our services, our expectations as to our ability to increase the number of hotels and hotel rooms we manage and our business operations, financial condition and results of operations;

statements of our plans, objectives or goals, including our ability to implement our strategy;

the availability of funds to finance growth;

currency fluctuations and inflation in the countries in which we operate;

the impact of natural events, such as earthquakes, hurricanes and floods; and

health pandemics, such as the recent H1N1 influenza outbreak.

These factors could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements.

These forward-looking statements speak only as of the date of this offering memorandum and we undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events or otherwise. Additional factors affecting our business emerge from time to time and it is not possible for us to predict all of these factors, nor can we assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe that the plans, intentions, and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In addition, you should not interpret statements regarding past trends or activities as assurances that those trends or activities will continue in the future. While we continually review trends and uncertainties affecting our results of operations and financial condition, we do not intend to update any particular forward-looking statements contained in this offering memorandum.

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SUMMARY

This summary contains basic information about us and this offering. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read this entire offering memorandum carefully, including the section entitled “Risk Factors” and our financial statements and the notes thereto incorporated by reference herein before making an investment decision.

Overview

We are primarily engaged in the business of operating hotels in several countries in Latin America and our principal operations are located in Mexico and Brazil. According to Hotels magazine, we are the largest Latin American operator of hotels based on number of hotels and number of rooms. We also believe that we are the leading operator of hotels in Mexico based on number of hotels, number of rooms, geographic coverage, revenues and market share. We distinguish ourselves from other operators by offering to hotel owners superior franchise services including, among other things, centralized reservation and marketing resources, revenue-optimization services, data gathering and analysis platforms, robust customer loyalty programs and strong, well-defined brands.

Through our subsidiaries, we operate 110 hotels (including four vacation club resorts) with a total of 19,454 rooms in Mexico, Brazil, Argentina, Chile and the United States (in the State of Texas). In Mexico we operate 94 hotels with a total of 16,487 rooms (including our vacation club units). We also operate 10 hotels in Brazil with a total of 1,899 rooms, two hotels in Argentina with a total of 247 rooms and one hotel in Chile with 142 rooms. In addition, we currently operate three hotels with a total of 679 rooms in Texas. Of the 110 hotels we operate, 33 are owned hotels, 19 are leased hotels and 58 are managed hotels (not including our owned and leased hotels that we also manage). Our hotels are located in a mix of urban and coastal destinations serving both leisure and business travelers and approximately 80% of our rooms are in urban destinations and 20% of our rooms are in coastal destinations. See “Business—Hotel Business” for a description of each of the structures under which we operate our hotel business.

We also operate a vacation club business through Fiesta Americana Vacation Club, or FAVC. FAVC markets and sells memberships that grant a right to use vacation club resorts that we own and operate in upscale destinations in Mexico including Los Cabos, Cancun, Acapulco and Kohunlich, Mexico, as well as other affiliated properties. In most cases, we provide financing to customers who purchase such memberships. Our vacation club business represented 20.9% and 29.2% of our revenues for the year ended December 31, 2008 and for the nine months ended September 30, 2009, respectively.

In addition, in recent years, we have attempted to market our management skills and technology platform, originally developed to support our hotel operating business, by opening a number of related services businesses: Ampersand manages loyalty programs for diverse related and unrelated businesses; Konexo provides call center and contact services and related customer-contact services for related and unrelated businesses; Conectum offers business process outsourcing services, or shared services, for diverse industries; and GloboGO offers online travel planning services.

Together with the expansion of our hotel operations and vacation club business, we have sought to develop strong brand names and to foster customer recognition of our brand-wide consistency of service. We consider our brands to be one of our main assets. We operate substantially all of our hotels in Mexico under the Fiesta Americana, Fiesta Inn, Live Aqua and One Hotels brand names, while in South America, we operate our hotels under the Caesar Park and Caesar Business brand.

Our Hotel Brands

Fiesta Americana is our flagship brand. We currently operate 18 hotels under this brand. Hotels operating under this brand offer deluxe, large scale, full-service accommodations to the high-end leisure traveler segment in coastal destinations and to the high-end business traveler segment in major urban centers. The Fiesta Americana line includes four hotels under the Fiesta Americana Grand brand. The Fiesta America hotels are upper-scale class hotels, and the Fiesta Americana Grand hotels are luxury class hotels. These hotels compete primarily with other high-end international and

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Mexican brands. The hotels range from around 150 to over 600 rooms each. The Fiesta Americana and Fiesta Americana Grand brands constitute 27% of our total rooms.

Fiesta Inn hotels are smaller, more moderately priced hotels relative to Fiesta Americana hotels. Fiesta Inn hotels are medium-scale class hotels offering modern, comfortable accommodations and efficient service primarily to the domestic and regional business traveler segment. We currently operate 60 hotels in Mexico under the Fiesta Inn brand and these hotels are typically located in small, mid-size or major urban destinations or suburbs of major urban areas. Fiesta Inn hotels compete primarily with other moderately priced Mexican and international chains, as well as with moderately priced Mexican independent hotel operators. The hotels range from around 100 to over 300 rooms each. The Fiesta Inn brand constitutes 45% of our total rooms.

Live Aqua is a luxury class, lifestyle resort hotel. The Live Aqua concept seeks to build a memorable experience through pampering details – including fine dining, aromatic scents, spirit-renewing sanctuaries and comfortable settings – and superior service. We have one, 371-room Live Aqua hotel which competes with other luxury resorts in the Riviera Maya and Cancun region. The Live Aqua brand constitutes 2% of our total rooms.

One Hotels is an innovative chain of economy class hotels in Mexico that offer guest’s security, confidence and comfort at an affordable cost. The warm atmosphere, efficient service and practical design is ideal for business travelers who desire a convenient location and restful accommodations at an accessible price. One Hotels compete primarily with other economy class Mexican chains and independent hotel operators. We operate 10 hotels under the One Hotels brand and each of the hotels has around 125 rooms. The One Hotels brand constitutes 7% of our total rooms.

Caesar Park and Caesar Park Silver hotels are luxury class, full-service hotels in major urban centers that cater primarily to the high-end business traveler segment. We currently operate three hotels in Brazil and two hotels in Argentina under the Caesar Park brand. Caesar Park hotels compete primarily with other high-end international brands. The hotels range from around 80 to over 200 rooms each. The Caesar Park and Caesar Park Silver brands constitute 4% of our total rooms.

Caesar Business hotels are smaller, moderately priced hotels offering practical lodging and efficient service primarily to the domestic and regional business traveler. We currently operate seven hotels in Brazil and one hotel in Chile under the Caesar Business brand. Caesar Business hotels are medium-scale class hotels that compete primarily with other moderately priced international brands. The hotels range from around 100 to 400 rooms each. The Caesar Business brand constitutes 8% of our total rooms.

We will selectively continue to develop new properties to grow our hotel and vacation club businesses, but we intend to emphasize growth by increasing the number of properties we manage under our brand portfolio. In particular, we plan to expand in Mexico primarily by adding more One Hotels and Fiesta Inn hotels to supply the business traveler segment and in South America by adding more Caesar Business hotels.

Our Other Brands

Fiesta Rewards is our customer loyalty program. Launched in 1989, we were the first hotel company in Mexico to develop a sound customer loyalty program. The point-based program offers a certain numbers of points for every dollar spent on stays and consumption in our hotels and in certain subscriber restaurants, bars and spas, among other places. The points can, in turn, be redeemed for a variety of rewards including, among other things, free hotel stays, airline reservations, car rentals and fashion products.

Fiesta Americana Vacation Club is the brand name for our vacation club business. FAVC members receive an annual allocation of points that members can redeem to stay

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at our FAVC properties, any other hotels that we operate or, through FAVC’s affiliations with Resorts Condominium International, or RCI, and Hilton Hotels Corp., any RCI-affiliated resort or Hilton Grand Vacation Club, or HGVC, resort throughout the world. As of September 30, 2009, FAVC had almost 29,000 members.

We are also developing brand identities around our service businesses, including:

Ampersand operating our loyalty program management business for diverse related and unrelated businesses;

Konexo providing call center and customer care solutions for related and unrelated businesses;

Conectum offering business process outsourcing services, or back office shared services, for diverse industries; and

GloboGO operating our online travel planning portal.

Our Competitive Strengths

Although we operate in a highly competitive environment, we believe that we have developed a number of competitive strengths that position us well in the regions and businesses in which we operate. We believe that the following are the key highlights of our competitive position:

Strong market position. We are a leading hotel operator in Latin America. According to Hotels magazine, we are the largest Latin American operator of hotels based on number of hotels and number of rooms, and we believe we are the leading operator of hotels in Mexico based on number of hotels, number of rooms, geographic coverage, revenues and market share. In addition, we believe that we benefit from strong brand recognition in Mexico and Brazil and we have a reputation for providing high value accommodations in desirable locations.

Diversified portfolio of properties. Our diversified brand portfolio targets various market segments in various geographic locations— including business and leisure travelers in urban destinations in upscale and moderately-priced categories, and groups, conventions and leisure travelers in urban and coastal destinations. Historically, this diversification has enhanced our ability to maintain a stable cash flow in a variety of market conditions while also limiting our exposure to any particular brand, market segment or geographic location.

Our market position, strong reputation and superior brand and hotel management services attract third-party investment. During the last few years we have been able to expand our hotel business mainly through increasing our operation of hotels developed with investment capital provided by third parties. We distinguish ourselves from other operators by offering to hotel owners superior brand and hotel management services including, among other things, centralized reservation and marketing resources, revenue-optimization technology, data gathering and analysis platforms, robust customer loyalty programs and strong, well-positioned brands.

Scale. As the leading hotel operator in Latin America, we have achieved a scale to support our core technology platforms and marketing functions. We also believe that our scale helps to lower our procurement expenses including, for example, insurance, utilities, food and beverages, furniture, fixtures and equipment. As we further increase our room count, we expect that our economies of scale would further improve our operating cost structure.

Loyal customer base. We have created a loyal customer base through our Fiesta Rewards guest loyalty program. As of December 31, 2008, Fiesta Rewards had approximately 2.2 million members and accounted for 19% and 25% of the occupancy in Fiesta Americana and Fiesta Inn hotels, respectively. As of September 30, 2009,

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members of Fiesta Rewards accounted for 13.8% and 19.8% of the occupancy in Fiesta Americana and Fiesta Inn hotels, respectively.

Investments in technology that seek to enhance profitability. We have invested and continue to invest in technology designed to achieve greater operating efficiencies, enhanced distribution capabilities and profitability. We believe that these investments have made our technology platform comparable to many major international hotel companies and have given us a strong competitive advantage over other Latin American competitors.

New business development and diversification. We have launched several new businesses with distinct competitive advantages by leveraging our strengths: talent, technology, marketing and broad expertise in the tourism and hospitality industry in Latin America for application to customers in the tourism space and in other industries.

Experienced management. Our senior management team is led by Mr. Gastón Azcárraga Andrade, who has been our Chairman and Chief Executive Officer since 1992. We have a well-qualified senior management team with an average of over 15 years of industry experience. We believe that, historically, the turnover among our senior management has been low relative to our competitors, reducing organizational volatility and allowing us consistently to pursue our long-term strategic interests.

Our Business Strategy

Our long term strategic plan is to be the leading hotel operator and a tourism-related services provider in Latin America, while developing and strategically investing in complementary and ancillary businesses that are synergistic with our core business.

We focus on maximizing shareholder value and return on capital by optimizing the use of our talent, real estate, third party management contracts and advanced proprietary operating systems. As part of our portfolio management strategy, we continuously examine our business units’ portfolio to address issues of market dynamics, demand, supply and competition. Several of our key strategies are highlighted below:

Leverage our infrastructure to improve on our previous utilization levels

We believe we have built a solid business infrastructure in recent years, diverse both geographically and by brand, and supported by talented professionals and leading-edge technology. Due to the negative impacts of the global economic crisis and H1N1 influenza outbreak, we believe our infrastructure is currently underutilized. Nevertheless, the recent crisis has allowed us to streamline our operations and improve our cost structure, responsiveness and profitability. We believe we are positioned to increase our utilization levels and operational performance in line with a global economic recovery.

Strengthen our capital structure

We seek to strengthen our capital structure to make us more resilient to industry cycles and to provide us with the flexibility and capacity to take advantage of opportunities that may arise in the future. Furthermore, we intend to focus on strengthening our capital structure through improving our cash flow generation and reprofiling the maturities of our consolidated indebtedness.

Continue to consolidate and expand our hotel network while maintaining limited capital expenditures

An important part of our growth strategy is to continue to benefit from our strong brand recognition, solid reputation, centralized resources and extensive management experience which allow us to enter into additional hotel management contracts and, at the same time, to reduce our investment in owned hotels. Management contracts with hotels owned by third parties, including hotels that we lease from third parties, help improve our profitability by generating revenue streams at a relatively low marginal cost of leveraging our centralized resources and systems and with fairly minimal additional capital

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investment by us. We believe that based on the above mentioned factors, we are an attractive option for hotel owners who seek profitable investments with a stable revenue stream. In the next 36 months, we plan to commence operating 52 new hotels with approximately 7,233 rooms pursuant to management contracts we are currently negotiating or have already entered into. Approximately 86% of these new hotels in development will be owned by unrelated third parties.

Continue to penetrate the moderately-priced business traveler segment

We have successfully addressed the needs of the domestic and regional business traveler, and our success has allowed us to diversify our operations. We believe the domestic and regional business travel segment continues to be underserved and represents attractive growth opportunities to us going forward. In 1993 we began to serve this segment in Mexico through our Fiesta Inn brand. Building on the success of Fiesta Inn, in 2001 we launched Caesar Business serving the business traveler in South America and, in 2007, we launched One Hotels, an economy class line in Mexico, catering to business travelers. We currently operate 60 Fiesta Inns, eight Caesar Business and ten One Hotels serving this market segment.

We plan to continue expanding our Fiesta Inn brand in the moderately-priced business traveler segment and to expand our One Hotels economy class brand to South America, primarily through third-party owned hotels.

Continue to develop our Fiesta Americana Vacation Club business

Leveraging our brand positioning, we have been able to build a solid and profitable vacation club business. Our solid brand names have helped us significantly increase our customer base while providing our customers a unique experience with unparalleled flexibility. We believe that the vacation club business enhances the profitability of our existing asset base by leveraging synergies stemming from both businesses. We will selectively continue converting, developing and constructing resorts or new vacation club units in appealing destinations.

Enhance the guest experience

We believe the knowledge of our guest’s preferences and patterns grant us a competitive advantage. For more than 20 years, we have consciously invested in customer loyalty programs, such as our Fiesta Rewards program, thereby creating loyal users of our hotels. Several years ago we decided to take the knowledge of our customer one step further. We have built a detailed database that feeds into a proprietary guest experience system, Delphos, which permits us to anticipate each customer's pre-stay, in-stay and post-stay needs, preferences and desires. Delphos allows us to tailor our services to each guest based on experience, thus creating a unique bond.

Develop talent

As we move from a company focused on property ownership towards an organization emphasizing portfolio management, we believe talent becomes one of our most important and visible assets. We believe our ability to identify, train and retain talent is one of our core enterprise strengths.

Focus on strengthening the core capabilities of our service businesses

We have successfully designed and developed specific service businesses, such as Ampersand, Konexo, Conectum and GloboGO, that support our day-to-day operations. We believe these businesses are synergistic to our operations and diversify our revenue stream. We intend to continue strengthening and developing those service businesses through marginal investments. We believe attractive business opportunities exist for the unique services we provide in the countries where we operate.

Continue leveraging our distribution strategy to efficiently capture market share

We believe our distribution platform gives us a competitive advantage because it allows us to seamlessly coordinate all reservation transactions in a dynamic pricing model, inventory and oversell limits that constrain the hotel industry. We believe that our information management platforms are robust and state of the art, and that these platforms allow us to benefit from the dynamic growth of our electronic distribution channels.

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Realize cost savings and improve operating efficiencies

We are focused on effectively streamlining our operations to take advantage of cost reduction opportunities and to improve our profitability. We have reduced our distribution costs structure by centralizing and consolidating the room inventory data from our entire hotel portfolio into a single proprietary solution called the Central Inventory Posadas (ICP). We have enhanced our profitability through real-time dynamic pricing of our room inventory. We have also achieved similar cost reductions by centralizing and consolidating accounting, payroll, strategic sourcing and receivables processing. We are one of the few hotel operators in Latin America that have developed such systems.

Future growth

While we are currently focused on preserving liquidity, reducing leverage and improving operational performance, we may consider additional investments in the tourism-related industry, including new developments and/or opportunistic acquisitions, when conditions improve and further investments would be prudent. We will only consider investments that would add value to the existing portfolio, diversify our operations by market, geography or customer type, and improve EBITDA generation.

Corporate Headquarters

Our principal executive offices are located at Paseo de la Reforma 155, Colonia Lomas de Chapultepec, Mexico City, Mexico 11000, and our telephone number is (52 55) 5326-6700. Additional information about our company and our operations can be found at our website at http://www.posadas.com. Information available on our website is not a part of, nor is it incorporated by reference into, this offering memorandum.

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SUMMARY OF THE OFFERING

Issuer................................................... Grupo Posadas, S.A.B. de C.V.

Notes Offered ..................................... U.S.$200,000,000 aggregate principal amount of 9.250% senior notes due January 15, 2015, or the Notes.

Issue Price .......................................... 99.023 % of the principal amount.

Maturity ............................................... January 15, 2015.

Interest Payment Dates ..................... January 15 and July 15 of each year, commencing July 15, 2010.

Indenture ............................................. The notes will be issued under an indenture, to be dated as of January 15, 2010, between us and The Bank of New York Mellon, as trustee.

Guarantees ......................................... The notes will be jointly and severally guaranteed by certain of our existing and future wholly-owned direct and indirect subsidiaries. See “Business—Organizational Structure” and “Risk Factors—Risks Relating to the Notes.”

Ranking ............................................... The notes will be our senior unsecured obligations and will rank equally with all of our other unsecured senior indebtedness, except for our obligations that are preferred by statute, and senior to all of our subordinated indebtedness. The guarantees of the guarantors will be the senior unsecured obligations of the guarantors and will rank equally with all of the guarantors’ other senior indebtedness, except for their obligations that are preferred by statute, and senior to all of the guarantors’ subordinated indebtedness. The notes and the guarantees will be effectively subordinated in right of payment to all of our and the guarantors’ secured indebtedness, and the notes and the guarantees will also be effectively subordinated in right of payment to all liabilities, including trade payables, of our subsidiaries that are not guarantors.

As of September 30, 2009, after giving pro forma effect to the sale of the notes offered hereby and the application of the gross proceeds thereof, our total consolidated indebtedness would have been U.S.$412.8 million. Applying the same pro forma effect and assuming that we do not elect to prepay the Banco del Bajio facility referred to in clause 6 of the second paragraph of “Use of Proceeds”, we and the guarantors would have had approximately U.S.$5.6 million of secured debt outstanding, while the total indebtedness of our non-guarantor subsidiaries would have been U.S.$25.2 million. The guarantors represented 88% and 64%, and 85% and 62%, of our total revenues and assets in the nine months ended September 30, 2008 and 2009, respectively.

Optional Redemption......................... We may redeem the notes, in whole or in part, at a redemption price based on a “make-whole” premium. Prior to January 15, 2013, we may redeem up to 35% of the aggregate principal amount of the notes with the proceeds from certain qualified equity offerings.

Redemption for Tax Reasons ........... We may redeem the notes at a redemption price equal to 100% of their principal amount, plus accrued interest, and any

8

additional amounts thereon, in whole but not in part, upon giving not less than 30 or more than 60 days’ notice if, as a result of

• any change in, or amendment to, the laws, rules or regulations of any Relevant Jurisdiction (as defined in “Description of the Notes—Redemption for Tax Reasons”) or taxing authority thereof or therein; or

• any amendment to or change in any (or any subsequently enacted) official interpretation, application or pronouncement regarding such laws, treaties rules or regulations, which are of general applicability;

we or any guarantor would be obligated to pay additional amounts in respect of the notes, in excess of those payable at a rate of 10.0%. See “Description of the Notes—Redemption for Tax Reasons.”

Restrictive Covenants ....................... The indenture governing the notes contains certain covenants which, among other things, restrict our and our restricted subsidiaries’ ability to:

• incur additional indebtedness; • grant liens; • make restricted payments; • make certain investments; • sell assets; • permit restrictions on the ability of restricted subsidiaries to

declare dividends; • enter into certain types of transactions with affiliates; and • merge or consolidate with other companies or transfer all or

substantially all of our assets.

These covenants are subject to a number of limitations and exceptions. See “Description of the Notes—Certain Covenants.”

Change of Control Offer .................... If we experience a change of control, holders of the notes may require us to repurchase all or part of the notes at 101% of their principal amount, plus accrued and unpaid interest and any additional amounts to the redemption date. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control.”

Transfer Restrictions ......................... We have not registered the notes under the Securities Act or any state securities laws, and we will not be required to do so. Consequently, the notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

Pursuant to the Ley del Mercado de Valores (Mexican Securities Market Law), the notes may not be offered or sold publicly in Mexico but may be privately offered under the private placement exemption set forth in Article 8 of the Mexican Securities Market Law.

Form of Notes and Clearance ........... The notes will be issued in the form of one or more global notes in fully registered form, without interest coupons, in denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof. Each global note will be deposited with, or on behalf of, a custodian for The Depository Trust

9

Company, or DTC, and registered in the name of DTC or its nominee.

Beneficial interests in each global note will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants, and any such interest may not be exchanged for certificated notes, except in limited circumstances.

Listing.................................................. We have applied to list the notes on the official list of the Luxembourg Stock Exchange and to trade on the Euro MTF market. However, we cannot assure you that the listing application will be approved.

Governing Law ................................... The notes, the guarantees and the indenture will be governed by the laws of the State of New York.

Use of Proceeds ................................. We intend to use the net proceeds from this offering to repay outstanding debt. Any remaining proceeds will be used for general corporate purposes. See “Use of Proceeds.”

Risk Factors........................................ Investing in the notes involves substantial risks. See “Risk Factors” for a description of certain of the risks that you should consider before investing in the notes.

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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The following tables set forth our summary historical and other financial data as of and for the periods indicated. The summary historical financial data for the years ended December 31, 2006, 2007 and 2008 were derived from the audited consolidated balance sheets as of December 31, 2008 and 2007 and the consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006, of cash flows for the year ended December 31, 2008 and of changes in financial position for the years ended December 31, 2007 and 2006, as audited by Galaz, Yamakazi, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu. The summary historical financial data as of and for the nine months ended September 30, 2008 and September 30, 2009, respectively, were derived from our unaudited condensed consolidated interim financial statements as of and for the periods then ended. Our unaudited condensed consolidated interim financial statements have been prepared on the same basis as our audited financial statements for the year ended December 31, 2008 and, in the opinion of management, include all adjustments, consistent only of normal, recurring adjustments, considered necessary for a fair presentation of our financial condition and results of operations for such periods. The following information is qualified by reference to, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes beginning on page F-1 of this offering memorandum. The historical results are not necessarily indicative of results to be expected in any future period.

Years ended December 31, Nine months ended September 30, 2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (U.S.$) (2) (Ps.) (Ps.) (U.S.$) (2) (Unaudited) (in thousands, except as otherwise indicated) Statement of Operations Data:

Total Revenues(1)..................... 5,528,221 5,974,224 6,904,520 509,999 5,211,854 5,224,969 387,350

Hotel ownership: Revenues .................................. 3,582,344 3,522,621 3,677,583 271,643 2,716,283 2,362,403 175,136 Direct costs and expenses ........ 2,569,770 2,625,464 2,791,774 206,213 2,063,135 1,875,420 139,033 Operating earnings from hotel ownership ......................

1,012,574

897,157

885,809

65,430 653,148

486,983

36,102

Hotel management, brand and other:

Revenues .................................. 1,040,469 1,289,110 1,655,402 122,275 1,240,637 1,219,952 90,441 Direct costs and expenses ........ 557,920 717,116 1,105,498 81,657 788,697 818,008 60,643 Operating earnings from hotel management, brand and other ................................

482,549

571,994

549,904

40,618 451,940

401,944

29,798

Vacation Club and other: Revenues .................................. 905,408 1,162,493 1,571,535 116,081 1,254,934 1,642,614 121,774 Direct costs and expenses ........ 660,308 844,594 1,046,496 77,299 856,647 1,268,469 94,037 Operating earnings from Vacation Club and other .........

245,100

317,899

525,039

38,782 398,287

374,145

27,737

Other operating expenses ......... 744,559 755,137 819,983 60,568 634,271 688,155 51,016 Operating income...................... 995,664 1,031,913 1,140,769 84,262 869,104 574,917 42,621 Comprehensive financing result:

Interest expense................. 415,179 388,397 420,311 31,046 296,311 289,760 21,481 Interest income .................. (35,979) (32,093) (6,989) (516) (14,736) (27,394) (2,031) Exchange loss (gain), net(3)...............................

65,738

(15,501)

(111,918)

(8,267) (54,084)

(29,296)

(2,172)

Loss from derivative financial instruments, net(4) ..............................

-

-

1,208,196

89,243 52,847

49,110

3,641 Gain on monetary position(5) .......................

(135,742)

(143,925)

——

——

——

——

——

Total comprehensive financing result .......................

309,196

196,878

1,509,600

111,506 280,338

282,180

20,919

Other expenses, net .................. 91,493 122,902 234,728 17,338 141,753 73,205 5,427 Equity in results of associated companies..............................

(1,114)

351,922

209,513

15,476 201,936

(1,350)

(100)

(Loss) income before income tax .............................

596,089

360,211

(813,072)

(60,057) 245,077

220,882

16,375

Income tax expense (benefit) .... 139,819 159,646 (111,226) (8,216) 220,016 86,330 6,400 Consolidated net (loss) income....................................

456,270

200,565

(701,846)

(51,842) 25,061

134,552

9,975

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As of and for the years ended

December 31, As of and for the nine months ended

September 30, 2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (U.S.$) (Ps.) (Ps.) (U.S.$) (Unaudited) (in thousands, except as otherwise indicated) Balance Sheet Data: Current assets: Cash and cash

equivalents ......................

526,766 381,690 830,922 61,376

582,358

589,752

43,721 Trade accounts receivable,

less allowance for doubtful accounts .............

1,026,214 1,777,451 1,540,540 113,791

1,441,989

1,503,109

111,432 Other current assets ..... 215,499 242,605 244,602 18,067 181,508 248,755 18,441 Total current assets ................. 1,814,631 2,440,784 2,666,990 196,996 2,245,627 2,369,484 175,660 Property and equipment, net(6) ....................................

9,092,168 9,266,017 9,386,720 693,346

9,275,113

9,396,943

696,637

Other non-current assets ......... 1,891,976 1,437,979 1,491,064 110,137 1,589,688 1,767,464 131,030 Total assets ............................. 12,798,775 13,144,780 13,544,774 1,000,478 13,110,428 13,533,891 1,003,328

Total current liabilities(7) ........... 1,148,563 1,934,793 2,659,011 196,407 1,992,850 2,489,876 184,586 Long-term liabilities: Long-term debt.................... 4,243,958 3,884,392 4,193,673 309,764 3,915,048 4,186,541 310,367 Derivative financial

instruments ......................

38,110 20,985 404,345 29,867

126,389

313,582

23,247 Total liabilities ......................... 7,408,720 7,852,365 9,085,931 671,128 8,026,636 8,604,204 637,868 Stockholders’ equity ................ 5,390,055 5,292,415 4,458,843 329,350 5,083,792 4,929,686 365,460 Cash Flow Data:(8) Net cash provided by

operating activities .............

932,065 698,120 1,925,503 142,226

1,105,663

771,128

57,167 Net cash used in investing activities .............................

(166,544) (454,212) (783,945) (57,906)

(826,088)

(709,260)

(52,581)

Net cash used in financing activities .............................

(680,953) (346,943) (505,302) (37,324)

(27,417)

(320,639)

(23,770)

Other Financial Data: EBITDA(9)................................. 1,437,728 1,462,875 1,529,949 113,009 1,188,215 914,400 67,788 Other Operating Data: ADR(10)..................................... 1,073 1,059 1,069 79 1,060 1,070 79 REVPAR(11).............................. 661 659 647 48 655 572 42 Occupancy(12) .......................... 61.7% 62.2% 60.6% — 61.8% 53.4% —

(1) Total revenues include revenue from hotel ownership, hotel management, brand and other and Vacation Club and other. (2) Converted into U.S. dollars using an exchange rate of Ps.13.5383 per U.S. dollar on December 31, 2008 and Ps.13.4890 per U.S. dollar on

September 30, 2009. These conversions should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the specified rate or at all. See “Exchange Rates.”

(3) Based on the provisions of NIF B-15, “Translation of foreign currency,” effective January 1, 2008, we have the following currencies:

Currency

Country Recording Functional Reporting

Mexico (FAVC) Mexican pesos U.S. dollar Mexican pesos

United States of America U.S. dollar U.S. dollar Mexican pesos

Brazil Brazilian reais Brazilian reais Mexican pesos

Argentina Argentine pesos Argentine pesos Mexican pesos

Chile Chilean pesos Chilean pesos Mexican pesos

(4) Reflects the effect of mark-to-market losses in connection with certain of our derivative financial instruments. See “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—Derivative Financial Instruments.”

(5) Gain on monetary position represents (for those periods prior to December 31, 2007 stated in constant pesos) the effects of inflation, as measured by the NCPI, on our monthly net monetary assets or liabilities during the period. Starting January 1, 2008, and following the provisions of NIF B-10 “Effects of inflation,” the effects of inflation are recognized only if the cumulative inflation in the last three years exceeds 26% in the countries where we operate.

(6) Net of accumulated depreciation. (7) Current liabilities include bank loans and current portion of long-term debt and other payable and accrued liabilities. (8) As a result of NIF B-2 “Statement of Cash Flows,” effective January 1, 2008, we have included the statement of cash flows for the year

ended December 31, 2008. For prior years, we have included the statement of changes in financial position. As a result, the cash flow figures for 2008 may not be directly comparable to those presented for the prior years, which are derived from the statement of changes in financial position.

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(9) We calculate EBITDA by adding depreciation and amortization to our consolidated operating income as determined in accordance with Mexican FRS. EBITDA is not a measure of financial performance under Mexican FRS and should not be considered as an alternative to net income as a measure of operating performance or to cash flow from operations as a measure of liquidity. The following table sets forth the reconciliation between EBITDA to operating income (loss) under Mexican FRS for each of the periods presented.

Years ended December 31, Nine months ended September 30,

2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (US$) (Ps.) (Ps.) (US$) (Unaudited) Operating income....... 995,664 1,031,913 1,140,769 84,262 869,104 574,917 42,621 Depreciation and amortization............. 442,064 430,962 389,180 28,747 319,111 339,483 25,167 EBITDA...................... 1,437,728 1,462,875 1,529,949 113,009 1,188,215 914,400 67,788

(10) ADR or average daily rate per room, is determined by dividing total room revenues for the period indicated by total room nights sold during

such period. (11) REVPAR is calculated as ADR multiplied by the occupancy rate (equivalent to dividing total room revenues by total room nights available

for sale). (12) Occupancy is determined for a period by dividing total room nights sold during the period by total rooms available for each day during the

period.

The following table sets forth the number of our hotels by type of hotel, the number of available rooms by type of hotel, the number of our hotels by brand and the number of available rooms by brand, in each case, as of and for the years ended December 31, 2006, 2007 and 2008 and as of and for the nine months ended September 30, 2008 and 2009:

As of and for the years ended December 31,

As of and for the nine months ended

Sep 30,

2006 2007 2008 2008 2009

Number of hotels............................................................................... 94 100 108 105 110

Owned Hotels .................................................................................. 31 32 33 33 33

Managed Hotels ............................................................................. 42 47 54 51 58

Leased Hotels.................................................................................. 21 21 21 21 19

Number of available rooms .............................................................. 17,227 18,049 19,270 18,867 19,454

Owned Hotels .................................................................................. 6,675 6,807 6,933 6,933 6,933

Managed Hotels ............................................................................. 7,310 8,000 8,892 8,489 9,378

Leased Hotels.................................................................................. 3,242 3,242 3,445 3,445 3,143

Number of hotels............................................................................... 94 100 108 105 110

Live Aqua ....................................................................................... — — 1 1 1

Fiesta Americana(1) ........................................................................ 20 20 19 19 18

Fiesta Americana Vacation Club...................................................... 3 3 4 4 4

Fiesta Inn......................................................................................... 53 57 59 57 60

One Hotels ...................................................................................... 1 4 8 7 10

Caesar Park..................................................................................... 5 4 5 5 5

Caesar Business ............................................................................ 8 8 8 8 8

Other brands.................................................................................... 4 4 4 4 4

Number of available rooms .............................................................. 17,227 18,049 19,270 18,867 19,454

Live Aqua ........................................................................................ — — 371 371 371

Fiesta Americana(1) ........................................................................ 5,198 5,406 5,366 5,366 5,213

Fiesta Americana Vacation Club...................................................... 637 637 677 677 677

Fiesta Inn......................................................................................... 7,860 8,390 8,662 8,385 8,747

One Hotels ...................................................................................... 126 510 1,014 888 1,266

Caesar Park..................................................................................... 979 679 753 753 753

Caesar Business ............................................................................. 1,535 1,535 1,535 1,535 1,535

Other brands.................................................................................... 892 892 892 892 892 (1) Includes hotels operated under the Fiesta Americana Grand brand.

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RISK FACTORS

You should review and consider carefully the following risk factors, as well as all the other information presented in this offering memorandum, before purchasing the Notes. The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently think are immaterial, or that in our judgment do not reach the level of materiality that merits disclosure may also impair our business operations. Any of the following risks, if they were to occur, could materially and adversely affect our business, results of operations, prospects and financial condition. In that event, the market price and liquidity of the Notes could decline and you could lose all or part of your investment. This offering memorandum also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the following risks faced by us and the risks described elsewhere in this offering memorandum.

Risks Relating to Our Hotel and Vacation Club Business

The current disruption in the global credit markets and its effects on the global and Mexican economies could adversely affect our business.

Substantial volatility in the global capital markets, unavailability of financing in the global capital markets at reasonable rates and widely documented commercial credit market disruptions since the fall of 2008 have had a significant negative impact on financial markets, as well as the global and domestic economies. The effects of these disruptions are widespread and difficult to quantify, and it is impossible to predict when the global financial markets will improve. There is now general consensus among economists that the economies in which we operate and much of the rest of the world were and may continue to be in a recession, and we are experiencing reduced demand for our hotel rooms and vacation club units. Substantial increases in air and ground travel costs, and decreases in airline capacity arising primarily from reduced flights, have also reduced demand for our hotel rooms and vacation club units. Accordingly, our financial results have been impacted by the economic slowdown and both our future financial results and growth could be further harmed if current global economic conditions persist or worsen, resulting in wide-ranging, adverse and prolonged effects on general business conditions, and material and adverse effects on our results of operations and liquidity. The effects of the current economic situation are extremely difficult to forecast and mitigate.

A high percentage of the hotel rooms we manage are in luxury hotels or in hotels in locations which have been particularly impacted by the current economic downturn, which has had and may continue to have a significant adverse effect on our results of operations and financial condition.

Approximately 34% of the rooms we manage are in hotels that we classify as deluxe or luxury hotels. Deluxe or luxury hotels generally command higher room rates. In an economic downturn, these hotels may be more susceptible to a decrease in revenues, as compared to hotels in other categories that have lower room rates, since hotels in this segment generally target business and high-end leisure travelers. In periods of economic difficulties, such as the current economic downturn, business and leisure travelers have sought to reduce travel costs by limiting trips or seeking to reduce costs on their trips. Continued adverse economic conditions could have a material adverse effect on our results of operations and financial condition.

The geographic concentration of our hotels in Mexico and Brazil exposes us to any adverse developments specifically affecting those countries.

Of the 110 hotels we operate, 94, or nearly 85%, are located in Mexico while 10, or approximately 10% are located in Brazil. Our operations in Mexico and Brazil accounted for approximately 89% and 8% and 90% and 7%, respectively, of our total revenues for the year ended December 31, 2008 and for the nine months ended September 30, 2009. Such geographic concentration exposes our operating results to events or conditions which specifically affect Mexico and, to a lesser extent, Brazil, such as local and regional economic, political, social, climate-related and other conditions. Adverse developments that specifically affect one or more of these areas may have a material adverse effect on our results of operations and financial condition.

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A regional, national or global outbreak of influenza or other disease, such as the recent international outbreak of H1N1 influenza, could adversely affect our business and results of operations.

In April 2009 an outbreak of H1N1 influenza occurred in Mexico and the United States which has spread to more than 70 countries, leading the World Health Organization to declare the first global flu pandemic in over 40 years. In Mexico, localized public-health measures have been implemented as a result of outbreaks of H1N1 influenza, including travel bans, the closings of schools and businesses, and cancellations of events. The H1N1 influenza epidemic adversely impacted public perception of the safety or desirability of travel to and within Mexico, which materially reduced demand for our hotel and vacation club businesses and, correspondingly, significantly reduced our revenue.

Further outbreaks of H1N1 influenza or other communicable diseases could impact travel and lead to the implementation of additional public-health measures and result in reduced demand for places of public accommodation, such as our hotels and vacation clubs, and negatively affect our business and results of operations. Likewise, any outbreaks or recurrence of avian flu, SARS, H1N1 influenza or other adverse public health developments in Mexico or Brazil may have a material adverse effect on our business operations. Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our business and results of operations.

We face competition for management and leasing agreements.

When we seek to grow through increasing the number of hotel properties we manage, we face competition from other entities seeking the same opportunities. We compete with entities that have substantially greater marketing and financial resources or that have better-recognized international brands than we do for opportunities to enter into management contracts and leases with hotel owners. In addition to the competition that we face for new opportunities, we are also subject to competition from other hotel companies when our existing management or lease contracts expire. Although in the past we have generally been successful in renewing our existing contracts, and in finding new properties to manage, there can be no assurance that we will continue to be as successful in the future. Competition may generally reduce the number of suitable growth opportunities available to us, increase the bargaining power of property owners and reduce our operating margins. In addition, the terms of management contracts and leases that we enter into in the future may not be as favorable as agreements that we have entered into previously.

Our management contracts and leases may be terminated or not renewed under various circumstances, which may have a material impact on our results of operations.

Under certain of our management contracts, the owner may cease our management of the property and terminate the contracts if specified performance standards at the hotel are not met or if we breach any substantial obligation under these agreements. In addition, although our hotel management contracts and/or leases ordinarily limit the owner’s ability to transfer or convey such hotels or to assign its rights to a third party and seek other protections, we cannot assure you that such transfer or conveyance will not occur nor that the third party to which the land or rights are conveyed will continue performing under such agreements. We have not experienced any material problems with respect to renewing our management or lease agreements, but we cannot assure you that the termination protections included in our management contracts and leases will prevail in our favor.

The termination of management contracts as a result of hotel dispositions or our inability to renew such contracts in terms as favorable to us could have an adverse effect on our revenues. In addition, hotel owners may choose to allow our management contracts to expire. As of September 30, 2009, the average remaining term of our management contracts was 6.4 years. In addition, for certain of our owners, we do not have the right to assign a management contract to an unrelated third party without prior written consent of the relevant hotel owner. The termination of management contracts could have a material adverse effect on our results of operations.

Our revenues may not be sufficient to cover our obligations under our lease agreements.

Of the hotels we operate, we lease 19 from third-party owners. We must comply with our lease obligations, including lease payment obligations and other obligations that require us to incur certain

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operating expenses, even if the hotel operation is not profitable. During the year ended December 31, 2008, eight of our 23 leased hotels during such period did not generate sufficient revenues to cover our lease payment obligations. For the nine months ended September 30, 2009, 13 of our 19 leased hotels during such period did not generate sufficient revenues to cover our lease payment obligations. Our financial and operating condition may be adversely affected to the extent that our revenues and operating profits are not sufficient to cover our obligations under the lease agreements.

Our growth strategy may not result in improvement in our results of operations.

We have implemented a growth strategy for our core hotel business. Our ability to expand will depend on a number of factors including, but not limited to, the conditions of the Mexican, Brazilian and Argentine economies, the ability of investors to construct new properties for us to lease and/or manage and the selection and availability of suitable locations for new hotels. There can be no assurance that our expansion plans can be achieved, or that new hotels will meet with consumer acceptance or be operated profitably.

Our new services businesses may not be successful and may be disruptive to our hotel business.

We have recently created certain services businesses, including Ampersand, Konexo, Conectum and GloboGO, which, on a consolidated basis, represented 14% and 14% of our revenues in the year ended December 31, 2008 and nine months ended September 30, 2009, respectively. These services businesses grew from our core competencies, which we have attempted to leverage to diversify our operations beyond the hotel industry; however there can be no assurances that these services businesses will perform in accordance with our expectations. Moreover, our efforts to establish these services businesses are likely to divert management attention and resources. If we take longer than anticipated or are not able to successfully establish the services businesses, their anticipated benefits may not be realized fully or at all, or may take longer to realize than expected.

In addition, we rely on several of these businesses to perform certain critical functions, such as administering our Fiesta Rewards loyalty program, operating our call center and providing process outsourcing services such as accounting, payroll and technology services. If any of these companies ceased to provide their respective services to us, or if they provide them less effectively, our operations and financial condition would be adversely affected.

Our properties are subject to risks relating to force majeure and any such event could materially adversely affect our operating results.

Our financial and operating performance may be adversely affected by force majeure, such as natural disasters, particularly in locations where we own and/or operate significant properties. Some types of losses, such as those from earthquakes, hurricanes, epidemics, terrorism and environmental hazards, may be either uninsurable or too expensive to justify insuring against and there may also be significant deductibles and certain caps on coverage. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property.

Nineteen of our hotels operating as of September 30, 2009 were located in the coastal areas of Mexico. In 2005, damage caused by Hurricane Wilma to one of the hotels which we lease in Cancun forced the owner to close the hotel and suspend our lease agreement until repairs were completed. The owner’s insurance policy did not cover consequential losses relating to a covered event, so we did not receive any income from that hotel during the two years it was closed.

The coastal areas of Mexico are prone to hurricanes, and our financial condition will be affected if its hotels suffer damage from hurricanes, as well as from the loss of business due to hurricane activity in these areas.

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High criminality rates and the threat of violence may adversely and materially affect our results.

High criminality rates, violence resulting from drug-trafficking activities and kidnappings have been experienced in several areas of Mexico and Brazil, including areas in which we operate, and have been widely covered in the international media. Both tourists and business travelers may be deterred from traveling to Mexico and Brazil based on the relevant crime situation and our revenues and results of operations would be materially and adversely affected due to decreased travel and reduced demand for our businesses, especially in areas affected by such events.

We have significant amounts of indebtedness coming due in each of the next several years, and we may not be able to secure refinancing on favorable terms or at all.

We currently have a substantial amount of indebtedness. As of September 30, 2009, we had directly or indirectly Ps.5,407.4 (U.S.$400.9) million of total indebtedness including net mark-to-market from hedging agreements. Of our total indebtedness as of September 30, 2009, approximately Ps.907.3 (U.S.$67.3) million was short-term indebtedness (including the current portion of long-term indebtedness), and approximately Ps.4,500.1 (U.S.$333.6) million was long-term indebtedness. We have a substantial amount of indebtedness maturing in the next several years: as of September 30, 2009, we had indebtedness with an aggregate principal amount of approximately Ps.894.6 (U.S.$66.3) million maturing in 2010, and Ps.1,024.7 (U.S.$76.0) million maturing in 2011. Subject to the terms of the contractual restrictions binding on us at the time, we may also incur additional indebtedness in the future.

Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance indebtedness, and fund working capital and planned capital expenditures) with operating cash flow, borrowings under credit facilities, proceeds of debt offerings and proceeds from asset sales. The global credit markets have recently experienced significant price volatility, dislocations and liquidity disruptions, which have caused market spreads on prospective and outstanding debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for financings materially less attractive, and in several cases have resulted in the unavailability of certain types of financing. This volatility and illiquidity has negatively impacted a broad range of fixed-income securities. As a result, the market for fixed-income securities has experienced decreased liquidity, increased price volatility, credit downgrade events and increased defaults. These factors and the continuing market disruption have had, and may continue to have, an adverse effect on us, including on our ability to refinance indebtedness. In addition, continued uncertainty in the equity and credit markets may negatively impact our ability to access additional short-term and long-term financing, which would negatively impact our liquidity and financial condition.

We are subject to significant claims under tax disputes in Mexico for which we do not maintain reserves.

We are involved in various tax proceedings, including several tax disputes with federal tax authorities in respect of our operations in the States of Baja California Sur and Quintana Roo alleging underpayments by us and certain of our subsidiaries for aggregate claims that are substantial and total approximately Ps.1,121.0 (U.S.$83.1) million. The foregoing amount does not include other amounts such as fees, penalties and interest that may be required to pay if these claims are unfavorable to us.

On November 12, 2004, the Servicio de Administración Tributaria (Tax Administration Service), or SAT, the Mexican federal revenue service, alleged that we failed to pay certain income taxes in fiscal year 2000 and levied a claim seeking Ps.103.2 (U.S.$7.7) million. We filed a juicio de nulidad (annulment action) before the Tribunal Federal de Justicia Fiscal y Administrativa (Federal Court of Fiscal and Administrative Justice), or TFJFA, to challenge the claim. One of our subsidiaries, Inmobiliaria Hotelera Posadas S.A. de C.V., has provided a payment guarantee in the amount of the claim in connection with the annulment action. Each party has presented its case to the TFJFA and we are currently awaiting a decision.

On April 28, 2005, the SAT alleged that Compañía Hotelera Los Cabos S.A. de C.V., one of our subsidiaries, failed to pay certain value-added taxes and income taxes in fiscal year 2000 and levied a claim seeking Ps.252.6 (U.S.$18.7) million. We initiated an administrative proceeding before the SAT to challenge the claim. The SAT did not act on our challenge and, consequently, we filed an annulment

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action before the TFJFA to challenge the claim. One of our subsidiaries, Inmobiliaria Hotelera Posadas S.A. de C.V., has provided a payment guarantee in the amount of the claim in connection with the annulment action. Each party has presented its case to the TFJFA and we are currently awaiting a decision.

On January 23, 2006, the SAT alleged that Compañía Desarrolladora Los Cabos S.A. de C.V. failed to pay certain value added taxes and income taxes in the fiscal year 2000 and levied a claim seeking Ps.244.8 (U.S.$18.1) million. We initiated an administrative proceeding before the SAT to challenge the claim. The SAT did not act on our challenge and, consequently, we filed an annulment action before the TFJFA to challenge the claim. One of our subsidiaries, Inmobiliaria Hotelera Posadas S.A. de C.V., has provided a payment guarantee in the amount of the claim in connection with the annulment action. The SAT has not yet answered our claim.

On September 4, 2007, the SAT alleged that we failed to pay certain income taxes in fiscal year 2000 and levied a claim seeking Ps.430.7 (U.S.$31.9) million. We filed an annulment action before the TFJFA. Two of our subsidiaries, Operadora del Golfo de Mexico, S.A. de C.V. and Gran Inmobiliaria Posadas, S.A. de C.V., have provided payment guarantees in the amount of the claim in connection with the annulment action. In addition, as security for the payment guarantee obligations, each of Operadora del Golfo de Mexico, S.A. de C.V. and Gran Inmobiliaria Posadas, S.A. de C.V. have granted a lien on one of their hotel buildings with a value in excess of the amount of the claim. The annulment action is currently in the pleadings stage.

On April 25, 2008, the SAT alleged that we failed to pay certain asset and income taxes in fiscal year 2001 and levied a claim seeking Ps.89.7 (U.S.$6.6) million. We filed an annulment action before the TFJFA to challenge the claim. Two of our subsidiaries, Posadas de Mexico, S.A. de C.V. and Hoteles La Mansion, S.A. de C.V., have provided payment guarantees in the amount of the claim in connection with the annulment action. The annulment action is currently in the discovery stage.

If any of these various actions is resolved unfavorably to us, we may ultimately be required to pay the amounts levied together with certain interest, penalties and fees associated with our challenges. These amounts are likely to be significant if so resolved. Tax proceedings pose a significant amount of unpredictability and, as a result, we cannot forecast the outcome of any of these proceedings, when they may be resolved or the final amounts that may be payable in connection therewith. As of September 30, 2009, we had not recorded any reserves in relation with such disputes as our management believes, based on the opinions of our tax advisors and as permitted under Mexican FRS, that the likelihood of an unfavorable outcome is possible but less than probable. If all or a significant part of these actions were decided adversely to us, it could have a material impact on our business, financial condition and results of operations.

Fluctuations in foreign currency exchange rates could negatively affect our operating results.

A significant portion of our revenues is denominated in U.S. dollars; however, our operating expenses are generally in Mexican pesos, Brazilian reais and, to a lesser extent, Argentine pesos and Chilean pesos. As we customarily do not hedge against exchange rate fluctuations other than with respect to our indebtedness, a weak U.S. dollar in relation to these foreign currencies may have an adverse effect on our results of operations and financial condition.

We are exposed to currency and interest rate risk on our debt, and we have entered into derivatives contracts.

Historically, the majority of our indebtedness has been denominated in U.S. dollars. As of September 30, 2009, approximately 71% of our indebtedness was denominated in U.S. dollars (Ps.3,827.0 (U.S.$283.7) million). In addition, approximately half of our indebtedness bears interest at variable rates. As a result, we are also exposed to risks from fluctuations in exchange rates and interest rates.

To help minimize our exposure to high volatility in peso interest rates, we have sought to maintain a significant percentage of our indebtedness in U.S. dollars. In times when non-U.S. dollar markets are available to issue debt, we enter into derivative financial instruments with financial institutions, to balance

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our debt in alignment with our revenues. Specifically, revenues from certain hotels in Mexico, Brazil and Argentina whose room rates are typically quoted in U.S. dollars, as well as the sale and financing of vacation club memberships, which are also typically quoted in U.S. dollars. We have not entered into derivative financial instruments for any other purpose, although we may do so in the future. The types of derivative instruments we have typically entered into in recent periods principally include cross-currency swaps in which we generally pay U.S. dollar amounts based on fixed interest rates and receive peso amounts based on peso floating interest rates. As of September 30, 2009, the net mark-to-market value of our cross-currency swaps, representing our liability under such swaps, was Ps.313.6 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Market Risk Disclosure—Derivative Financial Instruments.”

Our use of derivative instruments is primarily intended to provide protection against the exchange rate risk of our indebtedness. Our use of derivative instruments for interest-rates is primarily intended to mitigate risk. We may determine that such risks are acceptable or that the protection available through derivative instruments is insufficient or too costly. These determinations depend on many factors, including market conditions, the specific risks in question and our expectations concerning future market developments. We review our derivatives positions regularly, and our hedging policies change from time to time. Notwithstanding such review, our derivative positions may be insufficient to cover our exposure.

When the financial markets experience periods of heightened volatility, as they have recently, our results of operations may be substantially affected by variations in exchange rates and, to a lesser degree, interest rates. These effects include foreign exchange gain and loss on assets and liabilities denominated in U.S. dollars, fair value gain and loss on derivative instruments, and changes in interest income and interest expense.

Although we attempt to match the cash flows on our derivative transactions with the cash flows on our indebtedness, the net effects on our reported results in any period are difficult to predict and depend on market conditions and our specific derivatives positions. Although we seek to enter into derivatives that are not affected by volatility to a significant extent, in the event of volatile market conditions our exposure under derivative instruments may increase to a level that impacts our financial condition and results of operations. In addition, volatile market conditions may require us to post collateral to counterparties to our derivatives, which affects our cash flow position, the availability of cash for our operations and may impact our financial condition and results of operations.

Our derivative transactions are also subject to the risk that counterparties will default or seek bankruptcy protection. The instability and uncertainty in the financial markets has made it more difficult to assess the risk of counterparties to derivatives contracts. Moreover, in light of the greater volatility in the global securities and exchange markets, there may be fewer financial entities available with which we could continue entering into derivative financial instruments to protect against currency and interest rate risk and the financial condition of our counterparties may be adversely affected under stressful conditions. See “—Risks Relating to Mexico.”

Any failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business.

We believe our trademarks are an important component of our business. We rely on trademark laws to protect our proprietary rights. The success of our business depends in part upon our continued ability to use our trademarks to increase brand awareness and further develop our brand in both the Mexican and international markets. Monitoring the unauthorized use of our intellectual property is difficult and burdensome. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against us, divert management attention and could significantly harm our results of operations. From time to time, we apply to have certain trademarks registered. There is no guarantee that such trademark registrations will be granted. We cannot assure you that all of the steps we have taken to protect our trademarks in Mexico and the other countries in which we operate will be adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business.

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Costs of compliance with employment laws and regulations could adversely affect operating results.

Union contracts for hotel employees in several major markets are up for renewal periodically. Although under the terms of the management contracts the employees at our managed hotels are employed by the hotel owners, such employees may, nevertheless, direct their claims against us. In such circumstances, if we are not successful in defending our position before a labor court, we might be held liable for those employee claims. In addition, we have a significant number of employees working at our wholly owned hotels. Although we have not experienced labor stoppages or disruptions in the past, the failure to timely renegotiate the contracts that are expiring could result in labor stoppages or disruptions, which could adversely affect our revenues and profitability. Labor costs, including those related to indemnity payments under labor laws are significant, could also escalate beyond our expectations which could have a material adverse effect on our operating margins.

We depend on our key employees.

We are dependent on the members of our Executive Committee and other key members of our executive management staff, the loss of whose services could have a material adverse effect on our business and future operations. See “Management.”

Our insurance coverage may be insufficient to cover potential losses we face.

We carry insurance coverage for general liability, property, business interruption and other risks with respect to our owned, managed and leased hotels and we make available insurance programs for owners of hotels we manage. These policies offer coverage terms and conditions that we believe are usual and customary for our industry. Generally, our “all-risk” policies provide that coverage is available on a per occurrence basis and that, for each occurrence, there is a limit as well as various sub-limits on the amount of insurance proceeds we will receive in excess of applicable deductibles. In addition, there may be overall limits under the policies. Sub-limits exist for certain types of claims such as service interruption, debris removal, expediting costs or landscaping plant material replacement, and the covered amounts of these sub-limits are significantly lower than the covered amounts of the overall coverage limit. Our policies also provide that, for the coverage of earthquakes, hurricanes and floods, all claims from any hotel resulting from a covered event must be combined for purposes of the annual aggregate coverage limits and sub-limits. In addition, any such claims will be combined with claims by the owners of managed hotels that participate in our insurance program. Therefore, if covered events occur that affect more than one of our owned hotels and/or managed hotels that participate in our insurance program, the claims from each affected hotel will be added together to determine whether, depending on the type of claim, the per occurrence limit, annual aggregate limit or sub-limits have been reached. If the limits or sub-limits are exceeded, then each affected hotel would only receive a proportional share of the amount of insurance proceeds provided for under the policy. In addition, under those circumstances, claims by third-party owners would reduce the coverage available for our owned and leased hotels.

There are also other risks including, but not limited to, non-conventional war, certain forms of terrorism such as nuclear, biological or chemical terrorism, certain forms of political risks, some environmental hazards and/or certain events of force majeure that may be deemed outside of the general coverage limits of our policies, uninsurable or for which carrying insurance coverage is cost-prohibitive.

We may also encounter challenges from insurance providers regarding payment on a particular claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a hotel owned, managed or leased by us, as well as the anticipated future revenue from any such hotels. In that event, we might nevertheless remain obligated for any lease payments or other financial obligations related to the hotel.

Our vacation club business is subject to regulation.

We develop and operate vacation club resorts and we market and sell memberships in our vacation club. We generally sell the memberships pursuant to interest-accruing installment payment arrangements. These activities are all subject to regulations, including the standards established by the Normas Oficiales Mexicanas (Official Mexican Standards). For example, Mexican regulations grant the

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purchaser of a vacation club membership the right to rescind the purchase contract at any time within a minimum statutory rescission period of five business days that begins upon the signing of the contract. In addition, the Procuraduría Federal del Consumidor (the Mexican Consumer Protection Agency) must authorize our model contract for the sale of vacation club memberships. Although we believe that we are in material compliance with all applicable laws and regulations to which vacation club marketing, sales and operations are currently subject, including the terms of our agreements, changes in these requirements or a determination by a regulatory authority that we were not in compliance could adversely affect us and the manner through which we operate our vacation club business.

The vacation club business is subject to risk of member defaults.

We bear the risk of defaults under purchase contracts for vacation club memberships. Vacation club members buy a “40-year-right-to-use” evidenced by an annual allocation of vacation club points. We typically charge an initial payment of between 10% and 30% of the price of the membership and offer installment payment plans that accrue interest for the balance of the purchase price. We recognize as revenue the entire value of a purchase contract at the time 10% of the purchase price is paid and we create a reserve for future uncollectible accounts based on our experience. When a purchaser enters into a loan agreement with us for the remaining balance, defaults on such loans are covered by the reserve. It may be the case that our reserve could not be sufficient to offset non-performing receivables which could negatively affect our financial results.

Also, historically, substantially all of our vacation club sales were denominated in U.S. dollars. Due to the on-going financial crisis, a significant portion of our vacation club receivables portfolio has been re-denominated in pesos, albeit at a higher interest rate, at the request of certain members facing liquidity difficulties. Almost all Mexican members that wanted to convert their installment payment obligations from U.S. dollars were able to do so. We expect to continue to offer peso-denominated payment plans to Mexican residents challenged by the current economic situation. Recently we have financed our receivables in pesos, generating a better currency match of cash flows.

Notwithstanding our re-domination of a significant portion of our vacation club receivables portfolio, many outstanding vacation club sales and loans to purchasers remain denominated in U.S. dollars. Accordingly, our results will still be affected by U.S. dollar-peso exchange rate fluctuations. As payments are made in U.S. dollars over the term of the loan, sales revenues recognized in U.S. dollars at the time of purchase may ultimately be discounted to the extent the U.S. dollar has weakened against the peso. We do not completely hedge against our exposure to exchange rate risk. Traditionally, we have not hedged this exposure.

Risks Relating to the Hospitality Industry

We are subject to all of the operating risks common to the hotel and vacation club industries.

Operating risks common to the hotel and vacation club industries include:

changes in general economic conditions, including the timing and robustness of a recovery from the current economic downturn;

impact of war and terrorist activity on travel desirability;

domestic and international political and geopolitical conditions, including civil unrest, expropriation, nationalization and repatriation;

travelers’ fears of exposures to contagious diseases;

decreases in demand or increases in supply for vacation ownership interests;

the impact of internet intermediaries on pricing and our increasing reliance on technology;

cyclical over-building of hotel and vacation club properties;

restrictive changes in laws or regulations or the interpretations thereof and other governmental actions, including those relating to zoning and land use, health and safety, the environment, taxation, travel and immigration;

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changes in travel patterns;

changes in operating costs including, but not limited to, energy, labor and labor-related costs, insurance and unanticipated costs incurred due to disasters such as acts of nature and their consequences;

disputes with third-party property owners which may result in litigation;

disputes relating to the right to use brands and brand names;

the availability of capital to fund construction, renovations and other investments;

foreign exchange fluctuations;

personal injury and other types of litigation brought by our customers;

the financial condition of third-party property owners; and

the financial condition of the airline industry and its impact on the lodging industry.

We are also impacted by our relationships with third-party property owners. Our hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace us in certain circumstances, such as the bankruptcy of the hotel owner, the failure to meet certain financial or performance criteria and in certain cases, upon a sale of the property. Our ability to meet these financial and performance criteria is subject to, among other things, the risks described in this section. Additionally, our operating results would be adversely affected if we could not maintain existing management agreements or obtain new agreements on as favorable terms as the existing agreements.

We must compete for customers.

The hotel and vacation club industries are highly competitive. Our hotels and vacation club resorts compete for customers with other hotel and resort properties. The competition for hotel revenues comes from a variety of both domestic and international hotel operators. Some of our competitors are substantially larger than us, have greater marketing and financial resources, and operate under well-known international or local brand names. In addition to competing with other tourism resorts in the countries in which we operate, we compete with tourism resorts in other countries to attract tourists to our resorts. New or existing competitors in each of our business lines could significantly lower rates or offer greater conveniences, services or amenities or significantly expand, improve or introduce new facilities in markets in which we compete, thereby adversely affecting our operations and the number of suitable business opportunities.

We are subject to governmental regulations.

We are subject to laws, ordinances and regulations relating to, among other things, taxes, environmental matters, the preparation and sale of food and beverages, accessibility for disabled persons, construction, occupational health and safety, and general building and zoning requirements in the various jurisdictions in which our hotels are located. Owners and managers of hotels may also be subject to laws governing the relationship with hotel employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Compliance with these laws may be cumbersome and difficult to monitor and failure to comply with them may materially and adversely affect our results of operations.

Environmental laws, ordinances and regulations of the various jurisdictions in which we operate regulate our properties and could make us liable for the costs of removing or cleaning up hazardous or toxic substances on, under, or in property we currently own, operate or lease or that we previously owned, operated or leased without regard to whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to properly clean up such substances when present, could jeopardize our ability to develop, use, sell or rent the affected real property or borrow money using such property as collateral. We are also subject to other laws, ordinances and regulations relating to lead, asbestos-containing materials, operation and closure of storage tanks, and preservation of wetlands, coastal zones or endangered species, which could limit our ability to develop, use, sell or rent our real property or use it as collateral. Future changes

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in environmental laws or the discovery of currently unknown environmental conditions may have a material adverse effect on our financial condition and results of operations. In addition, Mexican environmental regulations have been increasingly stringent over the last decade. This trend is likely to continue and may be influenced by the environmental agreement entered into by Mexico, the United States and Canada in connection with the North American Free Trade Agreement, or NAFTA. Accordingly, there can be no assurance that more stringent enforcement of existing laws and regulations or the adoption of additional laws and regulations would not have a material effect on our business and financial (or other) condition or prospects.

The hotel industry is seasonal in nature.

The hotel industry is seasonal in nature; however, the periods during which our properties experience higher hotel revenue vary from property to property and depend principally on location. Of the 19,454 hotel rooms we operate, approximately 80% are in urban or suburban locations and cater primarily to business travelers. These hotel operations have not experienced significant seasonal fluctuations aside from minor reductions in occupancy during the holiday season from mid-December through mid-January. The remaining hotel rooms we operate are in resort locations. Generally, our resort hotel revenues are greater in the first and third quarters than in the second and fourth quarters. This seasonality can be expected to cause quarterly fluctuations in our revenues.

Concentration in Internet distribution channels may negatively impact our distribution costs.

An increasing number of our hotel rooms are booked through internet travel intermediaries that have developed in the past several years. As the percentage of internet bookings increases, these intermediaries may be able to obtain higher commissions or reduced room rates. Moreover, some of these internet travel intermediaries are attempting to commoditize hotel rooms, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These agencies hope that consumers will eventually develop brand loyalties to their reservations systems rather than to the supplier’s brands. Although we expect to derive most of our business from our direct channels (call center, our corporate sales booking engine and our websites) and traditional channels, if the amount of sales made through internet intermediaries increases significantly, our business and profitability may be harmed.

The hotel industry places significant dependence on technology.

The hospitality industry continues to demand the use of sophisticated technology and systems including solutions utilized for property management, revenue management, brand assurance and compliance, procurement, reservation systems, operation of our customer loyalty program, distribution and guest amenities. These technologies can be expected to require enhancements and new interfaces, including those to comply with legal requirements such as privacy regulations and specifications established by third parties such as the payment card industry. Further, the development and maintenance of these technologies may require significant capital. There can be no assurance that as various systems and technologies become outdated or new technology is required we will be able to replace or introduce them as quickly as our competition or within budgeted costs and timeframes for such technology. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system.

The hotel and vacation club industries are capital intensive.

For our hotel properties to remain attractive and competitive, we or the hotel or leasehold owners, as the case may be, have to spend money periodically to keep the properties well-maintained, modernized and refurbished. This creates an ongoing need for cash and, to the extent we or the hotel or leasehold owners, as the case may be, cannot fund expenditures from cash generated by operations, funds generally must be borrowed or otherwise obtained. In addition, to continue growing our vacation club business, we need to spend money to develop new units. Recent events, including the failures and near failures of financial services companies and the decrease in liquidity and available capital, have negatively impacted the capital markets for hotel and vacation club investments. Accordingly, our financial results have been and may continue to be impacted by the cost and availability of funds.

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We are subject to risks relating to real estate investing.

We are subject to risks that generally relate to investments in real property because of the properties we own and lease. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, and the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, real estate, insurance, zoning, tax and expropriation laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate hotels. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Furthermore, under expropriation and similar laws, governments can take or expropriate real property in exchange for some measure of “reasonable” compensation. Sometimes the compensation paid in an expropriation is less than the owner believes the property is worth. Any of these factors could have a material adverse impact on our results of operations or financial condition.

In addition, real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions. There can be no assurance that we will be able to dispose of a hotel if we find such a disposition advantageous or necessary, nor can there be any assurance that the sale price of any disposition will recoup or exceed the amount of our investment. The inability to respond promptly to changes in the performance of our investments could adversely affect our financial condition.

Hotel and vacation club development is subject to timing, budgeting and other risks.

We intend to develop hotel and vacation club properties as suitable opportunities arise. In addition, the owners and developers of new-build properties that we have entered into management agreements with are subject to these same risks which may impact the amount and timing of fees we had expected to collect from those properties. New project development has a number of risks, including risks associated with:

construction delays or cost overruns that may increase project costs;

receipt of zoning, environmental, occupancy and other required governmental permits and authorizations;

incurring development costs for projects that are not pursued to completion;

hurricanes, floods, fires or other acts of nature that could adversely impact a project;

defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation;

ability to raise capital; and

governmental restrictions on the nature or size of a project.

We cannot assure you that any development project will in fact be developed, and if developed, the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed may be less than initially contemplated.

Risks Relating to Our Services Business

Our business may be adversely impacted as a result of changes in demand for our services.

Economic and political uncertainty may, among other external factors, adversely impact our customers’ demand for our services businesses. A general economic downturn, such as the current worldwide economic dislocation, has and may continue to adversely affect our customers’ demand for

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Ampersand’s loyalty program management services, Conectum’s business process outsourcing services, Konexo’s call center and contact services and GloboGO’s travel planning services.

Our intellectual property portfolio may not prevent competitive offerings, and we may not be able to obtain necessary licenses.

Our patents and other intellectual property may not prevent competitors from independently developing products and services similar to or duplicative to ours, nor can there be any assurance that the resources we have invested to protect our intellectual property will be sufficient or that our intellectual property portfolio will adequately deter misappropriation or improper use of our technology. In addition, we may be the target of aggressive and opportunistic enforcement of patents by third parties, including non-practicing entities. Also, several of the services we provide rely on platforms and systems that we use under licenses from third parties, and there can be no assurances that we will be able to obtain from such third parties the licenses we need in the future.

Our ability to provide our customers with competitive services is dependent on our ability to attract, train and retain qualified personnel.

Our ability to grow and provide our customers with competitive services is partially dependent on our ability to attract, train and retain highly motivated people with the skills to serve our customers. The markets we serve are highly competitive and competition for skilled employees in the business process outsourcing and systems integration markets is intense.

Our customers may experience financial difficulties and we may not be able to collect our receivables, materially and adversely affecting our profitability.

Over the course of a contract, our customers’ financial fortunes may change affecting their ability to pay their obligations and our ability to collect our fees for services rendered. While we may resort to other methods to pursue our claims or collect our receivables, these methods are expensive and time consuming and success is not guaranteed. Failure to collect our receivables or prevail on our claims would have an adverse affect on our profitability.

Breaches of data protection could impact our services business.

Our services, systems and processes involve the storage and transmission of proprietary information and sensitive or confidential data, including personal information of employees, customers and others. Breaches in security could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, resulting in litigation and potential liability for us, as well as the loss of existing or potential customers and damage to our reputation. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

A network failure could cause delays or interruptions of service, which could cause us to lose customers and revenues.

We rely on our telecommunication network and infrastructure to provide our hotel customers, vacation club members and service business clients with reliable access to our reservation system, customer contact and other services, including internet and telephone. Some of the risks to our network and infrastructure include physical damage, natural disasters such as hurricanes, earthquakes, floods and storms, among others, and other disruptions beyond our control. Although we carry casualty insurance against loss and we have implemented redundancy in our network and installed backup technologies, disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and revenues or incur additional expenses and will adversely affect our operations, financial condition and results of operation.

Risks Relating to Mexico

Mexican federal governmental policies could adversely affect our results of operations and financial condition.

Most of our operations and assets are located in Mexico. As a result, our business may be affected by the general condition of the economy, inflation, interest rates, political and other developments and events in Mexico. The Mexican federal government has exercised, and continues to

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exercise, significant influence over the Mexican economy. We cannot assure you that changes in Mexican federal governmental policies will not adversely affect our business, financial condition and results of operations.

In addition, the Mexican government has in recent years implemented changes to tax laws applicable to Mexican companies. We cannot provide any assurance that future policy developments in Mexico, over which we have no control, will not have an unfavorable impact on our financial position or results of operations.

Economic situation. We believe that economic slowdowns have negatively affected and could continue to negatively affect our revenues.

Currency fluctuations. Approximately 88% of our indebtedness as of September 30, 2009, after giving pro forma effect to the sale of Notes offered hereby and the application of the gross proceeds thereof, would be U.S. dollar-denominated, whereas a significant portion of our consolidated revenues are peso-denominated. Accordingly, we are affected by fluctuations in the value of the peso against the U.S. dollar and any depreciation or devaluation of the peso against the U.S. dollar results in net foreign exchange losses. In the first nine months of 2009, the peso appreciated against the U.S. dollar by approximately 0.4%, however the peso has experienced considerable volatility throughout the year. In 2008, the peso depreciated against the U.S. dollar by approximately 25%. In 2007, the peso depreciated by approximately 0.8% against the U.S. dollar, compared to appreciation of approximately 4.6% in 2006.

Severe devaluation or depreciation of the peso may also result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert pesos into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on our non-peso-denominated indebtedness, including on the Notes. Although the Mexican government currently does not restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or transfer foreign currencies out of Mexico, the Mexican government could, as in the past, institute restrictive exchange rate policies that could affect us in the future. Devaluation or depreciation of the peso against the U.S. dollar may also adversely affect U.S. dollar prices for the Notes. Currency fluctuations are likely to continue to have an effect on our financial condition, results of operations and cash flows in future periods. In addition, fluctuations in the value of the peso against the U.S. dollar could affect the amount of outstanding debt we intend to repay with the proceeds from the sale of the Notes because such proceeds will be denominated in U.S. dollars, a portion of which will have to be converted into pesos for the repayment of peso-denominated debt.

See “—Fluctuations in foreign currency exchange rates could negatively affect our operating results.”

Inflation and interest rates. High inflation rates can adversely affect our business and results of operations in the following ways:

inflation can adversely affect consumer purchasing power, thereby adversely affecting demand for hotel rooms and vacation club memberships;

to the extent inflation exceeds our price increases, our prices and revenues will be adversely affected in “real” terms; and

if the rate of Mexican inflation exceeds the rate of the depreciation of the peso against the dollar, our dollar-denominated sales will decrease in relative terms when stated in constant pesos.

Interest rates on 28-day Certificados de la Tesorería de la Federación (Mexican treasury bills), or Cetes, averaged 7.2%, 7.2%, 7.7% and 5.5% for 2006, 2007, 2008, and the first nine months of 2009, respectively. High interest rates in Mexico may significantly increase our financing costs and thereby impair our financial condition, results of operations and cash flows.

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Political developments. Mexican President Felipe Calderón Hinojosa, of the political party Partido Acción Nacional, or PAN, may implement significant changes in laws, public policies and/or regulations that could affect Mexico’s political and economic situation, and which could adversely affect our business. Any change in the current tourism policies could have a significant effect on our business.

Furthermore, following Mr. Calderón’s election in 2006, the Mexican Congress became politically divided, as the PAN does not have majority control. Elections for the Mexican Senate, House of Representatives and for the governorship of certain states of the Republic took place on July 5, 2009, giving the political party Partido Revolucionario Institucional, or PRI, a majority in the legislature. The lack of political alignment between the legislature and the President could result in deadlock and prevent the timely implementation of political and economic reforms, which in turn could have a material adverse effect on Mexican economic policy and on our business. It is also possible that political uncertainty may adversely affect Mexico’s economic situation.

Social and political instability in Mexico or other adverse social or political developments in or affecting Mexico could adversely affect our business, financial condition and result of operations, as well as market conditions and prices for our securities. These and other future developments in the Mexican political or social environment may cause disruptions to our business operations and decreases in our sales and net income.

Changes to governmental policies, plans, strategies or regulations affecting tourism in Mexico could adversely affect our operations.

Our future growth greatly depends on the policies adopted by the Mexican government and regulations relating to investment in tourism and real estate development and the participation of private entities in such projects. Any change in such governmental policies and strategies, adjustments to the programs and budgets for the procurement of tourism projects or the enactment of new rules in connection with the development of tourism promotions may affect our activities. Our growth depends largely on our ability to obtain, in a timely manner, the permits, licenses and authorizations required for the construction and operation, by us or by third parties, of hotel and vacation club properties. We can give no assurance that amendments to laws and regulations applicable to the tourism or real estate industries, or that the application thereof, or the enactment of new laws and regulations, will not have a material adverse effect over our activities, our results of operations, our financial condition or our prospects. We likewise give no assurance that our operating expenses will not increase or that it may not become more difficult to obtain permits or authorizations required for the construction of our developments. Currently, our operations are mainly concentrated in Mexico, which makes us particularly sensitive to the regulations adopted by federal, state, local and municipal authorities of Mexico.

Recently, the Mexican legislature approved certain amendments to several tax statutes that, among other things, will increase certain taxes and eliminate certain deductions. In connection with changes to the régimen de consolidación fiscal (tax consolidation regime), we estimate that these amendments may increase our tax payments by a total of approximately Ps.100.0 (U.S.$7.4) million over the next five years. We believe that the increase in the rates at which income tax and value-added tax are levied might limit consumption, make our prices less competitive and could adversely affect our financial condition and results of operations. Due to the recent approval of these amendments we cannot conclusively determine the full impact that they will have on us. It is possible that further amendments could be adopted to further increase taxes or to create new tax regimes. If enacted, these amendments could adversely affect our financial condition and results of operations.

Our corporate disclosure, including our financial statements, may be different in significant respects than that of issuers in other countries.

We are listed on the Bolsa Mexicana de Valores, S.A.B. de C. V. (the Mexican Stock Exchange). Issuers of securities in Mexico are required to make public disclosure and provide periodic information that is different than disclosures required in countries with highly developed capital markets such as the United States. In addition, our financial statements have been prepared in accordance with Mexican FRS, which differ in certain significant respects from U.S. GAAP. The financial results reported using Mexican FRS may differ substantially from results that would have been obtained using U.S. GAAP. A summary of relevant differences between Mexican FRS and U.S. GAAP is included herein in Appendix A,

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including differences in the treatment of certain intercompany and off-balance sheet transactions. We have not provided a reconciliation of any financial information to U.S. GAAP.

We will be obligated to adopt new accounting standards in 2012 that could affect our consolidated financial statements and may affect the methods used by the financial community to evaluate our performance.

We currently prepare our financial statements in accordance with Mexican FRS. In January 2009, the CNBV approved a new regulation requiring all publicly listed companies in Mexico, including us, to apply International Financial Reporting Standards, or IFRS, in preparing their consolidated financial statements, including presentation of comparable annual statements for the prior year, by January 1, 2012.

Because our financial statements prepared in accordance with IFRS may differ from our financial statements prepared in accordance with Mexican FRS, the methods used by the financial community to assess our financial performance and value our publicly traded securities, such as debt-to-equity ratios, could be affected. As of the date hereof, we have not assessed the impact of the adoption of IFRS on our financial statements.

Developments in other countries could adversely affect the Mexican and other Latin American economies, the market value of the Notes and our financial condition and results of operations.

The market value of securities of Mexican companies is affected by economic and market conditions in developed and other emerging market countries. Although economic conditions in those countries may differ significantly from economic conditions in Mexico, adverse economic conditions may expand regionally or investors' reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. In recent years, for example, prices of both Mexican debt and equity securities have sometimes suffered substantial drops as a result of developments in other countries.

In addition, the direct correlation between economic conditions in Mexico and the United States has sharpened in recent years because of NAFTA and increased economic activity between the two countries. As a result, economic downturns in the United States, the termination of NAFTA or other related events could have a significant adverse effect on the Mexican economy, which, in turn, could affect our financial condition and results of operations. In addition, terrorist acts in the United States and elsewhere could depress economic activity in the United States and globally, including Mexico and Latin America. These events could have a material adverse effect on our operations and revenues, which could affect the market price of the Notes.

Investors may experience difficulties in enforcing civil liabilities against us or our directors, executive officers and controlling persons.

We are organized under the laws of Mexico. Most of our directors, executive officers and controlling persons reside outside the U.S., a significant portion of the assets of our directors, executive officers and controlling persons, and substantially all of our assets, are located outside the U.S. As a result, it may be difficult to effect service of process within the United States upon these persons or to enforce against them or us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Mexican counsel that there is doubt as to the enforceability, in original actions in Mexican courts, of liabilities predicated solely on the U.S. federal securities law and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of U.S. federal securities laws.

Risks Relating to Brazil, Argentina and Chile

Economic and political factors in Brazil may have an impact on our operations.

The financial condition and results of operations of our Caesar Park and Caesar Business brands are largely dependent on Brazil’s economy, which has been characterized by frequent and occasionally drastic intervention by the Brazilian government and volatile economic cycles in the past. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among

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other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Although the Brazilian government has implemented sound economic policies over the last few years, uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil. These uncertainties and other developments in the Brazilian economy may adversely affect us and the market value of the Notes.

Currency fluctuations. Our business is impacted by fluctuations in the value of the real. Since June 2004, the real has gradually appreciated in value against the U.S. dollar (reaching R$1.5593 per U.S.$1.00 as of August 1, 2008). In the second half of 2008, the value of the real declined sharply against the U.S. dollar (reaching R$2.3370 per U.S.$1.00 as of December 31, 2008). During 2009, the real again increased in value against the U.S. dollar (reaching R$1.7781 per U.S.$1.00 as of September 30, 2009 and R$1.7412 per U.S.$1.00 as of December 31, 2009). There has been volatility in the real/U.S. dollar exchange rate in recent years and no assurance can be given that the real/U.S. dollar exchange rate will not continue to experience significant fluctuations in the future and that any such fluctuation will not have a material adverse effect on our business, condition (financial or otherwise), properties, prospects or results of operations.

Inflation. Brazil has experienced extremely high rates of inflation. More recently, inflation rates in Brazil for the years ended December 31, 2006, 2007 and 2008, and for the nine months ended September 30, 2009, as measured by the national consumer price index (Índice de Preços ao Consumidor Amplo), or IPCA, were 3.1%, 4.5%, 5.9% and 3.2%, respectively. Governmental measures to combat inflation and public speculation about possible future government measures have in the past had significant negative effects on the Brazilian economy.

Governmental policies. The Brazilian economy has been characterized by frequent, and occasionally drastic, intervention by the Brazilian federal government, which has often changed monetary, credit and other policies to influence Brazil’s economy. Actions taken by the Brazilian federal government concerning the economy may have important effects on Brazilian companies, including us, and on market conditions and prices of Brazilian securities.

We have no control over, and cannot predict what measures or policies the Brazilian government may take and how such policies may affect, directly or indirectly, our operations in Brazil. These and other future developments in the Brazilian economy and government policies may adversely affect the operations and results of our Caesar Park and Caesar Business hotels in Brazil, and therefore our consolidated financial condition.

Economic and political factors in Argentina may have an impact on our operations.

We have two hotels in Argentina. Argentina’s economy has been characterized by volatile economic cycles in the past. In 2001, a severe economic and political crisis began in Argentina, the consequences of which continue to impact the Argentine economy. Despite recent improvements of some financial indicators, much of the economic, social and political deterioration caused by the crisis remains largely unaffected. Notwithstanding the continued stabilization during the recent years, the Argentine economic and social situation has been known to deteriorate quickly in the past, and may do so in the future. Moreover, the current international climate of instability in the financial markets could affect the Argentine economy.

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Currency fluctuations. On January 6, 2002, the Argentine Congress enacted the Law of Public Emergency and Reform of the Exchange Rate Regime (the “Public Emergency Law”), which effectively brought an end to the Convertibility Regime. The Public Emergency Law abolished the peg between the Argentine peso and the U.S. dollar and granted the executive branch the power to regulate the foreign exchange market and to establish foreign exchange rates. Since then, the value of the Argentine peso remained stable in 2004, with the exchange rate increasing from P$.2.93 per U.S.$1.00 as of December 31, 2003, to P$.2.97 per U.S.$1.00 as of December 31, 2004. The value of the Argentine peso also remained stable in 2005 as the exchange rate increased slightly from P$.2.97 per U.S.$1.00 as of December 31, 2004, to P$.3.03 per U.S.$1.00 as of December 31, 2005. The Argentine peso depreciated slightly in 2006, as the exchange rate increased slightly from P$.3.03 per U.S.$1.00 as of December 31, 2005, to P$.3.07 per U.S.$1.00 as of December 31, 2006. The yearly average exchange rate for 2007 was P$.3.12 per U.S.$1.00. More recently, on September 30, 2009 and December 31, 2009, respectively, the exchange rate as reported by the Central Bank of Argentina was P$3.84 and P$3.86 per U.S.$1.00.

Inflation. Argentina also has a history of hyper-inflation, which has materially undermined its economy and limited the ability of businesses to grow. Recently, Argentina has experienced increases in its consumer price index, or CPI, and wholesale price index, or WPI, that reflected the continued increase in private consumption and in levels of economic activity, which applied upward pressure on the demand for goods and services.

During 2008, the CPI increased 7.2% and the WPI increased 8.8%. The lower level of growth in the CPI and WPI in 2008 as compared to 2007, when it was 8.5% and 14.4%, respectively, was mainly due to the fiscal policies set out above and the decreasing commodity and other prices resulting from the slowdown in the global and local economy in the second half of 2008.

During the first eight months of 2009, the CPI increased 4.1% and the WPI increased 5.5% showing a deceleration as compared to the same period in 2008 during which the CPI increased by 5.4% and the WPI increased 7.9%. This deceleration is primarily attributable to the lower rate of growth of the economy and to lower commodity prices as compared to the first eight months of 2008.

Governmental policies. The Argentine government has a history of changing monetary, fiscal, taxation and other policies to influence the course of Argentina’s economy. For example, in 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of companies to make payments abroad. While these restrictions have been substantially eased, Argentina may tighten exchange controls or transfer restrictions in the future to prevent capital flight, counter a significant depreciation of the Argentine peso or address other unforeseen circumstances. Present circumstances and future developments in the Argentine economy and government policies may adversely affect the operations and results of our Caesar Park and Caesar Park Silver hotels in Argentina, and therefore our consolidated financial condition.

On October 28, 2007, presidential and congressional elections were held in Argentina. Cristina E. Fernández de Kirchner was elected and became Argentina’s President on December 10, 2007. Her term will expire on December 10, 2011. The Fernández de Kirchner administration has continued the policies of the previous government, including pursuing economic growth, maintaining fiscal and trade surpluses, maintaining a weak currency and low interest rates, suppressing inflation and redistributing income through food, energy, and transport subsidies.

Economic and political factors in Chile may have an impact on our operations.

We have one hotel in Chile. Despite growth in the 1980s and 1990s, the Chilean economy has remained smaller than that of certain other Latin America countries. The GDP of Chile grew 4.0% in 2006, 5.1% in 2007 and 3.2% in 2008. The GDP of Chile is expected to decrease or remain at the same level in 2009 as the previous years.

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Currency fluctuations. The Chilean peso has been subject to devaluation in the past and could be subject to significant fluctuations in the future. During 2008, the value of the Chilean peso relative to the U.S. dollar decreased approximately 21% in nominal terms and approximately 15.4% in real terms, based on the observed exchange rates on December 31, 2007 and December 31, 2008.

Inflation. Chile’s inflation rates, which were 7.8% in 2007 and 7.1% in 2008, as measured by changes in the Chilean consumer price index, may adversely affect our operations in Chile and financial condition.

Governmental policies. The Chilean government has exercised and continues to exercise a substantial influence over many aspects of the private sector and has changed monetary, fiscal, tax and other policies to influence Chilean economy. We have no control over and cannot predict how government intervention and policies will affect the Chilean economy or, directly or indirectly, our operations and revenues.

Risks Relating to the Notes

We may be unable to repay our debt, access credit or pursue business opportunities because of our leverage and debt service requirements.

As of September 30, 2009, after giving pro forma effect to the sale of the Notes offered hereby and the application of the gross proceeds thereof, our total consolidated indebtedness would have been U.S.$412.8 million. Our leverage may adversely affect our ability to service our indebtedness, finance future operations, acquisitions and capital expenditures, compete effectively against better capitalized competitors, withstand downturns in our business, and could also increase our vulnerability to adverse general economic and industry conditions, including increases in interest rates, foreign currency exchange rate fluctuations and market volatility. Our ability to make scheduled payments on or refinance our indebtedness depends on, and is subject to, our financial and operating performance, which is affected by prevailing economic conditions and financial, business and other factors, including the availability of financing generally in the Mexican and international banking and capital markets. We cannot assure you that our results of operations will be sufficient for the payment or refinancing of the Notes or our other indebtedness or that prevailing economic conditions will permit such refinancing, particularly on terms favorable to us. To the extent that cash generated from operations is insufficient to fulfill our capital expenditure requirements, we may need to incur further indebtedness for similar uses in the future. We cannot assure you that we will be able to incur indebtedness on favorable terms to us or at all, which could impair our ability to take advantage of significant business opportunities that may arise.

The restrictive covenants in the indenture governing the Notes and of our existing indebtedness could adversely restrict our financial and operating flexibility and subject us to other risks.

The indenture governing the Notes contains affirmative and negative covenants that limit our and our subsidiaries’ ability to take certain actions. The indenture restricts our and our subsidiaries’ ability to incur additional debt, pay dividends or make other distributions, make certain investments, create liens, enter into certain types of transactions with affiliates, sell certain assets or merge with or into other companies, and permit restrictions on the ability of our subsidiaries to declare dividends. The breach of any of these covenants would result in a default, which could, in turn, lead to all the outstanding amounts under those debt documents becoming immediately due and payable. These restrictions may limit our ability to operate our business and may prohibit or limit our ability to enhance our operations or take advantages of business opportunities as they arise.

Despite our current indebtedness levels, we may still be able to incur substantially more debt. This could exacerbate further the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness, including secured indebtedness, in the future. The terms of the indenture will restrict, but will not completely prohibit, us from doing so. In addition, the indenture will allow us to issue additional notes under certain circumstances, which will also be guaranteed by the guarantors. The indenture will also allow us to incur certain secured debt which would be effectively senior to the Notes. In addition, the indenture will not prevent us from incurring other liabilities that do not constitute indebtedness. See “Description of the

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Notes.” If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify.

The Notes and the guarantees will be effectively subordinated to our secured debt and to certain claims preferred by statute.

Our obligations under the Notes, and the obligations of the guarantors under the guarantees, are unsecured. As a result, the Notes will be effectively subordinated to all of our and the guarantors’ secured debt to the extent of the value of the collateral securing such debt. As of September 30, 2009, after giving pro forma effect to the sale of the Notes offered hereby and the application of the gross proceeds thereof and assuming that we do not elect to prepay the Banco del Bajio facility referred to in clause 6 of the second paragraph of “Use of Proceeds”, we and the guarantors would have had approximately U.S.$5.6 million of secured debt outstanding. In the event that we or our subsidiaries are not able to repay amounts due under such secured debt obligations, creditors could proceed against the collateral securing such indebtedness. In that event, any proceeds upon a realization of the collateral would be applied first to amounts due under the secured debt obligations before any proceeds would be available to make payments on the Notes. If there is a default, the value of this collateral may not be sufficient to repay both our secured creditors and the holders of the Notes. Additionally, the claims of holders of the Notes will rank effectively junior to certain obligations that are preferred by statute, including certain claims relating to taxes and labor.

Certain of our subsidiaries are not guarantors and our obligations with respect to the Notes will be effectively subordinated to all liabilities of these non-guarantor subsidiaries.

The guarantors of the Notes include only some of our subsidiaries. However, our financial information (including our financial statements included herein) is presented on a consolidated basis. As of and for the year ended December 31, 2008 and for the nine months ended September 30, 2009, our non-guarantor subsidiaries represented 12% and 36%, and 15% and 36% of our total revenues and assets, respectively. Our non-guarantor subsidiaries had U.S.$25.1 million of indebtedness as of September 30, 2009, all of which is structurally senior to the Notes. Any right that we or the subsidiary guarantors have to receive assets of any of the non-guarantor subsidiaries upon the liquidation or reorganization of those subsidiaries, and the consequent rights of holders of Notes to realize proceeds from the sale of any of those subsidiaries’ assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors and holders of debt of that subsidiary. In addition, the indenture will, subject to certain limitations, permit these subsidiaries to incur additional indebtedness and will not contain any limitation on the amount of other liabilities, such as trade payables, that these subsidiaries may incur. We expect that the Senior Notes will be subordinated to the Banco del Bajío loan, which holds a lien on the Fiesta Inn Tlalnepantla Hotel, and to the lien granted on one of our hotel buildings related to the tax dispute described above. See “—We are subject to significant claims under tax disputes in Mexico for which we do not maintain reserves.” Both hotels are owned by Gran Inmobiliaria Posadas, S.A. de C.V. and Operadora del Golfo de México S.A. de C.V.

We also expect that the Notes will be subordinated in right of payment to (i) the Banco del Bajio loan, which holds a lien on the Fiesta Inn Tlalnepantla Hotel, (ii) a Banorte credit facility, which has a lien on the Fiesta Americana Vacation Club resorts in Cancun, Kohunlich and Acapulco, as well as security interests in certain Acapulco, Cancun and Kohunlich timeshare sales receivables, (iii) a Bancomext credit facility, which has a lien on the Fiesta Americana Vacation Club resort in Los Cabos, as well as a security interest in the Los Cabos timeshare sales receivables and (iv) the lien granted on one of our hotel buildings related to the tax dispute described above. See “—We are subject to significant claims under tax disputes in Mexico for which we do not maintain reserves.” The hotels subject of the security interests described above are owned by Gran Inmobiliara Posadas, S.A. de C.V. and Operadora del Golfo de Mexico S.A. de C.V., and the vacation club resorts subject of the security interests described above are owned by Inversora Inmobiliaria Club S.A. de C.V. and Desarrolladora Caribe S.A. de C.V.

We may be unable to make a change of control offer required by the indenture governing the Notes which would cause defaults under the indenture governing the Notes.

The terms of the Notes will require us to make an offer to repurchase the Notes upon the occurrence of a change of control at a purchase price equal to 101% of the principal amount of the Notes,

32

plus accrued interest to the date of the purchase. Any financing arrangements we may enter may require repayment of amounts outstanding in the event of a change of control and limit our ability to fund the repurchase of the Notes in certain circumstances. It is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of Notes, or that restrictions in our credit facilities and other financing arrangements will not allow the repurchases. See “Description of the Notes—Repurchase at the Option of Holders—Change of Control.”

The guarantees may not be enforceable.

The guarantees provide a basis for a direct claim against the guarantors; however, it is possible that the guarantees may not be enforceable under Mexican law. While Mexican law does not prohibit the making of guarantees and, as a result, does not prevent the guarantees from being valid, binding and enforceable against the guarantors, in the event that a guarantor becomes subject to a reorganization proceeding (concurso mercantil) or to bankruptcy (quiebra), the relevant guarantee may be deemed to have been a fraudulent transfer and declared void, based upon the guarantor being deemed not to have received fair consideration in exchange for such guarantee.

If we or any of the subsidiary guarantors were to be declared insolvent or bankrupt, holders of the Notes may find it difficult to collect payment on the Notes.

Under the Ley de Concursos Mercantiles (Mexican Bankruptcy Law), if we or the subsidiary guarantors are declared bankrupt or become subject to concurso mercantil (judicial reorganization), our obligations and the obligations of the subsidiary guarantors in respect of the Notes, (i) would be converted into pesos and then from pesos into UDIs (instruments denominated in pesos that automatically adjust the principal amount of an obligation to the inflation rate officially recognized by Banco de México) and would not be adjusted to take into account any devaluation of the peso relative to the U.S. dollar occurring after such conversion, (ii) would be satisfied at the time claims of all our creditors are satisfied, (iii) would be subject to the outcome of, and priorities recognized in, the relevant proceedings, (iv) would cease to accrue interest from the date a concurso mercantil is declared and (v) would be subject to certain statutory preferences, including tax, social security and labor claims and claims of secured creditors.

Provisions of Mexican law may make it difficult for holders of the Notes to convert payments they receive in pesos into U.S. dollars or to recognize the full value of payments to them.

We are required to make payments in respect of the Notes in U.S. dollars. However, under the Ley Monetaria de los Estados Unidos Mexicanos (Mexican Monetary Law), obligations to make payments in Mexico in foreign currency, whether by agreement or upon enforcement of a judgment, may be discharged in pesos at the exchange rate for pesos prevailing at the time and place of payment or judgment. Accordingly, we will be legally entitled to make payment of amounts due on the Notes in pesos if payment of the Notes is sought in Mexico through the enforcement of a non-Mexican judgment or otherwise. If we elect to make payments due on the Notes in pesos in accordance with the Mexican Monetary Law, we can make no assurance that the amounts paid may be converted by the payee into U.S. dollars or that, if converted, such amounts would be sufficient to purchase U.S. dollars equal to the amount of principal, interest or additional amounts due on the Notes.

An active trading market may not develop for the Notes, which may hinder your ability to liquidate your investment.

The Notes are a new issue of securities with no established trading market. We have applied to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF Market. We cannot assure you, however, that the application will be accepted or that an active trading market for the Notes will develop or be sustained. The initial purchaser has informed us that they intend to make a market in the Notes after the completion of this offering. However, the initial purchaser is not obligated to do so and may cease their market-making at any time. In addition, the liquidity of the trading market in the Notes, and the market price quoted for the Notes, may be adversely affected by changes in the overall market for fixed income securities and by changes in our financial performance or prospects or in the prospects for companies in our industry in general. As a result, we cannot assure you that an active trading market will develop for the Notes. If no active trading market develops, you may not

33

be able to resell the Notes at their fair market value or at all. The reoffering and resale of the Notes is subject to significant legal restrictions.

The Notes may not be freely transferred.

The Notes have not been registered under the Securities Act or any U.S. state securities laws or any other jurisdiction’s securities laws and, unless so registered, may not be offered or sold within the U.S., or to, or for the benefit of, a U.S. citizen, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable U.S. state securities laws.

34

EXCHANGE RATES

Since November 1991, Mexico has had a free market for foreign exchange. Prior to December 21, 1994, the Banco de México kept the peso-U.S. dollar exchange rate within a range prescribed by the government through intervention in the foreign exchange market. Within the band, the Banco de México generally intervened to reduce day-to-day fluctuations in the exchange rate. In December 1994, the government suspended intervention by the Banco de México and allowed the peso to float freely against the United States dollar. The peso declined sharply in December 1994 and continued to fall under conditions of high volatility in 1995. In 1996, the peso fell more slowly and was less volatile. Relative stability characterized the foreign exchange markets during the first three quarters of 1997. The fall of the Hang Seng Index of the Hong Kong Stock Exchange on October 24, 1997 marked the beginning of a period of increased volatility in the foreign exchange markets with the peso falling approximately 10.0% in just a few days. During 1998, the foreign exchange markets experienced volatility as a result of the financial crisis in Asia and Russia and the financial turmoil in countries such as Brazil and Venezuela. For the last few years, the Mexican government has maintained a policy of non-intervention in the foreign exchange markets, other than conducting periodic auctions for the purchase of U.S. dollars, and has not had in effect any exchange controls (although such controls have existed and have been in effect in the past). We cannot assure you that the Mexican government will maintain its current policies with regard to the peso or that the peso will not further depreciate or appreciate significantly in the future.

The following table sets forth, for the periods indicated, the high, low, average and period end free market exchange rate for the purchase of U.S. dollars, expressed in nominal pesos per U.S. dollar. All amounts are stated in pesos per U.S. dollar. Certain amounts presented in pesos in this offering memorandum as of and for the year ended December 31, 2008 and as of and for the nine months ended September 30, 2009 have been converted into U.S. dollars at specified exchange rates. According to the Mexican FRS, Posadas determines the exchange rate applicable for the end of each period from the conversion rate of the transactions executed by Posadas in the open market prior to the end of the dates indicated. Unless otherwise indicated, the exchange rate used in converting Mexican pesos into U.S. dollars for amounts presented as of and for the year ended December 31, 2008 and as of and for the nine months ended September 30, 2009 was determined by reference to the exchange rate of Ps.13.5383 per U.S. dollar and Ps.13.4890 per U.S. dollar, respectively. Management does not believe there is a material difference between the rate applied for purposes of our financial reporting and the published rates set forth below as of such dates.

Exchange rate(1)

Year ended December 31, High Low Average(2) Period End

2005................................................................................................... 11.40 10.41 10.90 10.71 2006................................................................................................... 11.48 10.43 10.90 10.88 2007................................................................................................... 11.27 10.66 10.93 10.87 2008................................................................................................... 13.92 9.92 11.14 13.54 2009................................................................................................... 15.35 12.67 14.01 13.06

Month ended July 31, 2009 ..................................................................................... 13.81 13.10 13.37 13.26 August 31, 2009................................................................................. 13.25 12.82 13.01 13.25 September 30, 2009 .......................................................................... 13.64 13.23 13.41 13.50 October 31, 2009 ............................................................................... 13.68 12.92 13.25 13.08 November 30, 2009 ........................................................................... 13.38 12.87 13.13 12.95 December 31, 2009 ........................................................................... 13.06 12.67 12.86 13.06

(1) The exchange rates are the exchange rates published by the Banco de México in the Federal Official Gazette as the rate for

the payment of obligations denominated in non-Mexican currency payable in Mexico. (2) The average rate means the daily average of the exchange rates on each day during the relevant period.

35

USE OF PROCEEDS We will use the gross proceeds from the sale of the notes being offered hereby to repay

approximately U.S.$195.6 million of our outstanding indebtedness, of which approximately U.S.$110.5 million is secured indebtedness (excluding the Banco del Bajio facility described in clause 6 below). Debt in pesos has been converted to U.S. dollars at an exchange rate of Ps.13.4890 to U.S.$1.00. Part of the indebtedness we expect to repay with the proceeds of this offering is denominated in pesos, and our ability to apply U.S. dollar proceeds to repay the peso-denominated indebtedness depends on the exchange rate of pesos to U.S. dollars in effect on the date of repayment.

The secured indebtedness being repaid includes approximately:

1. U.S.$31.8 million of indebtedness either directly or indirectly under a facility with Banco Nacional de Mexico, S.A., or Banamex, which is an affiliate of Citigroup Inc., which, as of September 30, 2009, accrued interest at 8.94% and matures on April 25, 2013.

2. U.S.$17.0 million of indebtedness under a facility with California Commerce Bank, which is an affiliate of Banamex and Citigroup Inc., which, as of September 30, 2009, accrued interest at 5.03% and matures on March 5, 2011.

3. U.S.$25.9 million of indebtedness under a facility with Banco de Comercio Exterior, or Bancomext, which, as of September 30, 2009, accrued interest at 5.03% and matures on December 26, 2011.

4. U.S.$29.1 million of indebtedness under a peso-denominated facility with Bancomext which, as of September 30, 2009, accrued interest at 8.78% and matures on April 1, 2013.

5. U.S.$6.7 million of indebtedness under a peso-denominated facility with Banco Santander, S.A., which, as of September 30, 2009, accrued interest at 9.80% and matures on October 30, 2012.

6. We may elect to repay approximately U.S.$5.6 under a facility with Banco del Bajio, which, as of September 30, 2009, accrued interest at 8.70% and matures on April 30, 2014.

The unsecured indebtedness being repaid includes approximately:

1. Up to U.S.$35.8 million of unsecured indebtedness under our existing Senior Notes due 2011 which, as of September 30, 2009, accrued interest at 8.75% and mature on October 4, 2011, and

2. U.S.$49.3 million (of which U.S.$30.8 million is denominated in U.S. dollars either directly or indirectly) of unsecured indebtedness under a syndicated facility among several lenders from time to time and ING Capital LLC as administrative agent for the lenders, which matures on November 15, 2010 and, as of September 30, 2009, accrued interest on the U.S. dollar tranche at 2.10% and on the peso tranche at 6.59%.

For additional information with respect to our outstanding indebtedness, see “Capitalization” and “Description of Other Indebtedness.”

Agreements governing certain of the debt to be discharged with the proceeds of this offering include covenants that prohibit us from undertaking this offering. Although the issuance of the notes offered hereby would place us in technical default of such agreements, we intend to use the proceeds of this offering to satisfy and discharge any such debt. Furthermore, we do not expect to pay any penalties in connection with the pre-payments of such debt.

36

CAPITALIZATION

The following table sets forth our short-term debt and consolidated capitalization (in accordance with Mexican FRS) as of September 30, 2009, or the Actual column, and also after giving effect to the following events subsequent to September 30, 2009:

the repayment of Ps.24.0 million of long-term indebtedness, and borrowing of an additional U.S.$9.3 million in indebtedness (U.S.$0.8 million in short-term), or the As adjusted column; and

as further adjusted after additionally giving effect to the sale of the notes offered hereby and the application of the estimated gross proceeds thereof as set forth under “Use of Proceeds,” or the As further adjusted column.

Since September 30, 2009, there has been no material change to our capitalization, except as otherwise disclosed herein. For additional information relating to our indebtedness and certain off-balance sheet transactions, see “Description of Other Indebtedness.”

As of September 30, 2009

Actual As adjusted As further adjusted

Actual As adjusted

As further adjusted

(in millions) Short-term debt (including current Ps. Ps. Ps. U.S.$ U.S.$ U.S.$

portion of long-term debt) ............................... 907 759 26 67 56 2 Long-term debt(1)

Long-term bank and other debt.......................... 1,767 2,017 594 131 150 44 Medium and long-term notes ............................. 2,733 2,733 2,250 203 203 167 Senior Notes due 2015 offered

hereby — — 2,698 — — 200 5,407 5,509 5,568 401 409 413 Stockholders´ equity

Capital stock: Historical.......................................................... 489 489 489 36 36 36 Contributions for future capital increases......... 200 200 200 15 15 15 Amount assigned for repurchase of shares ..... 139 139 139 10 10 10 Shares in trust ................................................. (3) (3) (3) 0 0 0 Additional paid-in capital.................................. 70 70 70 5 5 5 Restatement for inflation.................................. 1,774 1,774 1,774 132 132 132

Other capital: Reserve for repurchase of shares.................... 652 652 652 48 48 48 Retained earnings ........................................... 337 337 337 25 25 25 Cumulative translation effect ........................... 335 335 335 25 25 25

3,993 3,993 3,993 296 296 296 Non-controlling interest .................................. 937 937 937 69 69 69

Total stockholders´ equity .................................. 4,930 4,930 4,930 365 365 365 Total capitalization .............................................. 10,337 10,439 10,498 766 774 778

(1) Long-term debt includes mark-to-market net of margin calls from derivative positions.

37

SELECTED FINANCIAL AND OPERATING INFORMATION

The selected financial and operating information for the years ended December 31, 2006, 2007 and 2008 were derived from the audited consolidated balance sheets as of December 31, 2008 and 2007 and the consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006, of cash flows for the year ended December 31, 2008 and of changes in financial position for the years ended December 31, 2007 and 2006, as audited by Galaz, Yamakazi, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu. The selected financial and operating information as of and for the nine months ended September 30, 2008 and September 30, 2009, respectively, were derived from our unaudited condensed consolidated interim financial statements as of and for the periods then ended. Our unaudited condensed consolidated interim financial statements have been prepared on the same basis as our audited financial statements for the year ended December 31, 2008 and, in the opinion of management, include all adjustments, consistent only of normal, recurring adjustments, considered necessary for a fair presentation of our financial condition and results of operations for such periods. The following information is qualified by reference to, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes beginning on page F-1 of this offering memorandum. The historical results are not necessarily indicative of results to be expected in any future period.

Years ended December 31, Nine months ended September 30, 2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (U.S.$) (2) (Ps.) (Ps.) (U.S.$) (2) (Unaudited) (in thousands, except as otherwise indicated) Statement of Operations Data:

Total Revenues(1)..................... 5,528,221 5,974,224 6,904,520 509,999 5,211,854 5,224,969 387,350

Hotel ownership: Revenues .................................. 3,582,344 3,522,621 3,677,583 271,643 2,716,283 2,362,403 175,136 Direct costs and expenses ........ 2,569,770 2,625,464 2,791,774 206,213 2,063,135 1,875,420 139,033 Operating earnings from hotel ownership ......................

1,012,574

897,157

885,809

65,430 653,148

486,983

36,102

Hotel management, brand and other:

Revenues .................................. 1,040,469 1,289,110 1,655,402 122,275 1,240,637 1,219,952 90,441 Direct costs and expenses ........ 557,920 717,116 1,105,498 81,657 788,697 818,008 60,643 Operating earnings from hotel management, brand and other ................................

482,549

571,994

549,904

40,618 451,940

401,944

29,798

Vacation Club and other: Revenues .................................. 905,408 1,162,493 1,571,535 116,081 1,254,934 1,642,614 121,774 Direct costs and expenses ........ 660,308 844,594 1,046,496 77,299 856,647 1,268,469 94,037 Operating earnings from Vacation Club and other .........

245,100

317,899

525,039

38,782 398,287

374,145

27,737

Other operating expenses ......... 744,559 755,137 819,983 60,568 634,271 688,155 51,016 Operating income...................... 995,664 1,031,913 1,140,769 84,262 869,104 574,917 42,621 Comprehensive financing result:

Interest expense................. 415,179 388,397 420,311 31,046 296,311 289,760 21,481 Interest income .................. (35,979) (32,093) (6,989) (516) (14,736) (27,394) (2,031) Exchange loss (gain), net(3)...............................

65,738

(15,501)

(111,918)

(8,267) (54,084)

(29,296)

(2,172)

Loss from derivative financial instruments, net(4) ..............................

-

-

1,208,196

89,243 52,847

49,110

3,641 Gain on monetary position(5) .......................

(135,742)

(143,925)

——

——

——

——

——

Total comprehensive financing result .......................

309,196

196,878

1,509,600

111,506 280,338

282,180

20,919

Other expenses, net .................. 91,493 122,902 234,728 17,338 141,753 73,205 5,427 Equity in results of associated companies..............................

(1,114)

351,922

209,513

15,476 201,936

(1,350)

(100)

(Loss) income before income tax .............................

596,089

360,211

(813,072)

(60,057) 245,077

220,882

16,375

Income tax expense (benefit) .... 139,819 159,646 (111,226) (8,216) 220,016 86,330 6,400 Consolidated net (loss) income....................................

456,270

200,565

(701,846)

(51,842) 25,061

134,552

9,975

38

As of and for the years ended

December 31, As of and for the nine months ended

September 30, 2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (U.S.$) (Ps.) (Ps.) (U.S.$) (Unaudited) (in thousands, except as otherwise indicated) Balance Sheet Data: Current assets: Cash and cash

equivalents ......................

526,766 381,690 830,922 61,376

582,358

589,752

43,721 Trade accounts receivable,

less allowance for doubtful accounts .............

1,026,214 1,777,451 1,540,540 113,791

1,441,989

1,503,109

111,432 Other current assets ..... 215,499 242,605 244,602 18,067 181,508 248,755 18,441 Total current assets ................. 1,814,631 2,440,784 2,666,990 196,996 2,245,627 2,369,484 175,660 Property and equipment, net(6) ....................................

9,092,168 9,266,017 9,386,720 693,346

9,275,113

9,396,943

696,637

Other non-current assets ......... 1,891,976 1,437,979 1,491,064 110,137 1,589,688 1,767,464 131,030 Total assets ............................. 12,798,775 13,144,780 13,544,774 1,000,478 13,110,428 13,533,891 1,003,328

Total current liabilities(7) ........... 1,148,563 1,934,793 2,659,011 196,407 1,992,850 2,489,876 184,586 Long-term liabilities: Long-term debt.................... 4,243,958 3,884,392 4,193,673 309,764 3,915,048 4,186,541 310,367 Derivative financial

instruments ......................

38,110 20,985 404,345 29,867

126,389

313,582

23,247 Total liabilities ......................... 7,408,720 7,852,365 9,085,931 671,128 8,026,636 8,604,204 637,868 Stockholders’ equity ................ 5,390,055 5,292,415 4,458,843 329,350 5,083,792 4,929,686 365,460 Cash Flow Data:(8) Net cash provided by

operating activities .............

932,065 698,120 1,925,503 142,226

1,105,663

771,128

57,167 Net cash used in investing activities .............................

(166,544) (454,212) (783,945) (57,906)

(826,088)

(709,260)

(52,581)

Net cash used in financing activities .............................

(680,953) (346,943) (505,302) (37,324)

(27,417)

(320,639)

(23,770)

Other Financial Data: EBITDA(9)................................. 1,437,728 1,462,875 1,529,949 113,009 1,188,215 914,400 67,788 Other Operating Data: ADR(10)..................................... 1,073 1,059 1,069 79 1,060 1,070 79 REVPAR(11).............................. 661 659 647 48 655 572 42 Occupancy(12) .......................... 61.7% 62.2% 60.6% — 61.8% 53.4% —

(1) Total revenues include revenue from hotel ownership, hotel management, brand and other and Vacation Club and other. (2) Converted into U.S. dollars using an exchange rate of Ps.13.5383 per U.S. dollar on December 31, 2008 and Ps.13.4890 per U.S. dollar on

September 30, 2009. These conversions should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the specified rate or at all. See “Exchange Rates.”

(3) Based on the provisions of NIF B-15, “Translation of foreign currency,” effective January 1, 2008, we have the following currencies:

Currency

Country Recording Functional Reporting

Mexico (FAVC) Mexican pesos U.S. dollar Mexican pesos

United States of America U.S. dollar U.S. dollar Mexican pesos

Brazil Brazilian reais Brazilian reais Mexican pesos

Argentina Argentine pesos Argentine pesos Mexican pesos

Chile Chilean pesos Chilean pesos Mexican pesos

(4) Reflects the effect of mark-to-market losses in connection with certain of our derivative financial instruments. See “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—Derivative Financial Instruments.”

(5) Gain on monetary position represents (for those periods prior to December 31, 2007 stated in constant pesos) the effects of inflation, as measured by the NCPI, on our monthly net monetary assets or liabilities during the period. Starting January 1, 2008, and following the provisions of NIF B-10 “Effects of inflation,” the effects of inflation are recognized only if the cumulative inflation in the last three years exceeds 26% in the countries where we operate.

(6) Net of accumulated depreciation. (7) Current liabilities include bank loans and current portion of long-term debt and other payable and accrued liabilities. (8) As a result of NIF B-2 “Statement of Cash Flows,” effective January 1, 2008, we have included the statement of cash flows for the year

ended December 31, 2008. For prior years, we have included the statement of changes in financial position. As a result, the cash flow figures for 2008 may not be directly comparable to those presented for the prior years, which are derived from the statement of changes in financial position.

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(9) We calculate EBITDA by adding depreciation and amortization to our consolidated operating income as determined in accordance with Mexican FRS. EBITDA is not a measure of financial performance under Mexican FRS and should not be considered as an alternative to net income as a measure of operating performance or to cash flow from operations as a measure of liquidity. The following table sets forth the reconciliation between EBITDA to operating income (loss) under Mexican FRS for each of the periods presented.

Years ended December 31, Nine months ended September 30,

2006 2007 2008 2008 2008 2009 2009 (Ps.) (Ps.) (Ps.) (US$) (Ps.) (Ps.) (US$) (Unaudited) Operating income....... 995,664 1,031,913 1,140,769 84,262 869,104 574,917 42,621 Depreciation and amortization............. 442,064 430,962 389,180 28,747 319,111 339,483 25,167 EBITDA...................... 1,437,728 1,462,875 1,529,949 113,009 1,188,215 914,400 67,788

(10) ADR or average daily rate per room, is determined by dividing total room revenues for the period indicated by total room nights sold during

such period. (11) REVPAR is calculated as ADR multiplied by the occupancy rate (equivalent to dividing total room revenues by total room nights available

for sale). (12) Occupancy is determined for a period by dividing total room nights sold during the period by total rooms available for each day during the

period.

The following table sets forth the number of our hotels by type of hotel, the number of available rooms by type of hotel, the number of our hotels by brand and the number of available rooms by brand, in each case, as of and for the years ended December 31, 2006, 2007 and 2008 and as of and for the nine months ended September 30, 2008 and 2009:

As of and for the years ended December 31,

As of and for the nine months ended

Sep 30,

2006 2007 2008 2008 2009

Number of hotels............................................................................... 94 100 108 105 110

Owned Hotels .................................................................................. 31 32 33 33 33

Managed Hotels ............................................................................. 42 47 54 51 58

Leased Hotels.................................................................................. 21 21 21 21 19

Number of available rooms .............................................................. 17,227 18,049 19,270 18,867 19,454

Owned Hotels .................................................................................. 6,675 6,807 6,933 6,933 6,933

Managed Hotels ............................................................................. 7,310 8,000 8,892 8,489 9,378

Leased Hotels.................................................................................. 3,242 3,242 3,445 3,445 3,143

Number of hotels............................................................................... 94 100 108 105 110

Live Aqua ....................................................................................... — — 1 1 1

Fiesta Americana(1) ........................................................................ 20 20 19 19 18

Fiesta Americana Vacation Club...................................................... 3 3 4 4 4

Fiesta Inn......................................................................................... 53 57 59 57 60

One Hotels ...................................................................................... 1 4 8 7 10

Caesar Park..................................................................................... 5 4 5 5 5

Caesar Business ............................................................................ 8 8 8 8 8

Other brands.................................................................................... 4 4 4 4 4

Number of available rooms .............................................................. 17,227 18,049 19,270 18,867 19,454

Live Aqua ........................................................................................ — — 371 371 371

Fiesta Americana(1) ........................................................................ 5,198 5,406 5,366 5,366 5,213

Fiesta Americana Vacation Club...................................................... 637 637 677 677 677

Fiesta Inn......................................................................................... 7,860 8,390 8,662 8,385 8,747

One Hotels ...................................................................................... 126 510 1,014 888 1,266

Caesar Park..................................................................................... 979 679 753 753 753

Caesar Business ............................................................................. 1,535 1,535 1,535 1,535 1,535

Other brands.................................................................................... 892 892 892 892 892 (1) Includes hotels operated under the Fiesta Americana Grand brand.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help you understand and assess the significant changes and trends in the historical results of our operations and financial condition and factors affecting our financial resources. You should read this section in conjunction with our financial statements, including the notes thereto, which are included elsewhere in this offering memorandum. Our financial statements have been prepared in accordance with Mexican FRS, which differ in certain significant respects from U.S. GAAP. See “Presentation of Financial and Operating Information,” “Risk Factors—Risks Relating to Mexico—Our corporate disclosures, including our financial statements, may be different in significant respects than that of issuers in other countries” and “Appendix A—Summary of Certain Differences Between Mexican FRS and U.S. GAAP.”

Overview

We are primarily engaged in the business of operating hotels in several countries in Latin America and our principal operations are located in Mexico and Brazil. According to Hotels magazine, we are the largest Latin American operator of hotels based on number of hotels and number of rooms. We also believe that we are the leading operator of hotels in Mexico based on number of hotels, number of rooms, geographic coverage, revenues and market share. We distinguish ourselves from other operators by offering to hotel owners superior franchise services including, among other things, centralized reservation and marketing resources, revenue-optimization services, data gathering and analysis platforms, robust customer loyalty programs and strong, well-defined brands.

Through our subsidiaries, we operate 110 hotels (including four vacation club resorts) with a total of 19,454 rooms in Mexico, Brazil, Argentina, Chile and the United States (in the State of Texas). In Mexico we operate 94 hotels with a total of 16,487 rooms (including our vacation club units). We also operate 10 hotels in Brazil with a total of 1,899 rooms, two hotels in Argentina with a total of 247 rooms and one hotel in Chile with 142 rooms. In addition, we currently operate three hotels with a total of 679 rooms in Texas. Of the 110 hotels we operate, 33 are owned hotels, 19 are leased hotels and 58 are managed hotels (not including our owned and leased hotels that we also manage). Our hotels are located in a mix of urban and coastal destinations serving both leisure and business travelers and approximately 80% of our rooms are in urban destinations and 20% of our rooms are in coastal destinations. See “Business—Hotel Business” for a description of each of the structures under which we operate our hotel business.

We also operate a vacation club business through Fiesta Americana Vacation Club, or FAVC. FAVC markets and sells memberships that grant a right to use vacation club resorts that we own and operate in upscale destinations in Mexico including Los Cabos, Cancun, Acapulco and Kohunlich, Mexico, as well as other affiliated properties. In most cases, we provide financing to customers who purchase such memberships. Our vacation club business represented 20.9% and 29.2% of our revenues for the year ended December 31, 2008 and for the nine months ended September 30, 2009, respectively.

In addition, in recent years, we have attempted to market our management skills and technology platform, originally developed to support our hotel operating business, by opening a number of related services businesses: Ampersand manages loyalty programs for diverse related and unrelated businesses; Konexo provides call center and contact services and related customer-contact services for related and unrelated businesses; Conectum offers business process outsourcing services, or shared services, for diverse industries; and GloboGO offers online travel planning services.

Basis of Preparation of Financial Statements

Our financial statements and other financial information have been prepared in accordance with Mexican FRS, and are presented in pesos. Mexican FRS differs in certain respects from U.S. GAAP. Appendix A provides a description of the principal differences between Mexican FRS and U.S. GAAP, as they relate to us.

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Through December 31, 2007, Mexican FRS required that the effects of inflation be recorded in the financial statements, as well as the restatement of financial information from prior periods to constant pesos as of the end of the most recent period presented. In order to recognize the effects of inflation, we applied Bulletin B-10, “Recognition of Effects of Inflation on Financial Information,” and Bulletin B-15, “Foreign Currency Transactions and the Translation of Financial Statements of Foreign Operations,” whereby non-monetary assets were restated at current replacement cost, stockholders’ equity was restated using NCPI and gains and losses in purchasing power from holding monetary liabilities and assets were recognized in results.

Beginning January 1, 2008, we adopted NIF B-10, “Effects of Inflation,” whereby the effects of inflation are not recognized unless the economic environment in which the entity operates is considered inflationary, as established under the standard. An environment is considered inflationary when cumulative inflation over the preceding three-year period is 26% or more. Given the low level of inflation in Mexico in the preceding three-year period, the recognition of the effects of inflation on our financial information was discontinued in Mexico. Accordingly, data in the Consolidated Financial Statements and “Summary Consolidated Financial Information” as of and for the years ended December 31, 2006 and 2007 have been restated in constant pesos as of December 31, 2007, unless otherwise noted, and no further restatement to constant pesos has been made after that date. Our financial statements as of and for the year ended December 31, 2008, and as of and for the nine months ended September 30, 2008 and 2009, respectively, include balances and transactions denominated in pesos of different purchasing power.

Additionally, during 2008, we adopted NIF B-2, “Statement of Cash Flows,” which superseded Bulletin B-12, “Statement of Changes in Financial Position.” NIF B-2 requires the presentation of a statement of cash flows using either the direct or indirect method; and we elected to use the indirect method which uses (loss) income before taxes as a starting point and adjusts for all transactions for non-cash items and then for all cash-based transactions.

Beginning on January 1, 2012, we will need to prepare our consolidated financial statements, including presentation of comparable annual statements for the prior year, in accordance with IFRS in order to comply with regulations promulgated by the CNBV. As of the date hereof, we have not assessed the impact of the adoption of IFRS on our financial statements.

Overview of Macroeconomic Conditions

A majority of our operations and a substantial majority of our sales are in Mexico. As a result, our business, results of operations, financial condition and prospects are, to a great extent, tied to the general condition of the Mexican economy and the purchasing power of the Mexican population. In the past, the Mexican economy has been affected by adverse factors, including:

exchange rate instability and devaluations of the peso against the U.S. dollar and other currencies;

inflation and high interest rates;

uncertainty about Mexico's political, social and economic future, especially in the years immediately preceding and following presidential and congressional elections;

volatility and uncertainties in the global stock and credit markets; and

economic and political uncertainties in emerging or developing economies.

We also have significant operations in Brazil, Argentina, Chile and the United States. If inflation or interest rates in Mexico increase significantly, or if the economies of countries in which we operate fall into a recession or political conditions deteriorate, our business, results of operations, financial condition and prospects could suffer material adverse consequences because, among other things, demand for our hotel rooms and vacation club products may be reduced. See “Risk Factors—Risks relating to Mexico” and “Risk Factors—Risks relating to Brazil, Argentina and Chile.”

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Factors Affecting Our Results of Operations

Our revenues are primarily derived from the following sources: (1) hotel revenues at our owned and leased properties; (2) management, brand and other revenues, which include revenues from businesses which are ancillary to our operations and comprise services rendered both to related parties and unrelated parties; and (3) vacation club revenues.

In general, our hotel and management business line results are affected by:

occupancy and room rates achieved by our hotels that we operate,

our ability to manage costs,

the respective percentages in our portfolio of our owned, leased and managed hotels,

changes in the number of available hotel rooms,

quantity and pricing of vacation club membership sales, and

timing of revenue recognition from ongoing vacation club projects.

The following factors, which are not within our control, affect our revenues:

global economic conditions affecting the travel and hospitality industry,

supply and demand change for hotel rooms in our markets,

the financial condition of the airline industry, whether airlines will continue to serve the geographic markets where we operate and the impact of the airline industry on the lodging industry in our markets,

the effects of general health alerts, epidemics and virulent outbreaks,

natural phenomena such as hurricanes or earthquakes;

terrorism, violence or other public safety risks that may affect travel and demand for lodging,

competition from within our industry, including new competitors in our markets, and

the availability of capital resources, including equity investment and financing on acceptable terms, to finance growth.

Unfavorable changes in these factors could negatively impact hotel room demand and pricing, our ability to manage costs and our capacity to continue with our expansion plans.

The following table sets forth, for the periods indicated, our average daily rate per room, or ADR, calculated by dividing total room revenues over such period by total room nights sold during such period; revenue per available room, or REVPAR, calculated by multiplying ADR by the occupancy rate; and occupancy, calculated for a period by dividing total room nights sold during the period by total rooms available for each day during the period. Our ADR, REVPAR and occupancy is set forth on a consolidated basis, by our urban and coastal properties, for the last three years and for the nine months ended September 30, 2008 and 2009. ADR and REVPAR figures for the years ended December 31, 2006 and December 31, 2007 are presented in constant pesos as of December 31, 2007 and for the year ended December 31, 2008 and for the nine months ended September 30, 2008 and September 30, 2009 are presented in pesos of different purchasing power. See “—Basis of Preparation of Financial Statements” for a discussion of how the effects of inflation are recorded in our financial statements.

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For the years ended

December 31, For the nine months ended

September 30,

2006 2007 2008 2008 2009 (amounts in pesos)

Total

ADR (1) 1,073 1,059 1,069 1,060 1,070

REVPAR (2) 661 659 647 655 572

Occupancy (3) 61.7% 62.2% 60.6% 61.8% 53.4%

Urban

ADR (1) 961 959 979 969 980

REVPAR (2) 596 659 608 610 528

Occupancy (3) 62.0% 63.5% 62.1% 63.0% 53.9%

Coastal

ADR (1) 1,576 1,601 1,587 1,560 1,611

REVPAR (2) 952 893 841 871 817

Occupancy (3) 60.4% 55.8% 53.0% 55.9% 50.7% (1) ADR means average daily rate per room and is determined by dividing total room revenues by total room nights sold

during a period.

(2) REVPAR means revenue per available room and is the product of multiplying ADR by the occupancy rate.

(3) Occupancy is determined by dividing total room nights sold by total rooms available.

In recent years, we have attempted to market our management skills and technology platforms developed to support our hotel operating business by opening a number of related businesses:

Soluciones de Lealtad, S.A. de C.V., or Ampersand, manages loyalty programs for diverse related and unrelated businesses;

Konexo Centro de Soluciones, S.A. de C.V., or Konexo, provides call center and contact services;

Conectum, S.A. de C.V., or Conectum, offers business process outsourcing services, or shared services, for diverse industries; and

Solosol Tours, S.A. de C.V., or GloboGO, offers online travel agency services.

A majority of our operations and a substantial majority of our sales are in Mexico. We also have significant operations in Brazil, Argentina, Chile and the United States. Of the 19,270 and 19,454 rooms we operated as of December 31, 2008 and September 30, 2009, respectively, 16,303 and 16,487, or approximately 85% and 85%, were located in Mexico while 1,899 and 1,899, or approximately 10% and 10%, were located in Brazil. Our operations in Mexico and Brazil accounted for approximately 89% and 7.3%, respectively of our total revenues in 2008. The economic conditions in these countries have a significant effect on our business, results of operations and financial position.

The following is a more detailed explanation of our revenues:

Hotel ownership. We generate revenues from our owned and leased hotels which include revenues from room rentals, food and beverage sales and other sources, including telephone, guest services, conference room rentals, gift shops and other amenities. With one exception, we do not have, nor do we seek to acquire, equity interests in hotels that we do not or will not operate. Revenues from hotel ownership include revenues generated by those hotels in which we have an equity interest of 50% or greater. Revenues from hotels and other businesses in which we have less than a 50% equity interest are presented under the line item Equity in results of associated companies net of all related expenses.

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Revenues from hotel ownership also include revenues from our leased hotels. We operate and derive profits from our leased hotels as if such hotels were owned by us. Under our lease contracts, we pay a fixed rent to the hotel owner and, in certain instances, the owner benefits from the successful operation of the hotel through additional variable rent payments.

Hotel management, brand and other. We receive fees pursuant to long-term management contracts for all of the hotels we operate. In general, the terms of these agreements provide for: (i) a management fee calculated as a percentage of a hotel’s total revenues; (ii) an incentive fee calculated as a percentage of a hotel’s gross operating profit; (iii) a brand use fee calculated as a percentage of a hotel’s room revenues; and (iv) a reservation fee calculated as a percentage of a hotel’s room revenues. In addition, we receive fees for other services such as our customer loyalty program and advertising and promotional services, which are typically based on a percentage of room revenue. We charge other fees related to use of technology, receivables collection and centralized purchasing services. Revenues from hotel management also include payments we receive in connection with early termination of management contracts.

Because we have entered into management contracts with all of the hotels we operate, we receive management and other fees from our owned and leased hotels. Fees we receive from our owned and leased hotels are paid to us on substantially the same basis as the management fees we receive from unrelated third parties. In order to account for all of the revenues generated by our hotel management business, we do not eliminate from our consolidated statements of operations revenues generated by the fees that our owned and leased hotels pay to us. Our consolidated operating income is not affected by this treatment because the expenses relating to the fees paid by our owned and leased hotels are also not eliminated. Other significant intercompany balances are eliminated in consolidation. See note 2(a) to our audited financial statements for additional information relating to the consolidation of our financial statements and the methods of intercompany elimination employed in such consolidation.

Also, as mentioned above, our services businesses historically supported our hotel management business and we have relatively recently started to market these services to third parties. We consolidate revenues from Ampersand, Conectum and Konexo and include such consolidated revenues in our hotel management, brand and other revenues line item.

Vacation Club and other. Revenues from our Vacation Club and other line item consist primarily of revenues from the operation of FAVC which generates revenues from selling and financing vacation club memberships. This line item also includes revenues from GloboGO.

Effect of Devaluation and Inflation on Our Revenues, Costs and Operating Margins

Historically, when the rate of devaluation in any fiscal period exceeds the rate of inflation for such period, the value of transactions denominated in U.S. dollars increases when converted to constant pesos. The effect of a sharply lower value of the peso against the U.S. dollar is to increase the revenues from our coastal hotels and vacation club business (from which we derive revenues primarily denominated in U.S. dollars). Generally, costs associated with our coastal hotels and our vacation club business do not increase proportionally during such periods, because (i) the substantial majority of our operating costs at our coastal hotels and our vacation club business are peso-denominated and (ii) the increase in our labor costs generally lags behind the rate of inflation. However, we also have lease agreements payable in U.S. dollars and, in the context of a devaluation of the peso, the lease payment obligations become relatively more burdensome for us. The combined effect of these factors is to increase our operating margins and operating cash flows during such periods, offsetting negative effects that lower occupancy levels or a recessionary climate may have on the margins of urban hotels. In 2009, however, we did not enjoy higher operating margins or operating cash flows due to the combination of a peso devaluation in Mexico and the economic recession in the United States leading to lower occupancy for our hotels, particularly our coastal hotels.

In contrast, during periods in which the rate of inflation exceeds the rate of devaluation, U.S. dollar denominated revenues decrease when converted to constant pesos, while peso-denominated costs increase proportionately to inflation. With the addition of more urban hotels (from which we derive revenues primarily denominated in pesos), we have managed to achieve a more balanced portfolio than

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in the past, providing a partial hedge against negative effects on operating margins which may be caused either by a devaluation or by an appreciation of the peso.

Effect of Devaluation on Our Indebtedness

In periods of peso devaluation, our net foreign exchange losses on our U.S. dollar denominated indebtedness tend to be higher and our costs of servicing such indebtedness tend to increase. In contrast, in periods of peso appreciation, the improvement in the value of the peso relative to the U.S. dollar results in a net foreign exchange gain for us. Historically, our policy has been to maintain a significant portion of our debt in U.S. dollars, see “—Liquidity and Capital Resources.” Of our total indebtedness as of December 31, 2008 and September 30, 2009, respectively, approximately 87% and 71% was denominated in U.S. dollars. From time to time we enter into foreign currency exchange derivative contracts to balance our currency exposure or to hedge our exposure to fluctuations in the value of the peso against the dollar. During 2008, we recognized a Ps.1,096.3 million foreign exchange loss and, over the nine months ended September 30, 2009, we recognized a Ps.19.8 million foreign exchange loss. As of December 31, 2008 and September 30, 2009, respectively, we had five cross-currency swap contracts with notional amounts outstanding of U.S.$ 265.5 million and U.S.$ 187.7 million and mark-to-market values of U.S.$91.1 million and U.S.$ 57.8 million, of which we had posted margin calls for U.S.$61.8 million and U.S.$34.7 million, respectively. See “Risk Factors—We are exposed to currency and interest rate risk on our debt, and we have entered into derivatives contracts.”

Seasonality

As of September 30, 2009, of the 19,454 hotel rooms we operate, approximately 80% are in urban or suburban locations and cater primarily to business travelers. These hotel operations have not experienced significant seasonal fluctuations aside from minor reductions in occupancy during the holiday season from mid-December through mid-January. The remaining hotel rooms we operate are in coastal resort locations. Our coastal hotel operations generally experience two peak seasons. The first peak, the traditional winter season, occurs during the months of December through April and results primarily from foreign tourism. The second peak occurs during the summer months of July through August and results from Mexican and foreign tourism. This seasonality can be expected to cause quarterly fluctuations in our revenues. See “Risk Factors—The hotel industry is seasonal in nature.”

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with Mexican FRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates. In the judgment of our management, the estimates used and assumptions made were adequate under the circumstances. In order to understand the manner in which we arrive at these assumptions and estimates as to future events, including the variables and assumptions that serve as the basis for such estimates and the potential effect of such assumptions over various variables and conditions, we have set forth below a discussion of our most critical accounting policies under Mexican FRS.

Revenue recognition. Generally, we recognize our revenues as follows: (i) for hotel ownership (which include the operation of leased hotels), we recognize revenues when rooms are occupied, (ii) revenues for management brand and other, fees charged to the hotels we manage are recognized when they are accrued according to management contracts. In our loyalty program business, revenues are recognized in several manners, depending on the defined scheme with each customer, in general: a) when loyalty administration services are rendered; b) when points to frequent customers are delivered (see section below for additional information on the loyalty program), and c) when rewards are redeemed; and (iii) revenues related to the vacation club operation are recognized: (a) for real estate ready to be used when the contracts are formalized and the corresponding 10% down payment is collected and (b) for real estate under construction by the percentage of completion method, through which revenues are identified based on the proportion to the costs incurred at a certain date. When estimated actual costs exceed budgeted costs, the loss is recorded in that year. Finally, revenues for the services businesses such as Konexo and Conectum are recognized as services are rendered.

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Impairment of long-lived assets in use. Long-lived assets are tested for impairment when indicators of potential impairment in the carrying amount of long-lived assets in use exist, indicating that the carrying value of such assets may not be recoverable. Management considers impairment indicators including (but not limited to) market conditions, operating losses or negative cash flows in the current period when combined with a history or projection of such losses or negative cash flows, and depreciation and amortization charged to results that are substantially higher than that of previous years, in percentage terms and competition. The variability of these factors depends on a number of conditions, including uncertainty about future events, and thus accounting estimates may change from period to period. Recoverability of long-lived assets is determined based on the greater of the present value of future net cash flows generated by such assets or an estimated net sales price of the asset. An impairment is recorded when the carrying amount of long-lived assets exceeds the greater of the amounts mentioned above. Present value of future net cash flows for recoverability purposes is based on management’s projections of future operations, discounted using current interest rates.

Notes receivable from vacation club operation. The collection rights derived from the sale of vacation club memberships are reflected net of an estimated allowance for uncollectible amounts in the consolidated balance sheet. This allowance is determined based on business’ experience and certain assumptions with respect to collection trends. The notes receivable are assigned to a trust to guarantee credit lines contracted to finance the operations. The amount received under these credit lines are shown net of notes receivable in the consolidated balance sheet.

Derivative financial instruments. We obtain financing under different conditions. Occasionally, we use interest rate swaps, cross currency swaps and foreign currency forward contracts to manage our exposure to interest rate and foreign currency. We document all hedging relationships, describing objectives and risk management strategies for derivative transactions and their recognition in accounting. We recognize all assets or liabilities that arise from transactions with derivative financial instruments at fair value in the balance sheet, regardless of the purpose for which they are held. Fair value is determined based on recognized market prices and, when they are not listed in a market, based on recognized valuation techniques accepted in the financial community. Movements in the fair values of derivative financial instruments may be accounted for pursuant to hedge accounting where the relevant eligibility, documentation and effectiveness testing requirements are met. If a hedge does not meet the strict criteria for hedge accounting or where it is deemed to be ineffective, fair value is recorded in the statement of income immediately as a component of comprehensive financing cost, instead of being recognized temporarily in other comprehensive income within stockholders’ equity. As a policy, we avoid performing derivative transactions for speculative purposes; however, sometimes we enter into speculative contracts provided that our highest exposure meets the limits of immateriality established by management. When we enter into derivative financial instruments of any nature, we do so to hedge our positions by matching cash flows on our derivative transactions with cash flows on our indebtedness; however, for accounting purposes, some of our derivative financial instruments may not be designated as hedges because they do not always meet the accounting requirements for hedgers established by Mexican FRS.

Customer loyalty program. We offer various customer loyalty incentives to our customers mainly under the Fiesta Rewards customer loyalty program, which includes points earned based on amounts spent by guests which can be redeemed among other things for future discounts on hotel services, and coupons offered under certain circumstances for free hotel nights among others. We record a liability provision related to the incremental costs to be incurred in connection with the delivery of services likely to be redeemed by guests. Such provision is determined based on actuarial analyses, taking into account guest redemption rates based on historical experience. These estimates are used to determine the required liability for outstanding points. Actual costs incurred under the Fiesta Rewards customer loyalty program may differ from the actuarially determined liability.

Provisions. Provisions are recognized for current obligations that result from a past event, that are probable to result in the future use of economic resources, and can be reasonably estimated.

Income taxes. Income tax expense, calculated as the higher of the regular income tax, or ISR, or the Business Flat Tax, IETU, is recorded in the results of the year in which such tax expense or benefit is incurred. To recognize deferred income taxes, we determine, based on financial projections approved

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by management, whether we expect to incur ISR or IETU and, accordingly, recognize deferred taxes based on the tax we expect to pay. Deferred taxes are calculated by applying the corresponding tax rate to the applicable temporary differences resulting from comparing the accounting and tax bases of assets and liabilities and including future benefits, if any, from tax loss carryforwards and certain tax credits. Management evaluates the recoverability of deferred income tax assets based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing taxable temporary differences. A valuation allowance is recognized when, based on this analysis, it is highly probable that the deferred income tax asset will not be realized.

See note 3 to our consolidated financial statements for the year ended December 31, 2008 for a summary of other significant accounting policies.

New Accounting Pronouncements

As part of efforts to converge Mexican standards with international standards, in 2008, the Mexican Board for Research and Development of Financial Information Standards, or CINIF, issued the following NIFs, which are in effect for fiscal years beginning on January 1, 2009 and thereafter:

NIF B-7, Business Acquisitions. Requires fair value measurement of the non-controlling interest (previously called minority interest) as of the acquisition date and recognition of the overall goodwill at fair value. NIF B-7 establishes that acquisition costs should not be part of the consideration paid and restructuring costs should not be recognized as an assumed liability from the acquisition.

NIF B-8, Consolidated or Combined Financial Statements. Establishes that special purpose entities should be consolidated when control is exercised. Provided certain requirements are met, NIF B-8 allows the presentation of stand-alone financial statements for intermediate controlling companies and requires that potential voting rights be considered when analyzing whether control exists.

NIF C-7, Investments in Associated Companies and other Permanent Investments. Requires that investments in special purpose entities be valued using the equity method where significant influence is exercised. NIF C-7 also requires that potential voting rights be considered when analyzing whether significant influence exists. In addition, NIF C-7 establishes a specific procedure and sets caps for the recognition of losses in associated companies, and requires that investments in associated companies be presented including the related goodwill.

NIF C-8, Intangible Assets. Requires that any pre-operating expenses not yet amortized as of December 31, 2008 be cancelled against retained earnings.

NIF D-8, Share-based Payments. Sets the rules for recognition of share-based payments (at fair value of goods received or at fair value of equity instruments granted), including the granting of stock options to employees.

Taxes

Tax regulations in Mexico.

In accordance with the Mexican tax law, we were subject to income taxes (ISR) and Business Flat Rate Tax (IETU) in 2008, and to ISR and asset taxes (IMPAC) in 2007.

ISR takes into account the taxable and deductible effects of inflation. The tax rate in 2009 was 28%. Posadas pays consolidated ISR and, through 2007, IMPAC for most of its Mexican subsidiaries based on the daily average of the subsidiaries voting stock held by Posadas. In 2010, we expect to be subject to an ISR rate of 30%.

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IETU applies to the sale of goods, the provision of independent services and the granting of temporary use or enjoyment of goods, according to the terms of the IETU Law, less certain authorized deductions. IETU payable is calculated by subtracting certain tax credits from the tax determined. Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008. The IETU rate was 16.5% in 2008, 17% in 2009 and will be 17.5% in 2010 and for years thereafter. The IMPAC Law was repealed upon enactment of the IETU Law; however, pursuant to the terms of the law, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid may be refunded. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis.

In 2007, IMPAC was calculated by applying 1.25% to the net average value of the majority of our assets (at restated values), without deducting any liabilities, and was paid only to the extent that it exceeded ISR payable for the same period.

Based on our financial projections, we have determined that we will only pay ISR in Mexico, and some subsidiaries will pay IETU. Consequently, we computed both deferred ISR and deferred IETU. See “Risk Factors—Mexican federal governmental policies could adversely affect our results of operations and financial condition.”

Tax regulations in Brazil.

According to current Brazilian Income Tax Law, our subsidiaries operating in that country are subject to federal income and social contribution taxes, which are computed at the rates of 26% and 8%, respectively. The federal income tax may be reduced by certain amounts, when applicable, if the companies invest an equivalent amount in government-approved projects and in other priority areas or industries in Brazil.

As of December 31, 2008, the subsidiaries that operate in Brazil had tax loss carryforwards for income tax purposes of Ps.13,036. Likewise, these companies did not recognize deferred income tax effects due to the uncertainty of the recovery of the tax losses.

Taxable income for Mexico.

The principal differences between income for tax and for accounting purposes include income related to inflation effects, participation in net earnings of associated companies, the difference between purchases and cost of operations, amortization of deferred credits and the utilization of tax loss carry-forwards.

Results of operations for the nine months ended September 30, 2009 compared to nine months ended September 30, 2008

Extraordinary events influencing our performance in 2009

In relative terms, 2009 has been the worst year in the history of Posadas. Several external factors have contributed significantly to this outcome. We started the year in an economic downturn without certainty as to the breadth or scope of the downturn. According to preliminary figures, Mexican GDP decreased by 9.2% during the first six months of 2009 as compared to the same period of 2008. According to the U.S. Bureau of Economic Analysis, U.S. GDP decreased by 3.8% during the first six months of 2009 as compared to 1.6% growth during the same period of 2008. In addition, the other main countries from which our international guests come also experienced economic recessions. The reduction in global GDP growth caused a significant reduction in the demand for hotel services worldwide.

There was high volatility in the currencies of each of the countries where we operate during the first four months of 2009. Volatility has since measurably decreased, although it remains higher than pre-crisis levels. The peso is one of the worst performing currencies in 2009 and, for the first time in recent years, its depreciation has not created inflationary pressure. Continued economic uncertainty has inhibited purchase decisions by consumers and has adversely affected our different businesses and margins.

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In April 2009, Mexico suffered an outbreak of H1N1 influenza and public health authorities limited economic activity in an effort to contain the outbreak. Other governments, including the United States, advised their nationals against travel to Mexico. Such measures and advisories led to a severe reduction in hotel occupancy and forward cancellations of reserved rooms. In particular, group cancellations have affected our sales more significantly because group purchase decisions are often made with long lead time and group reservations are not easily rescheduled. Our hotel occupancy decreased 11.2%, 24.3% and 9.3% and our REVPAR decreased 18.0%, 40.8% and 18.4% in April, May and June of 2009, respectively, as compared to the same months of 2008 and stabilized during the months of July and August due to the summer vacation period and the swift governmental response that limited the spread and severity of the H1N1 influenza outbreak.

The following table sets forth revenues and operating earnings derived from our three principal operating business lines and certain other data for the periods specified:

Nine months ended

September 30, 2008 2009 (in thousands of pesos) Total Revenues Ps. 5,211,854 Ps. 5,224,969 Hotel ownership:

Revenues......................................................... 2,716,283 2,362,403 Departmental costs and expenses .................. 949,271 899,491

Departmental profit .................................. 1,767,012 1,462,912 General expenses: Administrative .................................................. 425,186 410,639 Sales, advertising and promotion .................... 307,275 256,405 Maintenance and energy ................................. 300,048 266,564

1,032,509 933,608 Income before other expenses ................ 734,503 529,304

Other expenses: Property taxes and insurance .......................... 41,237 40,234 Other expenses, net......................................... 40,118 2,087

81,355 42,321 Operating earnings from hotelownership 653,148 486,983

Hotel management, brand and other: Revenues......................................................... 1,240,637 1,219,952 Direct costs and corporate expenses .............. 788,697 818,008

Operating earnings from hotel management, brand and other ........ 451,940 401,944

Vacation Club and other:

Revenues......................................................... 1,254,934 1,642,614 Direct costs and expenses............................... 856,647 1,268,469

Operating earnings from Vacation Club and other.......................................... 398,287 374,145

Corporate expenses................................................. 79,658 61,295 Depreciation and amortization ................................. 319,111 339,483 Real estate leasing .................................................. 235,502 287,377 Operating income..................................................... 869,104 574,917 Other expenses, net................................................. 141,753 73,205 Comprehensive financing result:

Interest expense .............................................. 296,311 289,760 Interest income ................................................ (14,736) (27,394) Exchange (gain) loss, net ................................ (145,339) 62,567 Exchange and conversion effects related to

foreign operations .................................... 91,255 (91,863) Valuation of financial instruments .................... 52,847 49,110

280,338 282,180 Income tax expense................................................. 220,016 86,330 Equity in results of associated companies ............... (201,936) 1,350 Consolidated net income ...................................... Ps. 25,061 Ps. 134,552

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Hotel ownership

Hotel ownership includes revenues and expenses derived from the operation of owned or leased hotels. Revenues for the first nine months of 2009 decreased by 13.0% to Ps.2,362.4 million from Ps.2,716.3 million in the first nine months of 2008. This decrease is primarily attributable to: (i) a 10% decrease in occupancy, (ii) a 0.3% decrease in the average number of available rooms and (iii) a reduction of 12.3% in REVPAR which was Ps.584 in the first nine months of 2009 as compared to Ps.665 in the first nine months of 2008. The decrease in REVPAR primarily resulted from a reduction in guests at our hotels due to the financial crisis and H1N1 influenza outbreak. Performance, however, improved during the summer vacation period of the third quarter as a result of strong marketing and promotions targeting domestic Mexican travelers.

Departmental costs and expenses in our hotel ownership business consist of food and beverage costs, wages related to room staff and food and beverage personnel and other expenses such as commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs and expenses were Ps.899.5 million in the first nine months of 2009, representing a 5.2% decrease as compared to Ps.949.3 million in the first nine months of 2008. We exercised any flexibility we had under labor contracts to reduce an otherwise fixed cost and mitigate the drop in hotel occupation. Department costs and expenses also decreased as a result of the reduced number of guests that stayed at our hotels in comparison with the previous year. Departmental profits (revenues minus departmental costs and expenses) were Ps.1,462.9 million in the first nine months of 2009, representing a 17.2% decrease when compared to Ps.1,767.0 million in the comparable period of 2008.

General expenses related to our hotel ownership business consist of administrative expenses, sales, advertising and promotion expenses and maintenance and energy costs. In the aggregate, such expenses decreased by 9.6% to Ps.933.6 million in the first nine months of 2009 from Ps.1,032.5 million in the comparable period of 2008. By category, such expenses decreased as follows: (i) administrative expenses, which were Ps.410.6 million in the first nine months of 2009 and Ps.425.2 million in the first nine months of 2008, decreased 3.4%, (ii) sales, advertising and promotion expenses, which were Ps.256.4 million in the first nine months of 2009 and Ps.307.3 million in the first nine months of 2008, decreased 16.6% and (iii) maintenance and energy expenses, which were Ps.266.6 million in the first nine months of 2009 and Ps.300.0 million in the first nine months of 2008, decreased 11.2%. General expenses decreased primarily as a result of the reduction in the number of guests.

Other expenses related to our hotel ownership business include property taxes, payment of insurance premiums and other (income) expenses, net. Other expenses, net consists primarily of consumer goods lease payments, auditing fees and legal fees. When applicable, gains or losses derived from the sale of assets are also included under this item. We had no asset sales in the first nine months of 2009 or in 2008. Other expenses, net decreased by 48.0% to Ps.42.3 million in the first nine of months of 2009 from Ps.81.4 million in the comparable period of 2008.

As a result of the foregoing, operating earnings from our hotel ownership business decreased by 25.4% to Ps.486.9 million in the first nine months of 2009 from Ps.653.1 million in the comparable period of 2008.

Hotel management, brand and other

Hotel management, brand and other includes management and brand services along with our loyalty management (Ampersand), call center (Konexo) and shared services (Conectum) businesses. Revenues decreased 1.7% to Ps.1,220.0 million in the first nine months of 2009 from Ps.1,240.6 million in the first nine months of 2008. Lower revenues were primarily due to a decrease of 12.7% in consolidated REVPAR of the hotels we operate due to lower occupancy over the same period. Three new hotels opened during the first nine months of 2009: One Hotels Aguascalientes San Marcos (126 rooms), Fiesta Inn Toluca Centro (85 rooms) and One Hotels Saltillo Derramadero (126 rooms), all under management agreements. Partially offsetting the decrease in REVPAR, our Ampersand, Konexo and Conectum businesses revenue grew 3.2% from Ps 656.7 million in the first nine months of 2008 to Ps.677.7 million in the first nine months of 2009, and represented approximately 56% of total revenues for our hotel management, brand and other business line in the first nine months of 2009. For a more detailed discussion about these businesses see "Business– Other Related Services Businesses."

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Direct costs and corporate expenses relating to our hotel management, brand and other business line include primarily the costs expenses of our corporate sales, hotel operations and administration and hotel human resources departments. They also include the costs and expenses of our Ampersand, Konexo and Conectum businesses. Such costs and expenses increased 3.7% to Ps.818.0 million in the first nine months of 2009 from Ps.788.7 million in the comparable period of 2008. The increase in these costs and expenses is primarily due to an increased number of call center agents in our Konexo business, due to higher call activity over this period in 2009 as compared to 2008.

As a result of the foregoing, operating earnings from our hotel management, brand and other business line decreased by 11.1% in the first nine months of 2009 to Ps.401.9 million from Ps.451.9 million in the comparable period of 2008. This business line achieved an operating earnings margin of 33% during the first nine months of 2009, which we believe is competitive for the industry.

Vacation Club and other

Our Vacation Club and other business line primarily includes our Fiesta Americana Vacation Club. Revenues for our Vacation Club and other increased 30.9% to Ps.1,642.6 million in the first nine months of 2009 from Ps.1,254.9 million in the comparable period for 2008, with the vacation club representing 93% of the revenues of this business line. The increase is primarily a result of higher sales of memberships at our resorts in Acapulco and Los Cabos, and the recognition of sales realized in 2008 but recognized in 2009 due to the percentage of completion method of accounting used in this business.

Expenses for our vacation club and other business line mainly include expenses relating to vacation club sales, financing, administration and resort operation expenses. These expenses increased 48.1% to Ps.1,268.5 million in the first nine months of 2009 from Ps.856.6 million in the comparable period of 2008. The high cost increase is due primarily to the associated cost of the recognition of revenues mentioned above. During this first nine months of 2009, our cancellation rates related to the sale of memberships almost doubled the rates for the comparable period of 2008. Over the course of the year, we have successfully implemented several strategies to control and reduce cancellations which include targeting solutions to the needs of particular vacation club members by, for example, re-scheduling a member's payment schedule or converting a member's U.S. dollar-denominated payment obligation to a peso-denominated payment obligation at higher interest rates.

Operating earnings from our Vacation Club and other business line decreased 6.1% to Ps.374.1 million in the first nine months of 2009 compared to Ps.398.3 million in the comparable period of 2008.

Corporate expenses

Corporate expenses generally include our corporate overhead such as salaries, administrative expenses, legal fees and severance payments of our corporate finance, corporate human resource and technology departments, as well as the office of the Chief Executive Officer. Corporate expenses amounted to Ps.61.3 million in the first nine months of 2009, a 23.1% decrease as compared to Ps.79.6 million in the first nine months of 2008. The decrease is a result of several cost-cutting initiatives undertaken over the first nine months of 2009 including, among others, reducing discretionary expenses and corporate limiting donations to charitable and educational institutions. As a percentage of total revenue, corporate expenses represented 1.2% of total revenues in the first nine months of 2009.

Depreciation, amortization and real estate leasing

We had depreciation, amortization and real estate leasing expenses of Ps.626.9 million in the first nine months of 2009, an increase of 13.0% from Ps.554.6 million in the comparable period of 2008. The increase in these expenses was partially due to higher lease payments, which were Ps.287.4 million in the first nine months of 2009 from Ps.235.5 million in the comparable period of 2008. This increase in lease payments is primarily attributable to the devaluation of the peso as most of these lease agreements are denominated in U.S. dollars.

Operating income

Our operating income consolidates the earnings of our hotel ownership; hotel management, brand and other; and Vacation Club and other business lines and deducts our corporate expenses and

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depreciation, amortization and real estate leasing expenses. Accordingly, as a result of the foregoing, consolidated operating income was Ps.574.9 million in the first nine months of 2009, a 33.8% decrease as compared to Ps.869.1 million in the first nine months of 2008.

Other expenses, net

Other expenses, net include primarily all amortized commissions, premiums and fees related to new loans or debt issuances and pre-operating expenses.

Our other expenses, net decreased by 48.4% in the first nine months of 2009 to Ps.73.2 million as compared to Ps.141.7 million in the first nine months of 2008. The decrease is predominantly attributable to two significant transactions undertaken during the first nine months of 2008, namely the premium paid for the repurchase of 84.1% of our senior notes and issuance expenses for our Ps.2,250 million Certificados Bursátiles due in 2013.

Comprehensive financing result

Our comprehensive financing result was Ps.282.2 million in the first nine months of 2009, a slight increase as compared to Ps.280.3 million in the first nine months of 2008. Net interest expense decreased 6.8% to Ps.262.4 million in the first nine months of 2009 from Ps.281.6 million in the comparable period of 2008, mainly due to lower interest rates in our variable loans. The exchange and conversion effects related to foreign operations was a gain of Ps.91.9 million during the first nine months ended September 30, 2009 compared to a loss of Ps.91.3 million in 2008. This is due to the impact of the appreciation of the peso of 0.4% during the first nine months of 2009 compared to a depreciation of 1.0% in the same period of the previous year.

Taxes

Taxes were Ps.86.3 million in the first nine months of 2009, compared to Ps.220.0 million in the comparable period of 2008. This decrease is attributable mostly to: (i) a reduction of taxable income due to the lower revenues explained above; and (ii) a current and deferred IETU tax expense decrease from an aggregate of Ps.69.3 million in 2008 to Ps.12.3 million in 2009.

Consolidated net income

As a result of the factors described above, our net consolidated income in the first nine months of 2009 was Ps.134.6 million, which compares favorably to our Ps.25.1 million net income in the first nine months of 2008. Aside from the aforementioned factors, this increase was also attributable to: (i) the recognition under Mexican FRS of a Ps.201.9 million impairment over the first nine months of 2008 relating to our investment in Grupo Mexicana recorded in the line item Equity in the results of associated companies, and (ii) the recognition of issuance costs associated with notes repurchased in April 2008, as discussed above.

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Results of operations for the year ended December 31, 2008 compared to the year ended December 31, 2007

The following table sets forth revenues and operating earnings derived from our three principal operating business lines and certain other data for the periods specified:

Years ended

December 31, 2007 2008 (in thousands of pesos) Total Revenues Ps. 5,974,224 Ps. 6,904,520 Hotel ownership:

Revenues......................................................... 3,522,621 3,677,583 Departmental costs and expenses .................. 1,284,822 1,330,756

Departmental profit .................................. 2,237,799 2,346,827 General expenses: Administrative .................................................. 540,443 565,599 Sales, advertising and promotion .................... 324,827 381,671 Maintenance and energy ................................. 362,431 405,098

1,227,701 1,352,368 Income before other expenses ................ 1,010,098 994,459

Other expenses: Property taxes and insurance .......................... 52,519 57,925 Other expenses, net......................................... 60,422 50,725

112,941 108,650 Operating earnings from hotelownership 897,157 885,809

Hotel management, brand and other: Revenues......................................................... 1,289,110 1,655,402 Direct costs and corporate expenses .............. 717,116 1,105,498

Operating earnings from hotel management, brand and other ........ 571,994 549,904

Vacation Club and other:

Revenues......................................................... 1,162,493 1,571,535 Direct costs and expenses............................... 844,594 1,046,496

Operating earnings from Vacation Club and other.......................................... 317,899 525,039

Corporate expenses................................................. 90,345 97,642 Depreciation and amortization ................................. 430,962 389,180 Real estate leasing .................................................. 233,830 333,161 Operating income..................................................... 1,031,913 1,140,769 Other expenses, net................................................. 122,902 234,728 Comprehensive financing result:

Interest expense .............................................. 388,397 420,311 Interest income ................................................ (32,093) (6,989) Exchange (gain) loss, net ................................ (15,501) 160,354 Exchange and conversion effects related to

foreign operations .................................... — (272,272) Valuation of financial instruments .................... — 1,208,196 Monetary position gain..................................... (143,925) —

196,878 1,509,600 Income tax expense (benefit)................................... 159,646 (111,226) Equity in results of associated companies ............... (351,922) (209,513) Consolidated net income (loss)............................ Ps. 200,565 Ps. (701,846)

Hotel ownership

Our hotel ownership business line includes revenues and expenses derived from the operation of owned and leased hotels. Revenues for the year ended December 31, 2008 increased by 4.4% to Ps.3,677.6 million from Ps.3,522.6 million in 2007. This increase is primarily attributable to: (i) a 4.3%

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increase in the average number of rooms available per night, which was 9,606 in 2008 and 9,212 in 2007. The increase in available rooms is due to the reopening of the Live Aqua hotel in Cancun, which was completely refurbished after the impact of Hurricane Wilma in October 2005, the addition of a new owned hotel (One Hotels Queretaro, opened in July 2008) and the opening of the Caesar Park Silver Buenos Aires Obelisco Hotel in Argentina; slightly offset by (ii) a decrease in revenue per available room (REVPAR) which was Ps.665 in 2008 and Ps.668 in 2007. The stable performance of our REVPAR in 2008 was mainly due to the strength of our urban hotels.

Departmental costs and expenses in our hotel ownership business line consist of food and beverage costs, wages related to room staff and food and beverage personnel and other expenses such as commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs and expenses were Ps.1,330.8 million in the year ended December 31, 2008, which were 3.6% higher than the Ps.1,284.8 million incurred in 2007. Since departmental costs are mostly of a variable nature and are related to occupancy rates of our hotels, this increase is a result of the increase in revenues. Departmental profit for our hotel ownership business was Ps.2,346.8 million in the year ended December 31, 2008, representing an increase of 4.9% when compared to Ps.2,237.8 million in 2007, a result in line with the growth of average number of rooms available per night.

General expenses related to our hotel ownership business line consist of administrative expenses, sales, advertising and promotion expenses and maintenance and energy costs. In the aggregate, such expenses increased 10.2% to Ps.1,352.4 million in the year ended December 31, 2008 from Ps.1,227.7 million in 2007. By category, such expenses increased as follows: (i) administrative expenses, which were Ps.565.6 million in the year ended December 31, 2008 and Ps.540.4 million in 2007, increased 4.7%, (ii) sales, advertising and promotion expenses, which were Ps.381.7 million in the year ended December 31, 2008 and Ps.324.8 million in 2007, increased 17.5%; and (iii) maintenance and energy expenses, which were Ps.405.1 million in the year ended December 31, 2008 and Ps.362.4 million in 2007, increased 11.8%. Administrative expenses and sales, advertising and promotion expenses increased primarily as a result of the increase in revenues, since these expenses include the administrative and use of brand fees that are computed over total revenues and room revenues of our hotels. Additionally, energy prices in Mexico were higher during the first half of 2008 when compared to the same period of the previous year.

Other expenses related to our hotel ownership business line consist of property taxes and payment of insurance premiums and other expenses, net. Other expenses, net consist primarily of consumer goods lease payments, auditing fees and legal fees. When applicable, included under this item are the gains or losses generated by the sale of assets. We had no asset sales in the year ended December 31, 2008 or in the year ended December 31, 2007. Other expenses, net decreased by 3.8% to Ps.108.7 million in 2008 from Ps.112.9 million in the comparable period of 2007 due to lower lease payments as a result of the termination of certain equipment leases.

As a result of the foregoing, operating earnings from our hotel ownership business line decreased by 1.3% to Ps.885.8 million in the year ended December 31, 2008 from Ps.897.2 million in 2007.

Hotel management, brand and other

Our hotel management, brand and other business line include management, brand and franchise related services along with our loyalty management (Ampersand), call center (Konexo) and shared services (Conectum) businesses. Revenues increased 28.4% to Ps.1,655.4 million in the year ended December 31, 2008 from Ps.1,289.1 million in 2007. This increase is primarily attributable to the growth of 39.2% in aggregate revenues in our Ampersand, Konexo and Conectum businesses to Ps.873.3 million in 2008 from Ps.627.5 million in 2007. These businesses represented 52.8% of total revenues for our hotel management, brand and other business line for the year ended December 31, 2008. Additionally, higher revenues were due to a 6.7% increase in the average number of rooms managed chainwide of 17,983 in 2008 from 16,850 in 2007. Chainwide REVPAR increased only 0.4% due to the opening of nine new hotels during 2008 (average daily rates and occupancies in the new hotels are typically lower than in established hotels).

Direct costs and corporate expenses relating to hotel management, brand and other include primarily the costs and expenses of our corporate sales, hotel operations and administration and hotel

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human resources departments. They also include the costs and expenses of our Ampersand, Konexo and Conectum businesses. Such costs and expenses increased to Ps.1,105.5 million in the year ended December 31, 2008 from Ps.717.1 million in 2007. This increase was mainly the result of costs associated with higher revenues in 2008 due to the launching of new businesses and having more hotels in operation.

As a result of the foregoing, operating earnings from our hotel management, brand and other business line decreased by 3.9% to Ps.549.9 million in 2008 from Ps.571.9 million in 2007.

Vacation Club and other

Our Vacation Club and other business line primarily includes our Fiesta Americana Vacation Club. Revenues increased 35.2% to Ps.1,571.5 million in the year ended December 31, 2008 from Ps.1,162.5 in 2007. Sales of vacation club represented 92% of total revenues for our Vacation Club and other business line in 2008. The growth in revenues was primarily a result of higher membership sales in our Los Cabos and Acapulco vacation club resorts and incremental sales due to the conversion of the Explorean Kohunlich hotel into a Fiesta Americana Vacation Club property.

Costs and expenses for our Vacation Club and other business line include mainly those associated with the sales, financing and administration of vacation club memberships along with those derived from vacation club resort operations. For the year ended December 31, 2008, costs and expenses increased by 23.9% to Ps.1,046.5 million from Ps.844.6 million in 2007 mainly as a result of the costs and expenses associated with the higher revenues.

As a result of the above, operating earnings from the Vacation Club and other business line increased 65.2% to Ps.525.0 million in the year ended December 31, 2008 when compared to Ps.317.9 million in 2007.

Corporate expenses

Corporate expenses generally include our corporate overhead such as salaries, administrative expenses, legal fees and severance payments of our corporate finance, corporate human resources and technology departments, as well as the office of the Chief Executive Officer. We had corporate expenses of Ps.97.6 million in the year ended December 31, 2008, an 8.1% increase when compared to Ps.90.3 million in 2007. The increase was a result primarily of increasing the head count of our legal and internal audit departments, both in our Mexican and South American corporate offices. As a percentage of total revenue, corporate expenses represented 1.4% of total revenues in 2008, and 1.5% in 2007.

Depreciation, amortization and real estate leasing

We had depreciation, amortization and real estate leasing expenses of Ps.722.3 million in the year ended December 31, 2008, an increase of 8.7% from Ps.664.8 million in 2007. This increase was partially due to higher lease payments, which were Ps.333.2 million in 2008 and Ps.233.8 million in 2007. The increase in lease payments is directly attributable to: (i) the peso devaluation, as most of our lease agreements are denominated in U.S. dollars, (ii) the reopening of the Aqua hotel in Cancun, under a leasing agreement and (iii) the opening of the Caesar Park Silver hotel in Buenos Aires, in the second half of 2008.

Operating income

Our operating income consolidates the earnings of our hotel ownership; hotel management, brand and other; and Vacation Club and other business lines and deducts our corporate expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a result of the foregoing, consolidated operating income was Ps.1,140.8 million in the year ended December 31, 2008, a 10.5% increase compared to Ps.1,031.9 million in 2007.

Other expenses, net

Other expenses, net include primarily all amortized commissions, premiums and fees related to new loans or debt issuances and pre-operating expenses.

Our other expenses, net increased by 91.0% in the year ended December 31, 2008 to Ps.234.7 million as compared to Ps.122.9 million in 2007. The increase is predominantly attributable to two

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significant transactions undertaken during 2008, namely the premium paid for the repurchase of 84.1% of our senior notes and issuance expenses for our Ps.2,250 million Certificados Bursátiles due in 2013.

Comprehensive financing result

Our comprehensive financing result was Ps.1,509.6 million in the year ended December 31, 2008, a significant variance when compared to Ps.196.9 million in 2007. Interest expense grew 8.2% to Ps.420.3 million in the year ended December 31, 2008 from Ps.388.4 million in 2007, due to higher average debt outstanding while interest income decreased to Ps.7.0 million in 2008 from Ps.32.1 million in 2007 as a result of lower average cash balances related to the posting of margin calls during the fourth quarter of 2008. Net exchange rate (gain) loss amounted to a loss of Ps.160.3 million in the year ended December 31, 2008 compared to a gain of Ps.15.5 million in 2007, as a result of the impact on our U.S. dollar-denominated debt of the nearly 25% devaluation of the peso in 2008 compared to the exchange rate at the end of 2007. Additionally we incurred a loss of Ps.1,208.2 million in valuation of financial instruments derived from cross-currency swap positions, attributable to the depreciation of the Mexican peso mentioned above. See “Liquidity and Capital Resources.”

Taxes

Taxes were a benefit of Ps.111.2 million in the year ended December 31, 2008, compared to an expense of Ps.159.6 million in 2007. This decrease was attributable primarily to the combination of (i) a decrease of 87% in current income tax to Ps.23.3 million in 2008 from Ps.183.4 million in 2007; (ii) a deferred income tax credit of Ps.226.9 million in 2008 compared to a lower Ps.69.4 million deferred income tax credit in 2007; (iii) a IETU tax of Ps.11.7 million that did not exist in 2007; (iv) a IETU deferred tax of Ps.80.6 million in 2008 compared to a deferred IETU credit of Ps.28.1 million in 2007 and (v) asset taxes of Ps.73.7 million in 2007 that do not apply for 2008 onwards.

Consolidated net income (loss)

As a result primarily of the comprehensive financing result we had a consolidated net loss of Ps.701.8 million for the year ended December 31, 2008 compared to a consolidated net income of Ps.200.6 million in 2007.

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Results of operations for the year ended December 31, 2007 compared to the year ended December 31, 2006

The following table sets forth revenues and operating earnings derived from our three principal operating business lines and certain other data for the periods specified:

Years ended December 31,

2006 2007 (In thousands of pesos) Total Revenues Ps. 5,528,221 Ps. 5,974,224 Hotel ownership:

Revenues ....................................................................... 3,582,344 3,522,621 Departmental costs and expenses ................................. 1,258,730 1,284,822 Departmental profit ......................................................... 2,323,614 2,237,799 General expenses: Administrative................................................................. 556,153 540,443 Sales, advertising and promotion ................................... 356,811 324,827 Maintenance and energy................................................ 360,581 362,431

1,273,545 1,227,701 Income before other expenses............................... 1,050,069 1,010,098

Other expenses: Property taxes and insurance......................................... 51,380 52,519 Other expenses (income), net ........................................ (13,885) 60,422

37,495 112,941 Operating earnings from hotel ownership .............. 1,012,574 897,157

Hotel management, brand and other:

Revenues ....................................................................... 1,040,469 1,289,110 Direct costs and corporate expenses ............................. 557,920 717,116

Operating earnings from hotel management, brand and other ...................................................... 482,549 571,994

Vacation Club and other:

Revenues ....................................................................... 905,408 1,162,493 Direct costs and expenses ............................................. 660,308 844,594

Operating earnings from Vacation Club and other ....................................................................... 245,100 317,899

Corporate expenses ............................................................... 84,028 90,345 Depreciation and amortization................................................ 442,064 430,962 Real estate leasing ................................................................. 218,467 233,830 Operating income ................................................................... 995,664 1,031,913 Other expenses, net ............................................................... 91,493 122,902 Comprehensive financing result:

Interest expense............................................................. 415,179 388,397 Interest income............................................................... (35,979) (32,093)Exchange (gain) loss, net............................................... 65,738 (15,501)Monetary position gain ................................................... (135,742) (143,925)

309,196 196,878 Income tax expense ............................................................... 139,819 159,646 Equity in results of associated companies ............................. 1,114 (351,922)

Consolidated net income ..................................................... Ps. 456,270 Ps. 200,565

Hotel ownership

Our hotel ownership business line includes revenues and expenses derived from the operation of owned or leased hotels. Revenues for the year ended December 31, 2007 decreased by 1.7% to Ps.3,522.6 million from Ps.3,582.3 million in 2006. This decrease is primarily attributable to: (i) a 2.9% decrease in the average number of rooms available per night which was 9,212 in the year ended December 31, 2007 and 9,491 in 2006, due to the conversion of the Fiesta Americana Condesa Acapulco

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hotel into Fiesta Americana Vacation Club villas, partially offset by the addition of a new owned hotel (One Hotels Patriotismo); offset by (ii) a 3.2% increase in revenue per available room (REVPAR) to Ps.668 in 2007 from Ps.647 in 2006. The strong performance of our REVPAR was mainly due to increased occupancy in our urban hotels.

Departmental costs and expenses in our hotel ownership business line consist of food and beverage costs, wages related to room staff and food and beverage personnel and other expenses such as commissions to agencies, reservation fees, room amenities and laundry services. Departmental costs and expenses were Ps.1,284.8 million in the year ended December 31, 2007, representing a 2.1% increase compared to Ps.1,258.7 million in 2006. Departmental profit from our hotel ownership business was Ps.2,237.8 million in the year ended December 31, 2007, representing a decrease of 3.7% compared to Ps.2,323.6 million in 2006, a result in line with the decrease of average number of rooms available per night.

General expenses related to our hotel ownership business line consist of administrative expenses, sales, advertising and promotion expenses and maintenance and energy costs. In the aggregate, such expenses decreased by 3.6% to Ps.1,227.7 million in the year ended December 31, 2007 from Ps.1,273.5 million in 2006. By category, such expenses increased or decreased as follows: (i) administrative expenses, which were Ps.540.4 million in the year ended December 31, 2007 and Ps.556.2 million in 2006, decreased 2.8%, (ii) sales, advertising and promotion expenses, which were Ps.324.8 million in the year ended December 31, 2007 and Ps.356.8 million in 2006, decreased 9% and (iii) maintenance and energy expenses, which were Ps.362.4 million in the year ended December 31, 2007 and Ps.360.6 million in 2006, an increase of 0.5%, which is attributable to volatile energy prices. Administrative expenses and sales, advertising and promotion expenses decreased as a result of the reduction in the average number of rooms mentioned above.

Other expenses related to our hotel ownership business line consist of property taxes and payment of insurance premiums and other (income) expenses, net. Other (income) expenses, net consists primarily of computer, car and television set lease payments, auditing and legal fees. Also included under this item are, when applicable, the gains or losses generated by the sale of assets. We had no asset sales in 2007, however we sold two of our hotels in the U.S. in 2006 which generated a gain on sale of assets of Ps.76.4 million, which is reflected in a reduction in other expenses, net in 2006. Because of this, other expenses, net increased by 201.2% to Ps.112.9 million in 2007 from Ps.37.5 million in the comparable period of 2006.

As a result of the foregoing, operating earnings from our hotel ownership business decreased by 11.4% to Ps.897.2 million in the year ended December 31, 2007 from Ps.1,012.6 million in 2006.

Hotel management, brand and other

Our hotel management, brand and other business line includes management, brand and franchise related services along with our loyalty management (Ampersand), call center (Konexo) and shared services (Conectum) businesses. Revenues increased 23.9.% to Ps.1,289.1 million in the year ended December 31, 2007 from Ps.1,040.5 million in 2006. This increase is primarily attributable to a 4.6% increase in the average daily number of rooms managed chainwide to 16,850 rooms in the year ended December 31, 2007 from 16,107 in 2006. In addition, aggregated revenue in our Ampersand, Konexo and Conectum businesses grew 61.1% to Ps.627.5 million in 2007 from Ps.389.5 million in 2006 and represented approximately 48.7% of total revenues for our hotel management, brand and other business line in 2007.

Direct costs and corporate expenses relating to hotel management, brand and other include primarily the costs and expenses of our corporate sales, hotel operations and administration and hotel human resources departments. They also include the costs and expenses of our Ampersand, Konexo and Conectum businesses. Such costs and expenses increased 28.5% to Ps.717.1 million in the year ended December 31, 2007 from Ps.557.9 million in 2006. This increase was mainly the result of costs associated with increased operations in Ampersand, Konexo and Conectum.

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As a result of the foregoing, operating earnings from our hotel management, brand and other business line increased by 18.5% to Ps.571.9 million in the year ended December 31, 2007 from Ps.482.5 million in 2006.

Vacation Club and other

Our Vacation Club and other business line primarily includes our Fiesta Americana Vacation Club. Revenues increased 28.4% to Ps.1,162.5 million in the year ended December 31, 2007 from Ps.905.4 million in 2006. Sales of vacation club accounted for 90.7% of total revenues for Vacation Club and other in 2007. Our vacation club revenues increased primarily as a result of new sales of memberships in the Acapulco vacation club resort.

Costs and expenses for our Vacation Club and other business line include mainly those associated with the sales, financing and administration of vacation club memberships along with those derived from vacation club resort operations. For the year ended December 31, 2007, our costs and expenses increased by 27.9% to Ps.844.6 from Ps.660.3 in 2006. Our increases primarily resulted from increased activity in vacation club operations.

As a result of the above, operating earnings from our Vacation Club and other business line increased 29.7% to Ps.317.9 million in the year ended December 31, 2007 compared to Ps.245.1 million in 2006.

Corporate expenses

Corporate expenses include our corporate overhead such as salaries, administrative expenses, legal fees and severance payments of our corporate finance, human resource and technology departments, as well as the office of the Chief Executive Officer. We had corporate expenses of Ps.90.3 million in the year ended December 31, 2007, a 7.5% increase when compared to Ps.84.0 million in 2006. The increase was primarily a result of increasing staff at our corporate offices in Brazil, mainly in administrative areas resulting from the opening of more hotels. As percentage of total revenue, corporate expenses represented 1.5% of total revenues in 2007 and 2006.

Depreciation, amortization and real estate leasing

We had depreciation, amortization and real estate leasing expenses of Ps.664.8 million in the year ended December 31, 2007, a small increase of 0.6% from Ps.660.5 million in 2006. The increase in this item was partially due to higher lease payments of Ps.233.8 million in 2007 from Ps.218.5 million in 2006. This increase is primarily attributable to full year lease recognition from three hotels that opened during the second half of 2006 (Fiesta Americana Santa Fe, Fiesta Inn Santa Fe and the Caesar Business Santiago Chile).

Operating income

Our operating income consolidates the earnings of our hotel ownership; hotel management, brand and other; and Vacation Club and other business lines and deducts our corporate expenses and depreciation, amortization and real estate leasing expenses. Accordingly, as a result of the foregoing, consolidated operating income was Ps.1,031.9 million in the year ended December 31, 2007, a 3.6% increase compared to Ps.995.7 million in 2006.

Other expenses, net

Other expenses, net include primarily all amortized commissions, premiums and fees related to new loans or debt issuances and pre-operating expenses.

Our other expenses, net increased by 34.3% in the year ended December 31, 2007 to Ps.122.9 million compared to Ps.91.5 million in 2006, mainly as a result of higher pre-operating expenses related to the reopening of the Live Aqua hotel in Cancun.

Comprehensive financing result

Our comprehensive financing result was Ps.196.9 million in the year ended December 31, 2007, 36.3% smaller than the Ps.309.2 million incurred in 2006. Net interest expense decreased 6.0% to Ps.356.3 million in the year ended December 31, 2007 from Ps.379.2 million in 2006 mainly due to lower

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interest rates in the international markets. Net exchange rate gain amounted to Ps.15.5 million in 2007, reflecting a stable peso, compared to a loss of Ps.65.7 million in 2006 when the peso depreciated against the U.S. dollar by 1.7%.

Taxes

Taxes were Ps.159.6 million in the year ended December 31, 2007, an increase of 14.2% when compared to Ps.139.8 million in 2006. This increase was attributable primarily to the combination of (i) an increase of 286% in current income tax to Ps.183.4 million in 2007 from Ps.47.5 million in 2006; (ii) a deferred income tax credit of Ps.69.4 million in 2007 compared to a Ps.3.2 million deferred income tax expense in 2006; (iii) a decrease in asset taxes of 17.2% in 2007 and (iv) IETU deferred tax credit of Ps.28.1 million in 2007 that did not exist in 2006.

Consolidated net income

As a result of the above described factors, our net consolidated income in the year ended December 31, 2007 was Ps.200.6 million, representing a decrease of 56% compared to Ps.456.2 million in 2006. Aside from the above factors, this decrease was also attributable to the recognition in 2007 of an impairment of Ps.351.9 million in our investment in Grupo Mexicana, our affiliate, under the Equity in results of associated companies line item.

Liquidity and Capital Resources

Overview

We have successfully transitioned from an enterprise that primarily owns hotels to a company whose growth and revenue derive mainly from hotel management and other related services. While capital expenditures under our management model are substantially lower than under our hotel ownership model, in order to keep our owned hotels attractive and competitive, we continue spending to maintain, modernize and refurbish our owned hotels. In addition, to continue growing our vacation club business, we make expenditures to develop new units. All of these expenses create a continuing need for cash. To the extent we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained through other financings.

As a holding company, our ability to meet our debt and other obligations is dependent on the earnings and cash flows of our subsidiaries. We maintain centralized control of our enterprise’s finances, regulating cash flows of each of our subsidiaries in relation to income and expense budgets periodically submitted by each subsidiary. We also centralize control of obtaining and administering our various credit lines.

Liquidity

Cash flow from operating activities is generated primarily from operating income from our owned and leased hotels, management revenues and the sale and financing of vacation club memberships. These are the principal sources of cash used to fund our operating expenses, interest payments on debt, capital expenditures, dividend payments and income taxes.

The following table sets forth the generation and application of cash for the years ended December 31, 2006, 2007 and 2008 and for the nine months ended September 30, 2008 and 2009. As a result of NIF B-2, Statement of Cash Flows, effective January 1, 2008, we have included the statement of cash flows for the year ended December 31, 2008 and the nine months ended September 30, 2008 and 2009. For prior years, we included the statement of changes in financial position. As a result, the cash flow amounts for the year ended 2008 may not be directly comparable to those presented for the previous years ended 2006 and 2007.

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For the years ended Nine months

December 31, ended September 30,

2006 2007 2008 2008 2009

(in thousands of pesos) Net cash provided by operating activities .......... 932,065 698,120 1,925,503 1,105,663 771,128 Net cash used in investing activities .................. (166,544) (454,212) (783,945) (826,088) (709,260) Net cash used in financing activities.................. (680,953) (346,943) (505,302) (27,417) (320,639) Adjustment to cash flows due to exchange rate fluctuations ................................................. —— —— (187,024) (51,490) 17,601 Cash and cash equivalents at period end.......... 443,019 339,984 830,922 582,358 589,752

Operating Activities

In the nine months ended September 30, 2009, our net cash provided by operating activities was Ps.771.1 million, decreasing by Ps.334.5 million compared to the same period of 2008. This decrease is mainly due to lower operating income of Ps.294.2 as a result of a reduction in guest visits to our hotels caused due to the impact of the financial crisis and the H1N1 influenza outbreak. See “—Nine Months Ended September 30, 2009 Compared with the Nine Months Ended September 30, 2008.”

Net cash provided by operating activities was Ps.1,925.5 million in 2008, compared to Ps.698.1 million in 2007 and Ps.932.1 million in 2006. Our higher net cash provided by operating activities in 2008 was primarily due to (i) solid operating performance and (ii) the collection of mainly recoverable value added taxes paid in 2007. In 2007, lower net cash provided by operating activities was primarily due to a temporary increase in value added taxes derived from a corporate restructuring of some of our subsidiaries.

In 2006, net cash from operating activities was Ps.932.1 million due to (i) solid operating performance and (ii) the recovery of consequential losses in connection with our insurance policy covering Hurricane Wilma’s damages on our coastal hotels in the Yucatan Peninsula in the last quarter of 2005.

Investing Activities

In the nine months ended September 30, 2009, net cash used in investment activities was Ps.709.3 million compared to Ps.826.1 million for the nine months ended September 30, 2008. This decrease was primarily due to a reduction in our budgeted capital expenditures, mainly for hotel maintenance, derived from the decrease in operating income. In the nine months ended September 30, 2009, we mainly had expenditures to continue construction of new units at our Los Cabos vacation club, to refurbish some of our owned hotels and to invest in various technology platforms for our services businesses.

In 2008, net cash used in investment activities was Ps.783.9 million and comprised primarily maintenance capital expenditures for our owned hotels, technology-related investments for our services businesses and capital expenditures to convert the Explorean hotel to vacation club units and to construct new units at the Los Cabos vacation club. In 2007, net cash in investing activities was primarily used to convert the Fiesta Americana Condesa Acapulco hotel to vacation club units, to construct our call center in Morelia, Michoácan, Mexico and for hotel maintenance.

In 2006, net cash used in investing activities was Ps.166.5 million was primarily used for maintenance purposes in our owned hotels and the construction of our One Hotels Patriotismo and significant refurbishing at our Fiesta Americana Condesa Cancun property.

Financing Activities

In the nine months ended September 30, 2009, net cash used in financing activities was Ps.320.6 million compared to Ps.27.4 million for the nine months ended September 30, 2008. The increase in the amount used in financing activities mainly includes the amortization of our loans and loans obtained to supplement the loss of liquidity derived from the H1N1 influenza outbreak. Dividends were not declared or paid in 2009.

In 2008, net cash used in financing activities included borrowings used to finance the repurchase of the majority of our 8¾ senior notes due 2011. Other principal uses were margin calls in connection

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with our cross-currency swaps due to a large depreciation of the Mexican peso and interest paid. In mid-2008, we paid a dividend to our shareholders of Ps.154.3 million. In 2007, net cash from financing activities was used primarily to repurchase Ps.91.8 million of our shares. Additionally we paid a dividend of Ps.131.0 million to our shareholders.

In 2006 net cash used in financing activities of Ps.681.0 million was directed to the repayment of debt, the payment of a dividend of Ps.117.2 million and the purchase of a minority interest in one of our owned hotels.

Indebtedness

The following table sets forth information regarding our consolidated long-term debt, without the effect of cross-currency swaps entered into, as of September 30, 2009:

Amounts (In thousands of Ps.) Currency Average cost Maturity

Certificados Bursátiles .......................... Ps. 2,250,000 MXN TIIE + 1.80% 04/2013 Mortgage loans ..................................... 704,916 MXN TIIE + 3.85% Several Senior Notes due 2011 ......................... 482,677 USD 8.75% 10/2011 Mortgage loans ..................................... 452,601 USD LIBOR + 4.70% Several Syndicated loan .................................... 373,963 USD LIBOR + 1.75% 11/2010 Syndicated loan .................................... 250,279 MXN TIIE + 1.65% 11/2010 Subsidiary mortgage loans.................... 97,887 MXN TIIE + 2.00% 11/2013 Subsidiary mortgage loans.................... 240,104 USD LIBOR + 2.00% 11/2013 Other loans (pesos) .............................. 238,025 MXN TIIE + 3.10% 10/2009 Other loans (U.S. dollars)...................... 3,409 USD LIBOR + 1.90 12/2009 Thresholds (1)....................................... 313,582 USD n.a. Several Ps. 5,407,443

(1) Thresholds are the mark-to-market value of all derivative positions as of September 30, 2009 minus posted margin calls at

that date.

During 2008, we incurred debt in connection with the repurchase of the majority of our 8¾% senior notes due 2011. In 2008, we established an unsecured debt program (Certificados Bursátiles) with an authorized value of up to Ps.3,000.0 million.

In April 2008, we issued Ps.1,500.0 million of Certificados Bursátiles and, on July 2008, we made a second issuance of Ps.750.0 million of Certificados Bursátiles on the same terms and conditions.

In April 2008, we entered into a five year bilateral secured loan with a two year grace period with Banco Nacional de México, S. A. (Banamex) for Ps.312.0 million.

During the last quarter of 2008, as a result of the world economic crisis, we borrowed:

Ps.100.0 million from a long-term credit facility with Banco del Bajio, S.A.;

Ps.90.0 million from another short-term line of credit with Banco Santander, S. A.; and

U.S.$23.4 million from a U.S.$27.3 million secured loan from Bancomext and, in January 2009, the remaining amount available thereunder.

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During 2009 we performed the following actions regarding our indebtedness:

we borrowed Ps.392.9 million under a secured loan from Bancomext to provide us with liquidity in the midst of the H1N1 influenza outbreak;

we extended by one year the grace period and amortized partially the Bancomext 2008 loan;

we changed the Banco del Bajio, S.A. long-term credit line to a 4.5-year secured loan of Ps.76.0 million;

we refinanced Ps.90.0 million from the Santander short-term credit line to a 3-year secured loan; and

we drew an additional U.S.$9.3 million from California Commerce Bank (an affiliate of Banamex and Citigroup Inc.) for a total outstanding of U.S.$17 million.

Contractual obligations

The following is a summary of our contractual obligations as of September 30, 2009 without giving effect to this offering:

Payments due by period

(in thousands of pesos) Less than 1-3 3-5 More than Total 1 year years years 5 years Contractual Obligations Short-term debt obligations (includes short-term portion of long-term debt ...... Ps. 907,320 Ps. 907,320 Ps. — Ps. — Ps. — Long-term debt obligations(1) ........................ 4,500,124 — 1,531,189 2,937,764 31,171 Convertibles(2) ........................ 236,058 236,058 — — — Capital lease obligations.......... 76,564 38,183 38,105 276 — Operating lease obligations(3) ........................ 2,075,977 308,778 560,505 475,315 731,379

Total......................................... Ps. 7,796,043 Ps. 1,490,339 Ps. 2,129,799 Ps. 3,413,355 Ps. 762,550

(1) Long-term debt includes mark-to-market net of margin calls from derivative positions. (2) Convertibles refer to the IFC and DEG senior loans described herein. See “Description of Other Indebtedness.” (3) Obligations have been determined based on fixed leases, thus not considering variable portions.

Our operating lease obligations include fixed lease payments deriving from long-term agreements of our leased hotels. Some of these leasing agreements provide for payments in U.S. dollars and, for purposes of this table, they are converted to pesos at the exchange rate as of September 30, 2009.

Capital lease obligations include capital lease agreements of up to 3 years related primarily to the leasing of computing equipment for our hotels and corporate offices.

In the ordinary course of business, we also enter into long-term supply arrangements for different services and with several suppliers which are not reflected in the table above.

In addition, our obligations under derivative financial instruments are described below under “—Market Risk Disclosure—Derivative Financial Instruments.”

Market Risk Disclosure

Derivative financial instruments

Historically, a significant portion of our total revenues, typically around 45%, have been either directly or indirectly denominated in U.S. dollars. This is due to the fact that the room rates at our coastal hotels (primarily at our Cancun and Los Cabos resorts) and our hotels in Brazil and Argentina are quoted

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in U.S. dollars, and also that, historically, the sale and financing of vacation club memberships have been quoted in U.S. dollars.

Because a significant portion of our revenues are denominated directly or indirectly in U.S. dollars and to minimize our exposure to highly volatile peso interest rates, our policy has been to maintain a significant portion of our debt in U.S. dollars. We have achieved this by borrowing U.S. dollar denominated debt when credit market conditions allow for it, or, in recent periods, entering into cross-currency swaps where we generally pay U.S. dollar amounts based on fixed interest rates and receive peso amounts based on peso variable interest rates. Our derivative financial instruments are contracted in the over-the-counter market with international financial institutions.

In particular, when entering into these recent cross-currency swaps, we attempt to hedge the positions by matching cash flows on our derivative transactions with cash flows on our indebtedness; however, for accounting purposes, some of our derivative financial instruments have not been designated as hedges because they do not always meet all of the accounting requirements established by Mexican FRS.

In April and July 2008, we took advantage of the liquidity and the favorable conditions in the peso market to issue Ps.1,500.0 million and Ps.750.0 million of Certificados Bursátiles. See “Description of Other Indebtedness.” With these issuances, although still predominantly U.S. dollar- denominated, the currency mix of our indebtedness shifted importantly towards pesos. Consistent with our policy, we entered into two cross-currency swaps for an aggregate notional amount of U.S.$ 214.8 million and also achieved a weighted fixed interest rate in U.S. dollars of 6.2%. We also entered during 2008 into three cross-currency swaps related to other peso-denominated debt for an aggregate notional amount of U.S.$ 50.7 million (including amortizing swaps). As of December 31, 2008, our outstanding notional amount in cross currency swaps was U.S.$ 265.5 million

During the third quarter of 2009, we closed U.S.$70.0 million of our derivatives position related to the Certificados Bursátiles, which are subject to margin calls. With this, the currency mix of our indebtedness changed from 92% to 71% in U.S. dollars. We have at all times met the margin calls from our counterparties. As of September 30, 2009, of our cross currency swaps approximately U.S.$34.7 million in margin calls were posted, and we had a total notional amount outstanding of U.S.$ 187.7 million.

Our liability for outstanding total swap positions was Ps.404.3 million and Ps.313.6 million as of December 31, 2008 and September 30, 2009, respectively, net of margin calls.

Interest Rate Risk

From the middle of 2006 until early 2009, market interest rates remained relatively stable. In 2006, we entered into an interest rate swap whereby the interest rate of one specific tranche of indebtedness was swapped from floating to fixed with a TIIE index. As a result, we then believed we limited our exposure to potential increases in interest rates. In early 2009, the TIIE rate decreased to almost 5%.

As of September 30, 2009, our position of interest rate swaps was as follows:

Type of derivative, Notional Fair Maturity

value or contract amount value 2009 2010 2011 2012 2013 Collateral

(in millions) Interest rate swap Ps.83.1 (Ps.1.8) (Ps.41,6) (Ps.41,6) Ps.- Ps.- Ps.- Ps.-

Exchange Rate Risk

As of September 30, 2009, our position of exchange rate derivatives held for hedging purposes from an economic perspective (which were designed in light of our dollar-based revenues to effectively convert to dollars certain peso-denominated liabilities) was as follows:

Type of derivative, Notional Fair Maturity

Value or contract amount value 2009 2010 2011 2012 2013 Collateral

(in millions) Peso/U.S. dollar cross-currency swap .................... U.S.$187.7 (U.S.$57.8) (U.S.$ 6.6) (U.S.$ 15.0) (U.S.$ 8.5) (U.S.$ 8.5) (U.S.$ 149.1) (U.S.$34.7)

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Off-Balance Sheet Arrangements

In 2004, we entered into a non-recourse, revolving credit line with Bancomext for up to an authorized amount of U.S.$29.2 million. Additionally, in December 2004 and September 2006, we entered into two more non-recourse dual currency revolving lines of credit with Banco Mercantil del Norte, S.A., or Banorte, for up to an authorized amount of U.S.$44 million and U.S.$47 million, respectively. In December 2009, we entered into a non-recourse dual currency revolving line of credit with Banorte, for up to an authorized amount of U.S.$91 million, substituting the two credit lines previously mentioned. Borrowings under these credit lines bear variable interest rates and are secured by notes receivable related to vacation club sale financings and liens over Fiesta Americana Vacation Club in Los Cabos, Kohunlich, Acapulco and Cancun. The collection rights on the vacation club sale notes receivable have been assigned to trust funds inside and outside of Mexico. Pursuant to trust contracts, we have granted Bancomext and Banorte a security interest in the collection rights assigned to the trust funds. These credit lines also have mortgages on vacation club real property.

As of December 31, 2008 the outstanding balances of our credit lines entered into with Banorte was U.S.$ 16.4 million and Ps.717.2 million; and those entered with Bancomext was U.S.$ 28.4 million. As of December 31, 2007, the outstanding balances of our credit lines entered into with Banorte were U.S.$ 29.8 million and Ps.143.0 million and those entered into with Bancomext was U.S.$ 29.2 million. Each of these outstanding balances is presented net within the long-term notes receivable assigned to the trust. As of December 31, 2008 and 2007, respectively, our notes receivable assigned to the trust were U.S.$ 217.3 million and U.S.$ 208.3 million.

As of September 30, 2009 and 2008, respectively, the outstanding balances of credit lines with Banorte are U.S.$10.4 million and U.S.$ 19.3 million and Ps.666.2 million and Ps.329.0 million, respectively and with Bancomext is U.S.$ 27.7million and U.S.$ 22.6 million. Each of these outstanding balances is presented net within the long-term notes receivable assigned to the trust. As of September 30, 2009 and 2008, respectively, our notes receivable assigned to the trust to secure our obligations under the credit lines were U.S.$ 194.9 million and U.S.$ 188.0 million.

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BUSINESS

Overview

We are primarily engaged in the business of operating hotels in several countries in Latin America and our principal operations are located in Mexico and Brazil. According to Hotels magazine, we are the largest Latin American operator of hotels based on number of hotels and number of rooms. We also believe that we are the leading operator of hotels in Mexico based on number of hotels, number of rooms, geographic coverage, revenues and market share. We distinguish ourselves from other operators by offering to hotel owners superior franchise services including, among other things, centralized reservation and marketing resources, revenue-optimization services, data gathering and analysis platforms, robust customer loyalty programs and strong, well-defined brands.

Through our subsidiaries, we operate 110 hotels (including four vacation club resorts) with a total of 19,454 rooms in Mexico, Brazil, Argentina, Chile and the United States (in the State of Texas). In Mexico we operate 94 hotels with a total of 16,487 rooms (including our vacation club units). We also operate 10 hotels in Brazil with a total of 1,899 rooms, two hotels in Argentina with a total of 247 rooms and one hotel in Chile with 142 rooms. In addition, we currently operate three hotels with a total of 679 rooms in Texas. Of the 110 hotels we operate, 33 are owned hotels, 19 are leased hotels and 58 are managed hotels (not including our owned and leased hotels that we also manage). Our hotels are located in a mix of urban and coastal destinations serving both leisure and business travelers and approximately 80% of our rooms are in urban destinations and 20% of our rooms are in coastal destinations. See “—Hotel Business” for a description of each of the structures under which we operate our hotel business.

We also operate a vacation club business through Fiesta Americana Vacation Club, or FAVC. FAVC markets and sells memberships that grant a right to use vacation club resorts that we own and operate in upscale destinations in Mexico including Los Cabos, Cancun, Acapulco and Kohunlich, Mexico, as well as other affiliated properties. In most cases, we provide financing to customers who purchase such memberships. Our vacation club business represented 20.9% and 29.2% of our revenues for the year ended December 31, 2008 and for the nine months ended September 30, 2009, respectively.

In addition, in recent years, we have attempted to market our management skills and technology platform, originally developed to support our hotel operating business, by opening a number of related services businesses: Ampersand manages loyalty programs for diverse related and unrelated businesses; Konexo provides call center and contact services and related customer-contact services for related and unrelated businesses; Conectum offers business process outsourcing services, or shared services, for diverse industries; and GloboGO offers online travel planning services.

Together with the expansion of our hotel operations and vacation club business, we have sought to develop strong brand names and to foster customer recognition of our brand-wide consistency of service. We consider our brands to be one of our main assets. We operate substantially all of our hotels in Mexico under the Fiesta Americana, Fiesta Inn, Live Aqua and One Hotels brand names, while in South America, we operate our hotels under the Caesar Park and Caesar Business brand.

Our Hotel Brands

Fiesta Americana is our flagship brand. We currently operate 18 hotels under this brand. Hotels operating under this brand offer deluxe, large scale, full-service accommodations to the high-end leisure traveler segment in coastal destinations and to the high-end business traveler segment in major urban centers. The Fiesta Americana line includes four hotels under the Fiesta Americana Grand brand. The Fiesta America hotels are upper-scale class hotels, and the Fiesta Americana Grand hotels are luxury class hotels. These hotels compete primarily with other high-end international and Mexican brands. The hotels range from around 150 to over 600 rooms each. The Fiesta Americana and Fiesta Americana Grand brands constitute 27% of our total rooms.

Fiesta Inn hotels are smaller, more moderately priced hotels relative to Fiesta Americana hotels. Fiesta Inn hotels are medium-scale class hotels offering modern, comfortable accommodations and efficient service primarily to the domestic and regional business

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traveler segment. We currently operate 60 hotels in Mexico under the Fiesta Inn brand and these hotels are typically located in small, mid-size or major urban destinations or suburbs of major urban areas. Fiesta Inn hotels compete primarily with other moderately priced Mexican and international chains, as well as with moderately priced Mexican independent hotel operators. The hotels range from around 100 to over 300 rooms each. The Fiesta Inn brand constitutes 45% of our total rooms.

Live Aqua is a luxury class, lifestyle resort hotel. The Live Aqua concept seeks to build a memorable experience through pampering details – including fine dining, aromatic scents, spirit-renewing sanctuaries and comfortable settings – and superior service. We have one, 371-room Live Aqua hotel which competes with other luxury resorts in the Riviera Maya and Cancun region. The Live Aqua brand constitutes 2% of our total rooms.

One Hotels is an innovative chain of economy class hotels in Mexico that offer guest’s security, confidence and comfort at an affordable cost. The warm atmosphere, efficient service and practical design is ideal for business travelers who desire a convenient location and restful accommodations at an accessible price. One Hotels compete primarily with other economy class Mexican chains and independent hotel operators. We operate 10 hotels under the One Hotels brand and each of the hotels has around 125 rooms. The One Hotels brand constitutes 7% of our total rooms.

Caesar Park and Caesar Park Silver hotels are luxury class, full-service hotels in major urban centers that cater primarily to the high-end business traveler segment. We currently operate three hotels in Brazil and two hotels in Argentina under the Caesar Park brand. Caesar Park hotels compete primarily with other high-end international brands. The hotels range from around 80 to over 200 rooms each. The Caesar Park and Caesar Park Silver brands constitute 4% of our total rooms.

Caesar Business hotels are smaller, moderately priced hotels offering practical lodging and efficient service primarily to the domestic and regional business traveler. We currently operate seven hotels in Brazil and one hotel in Chile under the Caesar Business brand. Caesar Business hotels are medium-scale class hotels that compete primarily with other moderately priced international brands. The hotels range from around 100 to 400 rooms each. The Caesar Business brand constitutes 8% of our total rooms.

We will selectively continue to develop new properties to grow our hotel and vacation club businesses, but we intend to emphasize growth by increasing the number of properties we manage under our brand portfolio. In particular, we plan to expand in Mexico primarily by adding more One Hotels and Fiesta Inn hotels to supply the business traveler segment and in South America by adding more Caesar Business hotels.

Our Other Brands

Fiesta Rewards is our customer loyalty program. Launched in 1989, we were the first hotel company in Mexico to develop a sound customer loyalty program. The point-based program offers a certain numbers of points for every dollar spent on stays and consumption in our hotels and in certain subscriber restaurants, bars and spas, among other places. The points can, in turn, be redeemed for a variety of rewards including, among other things, free hotel stays, airline reservations, car rentals and fashion products.

Fiesta Americana Vacation Club is the brand name for our vacation club business. FAVC members receive an annual allocation of points that members can redeem to stay at our FAVC properties, any other hotels that we operate or, through FAVC’s affiliations with Resorts Condominium International, or RCI, and Hilton Hotels Corp., any RCI-affiliated resort or Hilton Grand Vacation Club, or HGVC, resort throughout the world. As of September 30, 2009, FAVC had almost 29,000 members.

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We are also developing brand identities around our service businesses, including:

Ampersand operating our loyalty program management business for diverse related and unrelated businesses;

Konexo providing call center and customer care solutions for related and unrelated businesses;

Conectum offering business process outsourcing services, or back office shared services, for diverse industries; and

GloboGO operating our online travel planning portal.

Our Competitive Strengths

Although we operate in a highly competitive environment, we believe that we have developed a number of competitive strengths that position us well in the regions and businesses in which we operate. We believe that the following are the key highlights of our competitive position:

Strong market position. We are a leading hotel operator in Latin America. According to Hotels magazine, we are the largest Latin American operator of hotels based on number of hotels and number of rooms, and we believe we are the leading operator of hotels in Mexico based on number of hotels, number of rooms, geographic coverage, revenues and market share. In addition, we believe that we benefit from strong brand recognition in Mexico and Brazil and we have a reputation for providing high value accommodations in desirable locations.

Diversified portfolio of properties. Our diversified brand portfolio targets various market segments in various geographic locations— including business and leisure travelers in urban destinations in upscale and moderately-priced categories, and groups, conventions and leisure travelers in urban and coastal destinations. Historically, this diversification has enhanced our ability to maintain a stable cash flow in a variety of market conditions while also limiting our exposure to any particular brand, market segment or geographic location.

Our market position, strong reputation and superior brand and hotel management services attract third-party investment. During the last few years we have been able to expand our hotel business mainly through increasing our operation of hotels developed with investment capital provided by third parties. We distinguish ourselves from other operators by offering to hotel owners superior brand and hotel management services including, among other things, centralized reservation and marketing resources, revenue-optimization technology, data gathering and analysis platforms, robust customer loyalty programs and strong, well-positioned brands.

Scale. As the leading hotel operator in Latin America, we have achieved a scale to support our core technology platforms and marketing functions. We also believe that our scale helps to lower our procurement expenses including, for example, insurance, utilities, food and beverages, furniture, fixtures and equipment. As we further increase our room count, we expect that our economies of scale would further improve our operating cost structure.

Loyal customer base. We have created a loyal customer base through our Fiesta Rewards guest loyalty program. As of December 31, 2008, Fiesta Rewards had approximately 2.2 million members and accounted for 19% and 25% of the occupancy in Fiesta Americana and Fiesta Inn hotels, respectively. As of September 30, 2009, members of Fiesta Rewards accounted for 13.8% and 19.8% of the occupancy in Fiesta Americana and Fiesta Inn hotels, respectively.

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Investments in technology that seek to enhance profitability. We have invested and continue to invest in technology designed to achieve greater operating efficiencies, enhanced distribution capabilities and profitability. We believe that these investments have made our technology platform comparable to many major international hotel companies and have given us a strong competitive advantage over other Latin American competitors.

New business development and diversification. We have launched several new businesses with distinct competitive advantages by leveraging our strengths: talent, technology, marketing and broad expertise in the tourism and hospitality industry in Latin America for application to customers in the tourism space and in other industries.

Experienced management. Our senior management team is led by Mr. Gastón Azcárraga Andrade, who has been our Chairman and Chief Executive Officer since 1992. We have a well-qualified senior management team with an average of over 15 years of industry experience. We believe that, historically, the turnover among our senior management has been low relative to our competitors, reducing organizational volatility and allowing us consistently to pursue our long-term strategic interests.

Our Business Strategy

Our long term strategic plan is to be the leading hotel operator and a tourism-related services provider in Latin America, while developing and strategically investing in complementary and ancillary businesses that are synergistic with our core business.

We focus on maximizing shareholder value and return on capital by optimizing the use of our talent, real estate, third party management contracts and advanced proprietary operating systems. As part of our portfolio management strategy, we continuously examine our business units’ portfolio to address issues of market dynamics, demand, supply and competition. Several of our key strategies are highlighted below:

Leverage our infrastructure to improve on our previous utilization levels

We believe we have built a solid business infrastructure in recent years, diverse both geographically and by brand, and supported by talented professionals and leading-edge technology. Due to the negative impacts of the global economic crisis and H1N1 influenza outbreak, we believe our infrastructure is currently underutilized. Nevertheless, the recent crisis has allowed us to streamline our operations and improve our cost structure, responsiveness and profitability. We believe we are positioned to increase our utilization levels and operational performance in line with a global economic recovery.

Strengthen our capital structure

We seek to strengthen our capital structure to make us more resilient to industry cycles and to provide us with the flexibility and capacity to take advantage of opportunities that may arise in the future. Furthermore, we intend to focus on strengthening our capital structure through improving our cash flow generation and reprofiling the maturities of our consolidated indebtedness.

Continue to consolidate and expand our hotel network while maintaining limited capital expenditures

An important part of our growth strategy is to continue to benefit from our strong brand recognition, solid reputation, centralized resources and extensive management experience which allow us to enter into additional hotel management contracts and, at the same time, to reduce our investment in owned hotels. Management contracts with hotels owned by third parties, including hotels that we lease from third parties, help improve our profitability by generating revenue streams at a relatively low marginal cost of leveraging our centralized resources and systems and with fairly minimal additional capital investment by us. We believe that based on the above mentioned factors, we are an attractive option for hotel owners who seek profitable investments with a stable revenue stream. In the next 36 months, we

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plan to commence operating 52 new hotels with approximately 7,233 rooms pursuant to management contracts we are currently negotiating or have already entered into. Approximately 86% of these new hotels in development will be owned by unrelated third parties.

Continue to penetrate the moderately-priced business traveler segment

We have successfully addressed the needs of the domestic and regional business traveler, and our success has allowed us to diversify our operations. We believe the domestic and regional business travel segment continues to be underserved and represents attractive growth opportunities to us going forward. In 1993 we began to serve this segment in Mexico through our Fiesta Inn brand. Building on the success of Fiesta Inn, in 2001 we launched Caesar Business serving the business traveler in South America and, in 2007, we launched One Hotels, an economy class line in Mexico, catering to business travelers. We currently operate 60 Fiesta Inns, eight Caesar Business and ten One Hotels serving this market segment.

We plan to continue expanding our Fiesta Inn brand in the moderately-priced business traveler segment and to expand our One Hotels economy class brand to South America, primarily through third-party owned hotels.

Continue to develop our Fiesta Americana Vacation Club business

Leveraging our brand positioning, we have been able to build a solid and profitable vacation club business. Our solid brand names have helped us significantly increase our customer base while providing our customers a unique experience with unparalleled flexibility. We believe that the vacation club business enhances the profitability of our existing asset base by leveraging synergies stemming from both businesses. We will selectively continue converting, developing and constructing resorts or new vacation club units in appealing destinations.

Enhance the guest experience

We believe the knowledge of our guest’s preferences and patterns grant us a competitive advantage. For more than 20 years, we have consciously invested in customer loyalty programs, such as our Fiesta Rewards program, thereby creating loyal users of our hotels. Several years ago we decided to take the knowledge of our customer one step further. We have built a detailed database that feeds into a proprietary guest experience system, Delphos, which permits us to anticipate each customer's pre-stay, in-stay and post-stay needs, preferences and desires. Delphos allows us to tailor our services to each guest based on experience, thus creating a unique bond.

Develop talent

As we move from a company focused on property ownership towards an organization emphasizing portfolio management, we believe talent becomes one of our most important and visible assets. We believe our ability to identify, train and retain talent is one of our core enterprise strengths.

Focus on strengthening the core capabilities of our service businesses

We have successfully designed and developed specific service businesses, such as Ampersand, Konexo, Conectum and GloboGO, that support our day-to-day operations. We believe these businesses are synergistic to our operations and diversify our revenue stream. We intend to continue strengthening and developing those service businesses through marginal investments. We believe attractive business opportunities exist for the unique services we provide in the countries where we operate.

Continue leveraging our distribution strategy to efficiently capture market share

We believe our distribution platform gives us a competitive advantage because it allows us to seamlessly coordinate all reservation transactions in a dynamic pricing model, inventory and oversell limits that constrain the hotel industry. We believe that our information management platforms are robust and state of the art, and that these platforms allow us to benefit from the dynamic growth of our electronic distribution channels.

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Realize cost savings and improve operating efficiencies

We are focused on effectively streamlining our operations to take advantage of cost reduction opportunities and to improve our profitability. We have reduced our distribution costs by centralizing and consolidating the room inventory data from our entire hotel portfolio into a single proprietary solution called the Central Inventory Posadas (ICP). We have enhanced our profitability through real-time dynamic pricing of our room inventory. We have also achieved similar cost reductions by centralizing and consolidating accounting, payroll, strategic sourcing and receivables processing. We are one of the few hotel operators in Latin America that have developed such systems.

Future growth

While we are currently focused on preserving liquidity, reducing leverage and improving operational performance, we may consider additional investments in the tourism-related industry, including new developments and/or opportunistic acquisitions, when conditions improve and further investments would be prudent. We will only consider investments that would add value to the existing portfolio, diversify our operations by market, geography or customer type, and improve EBITDA generation.

History

Grupo Posadas, S.A.B. de C.V. was incorporated under the laws of Mexico on April 18, 1967 when Gastón Azcárraga Tamayo formed Promotora Mexicana de Hoteles, S.A., or Promotora, to build and operate a flagship hotel in Mexico City. This hotel, which first opened as the Fiesta Palace in 1970, is known today as the Fiesta Americana Reforma.

In 1979, Promotora opened the first hotel under the Fiesta Americana brand name in Puerto Vallarta through a joint venture company called Operadora Mexicana de Hoteles, S.A. de C.V., or Operadora. Americana Hotels Inc., a subsidiary of American Airlines, was Promotora’s joint venture partner in Operadora.

In 1982, Promotora acquired a 50% equity interest in Posadas de México, S.A. de C.V., or Posadas de México, then a franchisee of a Holiday Inn hotel in Mexico. At the time of the acquisition, Promotora was the largest hotel operator in Mexico, with a portfolio consisting of 12 Fiesta Americana hotels and one Holiday Inn hotel. Throughout the 1980s, Promotora focused on the development of the Fiesta Americana brand, although it continued as a Holiday Inn franchisee in a few select locations. In 1983, Promotora acquired Americana Hotels’ interest in Operadora and in 1990 it acquired the other 50% interest in Posadas de México.

In 1992, Promotora changed its corporate name to Grupo Posadas, S.A.B. de C.V and we listed our common stock on the Mexican Stock Exchange. In 1993, we began to target the business traveler market through our Fiesta Inn brand when we opened our first Fiesta Inn hotel in an urban location.

In 1996, we launched our Fiesta Rewards customer loyalty program to help foster a loyal customer base. The point-based program offers a certain numbers of points for every dollar spent on stays and consumption in our hotels and in certain subscriber restaurants, bars and spas, among other places. The points can, in turn, be redeemed for a variety of attractive rewards including, among other things, free hotel stays, airline reservations, car rentals and fashion products.

In 1998, we started our expansion into South America with the acquisition of the Caesar Park chain. As part of the acquisition we added hotels in Brazil and Argentina to our portfolio and also obtained the rights to the Caesar Park brand name throughout Latin America (except that the Caesar Park hotel currently operating in Panama City, Panama was not a part of this acquisition).

We entered the vacation club business in 1999 when we opened our first Fiesta Americana Vacation Club resort in Los Cabos. We have since added other vacation club resorts in Cancún, Acapulco and Kohunlich.

In 2001, we opened our first Caesar Business hotel in Brazil and, in 2007, we opened our first hotel in Chile, the Caesar Business hotel in Santiago. Also, in 2001, we started to implement our

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Posadas Central Inventory, or ICP, to consolidate room inventory data from our hotel portfolio into a single database. In 2003, we began the implementation of Conectum, our business process outsourcing service company.

Also, in 2005, we launched Live Aqua, a deluxe, lifestyle brand with a resort in Cancun. In the same year, we made a strategic minority investment in Mexicana de Aviación, the leading airline in Mexico, which has provided us with synergies within the travel industry and opportunities to leverage our existing infrastructure.

In 2007 we opened our first One Hotels, a 3-star tier budget brand catering to the business traveler who looks for affordable, well located accommodations. We also launched our Konexo and Ampersand businesses in 2007. In 2008, GloboGO was launched.

Principal Business Activities

We are one of the largest hotel operators in Latin America, with operations in Mexico, Brazil, Argentina, Chile and the United States. Our hotel business includes 110 owned, leased or managed hotels representing a total of 19,454 rooms marketed predominantly under eight brands. All brands are full-service properties that range in amenities from luxury hotels to economy hotels.

Brand Class Mexico Brazil Argentina Chile USA Total

Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms

Fiesta Americana Upper-Scale 14 3,951 14 3,951

Fiesta Americana Grand Luxury 4 1,262 4 1,262

Fiesta Inn Medium-Scale 60 8,747 60 8,747

Live Aqua Luxury 1 371 1 371

One Hotels Economy 10 1,266 10 1,266

Caesar Park (1) Luxury 3 506 2 247 5 753

Caesar Business Medium-Scale 7 1,393 1 142 8 1,535

FA Vacation Club Luxury 4 677 4 677

Others — 1 213 3 679 4 892

Total 94 16,487 10 1,899 2 247 1 142 3 679 110 19,454

% of Total 85% 10% 1% 1% 3% 100%

(1) Includes one hotel with 74 rooms in Argentina marketed under the Caesar Park Silver brand.

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The following map shows the number and brand of our hotels in the countries in which we operate as of September 30, 2009:

Source: Grupo Posadas

Hotel Business

Owned hotels. We have 33 owned hotels in our portfolio representing 6,933 rooms and 36% of our total rooms. We continuously refurbish our owned hotels in order to maintain consistent quality standards. Each year we typically spend 5% of our owned hotels’ revenues on capital improvements. Our owned hotels contributed approximately 35% and 30% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

Leased hotels. We have 19 leased hotels in our portfolio representing approximately 3,143 rooms and 16% of our total rooms. Our lease contracts typically have a ten-year term and are generally renewable for an additional five-year period. The lease payments we are required to make under these agreements are generally equal to the greater of the specified fixed lease amount and a specified percentage of the hotel’s total revenues. The lease agreements also require us to invest a percentage of the hotel’s gross revenues to apply toward the costs of maintenance and refurbishing. As of September 30, 2009, the average remaining term of our existing lease agreements was approximately 5.4 years, not taking into account any extension rights we may choose to exercise. Our leased hotels contributed approximately 17% and 15% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

Managed hotels. We have 58 managed hotels in our portfolio (not including our owned and leased hotels, all of which we also manage) representing approximately 9,378 rooms and 48% of our total rooms. We enter into management contracts with all of the hotels we operate. Our management contracts are typically ten years in duration and are generally renewable for an additional five-year period. The agreements provide us with authority over all necessary activities for the operation of the hotels,

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including procuring food, beverages and other inventories, marketing the hotels, establishing room rates, processing reservations and staffing the hotels (although we do not directly employ the vast majority of the staff at any given hotel). Our management services include branding, distribution, marketing, customer loyalty programs, standards, consulting, on-site selection and research and development support. In general, terms of our management agreements provide for us to receive, among other things, a management fee, an incentive fee, a brand use fee, a reservation fee, a technology fee, fees for services such as our customer loyalty program and promotional services, in each case, equal to a specified percentage of the hotel’s revenues or profits. Moreover, these agreements generally require that the hotel owners, or the owners of the leasehold interest in a hotel, as the case may be, invest a specified percentage of annual revenues to refurbish and maintain the hotels in accordance with operating standards we establish. As of September 30, 2009, the average remaining life of our existing management agreements with third parties was 6.4 years. Our managed hotels contributed approximately 7.4% and 7.4% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively. See note 2(c) to our consolidated financial statements in this offering memorandum for information relating to the methods applied to consolidate our operating results.

We also operate four hotels under other brands, one in Mexico and three others in Texas (one of which we also own). These hotels are under the Holiday Inn and Sheraton Fiesta franchise brands and we pay franchise fees for the use of these brands. The Holiday Inn and Sheraton Fiesta brands constitute 4.5% of our total rooms.

The following table sets forth our hotels organized by brand, lists the country where each hotel is located, characterizes each hotel’s location as urban areas or coastal regions, identifies whether each hotel is owned, leased or managed, indicates the number of rooms per hotel and, for owned hotels, indicates our percentage ownership as of December 31, 2009:

Fiesta Inn

Hotel State Country Urban/Coastal Type Rooms %Owned

Acapulco Guerrero Mexico Coastal Managed 220 0% Aeropuerto Ciudad de Mexico Distrito Federal Mexico Urban Owned 327 100% Aguascalientes Aguascalientes Mexico Urban Owned 125 52% Celaya Guanajuato Mexico Urban Managed 124 0% Centro Historico Distrito Federal Mexico Urban Leased 140 0% Chihuahua Chihuahua Mexico Urban Owned 152 52% Ciudad del Carmen Campeche Mexico Urban Managed 131 0% Ciudad Juarez Chihuahua Mexico Urban Owned 166 52% Ciudad Obregon Sonora Mexico Urban Managed 123 0% Coatzacoalcos Veracruz Mexico Urban Managed 122 0% Colima Colima Mexico Urban Managed 104 0% Cuautitlan Estado de Mexico Mexico Urban Leased 128 0% Cuernavaca Morelos Mexico Urban Managed 155 0% Culiacan Sinaloa Mexico Urban Leased 142 0% Durango Durango Mexico Urban Managed 138 0% Ecatepec Estado de Mexico Mexico Urban Leased 143 0% Guadalajara Expo Jalisco Mexico Urban Owned 158 52% Hermosillo Sonora Mexico Urban Leased 155 0% Insurgentes Viaducto Distrito Federal Mexico Urban Leased 210 0% La Paz Baja California Sur Mexico Coastal Managed 120 0% Leon Guanajuato Mexico Urban Owned 160 50% Mazatlan Sinaloa Mexico Coastal Managed 117 0% Mexicali Baja California Mexico Urban Owned 150 52% Monclova Coahuila Mexico Urban Owned 121 50% Monterrey Centro Nuevo Leon Mexico Urban Managed 231 0% Monterrey Fundidora Nuevo Leon Mexico Urban Managed 155 0% Monterrey La Fe Nuevo Leon Mexico Urban Owned 161 52% Monterrey Norte Nuevo León Mexico Urban Managed 156 0% Monterrey Valle Nuevo Leon Mexico Urban Owned 176 100% Morelia Michoacan Mexico Urban Leased 253 0% Naucalpan Estado de Mexico Mexico Urban Managed 119 0% Nogales Sonora Mexico Urban Managed 107 0% Nuevo Laredo Tamaulipas Mexico Urban Managed 111 0% Oaxaca Oaxaca Mexico Urban Managed 143 0% Orizaba Veracruz Mexico Urban Managed 103 0% Pachuca Hidalgo Mexico Urban Leased 114 0%

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Periferico Sur Distrito Federal Mexico Urban Leased 212 0% Perinorte Distrito Federal Mexico Urban Managed 123 0% Poza Rica Veracruz Mexico Urban Managed 107 0% Puebla FINSA Puebla Mexico Urban Managed 123 0% Queretaro Queretaro Mexico Urban Owned 175 52% Reynosa Tamaulipas Mexico Urban Managed 127 0% Saltillo Coahuila Mexico Urban Owned 149 52% San Luis Potosi Glorieta Juarez San Luis Potosi Mexico Urban Managed 135 0% San Luis Potosi Oriente San Luis Potosi Mexico Urban Leased 140 0% Santa Fe Distrito Federal Mexico Urban Leased 189 0% Tampico Tamaulipas Mexico Urban Managed 124 0% Tepic Nayarit Mexico Urban Managed 139 0% Tijuana Otay Aeropuerto Baja California Mexico Urban Leased 142 0% Tijuana Rio Baja California Mexico Urban Leased 127 0% Tlalnepantla Estado de Mexico Mexico Urban Owned 131 100% Toluca Centro Estado de Mexico Mexico Urban Managed 85 0% Toluca Tollocan Estado de Mexico Mexico Urban Owned 144 80% Torreon Galerías Coahuila Mexico Urban Managed 146 0% Torreon Plaza la Rosita Coahuila Mexico Urban Managed 149 0% Tuxtla Gutiérrez Chiapas Mexico Urban Managed 120 0% Veracruz Boca del Río Veracruz Mexico Coastal Managed 144 0% Veracruz Malecón Veracruz Mexico Coastal Managed 92 0% Villahermosa Tabasco Mexico Urban Managed 145 0% Xalapa Veracruz Mexico Urban Managed 119 0%

Fiesta Americana Vacation Club

Hotel State Country Urban/Coastal Type Rooms %Owned

Cancun Quintana Roo Mexico Coastal Owned 179 100% Condesa Acapulco Guerrero Mexico Coastal Owned 324 100% Explorean Kohunlich Quintana Roo Mexico Coastal Owned 40 100% Los Cabos Baja California Sur Mexico Coastal Owned 134 100%

Fiesta Americana

Hotel State Country Urban/Coastal Type Rooms %Owned

Aguascalientes Aguascalientes Mexico Urban Managed 192 0% Condesa Cancun Quintana Roo Mexico Coastal Owned 502 92% Grand Coral Beach Cancun Quintana Roo Mexico Coastal Managed 602 0% Grand Chapultepec Distrito Federal Mexico Urban Managed 203 0% Grand Guadalajara Country Club Jalisco Mexico Urban Managed 208 0% Grand Los Cabos Baja California Sur Mexico Coastal Owned 249 100% Hacienda Galindo Queretaro Mexico Urban Owned 168 100% Hermosillo Sonora Mexico Urban Owned 221 100% Merida Yucatan Mexico Urban Owned 350 51% Reforma Distrito Federal Mexico Urban Owned 616 100% Veracruz Veracruz Mexico Coastal Managed 233 0% Centro Monterrey Nuevo Leon Mexico Urban Managed 207 0% Cozumel Dive Resort Quintana Roo Mexico Coastal Owned 224 100% Guadalajara Jalisco Mexico Urban Owned 391 100% Leon Guanajuato Mexico Urban Managed 211 0% Live Aqua Quintana Roo Mexico Coastal Leased 371 0% Puerto Vallarta Jalisco Mexico Coastal Managed 291 0% Queretaro Queretaro Mexico Urban Managed 173 0% Santa Fe Distrito Federal Mexico Urban Leased 172 0%

One Hotels

Hotel State Country Urban/Coastal Type Rooms %Owned

Acapulco Costera Guerrero Mexico Urban Managed 126 0% Aguascalientes Ciudad Industrial Aguascalientes Mexico Urban Managed 126 0% Aguascalientes San Marcos Aguascalientes Mexico Urban Managed 126 0% Ciudad de Mexico Patriotismo Distrito Federal Mexico Urban Owned 132 52% Coatzacoalcos Veracruz Mexico Urban Managed 126 0% Monterrey Aeropuerto Nuevo Leon Mexico Urban Managed 126 0% Queretaro Plaza Galerias Queretaro Mexico Urban Owned 126 52% San Luis Potosí Glorieta Juarez San Luis Potosí Mexico Urban Managed 126 0% Saltillo Derramadero Coahuila Mexico Urban Managed 126 0% Toluca Aeropuerto Estado de Mexico Mexico Urban Managed 126 0%

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Caesar Park

Hotel State Country Urban/Coastal Type Rooms %Owned

Buenos Aires Buenos Aires Argentina Urban Owned 173 88% Rio de Janeiro – Ipanema Rio de Janeiro Brazil Urban Owned 222 88% Sao Paulo International Airport Sao Paulo Brazil Urban Owned 153 100% Sao Paulo Faria Lima Sao Paulo Brazil Urban Leased 131 25% Silver Buenos Aires Obelisco Buenos Aires Argentina Urban Leased 74 0%

Caesar Business

Hotel State Country Urban/Coastal Type Rooms %Owned

CB Sao Paulo International Airport Sao Paulo Brazil Urban Owned 232 100% CB Lagoa dos Ingleses Minas Gerais Brazil Urban Managed 123 0% CB Sao Jose dos Campos Sao Paulo Brazil Urban Managed 157 0% CB Rio de Janeiro-Botafogo Rio de Janeiro Brazil Urban Managed 110 0% CB Belo Horizonte Minas Gerais Brazil Urban Leased 158 0% CB Sao Paulo-Paulista Sao Paulo Brazil Urban Managed 400 0% CB Sao Paulo Faria Lima Sao Paulo Brazil Urban Managed 213 0% CB Santiago de Chile Santiago de Chile Chile Urban Leased 142 0%

Other

Hotel State Country Urban/Coastal Type Rooms %Owned

Holiday Inn Laredo Civic Center Texas USA Urban Owned 202 100% Holiday Inn Sunspree Resort (South Padre Island) Texas USA Coastal Managed 227 0% Sheraton Fiesta Beach Resort (South Padre Island) Texas USA Coastal Managed 250 0% Holiday Inn Merida Yucatan Mexico Urban Managed 213 9%

Because of our market position and strong reputation, during the last few years we have been able to expand our hotel business mainly through increasing our operation of hotels developed with investment capital provided by third parties, thus reducing our need to use financial resources generated by our own cash flow or financing activities. We plan to open 52 hotels with approximately 7,233 rooms over the next three years, and expect that approximately 86% of those hotels will be managed hotels.

We are also exploring the possibility of developing a multi-stage, multi-complex hotel and vacation resort campus in Chemuyil on the Riviera Maya, between Tulum and Playa del Carmen. In 1998 we acquired certain beneficial rights derived from an irrevocable trust agreement entered into by us and the Instituto del Patrimonio Inmobiliario de la Administración Pública Estatal del Estado de Quinta Roo, or IPAE, the real estate entity of the state of Quintana Roo. The trust’s sole asset is a parcel of land comprised of 130.72 hectares. In order to acquire full ownership of the land held in the trust, we must satisfy certain conditions including, but not limited to, the construction of 250 rooms or FAVC units by December 2010. If we fail to satisfy the conditions in the trust agreement, the land will revert to the government of Quintana Roo. There are no assurances that our current plan or any plan for the project will be completed, or that we will be able to timely comply with the trust’s requirements to acquire the land. Several terms necessary for completion of the project, including the financing strategy we would use, remain to be determined. See “Risk Factors—Hotel and vacation club development is subject to timing, budgeting and other risks.”

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The following table sets forth, for the indicated periods, certain operating data by brand for the hotels in our portfolio:

Total Portfolio

ADR(1)(2) ADR(1)(2) REVPAR(2)(3) REVPAR(2)(3) Occupancy Ps. U.S.$ Ps. U.S.$

Fiesta Americana and Fiesta Americana Grand(4) Year ended December 31, 2008 ............................. 61% 1,286 116 784 71 Nine months ended September 30, 2009 ............... 52% 1,293 94 670 49

Fiesta Inn

Year ended December 31, 2008 ............................. 64% 854 77 547 50 Nine months ended September 30, 2009 ............... 57% 840 62 480 35

Live Aqua

Year ended December 31, 2008 ............................. 30% 2,669 241 794 72 Nine months ended September 30, 2009 ............... 39% 2,341 171 913 67

One Hotels

Year ended December 31, 2008 ............................. 53% 578 52 304 27 Nine months ended September 30, 2009 ............... 50% 572 42 286 21

Caesar Park and Caesar Park Silver

Year ended December 31, 2008 ............................. 58% 2,045 182 1,183 106 Nine months ended September 30, 2009 ............... 44% 2,312 169 1,015 74

Caesar Business

Year ended December 31, 2008 ............................. 59% 1,013 91 600 54 Nine months ended September 30, 2009 ............... 53% 1,139 84 604 44

Other Brands(5)

Year ended December 31, 2008 ............................. 39% 1,200 113 466 44 Nine months ended September 30, 2009 ............... 33% 1,644 123 543 41

(1) ADR is calculated by dividing total room revenues for the period indicated by total room nights sold during such period.

(2) ADR and REVPAR figures are presented for all of the hotels in our portfolio. Therefore, these figures include information

relating to hotels we do not own (i.e., those we manage but that are owned by third parties).

(3) REVPAR is calculated as ADR multiplied by the occupancy rate (equivalent to dividing total room revenues by total room

nights available for sale).

(4) Includes hotels operating under the Fiesta Americana, Fiesta Americana Grand.

(5) Includes hotels operating under the Holiday Inn, Residence Inn and Sheraton Fiesta names.

Vacation Club Business—Fiesta Americana Vacation Club

We also operate a vacation club business through which we market and sell memberships that grant a right to use our vacation club resorts we own and operate in upscale destinations in Mexico including Los Cabos, Cancún, Acapulco and Kohunlich, Mexico, as well as other affiliated properties. Our vacation club business operates under the brand name Fiesta Americana Vacation Club, or FAVC. The Cancún property has 179 units, the Los Cabos property has 134 units, the Acapulco property has 324 units and the Kohunlich has 40 units. We expect that demand for FAVC properties may grow so as to allow us to expand the Los Cabos property and to develop a resort in Chemuyil on the Riviera Maya. As of September 30, 2009, FAVC had nearly 29,000 members, primarily residents of Mexico and the United States.

Vacation club members buy a “40-year-right-to-use” evidenced by an annual allocation of vacation club points. FAVC typically charges an initial payment of 10% and offers installment payment plans that accrue interest for the balance of the purchase price. Historically, substantially all vacation club sales have been denominated in U.S. dollars. Due to the on-going financial crisis, a significant portion of our vacation club receivables portfolio has been re-denominated in pesos, albeit at a higher interest rate, for the benefit of certain members facing liquidity difficulties. Almost all Mexican members that wanted to convert their installment payment obligations from U.S. dollars were able to do so. We expect to continue to offer peso-denominated payment plans to Mexican residents challenged by the

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current economic situation. See “Risk Factors—The vacation club business is subject to risk of member defaults.”

Vacation club points can be redeemed to stay at our FAVC properties, as well as any of our hotels or, through FAVC’s affiliations with Resorts Condominium International, or RCI, and Hilton Hotels Corp., any RCI-affiliated resort or Hilton Grand Vacation Club, or HGVC, resort throughout the world. In connection with FAVC’s agreement with HGVC, HGVC provides certain services related to product development and vacation club design, sales and marketing consultation transaction processing, and member contact and communication. Members can also exchange points for miles on partner airlines.

Since its inception in 1999, FAVC has become a significant source of our revenue. FAVC contributed approximately 20.9% and 29.2% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

Other Related Services Businesses

We have established a number of related business that attempt to market to third-parties our management skills and technology platform initially developed to support our hotel operating business.

Ampersand

Our Ampersand business manages various loyalty programs with world-class capabilities in consulting, developing, executing, operating and managing such loyalty programs. Ampersand contributed approximately 8% and 8% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

We believe Ampersand is the market leader for the administration of loyalty programs in Mexico. To achieve customer objectives, Ampersand combines call center services, benefits and prizes, a technological platform and commercial alliances, as well as specialized website design, marketing, communication and fulfillment programs. The business concept developed from our success with our Fiesta Rewards customer loyalty program, which launched in 1989, and which Ampersand continues to manage. Ampersand has since expanded to service several well-known financial institutions as well as customers in the insurance and automotive service industry. As Ampersand grows to service additional loyalty programs and as the currently-served loyalty programs gain additional members, we expect to achieve benefits of scale to allow us, among other things, to negotiate more favorable arrangements with companies, such as hotels, airlines and car rental companies, to offer increasingly desirable prizes and benefits to loyalty program members at a lower cost to us.

Conectum

Our Conectum unit offers business process outsourcing services such as accounting, payroll and technology services to a variety of industries. Like Ampersand, the Conectum business has its roots in our efforts to consolidate and integrate the financial operations of the different hotels in our portfolio. Conectum contributed approximately 2% and 2% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

We achieved the consolidation and integration of our financial operations by implementing a shared services center in Morelia, Michoacan, Mexico, where we also migrated our business operations to a single platform. This allowed our hotels to focus on their core business strategy: providing optimal guest services. Since the establishment of the Morelia services center in 2003, we service all of our owned and leased hotels, all of our One Hotels and most of our managed Fiesta Americana, Fiesta Americana Grand and Fiesta Inn hotels. Currently, we are attempting to expand Conectum’s business by providing the cost and process optimization benefits we have enjoyed as hotel operators to third-party clients. In partnership with Accenture, we are transforming Conectum into a world-class business process outsourcing services provider that offers best-practices-based financial processes supported by state of the art applications and operated by high-class professionals specialized in our various operational processes.

Konexo

Our Konexo business provides call center and customer care services to a variety of clients. The Konexo service center in Morelia, Michoacan, Mexico has grown out of our efforts to create an efficient

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and less expensive direct and real-time distribution channel for our hotel operations. Konexo contributed approximately 3% and 3% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

Initially, the service center handled the central reservation call center for our managed hotels. Based on this platform, Konexo has expanded to serve clients who seek to improve the efficiency of their critical contact processes. The service center handles thousands of contacts per day, thus making it among the ten most important contact centers in Mexico, and the services offered include, among others, reservations, customer care, specialized telemarketing, loyalty program services, database creation, electronic mail management and account validation.

Since its establishment in 2007, Konexo has increased the number of call center positions by approximately 200%. In 2008 alone, Konexo’s call volume increased 183%. This exponential growth brings the business closer to fulfillment of its mission: to become the Latin American leader in contact solutions oriented toward end customer satisfaction. Konexo’s client portfolio includes both internal and external customers.

GloboGO

Our GloboGO business offers travel planning services that optimizes the flow of real-time inventory information from providers to end-consumers. GloboGO manages inventory information for hotel accommodations, flights, car rentals, bus transport and tour operators and operates through a variety of channels including through our website, call center and network of ticket offices. Recently, GloboGO has also begun operating as a corporate travel agency to corporate clients in Mexico. GloboGO contributed approximately 1% and 1% of our revenues in 2008 and during the nine months ended September 30, 2009, respectively.

Organizational Structure

Grupo Posadas, S.A.B. de C.V. is a corporation with variable capital under the Mexican Ley General de Sociedades Mercantiles (the General Law of Business Associations). The corporate purpose of Grupo Posadas, S.A.B. de C.V. is, among other things, to acquire, hold, subscribe, dispose of or, in any other manner, perform commercial transactions related to stock and other equity interests in commercial entities or civil associations, incorporated according to Mexican or foreign law.

The chart on the following page presents the organizational structure of our main operating subsidiaries and our direct or indirect percentage of equity ownership in such subsidiaries as of September 30, 2009. The shaded boxes indicate subsidiaries that will be guarantors of the notes. For purposes of the chart “CP” means Caesar Park and “FA” and “FI” mean Fiesta Americana and Fiesta Inn, respectively.

Inmobiliaria Hotelera Posadas S.A. de C.V. (2)

(100%)

Hotel Condesa del MarS.A. de C.V.

(100%)

Posadas de México S.A. de C.V.

(100%)

Fondo Inmobiliario Posadas(3)

S.A. de C.V. (52%)

Posadas USA Inc.(100%)

Bia Acquisition Ltd. (6)(100%)

Ridgedale Corp.(100%)

MLIC, Inc.(100%)

Posadas de Latinoamérica,S.A. de C.V. (5)

(100%)

Fiesta Vacation,S.A. de C.V.

(100%)

Comisiones e Incentivos Fiesta, S.A. de C.V.

(100%)

Compañía Hotelera los Cabos, S.A. de C.V. (100%)

(FAVC - Los Cabos)

Desarrolladora Caribe,S.A. de C.V.

(100%) (FAVC)

Inversora Inmobiliaria Club S.A. de C.V.

(100%)

Compañía Desarrolladora Los Cabos, S.A. de C.V.

(100%)

Proyectos Ecológicos del Sureste, S.A. de C.V.

(100%)

Gran Operadora Posadas,S.A. de C.V.

(100%)

Hotelera del Sudeste,S.A. de C.V. (51%)

(FA Mérida)

Hotelera Inmobiliaria de Monclova, S.A. de C.V.

(50%) (FI Monclova)

Sudamérica en Fiesta,S.A. (7)(88%)

Posadas do Brasil Ltd.(100%)

Caesar Park Argentina,S.A. (100%)

(CP Buenos Aires)

Grupo Posadas S.A.B. de C.V. (1)

Soluciones de LealtadS.A. de C.V.

(100%)

Administradora de Propiedad Industrial Fiesta

Americana, LLC.(100%)

Administradora de Propiedad Industrial de Latino America, LLC.

(100%)

ConectumS.A. de C.V.

(100%)

Inmobiliaria Opus,S.A. de C.V. (100%)

Promotora Dinatur de Sonora S.A. de C.V.

(100%)

Arrendadora PosadasS.A. de C.V.

(100%)

Administradora Porto Ixtapa

S.A. de C.V. (100%)

Hoteles Fiesta Americana,S.A. de C.V.

(100%)

Altiuspar, Inc.(100%)

Hoteles Fiesta Inn,S.A. de C.V.

(100%)

Servicios Centrales de Cobranza,

S.A. de C.V. (100%)

Sunwild, Ltd(100%)

YIPA,S.A. de C.V.

(100%)

Inmobiliaria y Administradora Minerva,

S.A. de C.V. (100%)(FA Guadalajara - Land)

Operadora del Golfo de México, S.A. de C.V.

(100%)

Tesorería Central PosadasS.A. de C.V.

(100%)

Operadora FAVCS.A. de C.V.

(100%)

Fiesta Americana Vacation Credit, Sofom ENR.

(100%)

Impulsora de Vacaciones Fiesta

S.A. de C.V. (100%)

Hotelera Península Maya,S.A. de C.V. (100%)

(Explorean Costa Maya)

Inmuebles Cozumel Reef,S.A. de C.V. (100%)

Hoteles La Mansión,S.A. de C.V. (100%)

Inmobiliaria de la Ciudad deLoreto, S.A. de C.V.

(100%)

Inmobiliaria Punta Mita,S.A. de C.V.

(100%)

Kohunlich Adventures,S.A. de C.V.

(100%)

Promotora Hotelera Villahermosa,

S.A. de C.V. (100%)

Sian HoteleraS.A. de C.V. (100%)

Turística Hotelera Cabos Siglo XXI, S.A. de C.V.

(100%)

Inmobiliaria Insurgentes y Viaducto, S.A. de C.V.

(100%)

Posadas Venture, B.V.(4)(100%)

Hotelera Administradora de Aeropuertos,

S.A. de C.V. (100%)

Posadas Sudamerica Emprendimientos

Hoteleiros, Ltda. (100%)Porto Ixtapa, S.A. de C.V.

(100%)

Sistema Director de Proyectos

S.A. de C.V. (100%)

Konexo Centro deSoluciones, S.A de C.V.

(100%)

Proyectos y Construcciones OBS.A. de C.V. (50%)

(FI León)

Inmobiliaria Hotelera de Toluca,

S.A. de C.V. (79%) (FI Toluca)

Servicios Administrativos Los Cabos,

S.A. de C.V. (100%)

Promotora Inmobiliaria Hotelera, S.A. de C.V.

(100%)

Inmobiliaria Administradora del Valle, S.A. de C.V.

(100%)(FI Guadalajara)

Inmobiliaria Hotelera Napoles, S.A. de C.V.

(100%) (One Patriotismo)

Promotora Hotelera de Querétaro, S.A. de C.V.(100%) (FI Querétaro)

Hotelera Administradora de Monterrey, S.A. de C. V.

(100%)(FI Monterrey la Fe - Apto)

Promotora Turística de Saltillo S.A. de C.V. (100%)

(FI Saltillo)

Corporación Hotelera de Ciudad Juárez, S.A. de

C.V.(100%) (FI Ciudad Juárez)

Compañía Inm. Hotelera deChihuahua, S.A. de C.V.(100%) (FI Chihuahua)

Inmobiliaria Carretera Constitución de Queretaro,

S.A. de C.V.(100%) (One Queretaro)

Administradora Profesionalde Hoteles, S.A. de C.V.

(100%)

Administradora InmobiliariaPosadas,S.A. de C.V.

(100%)

Servicios Hoteleros Posadas

S.A. de C.V. (100%)

Altiuspar SolutionsS.A. de C.V.

(100%)

Operadora Porto Ixtapa, S.A. de C.V.

(100%)

Promotora Turistica de Mexicali, S.A. de C.V.(100%) (FI Mexicali)

Gran Inmobiliaria Posadas, S.A.de C.V.

(100%)

Inmobiliaria Hotelera de Aguascalientes, S.A. de

C.V. (100%) (FI Aguascalientes)

Promociones Hoteleras del Caribe, S.A. de C.V. (99.9%)

(FA Condesa Cancun)

Promotora del Caribe, S.A.(99.9%)

Axioma Demostrado, S.L.(100%)

South America Investment (100%)

Administradora de Propiedad Industrial

Posadas,LLC (100%)

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___________________________________

(1) Grupo Posadas, S.A.B. de C.V. is party to all of the hotel management contracts for our hotels in Mexico. (2) Inmobiliaria Hotelera Posadas, S.A. de C.V., or Inmobiliaria, is the subsidiary through which we hold all of our owned hotels in Mexico and South America and three vacation

club resorts. In general, separate subsidiaries of Inmobiliaria own the shares of each of our owned hotels in Mexico held through Inmobiliaria. However, Gran Operadora Posadas, S.A. de C.V., receives all of the cash flows of our wholly owned hotels in Mexico and pays rents for these hotels to Gran Inmobiliaria Posadas, S.A. de C.V. Operadora del Golfo, S.A. de C.V. owns all the personal property of our owned properties in Mexico.

(3) In order to obtain access to additional capital and greater flexibility in financing the development of Fiesta Americana, Fiesta Inn and One Hotels, in 1993 we sponsored the formation of Fondo Inmobiliario Posadas, S.A. de C.V., or FIP, a sociedad de inversión de capitales (closed-end investment fund) regulated by the CNBV under Mexican law. We own a 52.2% controlling equity interest in FIP, with the remainder owned by two unrelated third parties. Through FIP, we hold certain of our owned hotels in Mexico.

(4) Posadas Venture B.V. is the subsidiary through which we hold the brand names of South America for which we receive brand use fees. (5) Posadas de Latinoamérica, S.A. de C.V. is party to all of the lease contracts relating to our leased hotels in Mexico. (6) Bia Acquisition Ltd. is the subsidiary through which we hold one owned hotel located in the United States. (7) Sudamérica en Fiesta, S.A. is the subsidiary through which we hold all of our owned hotels in Brazil and Argentina.

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Projects Under Development

We continually assess opportunities to operate hotels in new locations. Our development department is responsible for identifying locations for new projects. We do not apply fixed statistical or numerical parameters when making a decision on whether to expand into a particular area, but our analysis takes into account the population of the city, the area’s level of local economic activity and the willingness of investors to invest capital in the location. Once a location has been identified by our development department, our marketing department evaluates the feasibility of the proposal by analyzing existing supply and demand for rooms in the area, the level of local competition, ranges of rates to charge, and which of our brands would be appropriate for the project. The following briefly discusses our current hotel projects under development.

Mexico

Over the next 36 months we plan to commence operating an additional 48 hotels in Mexico pursuant to management contracts we are currently negotiating or have already entered into, for a total of 6,596 additional rooms. We intend 24 of the hotels to operate under our One Hotels brand, 20 under our Fiesta Inn brand, two under our Live Aqua brand and two more to operate under our Fiesta Americana brand. Sixteen of the hotels are already under construction. Consistent with our growth strategy of operating additional hotels with minimum capital investment, we plan for 45 of these new hotels to be owned by unrelated third parties. We estimate that adding these hotels in Mexico will require a total investment of approximately U.S.$414 million, almost all of which we anticipate will be provided by third-party investors.

South America

Within the next 36 months we plan to commence operating an additional four hotels in South America pursuant to management contracts (three in Brazil, and one in Panama), for a total of 637 additional rooms. Three of these hotels will operate under the Caesar Business brand and one under the Caesar Park brand. One hotel is already under construction. Consistent with our growth strategy of operating additional hotels with minimum capital investment, we plan for all of these new hotels to be owned by unrelated third parties. We estimate that adding these hotels will require a total investment of approximately U.S.$30 million, almost all of which we anticipate will be provided by third-party investors.

Management Divisions

We operate our business through five divisions: hotel operations, hotel properties, vacation club, new business and finance. The heads of each of these five divisions, together with our Chairman of the Board of Directors, constitute our Executive Committee. See “Management—Executive Committee.”

The operations division is responsible for the day-to-day operations of our hotels and is focused on achieving optimum service and customer satisfaction levels at each of our properties. This division is responsible for developing and enforcing guidelines, policies and procedures that seek to ensure brand consistency throughout all of the hotels in our portfolio. This division is responsible for the implementation of Delphos, our proprietary quality assurance system. In addition, our sales force reports to the operations division. This division is also responsible for planning, managing and overseeing our development pipeline, including identifying locations for new projects and evaluating the feasibility of a proposed location. See “—Projects Under Development.”

The hotel properties division is responsible for maximizing the value of our hotel properties and increasing the profitability of those assets. The division also handles procurement and purchasing for our enterprise.

The vacation club division is responsible for the sales, operation and development of the Fiesta Americana Vacation Club business.

The new business division is responsible for managing our distribution network, customer loyalty programs, as well as strengthening and marketing our brand identity. Our new businesses report to the division head including Ampersand, Conectum, Konexo and GloboGO.

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The finance division is responsible for overseeing and managing our finances. In particular, this division manages our financial, treasury, tax, insurance, banking relationships, loan administration and derivatives policies. Additionally, information technology reports to the head of the finance division.

Systems and Technology

We believe that investing in new systems and technology is critical to our growth and distinguishes our enterprise from other companies in the Latin American hotel and tourism industry. Throughout our history we have developed new systems, technology and platforms that we believe have allowed us to achieve success by optimizing our product distribution, managing our operations more efficiently and cultivating the talents of our employees.

One such capability is ICP, our centralized and consolidated room inventory solution for our entire hotel portfolio. ICP updates in real-time as room availability changes and this information is furnished to all distribution channels through which we sell rooms. We believe the ICP platform allows us to optimize our earnings by allowing us to price our actual room inventory rapidly to meet fluctuations in customer demand.

Another such capability is Delphos, our guest experience system that places our guests at the very core of our operations by recognizing them and personalizing the service they receive before, during and after their stay, systematizing their benefits and exerting rigorous control over their requests and our responses to them over the course of their stay.

See “Risk Factors—Our intellectual property portfolio may not prevent competitive offerings, and we may not be able to obtain necessary licenses” and “Risk Factors—A network failure could cause delays or interruptions of service, which could cause us to lose customers and revenues” for risks associated with our systems and technology.

Seasonality

Of the 19,454 hotel rooms we operate, approximately 80% are in urban or suburban locations and cater primarily to business travelers. These hotel operations have not experienced significant seasonal fluctuations aside from minor reductions in occupancy during the holiday season from mid-December through mid-January. The remaining hotel rooms we operate are in coastal resort locations. Our coastal hotel operations generally experience two peak seasons. The first peak, the traditional winter season, occurs during the months of December through April and results primarily from foreign tourism. The second peak occurs during the summer months of July through August and results from Mexican and foreign tourism. This seasonality can be expected to cause quarterly fluctuations in our revenues. See “Risk Factors—The hotel industry is seasonal in nature.”

Competition

The hotel industry is highly competitive. Our resort hotels compete with other resort hotels in Mexico and other countries. Our hotels generally compete with a variety of Mexican and international hotel operators, some of which, on an international basis, are substantially larger than us and operate under well-known international brand names. In mid-size urban areas and suburbs of large cities, our hotels primarily compete with Mexican and international chains as well as independently owned and managed hotels. Depending upon the class of the hotel, competition is based primarily upon price, quality of facilities and services offered, physical location within a particular market and the ability to earn and redeem customer loyalty program points. Hotel owners must make continuing expenditures for modernization, refurbishment and maintenance to prevent competitive obsolescence. The competitiveness of our hotels has been enhanced by our customer loyalty program and the Fiesta Americana Vacation Club.

The principal competitors of our Fiesta Americana hotels are other high-end international and Mexican chains such as Camino Real, Hyatt, Sheraton and Intercontinental. The competitors of our Fiesta Inn hotels are both independent local hotel operators and moderately priced international and Mexican chains such as Holiday Inn, Hampton Inn, NH Hotels and City Express. Our Caesar Park hotels compete primarily with other high-end international brands, such as Sheraton, Hyatt, Hilton, Marriott, Sofitel and Intercontinental. The principal competitors of our Caesar Business hotels are other moderately priced brands such as Blue Tree, Four Points and Accor.

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In our efforts to increase the number of hotel properties we manage to our portfolio, we also compete with entities who seek the same opportunities to enter into management contracts with hotel owners. Some of these entities have substantially greater marketing and financial resources than we do, although few are as well situated as we are in the markets that we serve. Our principal competitors for management opportunities include Marriott, Hilton and Starwood. We do not allow any competitors to operate hotels under our distinctive brands.

The vacation club industry is also highly competitive. FAVC competes primarily with Palace Resorts, Club Regina and Royal Holiday Club in Mexico, and generally with other vacation club destinations in the Caribbean and other coastal resort areas.

We are also subject to competition in our services businesses. Ampersand competes with small to medium-sized companies in the loyalty program management business in Mexico, but we do not believe that any of these competitors integrate the range of capabilities that Ampersand offers to its customers. Konexo competes with many large, multinational providers of call center and contact services. Conectum competes with many entities offering similar business process outsourcing services and with accounting professionals who provide some similar services.

Environmental Matters

We are subject to certain legal requirements and potential liabilities under various federal, state and municipal environmental laws and regulations, including the regulations for environmental impact, hazardous waste and prevention and control for the contamination of water, air and soil, which we refer to as “Environmental Laws”. Governmental authorities may impose certain administrative and criminal penalties or fines for violation of Environmental Laws. Such authorities may also, among other things, close, either indefinitely or temporarily, operations of any businesses located at any real properties found in violation of any Environmental Laws. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The punishment for infringement of the Environmental Laws might consist of remediation of the damaged environment, administrative and criminal penalties and fines. The presence of hazardous or toxic substances may adversely affect the owner’s ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We do not believe that we use substances or generate waste that may be deemed hazardous or toxic under applicable Environmental Laws. We have not been subject to or suffered any civil liabilities or costs related to cleaning up contamination resulting from historic uses of our current or former properties owned, leased or managed by us.

In addition to the above, owners and operators of real property may face civil liability for personal injury or property damage because of various environmental conditions such as alleged exposure to hazardous or toxic substances, poor indoor air quality, radon or poor drinking water quality.

We are also subject to other laws and regulations relating to operation and closure of storage tanks, and preservation of wetlands, coastal zones or endangered species, which could limit our ability to develop, use, sell or rent our real property or use it as collateral. Future changes in environmental laws or the discovery of currently unknown environmental conditions may have a material adverse effect on our financial condition and results of operations. In addition, Mexican environmental regulations have become increasingly stringent over the last decade. This trend is likely to continue and may be influenced by the environmental agreement entered into by Mexico, the United States and Canada in connection with NAFTA. Accordingly, there can be no assurance that more stringent enforcement of existing laws and regulations or the adoption of additional laws and regulations would not have a material effect on our business and financial condition or prospects.

Intellectual Property

We own various trademarks either directly or through our subsidiaries that are registered in Mexico and/or in certain foreign countries in which we operate, including Live Aqua®, Fiesta Americana®, Fiesta Americana Grand®, Fiesta Americana Vacation Club®, Fiesta Rewards®, Fiesta Inn®, One Hotels®, Caesar Park®, Caesar Business®, Posadas® Ampersand®, Konexo®, Conectum® and GloboGO®. We also

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own various unregistered trademarks either directly or through our subsidiaries, including Inventario Central PosadasTM, and ConectumTM. With respect to ICP we have filed a United States and an International patent application. In addition, we hold licenses either directly or through our subsidiaries to certain intellectual property used in connection with the management of our business, including the third-party software we use in our Conectum and ICP. We consider all of foregoing intellectual property and the associated name recognition to be valuable to our business. We know of no material legal challenge or imminent threat of a material challenge to our use of such intellectual property.

We are also party to co-existence agreements with Harrah’s Entertainment with respect to the “Caesar” name and with Aqua Hotels & Resorts with respect to the “Aqua” name.

Employees

As of October 31, 2009, we employed 7,989 employees at our owned hotels and corporate positions and 2,724 employees through third-party providers. As of October 31, 2009, 4,959 employees were employed at the hotels that we operate but with whom we do not have a direct contractual relationship.

In Mexico, approximately 44% of our workforce is unionized. Collective bargaining agreements with our unionized employees are entered between the individual hotels at which such unionized employees work and the relevant union. In general, there is a different union representing our unionized employees at each of our hotels. These collective bargaining agreements are generally reviewed and revised annually for salary adjustments and every two years for other contractual terms. Each of the individual hotel unions is affiliated with a national labor organization: either the CTM (Confederación de Trabajadores de México) or the CROC (Confederación Revolucionaria de Obreros y Campesinos).

During the past ten years, we have not had any material disputes with any of the unions that represent our employees. We currently believe that we have good relations with employees at all of our properties, as well as with the unions to which certain of our employees belong.

Regulation

Our operations are subject to federal, state and municipal regulations in each of the jurisdictions in which we operate. See “Risk Factors—We are subject to governmental regulations.”

In Mexico, each of our hotels is granted a business license by both the state and the municipality to operate locally. We must also register each of our hotels and the rates charged by each of them with the Mexican Registro Nacional de Turismo (National Tourism Registry), together with any related services such as restaurants and bars provided by such hotel. State and municipal laws in Mexico also regulate fire safety. Additionally, each of our hotels is required to have sanitation licenses and hotel construction projects are required to have a construction license and environmental authorization, and must comply with several zoning and land-use regulations. We believe that we are in material compliance with all applicable sanitation and construction licenses in Mexico, and with the environmental authorizations and zoning and land-use regulations applicable to our operations.

Our operations in Mexico are also subject to the Mexican Ley General de Equilibrio Ecológico y de la Protección al Ambiente (General Law of Ecological Stabilization and Environmental Protection), the rules and regulations published thereunder and the state and local equivalents. Under this law, companies are under the regulatory jurisdiction of the Mexican Secretaría del Medio Ambiente y Recursos Naturales (Ministry of the Environment and Natural Resources). Environmental regulations in Mexico became stricter in the past decade in a trend that is likely to continue in the future in view of the environmental agreements entered by Mexico, the United States and Canada in connection with NAFTA. We have an internal environmental and safety compliance program that seeks to ensure that all of our properties and businesses are in compliance with applicable environmental laws and regulations. We believe that we are taking appropriate measures to ensure compliance and/or are in compliance with all environmental laws and regulations.

We develop and operate vacation club resorts and we market and sell memberships in the vacation club. We generally sell the memberships pursuant to interest-accruing installment payment arrangements that require a10% down payment. These activities are all subject to regulation, including the standards established by the Official Mexican Standards. For example, Mexican regulations grant the

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purchaser of a vacation club membership the right to rescind the purchase contract at any time within a minimum statutory rescission period of five business days that begins upon the signing of the contract. These activities are also regulated at the state level; therefore, regulations may vary in each state in which we operate. In addition, the Procuraduría Federal del Consumidor (Mexican Consumer Protection Agency) must authorize our model contract for the sale of vacation club memberships.

In addition to the regulations discussed above, each of our hotels is subject to extensive federal, state and local regulations in Mexico, the United States, Brazil, Argentina and Chile, as applicable, and, on a periodic basis, must obtain various licenses and permits, including, but not limited to, those relating to the operation of restaurants, swimming pools, fitness club facilities, parking garages, the sale of alcoholic beverages and occupational health and safety.

We believe that we are in material compliance with applicable laws and regulations and have obtained all applicable licenses and permits and that our business is conducted in substantial compliance with applicable laws.

Legal Proceedings

We are involved in various tax proceedings, including several tax disputes with federal tax authorities in respect of our operations in the States of Baja California Sur and Quintana Roo alleging underpayments by us and certain of our subsidiaries for aggregate claims that are substantial and total approximately Ps.1,121.0 (U.S.$83.1) million. The foregoing amount does not include other amounts such as fees, penalties and interest that we may be required to pay if these claims are unfavorable to us.

On November 12, 2004, the Servicio de Administración Tributaria (Tax Administration Service), or SAT, the Mexican federal revenue service, alleged that we failed to pay certain income taxes in fiscal year 2000 and levied a claim seeking Ps.103.2 (U.S.$7.7) million. We filed a juicio de nulidad (annulment action) before the Tribunal Federal de Justicia Fiscal y Administrativa (Federal Court of Fiscal and Administrative Justice), or TFJFA, to challenge the claim. Each party has presented its case to the TFJFA and we are currently awaiting a decision.

On April 28, 2005, the SAT alleged that Compañía Hotelera Los Cabos S.A. de C.V., one of our subsidiaries, failed to pay certain value-added taxes and income taxes in fiscal year 2000 and levied a claim seeking Ps.252.6 (U.S.$18.7) million. We initiated an administrative proceeding before the SAT to challenge the claim. The SAT did not act on our challenge and, consequently, we filed an annulment action before the TFJFA to challenge the claim. One of our subsidiaries, Inmobiliaria Hotelera Posadas S.A. de C.V., issued a payment guarantee in the amount of the claim in connection with the annulment action. Each party has presented its case to the TFJFA and we are currently awaiting a decision.

On January 23, 2006, the SAT alleged that Compañía Desarrolladora Los Cabos S.A. de C.V. failed to pay certain value added taxes and income taxes in the fiscal year 2000 and levied a claim seeking Ps.244.8 (U.S.$18.1) million. We initiated an administrative proceeding before the SAT to challenge the claim. The SAT did not act on our challenge and, consequently, we filed an annulment action before the TFJFA to challenge the claim. One of our subsidiaries, Inmobiliaria Hotelera Posadas S.A. de C.V., issued a payment guarantee in the amount of the claim in connection with the annulment action. The SAT has not yet answered our claim.

On September 4, 2007, the SAT alleged that we failed to pay certain income taxes in fiscal year 2000 and levied a claim seeking Ps.430.7 (U.S.$31.9) million. We filed an annulment action before the TFJFA. Two of our subsidiaries, Operadora del Golfo de Mexico, S.A. de C.V. and Gran Inmobiliaria Posadas, S.A. de C.V., have provided payment guarantees in the amount of the claim in connection with the annulment action. In addition, as security for the payment guarantee obligations, each of Operadora del Golfo de Mexico, S.A. de C.V. and Gran Inmobiliaria Posadas, S.A. de C.V. have granted a lien on one of their hotel buildings with a value in excess of the amount of the claim. The annulment action is currently in the pleadings stage.

On April 25, 2008, the SAT alleged that we failed to pay certain asset and income taxes in fiscal year 2001 and levied a claim seeking Ps.89.7 (U.S.$6.6) million. We filed an annulment action before the TFJFA to challenge the claim. Two of our subsidiaries, Posadas de Mexico, S.A. de C.V. and Hoteles La

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Mansion S.A. de C.V., issued payment guarantees in the amount of the claim in connection with the annulment action. The annulment action is currently in the discovery stage.

If any of these various actions is resolved unfavorably to us, we may ultimately be required to pay the amounts levied together with certain interest, penalties and fees associated with our challenges. These amounts are likely to be significant if so resolved. Tax proceedings pose a significant amount of unpredictability and, as a result, we cannot forecast the outcome of any of these proceedings, when they may be resolved or the final amounts that may be payable in connection therewith. As of September 30, 2009, we had not recorded any reserves in relation with such disputes as our management believes, based on the opinions of our tax advisors and as permitted under Mexican FRS, that the likelihood of an unfavorable outcome is possible but less than probable. If all or a significant part of these actions were decided adversely to us, it could have a material impact on our business, financial condition and results of operations. See “Risk Factors—We are subject to significant claims under tax disputes in Mexico for which we do not maintain reserves.”

Other Proceedings

In addition to the matters described above, we are from time to time subject to certain claims and party to certain legal proceedings incidental to the normal course of business. In view of the inherent difficulty of predicting the outcome of legal matters, we cannot state with confidence what the eventual outcome of these pending matters will be, what the timing of the ultimate resolution will be or what the eventual loss, fines or penalties related to each pending matter may be.

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MANAGEMENT

Board of Directors

Pursuant to our estatutos sociales (by-laws), members of our Board of Directors are elected annually at the ordinary general stockholders’ meeting by our stockholders. Our Board of Directors takes all major decisions concerning the management of Grupo Posadas, S.A.B. de C.V. Our by-laws have been amended in order to comply with the requirements of the Mexican Securities Market Law and the regulations thereunder, which require us, among other things, to have at least five members of the Board of Directors but no more than 21 (plus their respective alternates) and that at least 25% of the members should be independent. Our by-laws also require that a majority of the members of our Board of Directors be Mexican citizens. Our current Board of Directors is comprised of fourteen members and five alternate members.

The following table lists the current members of our Board of Directors:

Name Age Position Date of Designation

Gastón Azcárraga Andrade 54 Chairman of the Board of Directors and Chief Executive Officer

July 29, 1988

Enrique Azcárraga Andrade 45 Director May 31, 1991

Pablo Azcárraga Andrade 51 Vice Chairman of the Board of Directors, Executive Vice President and Chief Executive of Propietaria Posadas

April 29, 1997

Fernando Chico Pardo 57 Director July 26, 1995

Joaquín Vargas Guajardo* 55 Independent Director April 24, 1996

Carlos Llano Cifuentes* 77 Independent Director July 22, 1992

Antonio Madero Bracho* 72 Independent Director July 28, 1993

Sergio Mariscal Lozano* 51 Independent Director April 22, 2004

José Carlos Azcárraga Andrade 44 Executive Vice President and Chief Executive of Fiesta Americana Vacation Club

April 30, 2008

Jorge Soto y Galvez* 66 Independent Director April 28, 2006

Alfredo H. Harp Calderoni(1) 40 Independent Director April 28, 2006

Carlos Levy Covarrubias 48 Director April 28, 2006

Emilio Carrillo Gamboa* 72 Independent Director April 28, 2006

Manuel Borja Chico 44 Director, Chief Executive Officer of Grupo Mexicana de Aviación, S.A. de C.V.

November 30, 2007

(*) Independent board members (1) Mr. Alfredo H. Harp Calderoni died on July 5, 2009. The vacancy on the board of directors has not been filled pending the

annual shareholders meeting.

Set forth below is a brief summary of the business experience of our directors:

Gastón Azcárraga Andrade

Mr. Azcárraga is the Chairman of the Board of Directors and Chief Executive Officer of Grupo Posadas, S.A.B. de C.V. Since Mr. Azcárraga’s arrival to Posadas, it has undergone vast expansion, and has been operating over 100 hotels and nearly 20,000 rooms within Mexico and Latin America. Mr. Azcárraga is also Chairman of the Board of Directors of Grupo Mexicana de Aviación, S.A. de C.V. (part of One World Alliance). Both companies generate approximately 18,000 direct jobs today. Mr. Azcárraga holds a degree in industrial engineering from Universidad Anahuac, Mexico City, and a master’s degree in business administration from Harvard Business School.

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Mr. Azcárraga’s extensive curricula also include being member of the Board of Directors of BBVA Bancomer, S.A., and Cementos Holcim Apasco, S.A. de C.V., member of the David Rockefeller Center for Latin American Studies, and currently the President of the Technology Museum of the Federal Electricity Commission (Museo Tecnológico de la Comisión Federal de Electricidad). Mr. Azcárraga is also engaged in numerous charitable activities with Fundación Posadas, A.C.

Enrique Azcárraga Andrade

Mr. Azcárraga is an industrial engineer with an MBA degree from Harvard University. He has collaborated in several prestigious Mexican companies such as Operadora de Bolsa, S.A. de C.V., Grupo Posadas, S.A.B. de C.V., DESC – Sociedad de Fomento Industrial, GBM – Grupo Bursátil Mexicano, S.A.B. de C.V., and is currently the General Director of Exio, S.C., an investment consulting company.

Pablo Azcárraga Andrade

Mr. Azcárraga is currently the Vice Chairman of the Board of Directors, Executive Vice President and Chief Executive of Propietaria Posadas. Since Mr. Azcárraga’s arrival to Grupo Posadas, S.A.B. de C.V., in 1986, he has been in charge of numerous hotel openings, development and management projects such as Holiday Inn Crowne Plaza (today Fiesta Americana Reforma) and Fiesta Americana Condesa Cancún, among others. From 1992 through late 2008, Mr. Azcárraga led the supervision, management, development and aggressive expansion of the Posada’s hotels and brands, such as Fiesta Americana, Fiesta Americana Grand, Fiesta Inn, Caesar Park and Caesar Business in Mexico and South America.

Mr. Azcárraga holds an accounting degree from Universidad Anahuac, Mexico City, and a master’s degree in hotel management from Cornell University. He also holds an executive degree in advanced management from Harvard University. Mr. Azcárraga is also involved in the charitable activities of Fundación Posadas, A.C.

Fernando Chico Pardo

Mr. Chico holds a college degree in business and a master’s degree in business administration from Northwestern University. Mr. Chico has held several positions in the following companies: Bimbo, S.A. de C.V., Anderson Clayton, Bank of America, Salomon Brothers, Standard Chartered Bank, Mocatta Metals Corporation, Casa de Bolsa Acciones y Asesoría Bursátil, Inversora Bursátil, Grupo Financiero Inbursa and is currently the President of Promecap, S.C. and ASUR, S.A.B. de C.V. Mr. Chico is also an active member of the Board of Directors of: Grupo Financiero Inbursa, S.A., Condumex, S.A. de C.V., Grupo Carso, S.A.B. de C.V., Sanborns, S.A. de C.V., Sears Roebuck de México; United Pension Fund; Quantum Grupo of Funds and Papalote Museo del Niño, among others.

Joaquín Vargas Guajardo

Mr. Vargas is the President of the Board of Directors of Corporación Mexicana de Restaurantes, S.A. de C.V., and has been a member of the Board of Directors for over 31 years. He is currently the President and General Manager of Grupo MVS, S.A. de C.V., and has participated as President of the Consejo Directivo de la Cámara Nacional de la Industria de Radio y Televisión, as President of the Asociación Mexicana de Restaurantes and President of the Asociación de Directores de Cadenas de Restaurantes. Mr. Vargas is currently participating in the board of directors of Grupo Vitro, S.A.B. de C.V., El Universal, S.A. de C.V., Grupo Costamex, S.A. de C.V., Médica Sur, S.A. de C.V., and the Mexican Stock Exchange, among others.

Carlos Llano Cifuentes

Mr. Llano is an economist from Universidad Complutense de Madrid with a doctorate in philosophy from the Universidad Nacional Autónoma de México and Universidad Santo Tomás in Rome, Italy. From 1968 through 1994, he was the President and Founder of the Consejo Superior del Instituto Panamericano de Alta Dirección de Empresa (IPADE), and Dean of Universidad Panamericana from 1985 through 1994. He was a member of the board of the Human Rights Commission in Mexico City and founder of Universidad Bonaterra in the State of Aguascalientes, Mexico. He holds numerous acknowledgments and awards such as: Business Merit Medal (Medalla al Mérito Empresarial), Eugenio

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Garza Sada Award, Honorary Member of Unión Social de Empresarios Mexicanos (USEM), Jaime Torres Bodet Award of Excellence. He has authored over twenty five books and coauthored six.

Antonio Madero Bracho

Mr. Madero is an engineer with a master’s degree in business administration from Harvard University. He is the founder and President of the Executive Committee of San Luis Corporación, S.A. de C.V., member and former president of Consejo Mexicano de Hombres de Negocios, and is a member in the board of the following companies: Deere & Company Goldcorp, Inc., Alfa, S.A.B. de C.V., Grupo Industrial Saltillo, S.A. de C.V., Grupo México, S.A. de C.V., and Museo Nacional de Arte. Mr. Madero is a former consultant for J.P. Morgan Chase.

Sergio Mariscal Lozano

Mr. Mariscal holds a degree in business, several diplomas from IPADE, NYSE and NASDAQ, and is qualified to trade securities (Series 7 Exam administered by FINRA). Mr. Mariscal has occupied several positions among financial institutions in Mexico, such as Casa de Bolsa Banamex, Operadora de Bolsa Inverlat, Inverméxico, and ING México, where he participated as Vice President of Private Banking. Mr. Mariscal was the Private Banking Vice President of Lehman Brothers branch in Miami for more than ten years.

José Carlos Azcárraga Andrade

Mr. Azcárraga holds a degree in Industrial Engineering from Anáhuac University, Mexico City Campus, and obtained a master’s degree in business administration from the J.L. Kellogg Graduate School, Northwestern University, Evanston, Illinois. Prior to joining Grupo Posadas, he worked for two years as a consultant for Booz Allen & Hamilton at the offices in Mexico, Washington DC, and Bogotá, Colombia, and also in the Chase Manhattan Bank of New York.

In 1995, he joined Grupo Posadas as Commercial Director of the Real Estate Division.

In 1997, he was in charge of the structure and design of the Fiesta Americana Vacation Club. He established a strong alliance with the Hilton Grand Vacations Club, and in 1999 was promoted to CEO of the Fiesta Americana Vacation Club, a position he has held to date.

In 2002, he was appointed Marketing Managing Director of Grupo Posadas. Since 2007, he has been the Executive Vice President and Chief Executive Officer of Fiesta Americana Vacation Club.

In 2008 he was appointed, and still is, the Chairman of the Mexican Resort Development Association (AMDETUR).

Jorge Soto y Gálvez

Mr. Soto holds an accounting degree from Universidad Nacional Autónoma de México. Prior to joining Grupo Posadas, S.A.B. de C.V., Mr. Soto worked in Arthur Andersen and managed some of the elite clients of the firm, until becoming part of the Executive Committee for the Mexico division. Mr. Soto has been a member of the board of directors of several elite clients of Arthur Andersen and currently has his own consulting company.

Carlos Levy Covarrubias

Mr. Levy holds a bachelor’s degree in business from Universidad Anahuac. In 1987 he joined Casa de Bolsa Accival and held several operative positions until he became Operations Director. From 1991 through 2005, Mr. Levy held several positions in Grupo Financiero Banamex-Accival, such as Director of Assets Coordination, Deputy General Director of the Treasury, General Director of Casa de Bolsa Accival and Corporate Director of Specialized Banking and Management of Investments of Grupo Financiero Banamex. From 2003 through 2005, Mr. Levy was also President of the Mexican Association of Financial Intermediaries (Asociación Mexicana de Intermediarios Bursátiles) and currently leads his own consulting company.

Emilio Carrillo Gamboa

Mr. Carrillo is an attorney-at-law. He is a founding partner of Bufete Carrillo Gamboa, S.C. law firm and is currently president of the board of directors of Cementos Holcim-Apasco, S.A. de C.V. Mr.

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Carrillo actively participates in the Board of Directors of Empresas ICA, S.A.B. de C.V., Grupo Modelo, S.A.B. de C.V., Grupo Nacional Provincial, Kimberly Clark de México, S.A.B. de C.V., Medica Integral GNP, S.A. de C.V., Profuturo GNP, S.A. de C.V., Afore, San Luis Corporación, S.A.B. de C.V., Grupo México, S.A.B. de C.V., Southern Copper Corporation, The Mexico Fund, Inc., among others. In 1988, Mr. Carrillo was appointed as Ambassador of Mexico in Canada.

Manuel Borja Chico

Mr. Borja is an industrial engineer with a master’s degree in business administration from The University of Texas. Mr. Borja collaborated in Grupo Posadas, S.A.B. de C.V., for more than twelve years and is the former Vice President of Finance of Grupo Posadas, S.A.B. de C.V. He is currently the Chief Executive Officer of Mexicana de Aviación, S.A. de C.V., and an independent member of the board of directors of Mega.

Mr. Gastón Azcárraga Andrade, Mr. Pablo Azcárraga Andrade, Mr. Enrique Azcárraga Andrade and Mr. Jose Carlos Azcárraga Andrade are brothers. Mr. Fernando Chico Pardo is uncle of Mr. Manuel Borja Chico.

The five alternate members of the Board of Directors are (i) Silvia Sisset de Guadalupe Harp Calderoni, (ii) Javier Barrera Segura, (iii) Jorge Carvallo Couttolenc, (iv) Miguel Alejandro García Jaramillo and (v) Charbel Christian Francisco Harp Calderoni.

Executive Committee

Pursuant to our by-laws, we have an Executive Committee elected by the Board of Directors consisting of at least three, but no more than eight, members. The Executive Committee is currently comprised of Messrs. Gastón Azcárraga Andrade, Pablo Azcárraga Andrade, José Carlos Azcárraga Andrade, Javier Barrera Segura, Rubén Camiro Vazquez and Jorge Carvallo Couttolenc.

The main roles of the Executive Committee are: (i) to execute, operate, direct and manage the resolutions adopted by the board of Directors, and (ii) to enforce the corporate, business and operative policies of Grupo Posadas, S.A.B. de C.V.

We have granted loans from time to time to members of our Executive Committee in amounts not exceeding the present value of 75% of the executive’s expected variable annual compensation (bonus) for the next five years combined. These loans bear interest at what we believe to be market rates. The loans have five-year terms and the proceeds can only be applied to the purchase of a primary residence or to cover healthcare or education expenses. Our Board of Directors is responsible for granting these loans, which can be proposed by our Corporate Practices Committee.

Corporate Practices Committee

Both the Mexican Securities Market Law and our by-laws require us to have a Corporate Practices Committee that is currently comprised of Messrs. Enrique Azcárraga Andrade, as President, Jorge Soto y Galvez and Emilio Carrillo Gamboa. These members were elected by the Board of Directors and by the stockholders` meeting on April 26, 2007. The Corporate Practices Committee is responsible for, among other things:

providing its opinion to the Board of Directors with respect to matters that are under its responsibility, pursuant to the Mexican Securities Market Law;

requesting the opinion of independent experts when considered convenient, for the adequate performance of its functions or when requested by the Mexican Securities Market Law;

calling stockholders` meetings and include relevant points for the agenda of such meetings, as they believe necessary.

Audit Committee

Both the Mexican Securities Market Law and our by-laws require us to have an Audit Committee. The Audit Committee is responsible for, among other things:

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reviewing our financial statements and assuring compliance with Mexican financial reporting standards;

preparing an annual report of activities for submission to the Board of Directors;

reviewing financial proposals before submission to our Board of Directors;

issuing opinions regarding related party transactions prior to submission to the Board of Directors, and seeking the opinion of external counsel in connection therewith as appropriate; and

periodically meeting with our internal auditor to review audit reports.

The current members of our Audit Committee are Jorge Soto y Gálvez, as President, Joaquín Vargas Guajardo and Emilio Carillo Gamboa, each of whom is an independent member of our Board of Directors.

Officers

Set forth below are the names, ages and current positions of our officers, together with their years of service with us (rounded to the nearest year). These officers are responsible for our day-to-day management and operations and are the heads of our main operational and financial departments:

Name Age Position Years with Posadas

Gastón Azcárraga Andrade 54 Chairman of the Board of Directors and Chief Executive Officer

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Pablo Azcárraga Andrade 51 Vice Chairman of the Board of Directors, Executive Vice President and Chief Executive of Propietaria Posadas

25

Javier Barrera Segura 47 Executive Vice President and Chief New Ventures Officer

20

Jorge Carvallo Couttolenc 53 Executive Vice President and Chief Executive of Hotelera Posadas

16

Rubén Camiro Vázquez 47 Executive Vice President and Chief Financial Officer

2

José Carlos Azcárraga Andrade 44 Executive Vice President and Chief Executive of Fiesta Americana Vacation Club

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Set forth below is a brief summary of the business experience of our officers who are not also directors:

Javier Barrera Segura

Mr. Barrera is currently the Executive Vice President and Chief New Ventures Officer. He has been in Grupo Posadas, S.A.B. de C.V. for the last 20 years and is responsible for the strategic marketing, brand development and strategic planning for Grupo Posadas, S.A.B. de C.V. Among Mr. Barrera’s thriving successes is the launch of Fiesta Americana Vacation Club in 1998, and the creation, development and expansion of Ampersand, Konexo, GloboGO and Conectum, all between 2007 and 2009. He also developed the Fiesta Rewards loyalty program, which he still manages today.

Mr. Barrera has been a member of the Executive Committee and Board of Directors of Grupo Posadas, S.A.B. de C.V., since 1993. He holds a degree in economics from Instituto Tecnológico Autónomo de México, or ITAM, and a master’s degree in business administration from Tulane University.

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Jorge Carvallo Couttolenc

Mr. Carvallo is currently the Executive Vice President and Chief Executive of Hotelera Posadas. Mr. Carvallo has been in Grupo Posadas, S.A.B. de C.V. for more than 16 years. He is responsible for the operative, commercial, management development and human resources divisions of the hotel branch of Grupo Posadas, S.A.B. de C.V. Mr. Carvallo has participated in several financial, operational and development ventures within Grupo Posadas, S.A.B. de C.V., including the company’s incursion in South America. Mr. Carvallo served as the head of Grupo Posadas, S.A.B. de C.V., in South America for three years and has been dynamically involved in the expansion of the hotel management and operation activities of Grupo Posadas, S.A.B. de C.V. throughout Mexico.

Mr. Carvallo holds a degree in chemical engineering from Universidad Iberoamericana, Mexico City, and a master’s degree in business administration from Instituto Tecnológico Autónomo de Mexico, or ITAM, in Mexico City.

Rubén Guillermo Camiro Vázquez

Mr. Camiro joined Grupo Posadas, S.A.B. de C.V., in 2007, as the Executive Vice President and Chief Financial Officer. Before joining Grupo Posadas, S.A.B. de C.V., Mr. Camiro served as Chief Executive Officer of WFI de México, S. de R.L. de C.V., and as Chief Financial Officer of Pegaso Telecomunicaciones, S.A. de C.V., Bestel, S.A. de C.V. and Grupo Casa Autrey, S.A. de C.V. Before that, he was the General Manager of Publicaciones Citem, S.A. de C.V.

Mr. Camiro is currently an independent Board member of Agroasemex, S.A. and has been an independent consultant for several international companies. Mr. Camiro holds a bachelor’s degree in actuarial sciences from Universidad Anáhuac, Mexico City, and a master’s degree in business administration from the Fuqua School of Business, Duke University.

Stock Option Plan

In 1994 we implemented a stock option plan and established two trusts to hold the shares available for purchase under the plan. The plan is exclusively for current and former members of our Executive Committee. Under the plan, individuals are granted options to purchase a certain number of our common shares at a fixed price denominated in pesos, which is determined according to the market value of the stock at the date the individual becomes a part of the plan. The plan is managed by a technical committee, but each option grant is subject to the approval of the Board of Directors. In 2008, when assigned, the plan represented between 15% and 31% of the annual cash compensation of the members of the Executive Committee.

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PRINCIPAL SHAREHOLDERS

Our common stock has been listed on the Mexican Stock Exchange since 1992. There are approximately 497 million shares outstanding and fully paid, of which approximately 78% are Series “A” common shares, which have unrestricted voting rights, and 22% are Series “L” shares, which have restricted voting rights. The Series “A” shares have showed a non-trading status according to the rates of the Mexican Stock Exchange, while the Series “L” have showed a minor trading status according to the rates of the Mexican Stock Exchange. The quotations of the Series “A” and “L” have never been suspended by any regulatory authority.

A majority of our common shares are held by a master trust whose beneficiaries are, in a majority, members of the Azcárraga Andrade family and represent, directly or indirectly, an aggregate of approximately 53% of the Series “A” shares. The master trust follows the instructions of a committee comprised of the members of the Azcárraga Andrade family and presided over by Mr. Gastón Azcárraga Andrade. Approximately 0.5% of the Series “A” shares are held in a trust related to our stock option plan. The remaining shares are held by the public.

Some members of the Azcárraga Andrade family and Mr. Fernando Chico Pardo, who are also members of the Board of Directors or relevant officers of Grupo Posadas S.A.B. de C.V., each individually hold approximately 1% of our capital stock.

To the best of our knowledge, other than Mrs. Maria Luisa Andrade de Azcárraga and Mr. Gastón Azcárraga Andrade, no person, including any member of the Azcárraga Andrade family, directly or indirectly, owns more than 5% of our Series “A” shares. Mr. Gastón Azcárraga Andrade, as Chief Executive Officer and Chairman of our Board of Directors, has control of Grupo Posadas S.A.B. de C.V. in terms of the Mexican Securities Market Law.

Grupo Posadas S.A.B. de C.V. holds in trust 13,580,362 and 965,000 Series “A” and Series “L” shares, respectively, to be assigned and offered in option to eligible officers. We have a committee elected by the Board of Directors who grants the options and assigns the number of shares to each eligible officer. The price of the call options is fixed in U.S. dollars considering the market value and the exchange rate prevailing at the date of the assignment or exercise. Since the term to exercise the call option is 3 years, with 2 years of grace period, an interest cost is added for the financing period. As of December 31, 2008, the cost of the shares held in trust is Ps.17.9 million (acquisition value).

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RELATED PARTY TRANSACTIONS

Our Holiday Inn and Sheraton Fiesta hotels in South Padre Island, Texas, are owned by an investment entity in which our Chief Executive Officer and Chairman of our Board of Directors, the President of Posadas USA and a member of our Board of Directors hold a controlling interest. In addition, our Fiesta Inn Acapulco hotel is owned by an investment entity in which an uncle of our Chief Executive Officer and Chairman of our Board of Directors has a majority equity interest.

The management agreements that we have entered into in relation to our South Padre Island, Texas, hotels and our Fiesta Inn Acapulco have been entered into on an arm’s-length basis and contain terms and conditions substantially similar to those in management agreements we typically enter into with unrelated third parties. For a more detailed description please refer to note 18 of our audited consolidated financial statements for the year ended December 31, 2008.

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DESCRIPTION OF OTHER INDEBTEDNESS

The following description summarizes material terms of certain of our loan agreements and credit facilities, including such agreements and facilities of our subsidiaries. The description is only a summary and is not intended to describe all of the terms of the credit arrangements that may be important.

In general, our loan agreements and credit facilities contain restrictions such as limitations on substantial transfers of assets, payments of dividends and debt incurrence. Agreements governing certain of the debt to be discharged with the proceeds of this offering include covenants that prohibit us from undertaking this offering. Although the issuance of the notes offered hereby would place us in technical default of such agreements, we intend to use the proceeds of this offering to satisfy and discharge any such debt. See “Use of Proceeds.”

IFC and DEG Financings

In 1999, we entered into a U.S.$45.0 million financing arrangement led by International Finance Corporation (IFC), of which the following components are outstanding as of September 30, 2009:

• a subordinated convertible U.S.$10.0 million loan funded by the IFC, or the 1999 C loan. As of September 30, 2009 we had an outstanding amount of U.S.$10.0 million under this loan.

• a EUR 5.0 million subordinated convertible loan agreement with DEG–Deutsche Investitions-Und Entwicklungs-Gesellschaft Mbh, arranged by the IFC, or the 1999 DEG loan. As of September 30, 2009 we had an outstanding amount of EUR 5.0 million under this loan.

The 1999 C loan bears interest at LIBOR plus 100 basis points per annum and is subordinated to all of our outstanding indebtedness. The 1999 DEG loan bears interest at the six-month Euro LIBOR plus 300 basis points. Each of the 1999 C loan and the 1999 DEG loan is convertible into our Series “L” shares at any time during the period commencing September 14, 2002 and ending on December 15, 2009 and upon the occurrence of certain events, including but not limited to, a merger in which we are not the surviving entity or a tender offer for all or a majority of our capital stock.

Both the 1999 C loan and the 1999 DEG loan impose maintenance covenants which restrict our ability to, among other things:

• incur indebtedness (unless we can meet a certain interest-coverage ratio, a debt-to-equity ratio and a current ratio);

• sell or transfer certain of our non-current assets;

• make certain investments;

• enter into transactions other than in the ordinary course of business;

• prepay outstanding indebtedness under certain conditions; and

• pay dividends.

Both of the 1999 C loan and the 1999 DEG loan initially matured on December 15, 2009, with interest payable semiannually. We have executed agreements with both institutions to extend the maturities of these loans to March 15, 2010 upon a partial prepayment in the amount of U.S.$2.0 million to the IFC and EUR 1.0 to DEG. After these partial prepayments, the outstanding amounts due under such loans will be U.S.$8.0 million and EUR 4.0 million, respectively.

In 1999, in connection with the 1999 C loan, we also entered into a put option agreement with the IFC which grants the IFC a right to sell to us up to 12.07% of the ordinary voting shares of our subsidiary Sudamerica en Fiesta, S.A. Such shares represent all of the shares held by the IFC in such subsidiary. Under the terms of the put option agreement, the put is effective from July 9, 2005 until June 30, 2011. We believe the current exercise price of the put to be approximately U.S.$11.0 million.

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8¾% Senior Notes due 2011

We issued U.S.$225.0 million under a senior notes program due on October 4, 2011. The notes bear interest at the rate of 8.75% per year, which is payable semiannually. In 2008, we repurchased 84.1% of the notes then outstanding and solicited and received bondholder approval to remove all covenants. As of December 31, 2008 and September 30, 2009, the Senior Notes under this issuance amount to U.S.$35.8 million, maturing on October 4, 2011.

Syndicated Loan

During November 2005, we structured a syndicated loan for U.S.$50.0 million for a five-year term (with a two-year grace period). The lead bank is ING Bank (México), S.A., while the other participants include Banco Nacional de Comercio Exterior, S. N. C. (Bancomext), BBVA Bancomer, S.A., Bayerische HYPO-UND Vereinsbank AG, HVB Group (UniCredit), Banco de Crédito e Inversiones, Miami Branch and Banco Industrial, S.A. This transaction assured funds for the timely payment of unsecured debt certificates. In addition, in November 2006, an add-on to the above syndicated loan of U.S.$30.0 million was executed, resulting in a total loan of U.S.$80.0 million. The terms of this add-on are similar to the original loan terms. In April 2008, we requested an additional U.S.$21.5 million, Banco Santander, S.A. and JP Morgan also participated in this addition for a total facility of U.S.$101.5 million. Resources obtained from these transactions were used to settle short-term credit lines. As of December 31, 2008, the total principal amount outstanding under this loan was equivalent to U.S.$73.9 million, at rate of LIBOR plus 1.5 percentage points for U.S. dollar dispositions and TIIE plus 1.4 percentage points for peso dispositions. As of September 2009, the total principal amount outstanding under this loan equivalent to U.S.$46.3 million remain outstanding, at a rate of LIBOR plus 1.75 percentage points for US dollar dispositions and TIIE plus 1.65 percentage points for peso dispositions. Financial covenants under this loan include limitations on (i) financial leverage and the maintenance of a minimum interest coverage ratio and net worth, (ii) prepayment of outstanding indebtedness under certain conditions and (iii) incurrence of indebtedness in an aggregate principal amount exceeding U.S.$ 180.0 million. We intend to apply the proceeds of this offering prepay all amounts outstanding under this loan.

California Commerce Bank (Citibank (Banamex USA))

In December 2005, we entered into a five-year bilateral secured loan with a two-year grace period with California Commerce Bank (Citibank (Banamex USA)) for U.S.$20.0 million. In October 2009 we drew U.S.$9.3 million additional for a total outstanding of U.S.$17.0 million maturing in 18 months at a rate of LIBOR plus 4.50 percentage points. Financial covenants under this loan include limitations on financial leverage and capital expenditures, and the maintenance of a minimum interest coverage ratio and net worth. We intend to prepay all amounts outstanding under this loan with the proceeds of this offering of notes.

Certificados Bursátiles

During 2008, we established an unsecured debt certificated program with an authorized value up to Ps.3,000.0 million. In April 2008, a Ps.1,500.0 million borrowing was made and, on July 2008, a second borrowing of Ps.750.0 million was made under the same terms and conditions. Each certificate is denominated in pesos, the par value of each certificate is Ps.100.0, each issuance matures in five years and interest is payable every 28 days at a rate established for each issuance (both at TIIE rate plus 1.80 percentage points). The Certificados Bursátiles have no financial covenants.

Resources obtained from this program were used to repurchase 84.1% or U.S.$189.2 million of the Senior Notes due on October 4, 2011.

Banamex Loan

In April 2008, we entered into a five-year bilateral loan with a two-year grace period with Banco Nacional de México, S.A. (Banamex) for Ps.312.0 million. At such time, the loan was unsecured although, as of today, the facility is secured. The applicable rate as of September 30, 2009 is TIIE plus 4.00 percentage points with an additional six month grace period, payable semiannually and with final maturity in April 2013. Financial covenants under this loan include limitations on financial leverage and the maintenance of a minimum interest coverage ratio and net worth. We intend to prepay all amounts outstanding under this loan with the proceeds of this offering of notes.

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Bancomext Loans

In December 2008, we drew U.S.$23.4 million from a U.S.$27.3 million secured loan from Bancomext and in January 2009 the remaining amount was drawn. As of September 30, 2009, US$25.9 million remains outstanding. The terms are 3 years with 21 month grace period with a rate of three month Libor plus 4.75 percentage points. Financial covenants under this loan include limitations on financial leverage and the maintenance of a certain interest coverage ratio. We intend to prepay all amounts outstanding under this loan with the proceeds of this offering of notes.

In July 2009, Posadas drew Ps.392.9 million from another secured loan from Bancomext that as of September 30, 2009 remained outstanding. The terms are 4 years with 12 month grace period with a rate of TIIE plus 3.75 percentage points. This loan has no financial covenants. We intend to prepay all amounts outstanding under this loan with the proceeds of this offering of notes.

Banco del Bajio Loan

During the last quarter of 2008, Posadas drew Ps.100.0 million from a long-term credit line with Banco del Bajio at a rate of TIIE plus 2 percentage points. In October 2009 this line was changed to a 4.5 year secured loan of Ps.76.0 million with amortizations after six months at a rate of TIIE plus 3.75 percentage points and payable in advance on the last business day of each month at a cost of 1% of the outstanding amount. The loan imposes maintenance covenants which restrict our ability to incur indebtedness (unless we can meet a certain interest-coverage ratio, a net debt to EBITDA ratio and a current ratio).

Banco Santander Loan

During the last quarter of 2008, Posadas drew Ps.89 million from another short term line of credit with Banco Santander, S.A. at a rate of TIIE plus 4 percentage points. In October 2009, Ps.90.0 million were refinanced to a 3 year secured loan with monthly amortizations at a rate of TIIE plus 4.85 percentage points. This loan imposes maintenance covenants which require us to maintain, among other financial covenants, a consolidated net debt to consolidated EBITDA ratio and a minimum interest coverage. We intend to prepay all amounts outstanding under this loan with the proceeds of this offering of notes.

Uncommitted Revolving Lines of Credit

In order to provide for financial flexibility and to fund certain of our working capital requirements, we have the following uncommitted revolving lines of credit:

Ps.300.0 million line of credit with HSBC, expiring on September 12, 2010, from which no amounts have been borrowed as of September 30, 2009.

U.S.$30.0 million line of credit with Banamex, expiring on March 30, 2010, of which no amounts have been borrowed as of September 30, 2009.

Ps.100.0 million line of credit with Ixe Banco, S.A., expiring on November 25, 2010, from which no amounts have been borrowed as of September 30, 2009. This agreement contains certain limitations on our ability to pay dividends and to incur additional debt.

Because these are uncommitted lines of credit, the banks have the right to terminate them with respect to any amounts not drawn, subject only to the obligation to provide us with prior notice.

Solosol Convertible Note

In February 2009, our subsidiary Solosol Tours, S.A. de C.V., issued a note convertible into series L shares of the capital stock of Posadas for up to an aggregate amount of U.S.$13.0 million. We used the proceeds from the issuance of the note to fund the development of our virtual travel agency business. The note bears an interest rate of 9% per annum payable on an annual basis on every anniversary of the initial issuance date. As per the holders’ choice, the note will be convertible into Posadas’ series L shares, starting as of the tenth anniversary of the subscription of the note. We hold 50% and Grupo Mexicana de Aviación, S.A. de C.V. holds the other 50% of the note. The actual amount registered as of September 30, 2009 in our long term debt is Ps.31.2 million.

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Existing Indebtedness of Certain Subsidiaries

Scotiabank Inverlat Loan. In 2002, Promotora Inmobiliaria Hotelera, S.A. de C.V (successor-in-interest to Promoción de Inversiones Hoteleras, S.A. de C.V.) entered into a loan agreement with Scotiabank Inverlat, S.A. This loan matures on November 27, 2013 and bears interest at LIBOR plus 200 basis points for loans denominated in U.S. dollars and TIIE plus 200 basis points for loans denominated in pesos, payable quarterly. The loan is secured by a mortgage on certain properties owned by another of our subsidiaries and guaranteed by certain of our subsidiaries. This agreement contains restrictions which, among other things, prohibit Promotora Inmobiliaria Hotelera, S.A. de C.V. from making any transfers of its assets or granting any security interest in its assets and from incurring additional debt. In addition, the agreement restricts the ability of Promotora Inmobiliaria Hotelera, S.A. de C.V. to pay dividends. As of September 30, 2009, there was U.S.$17.8 million and Ps.97.9 million outstanding under this loan. This loan imposes maintenance covenants which restrict our ability to incur indebtedness, unless we can meet a certain interest-coverage ratio, a debt-to-equity ratio and a current ratio.

Off-Balance Sheet Arrangements

As of December 31, 2008 and 2007, respectively, the outstanding balance of our credit lines entered into with Banorte was U.S.$16.4 million, U.S.$29.8 million, Ps.717.2 million and Ps.143 million and those entered into with Bancomext was U.S.$28.4 million and U.S.$29.2 million. We consider these arrangements to be off-balance sheet arrangements because they are non-recourse to Grupo Posadas, S.A.B. de C.V. Each of these outstanding balances is presented net of the long-term notes receivable assigned to the respective trusts established to secure our obligations under such lines of credit. As of December 31, 2008 and 2007, respectively, our notes receivable assigned to such trusts were U.S.$217.3 million and U.S.$208.3 million.

As of September 30, 2009 and 2008, respectively, the outstanding balances of credit lines with Banorte are for the amounts of U.S.$10.4 million and U.S.$19.3 million and Ps.666.2 million and Ps.329.0 million, respectively and with Bancomext is U.S.$27.7 million and U.S.$22.6 million. Each of these outstanding balances is presented net of the long-term notes receivable assigned to the respective trusts established to secure our obligations under such lines of credit. As of September 30, 2009 and 2008, respectively, our notes receivable assigned to such trusts were U.S.$194.9 million and U.S.$188.0 million.

On December 18, 2009, we consolidated the Banorte credit lines described above into a single secured credit line for an amount up to U.S.$91 million.

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DESCRIPTION OF THE NOTES

Posadas will issue $200 million aggregate principal amount of the Notes in connection with this offering (the “Offering”) pursuant to an Indenture to be dated as of January 15, 2010 (the “Indenture”), among Posadas, as Issuer, the Guarantors (as defined below), The Bank of New York Mellon, as trustee (the “Trustee”), Registrar, Paying Agent and Transfer Agent. The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture. A copy of the Indenture is available for inspection at the offices of the Issuer and any Paying Agent during regular business hours. In addition, for so long as any Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market and the rules of such exchange shall so require, copies of the Indenture may be obtained upon request to the Luxembourg Paying Agent. As used in this “Description of the Notes,” the terms “Posadas” and “Issuer” refer to Grupo Posadas, S.A.B. de C.V., a sociedad anónima bursátil de capital variable organized under the laws of the United Mexican States, or Mexico, but not its subsidiaries. All references to “$” or “Dollars” are to United States of America Dollars.

General

The Notes and the Guarantees will be senior unsecured obligations of the Issuer and the Guarantors, ranking equal in right of payment with all other senior unsecured obligations of the Issuer and the Guarantors. The Notes and the Guarantees will be effectively subordinated to all existing and future secured debt of the Issuer and the Guarantors to the extent of the assets securing such debt. As of September 30, 2009, after giving pro forma effect to the sale of the Notes offered hereby and the application of the gross proceeds thereof and assuming that the Issuer does not elect to prepay the Banco del Bajio facility referred to in clause 6 of the second paragraph of “Use of Proceeds”, the Issuer and the Guarantors would have had approximately U.S.$5.6 million of secured debt outstanding.

The Notes also will be effectively subordinated to any debt, preferred stock obligations and other liabilities of the Issuer’s Subsidiaries who will not be Guarantors. As of September 30, 2009, after giving pro forma effect to the sale of the Notes offered hereby and the application of the gross proceeds thereof and assuming that the Issuer does not elect to prepay the Banco del Bajio facility referred to in clause 6 of the second paragraph of “Use of Proceeds”, the Issuer’s Subsidiaries who will not be Guarantors would have had approximately U.S.$25.2 million of debt outstanding. The Issuer’s Subsidiaries who will not be Guarantors represented 12% and 36%, and 15% and 38%, of the Issuer’s total revenues and assets for the nine months ended September 30, 2008 and 2009, respectively.

The claims of the Holders with respect to the Notes are subject to the prior payment of all liabilities (whether or not for borrowed money) and to any preferred stock interest of such Subsidiaries. There can be no assurance that, after providing for all prior claims, there would be sufficient assets available from the Issuer and the Guarantors to satisfy the claims of the Holders of Notes. Additionally, the Issuer is dependent upon the distribution of the earnings of its Subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations, to service its debt obligations. See “Risk Factors.”

Additional notes may be issued from time to time (the “Additional Notes”) subject to the limitations set forth under “—Certain Covenants—Limitation on Indebtedness.” Any Additional Notes subsequently issued under the Indenture will be treated as a single class with the Notes issued in the Offering for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

Payment, Transfer and Exchange

The Notes will bear interest at the rate per annum shown on the front cover of this offering memorandum from the Closing Date, or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semiannually (to Holders of record at the close of business on January 1 or July 1 (whether or not a Business Day) immediately preceding the Interest Payment Date) on January 15 and July 15 of each year, commencing July 15, 2010. Interest on the Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months.

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Principal of, and interest on, the Notes will be payable, and the Notes may be exchanged or transferred, at the office or agency of Posadas (i) in New York, New York (which initially will be the corporate trust office of the New York Paying Agent) and (ii) so long as any Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, in Luxembourg (which initially will be the office of The Bank of New York Mellon (Luxembourg), S.A. the Luxembourg Paying Agent), or at the option of the holder and subject to any fiscal or other laws or regulations applicable thereto, at any other office or agency maintained by Posadas for such purpose; provided that, at the option of Posadas, payment of interest may be made by check mailed to the address of the holders as such address appears in the register maintained by the Trustee.

If the due date for payment of any amount in respect of principal or interest on any Note is not a Business Day, the holder thereof shall not be entitled to payment of the amount due until the next succeeding Business Day and shall not be entitled to any further interest or other payment in respect of any such delay. As used in the Indenture regarding payment, “Business Day” means a day on which banks in New York, New York, Mexico City, Mexico, and the relevant place of payment are open for business, are not required or permitted to be closed and are carrying out transactions in Dollars.

The Notes will be issued in denominations of $100,000 principal amount and any integral multiples of $1,000 in excess thereof. No service charge will be made for any registration of transfer or exchange of Notes, but Posadas may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.

Guarantees

The Notes will be unconditionally guaranteed, jointly and severally, by each Wholly Owned Restricted Subsidiary of Posadas except for (i) any Receivables Entity, (ii) Service Subsidiaries that do not have in excess of $500,000 of Indebtedness (excluding Indebtedness owed to the Issuer or any Guarantor) and did not have greater than $500,000 of net income (on a consolidated basis with its Subsidiaries) in the twelve-month period ended September 30, 2009 or (iii) certain immaterial subsidiaries which cannot provide guarantees for local regulatory reasons. Following the Issue Date, the Notes will be guaranteed by additional Restricted Subsidiaries of the Issuer to the extent required under “—Additional Guarantees.”

Notwithstanding the preceding paragraph, certain of the Issuer’s Wholly Owned Restricted Subsidiaries who would otherwise be required to guarantee the Notes on the Issue Date will not be able to provide such guarantees on the Issue Date due to certain procedural matters with which such Subsidiaries must comply. Such Subsidiaries represented 1% and 1%, and 1% and 1%, of the Issuer’s total revenues and assets for the nine months ended September 30, 2008 and 2009, respectively. However, the Issuer shall agree in the Indenture to cause such Subsidiaries to jointly and severally guarantee the obligations of the Issuer under the Notes and the Indenture within 30 Business Days following the Issue Date.

The Guarantee of a Guarantor will be released:

(1) in connection with any sale of other disposition of all of the Capital Stock of such Guarantor to a Person other than the Issuer or any Subsidiary of the Issuer, if the sale complies with the provisions set forth under “—Certain Covenants—Asset Sales;” or

(2) if the Issuer designates such Guarantor to be an Unrestricted Subsidiary in accordance with the provisions set forth under “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries.”

The amount of each Guarantee will be limited to the extent required under applicable fraudulent conveyance laws to cause such Guarantee to be enforceable.

Redemption at Maturity

The Notes will mature on January 15, 2015, unless earlier repurchased or redeemed pursuant to the terms thereof and the Indenture. At maturity, the Notes will be redeemed at 100% of the principal amount plus accrued and unpaid interest.

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Optional Redemption

Optional Redemption With a Make-Whole Premium

The Issuer will have the right, at its option, to redeem any of the Notes, in whole or in part, at any time or from time to time prior to their maturity at a redemption price equal to the greater of (1) 100% of the principal amount of such Notes and (2) the sum of the present value of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “Make-Whole Amount”), plus in each case any accrued and unpaid interest on the principal amount of the Notes to the date of redemption.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Notes.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Issuer.

“Comparable Treasury Price” means, with respect to any redemption date (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (2) if fewer than four such Reference Treasury Dealer Quotations are obtained, the average of all such quotations.

“Reference Treasury Dealer” means J.P. Morgan Securities Inc. or its affiliates which are primary United States government securities dealers and not less than two other leading primary United States government securities dealers in New York City reasonably designated by the Issuer; provided that if any of the foregoing cease to be a primary United States government securities dealer in New York City (a “Primary Treasury Dealer”), the Issuer will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by an Independent Investment Banker, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p.m. New York time on the third Business Day preceding such redemption date.

Optional Redemption With Proceeds of Equity Offerings

At any time, or from time to time, on or prior to January 15, 2013, the Issuer may, at its option, use all or any portion of the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes issued at a redemption price equal to 109.25% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of Notes originally issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Issuer shall consummate such redemption not more than 90 days after the consummation of that Equity Offering.

Selection and Notice of Redemption

In the event that less than all of the Notes are to be redeemed at any time, selection of the Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that:

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no Notes of a principal amount of $1,000 shall be redeemed in part; and

if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited.

Notice of an optional redemption will be mailed at least 30 but not more than 60 days before the redemption date to each Holder of a Note to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note will state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Issuer has deposited with the paying agent funds in satisfaction of the applicable redemption price plus accrued and unpaid interest, if any, to the date of redemption pursuant to the Indenture.

Redemption for Tax Reasons

The Notes may be redeemed, at the option of Posadas, in whole but not in part, at any time, upon giving not less than 30 or more than 60 days’ notice to the Trustee, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the date fixed for redemption, if Posadas, or any Guarantor has become or would become obligated to pay any Additional Amounts (as defined below) on the next date on which any payment is due under the Notes or the Guarantees but only if such Additional Amount is attributable to any tax, duty, levy, impost, assessment or other governmental charge imposed or levied by any Relevant Jurisdiction (as defined below) or of any subdivision thereof or by any authority or agency therein or thereof having power to tax at a rate greater than 10%, as a result of any change in, or amendment to (1) the laws, treaties, rules or regulations of any Relevant Jurisdiction or of any political subdivision thereof or by any authority or agency of or in a Relevant Jurisdiction having power to tax; or (2) the interpretations relating to those laws, treaties, rules or regulations, that have general application, made by any legislative body, governmental or regulatory agency or authority of a Relevant Jurisdiction or of any political subdivision or by any authority or agency of or in a Relevant Jurisdiction having power to tax, including the publication of any regulatory determination.

A notice of redemption may not be issued earlier than 90 days prior to the earliest date on which the Issuer or any Guarantor would be obligated to pay such Additional Amounts were a payment on the Notes or the Guarantees then due.

Prior to the publication or delivery to holders of any notice of redemption pursuant to this provision, the Issuer will deliver to the Trustee:

a certificate signed by one of the Issuer’s duly authorized representatives stating that the Issuer is entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to the Issuer’s right to redeem have occurred; and

an opinion of legal counsel (which may be the Issuer’s counsel) of recognized standing to the effect that the Issuer has or will become obligated to pay such additional amounts as a result of such change or amendment.

This notice, once delivered to the Trustee, will be irrevocable. The Issuer will give notice to Holders of the Notes pursuant to the provisions described under “—Notices” of any redemption it proposes to make at least 30 days (but not more than 60 days) before the redemption date.

The term “Relevant Jurisdiction” as used herein means (1) Mexico, (2) any jurisdiction in which the Issuer or any Guarantor (including any successor entity) is then incorporated, engaged in business or resident for tax purposes or (3) any jurisdiction by or through which payment is made.

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Additional Amounts

We are required by Mexican law to deduct Mexican withholding taxes at a rate of 4.9% (subject to certain exceptions) from payments of interest to investors who are not residents of Mexico for tax purposes, and we will pay additional amounts on those payments (and certain other payments) to the extent described below (“Additional Amounts”).

The Issuer and the Guarantors will pay to Holders of the Notes such Additional Amounts as may be necessary so that every net payment of interest (including any premium paid upon redemption of the Notes and any discount deemed interest under the law of any Relevant Jurisdiction) or principal to the Holders will not be less than the amount provided for in the Notes to be then due and payable under the Notes. By net payment, we mean the amount that we or our paying agent pay any Holder after deducting or withholding an amount for or on account of any present or future taxes, duties, assessments or other governmental charges imposed with respect to that payment by any Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein.

Our obligation to pay Additional Amounts is subject to several important exceptions. The Issuer and the Guarantors will not be required to pay Additional Amounts to any Holder for or on account of any of the following:

any taxes, duties, assessments or other governmental charges imposed solely because at any time there is or was a connection between the Holder and a Relevant Jurisdiction (other than the mere receipt of a payment or the ownership or holding of a Note);

any tax that is an estate, inheritance, gift, sales, personal property or similar tax, assessment or other governmental charge imposed with respect to the Notes;

any taxes, duties or other similar governmental charges imposed (or imposed at a higher rate) solely because the Holder or any other Person fails to comply with any certification, identification or other reporting requirement concerning the nationality, residence, identity or connection with the Relevant Jurisdiction, for tax purposes, of the Holder or any beneficial owner of the Note if compliance is required by law, regulation thereunder or by an applicable income tax treaty to which the Relevant Jurisdiction is a party, as a precondition to exemption from, or reduction in the rate of, the tax or other similar governmental charge and we have given the Holders at least 30 days’ notice that Holders will be required to provide such information and identification;

any tax, duty, assessment or other governmental charge payable otherwise than by deduction or withholding from payments on the Notes (but excluding stamp or similar taxes);

any payment on the Note to a Holder that is a fiduciary or partnership or a person other than the sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of the payment would not have been entitled to the Additional Amounts had the beneficiary, settlor, member or beneficial owner been the Holder of the Note; and

any combination of the above.

The exceptions on our obligations to pay Additional Amounts stated in the third bullet point above will not apply if the provision of information, documentation or other evidence described in the applicable bullet point would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a Holder or beneficial owner of a Note (taking into account any relevant differences between U.S. and the Relevant Jurisdiction’s law, regulations or administrative practice) than comparable information or other reporting requirements imposed under U.S. tax law, regulations and administrative practice (such as IRS Forms W-8BEN and W-9).

The exceptions on our obligations to pay Additional Amounts stated in the third bullet point above will not apply if, with respect to taxes imposed by Mexico or any political subdivision or taxing authority thereof, Article 195, Section II, of the Mexican income tax law (or a substantially similar successor of such Article, whether included in any law or regulation) is in effect, unless (a) the provision of the information, documentation or other evidence described in the applicable bullet point is expressly required by statute,

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regulation, or published administrative practice of general applicability in order to apply Article 195, Section II, of the Mexican income tax law (or a substantially similar successor of such Article, whether included in any law or regulation), (b) we cannot obtain the information, documentation or other evidence necessary to comply with the applicable laws and regulations on our own through reasonable diligence and without requiring it from Holders, and (c) we otherwise would meet the requirements for application of Article 195, Section II, of the Mexican income tax law (or a substantially similar successor of such Article, whether included in any law or regulation).

In addition, the third bullet point above does not and shall not be construed to require that any Person, including any non-Mexican pension fund, retirement fund, financial institution or any other holder or beneficial owner of a Note, register with the Mexican Ministry of Finance and Public Credit to obtain eligibility for an exemption from, or a reduction of, Mexican withholding tax.

The Issuer and the Guarantors will provide the Trustee with documentation satisfactory to the Trustee evidencing the payment of taxes in respect of which we have paid any Additional Amount. We will make copies of such documentation available to the Holders of the Notes or the relevant paying agent upon request.

Any reference in this offering memorandum, the Indenture or the Notes to principal, premium, interest or any other amount payable in respect of the Notes by us will be deemed also to refer to any Additional Amount that may be payable with respect to that amount under the obligations referred to in this section.

In the event of any merger or other transaction described and permitted under “—Limitation on Merger, Consolidation and Sale of Assets,” in which the surviving entity is a corporation organized and validly existing under the laws of a country other than Mexico, all references to Mexico, Mexican law or regulations, and Mexican political subdivisions or taxing authorities under this “Additional Amounts” section (other than the fifth and sixth paragraphs of this “Additional Amounts” section) and under “Redemption for Tax Reasons” will be deemed to also include such country and any political subdivision therein or thereof, law or regulations of such country, and any taxing authority of such country or any political subdivision therein or thereof, respectively.

Repurchase at the Option of Holders

Change of Control

The Indenture will provide that, upon the occurrence of a Change of Control, each Holder will have the right to require that the Issuer purchase all or a portion of such Holder’s Notes pursuant to the offer described below (the “Change of Control Offer”), at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, thereon to the date of purchase (the “Change of Control Payment”).

Within 30 days following the date upon which the Change of Control occurs, the Issuer must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice will state, among other things, the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the paying agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date.

On the Change of Control Payment Date, the Issuer will, to the extent lawful:

(1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

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(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an officers’ certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

The paying agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail to each Holder a new Note in a principal amount equal to any unpurchased portion of the Notes surrendered, if any; provided, however, that each new Note will be in a principal amount of $1,000 or integral multiples thereof.

If a Change of Control Offer is required to be made, there can be no assurance that the Issuer will have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Issuer is required to purchase outstanding Notes pursuant to a Change of Control Offer, the Issuer expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Issuer would be able to obtain such financing.

Neither the Board of Directors of the Issuer nor the Trustee may waive the covenant relating to a Holder’s right to require the purchase of Notes upon a Change of Control. Restrictions in the Indenture described herein on the ability of the Issuer and the Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on their property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Issuer, whether favored or opposed by the management of the Issuer. Consummation of any such transaction in certain circumstances may require the purchase of the Notes, and there can be no assurance that the Issuer or the acquiring party will have sufficient financial resources to effect such purchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Issuer or any of its Subsidiaries by the management of the Issuer. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction.

The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent such laws and regulations are applicable in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Change of Control” provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the “Change of Control” provisions of the Indenture by virtue thereof.

Certain Covenants

Limitation on Indebtedness

(a) Under the terms of the Indenture, Posadas will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness; provided, however, that Posadas may Incur Indebtedness and any Restricted Subsidiary may Incur Indebtedness if on the date of the Incurrence of such Indebtedness, the Consolidated Interest Coverage Ratio would be greater than 2.5 to 1.0.

The foregoing restrictions will not apply to any of the following Incurrence of Indebtedness (collectively, “Permitted Indebtedness”):

(i) Indebtedness under the Notes issued in this Offering in an aggregate principal amount not to exceed $200.0 million;

(ii) Indebtedness under Credit Facilities in an amount not to exceed the greater of (x) $75.0 million and (y) 10% of Consolidated Net Tangible Assets (reduced by the amount of any prepayment thereof with the Net Cash Proceeds of any Asset Sale pursuant to clause (iii)(a) of the first paragraph of “—Asset Sales”);

(iii) Indebtedness of Posadas and the Restricted Subsidiaries (not otherwise described in clauses (i) and (ii) above and subject to the provisions of clause (d) below) outstanding on the Closing Date;

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(iv) Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that (x) any Indebtedness owed by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary that is not a Guarantor shall be subordinated to prior payment in full of the Notes and (y) upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have Incurred Indebtedness not permitted by this clause (iv);

(v) Indebtedness of the Issuer or any Restricted Subsidiary issued in exchange for, or the net proceeds of which are used to refinance or refund, Indebtedness permitted by the Indenture (other than Indebtedness outstanding under subclause (a)(iv)) and any refinancing thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (A) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinate in right of payment to, the Notes shall only be permitted under this subclause (a)(v) if (x) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes; (B) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not have a Stated Maturity earlier than the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded; and (C) the obligors with respect to such new Indebtedness are the obligors on the Indebtedness to be refinanced or refunded (such new Indebtedness under this subclause (a)(v), “Refinancing Indebtedness”);

(vi) Indebtedness (A) in respect of workers’ compensation claims, self-insurance obligations, bid, reimbursement, performance, surety or appeal bonds or obligations provided in the ordinary course of business, including guarantees and letters of credit functioning or supporting these bonds or obligations (in each case other than for an obligation for money borrowed); (B) under Hedging Obligations; provided that such agreements (x) are designed solely to protect Posadas or its Restricted Subsidiaries against fluctuations in foreign currency exchange rates, commodity prices or interest rates and (y) do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in foreign currency exchange rates, interest rates or commodity prices or by reason of fees, indemnities and compensation payable thereunder; and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of Posadas or any of its Restricted Subsidiaries pursuant to such agreements, in any case incurred in connection with the disposition of any business, assets or Subsidiary of Posadas (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary of Posadas for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by Posadas or any Restricted Subsidiary in connection with such disposition;

(vii) Indebtedness of Posadas and its Restricted Subsidiaries, to the extent the net proceeds thereof are promptly deposited to defease the Notes as described under “—Defeasance”;

(viii) guarantees of the Notes and guarantees of Indebtedness of Posadas or any Restricted Subsidiary by any Guarantor;

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(ix) guarantees by Posadas of Indebtedness of any Restricted Subsidiary permitted hereunder;

(x) additional Indebtedness of Posadas and the Restricted Subsidiaries in an aggregate principal amount not to exceed $35.0 million at any one time outstanding;

(xi) Indebtedness of Posadas and the Restricted Subsidiaries having a maturity no later than one year after the incurrence thereof in an amount incurred for working capital purposes; provided that such Indebtedness, together with all other Indebtedness outstanding under this clause (xi) at the time of incurrence, does not to exceed 15% of Consolidated Net Tangible Assets of Posadas;

(xii) Indebtedness of a Restricted Subsidiary Incurred and outstanding on the date on which such Restricted Subsidiary was acquired by Posadas (other than Indebtedness Incurred (a) to provide all or any portion of the funds utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by Posadas or (b) otherwise in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted Subsidiary is acquired by Posadas, Posadas would have been able to Incur $1.00 of additional Indebtedness pursuant to the first paragraph of this covenant;

(xiii) Indebtedness under Permitted Vacation Club Financing Facilities in an amount not to exceed the greater of (x) $100.0 million at any one time outstanding (reduced by the amount of any prepayment thereof with the Net Cash Proceeds of any Asset Sale pursuant to clause (iii)(a) of the first paragraph of “—Asset Sales”) and (y) 80% of the amount of the accounts receivable of the Vacation Club Business (excluding accounts receivables sold, conveyed or transferred to a Receivables Entity in connection with a Receivables Transaction) at the time such Indebtedness is Incurred;

(xiv) Indebtedness of the Issuer or any of its Restricted Subsidiaries arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (including daylight overdrafts paid in full by the close of business on the day such overdraft was Incurred) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of Incurrence; and

(xv) Indebtedness of the Issuer or any Restricted Subsidiary represented by Capitalized Lease Obligations or Purchase Money Indebtedness, in each case Incurred for the purpose of acquiring or financing all or any part of the purchase price or cost of construction or improvement of property or equipment used in the business of the Issuer or such Restricted Subsidiary in an aggregate amount at any time not to exceed the greater of (x) $25.0 million and (y) 2.5% of Consolidated Net Tangible Assets.

(b) For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a non-U.S. currency will be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred or, in the case of revolving credit Indebtedness, first committed; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a non-U.S. currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, will be calculated based on the currency exchange rate applicable to the currencies in which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

(c) For purposes of determining any particular amount of Indebtedness: (i) guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (ii) any Liens granted pursuant to the equal and ratable provisions of the Indenture shall not be treated as Indebtedness.

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(d) For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described herein, Posadas, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness; provided that all Indebtedness of Posadas and its Restricted Subsidiaries outstanding on the Closing Date under (i) Credit Agreements (after giving effect to the use of proceeds contemplated by this offering memorandum) shall be deemed to have been incurred under clause (a)(ii) above and any Indebtedness outstanding on the Closing Date and described in clause (a)(xiii)(a) shall be deemed to have been incurred under clause (a)(xiii)(a).

Limitation on Restricted Payments

Posadas will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly:

(a) declare or pay any dividend or make any distribution (other than (i) dividends or distributions payable in Qualified Capital Stock of Posadas and (ii) in the case of Restricted Subsidiaries, dividends or distributions to Posadas or any other Restricted Subsidiary and pro rata dividends or distributions payable to the other holders of the same class of Capital Stock of such Restricted Subsidiary) on or in respect of shares of its Capital Stock to holders of such Capital Stock;

(b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of Posadas or acquire shares of any class of such Capital Stock other than Capital Stock owned by Posadas or any Wholly Owned Restricted Subsidiary (other than in exchange for its Capital Stock) which is not Disqualified Stock;

(c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment (other than the purchase, redemption, prepayment or other acquisition of any such subordinated Indebtedness in anticipation of any such sinking fund obligation, principal installment or final maturity, in each case, due within one year of such purchase, redemption, prepayment or other acquisition), any Indebtedness that is subordinate or junior in right of payment to the Notes or the Guarantees; or

(d) make any Investment (other than Permitted Investments)

(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a “Restricted Payment”), if at the time of such Restricted Payment or immediately after giving effect thereto:

(1) a Default or an Event of Default shall have occurred and be continuing;

(2) Posadas is not able to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness”; or

(3) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made after the Closing Date (the amount expended for such purpose, if other than in cash, being the Fair Market Value of such property as determined reasonably and in good faith by the Board of Directors of Posadas) shall exceed the sum of:

(v) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of Posadas earned during the period beginning on January 1, 2010 and ending on the last date of the most recent fiscal quarter for which financial statements are available prior to the date of such Restricted Payment (the “Reference Date”) (treating such period as a single accounting period); plus

(w) 100% of the Net Cash Proceeds received by Posadas from any Person (other than a Subsidiary of Posadas) subsequent to the Closing Date and on or prior to the Reference Date (a) as a contribution to the common equity capital of Posadas by any holder of Posadas’ Capital Stock or (b) from the issuance and sale of Qualified Capital Stock of Posadas; plus

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(x) without duplication of any amounts included in clause (3)(w) above, 100% of the Net Cash Proceeds received by Posadas from any Person (other than a Subsidiary of Posadas) subsequent to the Closing Date and on or prior to the Reference Date from the issuance and sale of debt securities or Disqualified Stock of Posadas that has been converted into Qualified Capital Stock of Posadas; plus

(y) without duplication, the sum of:

(1) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Closing Date whether through interest payments, principal payments, dividends or other distributions or payments;

(2) the net cash proceeds received by Posadas or any of the Restricted Subsidiaries from the disposition of all or any portion of any Investment (other than a Permitted Investment) made after the Closing Date (other than to a Subsidiary of Posadas); and

(3) upon Revocation of the status of an Unrestricted Subsidiary as an Unrestricted Subsidiary, the Fair Market Value of Posadas’ and the Restricted Subsidiaries’ Investment in such Subsidiary;

provided, however, no amount will be included under this clause (y) to the extent it is included in Consolidated Net Income; plus

(z) $10.0 million.

Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph will not prohibit:

(1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration;

(2) if no Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of Posadas, either (i) solely in exchange for shares of Qualified Capital Stock of Posadas or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of Posadas) of shares of Qualified Capital Stock of Posadas;

(3) if no Default shall have occurred and be continuing, the acquisition of any Indebtedness of Posadas that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of Posadas or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of Posadas) of shares of Qualified Capital Stock of Posadas or (iii) Refinancing Indebtedness;

(4) if no Default or Event of Default has occurred and is continuing, the Issuer may pay dividends or other distributions in respect of its Capital Stock in an amount not to exceed $20.0 million (or the equivalent in other currencies) in the aggregate so long as at the time of declaration and payment the Issuer’s Consolidated Interest Coverage Ratio is greater than or equal to 2.25 to 1.0.

(5) if no Default shall have occurred and be continuing, repurchases by the Issuer of Capital Stock (or rights or options therefor) of Posadas from employees or directors of the Issuer or any Subsidiary or their authorized representatives, upon the death, disability or termination of employment of such employees, in an aggregate amount not to exceed $7.5 million in any calendar year;

(6) payments to holders of Disqualified Stock of Posadas issued in accordance with the terms of the Indenture to the extent such payments are included in the calculation of Consolidated Interest Expense;

(7) the payment of any dividend or distribution to holders of Posadas’ Capital Stock payable solely in the Qualified Capital Stock of any Restricted Subsidiary if, at the date of and

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immediately after giving pro forma effect to the payment thereof, the Debt to EBITDA Ratio shall not exceed 3.0 to 1.0; and

(8) any Restricted Payment as long as if, at the date of and immediately after giving pro forma effect to the payment thereof and to any related financing transactions, the Debt to EBITDA Ratio shall not exceed 2.5 to 1.0.

In determining the aggregate amount of Restricted Payments made subsequent to the Closing Date in accordance with clause (3) of the first paragraph of this covenant, amounts expended pursuant to clauses (1), (2)(ii), (3)(ii), (4) and (6) shall be included in such calculation.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary, (ii) pay any Indebtedness owed to Posadas or any other Restricted Subsidiary, (iii) make loans or advances to Posadas, or (iv) transfer any of its property or assets to Posadas or any other Restricted Subsidiary.

The foregoing provisions will not restrict any encumbrances or restrictions:

(a) existing on the Closing Date in the Indenture, or any other agreements in effect on the Closing Date, and any extensions, refinancings, renewals or replacements of such agreements; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are not materially more restrictive than those encumbrances or restrictions in effect on the Closing Date;

(b) existing under or by reason of applicable law or regulation;

(c) existing with respect to any Person or the property or assets of such Person acquired by Posadas or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired;

(d) in the case of clause (iv) above in the case of a transfer of any of the property or assets of a Restricted Subsidiary to Posadas or any other Restricted Subsidiary (i) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (ii) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of Posadas or any Restricted Subsidiary not otherwise prohibited by the Indenture, or (iii) arising or agreed to in the ordinary course of business, not relating to any Indebtedness;

(e) with respect to a Restricted Subsidiary (or any of its property or assets) and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary;

(f) contained in the terms of (i) any Indebtedness incurred by any Restricted Subsidiary for the purpose of an Asset Acquisition if the Incurrence of such Indebtedness otherwise complies with clause (a) of the “—Limitation on Indebtedness” covenant and any extensions, refinancings, renewals or replacements of such Indebtedness; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements taken as a whole are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(g) contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if (i) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement, (ii) the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings (as determined by Posadas in

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good faith), and (iii) Posadas delivers an Opinion of Mexican Counsel to the Trustee to the effect that any such encumbrance or restriction will not materially affect Posadas’ ability to make principal or interest payments on the Notes; or

(h) any encumbrance or restriction with respect to a Receivables Entity in connection with Receivables Transaction; provided that such encumbrances and restrictions are customarily required by the institutional sponsor or arranger of such Receivables Transaction in similar types of documents relating to the purchase of similar receivables, other rights to payment or inventory in connection with the financing thereof.

Nothing contained in this covenant will prevent Posadas or any Restricted Subsidiary from (a) creating, incurring, assuming or suffering to exist any Liens otherwise permitted under the “—Limitation on Liens” covenant or (b) restricting the sale or other disposition of property or assets of Posadas or any of its Restricted Subsidiaries that secure Indebtedness of Posadas or any of its Restricted Subsidiaries.

Limitation on Liens

Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any character, without making effective provision for all of the Notes and all other amounts due under the Indenture to be directly secured equally and ratably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the obligation or liability secured by such Lien, other than Permitted Liens.

Limitation on Asset Sales

Under the terms of the Indenture, Posadas will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:

(i) the consideration received by Posadas or such Restricted Subsidiary is at least equal to the Fair Market Value of the assets sold or disposed of as determined in good faith by Posadas’ Board of Directors (including as to the value of all non-cash consideration);

(ii) except in the case of any sale of time share, full or fractional ownership or membership interests in the ordinary course of the Vacation Club Business, at least 75% of the consideration received by Posadas or such Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Temporary Cash Investments and is received at the time of such disposition; provided that the amount of:

(a) any liabilities (as shown on the Issuer’s or such Restricted Subsidiary’s most recent balance sheet), of the Issuer or any of its Restricted Subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets shall be deemed to be cash for purposes of this clause (ii); and

(b) any securities, notes or other obligations received by the Issuer or any such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash (to the extent of the cash received) within 30 days following the closing of such Asset Sale shall be deemed to be cash for purposes of this clause (ii); and

(iii) an amount equal to 100% of the Net Cash Proceeds from such Asset Sale is either applied to (a) the repayment of Indebtedness of the Issuer or any Restricted Subsidiary which is secured by a Permitted Lien (with a corresponding reduction in the commitment with respect thereto) or (b) the investment in or acquisition of assets related to a Permitted Business, in each case, within 365 days from the later of the date of such Asset Sale or the receipt of the Net Cash Proceeds. Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will be deemed to constitute “Excess Proceeds.”

On the 365th day after an Asset Sale, if the aggregate amount of Excess Proceeds from all Asset Sales exceeds $10.0 million, Posadas will be required to make an offer (“Asset Sale Offer”) to all holders of Notes and, to the extent required by the terms thereof, to all holders of other Senior Indebtedness

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outstanding with similar provisions requiring Posadas to make an offer to purchase such Senior Indebtedness with the proceeds from any Asset Sale (“Pari Passu Notes”) to purchase the maximum principal amount of Notes and any Pari Passu Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date of purchase, in accordance with the procedures set forth in the Indenture; provided, however, that if at any time any non-cash consideration received by Posadas or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration) or Temporary Cash Investments, then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. To the extent that the aggregate amount of Notes and Pari Passu Notes so validly tendered and not properly withdrawn pursuant to an Asset Sale Offer is less than the Excess Proceeds, Posadas may use any remaining Excess Proceeds for any purpose not otherwise prohibited by the Indenture. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

The Asset Sale Offer will remain open for a period of 20 Business Days following its commencement, except to the extent that a longer period is required by applicable law (the “Asset Sale Offer Period”). No later than five Business Days after the termination of the Asset Sale Offer Period (the “Asset Sale Purchase Date”), Posadas will purchase the principal amount of Notes required to be purchased pursuant to this covenant (the “Asset Sale Offer Amount”) or, if less than the Asset Sale Offer Amount has been so validly tendered, all Notes validly tendered in response to the Asset Sale Offer. If the aggregate principal amount of Notes surrendered by Holders thereof and other Pari Passu Notes surrendered by holders or lenders thereof, collectively, exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and Pari Passu Notes to be purchased on a pro rata basis on the basis of the aggregate principal amount of tendered Notes and Pari Passu Notes.

If the Asset Sale Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

On or before the Asset Sale Purchase Date, Posadas will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Sale Offer Amount of Notes and Pari Passu Notes or portions thereof so validly tendered and not properly withdrawn pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been validly tendered and not properly withdrawn, all Notes and Pari Passu Notes so validly tendered and not properly withdrawn. Posadas will deliver to the Trustee an Officers’ Certificate stating that such Notes and Pan Passu Notes or portions thereof were accepted for payment by Posadas in accordance with the terms of this covenant. Posadas or the Paying Agent, as the case may be, will promptly (but in any case not later than five Business Days after the Asset Sale Purchase Date) mail or deliver to each tendering Holder of Notes an amount equal to the purchase price of the Notes so validly tendered and not properly withdrawn by such Holder and accepted by Posadas for purchase, and Posadas will promptly issue a new Note, and the Trustee, upon delivery of an Officers’ Certificate from Posadas will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted will be promptly mailed or delivered by Posadas to the Holder thereof. Posadas will publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.

The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the “Limitation on Asset Sales” provisions of the Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the “Limitation on Asset Sales” provisions of the Indenture by virtue thereof.

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Limitation on Sale and Leaseback Transactions

Posadas will not, and will not permit any of the Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that Posadas or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:

(1) Posadas or that Restricted Subsidiary, as applicable, could have

(a) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness”; and

(b) to the extent such lease is a Capitalized Lease, incurred a Lien to secure such Indebtedness pursuant to “—Limitation on Liens” above;

(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property sold; and

(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the proceeds of such transaction are applied in compliance with the covenant described under “—Asset Sales.”

Limitation on Transactions with Affiliates.

(a) Posadas will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any Affiliate of Posadas (each, an “Affiliate Transaction”), other than:

(i) Affiliate Transactions permitted under paragraph (b) below; and

(ii) certain Affiliate Transactions meeting the following requirements:

(a) the terms of such Affiliate Transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate of Posadas;

(b) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with a Fair Market Value, in excess of $5.0 million (or the equivalent in other currencies), the terms of such Affiliate Transaction shall be approved by a majority of the members of the Board of Directors of Posadas or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such members of the Board of Directors have determined that such transaction complies with clause (a) immediately above;

(c) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with a Fair Market Value, in excess of $15.0 million (or the equivalent in other currencies), the terms of such Affiliate Transaction will be set forth in an Officers’ Certificate delivered to the Trustee stating that such transaction complies with clauses (a) and (b) immediately above; and

(d) in the event that such Affiliate Transaction involves aggregate payments, or transfers of property or services with a Fair Market Value, in excess of $20.0 million (or the equivalent in other currencies), the Issuer will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such Affiliate Transaction to the Issuer and any such Restricted Subsidiary, if any, from a financial point of view from an independent financial advisor and file the same with Trustee.

(b) The restrictions set forth in clause (a) shall not apply to:

(i) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors or employees of Posadas or any Restricted Subsidiary as determined in good faith by the Board of Directors of Posadas or senior management;

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(ii) transactions exclusively between or among Posadas and any of the Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries;

(iii) any agreement as in effect as of the Closing Date the material terms of which are described in this offering memorandum or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) or in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Closing Date;

(iv) Restricted Payments permitted by the Indenture;

(v) the sale, conveyance or other transfer of accounts receivable in connection with a Receivables Transaction; and

(vi) loans and advances to executive committee members, employees and officers of Posadas and the Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of an aggregate of $3.0 million at any time outstanding.

Additional Guarantees

If, after the Closing Date, (a) any Person becomes a Wholly Owned Restricted Subsidiary of Posadas other than (i) a Receivables Entity, (ii) Service Subsidiaries that do not have in excess of $500,000 of Indebtedness (excluding Indebtedness owed to the Issuer or any Guarantor) and do not have greater than $500,000 of net income (on a consolidated basis with its Subsidiaries) in any twelve-month period following the Closing Date or (iii) certain immaterial subsidiaries which cannot provide guarantees for local regulatory reasons, or (b) Posadas otherwise elects to have any Restricted Subsidiary become a Subsequent Guarantor, then, in each such case, Posadas shall cause such Restricted Subsidiary to:

(i) execute and deliver to the Trustee a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Wholly Owned Restricted Subsidiary shall unconditionally guarantee all of the Issuer’s obligations under the Notes and the Indenture as a Subsequent Guarantor; and

(ii) deliver to the Trustee one or more Opinions of Counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms.

Limitation on Business Activities

The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any line of business other than a Permitted Business.

Limitation on Designations of Unrestricted Subsidiaries

After the Closing Date, Posadas may designate any Restricted Subsidiary of Posadas as an “Unrestricted Subsidiary” under the Indenture (a “Designation”) only if:

(1) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation;

(2) Posadas would be permitted under the Indenture to make a Restricted Payment pursuant to the first paragraph of the covenant described under “—Limitation on Restricted Payments” at the time of Designation (assuming the effectiveness of such Designation) in an amount equal to the Fair Market Value of such Subsidiary on such date; and

(3) Posadas would be permitted to incur $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness” at the time of Designation (assuming the effectiveness of such Designation).

Notwithstanding anything contained herein, Posadas may designate any Restricted Subsidiary as an “Unrestricted Subsidiary” under the Indenture in connection with the payment of any dividend or distribution payable solely in the Qualified Capital Stock of such Restricted Subsidiary as permitted by

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clauses (7) or (8) of the second paragraph of the covenant described under “—Limitation on Restricted Payments” if such dividend or distribution constitutes in excess of 50% of the Capital Stock of such Restricted Subsidiary.

The Indenture will further provide that Posadas shall not, and shall not cause or permit any Restricted Subsidiary to, at any time:

(x) provide direct or indirect credit support for, be directly or indirectly liable for or guarantee any Indebtedness of any Unrestricted Subsidiary (including any undertaking agreement or instrument evidencing such Indebtedness) (except that Posadas and the Guarantors may guarantee or otherwise provide credit support for up to $5.0 million of obligations of an Unrestricted Subsidiary for a period not to exceed 270 days); or

(y) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary),

except, in the case of clause (x), to the extent permitted under the covenant described under “—Limitation on Restricted Payments.”

The Indenture will further provide that Posadas may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (“Revocation”), whereupon such Subsidiary shall then constitute a Restricted Subsidiary, if

(1) no Default shall have occurred and be continuing at the time and after giving effect to such Revocation;

(2) immediately after giving effect to such Revocation, Posadas would be permitted to incur $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness”; and

(3) all Liens and Indebtedness of such Unrestricted Subsidiaries outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of the Indenture.

All Designations and Revocations must be evidenced by an officers’ certificate of Posadas delivered to the Trustee certifying compliance with the foregoing provisions.

Reporting

Under the terms of the Indenture, Posadas will furnish or cause to be furnished to the Trustee, holders of Notes and the Luxembourg Stock Exchange, (i) as soon as available but in any event not later than 120 days after the close of each of its fiscal years, a consolidated balance sheet, consolidated statement of income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for such fiscal year of Posadas, (ii) as soon as available but in any event not later than 60 days after the end of each of the first three quarters of each of its fiscal years a consolidated balance sheet, consolidated statement of income and consolidated statement of changes in shareholders’ equity for such fiscal quarter of Posadas, and which, in the case of the annual financial statements, will be audited by and accompanied by a report thereon of an independent public accountant selected by Posadas. Each such report shall include a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of Posadas and its consolidated Subsidiaries (and each report with respect to any fiscal year (but not with respect to fiscal quarters) shall show in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Issuer and the Guarantors separate from the financial condition and results of operations of the non-Guarantor Subsidiaries of the Issuer, if any).

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such reports shall not constitute constructive notice of any information

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contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates).

Covenant Suspension

If on any date following the Issue Date (i) the Notes have Investment Grade Ratings from at least two of Fitch, Moody’s and S&P, and (ii) no Default has occurred and is continuing under the Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event”), the Issuer and its Restricted Subsidiaries will not be subject to the following covenants (collectively, the “Suspended Covenants”):

(1) “—Certain Covenants—Limitation on Indebtedness;”

(2) “—Certain Covenants—Limitation on Restricted Payments;”

(3) “—Certain Covenants—Limitation on Asset Sales;”

(4) “—Certain Covenants—Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;”

(5) “—Certain Covenants—Limitation on Transactions with Affiliates;”

(6) “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries;” and

(7) clause (ii) of the first paragraph of “—Merger, Consolidation and Sale of Assets.”

In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants under the Indenture for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) at least two of Fitch, Moody’s or S&P no longer rate the Notes Investment Grade, then the Issuer and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under the Indenture.

The period of time between the occurrence of a Covenant Suspension Event and the Reversion Date is referred to in this description as the “Suspension Period.” In the event of any such reinstatement, no action taken or omitted to be taken by the Issuer or any of its Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under the Indenture with respect to Notes; provided that (1) with respect to Restricted Payments made after any such reinstatement, the amount of Restricted Payments made will be calculated as though the covenant described under “—Certain Covenants—Limitation on Restricted Payments” had been in effect prior to, but not during, the Suspension Period, provided that any Subsidiaries designated as Unrestricted Subsidiaries during the Suspension Period shall automatically become Restricted Subsidiaries on the Reversion Date (subject to the Issuer’s right to subsequently designate them as Unrestricted Subsidiaries pursuant to “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries”), and (2) all Indebtedness Incurred, or Disqualified Capital Stock or Preferred Stock issued, during the Suspension Period will be classified to have been Incurred or issued pursuant to clause (iii) of the second paragraph of “—Certain Covenants—Limitation on Indebtedness.”

The Issuer will promptly provide the Trustee with written notice of any Covenant Suspension Event or of any Reversion Date. In the absence of such notice, the Trustee shall be entitled to assume that no Covenant Suspension Date or Reversion Date (as applicable) has occurred.

The Notes may never achieve or maintain Investment Grade Ratings.

Merger, Consolidation and Sale of Assets

Posadas will not (a) in one or more related transactions, consolidate with or merge into or reorganize with or into, or directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person or (b) permit any Guarantor to, in one or more related transactions, consolidate with or merge into or reorganize with or into, or directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other Person in each case unless: (i) the Person formed by the consolidation, merger or reorganization, if it is not Posadas or the Guarantor, or that acquired by

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transfer, conveyance, sale, lease or other disposition Posadas or such Guarantor’s assets and property (any such Person, a “Successor”), (x) is engaged in a Permitted Business and (y) shall expressly assume all the obligations of Posadas under the Notes or of such Guarantor under the Guarantees or shall concurrently execute a supplemental indenture as a Subsequent Guarantor, guaranteeing, on a joint and several basis with each of the other Guarantors, all obligations of Posadas under the Notes and the Indenture; (ii) in the case of clause (a), immediately after giving effect to such transaction in accordance with the Indenture (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), Posadas or such Successor, as the case may be, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under “—Limitation on Indebtedness”; (iii) immediately after giving effect to such transaction in accordance with the Indenture (including the substitution thereunder of any Successor for a Guarantor or a subsidiary, as the case may be) and treating any Indebtedness incurred by Posadas or any Successor or any Subsidiary of either of them as a result of such transaction as having been incurred at the time of such transaction, no Default with respect to the Notes shall have occurred and be continuing; (iv) the Issuer or any Successor will have delivered to the Trustee an Opinion of Mexican Counsel and an Opinion of U.S. Counsel to the effect that, as applicable (x) the Holders of the Notes will not recognize income, gain or loss for Mexican or U.S. federal income tax purposes as a result of the transaction and will be subject to Mexican or U.S. federal income tax in the same manner and on the same amounts (assuming solely for this purpose that no Additional Amounts are required to be paid on the Notes) and at the same times as would have been the case if the transaction had not occurred and (y) no other taxes on income, including capital gains, will be payable by Holders of the Notes under the laws of Mexico or the United States relating to the acquisition, ownership or disposition of the Notes, including the receipt of interest or principal thereon, as a result of the transaction; and (v) Posadas has delivered to the Trustee an Officers’ Certificate setting forth in reasonable detail information demonstrating compliance with the foregoing requirements and an Opinion of Mexican Counsel and an Opinion of U.S. Counsel, each stating that such consolidation, merger or reorganization and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the provisions of the Indenture and that the conditions precedent in the Indenture relating to such transaction have been complied with.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of Posadas, shall be deemed to be the transfer of all or substantially all of the properties and assets of Posadas.

The Indenture will provide that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of Posadas in accordance with the foregoing in which Posadas is not the continuing corporation, the successor Person formed by such consolidation or into which Posadas is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, Posadas under the Indenture and the Notes with the same effect as if such surviving entity had been named as such.

Notwithstanding the above, (x) any Guarantor may consolidate with, merge into or transfer all or part of its properties and assets to Posadas or to another Guarantor and (y) Posadas may merge with an Affiliate incorporated solely for the purpose of reincorporating Posadas in another jurisdiction to realize tax or other benefits; provided that such consolidation or merger does not trigger a Change of Control.

Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a Person.

Events of Default

The following events will be defined as “Events of Default” in the Indenture:

(a) failure to pay principal of any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

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(b) failure to pay interest on any Note when the same becomes due and payable, continued for a period of 30 days;

(c) the default in the performance of or breach of any other covenant or agreement in the Indenture and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

(d) a default or defaults under the terms of any instruments evidencing or securing, or of any agreements pursuant to which there may be issued, Indebtedness of Posadas or any Restricted Subsidiary having an outstanding principal amount in excess of $20.0 million (or the equivalent thereof in other currencies or currency units) individually or in the aggregate, which Indebtedness now exists or is hereafter incurred, which default or defaults (i) result in the acceleration of the payment of such Indebtedness and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 10 days of such acceleration, or (ii) constitute the failure to pay all or any part of such Indebtedness at the final Stated Maturity thereof (after the expiration of any applicable grace period) and which shall not have been cured or waived;

(e) the rendering of a final judgment or judgments (not subject to appeal) or an order or orders against Posadas or any Restricted Subsidiary in an aggregate amount in excess of $20.0 million (or the equivalent thereof in other currencies or currency units), individually or in the aggregate, which is neither discharged nor bonded in full within 60 days thereafter (or which, if bonded, thereafter becomes unbonded);

(f) certain events of bankruptcy affecting the Issuer, any Guarantor or any Principal Subsidiary; or

(g) any of the Guarantees shall cease to be in full force and effect (except as contemplated by its terms or the terms of the Indenture).

If an Event of Default (other than an Event of Default specified in clause (f) above with respect to the Issuer) occurs and is continuing under the Indenture, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to Posadas (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, and accrued interest (together with any Additional Amounts) on, the Notes to be immediately due and payable. Upon such a declaration of acceleration, such principal and accrued interest shall be immediately due and payable. If an Event of Default specified in clause (f) above occurs with respect to the Issuer, the principal of, and accrued interest (together with any Additional Amounts) on, the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes, by written notice to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences, if (i) all existing Events of Default, other than the nonpayment of the principal of, and interest on, the Notes that have become due solely by such declaration of acceleration, have been cured or waived, (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (iii) and any unpaid fees, expenses or other amounts owed to the Trustee have been paid in full. For information as to the waiver of defaults, see “—Modification and Waiver.”

No Holder of any Note will have any right to institute any proceeding with respect to the Indenture or the Notes unless: (i) the Holder gives the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to institute such proceeding; (iii) such Holder or Holders offer the Trustee reasonable indemnity to institute such proceeding as Trustee; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, or interest (together with Additional Amounts) on, such Note or to

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bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.

The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the uncured Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of, premium, interest or Additional Amounts on any Note, the Trustee may withhold notice if and so long as a committee of trust officers of the Trustee in good faith determines that withholding the notice is in the interest of the Holders. In addition, Posadas is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. Posadas is also required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any events which would constitute certain Defaults, their status and what action Posadas is taking or proposes to take in respect thereof.

Satisfaction and Discharge

The Indenture provides that it will be discharged and shall cease to be of further effect (except as to rights of registration of transfer or exchange of Notes which shall survive until all Notes have been canceled and certain other limited provisions) as to all outstanding Notes and the Trustee, on written demand of and at the expense of Posadas, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either:

(a) all Notes theretofore authenticated and delivered (other than (i) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in the Indenture and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by Posadas and thereafter repaid to Posadas or discharged from such trust) have been delivered to the Trustee for cancellation; or

(b) (i) either (A) Posadas shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Notes under arrangements satisfactory to the Trustee for the giving of such notice or (B) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable; (ii) Posadas has irrevocably deposited or caused to be deposited with the Trustee in trust an amount of U.S. legal tender or U.S. government obligations sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for the principal of, premium, if any, and interest on the Notes to the date of such deposit; (iii) no Default with respect to the Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which Posadas is a party or by which it is bound; (iv) Posadas has paid or caused to be paid all other sums payable under the Indenture by Posadas; and (v) Posadas has delivered to the Trustee (A) irrevocable instructions to apply the deposited money toward payment of the Notes at the maturity or redemption thereof, and (B) an officers’ certificate and an Opinion of U.S. Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the Indenture have been complied with and that such satisfaction and discharge does not result in a default under any agreement or instrument then known to such counsel which binds or affects Posadas.

Defeasance

The Indenture will provide that, at the option of Posadas, (a) Posadas will be discharged from any and all obligations in respect of the outstanding Notes (except for, among other matters, certain obligations of Posadas to register the transfer or exchange of the Notes, and to replace lost, stolen or mutilated Notes) (“Legal Defeasance”) or (b) Posadas may omit to comply with “—Repurchase at Option of Holders—Change of Control,” clause (b)(i) of “—Merger, Consolidation and Sale of Assets” and the covenants set forth above under “—Certain Covenants,” excluding the covenant set forth under “—Certain Covenants—Reporting” (collectively, the “Defeased Covenants”), and such omission will not be deemed to be an Event of Default under clause (c) or clause (d) (but only with respect to clause (b)(ii) under “—Merger, Consolidation and Sale of Assets”) under “—Events of Default” (the “Defeased Events of Default”) under the Indenture and the Notes (“Covenant Defeasance”), in either case (a) or (b) on the

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271st day after irrevocable deposit with the Trustee, in trust, of U.S. dollars and/or U.S. government obligations which will provide money in an amount sufficient in the opinion of an independent accounting firm nationally recognized in the United States to pay the principal of, and each installment of interest on, the outstanding Notes and Additional Amounts then known. With respect to clause (b), the obligations under the Indenture other than the Defeased Covenants and the Events of Default other than the Defeased Events of Default shall remain in full force and effect. Such trust may be established only if, among other things, (i) Posadas has delivered to the Trustee an Opinion of U.S. Counsel and an Opinion of Mexican Counsel to the effect that the Holders of the Notes will not recognize gain or loss for Mexican income tax purposes as a result of such deposit and defeasance and will be subject to United States federal or Mexican income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (ii) no Event of Default or event that with the passing of time or the giving of notice, or both, would constitute an Event of Default shall have occurred or be continuing during the 271st day period referred to above; (iii) Posadas has delivered to the Trustee an Opinion of U.S. Counsel to the effect that such deposit shall not cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940; (iv) with respect to an election by Posadas under clause (a) Posadas has delivered to the Trustee an Opinion of Mexican Counsel to the effect that Posadas has paid all Additional Amounts due in respect of the Notes; (v) with respect to an election by Posadas under clause (a) Posadas has delivered to the Trustee an officers’ certificate to the effect that as a result of such deposit and defeasance the Notes will no longer be considered a liability of Posadas under Mexican FRS; and (vi) certain other customary conditions precedent set forth in the Indenture are satisfied.

In the event Posadas exercises its option to omit compliance with certain covenants and provisions of the Indenture as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. government obligations on deposit with the Trustee will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, Posadas will remain liable for such payments.

Modification and Waiver

Modifications of the Indenture, except as noted below, may be made by Posadas and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes; provided, however, that no such modification may, without the consent of the Holder of each outstanding Note affected thereby, (i) change the Stated Maturity of the principal of, or any installment of interest on any Note, (ii) reduce the principal amount of, or interest (including Additional Amounts) on, any Note, (iii) change the place or currency of payment of principal of, or interest (including Additional Amounts) on, any Note, (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note, (v) reduce the above-stated percentage of outstanding Notes the consent of whose Holders is necessary to modify the Indenture, (vi) change Posadas’ obligations under “—Reporting” in a manner materially adverse to Holders, (vii) waive a default in the payment of principal of, or interest (including Additional Amounts) on, the Notes, (viii) release any of the Guarantors from the Guarantees, (ix) reduce the percentage of aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults or (x) amend “Change of Control” provisions or “Asset Sale Offer” provisions at any time when the Issuer is obligated to make a Change of Control Offer or an Asset Sale Offer.

Notwithstanding the foregoing, from time to time, the Issuer and the Trustee, without the consent of the holders of Notes, may amend the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the holders of Notes in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel.

The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all Holders of Notes, may waive compliance by Posadas with certain restrictive provisions of the Indenture.

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The Holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all Holders of Notes, may waive any past default under the Indenture, except a default in the payment of principal or interest or in any covenant or provision that cannot be modified without the consent of the Holder of each outstanding Note affected thereby.

Payments for Consent

Posadas will not, and will not cause or permit any Subsidiary to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture, the Notes or the Guarantees unless such consideration is offered to be paid to all Holders who so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or amendment.

Concerning the Trustee

The Indenture provides that, except during the continuance of a Default, the Trustee will not be liable except for the performance of such duties as are specifically set forth in such Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person’s own affairs.

Notices

All notices to Holders of the Notes shall be deemed to have been duly given (i) upon the mailing of such notices to Holders of the Notes at their registered addresses as recorded in the Issuer’s register and (ii) for as long as the Notes are listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market, upon publication in a leading daily newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or on the website of the Luxembourg Stock Exchange at www.bourse.lu, in each case not later than the latest date, and not earlier than the earliest date, prescribed in the Indenture for the giving of such notice.

Governing Law and Submission to Jurisdiction

The Notes, the Guarantees and the Indenture will be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. Posadas and the Guarantors will submit to the jurisdiction of the US. Federal and New York state courts located in the Borough of Manhattan, The City of New York, and each such party will submit to the jurisdiction of the courts of its own corporate domicile (domicilio social) in respect of actions brought against it as a defendant, for purposes of all legal actions and proceedings instituted in connection with the Notes, the Guarantees and the Indenture. Posadas and each Guarantor has appointed, and Posadas has agreed to cause any Subsequent Guarantor to appoint National Corporate Research, Ltd., 10 East 40th. Street, 10th floor, New York, NY 10016 as its authorized agent upon which process may be served in any such action in Federal or state court in the Borough of Manhattan, The City of New York.

Certain Definitions

Set forth below is a summary of certain of the defined terms used in the covenants and other provisions of the Indenture. Reference is made to the Indenture for the full definition of all terms as well as any other capitalized term used herein for which no definition is provided.

“Acquired Indebtedness” means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or any of its Restricted Subsidiaries or is assumed in connection with the acquisition of assets from such Person. Acquired Indebtedness will be deemed to have been Incurred at the time such Person becomes a Restricted Subsidiary or at the time it merges or consolidates with the Issuer or a Restricted Subsidiary or at the time such Indebtedness is assumed in connection with the acquisition of assets from such Person.

“Additional Notes” has the meaning set forth under the section entitled “General.”

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“Affiliate” means, with respect to any specified Person, any other Person which directly or indirectly through one or more Persons controls, or is controlled by, or is under common control with, such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Affiliate Transaction” has the meaning set forth under “—Certain Covenants—Limitation on Transactions with Affiliates.”

“Asset Acquisition” means:

(i) an investment by Posadas or any of its Subsidiaries in any other Person under which that Person shall become a Restricted Subsidiary or shall be merged into or consolidated with Posadas or any of its Restricted Subsidiaries; provided that such Person’s primary business is related, ancillary or complementary to a Permitted Business, or

(ii) an acquisition by Posadas or any of its Restricted Subsidiaries of the property and assets of any Person other than Posadas or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person; provided that the property and assets acquired are related, ancillary or complementary to a Permitted Business.

“Asset Sale” means any direct or indirect sale, issuance, conveyance, lease (other than operating leases entered into in the ordinary course of business), assignment, transfer or other disposition (other than the granting of a Permitted Lien), including by way of merger, consolidation or Sale and Leaseback Transaction, in one transaction or a series of related transactions by Posadas or any of its Restricted Subsidiaries of:

(a) all or any of the Capital Stock of any Restricted Subsidiary, other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than Posadas or a Restricted Subsidiary in order to maintain the corporate status of such Subsidiary,

(b) all or substantially all of the property and assets of an operating unit or business of Posadas or any of its Restricted Subsidiaries, or

(c) any other property and assets of Posadas or any of its Restricted Subsidiaries outside the ordinary course of business of Posadas or such Restricted Subsidiary,

in each case, that is not governed by the provisions of the Indenture applicable to mergers, consolidations, sales and leases of Posadas. However, “Asset Sale” shall not include:

(i) sales or other dispositions of inventory, receivables and other current assets, in the ordinary course of business,

(ii) any Restricted Payment made under the “—Limitation on Restricted Payments” covenant or a Permitted Investment,

(iii) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of $3.0 million in any transaction or series of related transactions,

(iv) the sale or other disposition of Temporary Cash Investments,

(v) any sale, transfer, assignment or other disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of Posadas or its Subsidiaries,

(vi) the sale, conveyance or other transfer of accounts receivable in connection with a Receivables Transaction,

(vii) the issuance of Capital Stock by a Restricted Subsidiary of Posadas to Posadas or a Wholly Owned Restricted Subsidiary, or

(viii) any sale or disposition by Posadas or any Restricted Subsidiary to Posadas or any Restricted Subsidiary.

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“Attributable Indebtedness” in respect of a Sale and Leaseback Transaction means, as at the time of determination, the greater of:

(i) the fair value of the property subject to such arrangement; and

(ii) the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with Mexican FRS) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended).

“Average Life” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the original aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each scheduled installment, sinking fund, serial maturity or other required payment of principal including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment.

“Board of Directors” means, with respect to any Person, the board of directors of such Person (or other similar governing body) or any duly authorized committee thereof.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary (or equivalent officer) of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” has the meaning set forth under “—General.”

“Capital Stock” means, (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in the equity of such Person, whether now outstanding or issued after the date of the Indenture, including, without limitation, all common stock and preferred stock and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.

“Capitalized Lease” means, as applied to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with Mexican FRS, is required to be accounted for as a capital lease.

“Capitalized Lease Obligations” means, as at any date of determination, the capitalized amount shown as a liability in respect of all Capitalized Leases on the balance sheet of such Person prepared in conformity with Mexican FRS.

“Change of Control” means the occurrence of one or more of the following events:

(1) the Permitted Holders shall cease to (a) be the “beneficial owners” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of at least 35% of the outstanding Voting Stock of Posadas or (b) have the power to elect a majority of the Board of Directors of Posadas; or

(2) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Posadas to any Person or Group, together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture) unless such sale, lease, exchange or other transfer is to one acquiror and the Permitted Holders (a) are the beneficial owners (as defined above) of at least 35% of the outstanding Voting Stock of the acquiror and (b) have the power to elect a majority of the Board of Directors of the acquiror.

“Change of Control Offer” has the meaning set forth under “—Repurchase at the Option of Holders—Change of Control.”

“Change of Control Payment” has the meaning set forth under “—Repurchase at the Option of Holders—Change of Control.”

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“Change of Control Payment Date” has the meaning set forth under “—Repurchase at the Option of Holders—Change of Control.”

“Closing Date” means the first date on which the Notes are originally issued under the Indenture.

“Commission” means the Securities and Exchange Commission, as from time to time constituted, or if at any time after the execution of the Indenture such Commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time.

“Commodity Agreements” means any forward commodity contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement entered into by Posadas or any of its Subsidiaries.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, whether outstanding on the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock.

“Consolidated Assets” means, as at any date of determination, the aggregate of all of the assets of Posadas and its Subsidiaries, determined on a consolidated basis in accordance with Mexican FRS.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

(a) Consolidated Interest Expense,

(b) Consolidated Income Tax Expense,

(c) depreciation expense, and

(d) amortization expense.

“Consolidated Income Tax Expense” means, with respect to any Person for any period, the provision for or payment of federal, state, local and any other income taxes in any other jurisdiction where such Person and its Subsidiaries may operate or be subjected to, and any statutorily mandated employee profit sharing payable by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) for such period as determined on a consolidated basis in accordance with Mexican FRS.

“Consolidated Interest Coverage Ratio” means, as at any date of determination, the ratio of (i) Consolidated EBITDA of a Person for the period of the most recently completed four consecutive fiscal quarters for which financial statements are in existence (a “Test Period”) to (ii) Consolidated Interest Expense of such Person for such Test Period; provided that, for purposes of this definition, Consolidated EBITDA and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for such Test Period to:

(i) the incurrence of any Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or the issuance of any Preferred Stock by any such Subsidiary (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds thereof) and any repayment of other Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or redemption of other Preferred Stock by any such Subsidiary (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the applicable Test Period for which Consolidated EBITDA or Consolidated Interest Expense is being calculated or at any time subsequent to the last day of such Test Period and on or prior to the date of determination, as if such incurrence, issuance, repayment, or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Test Period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation will be computed based on (i) the average daily balance of such Indebtedness during such quarter or such shorter period for which such facility was outstanding or (ii) if such facility was created after

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the end of such quarter, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of calculation);

(ii) any Asset Sale or acquisition, including, without limitation, any acquisition giving rise to the need to make such calculation as a result of such Person or any of its Subsidiaries (including any Person who becomes a Subsidiary as a result of such Asset Acquisition) (Restricted Subsidiaries in the case of the Issuer) incurring Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) associated with any such Asset Sale or acquisition) occurring during the Test Period or at any time subsequent to the last day of the Test Period and on or prior to the date of determination, as if such Asset Sale or acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness) occurred on the first day of the Test Period;

(iii) the Investment in any Subsidiary (Restricted Subsidiary in the case of the Issuer) (or any Person who becomes a Subsidiary (Restricted Subsidiary in the case of the Issuer) or is merged with or into such Person) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, since the beginning of any Test Period, by such Person, or any Subsidiary (Restricted Subsidiary in the case of the Issuer) (by merger or otherwise), as if such Investment or acquisition of assets occurred on the first day of the Test Period;

(iv) any Asset Sale or any Investment or any acquisition of assets that would have required any adjustment pursuant to clauses (ii) or (iii) above if made by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) during such Test Period, by any Person that subsequently became a Subsidiary (Restricted Subsidiary in the case of the Issuer) or was merged with or into such Person or any of its Subsidiaries since the beginning of such Test Period) since the beginning of such Test Period, as if such Investment or acquisition of assets occurred on the first day of the Test Period; and

(v) the payment of any dividend or distribution permitted by clauses (7) or (8) of the second paragraph of the covenant described under “—Limitation on Restricted Payments” occurring during the applicable Test Period for which Consolidated EBITDA or Consolidated Interest Expense is being calculated or at any time subsequent to the last day of such Test Period and on or prior to the date of determination, as if such payment occurred on the first day of the Test Period.

In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio:

(i) interest on outstanding Indebtedness determined on a fluctuating basis as of the date of determination and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the date of determination;

(ii) if interest on any Indebtedness actually incurred on the date of determination may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the date of determination will be deemed to have been in effect during the Test Period; and

(iii) notwithstanding clause (i) or (ii) of this paragraph, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements.

“Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense of a Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) for such period, determined on a consolidated basis in accordance with Mexican FRS and including, to the extent not included in such interest expense, without duplication:

(a) imputed interest on Capitalized Lease Obligations and Attributable Indebtedness,

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(b) commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations and bankers’ acceptance financings,

(c) the net costs or gains associated with obligations under Hedging Obligations,

(d) amortization of debt issuance costs, debt discount or premium and other financing fees and expenses except, in the case of the Issuer or any of its Restricted Subsidiaries, any such costs, discount or premium and fees and expenses resulting from the issuance of the Notes hereunder or the application of the proceeds thereof to prepay Indebtedness,

(e) the interest portion of any deferred payment obligations,

(f) all other non-cash interest expense,

(g) capitalized interest,

(h) any premiums, fees, discounts, expenses and losses on the sale of accounts receivable (and any amortization thereof) payable by such Person or its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) in connection with a Receivables Transaction,

(i) the product of (a) all dividend payments on any series of Disqualified Stock of such Person or any Preferred Stock of any Subsidiary (Restricted Subsidiaries in the case of the Issuer) (other than any such Disqualified Stock or any Preferred Stock held by such Person or a Wholly Owned Restricted Subsidiary or to the extent paid in Qualified Capital Stock), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer), expressed as a decimal, and

(j) all interest payable with respect to discontinued operations.

Total interest expense will be determined after giving effect to any net payment made or received by such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) with respect to Interest Rate Agreements.

“Consolidated Net Income” means, for any period, net income of a Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) on a consolidated basis, determined in accordance with Mexican FRS; provided that there shall be excluded from such Consolidated Net Income:

(i) any net income of any Subsidiary (Restricted Subsidiary in the case of the Issuer) for any period to the extent (i) such Subsidiary (Restricted Subsidiary in the case of the Issuer) is subject to restrictions, directly or indirectly, on the making of distributions or dividends and (ii) at the time of determination of Consolidated Net Income, (x) the net income of such Subsidiary (Restricted Subsidiary in the case of the Issuer) for such period has not been paid as dividends or distributions by such Subsidiary (Restricted Subsidiary in the case of the Issuer), directly or indirectly, to such Person and (y) such restrictions prohibit the net income of such Subsidiary (Restricted Subsidiary in the case of the Issuer) for such period from being paid as a dividend or distribution by such Subsidiary (Restricted Subsidiary in the case of the Issuer), directly or indirectly, to such Person (for the avoidance of doubt, if for any period of determination, such Subsidiary (Restricted Subsidiary in the case of the Issuer) is able to make a distribution or dividend to such Person of any amount of its net income, such amount shall be included in determining such Person’s Consolidated Net Income for such period); provided that, notwithstanding the foregoing, such Person’s equity in a net loss of any such Subsidiary (Restricted Subsidiary in the case of the Issuer) for such period shall be included in determining such Consolidated Net Income;

(ii) any gain or loss realized upon the sale or other disposition of any assets of such Person, its consolidated Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or any other Person (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of such Person and any gain or loss realized upon

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the sale or other disposition of any Capital Stock of any Person which is not sold or otherwise disposed of in the ordinary course of business;

(iii) extraordinary gains or losses;

(iv) any gain (or loss) from foreign exchange translation or change in net monetary position;

(v) all other non-cash charges of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period);

(vi) the cumulative effect of a change in accounting principles; and

(vii) deferred income taxes.

Notwithstanding the foregoing, for the purposes of the covenant described under “—Certain Covenants—Limitation on Restricted Payments” only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Issuer or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(z) of the first paragraph of such covenant.

“Consolidated Net Tangible Assets” of any Person means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense (to the extent included in said aggregate amount of assets) and other like intangibles, as shown on the balance sheet of such Person for the most recently ended fiscal quarter for which financial statements are available, determined on a consolidated basis in accordance with Mexican FRS. Consolidated Net Tangible Assets shall be determined as of the time of the occurrence of the event(s) giving rise to the requirement to determine Consolidated Net Tangible Assets and after giving effect to such event(s).

“Consolidated Revenues” means, for any period, revenues of a Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer), determined on a consolidated basis in accordance with Mexican FRS.

“Consolidated Total Indebtedness” means, with respect to a Person as of any date of determination, an amount equal to the aggregate amount (without duplication) of all Indebtedness of such Person and its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) outstanding at such time.

“Covenant Defeasance” has the meaning set forth under “—Defeasance.”

“Credit Agreements” means, collectively (i) the U.S.$10.0 million 1999 C Loan credit facility between International Finance Corporation and Posadas, (ii) the EUR 5.0 million 1999 subordinated convertible loan agreement between Deutsche Investitions-Und Entwicklungs-gesellschaft mbh or DEG and Posadas, (iii) the U.S.$35.8 Senior Notes 2011 program with Posadas, (iv) the dual currency facility in an aggregate of U.S.$79.1 million Syndicated loan agreement between several lenders from time to time and ING Capital LLC as administrative agent for the lenders, (v) the U.S.$20 million loan agreement between Citibank (Banamex USA) and Posadas, (vi) the Ps.2,250.0 million certificates program (Certificados Bursátiles) with Posadas, (vii) the Ps.312.0 million loan agreement between Banco Nacional de Mexico, S.A., Institucion de Banca Multiple, Grupo Financiero Banamex and Posadas, (viii) the U.S.$25.9 million and the Ps.392.9 million loans between Banco Nacional de Comercio Exterior, Sociedad Nacional de Credito and Posadas, (ix) the Ps.76.0 million loan agreement between Banco del Bajio, S.A., Institucion de Banca Multiple and Posadas, (x) the Ps.90.0 million loan agreement between Banco Santander, S.A., Institucion de Banca Multiple, Grupo Financiero Santander and Posadas, (xi) the U.S.$17.8 million and Ps.97.9 million loan agreements between Scotiabank Inverlat, S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat and Promotora Inmobiliaria Posadas, S.A. de C.V. (successor-in-interest to Promoción de Inversiones Hoteleras, S.A. de C.V.), (xii) the U.S.$46 million credit line between Banco Mercantil del Norte, S.A., Institucion de Banca Multiple, Grupo Financiero Banorte and Desarrolladora Caribe, S.A. de C.V., (xiii) the U.S.$47 million credit line between Banco Mercantil del Norte, S.A., Institucion de Banca Multiple, Grupo Financiero Banorte and Hotel Condesa del

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Mar, S.A. de C.V., (xiv) the U.S.$29.2 million credit line between Banco Nacional de Comercio Exterior, Sociedad Nacional de Credito and Compañía Hotelera Los Cabos, S.A. de C.V., and (xv) the Convertible Note up to U.S.$6.5 million between Solosol Tours, S.A. de C.V. and Grupo Mexicana de Aviación, S.A. de C.V.

“Credit Facilities” means one or more debt facilities (which may be outstanding at the same time and including, without limitation, the Credit Agreements) providing for revolving credit loans, term loans or letters of credit and, in each case, as such agreements may be amended, refinanced or otherwise restructured, in whole or in part from time to time with respect to all or any portion of the Indebtedness under such agreement or agreements or any successor or replacement agreement or agreements and whether by the same or any other agent, lender or group of lenders.

“Currency Agreements” mean any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by Posadas or any of its Subsidiaries.

“Debt to EBITDA Ratio” means, with respect to any Person as of any date of determination, the ratio of the aggregate amount of Consolidated Total Indebtedness for such Person as of such date to Consolidated EBITDA for such Person for the Test Period; provided that, for purposes of this definition, Consolidated Total Indebtedness and Consolidated EBITDA shall be calculated after giving effect on a pro forma basis for such Test Period to:

(i) the incurrence of any Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or the issuance of any Preferred Stock by any such Subsidiary (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds thereof) and any repayment of other Indebtedness by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) or redemption of other Preferred Stock by any such Subsidiary (Restricted Subsidiary in the case of the Issuer) (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the applicable Test Period for which Consolidated EBITDA or Consolidated Total Indebtedness is being calculated or at any time subsequent to the last day of such Test Period and on or prior to the date of determination, as if such incurrence, issuance, repayment, or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Test Period (except that, in making such computation, the amount of Indebtedness under any revolving credit facility outstanding on the date of such calculation will be computed based on (i) the average daily balance of such Indebtedness during such quarter or such shorter period for which such facility was outstanding or (ii) if such facility was created after the end of such quarter, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of calculation);

(ii) any Asset Sale or acquisition, including, without limitation, any acquisition giving rise to the need to make such calculation as a result of such Person or any of its Subsidiaries (including any Person who becomes a Subsidiary as a result of such Asset Acquisition) (Restricted Subsidiaries in the case of the Issuer) incurring Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) associated with any such Asset Sale or acquisition) occurring during the Test Period or at any time subsequent to the last day of the Test Period and on or prior to the date of determination, as if such Asset Sale or acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness) occurred on the first day of the Test Period;

(iii) the Investment in any Subsidiary (Restricted Subsidiary in the case of the Issuer) (or any Person who becomes a Subsidiary (Restricted Subsidiary in the case of the Issuer) or is merged with or into such Person) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, since the beginning of any Test Period, by such Person, or any Subsidiary (Restricted Subsidiary in the case of the Issuer) (by merger or otherwise), as if such Investment or acquisition of assets occurred on the first day of the Test Period;

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(iv) any Asset Sale or any Investment or any acquisition of assets that would have required any adjustment pursuant to clauses (ii) or (iii) above if made by such Person or any of its Subsidiaries (Restricted Subsidiaries in the case of the Issuer) during such Test Period, by any Person that subsequently became a Subsidiary (Restricted Subsidiary in the case of the Issuer) or was merged with or into such Person or any of its Subsidiaries since the beginning of such Test Period) since the beginning of such Test Period, as if such Investment or acquisition of assets occurred on the first day of the Test Period; and

(v) the payment of any dividend or distribution permitted by clauses (7) or (8) of the second paragraph of the covenant described under “—Limitation on Restricted Payments” occurring during the applicable Test Period for which Consolidated EBITDA or Consolidated Total Indebtedness is being calculated or at any time subsequent to the last day of such Test Period and on or prior to the date of determination, as if such payment occurred on the first day of the Test Period.

“Default” means any event that is, or after the giving of notice or passage of time or both would be, an Event of Default.

“Defeased Covenants” has the meaning set forth under “—Defeasance.”

“Defeased Events of Default” has the meaning set forth under “—Defeasance.”

“Designation” has the meaning set forth under “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries.”

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the final Maturity of the Notes; provided, however, that only the amount of such Capital Stock that matures or is redeemable prior to the maturity of the Notes shall be deemed to be Disqualified Stock.

“Equity Offering” means a public or private offer and sale of Capital Stock of the Issuer other than to a Subsidiary.

“Event of Default” means the occurrence of any of the events set forth under “Events of Default.”

“Exchange Act” means the United States Securities Exchange Act of 1934 (or any successor statute), as amended and the rules and regulations of the Commission promulgated thereunder.

“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors (whose determination shall be conclusive) and evidenced by a resolution of the Board of Directors.

“Fitch” means Fitch Ratings Ltd. and its successors.

“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “guarantee” used as a verb has a corresponding meaning.

“Guarantees” mean the joint and several guarantees by the Guarantors and the Subsequent Guarantors of Posadas’ obligations under the Notes and the Indenture for the benefit of the Holders and the Trustee.

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“Guarantor” means each Person that has executed a Guarantee of the Notes on the Closing Date and any Subsequent Guarantor.

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Commodity Agreement or Currency Agreement.

“Holder” means any registered holder, from time to time, of any Note.

“IFRS” means International Financial Reporting Standards, as issued by the International Accounting Standards Board.

“Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee, acquire or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or other obligations or the recording, as required pursuant to Mexican FRS or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and “Incurrence,” “Incurred” and “Incurring” shall have meanings correlative to the foregoing); provided, however, Indebtedness or Capital Stock of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition of assets or otherwise) will be deemed to be incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary; provided, further, however, that a change in Mexican FRS that results in an obligation of such Person that exists at such time becoming Indebtedness will not be deemed an Incurrence of such Indebtedness.

“Indebtedness” means, with respect to any Person at any date of determination (without duplication), (i) all obligations of such Person, in respect of (a) borrowed money; (b) the outstanding principal amount of any bonds, notes, loan stock, commercial paper, acceptance credits, debentures, and bills or promissory notes drawn, accepted, endorsed, or issued by such Person (including, in the case of Posadas and the Guarantors, the Notes and the Guarantees, respectively); (c) any credit to such Person from, or other obligation of such Person to, a supplier of goods or services under any installment purchase or similar arrangement in respect of goods or services (except trade accounts payable within 180 days that were Incurred in the ordinary course of business); (d) non-contingent obligations of such Person to reimburse any other Person in respect of amounts paid under a letter of credit or similar instrument (excluding any such letter of credit or similar instrument issued for the benefit of such Person in respect of trade accounts in the ordinary course of business); (e) Capital Lease Obligations and (f) any fixed or minimum premium payable on a redemption or replacement of any of the foregoing obligations; (ii) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness; (iii) all Indebtedness of other Persons guaranteed by such Person to the extent such indebtedness is guaranteed by such Person; (iv) to the extent not otherwise included in this definition, the net payment obligations of such Person and its Subsidiaries under Currency Agreements, Commodity Agreements and Interest Rate Agreements; (v) all liabilities of such Person (actual or contingent) under any conditional sale or transfer with recourse or obligation to repurchase, including, without limitation, by way of discount or factoring of book debts or receivables; (vi) to the extent not otherwise included in this definition, the Receivables Transaction Amount outstanding relating to any Receivables Transaction; and (vii) all Disqualified Capital Stock of such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued and unpaid dividends, if any, the amount of Indebtedness of any Person at any date shall be (without duplication) the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation (unless the underlying contingency has not occurred and the occurrence of the underlying contingency is entirely within the control of Posadas or its Subsidiaries); provided that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in accordance with Mexican FRS.

“Indenture” has the meaning set forth in the first paragraph under “Description of the Notes.”

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“Independent Financial Advisor” means an investment banking firm, accounting firm or appraisal firm of national standing; provided that such firm is not an Affiliate of the Issuer.

“Interest Rate Agreements” mean any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar arrangements) entered into by Posadas or any of its Subsidiaries.

“Investment” means any direct or indirect advance (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of any Person or its Subsidiaries), loan, or other extension of credit or equity capital contribution to (by means of my transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by, any other Person. “Investment” shall exclude (i) extensions of trade credit by the Issuer and the Restricted Subsidiaries on commercials reasonable terms in accordance with normal trade practices of the Issuer or such Restricted Subsidiaries, as the case may be, (ii) Hedging Obligations entered into in the ordinary course of business and in compliance with the Indenture, (iii) endorsements of negotiable instruments and documents in the ordinary course of business and (iv) an acquisition of assets, Capital Stock or other securities by Posadas for consideration exclusively consisting of Capital Stock of Posadas. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary (the “Referent Subsidiary”) such that, after giving effect to any such sale or disposition, the Referent Subsidiary shall cease to be a Restricted Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of the Referent Subsidiary not sold or disposed of. Any Designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed to be an Investment by the Issuer in an amount equal to the Fair Market Value of such Subsidiary on the date of such Designation, provided that the Designation of a Restricted Subsidiary as an Unrestricted Subsidiary as permitted by the second paragraph of the covenant described under “—Limitation on Designations of Unrestricted Subsidiaries” shall not be deemed to be an Investment by the Issuer.

“Investment Grade Rating” means a rating equal to or higher than (a) BBB-, in the case of S&P and Fitch, and (b) Baa3, in the case of Moody’s.

“Issue Date” means the first date of issuance of Notes under the Indenture.

“Legal Defeasance” has the meaning set forth under “—Defeasance.”

“Lien” means, with respect to any assets or property of any kind, any mortgage or deed of trust, pledge, security interest, hypothecation, collateral, assignment, encumbrance, lien (statutory or otherwise) or charge of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any sale with recourse against the seller or any Affiliate of the seller, or any agreement to give any security interest).

“Mexican FRS” means Financial Reporting Standards in Mexico that are in effect as of the Issue Date (i.e., without giving effect to any amendment, modification or change to such Financial Reporting Standards after the Issue Date); provided that, if at any time after the Issue Date the Issuer prepares its financial statements in accordance with IFRS in lieu of Financial Reporting Standards in Mexico, the Issuer may, by giving written notice thereof to the Trustee, elect to apply IFRS in lieu of Financial Reporting Standards in Mexico under the Indenture and, upon any such election, references herein to Mexican FRS will thereafter be construed to mean IFRS as in effect on the date of such election; and provided, further, that any such election, once made, shall be irrevocable.

“Moody’s” means Moody’s Investors Service, Inc.

“Net Cash Proceeds” means (a) with respect to any Asset Sale, the cash or readily marketable cash equivalents received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiror of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) therefrom by such Person, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses Incurred and all federal, state, provincial, foreign and local

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taxes required to be accrued as a liability under Mexican FRS as a consequence of such asset disposition, (ii) all payments made by such Person or its Subsidiaries on any Indebtedness that is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or that must, by the terms of such Lien, or in order to obtain a necessary consent to such asset disposition, or by applicable law, be repaid out of the proceeds from such asset disposition, and (iii) appropriate amounts to be determined by Posadas or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with Mexican FRS, against any liabilities associated with such Asset Sale and retained by Posadas or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, and (b) with respect to any issuance and sale of Capital Stock by a Person, the proceeds to such Person of such issuance and sale in the form of cash or readily marketable cash equivalents, net, in each case, of any attorney’s fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions, and brokerage and other fees incurred in connection with such issuance and sale and net of taxes paid or payable by such Person as a result thereof.

“Notes” means the 9.250% Senior Notes due 2015 to by issued by the Issuer.

“Offering” means the offering of $200.0 million aggregate principal amount of Notes on the Closing Date.

“Opinion of Mexican Counsel” means a written opinion of counsel admitted to practice in Mexico and of recognized standing in Mexico who may be counsel to Posadas and who shall be acceptable to the Trustee; provided that such counsel may rely, as to any matters of U.S. law, on an Opinion of U.S. Counsel.

“Opinion of U.S. Counsel” means a written opinion of counsel admitted to practice in the State of New York and of recognized standing in the United States who may be counsel to Posadas and who shall be acceptable to the Trustee; provided that such counsel may rely, as to any matters of Mexican law, on an Opinion of Mexican Counsel.

“Pari Passu Notes” has the meaning set forth under “—Certain Covenants—Limitation on Asset Sales.”

“Permitted Business” means the business or businesses conducted by the Issuer and its Subsidiaries as of the Issue Date and any business ancillary or complementary thereto.

“Permitted Holders” means (i) any member of Posadas’ Board of Directors on the Closing Date, their respective spouses, ancestors, siblings, descendants (including children or grandchildren by adoption) and the descendants of any of his siblings; (ii) in the event of the incompetence or death of any of the Persons described in clause (i), such Person’s estate, executor, administrator, committee or other personal representative, in each case who at any particular date shall beneficially own or have the right to acquire, directly or indirectly, Equity Interests of Posadas; (iii) any trust created for the benefit of the Persons described in clause (i) or (ii) or any trust for the benefit of any such trust; or (iv) any investment entity a majority of the voting Equity Interests of which are owned by any of the Persons described in clause (i), (ii) or (iii).

“Permitted Indebtedness” has the meaning set forth under “—Certain Covenants—Limitation on Indebtedness.”

“Permitted Investments” means:

(a) Investments by Posadas or any Restricted Subsidiary in any Person that is or will become immediately after such Investment a Wholly Owned Restricted Subsidiary or that will merge or consolidate into Posadas or a Wholly Owned Restricted Subsidiary;

(b) Investments in a Person engaged in a Permitted Business not to exceed the greater of (x) $25.0 million and (y) 2.5% of Consolidated Net Tangible Assets of the Issuer at any time outstanding;

(c) Investments in cash and Temporary Cash Investments;

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(d) loans and advances to executive committee members, employees and officers of Posadas and the Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of an aggregate of $2.0 million at any one time outstanding;

(e) Investments in Currency Agreements, Commodity Agreements and Interest Rate Agreements entered into in the ordinary course of Posadas’ or a Restricted Subsidiary’s businesses to protect Posadas or its Subsidiaries from fluctuations in interest rates, exchange rates and commodity prices and not for speculative purposes;

(f) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

(g) Investments made by Posadas or a Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with the covenant described under “—Certain Covenants—Asset Sales”;

(h) Investments by Posadas and its Restricted Subsidiaries in Unrestricted Subsidiaries in an aggregate principal amount, measured based on the amount invested by Posadas and its Restricted Subsidiaries, not to exceed the greater of (x) $75.0 million and (y) 7.5% of Consolidated Net Tangible Assets of Posadas;

(i) Investments in a Receivables Entity in connection with a Receivables Transaction; provided that such Investment in any such Person is in the form of any equity interest or interests in receivables and related assets generated by the Issuer or any Restricted Subsidiary and transferred to such Person in connection with a Receivables Transaction; and

(j) Investments by the Issuer or its Restricted Subsidiaries in connection with the sale of vacation club memberships, full or fractional ownership or full ownership of vacation homes, land, amenities and other improvements in the ordinary course of the Vacation Club Business.

“Permitted Liens” means:

(a) Liens existing on the Closing Date and any extension, replacement or renewal thereof;

(b) Liens securing Indebtedness incurred under clause (a)(ii) of the covenant described under “—Certain Covenants—Limitation on Indebtedness” in an aggregate amount not to exceed $50.0 million;

(c) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to Posadas or a Wholly Owned Subsidiary;

(d) Liens granted after the Closing Date on any assets or Capital Stock of Posadas or its Subsidiaries created in favor of the Holders;

(e) Liens securing Refinancing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under the Indenture; provided that such Liens do not extend to or cover any property or assets of Posadas or any Subsidiary other than the property or assets securing the Indebtedness being Refinanced;

(f) purchase money Liens securing Purchase Money Indebtedness or Capitalized Lease Obligations Incurred to finance the acquisition or leasing of property of the Issuer or a Restricted Subsidiary used in a Permitted Business; provided that: (i) the related Purchase Money Indebtedness does not exceed the cost of such property together with the related costs of construction or improvement of such property and shall not be secured by any property of the Issuer or any Restricted Subsidiary other than the property so acquired, and (ii) the Lien securing such Indebtedness will be created within 365 days of such acquisition;

(g) in addition to Liens securing Indebtedness pursuant to paragraphs (a) through (f) above, Liens securing Indebtedness in an amount not to exceed 10% of Consolidated Net Tangible Assets of Posadas;

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(h) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with Mexican FRS shall have been made;

(i) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with Mexican FRS shall have been made;

(j) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security;

(k) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

(l) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of Posadas and the Subsidiaries taken as a whole;

(m) leases or subleases granted to others that do not materially interfere with the ordinary course of business of Posadas and the Subsidiaries, taken as a whole;

(n) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of Posadas or the Subsidiaries relating to such property or assets;

(o) Liens on property of, or on shares of Capital Stock or Indebtedness of any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of Posadas or any Restricted Subsidiary other than the property or assets acquired;

(p) Liens in favor of Posadas or any Guarantor;

(q) Liens arising from the rendering of a final judgment or order against Posadas or any Subsidiary that does not give rise to an Event of Default;

(r) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

(s) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(t) Liens on any assets acquired by Posadas or any Restricted Subsidiary after the Closing Date, which Liens were in existence prior to the acquisition of such assets (to the extent that such Liens were not created in contemplation of or in connection with such acquisition); provided that such Liens are limited to the assets so acquired and the proceeds thereof;

(u) Liens arising by virtue of any statutory, regulatory, contractual or warranty requirements of Posadas or any Restricted Subsidiary, including, without limitation, provisions relating to rights of offset and set-off, bankers’ liens or similar rights and remedies;

(v) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of banker’s acceptance issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

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(w) Liens arising under any Permitted Vacation Club Financing Facilities and Liens in effect on the Closing Date securing Indebtedness permitted under clause (xiii) of the second paragraph of the covenant described under “—Certain Covenants—Limitation on Indebtedness.”

(x) Liens on cash and Temporary Cash Investments securing any Hedging Obligations so long as the Lien is incurred in the ordinary course of business, and not for speculative purposes and pursuant to customary collateral provisions for Hedging Obligations of such type; and

(y) Liens on accounts receivable or assets related to such accounts receivable incurred in connection with a Receivables Transaction.

“Permitted Vacation Club Financing Facilities” means one or more debt facilities the proceeds of which are used in the Vacation Club Business; provided that such Indebtedness is not:

(a) an obligation of, or otherwise recourse, directly or indirectly, to the Issuer or any of its Restricted Subsidiaries other than a Vacation Club Business Subsidiary or any Receivables Entity; or

(b) secured by any Lien on any asset of the Issuer or any of its Restricted Subsidiaries, other than by a Lien on (i) properties and assets of the Vacation Club Business, (ii) property and assets to be developed into a Vacation Club Business, and (iii) Receivables Entities and the Capital Stock of a Receivables Entity.

“Person” means any individual, corporation, partnership, limited liability company, trust or other organization or any government or any agency or political subdivision thereof.

“Principal Subsidiary” means, at any date of determination, (a) any Subsidiary of Posadas, that, together with its Subsidiaries, on a consolidated basis, (i) had total assets (exclusive of assets owed to such Subsidiary by Posadas or other Subsidiaries of Posadas) in excess of 5% of Consolidated Assets or (ii) accounted for more than 5% of Consolidated Revenues, in each case determined by reference to the consolidated financial statements of Posadas and its Subsidiaries for the most recently completed fiscal quarter prior to the date of determination and (b) each Guarantor.

“Purchase Money Indebtedness” means Indebtedness Incurred for the purpose of financing all or any part of the purchase price, or other cost of construction or improvement of any property; provided that the aggregate principal amount of such Indebtedness does not exceed the lesser of the Fair Market Value of such property or such purchase price or cost, including any Refinancing Indebtedness that does not increase the aggregate principal amount (or accreted amount, if less) thereof as of the date of the Refinancing.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Stock.

“Receivables Entity” means a Person in which the Issuer or any Restricted Subsidiary makes an Investment and:

(1) to which the Issuer or any Restricted Subsidiary transfers receivables and related assets in connection with a Receivables Transaction;

(2) which engages in no activities other than in connection with the Receivables Transaction;

(3) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which:

(a) is guaranteed by the Issuer or any Restricted Subsidiary (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);

(b) is recourse to or obligates the Issuer or any Restricted Subsidiary in any way other than pursuant to Standard Securitization Undertakings; or

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(c) subjects any property or asset of the Issuer or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;

(4) with which neither the Issuer nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding (except in connection with a Receivables Transaction) other than on terms no less favorable to the Issuer or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer, other than fees payable in the ordinary course of business in connection with servicing receivables; and

(5) to which neither the Issuer nor any Restricted Subsidiary has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results.

“Receivables Transaction” means any securitization, factoring, discounting or similar financing transaction or series of transactions that may be entered into by the Issuer or any of its Restricted Subsidiaries pursuant to which the Issuer or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to any Person (including a Receivables Entity), or may grant a security interest in, any receivables (whether now existing or arising in the future) of the Issuer or any of its Restricted Subsidiaries, and any assets related thereto, including all collateral, securing such receivables, all contracts and all guarantees or other obligations in respect of such receivables, the proceeds of such receivables and other assets which are customarily transferred, or in respect of which security interests are customarily granted, in connection with securitization, factoring or discounting involving receivables.

“Receivables Transaction Amount” means the amount of obligations outstanding under the legal documents entered into as part of a Receivables Transaction on any date of determination that would be characterized as principal if such Receivables Transaction were structured as a secured lending transaction rather than a purchase.

“Reference Date” has the meaning set forth under “—Certain Covenants—Limitation on Restricted Payments.”

“Referent Subsidiary” has the meaning set forth in the definition of Investment.

“Refinance” means in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Indebtedness” has the meaning set forth in the covenant described under “—Certain Covenants—Limitation on Indebtedness.”

“Restricted Payment” has the meaning set forth under “—Certain Covenants—Limitation on Restricted Payments.”

“Restricted Subsidiary” means any Subsidiary of Posadas that has not been designated by the Board of Directors of Posadas, by a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with the covenant described under “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries.”

“Revocation” as the meaning set forth under “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries.”

“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

“Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to Posadas or a Restricted Subsidiary of any property, whether owned by Posadas or any Restricted Subsidiary on the Closing Date or later acquired, which has been or is to be sold or transferred by Posadas or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced on the security of such property.

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“Senior Indebtedness” means all indebtedness of Posadas and the Guarantors ranking senior to, or pari passu with, the Notes.

“Service Subsidiaries” means Subsidiaries of Posadas which do not own, lease as lessee or manage hotels and which are operated principally for the purpose of providing payroll, procurement, advertising or other similar support services for Posadas and its Subsidiaries.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Issuer or any Restricted Subsidiary which are reasonably customary in securitization of receivables transactions.

“Stated Maturity” means, (i) with respect to any debt security, the date specified in such debt security as the fixed date on which the final installment of principal of such debt security is due and payable and (ii) with respect to any scheduled installment of principal of, or interest on, any debt security, the date specified in such debt security as the fixed date on which such installment is due and payable.

“Subsequent Guarantor” means any Restricted Subsidiary that after the Closing Date has pursuant to a supplemental indenture executed a direct, unconditional and irrevocable guarantee of Posadas’ obligations under the Notes and the Indenture on the terms set forth in the Indenture.

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity (i) of which Voting Stock representing more than 50% of the total voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person or (ii) for which such Person may nominate or appoint more than 50% of the members of the board of directors or persons performing similar functions for such entity.

“Successor” has the meaning set forth under “—Merger, Consolidation and Sale of Assets.”

“Temporary Cash Investments” means any of the following:

(1) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, in each case, maturing within 365 days of the date of acquisition;

(2) time deposit accounts, certificates of deposit and money market deposits maturing within 365 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $200.0 million, or the foreign currency equivalent thereof, and has outstanding debt which is rated “A,” or such similar equivalent rating, or higher by S&P or Moody’s or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above or clause (6) below entered into with a bank or trust company meeting the qualifications described in clause (2) above or clause (9) below;

(4) commercial paper maturing not more than 90 days after the date of acquisition, issued by a corporation, other than an Affiliate of Posadas, organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” or higher according to Moody’s or “A-1” or higher according to S&P;

(5) securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s;

(6) Certificados de la Tesorería de la Federación (Cetes) or Bonos de Desarrollo del Gobierno Federal (Bondes) issued by the Mexican government and maturing not more than 365 days after the acquisition thereof;

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(7) Investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (1) through (6) above and (9) below;

(8) demand deposit accounts with U.S. banks or Mexican banks specified in clause (9) of this definition maintained in the ordinary course of business; and

(9) certificates of deposit, bank promissory notes and bankers’ acceptances denominated in pesos, maturing not more than 365 days after the acquisition thereof and issued or guaranteed by any one of the four largest banks, based on assets as of the immediately preceding December 31, organized under the laws of Mexico and which are not under intervention or controlled by the Instituto para la Protección al Ahorro Bancario or any successor thereto or any banking subsidiary of a foreign bank which has capital, surplus and undivided profits aggregating in excess of $200.0 million, or the foreign currency equivalent thereof, and has outstanding debt which is rated “A,” or such similar equivalent rating, or higher by S&P or Moody’s.

“Test Period” has the meaning set forth in the definition of Consolidated Interest Coverage Ratio.

“Trustee” has the meaning set forth in the first paragraph under “Description of the Notes.”

“Unrestricted Subsidiary” of Posadas, means, initially Promotora Ecotur, S.A. de C.V. and Fundación Posadas, A.C., their successors and Subsidiaries, and

(1) any Subsidiary of Posadas that at the time of determination shall be or continue to be designated as such pursuant to and in compliance with the covenant described under “—Certain Covenants—Limitation on Designations of Unrestricted Subsidiaries”; and

(2) any Subsidiary of an Unrestricted Subsidiary.

“Vacation Club Business” means the vacation ownership business of Posadas and its Subsidiaries described in this offering memorandum, and any related business involving the sale and operation of membership interests, time share right of use, or full or fractional ownership interests.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Wholly Owned” means, with respect to any Subsidiary of any Person, such Subsidiary if all of the outstanding Capital Stock in such Subsidiary (other than any shares required that the relevant company has two shareholders at all times as mandated by applicable law) is owned directly or indirectly by such Person or one or more Wholly Owned Subsidiaries of such Person.

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BOOK-ENTRY; DELIVERY AND FORM

The notes are being offered and sold in connection with the initial offering thereof solely to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act (“QIBs”), pursuant to Rule 144A and in offshore transactions to persons other than “U.S. persons,” as defined in Regulation S under the Securities Act (“Non-U.S. Persons”), in reliance on Regulation S. Following the initial offering of the notes, the notes may be sold to QIBs pursuant to Rule 144A, Non-U.S. Persons in reliance on Regulation S and pursuant to other exemptions from, or in transactions not subject to, the registration requirements of the Securities Act, as described under “Transfer Restrictions.”

The Global Notes

Rule 144A Global Notes. Notes offered and sold to QIBs pursuant to Rule 144A will be issued in the form of one or more registered notes in global form, without interest coupons (collectively, the “Rule 144A Global Note”). The Rule 144A Global Note will be deposited on the issue date with, or on behalf of, The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC, or will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee. Interests in the Rule 144A Global Note will be available for purchase only by QIBs.

Regulation S Global Notes. Notes offered and sold in offshore transactions to Non-U.S. Persons in reliance on Regulation S will initially be issued in the form of one or more registered notes in global form, without interest coupons (collectively, the “Regulation S Global Note”). Each Regulation S Global Note will be deposited upon issuance with, or on behalf of, a custodian for DTC in the manner described in the preceding paragraph.

Except as set forth below, the Rule 144A Global Note and the Regulation S Global Note (collectively, the “Global Notes”) may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in physical, certificated form (“Certificated Notes”) except in the limited circumstances described below.

The notes will be subject to certain restrictions on transfer and will bear a restrictive legend as set forth under “Transfer Restrictions.”

All interests in the Global Notes may be subject to the procedures and requirements of DTC. Any interests held through the Euroclear System (“Euroclear”) or Clearstream Banking S.A. of Luxembourg (“Clearstream, Luxembourg”) may also be subject to the procedures and requirements of such systems.

Exchanges Among the Global Notes

Prior to the expiration of the later of the 40th day after the later of the commencement of the offering of the notes and the issue date (such period through and including such 40th day, the “Distribution Compliance Period”), transfers by an owner of a beneficial interest in the Regulation S Global Note to a transferee who takes delivery of such interest through the Rule 144A Global Note may be made only in accordance with applicable procedures and upon receipt by the trustee of a written certification from the transferor of the beneficial interest in the form provided in the indenture to the effect that such transfer is being made to a person whom the transferor reasonably believes is (i) a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or (ii) pursuant to another exemption from the registration requirements under the Securities Act and, in either case, in accordance with all applicable securities laws of the United States or any other jurisdiction. Such written certification will no longer be required after the expiration of the Distribution Compliance Record.

Transfers by an owner of a beneficial interest in the Rule 144A Global Note to a transferee who takes delivery of such interest through the Regulation S Global Note, whether before or after the expiration of the Distribution Compliance Period, will be made only upon receipt by the trustee of a certification from the transferor to the effect that such transfer is being made in accordance with Regulation S under the Securities Act and that, if such transfer is being made prior to the expiration of the Distribution Compliance Period, the interest transferred will be held immediately thereafter through Euroclear or Clearstream, Luxembourg.

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Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

Certain Book-Entry Procedures for the Global Notes

The descriptions of the operations and procedures of DTC, Euroclear and Clearstream, Luxembourg set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. Neither we nor the initial purchaser take any responsibility for these operations or procedures, and investors are urged to contact the relevant system or its participants directly to discuss these matters.

DTC has advised us that it is:

a limited purpose trust company organized under the laws of the State of New York;

a “banking organization” within the meaning of the New York Banking Law;

a member of the Federal Reserve System;

a “clearing corporation” within the meaning of the Uniform Commercial Code, as amended; and

a “clearing agency” registered pursuant to Section 17A of the Exchange Act.

DTC was created to hold securities for its participants (collectively, the “Participants”) and facilitates the clearance and settlement of securities transactions between Participants through electronic book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC’s Participants include securities brokers and dealers (including the initial purchaser), banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the “Indirect Participants”) that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Investors who are not Participants may beneficially own securities held by or on behalf of DTC only through Participants or Indirect Participants.

We expect that pursuant to procedures established by DTC (1) upon deposit of each Global Note, DTC will credit the accounts of Participants designated by the initial purchaser with an interest in the Global Note and (2) ownership of the notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of Participants) and the records of Participants and the Indirect Participants (with respect to the interests of persons other than Participants).

The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the notes represented by a Global Note to such persons may be limited. In addition, because DTC can act only on behalf of its Participants, who in turn act on behalf of persons who hold interests through Participants, the ability of a person having an interest in notes represented by a Global Note to pledge or transfer such interest to persons or entities that do not participate in DTC’s system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest.

So long as DTC or its nominee is the registered owner of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the notes represented by the Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of certificated notes, and will not be considered the owners or holders thereof under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a

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beneficial interest in a Global Note must rely on the procedures of DTC and, if such holder is not a Participant or an Indirect Participant, on the procedures of the Participant through which such holder owns its interest, to exercise any rights of a holder of notes under the indenture or such Global Note. We understand that under existing industry practice, in the event that we request any action of holders of notes, or a holder that is an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of such Global Note, is entitled to take, DTC would authorize the Participants to take such action and the Participants would authorize holders owning through such Participants to take such action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such notes.

Payments with respect to the principal of, and premium, if any, and interest on (including additional interest, if any), any notes represented by a Global Note registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the Global Note representing such notes under the indenture. Under the terms of the indenture, we and the trustee may treat the persons in whose names the notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a Global Note (including principal, premium, if any, and interest, including additional interest, if any). Payments by the Participants and the Indirect Participants to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of the Participants or the Indirect Participants and DTC.

Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures.

Subject to compliance with the transfer restrictions applicable to the notes, cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream, Luxembourg participants, on the other hand, will be effected through DTC in accordance with DTC’s rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparts in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for Euroclear or Clearstream, Luxembourg.

Because of time zone differences, the securities account of a Euroclear or Clearstream, Luxembourg participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream, Luxembourg participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream, Luxembourg) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in the Global Notes by or through a Euroclear or Clearstream, Luxembourg participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTC’s settlement date.

Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have

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any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Certificated Notes

If:

we notify the trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation; or

an event of default has occurred and is continuing and the registrar has received a request from DTC to issue certificated notes,

then, upon surrender by DTC of the Global Notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the Global Notes. Upon any such issuance, the trustee is required to register such certificated notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto.

Neither we nor the trustee shall be liable for any delay by DTC or any Participant or Indirect Participant in identifying the beneficial owners of the related notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the notes to be issued).

In the event that certificated notes are issued, so long as the notes are listed on the Luxembourg Stock Exchange, the Issuer will notify the Luxembourg Stock Exchange and the holders of the notes via a notice to be published in the Luxemburger Wort which shall contain material information in regards to, but not limited to, the time and means of transfer or exchange of the notes for certificated notes.

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TAXATION

The following summary is based on the federal tax laws of Mexico and the United States as in effect on the date of this offering memorandum, and is subject to changes in Mexican or U.S. law, including changes that could have retroactive effect. The following summary does not take into account or discuss the tax laws of any country other than the federal laws of Mexico or the United States and does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase the notes. Prospective purchasers in all jurisdictions are advised to consult their own tax advisors as to Mexican, U.S. or other tax consequences of the purchase, ownership and holding, and disposition of the notes. Holders that are not U.S. Holders (as defined below) should consult their tax advisors with respect to whether they reside in a country that has entered into a Tax Convention (as defined below) with Mexico which is effective, and, if so, the conditions and requirements for obtaining benefits under any such Tax Convention, if any such benefits shall arise.

General Mexican Tax Considerations

The following is a summary of the main Mexican federal income tax consequences for non-Mexican tax residents in connection with the purchase, ownership and holding or disposition of notes, and is based upon the federal tax laws of Mexico as in effect on the date of this offering memorandum, all of which are subject to change.

This summary does not purport to be a comprehensive description of all Mexican tax considerations that may be relevant to a decision to purchase, hold or dispose of the notes. The summary does not address any tax consequences under the laws of any state or municipality of Mexico; nor does it address any tax consequences under the laws of the United States, Luxembourg or any other taxing jurisdiction.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE MEXICAN AND FOREIGN CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND HOLDING, AND DISPOSITION OF NOTES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN (NON-MEXICAN), STATE, LOCAL OR MUNICIPAL TAX LAWS.

The tax implications described herein may vary depending on the applicability of a treaty for the avoidance of double taxation in effect. Mexico has entered into or is negotiating several treaties regarding the avoidance of double taxation with various countries that may have an impact on the tax treatment of the purchase, ownership and holding or disposition of notes.

PROSPECTIVE PURCHASERS OF NOTES, WHO ARE NON-MEXICAN RESIDENTS, SHOULD CONSULT THEIR TAX ADVISORS IN RESPECT OF THE ENTITLEMENT TO BENEFITS AFFORDED BY TAX TREATIES EXECUTED BY MEXICO, IF ANY.

Mexican Federal Tax Considerations

An individual is a resident of Mexico if such person has established his or her domicile in Mexico. When such person has a home in another country, the individual will be considered a resident of Mexico for tax purposes, if his/her center of vital interests is located in Mexico, which is deemed to occur if (i) more than 50% of such individual’s total income, in any calendar year, has a Mexican source, or (ii) such individual’s principal center of professional activities is located in Mexico. Mexican nationals that are employed by the Mexican government are deemed residents of Mexico, even if his/her center of vital interests is located outside of Mexico. Unless otherwise proven, Mexican nationals are deemed residents of Mexico for tax purposes. A legal entity is a resident of Mexico if it maintains the principal administration of its business or the effective location of its management in Mexico.

Furthermore, a permanent establishment in Mexico for tax purposes of a foreign person will be required to pay taxes in Mexico, in accordance with applicable tax laws, for any and all income attributable to such permanent establishment. Mexican tax residents—both individuals and legal entities—are taxed on worldwide income regardless of the location of its source. Mexican resident individuals are subject to income tax at progressive rates while legal entities are subject to income tax at

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the applicable corporate tax rate. The maximum income tax rate for both individuals and legal entities is 30% from 2010 to 2012, 29% in 2013 and 28% in 2014.

The following is a general summary of the principal Mexican federal income tax consequences of the purchase, ownership and holding, and disposition of the notes by holders that are not residents of Mexico for tax purposes and that do not hold the notes through a permanent establishment for tax purposes in Mexico to which the holding of the notes is attributable.

Taxation of Interest

Payment of Interest. Pursuant to the Mexican Income Tax Law, payments of interest (including original issue discount and premiums, which are deemed interest under the Mexican income tax law) on the notes made by us or the guarantors, to a non-resident of Mexico holding the notes will generally be subject to Mexican withholding taxes at a rate of 4.9%, if, as expected, the following requirements are satisfied:

a notice has been filed with the CNBV describing the main characteristics of the notes offering, including that the notes were subject of a public offering outside of Mexico, as specified in the second paragraph of article 7 of the Mexican Securities Market Law;

the notes, as expected, are placed in an offering outside of Mexico, through banks or brokerage houses, in a country with which Mexico has in force a treaty for the avoidance of double taxation (which currently includes the United States of America and Luxembourg); and

the information requirements specified from time to time by the Servicio de Administración Tributaria (Mexican Tax Administration Service) under general rules, including, after completion of the offering of the notes, certain information related to the notes offering and this offering memorandum, are duly satisfied.

If any of the above-mentioned requirements is not met, the Mexican withholding tax applicable to interest payments under the notes made to non-residents of Mexico, will be imposed at a rate of 10% or higher.

In addition, if the effective beneficiaries, whether acting directly or indirectly, severally or jointly, with related parties, receiving more than 5% of the aggregate amount of each interest payment under the notes are (i) shareholders holding 10% or more of our voting stock, directly or indirectly, or (ii) corporations or other entities having more that 20% of their stock owned directly or indirectly, jointly or severally, by persons related to us, the Mexican withholding tax will be applied at a rate of 30% from 2010 to 2012, 29% in 2013 and 28% in 2014.

As of the date of this offering memorandum, neither the U.S.-Mexico Tax Treaty nor the Luxembourg-Mexico Tax Treaty is expected to have any effect on the Mexican tax consequences described in this summary, because, as described above, under the Mexican income tax law, we expect to be entitled to withhold taxes in connection with interest payments under the notes at a 4.9% rate.

Payments of interest on the notes made by us to non-Mexican pension and retirement funds will be exempt from Mexican withholding tax provided that:

such fund is duly incorporated pursuant to the laws of its country of residence and is the beneficial owner of the interest payment;

such income is exempt from taxes in its country of residence; and

such fund is registered in the Registry of Banks, Financing Entities, Pension and Retirement Funds and Investment Funds from Abroad, of the Mexican Ministry of Finance and Public Credit, in accordance with the rules issued by the Mexican Tax Administration Service for such purposes.

Holders or beneficial owners of the notes may be requested to, subject to specified exceptions and limitations, provide certain information or documentation necessary to enable us to apply the

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appropriate Mexican withholding tax rate on interest payments under the notes made by us, to such holders or beneficial owners. In the event that the specified information or documentation concerning the holder or beneficial owner, if requested and required, is not timely provided completely or at all, we may withhold Mexican tax from interest payments on the notes to that non-Mexican holder or beneficial owner at the maximum applicable rate, but our obligation to pay Additional Amounts relating to those withholding taxes will be limited as described under “Description of the Notes—Additional Amounts.”

We have agreed, subject to certain limitations and exceptions, to pay additional amounts in respect of the above-mentioned Mexican withholding taxes in connection with interest payments on the notes. See “Description of the Notes—Additional Amounts.”

Payments of Principal. Under existing Mexican law and regulations, payments of principal made by us in respect of the notes to a non-resident of Mexico holding the notes, will not be subject to Mexican withholding or similar taxes.

Gains obtained from the Disposition of the Notes. Pursuant to the Mexican Income Tax Law, in certain cases gains realized by a non-Mexican resident from the disposition of notes may be subject to income tax in Mexico. In this regard, if notes are transferred by a non-Mexican resident investor to a Mexican resident or to a permanent establishment in Mexico for tax purposes of a non-Mexican resident, gains, if any, would be subject to Mexican withholding tax pursuant to the rules described above in respect of interest payments. The amount of deemed interest income will be determined according to the rules established in the Mexican income tax law.

Gains realized by a non-Mexican resident investor from the sale or other disposition of notes transferred to another non-Mexican resident, would not be subject to Mexican withholding tax, provided that neither transferor nor transferee have a permanent establishment in Mexico for tax purposes.

Other Mexican Taxes. Under current Mexican tax laws and regulations, non-Mexican holders of the notes are not subject to estate, gift, inheritance or similar taxes in connection with the holding or disposition of the notes , nor will they be liable for Mexican stamp, registration or similar taxes with respect to purchase or holding of the notes.

United States Federal Income Taxation

THE FOLLOWING DISCUSSION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING UNITED STATES FEDERAL, STATE OR LOCAL TAX PENALTIES, AND WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE OFFERING. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON SUCH PERSON’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following is a summary of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of notes by a holder thereof. This description only applies to notes held as capital assets and does not address, except as set forth below, aspects of U.S. federal income taxation that may be applicable to holders that are subject to special tax rules, such as:

financial institutions,

insurance companies,

real estate investment trusts,

regulated investment companies,

grantor trusts,

tax-exempt organizations,

S corporations,

dealers or traders in securities or foreign currencies,

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holders that will hold a note as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal income tax purposes, or

U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar.

Moreover, this description does not address the U.S. federal estate and gift tax or alternative minimum tax consequences of the acquisition, ownership or disposition of notes and does not address the U.S. federal income tax treatment of holders that do not acquire notes as part of the initial distribution at their initial issue price. Each prospective purchaser should consult its tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, holding and disposing of notes.

This description is based on the Internal Revenue Code of 1986, as amended, existing and proposed Treasury Regulations, administrative pronouncements and judicial decisions, each as available and in effect on the date hereof. All of the foregoing are subject to change, possibly with retroactive effect, or differing interpretations which could affect the tax consequences described herein.

For purposes of this description, a U.S. Holder is a beneficial owner of notes that for U.S. federal income tax purposes is:

a citizen or resident of the United States;

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any State thereof, or the District of Columbia;

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

a trust (1) that validly elects to be treated as a United States person for U.S. federal income tax purposes or (2)(a) the administration over which a U.S. court can exercise primary supervision and (b) all of the substantial decisions of which one or more U.S. persons has the authority to control.

If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the notes, the tax treatment of the partnership and a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to its consequences.

Interest

The notes will not be issued with original issue discount in excess of the statutory de minimis amount. Accordingly, if you are a U.S. Holder, interest paid to you on a note, including any amounts withheld and any additional amounts, will be includible in your gross income as ordinary interest income in accordance with your usual method of tax accounting. In addition, interest on the notes will be treated as foreign source income for U.S. federal income tax purposes.

For U.S. foreign tax credit limitation purposes, interest on the notes generally will constitute passive income. Subject to applicable limitations, a U.S. Holder will generally be entitled to a credit against its U.S. federal income tax liability, or alternatively, a deduction in computing its U.S. federal taxable income, for Mexican income taxes withheld. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules regarding foreign tax credits are complex, and U.S. Holders should consult their own tax advisors concerning the availability and utilization of the foreign tax credit in their particular circumstances.

Sale, Exchange or Other Taxable Disposition

If you are a U.S. Holder, upon the sale, exchange or other taxable disposition of a note you will recognize gain or loss equal to the difference, if any, between the amount realized on the sale, exchange or other taxable disposition (other than accrued and unpaid interest, which will be treated as above) and your adjusted tax basis in the note. Your adjusted tax basis in a note generally will equal the cost of the note to you. Any such gain or loss will be capital gain or loss. If your holding period in a note exceeds

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one year at the time of the sale, exchange or other taxable disposition, such gain or loss will be long-term capital gain or loss. Long-term capital gains of noncorporate taxpayers are currently subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss realized on the sale, exchange or other taxable disposition of a note generally will be treated as U.S. source gain or loss.

U.S. Backup Withholding and Information Reporting

Backup withholding and information reporting requirements apply to certain payments of principal of, and interest on, an obligation and to proceeds of the sale or redemption of an obligation, to certain noncorporate U.S. Holders. Information reporting generally will apply to payments of interest and to proceeds from the sale or redemption of notes made within the United States to a holder of notes (other than an exempt recipient, including a corporation, a payee that is not a U.S. person who provides appropriate certification and certain other persons). Backup withholding will be required on payments made within the United States on a note to a U.S. Holder, other than an exempt recipient, such as a corporation, if the U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, the backup withholding requirements. Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder of notes under the backup withholding rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

The above description is not intended to constitute a complete analysis of all tax consequences relating to the ownership of notes. Prospective purchasers of notes should consult their own tax advisors concerning the tax consequences of their particular situations.

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PLAN OF DISTRIBUTION

Subject to the terms and conditions in the purchase agreement among us, the guarantors and the initial purchaser, we have agreed to sell to the initial purchaser, and the initial purchaser has agreed to purchase from us, the entire principal amount of the notes.

The purchase agreement provides that the initial purchaser will purchase all the notes if any of them are purchased.

The initial purchaser initially proposes to offer the notes for resale at the issue price that appears on the cover of this offering memorandum. After the initial offering, the initial purchaser may change the offering price and any other selling terms. The initial purchaser may offer and sell notes through certain of their affiliates.

We will indemnify the initial purchaser against certain liabilities, including liabilities under the Securities Act, or contribute to payments that the initial purchaser may be required to make in respect of those liabilities.

The notes have not been registered under the Securities Act or the securities laws of any other place. In the purchase agreement, the initial purchaser has agreed that:

The notes may not be offered or sold within the United States or to U.S. persons except pursuant to an exemption from the registration requirements of the Securities Act or in transactions not subject to those registration requirements.

During the initial distribution of the notes, it will offer or sell notes only to qualified institutional buyers in compliance with Rule 144A and outside the United States in compliance with Regulation S.

In addition, until 40 days following the commencement of this offering, an offer or sale of notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act unless the dealer makes the offer or sale in compliance with Rule 144A or another exemption from registration under the Securities Act.

The notes are a new issue of securities, and there is currently no established trading market for the notes. In addition, the notes are subject to certain restrictions on resale and transfer as described under “Transfer Restrictions”. We intend to apply to list the notes on the official list of the Luxembourg Stock Exchange and to trading on the Euro MTF market. However, we cannot assure you that the listing application will be approved. The initial purchaser has advised us that it intends to make a market in the notes, but it is not obligated to do so. The initial purchaser may discontinue any market making in the notes at any time in its sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop for the notes, that you will be able to sell your notes at a particular time or that the prices that you receive when you sell will be favorable.

You should be aware that the laws and practices of certain countries require investors to pay stamp taxes and other charges in connection with purchases of securities.

We expect that delivery of the notes will be made against payment therefor on or about January 15, 2010, which will be the fifth business day following the date of pricing of the notes (this settlement cycle being referred to as “T+5”). Under Rule 15c6-1 of the U.S. Securities and Exchange Commission under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the notes initially will settle in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the notes who wish to trade the notes on the date of pricing or the next succeeding business day should consult their own advisor.

In connection with the offering of the notes, the initial purchaser may engage in overallotment, stabilizing transactions and syndicate covering transactions. Overallotment involves sales in excess of the offering size, which creates a short position for the initial purchaser. Stabilizing transactions involve bids to purchase the notes in the open market for the purpose of pegging, fixing or maintaining the price of the notes. Syndicate covering transactions involve purchases of the notes in the open market after the

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distribution has been completed in order to cover short positions. Stabilizing transactions and syndicate covering transactions may cause the price of the notes to be higher than it would otherwise be in the absence of those transactions. If the initial purchaser engages in stabilizing or syndicate covering transactions, it may discontinue them at any time.

The initial purchaser has performed commercial banking, investment banking and advisory services for us and our affiliates from time to time for which it has received customary fees and reimbursement of expenses. The initial purchaser may, from time to time, engage in transactions with and perform services for us and our affiliates in the ordinary course of their business for which it may receive customary fees and reimbursement of expenses. In addition, an affiliate of the initial purchaser is a lender under our syndicated loan, which we intend to repay with the proceeds of this offering. As a result, an affiliate of the initial purchaser will receive a portion of the net proceeds of this offering.

Sales Outside the United States

We are not making an offer to sell, or seeking offers to buy, the notes in any jurisdiction where the offer and sale is not permitted. You must comply with all applicable laws and regulations in force in any jurisdiction in which you purchase, offer or sell the notes or possess or distribute this offering memorandum, and you must obtain any consent, approval or permission required for your purchase, offer or sale of the notes under the laws and regulations in force in any jurisdiction to which you are subject or in which you make such purchases, offers or sales. We will not have any responsibility therefor.

Mexico

The notes have not been registered in Mexico with the National Securities Registry (Registro Nacional de Valores) maintained by the CNBV. Accordingly, the notes may not be offered or sold in Mexico, absent an available exemption under Article 8 of the Mexican Securities Market Law.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), the initial purchaser has represented and agreed that, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), it has not made and will not make an offer of the notes to the public in that Relevant Member State prior to the publication of a prospectus in relation to the notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of the notes to the public in that Relevant Member State at any time:

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of the notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State; and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

United Kingdom

The initial purchaser has represented, warranted and agreed that:

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(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the United Kingdom Financial Services and Markets Act of 2000 (“FSMA”) received by it in connection with the issue or sale of such notes in circumstances in which Section 21(1) of the FSMA does not, or would not, apply to us; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any notes in, from or otherwise involving the United Kingdom.

Hong Kong

The notes may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Japan

The notes have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each initial purchaser has represented and agreed that it will not offer or sell any notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Singapore

This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the notes are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the notes under Section 275 except (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA, (2) where no consideration is given for the transfer or (3) by operation of law.

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TRANSFER RESTRICTIONS

Because the following restrictions will apply with respect to the resale of the notes, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of the notes.

None of the notes has been registered under the Securities Act or any state securities laws, and they may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the notes are being offered and sold only (A) to “qualified institutional buyers” (as defined in Rule 144A promulgated under the Securities Act, or Rule 144A) (“QIBs”) in compliance with Rule 144A and (B) outside the United States to persons other than U.S. persons (“non-U.S. purchasers,” which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or trust)) in reliance upon Regulation S under the Securities Act, or Regulation S. As used herein, the terms “United States” and “U.S. person” have the meanings given to them in Regulation S.

Each purchaser of notes will be deemed to have represented and agreed as follows:

1. It is purchasing the notes for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is either (A) a QIB, and is aware that the sale to it is being made in reliance on Rule 144A or (B) a non-U.S. purchaser that is outside the United States (or a non- U.S. purchaser that is a dealer or other fiduciary as referred to above).

2. It acknowledges that the notes are being offered in a transaction not involving any public offering in the United States within the meaning of the Securities Act; that the notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below.

3. It shall not resell or otherwise transfer any of such notes within one year (or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereunder) after the original issuance of the notes except (A) to us or any of our subsidiaries, (B) inside the United States to a QIB in a transaction complying with Rule 144A, (C) outside the United States in compliance with Rule 904 under the Securities Act, (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), (E) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if we so request), or (F) pursuant to an effective registration statement under the Securities Act.

4. It agrees that it will give to each person to whom it transfers the notes notice of any restrictions on transfer of such notes.

5. It acknowledges that prior to any proposed transfer of notes in certificated form or of beneficial interests in a note in global form (a “global note”) (in each case other than pursuant to an effective registration statement) the holder of notes or the holder of beneficial interests in a global note, as the case may be, may be required to provide certifications and other documentation relating to the manner of such transfer and submit such certifications and other documentation as provided in the indenture.

6. It understands that all of the notes will bear a legend substantially to the following effect unless otherwise agreed by us and the holder thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT EITHER (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)

152

TO US OR ANY OF OUR SUBSIDIARIES THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF WE SO REQUEST), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

7. It acknowledges that the foregoing restrictions apply to holders of beneficial interests in the notes, as well as holders of the notes.

8. It acknowledges that the trustee will not be required to accept for registration of transfer any notes acquired by it, except upon presentation of evidence satisfactory to us and the trustee that the restrictions set forth herein have been complied with.

9. It acknowledges that we, the initial purchaser and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations or agreements deemed to have been made by its purchase of the notes is no longer accurate, it shall promptly notify us and the initial purchaser. If it is acquiring the notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations, and agreements on behalf of each account.

153

LEGAL MATTERS

Certain legal matters in connection with the offering of the notes will be passed upon with respect to New York and U.S. law by Gibson, Dunn & Crutcher, LLP, New York, New York, counsel to Posadas, and by Davis Polk & Wardwell LLP, New York, New York, counsel to the initial purchaser, and, with respect to Mexican law, by Romo, Paillés y Guzmán, S.C., Mexico City, Mexico, counsel to Posadas, and by Ritch Mueller, S.C., Mexico City, Mexico, counsel to the initial purchaser.

154

INDEPENDENT AUDITORS

Our consolidated financial statements as of December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, included herein, were audited by Galaz, Yamazaki, Ruiz Urquiza, S.C., a member firm of Deloitte Touche Tohmatsu, independent auditors, as stated in their report which is included herein.

155

GENERAL LISTING INFORMATION

1. The notes have been accepted for clearance and settlement through DTC, Euroclear and Clearstream. The CUSIP, Common Code and ISIN numbers for the notes are as follows: Restricted Global Note Regulation S Global Note

CUSIP ....................................................................... 400489 AE0 P4983G AL4 Common Code .......................................................... 46294009 46293967 ISIN ........................................................................... US400489AE06 USP4983GAL43

2. Copies of our audited consolidated annual financial statements at and for the year ended December 31, 2008, our unaudited financial statements for the period ended September 30, 2009, our future audited consolidated annual financial statements, and our future unaudited consolidated quarterly financial statements, if any, and the indenture (including forms of notes and guarantees), as well as English-language copies of the articles of association and by-laws (estatuto social) of Grupo Posadas, S.A.B. de C.V., will be available free of charge at the offices of the principal paying agent and any other paying agent, including the Luxembourg listing agent. In addition, from and after the date the notes are admitted to listing with the Official List of the Luxembourg Stock Exchange and so long as it is required by the rules of such exchange, English-language copies of the articles of association and by-laws (estatuto social) of the guarantors will be made available, upon request, at the offices of the Luxembourg listing agent.

3. Except as disclosed in this offering memorandum, there has been no material adverse change in our financial position since September 30, 2009, the date of our latest financial statements included in this offering memorandum.

4. Except as disclosed in this offering memorandum, we are not involved in any litigation or arbitration proceedings relating to claims or amounts that are material in the context of this offering, nor so far as we are aware is any such litigation or arbitration threatened.

5. We have applied to list the notes on the Official List of the Luxembourg Stock Exchange and to trade the notes on the Euro MTF Market. We will comply with any undertakings assumed or undertaken by us from time to time to the Luxembourg Stock Exchange in connection with the notes, and we will furnish to them all such information as the rules of the Luxembourg Stock Exchange may require in connection with the listing of the notes.

6. We have obtained all necessary consents, approvals and authorizations in connection with the issuance and performance of the notes. The issuance of the notes was authorized by our board of directors on October 28, 2009.

7. Galaz, Yamazaki, Ruiz Urquiza, S.C., a member firm of Deloitte Touche Tohmatsu, has agreed to the inclusion of its report in this offering memorandum in the form and context in which it is included.

(This page has been left blank intentionally.)

F-1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Grupo Posadas, S. A. B. de C. V. and Subsidiaries Audited Consolidated Financial Statements Page Independent Auditors’ Report...................................................................................................................................... F-2 Consolidated balance sheets at December 31, 2008 and 2007..................................................................................... F-3 Consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006................................ F-5 Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2008, 2007 and

2006........................................................................................................................................................................... F-7 Consolidated statement of cash flows for the year ended December 31, 2008 ............................................................ F-9 Consolidated statements of changes in financial position for the years ended December 31, 2007 and 2006............ F-10 Notes to consolidated financial statements ................................................................................................................ F-11 Grupo Posadas, S. A. B. de C. V. and Subsidiaries Unaudited Condensed Consolidated Interim Financial Statements Page Unaudited condensed consolidated interim balance sheets as of September 30, 2009 and 2008............................... F-38 Unaudited condensed consolidated interim statements of income for the nine months ended September 31,

2009 and 2008.......................................................................................................................................................... F-40 Unaudited condensed consolidated interim statements of cash flows for the nine months ended September 31,

2009 and 2008.......................................................................................................................................................... F-42 Notes to unaudited condensed consolidated interim financial statements................................................................... F-43

F-2

Independent Auditors’ Report to the Board of Directors and Stockholders of Grupo Posadas, S. A. B. de C. V. We have audited the accompanying consolidated balance sheets of Grupo Posadas, S. A. B. de C. V. (a Mexican corporation) and Subsidiaries (collectively the Company) as of December 31, 2008 and 2007, and the related consolidated statements of operations and changes in stockholders’ equity for each of the three years in the period ended December 31, 2008, of cash flows for the year ended December 31, 2008 and of changes in financial position for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain subsidiaries, which statements reflect total assets constituting 13% and 13% of consolidated assets as of December 31, 2008 and 2007, respectively, and total revenues constituting 5%, 6% and 8% of consolidated revenues for the years ended December 31, 2008, 2007 and 2006, respectively. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these subsidiaries is based solely on the unqualified reports of such other auditors. We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they are prepared in accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial reporting standards used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. As mentioned in Note 3 to the accompanying consolidated financial statements, beginning January 1, 2008 the Company adopted the following financial reporting standards: NIF B-2, Statement of Cash Flows; NIF B-10 Effects of Inflation; NIF B-15, Translation of Foreign Currencies, NIF D-3, Employee Benefits and NIF D-4 Income Taxes. In our opinion, based on our audits and on the reports of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Grupo Posadas, S. A. B. de C. V. and Subsidiaries as of December 31, 2008 and 2007, the results of their operations and changes in their stockholders' equity for each of the three years ended December 31, 2008, their cash flows for the year ended December 31, 2008 and the changes in their financial position for the years ended December 31, 2007 and 2006, in conformity with Mexican Financial Reporting Standards. Our audits also included the translation of the Mexican peso amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2 to the accompanying consolidated financial statements. The translation of the consolidated financial statement amounts into U.S. dollars and the translation of the consolidated financial statements into English have been made solely for the convenience of users. Galaz, Yamazaki, Ruiz Urquiza, S. C. Member of Deloitte Touche Tohmatsu C.P.C. Fernando Loera Aguilar April 3, 2009

F-3

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Balance Sheets As of December 31, 2008 and 2007 (In thousands of U.S. dollars ($) and in thousands of Mexican pesos (Ps.)) Assets 2008 2008 2007

Current assets: Cash and cash equivalents $ 59,382 Ps. 803,936 Ps. 339,984 Investments in securities 1,993 26,986 41,706

Total cash, cash equivalents and investments in securities 61,375 830,922 381,690

Accounts and notes receivable - Net 113,791 1,540,540 1,777,451 Inventories 3,762 50,926 39,038 Prepaid expenses 5,414 73,292 38,504 Real estate held for sale 12,654 171,310 204,101

Total current assets 196,996 2,666,990 2,440,784

Long-term notes receivable 56,502 764,943 575,244 Vacation Club units 18,489 250,308 135,255 Property and equipment - Net 693,346 9,386,720 9,266,017 Investment in shares of associated companies 2,001 27,094 234,864 Other assets - Net 33,144 448,719 492,616 Total $ 1,000,478 Ps. 13,544,774 Ps. 13,144,780

F-4

Liabilities and stockholders’ equity 2008 2008 2007

Current liabilities: Bank loans and current portion of long-term debt $ 85,516 Ps. 1,157,747 Ps. 363,242 Suppliers 35,606 482,050 428,773 Other accounts payable and accrued liabilities 44,579 603,488 487,235 Value-added tax and other tax payables 30,707 415,726 655,543

Total current liabilities 196,408 2,659,011 1,934,793 Long-term debt 309,764 4,193,673 3,884,392 Derivative financial instruments 29,867 404,345 20,985 Long-term accrued liabilities 4,149 56,171 53,913 Value-added tax payable 19,446 263,268 175,734 Deferred income tax 89,874 1,216,745 1,358,899

Total liabilities 649,508 8,793,213 7,428,716 Deferred credits - Net 21,621 292,718 423,649 Stockholders’ equity:

Capital stock: Historical 36,151 489,427 489,427 Contributions for future capital increases 14,570 197,257 149,031 Amount assigned for repurchase of shares 10,277 139,133 140,627 Shares in trust (245) (3,322) (3,322) Additional paid-in capital 5,643 76,399 107,881 Restatement for inflation 131,037 1,774,015 1,774,015

197,433 2,672,909 2,657,659 Other capital:

Reserve for repurchase of shares 141,986 1,922,254 1,751,700 Retained earnings (accumulated deficit) (79,021) (1,069,805) 1,624,379 Cumulative effect of restatement - - (828,768) Cumulative initial effect of deferred income tax - - (919,158) Cumulative translation effect 2,455 33,243 -

65,420 885,692 1,628,153

Minority interest 66,496 900,242 1,006,603 Total stockholders’ equity 329,349 4,458,843 5,292,415

Total $ 1,000,478 Ps. 13,544,774 Ps. 13,144,780 See accompanying notes to consolidated financial statements.

F-5

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Operations For the years ended December 31, 2008, 2007 and 2006 (In thousands of U.S. dollars ($) and in thousands of Mexican pesos, except income per share which is expressed in U.S. dollars and Mexican pesos) 2008 2008 2007 2006 Hotel ownership:

Revenues $ 271,643 Ps. 3,677,583 Ps. 3,522,621 Ps. 3,582,344 Departmental costs and expenses 98,296 1,330,756 1,284,822 1,258,730

Departmental profit 173,347 2,346,827 2,237,799 2,323,614

General expenses: Administrative 41,778 565,599 540,443 556,153 Sales, advertising and promotion 28,192 381,671 324,827 356,811 Maintenance and energy 29,922 405,098 362,431 360,581

99,892 1,352,368 1,227,701 1,273,545 Income before other expenses 73,455 994,459 1,010,098 1,050,069

Other expenses:

Property taxes and insurance 4,279 57,925 52,519 51,380 Other expenses (income), net 3,747 50,725 60,422 (13,885)

8,026 108,650 112,941 37,495 Operating earnings from hotel

ownership 65,429 885,809 897,157 1,012,574

Hotel management, brand and other: Revenues 122,275 1,655,402 1,289,110 1,040,469 Direct costs and corporate expenses 81,657 1,105,498 717,116 557,920

Operating earnings from hotel management, brand and other 40,618 549,904 571,994 482,549

Vacation Club and other:

Revenues 116,081 1,571,535 1,162,493 905,408 Direct cost and expenses 77,299 1,046,496 844,594 660,308

38,782 525,039 317,899 245,100 Corporate expenses 7,212 97,642 90,345 84,028 Depreciation and amortization 28,747 389,180 430,962 442,064 Real estate leasing 24,608 333,161 233,830 218,467 53,355 722,341 664,792 660,531

Operating income 84,262 1,140,769 1,031,913 995,664 Other expenses, net 17,338 234,728 122,902 91,493

Comprehensive financing result:

Interest expense 31,046 420,311 388,397 415,179 Interest income (516) (6,989) (32,093) (35,979) Exchange (gain) loss, net 11,844 160,354 (15,501) 65,738 Exchange and conversion effects related to

foreign operations (20,111) (272,272) - - Valuation of financial instruments 89,243 1,208,196 - - Monetary position gain - - (143,925) (135,742)

111,506 1,509,600 196,878 309,196

Equity in results of associated companies (15,476) (209,513) (351,922) 1,114 (Loss) income before income tax (60,058) (813,072) 360,211 596,089

F-6

2008 2008 2007 2006

Income tax (benefit) expense (8,216) (111,226) 159,646 139,819 Consolidated net (loss) income for the

year (51,842) (701,846) 200,565 456,270

Minority stockholders’ net (loss) income (6,384) (86,425) 74,453 39,284

Majority stockholders’ net (loss)

income $ (45,458) Ps. (615,421) Ps. 126,112 Ps. 416,986 Majority (loss) income per share (in

pesos) $ (0.0918) Ps. (1.2433) Ps. 0.2583 Ps. 0.8387 Majority diluted (loss) income per

share (in pesos) $ (0.0889) Ps. (1.2036) Ps. 0.2499 Ps. 0.8121 Weighted average number of shares

outstanding 494,976,251 494,976,251 488,205,350 497,134,756 See accompanying notes to consolidated financial statements.

F-7

F-8

F-9

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Statement of Cash Flows For the year ended December 31, 2008 (In thousands of U.S. dollars ($) and in thousands of Mexican pesos (Ps.))

2008 2008 Operating activities:

Loss before income taxes $ (60,058) Ps. (813,072) Items related to investing activities:

Depreciation and amortization 28,747 389,180 Loss on sale of fixed assets 1,129 15,285 Equity in results of associated companies 15,476 209,513 Other unrealized items 14,730 199,419

Items related to financing activities: Valuation of financial instruments 90,255 1,221,897 Interest expense 31,046 420,311

121,325 1,642,533 (Increase) decrease in:

Accounts receivable 21,322 288,662 Inventories (878) (11,888) Prepaid expenses (2,570) (34,788)

Increase (decrease) in: Suppliers 3,935 53,277 Other accounts payable, accruals and taxes 11,985 162,256 Income taxes paid (12,893) (174,549)

Net cash provided by operating activities 142,226 1,925,503 Investing activities:

Purchases of property and equipment (30,284) (409,997) Vacation Club units (13,450) (182,091) Long-term notes receivable (4,020) (54,425) Other assets (10,151) (137,432)

Net cash used investing activities (57,905) (783,945)

Excess cash to apply to financing activities 84,321 1,141,558 Financing activities:

Proceeds from borrowings 300,754 4,071,697 Repayment of loans (232,078) (3,141,947) Margin calls on derivative instruments (60,333) (816,806) Interest paid (32,883) (445,177) Dividends paid (11,399) (154,326) Reduction of minority interest (1,473) (19,936) Repurchase of shares 1,371 18,562 Convertible debt (1,283) (17,369)

Net cash used in financing activities (37,324) (505,302)

Net increase in cash and cash equivalents 46,997 636,256 Adjustment to cash flows due to exchange rate fluctuations (13,814) (187,024) Cash and cash equivalents and investment in securities at

beginning of year 28,192 381,690

Cash and cash equivalents and investment in securities at end of year $ 61,375 Ps. 830,922

See accompanying notes to consolidated financial statements.

F-10

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Consolidated Statements of Changes in Financial Position For the years ended December 31, 2007 and 2006 (In thousands of Mexican pesos (Ps.)) 2007 2006 Operating activities:

Net consolidated income for the year Ps. 200,565 Ps. 456,270 Add (less) items that did not require (generate) resources:

Depreciation and amortization 430,962 442,064 Equity in results of associated companies 351,922 (1,114) Deferred income tax (97,461) 3,210 Long-term accrued liabilities 924 (37,116)

886,912 863,314 Changes in operating assets and liabilities:

(Increase) decrease in: Investments in securities 42,041 (12,281) Accounts and notes receivable, net (751,237) 332,528 Inventories 7,114 (16,767) Prepaid expenses (2,039) 33,375 Real estate held for sale (25,067) 5,059

Increase (decrease) in: Suppliers 50,317 (53,775) Other accounts payable and accrued liabilities 490,079 (219,388)

Net resources generated by operating activities 698,120 932,065 Financing activities:

Changes in financial debt at nominal value 252,176 184,463 Decrease in financial debt due to inflationary effects and

currency exchange (365,908) (204,251) Derivative financial instruments (17,125) 19,949 Value-added tax payable 29,592 28,434 Repurchase of shares, net (91,778) (68,508) Dividends paid (131,022) (117,181) Reduction of minority interest (18,562) (333,483) Convertible debt (8,373) (188,458) Shares in trust 4,057 - Effect of valuation of derivative financial instruments - (1,918)

Net resources used in financing activities (346,943) (680,953)

Investing activities: Long-term notes receivable (20,660) (219,402) Vacation club units 7,951 (12,107) Additions to property and equipment (539,896) (303,210) Disposals and transfers of property and equipment 10,657 199,041 Investment in shares of associated companies 37,495 26,773 Other assets (50,810) (30,618) Deferred credits, net 101,051 172,979

Net resources used in investing activities (454,212) (166,544) Cash and cash equivalents:

Net (decrease) increase (103,035) 84,568 Balance at beginning of year 443,019 358,451

Balance at end of year Ps. 339,984 Ps, 443,019

See accompanying notes to consolidated financial statements.

F-11

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Notes to Consolidated Financial Statements For the years ended December 31, 2008, 2007 and 2006 (In thousands of U.S. dollars ($) and in thousands of Mexican pesos (Ps.)) 1. Nature of business and significant events

Nature of business - Grupo Posadas, S. A. B. de C. V. (Posadas) and subsidiaries (collectively, the Company) are primarily engaged in the business of operating hotels. As of December 31, 2008, 2007 and 2006, the Company operated a total of 109 hotels with 19,633 rooms, 102 hotels with 18,778 rooms and 95 hotels with 17,922 rooms, respectively. The Company mainly operates hotels under its Fiesta Americana, Fiesta Inn and One Hotels brand names throughout Mexico, and Caesar Park and Caesar Business brand names in Brazil, Argentina and Chile. The Company enters into management contracts with all the hotels that it operates. Of the total hotels the Company operated as of December 31, 2008, 2007 and 2006, it had an equity interest of 50% or greater in 34, 33 and 32 hotels, respectively, and operated 21 in 2008 and 2007 and 22 in 2006, under leasing contracts in those years. The remaining hotels are those that the Company operated for unrelated third parties, which as of December 31, 2008, 2007 and 2006 were 54, 48 and 41 hotels, respectively. For purposes of these consolidated financial statements, these hotels are referred to as the Company’s “owned”, “leased” and “managed” hotels, respectively. Posadas receives fees pursuant to the management contracts it has with all of the hotels it operates. Certain fees, including management, brand use fee, reservation services and technology usage, among others, are based on hotel revenues. Posadas also receives an incentive fee according to the hotels’ operating results. Additionally, the Company operates a vacation club business called Fiesta Americana Vacation Club (FAVC) through which members purchase a “40-year-right-to-use” evidenced by an annual allocation of FAVC points. FAVC points can be redeemed to stay at the Company’s four FAVC resorts in Los Cabos, Baja California Sur, Acapulco, Guerrero, Cancun and Chetumal Quintana Roo, Mexico as well as any of the hotels in its portfolio. In addition, members of FAVC can also redeem their FAVC points to stay at any Resorts Condominium International (RCI)-affiliated resort or Hilton Grand Vacation Club resorts throughout the world. Significant events - a. As a result of the global economic slow-down during the fourth quarter of 2008, world financial

markets became highly volatile, leading to the bankruptcy and rescue of certain financial institutions, mainly in the United States of America. The aforementioned events resulted in an aversion to risk in the local investing environment, which was reflected in the downturn in stock markets, a credit contraction and liquidity crisis, as well as a depreciation in the value of the Mexican peso with respect to the U.S. dollar of approximately 25%.

b. As a result of the purchase in December 2005 of 94.97% of the common stock of Grupo Mexicana de

Aviación, S. A. de C. V. (Mexicana) from Cintra S. A. de C. V. now Consorcio Aeromexico, S. A. B. de C. V. (Consorcio), the Company executed purchase and sale agreements with third parties, to whom part of the Mexicana stock purchased by the Company was sold on the same date. Mexicana’s financial statements are not consolidated in the accompanying financial statements, given that the Company has significant influence but not control of Mexicana. As of December 31, 2008 and 2007 the Company maintains a 30.41% stake in Mexicana.

F-12

During June and September 2006, the Company sold 19% of the Mexicana capital stock, which generated a loss of Ps.6,000, included in other expenses, net, in the consolidated statements of operations. Additionally, in December of that year the Company received from Consorcio an adjustment to the purchase price payment for approximately $11 million, which was distributed between the stockholders in proportion to their stake in Mexicana.

c. During 2006, the Company sold a hotel located in Baja California Sur and two hotels located in

McAllen, Texas and its participation in the Fiesta Inn Oaxaca hotel. Gain from the sale was Ps.79,698 and is shown in the consolidated statements of operations in the other hotel operation income account for Ps.76,380 and in other businesses income for Ps.3,318.

d. Due to the hurricanes that hit the Yucatan Peninsula in July and October 2005, the Company’s owned

hotels located in Cancun and Cozumel, Quintana Roo, suffered significant damages, thereby causing their temporary closure. These hotels were reopened in December 2005 and January 2006. During 2006, revenues of Ps.42,362, related to business interruption insurance were recorded in the results of the year.

2. Basis of presentation

a. Explanation for translation into English - The accompanying consolidated financial statements are stated in thousands of Mexican Pesos (Ps.). The translation of Mexican Pesos into U.S. dollars ($) is included solely for the convenience of the users, using the exchange rate as of December 31, 2008 of 13.5383 Mexican Pesos to one U.S. dollar. The accompanying consolidated financial statements have also been translated from Spanish into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial Reporting Standards (MFRS, individually referred to as Normas de Información Financiera or NIFs). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use.

b. Monetary unit of the financial statements - The consolidated financial statements and notes as of

December 31, 2008 and for the year then ended, include balances and transactions denominated in Mexican pesos of different purchasing power, while those consolidated as of December 31, 2007 and for the years ended December 31, 2007 and 2006 are presented in Mexican pesos of purchasing power as of December 31, 2007.

c. Consolidation of financial statements - The accompanying consolidated financial statements include

the financial statements of Grupo Posadas, S. A. B. de C. V. and those of the subsidiaries that the Company controls.

Entities in which the Company’s ownership interest is greater than 50% and over which control is exercised are consolidated in these financial statements. These are as follows:

Company Participation (%)

Posadas de México, S. A. de C. V. and Subsidiaries 100 Inmobiliaria Hotelera Posadas, S. A. de C. V. and

Subsidiaries 100 Servicios Hoteleros Posadas, S. A. de C. V. and

Subsidiaries 100 Posadas USA Inc, and Subsidiaries 100 Fondo Inmobiliario Posadas, S. A. de C. V. and

Subsidiaries 52

F-13

Hotels owned and leased by the Company’s subsidiaries, pay to Posadas a management fee on a similar basis as hotels managed but not owned by the Company. For the purpose of showing the results of the hotel operation, hotel management fees, brand and other fees, the Company’s management decided not to eliminate these intercompany operations in the preparation of the consolidated statements of operations, which does not affect operating income. The intercompany transaction amounts that were not eliminated, as well as balance of the items which would be affected are presented below:

2008

Balance

Amount of after

elimination elimination

Hotel operation: General expenses- Administrative Ps. 326,734 Ps. 238,865 General expenses- Sales, advertising and promotion Ps. 191,667 Ps. 190,004 Hotel management fees, brand and other:

Revenues Ps. 529,667 Ps. 1,125,735

Other business: Direct cost and expenses Ps. 11,266 Ps. 1,035,230

2007

Balance

Amount of after

elimination elimination

Hotel operation: General expenses- Administrative Ps. 326,495 Ps. 213,948 General expenses- Sales, advertising and promotion Ps. 173,921 Ps. 150,906 Hotel management fees, brand and other:

Revenues Ps. 500,416 Ps. 788,694

Other business: Direct cost and expenses Ps. - Ps. -

2006

Balance

Amount of after

elimination elimination

Hotel operation: General expenses- Administrative Ps. 319,748 Ps. 236,405 General expenses- Sales, advertising and promotion Ps. 150,246 Ps. 206,565 Hotel management fees, brand and other:

Revenues Ps. 469,994 Ps. 570,475

Other business: Direct cost and expenses Ps. - Ps. -

Remaining significant intercompany balances and transactions have been eliminated in these consolidated financial statements.

F-14

d. Translation of financial statements of foreign subsidiaries - To consolidate the financial statements of foreign subsidiaries that operate independently of the Company in terms of finances and operations, the same accounting policies of the Company are applied. In 2008, foreign operations with a functional currency different from the local currency and the reporting currency translate their financial statements from the currency in which transactions are recorded to the functional currency, using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for monetary assets and liabilities; 2) historical exchange rates for non-monetary assets and liabilities and stockholders’ equity; and 3) the rate upon accrual in the statement of operations for revenues, costs and expenses, except those arising from non-monetary items are translated using the historical exchange rate for the related non-monetary item. Translation effects are recorded under Comprehensive Financing Result (CFR) in the consolidated statements of operations. Subsequently, to translate the financial statements from the functional currency for Mexican and foreign companies to Mexican pesos, the following exchange rates are used; 1) the closing exchange rate in effect at the balance sheet date for assets and liabilities and 2) historical exchange rates for stockholders’ equity, revenues costs and expenses. Translation effects are recorded in stockholders’ equity. Through 2007, the financial statements of foreign subsidiaries that operated independently of the Company in terms of finances and operations recognized the effects of inflation of the country in which they operate and were then translated using the closing exchange rate in effect at the balance sheet date, and the translation effects were recorded in stockholders’ equity. The currency in which transactions are recorded and the functional currency of foreign operations, are as follows:

Currency Country Recording Functional Reporting

Mexico (FAVC) Mexican pesos US dollar Mexican pesos United States of America US dollar US dollar Mexican pesos Brazil Brazilian reals Brazilian reals Mexican pesos Argentina Argentinean pesos Argentinean pesos Mexican pesos Chile Chilean pesos Chilean pesos Mexican pesos

e. Comprehensive (loss) income - Represents changes in stockholders’ equity during the year, for

concepts others than distributions and activity in contributed common stock, and is comprised of the net consolidated (loss) income for the year, plus other comprehensive income (loss) items of the same period, which are presented directly in stockholders’ equity without affecting the consolidated statements of operations. Other comprehensive (loss) income items in 2008 include, the translation effects of functional currency and foreign operations and in 2007 and 2006 the result from holding nonmonetary assets.

f. Classification of costs and expenses - Costs and expenses presented in the consolidated statements of operations were classified according to their function and nature, since this makes possible the determination of operating results of hotel operations and management and other businesses, as well as the detail of their expenses.

g. Operating income - Is the result of subtracting cost and departmental expenses and general and other expenses from net revenues. While NIF B-3, Statement of Income does not require inclusion of this line item in the consolidated statements of operations, it has been included for a better understanding of the Company’s economic and financial performance.

3. Summary of significant accounting policies

The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances. The significant accounting policies of the Company are as follows:

F-15

a. Accounting changes - Beginning January 1, 2008, the Company adopted the following new NIFs: i. Statement of Cash Flows - NIF B-12 supersedes Bulletin B-12, Statement of Changes in

Financial Position, and thereby replaces the statement of changes in financial position. NIF B-2 permits the presentation of such statement using either the direct or the indirect method; the Company elected to use the indirect method. The statement of cash flows is presented in nominal pesos. According to NIF B-2, this accounting change should be recognized prospectively; consequently, the Company presents a statement of cash flows for 2008 and statements of changes in financial position for 2007 and 2006.

ii. Effects of Inflation - NIF B-10 considers two economic environments: a) inflationary, where cumulative inflation over a three-year period is 26% or more, in which case, the effects of inflation need to be recognized , and b) non-inflationary, where inflation is less than 26% in the same period, in which case, the effects of inflation may not be recognized in the financial statements and requires that the gain (loss) from monetary position in equity and the cumulative gain (loss) from holding non-monetary assets be reclassified to retained earnings, except for the gain (loss) from holding non-monetary assets that is identified with inventories or fixed assets that have not been realized as of the effective date of this standard. The Company determined it was impractical to identify the result from monetary position in equity and the cumulative effect of restatement from holding non-monetary assets relating to unrealized assets as of January 1, 2008; therefore, on that date, the Company reclassified the entire balance of cumulative effect of restatement. NIF B-10 establishes that this accounting change be recognized prospectively Since cumulative inflation over the three preceding years is 11.56%, the environment in which the Company operates is not inflationary and beginning January 1, 2008 the Company discontinued recognition of the effects of inflation in its consolidated financial statements. However, assets, liabilities and stockholders’ equity at December 31, 2008 and 2007 include restatement effects recognized through December 31, 2007.

iii. Translation of Foreign Currencies - NIF B-15 eliminates the classification of foreign operations as integrated foreign operations and autonomous foreign entities and instead establishes the concepts of recording currency, functional currency and reporting currency. NIF B-15 establishes the procedures to translate the financial information of a foreign operation: i) from the recording currency to the functional currency; and, ii) from the functional currency to the reporting currency. NIF B-15 also allows an entity to present its financial statements in a reporting currency that is different from its functional currency.

iv. Employee Benefits - NIF D-3 incorporates current and deferred statutory employee profit sharing (PTU) as part of its provisions and establishes that deferred PTU must be determined using the asset and liability method established in NIF D-4, Income Taxes, instead of only considering temporary differences that arise in the reconciliation between the accounting result and income for PTU purposes. The effect of deferred PTU generated from this change in recognition method as of January 1, 2008, was recorded in retained earnings.

NIF D-3 also eliminates recognition of the additional liability because its determination does not incorporate a salary increase. NIF D-3 also incorporates the career salary concept in the actuarial calculation and limits the amortization of the following items to the lesser of five years or the employee’s remaining labor life:

- The beginning balance of the transition liability for termination benefits and retirement

benefits. - The beginning balance of past services and modifications to the plan included within the

transition liability. - When the company elects to fully expense actuarial gains and losses on a go-forward

basis , the beginning balance of actuarial gains and losses from retirement benefits is amortized over five years (net of the transition liability), with the option to fully amortize it against current earnings of 2008, under other income and expense. The Company chose to recognize actuarial gains and losses directly against results of 2008.

F-16

As of December 31, 2008 the Company generated a deferred PTU asset, which was fully reserved due to the uncertainty of its realization.

v. Income Taxes - NIF D-4 eliminates the permanent difference concept; clarifies and incorporates certain definitions, and requires that the balance of cumulative effect of deferred income tax be reclassified to retained earnings unless it is identified with any of the other comprehensive income (loss) items pending to be applied against current earnings.

b. Recognition of the effects of inflation - Beginning January 1, 2008, the Company discontinued

recognition of the effects of inflation. Through December 31, 2007, such recognition resulted mainly in inflationary gains or losses on non-monetary and monetary items that are presented in the financial statements under the two following captions:

Cumulative effect of restatement - Represents the accrued monetary position result through the initial restatement of the financial statements, the result from translating foreign subsidiaries and the gain (loss) from holding non-monetary assets, consolidated and from associated companies, which resulted from restating certain non-monetary assets above (below) inflation, less the related deferred income tax effect. Monetary position result - Represents the erosion of purchasing power of monetary items caused by inflation, and is calculated by applying National Consumer Price Index (NCPI) factors to monthly net monetary position. Gains result from maintaining a net monetary liability position.

For the years ended December 31, the inflation rates of each country´s respective currency were as follows:

2008 2007 2006

Mexico 6.53 3.75 4.05 United States of America 0.09 4.08 2.54 Brazil 6.90 5.16 2.81 Argentina 7.72 8.47 9.84 Chile 8.61 7.82 2.57

c. Cash and cash equivalents - Consists mainly of bank deposits in checking accounts and readily

available daily investments of cash surpluses. Cash and cash equivalents are stated at nominal value plus accrued yields, which are recognized in results as they accrue. Any fluctuations in fair value are recognized in CFR of the period. Cash equivalents are represented mainly by investment funds.

d. Investments in securities - According to its intent, from the date of acquisition, the Company classifies investments in securities in any of the following categories: (1) trading, when the Company intends to trade debt and equity instruments in the short-term, prior to maturity, if any, and are stated at fair value. Any value fluctuations are recognized within current earnings; (2) held-to-maturity, when the Company intends to, and is financially capable of, holding such investments until maturity. These investments are recognized and maintained at amortized cost; and (3) available-for-sale, which include those that are classified neither as trading nor held-to-maturity. These investments are stated at fair value. Fair value is determined using prices quoted on recognized markets. If such securities are not traded, fair value is determined by applying recognized technical valuation models. Investments in securities classified as held-to-maturity and available-for-sale are subject to impairment tests. If there is evidence that the reduction in fair value is other than temporary, the impairment is recognized in current earnings. As of December 2008, 2007and 2006, the balances of the investments in securities represent, deposit certificates as held-for-trading, with renewable maturities exceeding one month.

F-17

e. Notes receivable from Vacation Club operation - These represent collection rights derived from the sale of Vacation Club memberships, which are assigned to a trust to guarantee lines of credit contracted by the Company to finance this operation. The amounts received under these credit lines are shown net with notes receivable in the consolidated balance sheets. Notes receivable from the sales of Vacation Club units are shown in the consolidated balance sheets, net of the allowance for doubtful accounts. This allowance is determined based on business’ experience and certain assumptions with respect to collection trends.

f. Inventories and cost of sales - Inventories are valued at average cost, which due to their high turnover is similar to replacement cost, without exceeding market value. Through December 31, 2007, cost of sales was restated using factors derived from NCPI.

g. Vacation Club units and real estate held for sale - Vacation Club units are recorded at construction cost in U.S. dollars and through December 31, 2007 are restated to reflect the fluctuation of the Mexican peso against the U.S. dollar, for purposes of recognizing values in accordance with current real estate market values. Cost of sales is recognized at the time sales are recorded. Vacation Club units recorded as long-term correspond to the costs of reconstruction of hotel buildings, which are being remodeled to provide Vacation Club services, as well as the construction of the third stage in the Los Cabos, Baja California Sur resort. As of December 31, 2008, the budget for concluding this construction stage is approximately Ps.513 million. The remodeling of the Fiesta Americana Condesa Acapulco hotel to provide Vacation Club services was concluded during 2007 for a total cost of Ps.360 million. In prior years, the Company’s management discontinued the sale of the real estate inventory, which is therefore shown at its estimated realizable value. Even though their realization could be in the long-term, strategies have been established to achieve the short- term sale of these assets. The results of this business are shown under other expenses in the consolidated statements of operations. Assets available for sale are primarily real estate property approved for sale by management that is expected to be realized within one year, even though their business cycle could be longer.

h. Property and equipment - Are initially recorded at acquisition cost. Balances arising from acquisitions made through December 31, 2007 were restated for the effects of inflation by applying factors derived from the NCPI through that date. Depreciation is calculated using the straight-line method, based on the economic useful lives and residual values of 24% in the case of buildings determined by independent appraisers. The Company follows the practice of capitalizing, in addition to the restated cost, CFR incurred in hotels’ major remodeling and in the construction stage of new hotels in which it has a majority equity interest. Through 2007, the capitalized amounts were restated annually based on NPCI factors and the related amortization is recorded in the income statement based on the useful lives of the assets. As of December 31, 2008, 2007 and 2006, no amounts were capitalized related to this concept. Average annual depreciation percentages of property and equipment are as follows:

(%)

Buildings 2 Furniture and fixtures 10 Transportation equipment 25 Computer equipment 30

The cost of major improvements, remodeling and replacements is capitalized as furniture and fixtures and is amortized over periods that range between three and five years. The cost of minor repairs and maintenance is charged to results when incurred. Operating equipment is depreciated using the straight-line method over three years.

F-18

i. Impairment of long-lived assets in use - In the presence of an impairment indicator (operating losses, negative cash flows, a history of projection of losses, etc.) which suggests that long-lived assets in use might not be recoverable, the Company reviews their carrying amounts, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded if book value exceeds the values mentioned above.

j. Investment in shares of associated companies - Investment in shares where the Company has significant influence, are recorded under the equity method, recognizing the participation in the results and stockholders’ equity of associated companies, considering the adjustment from the allocation of the purchase price of acquired assets and assumed liabilities at fair value at acquisition date. Investments in shares where the Company does not have significant influence, are valued at cost of acquisition, and through December 31, 2007 were restated based on the NCPI, but not to exceed realizable value.

k. Derivative financial instruments - The Company obtains financing under different conditions. Occasionally, interest rate and exchange swaps are contracted to manage its exposure to interest rate and foreign currency fluctuations. The Company formally documents all hedges, describing objectives and risk management strategies for derivative transactions and their recognition in accounting. The Company’s policy is to avoid performing transactions with derivative financial instruments for speculative purposes. However, sometimes speculative contracts are entered into, provided that the highest exposure meets with the immaterial limits established by management. Most dates and amounts of derivative financial instruments contracted by the Company correspond to the asset acquisition dates or to the maturity of liabilities which they cover. The Company recognizes all assets or liabilities that arise from transactions with derivative financial instruments at their fair value in the consolidated balance sheet, regardless of its reason for holding them. Fair value is determined by using prices quoted on recognized markets. If such instruments are not traded, their fair value is determined by applying recognized valuation techniques. Changes in the value of derivative instruments designated as hedges are recognized as follows: (1) for fair value hedges, changes in both the derivative instrument and the hedged item are stated at fair value and recognized in current earnings; (2) for cash flow hedges, changes in the effective portion are temporarily recognized as a component of other comprehensive income in stockholders’ equity and then reclassified to current earnings when affected by the hedged item. The ineffective portion of the change in fair value is immediately recognized in current earnings. While certain derivative financial instruments are contracted for hedging from an economic point of view, they have not been designated as hedges for accounting purposes since they do not meet with all the criteria established by the accounting regulations. Changes in fair value of such derivative instruments are recognized in current earnings as a component of CFR.

l. Compound financial instruments - Compound financial instruments are contracts that include both liability and equity elements; they are recognized by the Company based on the nature of such elements and the substance of the transaction, rather than their legal form. The elements that represent unavoidable payment obligations are recognized as liabilities, while other elements are included in equity, when the contractual provisions establish an ownership relationship with the holder of the instrument. Initial costs incurred on the issuance of a compound financial instrument are proportionately assigned to liabilities and equity. Costs assigned to equity are deducted from additional paid-in capital, if any, and costs assigned to liabilities are included in deferred assets, which are amortized over the related contractual term.

m. Direct employee benefits - Direct employee benefits are calculated based on the services rendered by employees, considering their most recent salaries. The liability is recognized as it accrues. These benefits include mainly PTU payable, compensated absences, such as vacation and vacation premiums, and incentives.

F-19

n. Employee benefits from termination, retirement and other - Liabilities from seniority premiums, pension plans and severance payments at the end of the work relationship are recognized as they accrue and are calculated by independent actuaries using nominal interest rates in 2008 and real interest rates in 2007 and 2006. Foreign subsidiaries do not have significant employee benefit obligations.

o. Other assets - Costs incurred in the development phase that meet certain requirements and that the Company has determined will have future economic benefits are capitalized, and through December 31, 2007, were restated for effects of inflation, and are amortized based on the straight-line method. Disbursements that do not meet such requirements, such as research costs, are recorded in results of the period in which they are incurred. Preoperating expenses incurred and capitalized up to December 31, 2002 are amortized using the straight-line method over ten years. The concession right referred to in Note 10 is amortized based on the straight-line method during the life of the respective contract (25 years).

p. Provisions - Are recognized for current obligations that result from a past event, that are probable to result in the future use of economic resources, and can be reasonably estimated.

q. Statutory employee profit sharing - PTU is recorded in the results of the year in which it is incurred and presented under other expenses in the accompanying consolidated statements of operations. Deferred PTU is derived from temporary differences that in 2008 resulted from comparing the accounting and taxes basis of assets and liabilities and, in 2007 and 2006, resulted from comparing the accounting result and income for PTU purposes. Deferred PTU is recognized only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized. The income for PTU purposes applicable to the Mexican companies does not consider tax inflation adjustments, nor unrealized currency exchange gain or loss, and is calculated based on the individual results of each of the operating companies.

r. Income taxes - Income tax (ISR) and the Business Flat tax (IETU) are recorded in the results of the

year they are incurred. To recognize deferred income taxes, based on its financial projections, the Company determines whether it expects to incur ISR or IETU and, accordingly, recognizes deferred taxes based on the tax it expects to pay. Deferred taxes are calculated by applying the corresponding tax rate to the applicable temporary differences resulting from comparing the accounting and tax bases of assets and liabilities and including, if any, future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets are recorded only when there is a high probability of recovery. Tax on assets (IMPAC) paid through December 31, 2007, that is expected to be recoverable, is recorded as an advance payment of ISR and is presented in the consolidated balance sheet decreasing the deferred ISR liability.

s. Foreign currency balances and transactions - Foreign currency transactions are recorded at the

applicable exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect at the consolidated balance sheet date. Exchange fluctuations are recorded as a component of CFR in the consolidated statements of operations, except those amounts capitalized as a component of construction cost.

t. Revenue recognition - The Company recognizes revenues derived from the following operations: (i)

hotel investments (which include the operation of leased hotels); (ii) management fees, brand use fees, the loyalty programs; and (iii) other related businesses, mainly Vacation Club units. Generally the Company recognizes its revenues as follows: (i) for operation of hotel investment, the Company recognizes revenues when rooms are occupied; (ii) revenues for management and brand use fees are recognized when they are accrued according to management contracts, and Fiesta Rewards program revenues are recognized when administration services are rendered and points to frequent customers are delivered; and (iii) revenues related to the Vacation Club operation are recognized: (a) for real estate ready to be used when the contracts are formalized and the corresponding 10% down payment is collected and (b) for real estate under construction by the percentage of completion method, through which revenues are identified based on the proportion to the costs incurred at the reporting date. When estimated actual costs exceed budgeted costs, the loss is recorded in that year.

F-20

u. Vacation club and other - Includes principally revenues, direct costs and operating expenses of certain subsidiaries engaged in the sale of Vacation Club memberships, distribution of operating equipment for hotels, coordination and hotel design and travel agency operations.

v. Majority (loss) income per share - Majority (loss) income per share is determined by dividing the

majority net (loss) income by the weighted average number of common shares outstanding. Diluted (loss) income per share is determined by adding 1) the interest and foreign exchange gains or losses recorded in income attributable to convertible loans to the above-mentioned majority net (loss) income per share, and 2) to the weighted average outstanding shares, the weighted average of obligations that may be converted into shares outstanding during the period, converted into shares based on the conversion coefficients established in the convertible loan agreements.

4. Cash and cash equivalents 2008 2007

Cash Ps. 422,794 Ps. 170,856 Cash equivalents:

Investment funds 381,142 169,128 Ps. 803,936 Ps. 339,984

5. Accounts and notes receivable

2008 2007

Clients and agencies Ps. 281,251 Ps. 262,120 Real estate companies 95,857 84,528 Value-added tax 453,101 889,106 Refundable income and other taxes 295,744 93,522 Notes receivable, net 294,382 250,688 Credit cards 18,547 20,521 Other 187,352 233,551

1,626,234 1,834,036 Less - Allowance for doubtful accounts (85,694) (56,585)

Ps. 1,540,540 Ps. 1,777,451

6. Real estate held for sale 2008 2007

Vacation Club units Ps. 148,275 Ps. 174,909 Villas and residential lots 19,394 20,342 Land and buildings for sale 3,641 8,850 Ps. 171,310 Ps. 204,101

F-21

7. Long-term notes receivable These assets correspond to the long-term amounts receivable from the sale of Vacation Club memberships. Their maturities as of December 31, 2008 are as follows:

Thousands of

Year due U.S. dollars

2010 $ 13,920 2011 14,042

2012 and thereafter 39,461

$ 67,423

Equivalent in thousands of Mexican pesos Ps. 912,793 Less- Allowance for doubtful accounts (147,850) Ps. 764,943

8. Property and equipment 2008 2007 Buildings Ps. 9,221,425 Ps. 9,090,790 Furniture and fixtures 2,389,537 2,244,899 Transportation equipment 71,571 46,354 Computer equipment 310,026 184,424 11,992,559 11,566,467

Less- Accumulated depreciation (4,689,167) (4,349,619) 7,303,392 7,216,848 Land 1,946,901 1,897,356 Construction in-progress 136,427 151,813 Ps. 9,386,720 Ps. 9,266,017

9. Investment in shares of associated companies

Participation percentage as of December 31, 2008 2008 2007

Associated - Mexicana 30.41 Ps. - Ps. 210,751 Inmobiliaria Las Animas, S. A. de C. V. 25.00 18,457 15,534

Other-

Inmobiliaria Hotelera de Yucatán, S. A. de C. V. 9.2 5,354 5,289

Other Various 3,283 3,290 Ps. 27,094 Ps. 234,864

F-22

10. Other assets

2008 2007

Concession right Ps. 341,245 Ps. 385,709 Prepaid interest and commissions 48,085 53,032 Preoperating expenses, net 38,611 22,849 Vacation Club deferred charges 20,778 31,026 Ps. 448,719 Ps. 492,616

11. Long-term debt

As of December 31, long-term debt is comprised as follows (variable interest rates as of December 31, 2008):

2008 2007 Mexican peso denominated:

Debt certificates programs at rates range from 10.55% to 13.18% Ps. 2,500,000 Ps. 250,000

Syndicated loan at 9.33% 400,447 319,023 Mortgage loans at rates that range from 10.25% to 10.84% 102,407 111,688 Other loans at variable rates of 10.09% to 10.71% 501,322 184,600

U.S. dollar denominated:

Senior Notes at fixed interest rate of 8.75% 484,441 2,444,895 Syndicated loan at 2.06% 600,504 481,468 Mortgage loans at rates that range from 3.37% to 8.78% 736,737 418,112 Other loans at rates from 3.32% to 6.96% 25,562 37,848

5,351,420 4,247,634 Less- current portion (1,157,747) (363,242)

Long-term debt Ps. 4,193,673 Ps. 3,884,392 Long-term debt maturities as of December 31, 2008 are as follows:

Denominated in

Payable in Mexican

pesos U.S. dollars (thousands)

2010 Ps. 294,865 $ 44,907 2011 94,643 36,783 2012 94,643 1,000

2013 and thereafter 2,374,862 15,894 Ps. 2,859,013 $ 98,584 Equivalent in thousands of Mexican pesos Ps. 1,334,660 Total in thousands of Mexican pesos Ps. 4,193,673

a. During 2008, the Company established an Unsecured Debt Certificate Program; its authorized value is

up to Ps.3,000,000. The par value of each certificate is one hundred Mexican pesos, and each issuance expires within five years, denominated in Mexican pesos and with interest payable every 28 days at a rate established for each issuance (both at the Mexican Equilibrium Interbank Offered (TIIE) rate plus 1.80 percentage points). In April 2008, a Ps.1,500,000 withdrawal was made, and on July 2008, a second one was made for Ps.750,000 under the same terms and conditions.

F-23

Resources obtained from this program were used to repurchase 84.1% or $189 million of the Senior Notes due on October 4, 2011, with previous consent from the holders of these notes. Commissions from this operation were Ps.131,021, and are presented within other expenses, net in the accompanying consolidated statement of operations.

b. In 2001 the Company established an Unsecured Debt Certificate Program for an authorized amount of up to Ps.1,000,000. The nominal value of the certificates was one hundred Mexican pesos and the maturity term of each issue was from one to ten years denominated in Mexican pesos or in Units of Investment (UDI's) with interest payable every 28 days at the rate established for each issue. Under the terms of this program, the first payment of Ps.200,000 was fully settled on December 2, 2004. Under this same program, certificate maturities of Ps.300,000 and Ps.250,000 were settled in February and July 2006, respectively; one issue of Ps.250,000 matures on May 6, 2009 at the Mexican Treasury Bonds (CETES) rate plus 3.5 percentage points.

c. During November 2005, the Company structured a syndicated loan for $50 million for a five-year term (with a two-year grace period). The lead bank is ING Bank (México), S. A., while the other participants include Banco Nacional de Comercio Exterior, S. N. C. (Bancomext), BBVA Bancomer, S. A., Bayerische HYPO-UND Vereinsbank AG, HVB Group, Banco de Crédito e Inversiones, Miami Branch and Banco Industrial, S. A. This transaction assures funds for the timely payment of unsecured debt certificates referred to in previous paragraph b. In addition, in November 2006, an add-on to the above syndicated loan of $30 million was executed, resulting in a total loan of $80 million. The terms of this add-on are similar to the original loan terms. Resources obtained from these transactions were used to settle short-term credit lines. In April 2008, the Company requested an additional $21.5 million for a total facility as of December 31, 2008 of $101.5 million. As of December 31, 2008 and 2007, total proceeds are equivalent to $73.9 million, at rate of London Interbank Offered (LIBOR) rate plus 1.5 percentage points for U.S. dollar dispositions and TIIE plus 14 percentage points for Mexican peso dispositions.

d. The Company issued $225 million under a Senior Notes program due on October 4, 2011. The notes bear interest at the rate of 8.75% per year, which is payable semiannually. As mentioned in paragraph a, 84.1 % of the notes were repurchased during 2008. As of December 31, 2008 the Senior Notes under this program amount to $37 million under the same maturity and with no financial covenants. A breakdown of the main financial items of the guarantor and non-guarantor subsidiaries is detailed below:

Grupo Posadas, S.A.B. de C.V. and guarantor subsidiaries

2008 2007 2006

Total operating revenues Ps. 5,422,651 Ps. 4,272,482 Ps. 4,141,005 Depreciation, amortization and real

estate leasing Ps. 451,152 Ps. 450,472 Ps. 450,044 Operating income Ps. 801,747 Ps. 716,880 Ps. 633,996 Consolidated net (loss) income Ps. (915,078) Ps. (3,860) Ps. 403,727 Total assets Ps. 8,709,634 Ps. 7,878,835 Ps. 7,946,577 Total liabilities Ps. 7,775,196 Ps. 6,604,878 Ps. 6,514,576

F-24

Non-guarantor subsidiaries

2008 2007 2006

Total operating revenues Ps. 1,481,869 Ps. 1,701,742 Ps. 1,387,216 Depreciation, amortization and real

estate leasing Ps. 271,189 Ps. 214,320 Ps. 210,487 Operating income Ps. 339,022 Ps. 315,033 Ps. 361,668 Consolidated net (loss) income Ps. 213,232 Ps. 204,425 Ps. 52,543 Total assets Ps. 4,835,140 Ps. 5,265,945 Ps. 4,852,198 Total liabilities Ps. 1,018,017 Ps. 823,838 Ps. 571,546

Total consolidated

2008 2007 2006

Total operating revenues Ps. 6,904,520 Ps. 5,974,224 Ps. 5,528,221 Depreciation, amortization and real

estate leasing Ps. 722,341 Ps. 664,792 Ps. 660,531 Operating income Ps. 1,140,769 Ps. 1,031,913 Ps. 995,664 Consolidated net (loss) income Ps. (701,846) Ps. 200,565 Ps. 456,270 Total assets Ps. 13,544,774 Ps. 13,144,780 Ps. 12,798,775 Total liabilities Ps. 8,793,213 Ps. 7,428,716 Ps. 7,086,122

The main restrictions on the financial ratios and obligations established in loan contracts are as follows:

Financial ratios Restrictions

Current Greater than 0.60 Onerous debt-to-equity Less than 1.22 Interest coverage Greater than 2.20 Net debt to EBITDA Less than 4.75

The most significant covenants are: The level of indebtedness, payment of dividends and the stockholders’ distributions are subject

to the compliance with certain financial ratios.

The Company must insure and maintain insurance on all of its properties, assets and business against loss and damage, in similar terms as those used by companies in the same line of business.

As of December 31, 2008, 2007 and 2006, these restrictions and covenants have been complied with.

e. As of December 31, 2008 and 2007, mortgage loans amount to Ps.839,144 and Ps.529,800. The principal collateral consists of real estate (hotels), whose carrying value amounts to Ps.2,172,996, and Ps.1,335,941, respectively, as well as guarantees from certain subsidiaries. As of December 31, 2008 these loans bear interest at LIBOR plus the corresponding margin from 1 to 7 percentage points for U.S. dollar withdrawals, and TIIE plus 1.5 to 2 percentage points for Mexican peso withdrawals.

F-25

f. The Company has loan agreements for a $10 million and EUR5 million financing with the International Finance Corporation and Deutsche Investitions–Und Entwicklungsgesellchaft mbh, maturing in December 2009, with an interest rate of LIBOR plus 1 percentage point and the 6 month Euro LIBOR plus 3 percentage points, respectively, convertible into Series “L” shares of the Company. Due to this convertibility feature, the portion identified as equity is presented as contributions for future capital increases in the consolidated statements of changes in stockholders’ equity.

g. The Company executed three revolving credit lines, with Bancomext and Banco Mercantil del Norte,

S. A. (Banorte) for up to an authorized amount of $29.2 million, $44 million and $47 million, respectively, through several disposals maturing on or before December 24, 2013, June 28, 2013, and October 28, 2013, respectively. Disposals under these credit lines bear variable interest rates and are guaranteed by notes receivable related to financing granted on Vacation Club sales. The collection rights on the sale of Vacation Club intervals, which are formalized in notes receivable, have been assigned to a trust fund that is located outside Mexico. Pursuant to collateral assignment contracts, the Company has transferred the collection rights assigned to the trust fund to Bancomext and Banorte. These credit lines establish mortgage guarantees on Vacation Club real property.

During 2008 the Company disposed of four of its contracted lines of credit, three with Banorte amounting to Ps.643.4 million and one with Bancomext amounting to $7.8 million.

As of December 31, 2008 and 2007, the outstanding balances of credit lines contracted with Bancomext is $28.4 million, $29.2 million; those contracted with Banorte are for the amounts of $16.4 million, $29.8 million and Ps.717.2 million and Ps.143 million, respectively, amounts that are shown net within the long-term notes receivable, in the consolidated balance sheets. Notes receivable assigned to the trust are $217.3 million, $208.3 million as of December 31, 2008 and 2007, respectively.

h. In April 2008, the Company completed a five year bilateral loan with a two year grace period with

Banco Nacional de México, S. A (Banamex) for Ps.312,000. The rate is TIIE plus 1.40 percentage points.

i. In December 2008, the Company drew $23.4 million from a $27.3 million secured loan from

Bancomext. The terms are 2 years with a nine-month grace period with a rate of three month LIBOR plus 4.6 percentage points.

j. During the last quarter of 2008, the Company drew Ps.100,000 from a long-term credit line with Banco

del Bajio at a rate of TIIE plus 2 percentage points and Ps.89,800 from another short term line of credit with Banco Santander Serfin, S. A. at a rate of TIIE plus 4 percentage points.

k. During December 2005, the Company executed two loan agreements secured by a pledge with IXE

Banco, S.A. and Inmobiliaria Rancho Santa Fé, S.A. for Ps.261,600 and Ps.118,008, respectively, maturing in 2006. The pledge consisted of shares representing 20.08% of the common stock of Mexicana, which, according to the stock brokerage services agreement signed with IXE Casa de Bolsa, S.A. de C.V., were taken on a firm basis by the brokerage house. The resources obtained from the sale of those shares were applied to settle such debt. Consequently, these loan agreements were presented net with the investment in shares of Mexicana. These debts were settled in April and August 2006.

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12. Derivative financial instruments a. Derivative instruments related to interest rates and exchange rates

In order to maintain a debt mix mainly denominated in USD, the Company structured five Cross Currency Swap (CCS) contracts. With these, the Company exchanges a floating rate (TIIE 28) in Mexican pesos for a fixed rate in U.S. dollar. The characteristics of both sides of these agreements are detailed in the following table:

Notional amount

Beginning Date

Maturity date

Unsecured Debt Certificate

Program Ps. 1,500 million April, 2008 April, 2013 Unsecured Debt Certificate

Program Ps. 750 million July, 2008 April, 2013 Syndicated loan Ps. 109.7 million June, 2008 November, 2010 Syndicated loan Ps. 108 million April, 2008 November, 2010 Credit lines Ps. 312 million April, 2008 April, 2013

Notional amount

Beginning Date

Maturity date

Fair Value 2008

CCS $ 142 million April, 2008 April, 2013 Ps. (647,618) CCS $ 72.8 million July, 2008 April, 2013 Ps. (375,343) CCS $ 10.7 million June, 2008 November, 2010 Ps. (43,279) CCS $ 10.3 million April, 2008 November, 2010 Ps. (37,244) CCS $ 29.8 million April, 2008 April, 2013 Ps. (129,556)

As of December 31, 2008, the Company has met all margin calls that have been required by its counterparties in an amount of Ps.837,022 (Ps.816,806 net of exchange rate fluctuations), and are presented net in the account of derivative financial instruments in the consolidated balance sheet. The CCS were entered into as hedging instruments from an economic perspective, but since they do not comply with all conditions for hedge accounting required by the applicable standards, for accounting purposes, these have been recorded as trading derivatives. Fluctuations from these instruments are recorded in CFR. The Company entered into a Principal Only Swap for $26 million linked to the Senior Notes maturing in October 2011, with a fixed exchange rate at maturity. This instrument was classified as a fair value hedge and the exchange result was recorded in CFR, compensating the exchange rate result derived from the loan hedged. This swap was cancelled in October 2008.

b. Interest rate derivatives With the intention of capping the interest rate of a portion of the Syndicated loan in pesos with a rate of TIIE 28, an Interest Rate Swap (IRS) contract was put in place so the Company pays a fixed rate of 10.14% versus TIIE 28 plus the applicable margin. The characteristics are detailed in the table below:

Notional amount

Beginning Date

Maturity date

Syndicated loan Ps. 216 million November, 2005 November, 2010

Notional amount

Beginning date

Maturity date

Fair Value 2008

Fair Value 2007

IRS Ps. 216 million July, 2006 November, 2010 Ps. (1,049) Ps. (1,515)

This IRS has been contracted as a hedging instrument from an economic perspective but for accounting purposes it has been accounted for as a trading derivative.

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c. Derivative instruments for Exchange Rate Hedging (FX Forwards) Other exchange rate hedging transactions have been contracted according to the investment policies of the Company and are as follows:

Notional

amount

Beginning

date

Maturity

date

1st sale Ps. 11.3 million October, 2008 January, 2009 2nd sale Ps. 11.3 million October, 2008 January, 2009 3rd sale Ps. 11.5 million October, 2008 January, 2009

Notional

amount

Beginning

Date

Maturity

date

Fair Value

2008

Exchange rate forward $ 1,000 October, 2008 January, 2009 Ps. (2,506) Exchange rate forward $ 1,000 October, 2008 January, 2009 Ps. (2,496) Exchange rate forward $ 1,000 October, 2008 January, 2009 Ps. (2,276)

The changes in the fair value of these instruments are the result of the appreciation of the U.S. dollar against the Mexican peso. These contracts have been accounted for as trading derivatives. Fluctuations from these instruments are recorded in CFR.

13. Long–term accrued liabilities

2008 2008 2007

Contingency reserve $ 1,882 Ps. 25,481 Ps. 22,657 Employee retirement obligations 1,153 15,610 22,240 Severance payments 1,114 15,080 9,016 $ 4,149 Ps. 56,171 Ps. 53,913

14. Employee retirement obligations

The net cost for the period for obligations resulting from the pension plan, seniority premiums and severance payments was Ps.10,194, Ps.20,314 and Ps.6,683 in 2008, 2007 and 2006, respectively. Other disclosures required under accounting standards are not considered material.

15. Shares in trust

The Company holds in trust as of December 31, 2008 and 2007, 13,580,362 and 2,337,362 Series "A" shares, respectively, and 965,000 series "L" shares, of Grupo Posadas, S. A. B. de C. V., for assignment and sale to top executives. A committee has been created to grant the right to purchase and allocate the number of shares to each qualifying executive, based on performance criteria, with the executive retaining the option to purchase at the end of the corresponding term in question. The selling price is fixed in U.S. dollars based on the share market value and the exchange rate in effect when assigned to the executive. Given that the term to execute the share purchase term is three years, with a two year grace period, interest is charged for the financing period. As of December 31, 2008, 2007 and 2006, the cost of the shares held in trust is Ps.17,916, Ps.19,998 and Ps.47,054 (at nominal value) respectively.

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16. Stockholders' equity

a. As of December 31, the capital stock of the Company consists of shares with no par value and is

comprised as follows:

Number of Shares 2 0 0 8 2 0 0 7 Series "A" Series "L" Total Series "A" Series "L" Total Authorized capital 603,394,827 128,985,074 732,379,901 603,394,827 128,985,074 732,379,901 Less- Unsubscribed capital (135,453,063) (20,038,219) (155,491,282) (135,453,063) (20,038,219) (155,491,282) Subscribed capital 467,941,764 108,946,855 576,888,619 467,941,764 108,946,855 576,888,619 Less-

Repurchase of shares (6,801,966) (6,474,433) (13,276,399) (6,417,466) (6,470,533) (12,887,999) Shares in trust (13,645,962) (1,017,600) (14,663,562) (2,404,962) (1,017,600) (3,422,562) Shares in guarantee trust (64,980,546) - (64,980,546) (76,680,546) - (76,680,546)

(85,428,474) (7,492,033) (92,920,507) (85,502,974) (7,488,133) (92,991,107) 382,513,290 101,454,822 483,968,112 382,438,790 101,458,722 483,897,512

b. In accordance with the Company’s bylaws, Series "A" shares may be subscribed by Mexican citizens

or entities and may be purchased by non-residents through a neutral fund constituted in Nacional Financiera, S. N. C. Series "L" shares have limited voting rights and other limited corporate rights, are of free subscription and are limited to 25% of total stockholders' equity.

c. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to ISR at

the rate in effect when the dividend is distributed. Any tax paid on such distribution, may be credited against the ISR payable of the year in which the tax on the dividend is paid and the two fiscal years following such payment.

d. As of December 31, 2008, the legal reserve amounts to Ps.97,886 (nominal value) and is equal to 20% of nominal capital stock. This reserve may not be distributed to stockholders during the existence of the Company, except in the form of a stock dividend.

e. Shares in guarantee trust were guaranteed through their subscription and payment by the fiduciary, by means of a guarantee trust contract executed with Bancomext and the guarantee granted by the latter for securities with a value of Ps.875,000 issued by the Company in 2003 and prepaid in 2005. The Company’s Management will determine the treatment to be applied to these shares once such trust is cancelled. During 2008, 11,700,000 shares were transferred from this trust to the trust for assignment and sale to top executives.

f. At the Stockholders’ Ordinary General Meeting of April 2008, the stockholders resolved to declare

dividends of Ps.174,802, which were paid on June 2, 2008. In the consolidated statement of changes in stockholders’ equity, these dividends are shown net of dividends of Ps.20,476, reimbursed from the release of shares in guarantee trust.

g. At the Stockholders’ Extraordinary General Meeting of August 2007, the stockholders resolved that the maximum amount of resources destined for the purchase of the Company’s own shares, considering the limitations included in the Mexican Securities’ Exchange Law, would be Ps.1,900,000, amount that does not exceed the retained earnings balance as of December 31, 2006. During December 2007, the provision for the repurchase of shares was increased by Ps.1,253,090 with charge to retained earnings.

h. At the Stockholders’ Ordinary General Meeting of April 2007, the stockholders resolved to declare dividends of Ps.152,658, which were paid on June 1, 2007. In the consolidated statement of changes in stockholders’ equity, these dividends are shown net of dividends of Ps.21,636 reimbursed from the release of shares in guarantee trust.

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i. At the Stockholders’ Extraordinary General Meeting of April 2006, the stockholders resolved to declare dividends of Ps.137,523, which were paid on June 1, 2006. In the consolidated statement of changes in stockholders’ equity, these dividends are shown net of dividends of Ps.20,342, reimbursed from the release of shares in guarantee trust.

j. During December 2005, the Company received Ps.16.5 million through a convertible financial instrument to be settled at the Company’s discretion through a fixed number of its shares or those of any of its associated companies. Due to the nature of this instrument, it was classified in the consolidated statement of changes in stockholders’ equity as contributions for future capital increases at that date. During 2006, due to unfavorable conversion conditions, this amount was refunded and shown as reimbursement of convertible debt.

k. Due to preferred stockholders of subsidiary - During 2006, the Company, through a subsidiary, acquired 23,413,903 preferred shares of Promotora del Caribe, S. A. with a par value of U.S.1.00 each which represent the conversion of Mexican public debt invested by its stockholders in a hotel in Mexico, at a price of Ps.296,671, which is included under the reduction of minority interest heading in the consolidated statements of changes in stockholders’ equity.

17. Foreign currency position and transactions As of December 31, the foreign currency position is:

2008 2007 Thousands of U.S. dollars:

Current- Monetary assets $ 46,428 $ 34,236 Monetary liabilities (38,722) (32,953)

7,706 1,283

Long-term- Monetary assets 90,044 52,975 Monetary liabilities (99,551) (228,493)

(9,507) (175,518) Net foreign currency liability position $ (1,801) $ (174,235) Equivalent in thousands of Mexican pesos Ps. (24,382) Ps. (2,358,845)

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2008 2007

Thousands of Brazilian reals: Monetary assets 46,560 34,727 Monetary liabilities (24,983) (23,934)

Net foreign currency asset position 21,577 10,793 Equivalent in thousands of Mexican pesos Ps. 124,996 Ps. 62,523 Thousands of Argentinean pesos:

Monetary assets 24,838 24,119 Monetary liabilities (11,213) (11,548)

Net foreign currency asset position 13,625 12,571 Equivalent in thousands of Mexican pesos Ps. 53,391 Ps. 49,261

As of the date of the consolidated financial statements, the exchange rates were as follows:

December 31, April 3,

2008 2007 2006 2009

Mexican pesos per U.S. dollar Ps. 13.5383 Ps. 10.8662 Ps. 10.8116 Ps. 13.7924

Mexican pesos per Brazilian real Ps. 5.793 Ps. 6.1346 Ps. 5.0569 Ps. 6.2488

Mexican pesos per Argentinean peso Ps. 3.9186 Ps. 3.4496 Ps. 3.5297 Ps. 3.7337

Mexican pesos per Chilean peso Ps. 0.0211 Ps. 0.0218 Ps. 0.0203 Ps. 0.0238

Transactions denominated in foreign currencies that are carried out by the companies located in Mexico primarily consist of revenues from hotel operations, Vacation Club memberships and real estate development sales, and interest expense.

18. Transactions with related parties

a. During 2008, 2007 and 2006, the Company had the following transactions with the related parties,

which are presented in the consolidated statement of operations as revenues in other businesses:

2008 2007 2006

Reservation services Ps. 102,115 Ps. 47,150 Ps. 22,446 Maintenance fees services Ps. 32,083 Ps. - Ps. - Technical assistance Ps. 6,493 Ps. - Ps. - Financial advisory services Ps. - Ps. 22,777 Ps. -

b. Employee benefits granted to Company’s key management (and/or prominent executives) were as

follows:

2008 2007 2006

Short-and long-term direct benefits Ps. 50,109 Ps. 48,343 Ps. 41,674

Severance benefits Ps. 4,887 Ps. 4,425 Ps. 6,159

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19. Other expenses

2008 2007 2006

Restructured loan issuance costs Ps. 186,419 Ps. 20,743 Ps. 33,659 Preoperating costs 10,503 48,792 21,805 PTU 5,095 20,772 - Loss on sale of fixed assets, net 10,076 3,060 5,636 Discontinued operations result (5,414) 3,782 9,665 Other 28,049 25,753 20,728 Ps. 234,728 Ps. 122,902 Ps. 91,493

20. Income taxes

In accordance with the Mexican tax law, in 2008 the Company was subject to ISR and IETU, and in 2007 and 2006, to ISR and asset tax (IMPAC). ISR is computed taking into consideration the taxable and deductible effects of inflation. The tax rate is 28%. The Company pays ISR and through 2007, IMPAC, with most of its Mexican subsidiaries on a consolidated basis, based on the daily average of the subsidiaries voting stock held by the Company. IETU applies to the sale of goods, the provision of independent services and the granting of temporary use or enjoyment of goods, according to the terms of the Business Flat Tax Law, less certain authorized deductions. IETU payable is calculated by subtracting certain tax credits from the tax determined. Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008. The IETU rate was 16.5% in 2008 and will be 17% in 2009, and 17.5% as of 2010. The Asset Tax Law was repealed upon enactment of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid, may be refunded, according to the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis. In 2007, IMPAC was calculated by applying 1.25% to the net average value of the majority of the Company’s assets (at restated values), without deducting any liabilities, and was paid only to the extent that it exceeded ISR payable for the same period. Through 2006, IMPAC was calculated by applying 1.8% on the net average of the majority of restated assets less certain liabilities, including liabilities payable to banks and foreign entities. IMPAC was payable only to the extent that it exceeded ISR payable for the same period. Based on its financial projections the Company determined that it will basically pay ISR only in Mexico, and some subsidiaries will pay IETU. Consequently, the Company computed both deferred ISR and deferred IETU. Tax regulations in Brazil - According to current Brazilian Income Tax Law, the subsidiaries operating in that country are subject to federal income and social contribution taxes, which are computed at the respective rates of 26% and 8%. The federal income tax may be reduced by certain amounts, when applicable, if the companies invest an equivalent amount in government-approved projects and in other priority areas or industries in Brazil. As of December 31, 2008, the subsidiaries that operate in Brazil had tax loss carryforwards for income tax purposes of Ps.13,036. Likewise, these companies did not recognize deferred income tax effects due to the uncertainty of the recovery of the tax losses. Tax regulations in Argentina - According to current Argentinean Income Tax Law, the subsidiary operating in that country is subject to both income and minimum presumptive income taxes. The income tax rate in force is 35% on the estimated taxable income of each fiscal year. The minimum presumptive income tax is computed at 1% on the potential income from certain performing assets; thus, the Company’s tax obligation will coincide with the higher of the two taxes.

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Tax regulations in the United States - According to current US Income Tax Law, the subsidiaries operating in that country are subject to income taxes at a rate of 35%. Taxable income for Mexico - The principal differences between income for tax and accounting purposes were those related to inflation effects, participation in net earnings of associated companies, the difference between purchases and cost of operations, amortization of deferred credits and the utilization of tax loss carryforwards.

a. Income taxes are as follows:

2008 2007 2006

Current ISR Ps. 23,337 Ps. 183,360 Ps. 47,490 Deferred ISR (226,899) (69,359) 3,210 Current IETU 11,729 - - Deferred IETU 80,607 (28,102) 89,119 Current IMPAC - 73,747 - Ps. (111,226) Ps. 159,646 Ps. 139,819

b. The main items originating a deferred ISR liability are:

2008 2007

Notes receivable Ps. 425,582 Ps. 361,489 Allowance for doubtful accounts (3,535) (3,322) Inventories (17,698) (20,639) Property and equipment 1,462,783 1,485,987 Other assets 24,014 (56,112) Reserves (357,289) (300,839) Tax loss carryforwards (307,594) (11,283) Recoverable IMPAC (72,380) (68,280) Tax benefits (Conacyt) 6,219 - Deferred IETU liability (asset) 52,505 (28,102) 1,212,607 1,358,899 Translation effects of functional currency and

foreign operations 4,138 - Ps. 1,216,745 Ps. 1,358,899

c. At a consolidated level, as of December 31, 2008, 2007 and 2006, there are no consolidated tax loss

carryforwards and the recoverable IMPAC is Ps.72,380, for which a partial deferred ISR asset has been recognized, and can be recovered subject to certain conditions.

d. As of December 31, the main items comprising the net liability (asset) balance of deferred IETU are:

2008 2007

Deferred revenue Ps. (27,040) Ps. (25,956) Property and equipment 37,481 33,821 Real estate held for sale 3,200 3,356 Reserves (4,532) (6,893) Severance payments (5,374) (4,600) Valuation allowance for severance payments 48,114 3,085 Revenue-other 1,247 350 Recoverable IMPAC (1,304) (56,678) Valuation allowance for recoverable IMPAC 713 25,413

Total liability (asset) Ps. 52,505 Ps. (28,102)

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21. (Loss) earnings per share The amounts used to determine diluted earnings per share were as follows:

2008

Number Mexican pesos

Loss of shares per share

Net loss attributable to common stock Ps. (615,421) 494,976,251 Ps. (1.2433) Convertible debt in common shares - 16,329,114 - Ps. (615,421) 511,305,365 Ps. (1.2036) 2007

Number Mexican pesos

Income of shares per share

Net income attributable to common stock Ps. 126,112 488,205,350 Ps. 0.2583 Convertible debt in common shares - 16,329,114 - Ps 126,112 504,534,464 Ps. 0.2499 2006 Number Mexican pesos

Income of shares per share

Net income attributable to common stock Ps. 416,986 497,134,756 Ps. 0.8387 Convertible debt in common shares - 16,329,114 - Ps 416,986 513,463,870 Ps. 0.8121

22. Deferred credits

2008 2007

Vacation Club deferred revenues, net of costs and expenses Ps. 269,349 Ps. 294,854 Loyalty programs 19,027 117,455 Maintenance fees 512 7,289 Other deferred revenues 3,830 4,051 Ps. 292,718 Ps. 423,649

Vacation Club deferred revenues recorded as of December 31, 2008 and 2007 refer to net revenues on the “pre-sale” of the third stage of the hotel construction in Los Cabos, Baja California Sur, whose construction began in 2007.

23. Commitments As of December 31, 2008, 2007 and 2006, the Company has operating lease contracts for certain real estate it occupies, which typically have a duration of 10 years. Rental payments were established at variable percentages between 18% and 12% of revenues from hotel operations generated by each property. For the years ended December 31, 2008, 2007 and 2006, lease expense was Ps.333,161, Ps.233,830 and Ps.218,467, respectively.

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24. Contingencies a. As of December 31, 2008, the Company is involved in certain fiscal proceedings either as petitioner or

defendant, whose eventual outcomes cannot be anticipated. Company’s management and its external advisors consider that the Company has sound legal arguments to prevent such legal proceedings from significantly affecting its consolidated financial position or results.

b. Certain subsidiaries are involved in litigation arising in the ordinary course of business. The principal

claims have been covered by the contingency reserve shown in the balance sheet as long-term accrued liabilities. In the opinion of management and the Company’s legal department, the outcome of the uncovered contingencies is not likely to have a material adverse effect on the Company’s consolidated financial position and operating results.

25. Information by geographical areas and business segments The Company operates in different geographical areas including Mexico, South America (Brazil, Argentina and Chile) and United States of America. The main financial captions by geographical area for 2008 are:

Mexico

South

America

United States of

America Consolidated

Total operating revenues Ps. 6,145,709 Ps. 710,435 Ps. 48,376 Ps. 6,904,520

Depreciation, amortization and real estate leasing Ps. 588,597 Ps. 125,749 Ps. 7,995 Ps. 722,341

Operating (loss) income Ps. 1,091,786 Ps. 88,270 Ps. (39,287) Ps. 1,140,769

Consolidated net loss Ps. (612,136) Ps. (59,941) Ps. (29,769) Ps. (701,846)

Total assets Ps.11,234,958 Ps. 2,196,098 Ps. 113,718 Ps. 13,544,774

Total liabilities and deferred credits Ps. 8,792,887 Ps. 270,693 Ps. 22,351 Ps. 9,085,931

Total assets and depreciation, amortization and real estate leasing, for business segments for the year ended December 31, 2008 are as follows:

Hotel Hotel Other

operation and Management businesses

corporate and brand Consolidated

Total assets Ps. 6,514,153 Ps. 576,769 Ps. 6,453,852 Ps. 13,544,774 Depreciation, amortization

and real estate leasing Ps. 641,407 Ps. 1,144 Ps. 79,790 Ps. 722,341

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The main financial captions by geographical area for 2007 are:

Mexico

South

America

United States of

America Consolidated

Total operating revenues Ps. 5,265,866 Ps. 654,259 Ps. 54,099 Ps. 5,974,224 Depreciation, amortization

and real estate leasing Ps. 576,044 Ps. 82,279 Ps. 6,469 Ps. 664,792 Operating income (loss) Ps. 1,006,858 Ps. 56,971 Ps. (31,916) Ps. 1,031,913 Consolidated net income (loss) Ps. 245,129 Ps. (24,281) Ps. (20,283) Ps. 200,565 Total assets Ps. 10,793,004 Ps. 2,228,445 Ps. 123,331 Ps. 13,144,780 Total liabilities and deferred

credits Ps. 7,638,184 Ps. 195,546 Ps. 18,635 Ps. 7,852,365 Total assets and depreciation, amortization and real estate leasing, for business segments for the year ended December 31, 2007 are as follows:

Hotel Hotel

operation and management Other

corporate and brand businesses Consolidated

Total assets Ps. 8,453,185 Ps. 717,305 Ps. 3,974,290 Ps. 13,144,780 Depreciation, amortization

and real estate leasing Ps. 633,505 Ps. 1,404 Ps. 29,883 Ps. 664,792 The main financial captions by geographical area for 2006 are:

Mexico

South

America

United States of

America Consolidated

Total operating revenues Ps. 4,825,573 Ps. 569,213 Ps. 133,435 Ps. 5,528,221 Depreciation, amortization

and real estate leasing Ps. 577,844 Ps. 76,334 Ps. 6,353 Ps. 660,531 Operating income Ps. 887,938 Ps. 72,303 Ps. 35,423 Ps. 995,664 Consolidated net income Ps. 343,065 Ps. 89,217 Ps. 23,988 Ps. 456,270 Total assets Ps. 10,555,634 Ps. 2,090,538 Ps. 152,603 Ps. 12,798,775 Total liabilities and deferred

credits Ps. 7,092,557 Ps. 290,867 Ps. 25,296 Ps. 7,408,720

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Total assets and depreciation, amortization and real estate leasing, for business segments for the year ended December 31, 2006 are as follows:

Hotel Hotel

operation and management Other

Corporate and brand businesses Consolidated

Total assets Ps. 9,003,157 Ps. 638,744 Ps. 3,156,874 Ps. 12,798,775 Depreciation, amortization

and real estate leasing Ps. 625,146 Ps. 1,317 Ps. 34,068 Ps. 660,531 26. New accounting principles

As part of its efforts to converge Mexican standards with international standards, in 2008, the Mexican Board for Research and Development of Financial Information Standards (“CINIF”) issued the following NIFs and INIFs, which became effective for fiscal years beginning on January 1, 2009:

NIF B-7, Business Acquisitions NIF B-8, Consolidated or Combined Financial Statements NIF C-7, Investments in Associated Companies and other Permanent Investments NIF C-8, Intangible Assets NIF D-8, Share-based Payments

Some of the significant changes established by these standards are as follows: NIF B-7, Business Acquisitions. Requires fair value measurement of the non controlling interest (minority interest) as of the acquisition date and recognition of the overall goodwill at fair value. NIF B-7 establishes that acquisition costs should not be part of the consideration paid and restructuring costs should not be recognized as an assumed liability from the acquisition. NIF B-8, Consolidated or Combined Financial Statements. Establishes that special purpose entities, over which control is exercised, should be consolidated. Provided certain requirements are met, it allows the option to present stand-alone financial statements of intermediate controlling companies and requires that potential voting rights be considered to analyze whether control exists. NIF C-7, Investments in Associated Companies and other Permanent Investments. Requires that investments in special purpose entities where significant influence is exercised be valued using the equity method. It also requires that potential voting rights be considered to analyze whether significant influence exists. In addition, NIF C-7 establishes a specific procedure and sets caps to the recognition of losses in associated companies, and requires that investments in associated companies be presented including the related goodwill. NIF C-8, Intangible Assets. Requires that any pre-operating expenses not yet amortized as of December 31, 2008 be cancelled against retained earnings. NIF D-8, Share-based Payments. Sets the rules for recognition of share-based payments (at fair value of goods received or at fair value of equity instruments granted), including the granting of stock options to employees. Therefore, the use of IFRS 2, Share-Based Payments, that was supplementally applied is discontinued.

At the date of issuance of these consolidated financial statements, the Company is in the process of determining the effects of these new standards on its financial information.

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27. International financial reporting standards

In January 2009, the Mexican National Banking and Securities Commission published the amendments to its Single Circular for Issuers which requires public companies to file financial statements prepared according to the International Financial Reporting Standards beginning in 2012, and permits their early adoption.

28. Subsequent event

Regarding the loan agreement entered into in December 2008 with Bancomext for $27.3 million, during January 2009, a $27 million withdrawal was made under same terms and conditions established in the contract.

29. Financial statements issuance authorization

These consolidated financial statements prepared by Management, were authorized by the Audit Committee on April 3, 2009, and are subject to the approval at the Board of Directors and Stockholders’ Ordinary General Meeting, where the financial statements may be modified based on provisions of the Mexican General Corporate Law. The consolidated financial statements at December 31, 2007 were approved at the General Stockholders’ Ordinary Meeting on April 14, 2008.

* * * * * *

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Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Unaudited condensed consolidated interim balance sheets As of September 30, 2009 and 2008 (In thousands of Mexican pesos) Assets 2009 2008

Current assets:

Cash and cash equivalents Ps. 555,651 Ps. 549,277

Investments in securities 34,101 33,081

Total cash, cash equivalents and investments

in securities 589,752 582,358

Accounts and notes receivable – Net 1,503,109 1,441,989

Inventories 27,868 39,772

Prepaid expenses 115,401 77,732

Real estate held for sale 133,354 103,776

Total current assets 2,369,484 2,245,627

Long-term notes receivable 901,347 883,670

Vacation Club units 337,237 205,608

Property and equipment – Net 9,396,943 9,275,113

Investment in shares of associated companies 26,221 34,669

Other assets – Net 502,659 465,741

Total Ps. 13,533,891 Ps. 13,110,428

F-39

Liabilities and stockholders’ equity 2009 2008

Current liabilities: Bank loans and current portion of long-term debt Ps. 907,320 Ps. 706,154 Suppliers 461,435 337,708 Other accounts payable and accrued liabilities 690,506 710,192 Value-added tax and other tax payables 430,615 238,796

Total current liabilities 2,489,876 1,992,850 Long-term debt 4,186,541 3,915,048 Derivative financial instruments 313,582 126,389 Long-term accrued liabilities 63,359 50,466 Value-added tax payable 170,696 212,166 Deferred income tax 1,230,061 1,415,574

Total liabilities 8,454,115 7,712,493 Deferred credits – Net 150,089 314,143 Stockholders’ equity:

Capital stock: Historical 489,427 489,427 Contributions for future capital increases 200,011 151,612 Amount assigned for repurchase of shares 139,101 139,136 Shares in trust (3,322) (3,322) Additional paid-in capital 69,923 101,673 Restatement for inflation 1,774,015 1,774,015

2,669,155 2,652,541 Other capital:

Reserve for repurchase of shares 651,946 1,922,267 Retained earnings (accumulated deficit) 336,596 (360,528) Cumulative translation effect 334,948 (38,870)

1,323,490 1,522,869

Non-controlling interest 937,042 908,382 Total stockholders’ equity 4,929,687 5,083,792

Total Ps. 13,533,891 Ps. 13,110,428 See accompanying notes to unaudited condensed consolidated interim financial statements.

F-40

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Unaudited condensed consolidated interim statements of income For the nine-month periods ended September 30, 2009 and 2008 (In thousands of Mexican pesos, except income per share which is expressed in Mexican pesos) 2009 2008 Hotel ownership:

Revenues Ps. 2,362,403 Ps. 2,716,283 Departmental costs and expenses 899,491 949,271

Departmental profit 1,462,912 1,767,012

General expenses: Administrative 410,639 425,186 Sales, advertising and promotion 256,405 307,275 Maintenance and energy 266,564 300,048

933,608 1,032,509 Income before other expenses 529,304 734,503

Other expenses:

Property taxes and insurance 40,234 41,237 Other expenses net 2,087 40,118

42,321 81,355 Operating earnings from hotel ownership 486,983 653,148

Hotel management, brand and other:

Revenues 1,219,952 1,240,637 Direct costs and corporate expenses 818,008 788,697

Operating earnings from hotel management, brand and other 401,944 451,940

Vacation Club and other:

Revenues 1,642,614 1,254,934 Direct cost and expenses 1,268,469 856,647

Operating earnings from Vacation Club and other 374,145 398,287 Corporate expenses 61,295 79,658 Depreciation and amortization 339,483 319,111 Real estate leasing 287,377 235,502 626,860 554,613

Operating income 574,917 869,104 Other expenses, net 73,205 141,753

Comprehensive financing result:

Interest expense 289,760 296,311 Interest income (27,394) (14,736) Exchange loss (gain), net 62,567 (145,339) Exchange and conversion effects related to foreign operations (91,863) 91,255 Valuation of financial instruments 49,110 52,847

282,180 280,338

Equity in results of associated companies 1,350 (201,936) Income before income tax 220,882 245,077

F-41

2009 2008

Income tax expense 86,330 220,016

Consolidated net income for the period 134,552 25,061

Net loss of non-controlling interest (1,850) (69,903) Majority stockholders’ net income Ps. 136,402 Ps. 94,963 Majority income per share (in pesos) Ps. 0.2740 Ps. 0.1930 Majority diluted income per share (in pesos) Ps. 0.2653 Ps. 0.1868 Weighted average number of shares outstanding 497,765,347 492,145,594

See accompanying notes to unaudited condensed consolidated interim financial statements.

F-42

Grupo Posadas, S. A. B. de C. V. and Subsidiaries

Unaudited condensed consolidated interim statements of cash flows For the nine-month periods ended September 30, 2009 and 2008 (In thousands of Mexican pesos)

2009 2008 Operating activities:

Income before income taxes Ps. 220,882 Ps. 245,077 Items related to investing activities:

Depreciation and amortization 339,483 319,111 Loss on sale of fixed assets 2,299 12,721 Equity in results of associated companies (1,350) 201,936 Other unrealized items 286,519 (141,558)

Items related to financing activities: Valuation of financial instruments (459,323) 91,255 Interest expense 289,760 296,311

678,270 1,024,853 (Increase) decrease in:

Accounts receivable 223,151 415,190 Inventories 23,058 (734) Prepaid expenses (42,110) (39,228)

Increase (decrease) in: Suppliers (20,614) (91,065) Other accounts payable, accruals and taxes (173,696) (92,811) Income taxes paid 83,069 (110,542)

Net cash provided by operating activities 771,128 1,105,663 Investing activities:

Purchases of property and equipment (150,743) (265,213) Vacations Club units (223,266) (127,006) Long-term notes receivable (65,137) (291,318) Other assets (270,114) (142,551)

Net cash used investing activities (709,260) (826,088)

Excess cash to apply to financing activities 61,868 279,575 Financing activities:

Borrowings 439,030 3,457,186 Repayment of loans (720,998) (2,969,876) Margin calls on derivative instruments 262,301 - Interest paid (287,375) (326,391) Dividends paid - (154,326) Reduction of non-controlling interest (6,782) (15,653) Repurchase of shares, net (340) (7,438) Convertible debt (6,475) (10,919)

Net cash used in financing activities (320,639) (27,417)

Net (decrease) increase in cash and cash equivalents (258,771) 252,158 Adjustment to cash flows due to exchange rate fluctuations 17,601 (51,490) Cash and cash equivalents and investment in securities at

beginning of period 830,922 381,690 Cash and cash equivalents and investment in securities at end of period Ps. 589,752 Ps. 582,358

See accompanying notes to unaudited condensed consolidated interim financial statements.

F-43

Grupo Posadas, S.A. de C.V. and Subsidiaries

Notes to unaudited condensed consolidated interim financial statements As of and for the nine-month periods ended September 30, 2009 and 2008 (In thousands of Mexican pesos) 1. Nature of business and significant events

Grupo Posadas, S. A. B. de C. V. (Posadas) and Subsidiaries (collectively, the Company) are primarily engaged in the business of operating hotels. As of September 30, 2009 and 2008, the Company operated a total of 111 hotels with 19,607 rooms and 108 hotels with19,507 rooms, respectively. The Company mainly operates hotels under its Fiesta Americana, Fiesta Inn and One Hotels brand names throughout Mexico, and Caesar Park and Caesar Business brand names in Brazil, Argentina and Chile. The Company enters into management contracts with all the hotels that it operates. Of the total hotels the Company operated as of September, 2009 and 2008, it had an equity interest of 50% or greater in 33 and 34 hotels, respectively, and operated 20 and 21, respectively under leasing contracts in both periods. The remaining hotels are those that the Company operated for unrelated third parties, which as of September, 2009 and 2008 were 58 and 53 hotels, respectively. For purposes of these consolidated interim financial statements, these hotels are referred to as the Company’s “owned”, “leased” and “managed” hotels, respectively. Posadas receives fees pursuant to the management contracts it has with all of the hotels it operates. Certain fees, including management, brand use fee, reservation services and technology usage, among others, are based on hotel revenues. Posadas also receives an incentive fee according to the hotels’ operating results. Additionally, the Company operates a vacation club business called Fiesta Americana Vacation Club (FAVC) through which members purchase a “40-year-right-to-use” evidenced by an annual allocation of FAVC points. FAVC points can be redeemed to stay at the Company’s four FAVC resorts in Los Cabos, Baja California Sur, Acapulco, Guerrero, Cancun and Chetumal Quintana Roo, Mexico as well as any of the hotels in its portfolio. In addition, members of FAVC can also redeem their FAVC points to stay at any Resorts Condominium International (RCI)-affiliated resort or Hilton Grand Vacation Club resorts throughout the world. Significant events – a. During July and August of 2009, the Mexican government declared a sanitary emergency due to the

outbreak of swine flu AH1N1 in several cities of Mexico, which mandated the temporary closure of certain public places such as schools, museums and restaurants and which negatively affected the Mexican tourism industry.

b. As a result of the global economic slow-down during the fourth quarter of 2008, world financial

markets became highly volatile, leading to the bankruptcy and rescue of certain financial institutions, mainly in the United States of America. The aforementioned events resulted in an aversion to risk in the local investing environment, which was reflected in the downturn in stock markets, a credit contraction and liquidity crisis, as well as a depreciation in the value of the Mexican peso with respect to the US dollar of approximately 25%.

F-44

2. Basis of presentation a. Explanation for translation into English - The accompanying unaudited condensed consolidated

interim financial statements (the “interim financial statements”) have been translated from Spanish into English for use outside of Mexico. These interim financial statements are presented on the basis of Mexican Financial Reporting Standards (MFRS, individually referred to as Normas de Información Financiera or NIFs). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use.

b. Interim financial statements - The accompanying condensed consolidated interim financial statements as of and for the nine-month periods ended September 30, 2009 and 2008 have not been audited. In the opinion of Company’s management, all the adjustments (consisting mainly of ordinary, recurring adjustments) necessary for a fair presentation of the accompanying consolidated financial statements are included. The results of the periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements of the Company and the respective notes for the year ended December 31, 2008.

c. Consolidation of financial statements - The accompanying interim financial statements include the

financial statements of Grupo Posadas, S. A. B. de C. V. and those of the subsidiaries that the Company controls. Entities in which the Company’s ownership interest is greater than 50% and over which control is exercised are consolidated in these interim financial statements. These are as follows:

Company Participation (%) Posadas de México, S. A. de C. V. and Subsidiaries 100 Inmobiliaria Hotelera Posadas, S. A. de C. V. and

Subsidiaries 100 Servicios Hoteleros Posadas, S. A. de C. V. and

Subsidiaries 100 Posadas USA Inc, and Subsidiaries 100 Fondo Inmobiliario Posadas, S. A. de C. V. and

Subsidiaries 52 Hotels owned and leased by the Company’s subsidiaries, pay to Posadas a management fee on a similar basis as hotels managed but not owned by the Company. For the purpose of showing the results of the hotel operation, hotel management fees, brand and other fees, the Company’s management decided not to eliminate these intercompany operations in the preparation of the unaudited condensed consolidated interim statements of income, which does not affect operating income. The intercompany transaction amounts that were not eliminated, as well as balance of the items which would be affected are presented below:

2009 2008 Balance Balance Amount of after Amount of after elimination elimination elimination elimination Hotel ownership:

General expenses- Administrative Ps. 218,753 Ps. 191,886 Ps. 244,591 Ps. 180,595

General expenses- Sales,

advertising and promotion Ps. 126,451 Ps. 129,955 Ps. 131,341 Ps. 175,934

Hotel management,

brand and other: Revenues Ps. 354,858 Ps. 865,094 Ps. 383,217 Ps. 857,421

Vacation Club and other Direct cost and expenses Ps. 11,266 Ps. 1,035,230 Ps. 7,284 Ps. 849,363

F-45

Remaining significant intercompany balances and transactions have been eliminated in these interim financial statements.

d. Translation of foreign subsidiaries - To consolidate the financial statements of foreign subsidiaries

that operate independently of the Company in terms of finances and operations, the same accounting policies of the Company are applied. In 2009 and 2008, foreign operations with a functional currency different from the local currency and the reporting currency translate their financial statements from the currency in which transactions are recorded to the functional currency, using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for monetary assets and liabilities; 2) historical exchange rates for non-monetary assets and liabilities and stockholders’ equity; and 3) the rate upon accrual in the statement of operations for revenues, costs and expenses, except those arising from non-monetary items are translated using the historical exchange rate for the related non-monetary item. Translation effects are recorded under Comprehensive Financing Result (CFR). Subsequently, to translate the financial statements from the functional currency for Mexican and foreign companies to Mexican pesos, the following exchange rates are used; 1) the closing exchange rate in effect at the balance sheet date for assets and liabilities and 2) historical exchange rates for stockholders’ equity, revenues costs and expenses. Translation effects are recorded in stockholders’ equity.

The currency in which transactions are recorded and the functional currency of foreign operations, are as follows:

Currency

Country Recording Functional Reporting

Mexico (FAVC) Mexican pesos US dollar Mexican pesos United States of America US dollar US dollar Mexican pesos Brazil Brazilian reals Brazilian reals Mexican pesos Argentina Argentinean pesos Argentinean pesos Mexican pesos Chile Chilean pesos Chilean pesos Mexican pesos

e. Classification of costs and expenses - Costs and expenses presented in the unaudited condensed

consolidated interim statements of income were classified according to their function and nature, since this makes possible the determination of operating results of hotel operations and management and other businesses, as well as the detail of their expenses.

f. Operating income - Is the result of subtracting cost and departmental expenses and general and other

expenses from net revenues. While NIF B-3, Statement of Income, does not require inclusion of this line item in the unaudited condensed consolidated interim statements of income, it has been included for a better understanding of the Company’s economic and financial performance.

3. Significant accounting policies The accompanying interim financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances. The significant accounting policies of the Company are as follows:

a. Accounting changes - Beginning January 1, 2009, the Company adopted the following NIFs:

i. NIF B-7, Business Acquisitions - Requires fair value measurement of the non-controlling interest

(previously referred to as minority interest) as of the acquisition date and recognition of goodwill at fair value. NIF B-7 also establishes that acquisition costs do not form part of the purchase consideration paid and that restructuring costs should not be recognized as a liability assumed by the acquirer.

F-46

ii. NIF B-8, Consolidated or Combined Financial Statements - Establishes that special purpose entities should be consolidated when control is exercised. Provided certain requirements are met, NIF B-8 allows the presentation of stand-alone financial statements for intermediate controlling companies and requires that potential voting rights be considered when analyzing whether control exists.

iii. NIF C-7, Investments in Associated Companies and Other Permanent Investments - Requires that

investments in special purpose entities be valued using the equity method where significant influence is exercised. NIF C-7 also requires that potential voting rights be considered when analyzing whether significant influence exists. In addition, NIF C-7 establishes a specific procedure and sets caps for the recognition of losses in associated companies, and requires that investments in associated companies be presented including the related goodwill.

iv. NIF C-8, Intangible Assets - Requires that any pre-operating expenses not yet amortized as of

December 31, 2008 be cancelled against retained earnings, therefore as of January 1, 2009 the Company reclassified the entire balance of pre-operating expenses net of the related deferred income tax against retained earnings.

v. NIF D-8, Share-based Payments - Sets the rules for recognition of share-based payments (at fair

value of goods received or at fair value of equity instruments granted), including the granting of stock options to employees.

vi. IFRIC 13, Customer Loyalty Programmes - Effective on annual periods beginning on or after July 1, 2008 the International Financial Reporting Committee (IFRIC) issued IFRIC 13 to address the accounting by entities that provide their customers with incentives to buy goods or services by providing awards. According to IFRIC 13, the initial sale should be allocated to the award credits and recognized as deferred revenue until the entity fulfills its obligations to deliver awards to customers. The amount of deferred revenue would be measured by reference to the fair value of the award credits to the customer and recognized as an allocation of revenue.

4. Cash and cash equivalents

2009 2008

Cash Ps. 149,273 Ps. 161,160 Cash equivalents 406,378 388,117 Total Ps. 555,651 Ps. 549,277

5. Property and equipment

2009 2008

Buildings Ps. 9,375,948 Ps. 9,129,523 Furniture and fixtures 2,552,040 2,322,881 Transportation equipment 52,561 65,422 Computer equipment 371,182 247,760 12,351,731 11,765,586

Less- accumulated depreciation (5,068,591) (4,568,047) 7,283,140 7,197,539 Land 1,989,029 1,927,353 Construction in progress 124,774 150,221 Total Ps. 9,396,943 Ps. 9,275,113

F-47

6. Investment in shares of associated companies

Participation

percentage

as of September

30, 2009 2009 2008

Associated - Grupo Mexicana de Aviación, S. A. de

C. V. 30.41 Ps. - Ps. 7,967 Inmobiliaria Las Animas, S. A. de C. V. 25.00 19,773 18,067

Other- Inmobiliaria Hotelera de Yucatán, S. A.

de C. V. 9.2 3,126 5,354 Other Various 3,322 3,281

Ps. 26,221 Ps. 34,669

7. Other assets

2009 2008

Concession right Ps. 429,978 Ps. 349,048 Prepaid interest and commissions 48,645 48,982 Preoperating expenses, net 10,810 43,592 Vacation Club deferred charges 13,226 24,119 Total Ps. 502,659 Ps. 465,741

8. Long-term debt

As of September 30, long-term debt is comprised as follows (variable interest rates as of September 30, 2009):

2009 2008

Mexican peso denominated: Debt certificates programs at 6.72% Ps. 2,250,000 Ps. 2,500,000 Syndicated loan at 6.58% 250,278 400,447 Mortgage loans at rates that range from 6.95% to 8.93% 892,803 104,727 Other loans at variable rates that range from 6.92% to 8.89% 131,141 312,000

US dollar denominated:

Senior Notes at fixed interest rate of 8.75% 482,677 392,947 Syndicated loan at 2.10% 373,963 515,641 Mortgage loans at rates that range from 2.50% to 5.03% 692,705 361,429 Other loans at rates that range from 3.32% to 6.96% 20,294 34,011

5,093,861 4,621,202 Less- current portion (907,320) (706,154)

Long-term debt Ps. 4,186,541 Ps. 3,915,048

F-48

Long-term debt maturities as of September 30, 2009 are as follows: Denominated in

Payable in Mexican

pesos US dollars

(thousands)

2011 Ps. 257,784 23,921 2012 240,471 40,926 2013 2,490,471 1,000 2014 and thereafter 122,782 13,850 Ps. 3,111,508 79,697 Equivalent in thousands of Mexican pesos Ps. 1,075,033 Total in thousands of Mexican pesos Ps. 4,186,541

a. During 2008, the Company established an Unsecured Debt Certificate Program; its authorized value is

up to Ps.3,000,000. The par value of each certificate is one hundred Mexican pesos, and each issuance expires within five years, denominated in Mexican pesos and with interest payable every 28 days at a rate established for each issuance (both at the Mexican Equilibrium Interbank Offered (TIIE) rate plus 1.80 percentage points). In April 2008, a Ps.1,500,000 withdrawal was made, and on July 2008, a second one was made for Ps.750,000 under the same terms and conditions. Resources obtained from this program were used to repurchase 84.1% or US$189 million of the Senior Notes due on October 4, 2011, with previous consent from the holders of these notes. Commissions from this operation were Ps.131,021, and are presented within other expenses, net in the accompanying unaudited condensed consolidated interim statement of income.

b. In 2001 the Company established an Unsecured Debt Certificate Program for an authorized amount of

up to Ps.1,000,000. The nominal value of the certificates was one hundred Mexican pesos and the maturity term of each issue was from one to ten years denominated in Mexican pesos or in Units of Investment (UDI's) with interest payable every 28 days at the rate established for each issue. Under the terms of this program, the first payment of Ps.200,000 was fully settled on December 2, 2004. Under this same program, certificate maturities of Ps.300,000 and Ps.250,000 were settled in February and July 2006, respectively; one issue of Ps.250,000 matures on May 6, 2009 at the Mexican Treasury Bonds (CETES) rate plus 3.5 percentage points.

c. During November 2005, the Company structured a syndicated loan for US$50 million for a five-year term (with a two-year grace period). The lead bank is ING Bank (México), S. A., while the other participants include Banco Nacional de Comercio Exterior, S. N. C. (Bancomext), BBVA Bancomer, S. A., Bayerische HYPO-UND Vereinsbank AG, HVB Group, Banco de Crédito e Inversiones, Miami Branch and Banco Industrial, S. A. This transaction assures funds for the timely payment of unsecured debt certificates referred to in previous paragraph b. In addition, in November 2006, an add-on to the above syndicated loan of US$30 million was executed, resulting in a total loan of US$80 million. The terms of this add-on are similar to the original loan terms. In April 2008, the Company requested an additional US$21.5 million for a total facility of US$101.5 million. Resources obtained from these transactions were used to settle short-term credit lines. As of September 2009, a total equivalent to US$46.3 million, at LIBOR plus 1.75 percentage points for US dollar dispositions and TIIE plus 1.65 percentage points for Mexican peso dispositions.

d. In December 2005, the Company completed a five year bilateral secured loan with a two year grace period with California Commerce Bank (Citi Group) for US$20 million. In October 2009 the Company drew US$9.3 million additional for a total outstanding of US$17 million maturing in 18 months at a rate of LIBOR plus 4.50 percentage points.

e. The Company issued US$225 million under a Senior Notes program due on October 4, 2011. The notes bear interest at the rate of 8.75% per year, which is payable semiannually. As mentioned in paragraph a. 84.1 % of the notes were repurchased during 2008. As of September 30, 2009 the Senior Notes under this program amount to US$37 million under the same maturity and with no financial covenants.

F-49

A breakdown of the main financial items of the guarantor and non-guarantor subsidiaries is detailed below:

Grupo Posadas, S.A.B. de C.V. and guarantor subsidiaries

Non-guarantor subsidiaries Total consolidated

2009 2008 2009 2008 2009 2008 Total operating

revenues Ps. 3,489,481 Ps. 3,975,122 Ps. 1,735,488 Ps. 1,236,732 Ps. 5,224,969 Ps. 5,211,854 Depreciation and

amortization and real estate leasing Ps. 410,585 Ps. 358,619 Ps. 216,275 Ps. 195,994 Ps. 626,860 Ps. 554,613

Operating (loss)

income Ps. (48,708) Ps. 700,041 Ps. 623,625 Ps. 169,063 Ps. 574,917 Ps. 869,104 Consolidated net

(loss) income Ps. (131,690) Ps. (37,387) Ps. 266,242 Ps. 62,448 Ps. 134,552 Ps. 25,061 Total assets Ps. 8,788,333 Ps. 8,398,134 Ps. 4,745,558 Ps. 4,712,294 Ps.13,533,891 Ps.13,110,428 Total liabilities and deferred credits Ps. 6,543,628 Ps. 6,933,943 Ps. 2,060,576 Ps. 1,092,693 Ps. 8,604,204 Ps. 8,026,636

The main restrictions on the financial ratios and obligations established in loan contracts are as follows:

Financial ratios Restrictions Current Greater than 0.60 Onerous debt-to-equity Less than 1.22 Interest coverage Greater than 2.20 Net debt to EBITDA Less than 4.75

The most significant covenants are: The level of indebtedness, payment of dividends and the stockholders’ distributions are subject

to the compliance with certain financial ratios. The Company must insure and maintain insurance on all of its properties, assets and business

against loss and damage, in similar terms as those used by companies in the same line of business.

As of September 30, 2009 and 2008, these restrictions and covenants have been complied with.

f. As of September 30, 2009 and 2008, mortgage loans amount to Ps.1,585,508 and Ps.466,156, respectively. The principal collateral consists of real estate (hotels), whose carrying value amounts to Ps.2,148,838 and Ps.2,180,029, respectively, as well as guarantees from certain subsidiaries. As of September 30, 2009 these loans bear interest at LIBOR plus the corresponding margin from 1 to 7 percentage points for US dollar withdrawals, and TIIE plus 1.5 to 2 percentage points for Mexican peso withdrawals.

g. The Company has loan agreements for a US$10 million and EUR5 million financing with the International Finance Corporation and Deutsche Investitions–Und Entwicklungsgesellchaft mbh, maturing in December 2009, with an interest rate of LIBOR plus 1 percentage point and the 6 month Euro LIBOR plus 3 percentage points, respectively, convertible into Series “L” shares of the Company. Due to this convertibility feature, the portion identified as equity is presented as contributions for future capital increases within stockholders’ equity.

F-50

h. The Company executed three revolving credit lines, with Bancomext and Banco Mercantil del Norte, S. A. (Banorte) for up to an authorized amount of US$29.2 million, US$44 million and US$47 million, respectively, through several disposals maturing on or before December 24, 2013, June 28, 2013, and October 28, 2013, respectively. Disposals under these credit lines bear variable interest rates and are guaranteed by notes receivable related to financing granted on Vacation Club sales. The collection rights on the sale of Vacation Club intervals, which are formalized in notes receivable, have been assigned to a trust fund that is located outside Mexico. Pursuant to collateral assignment contracts, the Company has transferred the collection rights assigned to the trust fund to Bancomext and Banorte. These credit lines establish mortgage guarantees on Vacation Club real property. During 2008 the Company disposed of four of its contracted lines of credit, three with Banorte amounting to Ps.643.4 million and one with Bancomext amounting to US$7.8 million. As of September 30, 2009 and 2008, the outstanding balances of credit lines contracted with Bancomext is US$28.4 million and US$29.2 million; those contracted with Banorte are for the amounts of US$16.4 million, US$29.8 million and Ps.717.2 million and Ps.143 million, respectively, amounts that are shown net within the long-term notes receivable, in the unaudited condensed consolidated interim balance sheets. Notes receivable assigned to the trust are US$217.3 million and US$208.3 million as of September 30, 2009 and 2008, respectively.

i. In April 2008, the Company completed a five-year bilateral loan with a two-year grace period with

Banco Nacional de México, S. A (Banamex) for Ps.312,000. The rate is TIIE plus 4.00 percentage points.

j. In December 2008, the Company drew US$23.4 million from a US$27.3 million secured loan from Bancomext and in January 2009, drew the remaining capacity. The terms are three years with a 21-month grace period with a rate of three month LIBOR plus 4.75 percentage points.

k. In July 2009, the Company drew Ps.392,000 from another secured loan from Bancomext. The terms

are four years with a 12-month grace period with a rate of TIIE plus 3.75 percentage points.

l. During the last quarter of 2008, the Company drew Ps.100,000 from a long-term credit line with Banco del Bajio at a rate of TIIE plus 2 percentage points. In October 2009 this line was changed to a 4.5 year secured loan of Ps.76,000 with amortizations after six months and payable in advance on the last business day of each month at a cost of 1% of the outstanding amount.

m. During the last quarter of 2008, the Company drew Ps.89,800 from another short term line of credit

with Banco Santander, S. A. at a rate of TIIE plus 4 percentage points. In October 2009, this amount was refinanced to a three-year secured loan with monthly amortizations with at a rate of TIIE plus 4.85 percentage points.

9. Derivative financial instruments

a. Derivative instruments related to interest rates and exchange rates

In order to maintain a debt mix mainly denominated in USD, the Company structured five Cross Currency Swap (CCS) contracts. With these, the Company exchanges a floating rate (TIIE 28) in Mexican pesos for a fixed rate in US dollar. The characteristics of both sides of these agreements are detailed in the following table:

Notional amount

Beginning date

Maturity date

Unsecured Debt Certificate

Program Ps. 834.7 million April, 2008 April, 2013 Unsecured Debt Certificate

Program Ps. 677.3 million July, 2008 April, 2013 Syndicated loan Ps. 109.7 million June, 2008 November, 2010 Syndicated loan Ps. 108 million April, 2008 November, 2010 Credit lines Ps. 312 million April, 2008 April, 2013

F-51

Notional

amount

Beginning

date

Maturity

date

Fair Value

2009

CCS US$ 79 million April, 2008 April, 2013 Ps. (321,879)

CCS US$ 65.8 million July, 2008 April, 2013 Ps. (297,293)

CCS US$ 6.7 million June, 2008 November, 2010 Ps. (23,726)

CCS US$ 6.4 million April, 2008 November, 2010 Ps. (20,608)

CCS US$ 29.8 million April, 2008 April, 2013 Ps. (116,782) In July and August of 2009, US$70 million of the notional amounts was unwound from the contracts subjected to margin calls. As of September 30, 2009, the Company has met all margin calls that have been required by its counterparties in an amount of Ps.468,462 (Ps.502,889 net of exchange rate fluctuations), and are presented net in the account of derivative financial instruments in the unaudited condensed consolidated interim balance sheet. The CCS were entered into as hedging instruments from an economic perspective, but since they do not comply with all conditions for hedge accounting required by the applicable standards, for accounting purposes, these have been recorded as trading derivatives. Fluctuations from these instruments are recorded in CFR. The Company entered into a Principal Only Swap for US$26 million linked to the Senior Notes maturing in October 2011, with a fixed exchange rate at maturity. This instrument was classified as a fair value hedge and the exchange result was recorded in CFR, compensating the exchange rate result derived from the loan hedged. This swap was cancelled in October 2008.

b. Interest rate derivatives

With the intention of capping the interest rate of a portion of the syndicated loan in pesos with a rate of TIIE 28, an Interest Rate Swap (IRS) contract was put in place so the Company pays a fixed rate of 10.14% versus TIIE 28 plus the applicable margin. The characteristics are detailed in the table below:

Notional

amount

Beginning

date

Maturity

date

Syndicated loan Ps. 216 million November, 2005 November, 2010

Notional

amount

Beginning

date

Maturity

date

Fair Value

2009

Fair Value

2008

IRS Ps. 83.1 million July, 2006 November, 2010 Ps. (1,757) Ps. (1,049)

This IRS has been contracted as a hedging instrument from an economic perspective but for accounting purposes it has been accounted for as a trading derivative.

c. Derivative instruments for Exchange Rate Hedging (FX Forwards) Other exchange rate hedging transactions have been contracted according to the investment policies of the Company. The changes in the fair value of these instruments are the result of the appreciation of the US dollar against the Mexican peso. These contracts have been accounted for as trading derivatives. Fluctuations from these instruments are recorded in CFR.

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10. Stockholders' equity

a. As of September 30, the capital stock of the Company consists of shares with no par value and is comprised as follows:

Number of Shares

2 0 0 9 2 0 0 8

Series "A" Series "L" Total Series "A" Series "L" Total

Authorized capital 603,394,827 128,985,074 732,379,901 603,394,827 128,985,074 732,379,901

Less- Unsubscribed

capital (135,453,063) (20,038,219) (155,491,282) (135,453,063) (20,038,219) (155,491,282)

Subscribed capital 467,941,764 108,946,855 576,888,619 467,941,764 108,946,855 576,888,619

Less-

Repurchase of

shares (6,834,366) (6,475,433) (13,309,799) (6,800,966) (6,474,433) (13,275,399)

Shares in trust (13,645,962) (1,017,600) (14,663,562) (13,645,962) (1,017,600) (14,663,562)

Shares in guarantee

trust (49,886,206) - (49,886,206) (64,980,546) - (64,980,546)

Shares in security

interest (15,094,340) - (15,094,340) - - -

(85,460,874) (7,493,033) (92,953,907) (85,427,474) (7,492,033) (92,919,507)

382,480,890 101,453,822 483,934,712 382,514,290 101,454,822 483,969,112

b. In accordance with the Company’s bylaws, Series "A" shares may be subscribed by Mexican citizens or

entities and may be purchased by non-residents through a neutral fund constituted in Nacional Financiera, S. N. C. Series "L" shares have limited voting rights and other limited corporate rights, are of free subscription and are limited to 25% of total stockholders' equity.

c. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject to ISR at the rate in effect when the dividend is distributed. Any tax paid on such distribution, may be credited against the ISR payable of the period in which the tax on the dividend is paid and the two fiscal years following such payment.

d. As of September 30, 2009, the legal reserve amounts to Ps. 97,886 (nominal value) and is equal to 20% of nominal capital stock. This reserve may not be distributed to stockholders during the existence of the Company, except in the form of a stock dividend.

e. Shares in guarantee trust were guaranteed through their subscription and payment by the fiduciary, by

means of a guarantee trust contract executed with Bancomext and the guarantee granted by the latter for securities with a value of Ps.875,000 issued by the Company in 2003 and prepaid in 2005. The Company’s Management will determine the treatment to be applied to these shares once such trust is cancelled. During 2008 11,700,000 shares were transferred from this trust to the trust for assignment and sale to top executives.

f. Shares in security interest were temporarily transferred to a vehicle to guarantee a loan of Ps.90 million

with Banco Santander México, S.A. After September 2009, these shares were transferred back to the guarantee trust, as real estate was subsequently pledged to guarantee the loan.

g. At the Stockholders’ Ordinary General Meeting of April 2008, the stockholders resolved to declare

dividends of Ps.174,802, which were paid on June 2, 2008, net of dividends of Ps.20,476, reimbursed from the release of shares in guarantee trust.

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11. Foreign currency position and operations As of September 30, the foreign currency position is:

2009 2008

Thousands of US dollars:

Current- Monetary assets 42,287 46,430 Monetary liabilities (35,035) (39,069)

7,252 7,361

Long-term- Monetary assets 75,247 86,667 Monetary liabilities (84,705) (74,022)

(9,458) 12,645 Net foreign currency (liability) asset position (2,206) 20,006 Equivalent in thousands of Mexican pesos Ps. (29,757) Ps. 219,694 Thousands of Brazilian reals:

Monetary assets 73,810 59,394 Monetary liabilities (58,310) (56,985)

Net foreign currency asset (liability) position 15,500 (2,409) Equivalent in thousands of Mexican pesos Ps. 117,586 Ps. (13,819)

2009 2008

Thousands of Argentinean pesos:

Monetary assets 28,548 22,205 Monetary liabilities (13,905) (14,558)

Net foreign currency asset position 14,643 7,647 Equivalent in thousands of Mexican pesos Ps. 51,357 Ps. 26,790

As of the date of the interim financial statements and the date of the related independent accountants’ report, the exchange rates were as follows:

September 30, November 27,

2009 2008 2009

Mexican pesos per US dollar Ps. 13.4890 Ps. 10.9814 Ps. 12.9139 Mexican pesos per Brazilian real Ps. 7.5862 Ps. 5.7365 Ps. 7.4179 Mexican pesos per Argentinean peso Ps. 3.5073 Ps. 3.5034 Ps. 3.3954 Mexican pesos per Chilean peso Ps. 0.0245 Ps. 0.0199 Ps. 0.0261

Transactions denominated in foreign currencies that are carried out by the companies located in Mexico primarily consist of revenues from hotel operations, Vacation Club memberships and real estate development sales, and interest expense.

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12. Income taxes In accordance with the Mexican tax law, in 2009 and 2008 the Company is subject to ISR and IETU. ISR is computed taking into consideration the taxable and deductible effects of inflation. The tax rate in 2009 and 2008 was 28%. The Company pays ISR with most of its Mexican subsidiaries on a consolidated basis, on the daily average of the subsidiaries voting stock held by the Company. IETU applies to the sale of goods, the provision of independent services and the granting of temporary use or enjoyment of goods, according to the terms of the Business Flat Tax Law, less certain authorized deductions. IETU payable is calculated by subtracting certain tax credits from the tax determined. Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008. The IETU rate was 16.5% in 2008, 17% in 2009, and will be 17.5% as of 2010. The Asset Tax Law (IMPAC) was repealed upon enactment of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid, may be refunded, according to the terms of the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis. Based on its financial projections the Company determined that it will basically pay ISR only in Mexico, and some subsidiaries will pay IETU. Consequently, the Company computed both deferred ISR and deferred IETU. Through 2007 the Company was subject to IMPAC, which was calculated by applying 1.25% to the net average value of the majority of the Company’s assets (at restated values), without deducting any liabilities, and was paid only to the extent that it exceeded ISR payable for the same period. Through 2006, IMPAC was calculated by applying 1.8% on the net average of the majority of restated assets less certain liabilities, including liabilities payable to banks and foreign entities. IMPAC was payable only to the extent that it exceeded ISR payable for the same period. Tax regulations in Brazil - According to current Brazilian Income Tax Law, the subsidiaries operating in that country are subject to federal income and social contribution taxes, which are computed at the respective rates of 26% and 8%. The federal income tax may be reduced by certain amounts, when applicable, if the companies invest an equivalent amount in government-approved projects and in other priority areas or industries in Brazil. As of December 31, 2008, the subsidiaries that operate in Brazil had tax loss carryforwards for income tax purposes of Ps.13,036. Likewise, these companies did not recognize deferred income tax effects due to the uncertainty of the recovery of the tax losses. Tax regulations in Argentina - According to current Argentinean Income Tax Law, the subsidiary operating in that country is subject to both income and minimum presumptive income taxes. The income tax rate in force is 35% on the estimated taxable income of each fiscal year. The minimum presumptive income tax is computed at 1% on the potential income from certain performing assets; thus, the Company’s tax obligation will coincide with the higher of the two taxes. Tax regulations in the United States - According to current US Income Tax Law, the subsidiaries operating in that country are subject to income taxes at a rate of 35%. Taxable income for Mexico - The principal differences between income for tax and accounting purposes were those related to inflation effects, participation in net earnings of associated companies, the difference between purchases and cost of operations, amortization of deferred credits and the utilization of tax loss carryforwards.

Income taxes are as follows:

2009 2008

Current ISR Ps. 348 Ps. 91,073 Deferred ISR 73,693 59,691 Current IETU 10,124 8,797 Deferred IETU 2,165 60,455 Ps. 86,330 Ps. 220,016

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13. Deferred credits

2009 2008

Vacation Club deferred revenues, net of costs and expenses Ps. 79,345 Ps. 260,989 Loyalty programs 52,821 27,296 Maintenance fees 11,491 3,658 Other deferred revenues 6,432 22,200

Ps. 150,089 Ps. 314,143

Vacation Club deferred revenues recorded as of September 30, 2009 and 2008, refer to net revenues on the “pre-sale” of the third stage of the hotel construction in Los Cabos, Baja California Sur, whose construction began in 2007.

14. Contingencies a. As of September 30, 2009, the Company is involved in certain fiscal proceedings either as petitioner or

defendant, whose eventual outcomes cannot be anticipated. Company’s management and its external advisors consider that the Company has sound legal arguments to prevent such legal proceedings from significantly affecting its consolidated financial position or results.

b. Certain subsidiaries are involved in litigation arising in the ordinary course of business. The principal

claims have been covered by the contingency reserve shown in the balance sheet as long-term accrued liabilities. In the opinion of management and the Company’s legal department, the outcome of the uncovered contingencies is not likely to have a material adverse effect on the Company’s consolidated financial position and operating results.

15. Information by geographical areas and business segments The Company operates in different geographical areas including Mexico, South America (Brazil, Argentina and Chile) and United States of America. The main financial captions by geographical area for 2009 are as follows:

Mexico

South

America

United States of

America Consolidated

Total operating revenues Ps. 4,709,342 Ps. 484,881 Ps. 30,746 Ps. 5,224,969

Depreciation, amortization

and real estate leasing Ps. 542,441 Ps. 77,591 Ps. 6,828 Ps. 626,860

Operating income (loss) Ps. 597,364 Ps. 26,486 Ps. (48,933) Ps. 574,917

Consolidated net income (loss) Ps. 113,658 Ps. 48,802 Ps. (27,908) Ps. 134,552

Total assets Ps. 10,829,046 Ps. 2,616,953 Ps. 87,892 Ps. 13,533,891

Total liabilities and deferred credits Ps. 8,270,244 Ps. 312,360 Ps. 21,600 Ps. 8,604,204

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Total assets and depreciation, amortization and real estate leasing, for business segments for the nine-month period ended September 30, 2009 are as follows:

Hotel Hotel

operation and management Other

corporate and brand businesses Consolidated

Total assets Ps. 5,002,535 Ps. 663,247 Ps. 7,868,109 Ps. 13,533,891 Depreciation,

amortization and real estate leasing Ps. 516,535 Ps. 1,067 Ps. 109,258 Ps. 626,860

The main financial captions by geographical area for 2008 are as follows:

Mexico

South

America

United States of

America Consolidated

Total operating revenues Ps. 4,697,347 Ps. 477,453 Ps. 37,054 Ps. 5,211,854

Depreciation, amortization

and real estate leasing Ps. 456,384 Ps. 92,430 Ps. 5,799 Ps. 554,613

Operating (loss) income Ps. 840,540 Ps. 53,413 Ps. (24,849) Ps. 869,104

Consolidated net loss Ps. 22,718 Ps. 18,134 Ps. (15,791) Ps. 25,061

Total assets Ps. 10,836,319 Ps. 2,177,807 Ps. 96,302 Ps. 13,110,428

Total liabilities and deferred credits Ps. 7,778,942 Ps. 238,884 Ps. 8,810 Ps. 8,026,636

Total assets and depreciation, amortization and real estate leasing, for business segments for the nine-month period ended September 30, 2008 are as follows:

Hotel Hotel

operation and Management Other

corporate and brand businesses Consolidated

Total assets Ps. 7,599,266 Ps. 464,648 Ps. 5,046,514 Ps. 13,110,428 Depreciation,

amortization and real estate leasing Ps. 480,392 Ps. 1,067 Ps. 73,154 Ps. 554,613

16. International financial reporting standards In January 2009, the Mexican National Banking and Securities Commission published the amendments to its Single Circular for Issuers which requires Mexican public companies to file financial statements prepared according to the International Financial Reporting Standards beginning in 2012, and permits their early adoption.

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17. 2010 Tax reform On November 4, 2009 the Mexican Congress approved the Revenue Law for 2010 that includes certain changes that will impact the 2009 financial information. The most significant change relates to the rules related to tax consolidation that will require the recognition of an income tax liability related to previously deferred income taxes from 1999 through 2008. The estimated tax liability to be paid over a period of five years is approximately Ps.100,000.

18. New accounting principles As part of its efforts to converge Mexican standards with international standards, in 2009, the Mexican Board for Research and Development of Financial Information Standards (“CINIF”) issued the following Interpretation to Financial Reporting Standards (“INIF”), which will become effective for fiscal years beginning on January 1, 2010:

INIF 14, Construction Contracts Sale of Real Property and Rendering of Related Services. This INIF supplements Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and requires segregation of the different components of contracts in order to define whether the contract refers to construction of real property, sale of real property, or rendering of related services, and establishes the rules for recognizing revenue and related costs and expenses, based on the different elements identified in the contract. INIF 14 provides guidance for the appropriate use of the percentage-of-completion method for revenue recognition.

The revenues and related costs and expenses that will be subject to and could potentially change on adoption of this pronouncement recorded during the nine-month periods ended as of September 30, are:

2009 2008

Revenues from Vacation club and other Ps. 472,519 Ps. - Total costs Ps. 116,433 Ps. - Total operating expenses Ps. 268,868 Ps. -

19. Financial statements issuance authorization These interim financial statements were authorized by the Audit Committee on November 25, 2009.

* * * * * *

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APPENDIX A – SUMMARY OF CERTAIN DIFFERENCES BETWEEN MEXICAN FRS AND U.S. GAAP

Our consolidated financial statements are prepared and presented in accordance with Mexican FRS as issued by the Mexican Board for Research and Development of Financial Information Standards (“Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera” or “CINIF”). Certain differences exist between Mexican FRS and accounting principles generally accepted in the United States of America or U.S. GAAP which might be material to the financial information contained herein. The matters described below summarize certain differences between Mexican FRS and U.S. GAAP that may be material. We have not prepared a reconciliation of our consolidated financial statements and related footnote disclosures, appearing in the offering memorandum, from Mexican FRS to U.S. GAAP and we have not quantified those differences. Accordingly, no assurance is provided that the following summary of differences between Mexican FRS and U.S. GAAP is complete. In making an investment decision, investors must rely upon their own examination of Grupo Posadas, S.A.B. de C.V. and its consolidated subsidiaries, the terms of the offering and the financial information. Potential investors should consult their own professional advisors for an understanding of the differences between Mexican FRS and U.S. GAAP, and how those differences might affect the financial information herein.

Accounting for the Effects of Inflation

Mexico

Through December 31, 2007, Mexican FRS required that the effects of inflation be recorded in financial information and that such financial statements be restated to constant Mexican pesos as of the latest balance sheet date presented. Beginning January 1, 2008, Mexican FRS modified the accounting for inflationary effects and defines two economic environments, an “inflationary environment” and a “non-inflationary environment”. An inflationary environment is one in which the cumulative inflation of the three preceding years is 26% or more, in which case the comprehensive effects of inflation should be recognized in financial information; a non-inflationary environment is one in which the cumulative inflation of the three preceding years is less than 26%, in which case, no inflationary effects should be recognized in financial information.

United States

Under U.S. GAAP, companies are generally required to prepare financial statements using historical costs which are not subsequently adjusted for inflation. However, specific rules and regulations established by the Securities and Exchange Commission (SEC), allow for the presentation of inflation in a company’s reconciliation from local GAAP to U.S. GAAP for companies registering securities with the SEC for sale in the United States, when, for local purposes, such company prepares comprehensive price-level adjusted financial statements, as required or permitted by their home-country GAAP.

Revenue Recognition for Vacation Club Operations

Mexico

Under Mexican FRS, revenues from Posadas` vacation club business are recognized (a) for real estate ready to be used, when the contracts are formalized and the corresponding 10% down payment is collected and (b) for real estate under construction, by the percentage-of-completion method, through which revenues are identified based on the proportion to the costs incurred at the reporting date. Posadas` vacation club business consists mainly of the marketing and sale of memberships that grant a right to use its vacation club properties, as well as other properties.

United States

U.S. GAAP requires that revenues generated from time sharing transactions, which include fixed and floating time, interval ownership, undivided interests, points programs and vacation clubs, among others, be recognized in accordance with the guidance applicable to sales of real estate related to other than retail land sales. Accordingly, depending on the facts and circumstances (including the determinability of profit and the continuing involvement of the seller), revenue could be recognized on

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various bases, including full accrual, installment, deposit method, cost recovery, reduced profit or percentage-of-completion.

Accounting for Customer Loyalty Programs (Points-Based Discounts and Coupons for Free Stays)

Mexico

Under Mexican FRS, Posadas recognizes an accrued liability for the incremental operating costs that are incurred in connection with providing discounted hotel services. The provisions are estimated based on actuarial analyses.

United States

U.S. GAAP does not specifically address revenue recognition for customer loyalty programs. Although entities account for customer loyalty programs in different ways, they are typically accounted for as multiple-element arrangements or under an incremental-cost model.

Preoperating Costs

Mexico

Through December 31, 2002, under Mexican FRS, preoperating costs were permitted to be capitalized and amortized over a period of time estimated to generate the income necessary to recover such expenses. Beginning January 1, 2003, preoperating costs are required to be expensed as incurred; however, previously capitalized amounts are permitted to continue to be amortized through December 31, 2008. As of January 1, 2009, any remaining unamortized preoperating costs must be written off to retained earnings.

United States

Under U.S. GAAP, preoperating costs are expensed as incurred.

Long-Term Debt

Mexico

Mexican FRS allows the classification of borrowings outstanding under a revolving credit agreement as a long-term debt when the agreement does not expire within one year.

United States

Under U.S. GAAP, borrowings outstanding under a revolving credit agreement that includes both a subjective acceleration clause and a requirement to maintain a lock-box agreement, whereby remittances from the borrower´s customers reduce the debt outstanding, are considered short-term obligations.

Consolidation Criteria

Mexico

Under Mexican FRS, an entity is required to consolidate subsidiaries over which it has established control. Determining whether an entity has control is based on an analysis of both corporate governance and economic risks and benefits. Control may exist despite not holding a majority of the voting stock of the subsidiary.

United States

U.S. GAAP only permits consolidation when a company has a controlling financial interest, which can be represented by a majority voting interest or through the existence of other control factors. Additionally, it requires consolidation of variable interest entities for which the company is the primary beneficiary, will absorb a majority of the investee’s expected losses, and is entitled to receive a majority of the entity’s expected residual returns or both.

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Consolidation by the majority investor is precluded in instances when a noncontrolling interest has substantive rights to effectively participate in significant decisions related to the investee’s ordinary course of business.

Under both Mexican FRS and U.S. GAAP, the terminology “minority interest” was changed to “noncontrolling interest” in 2009.

Equity Method Investees

Mexico

Under Mexican FRS, investments in associated companies in which an entity owns 50% or less and over which significant influence is exercised, are accounted for using the equity method. An entity is presumed to have significant influence if it owns 10% to 50% ownership of an investee.

United States

Under U.S. GAAP, investments in associated companies in which a 20% to 50% ownership exists, and over which significant influence is exercised, are accounted for using the equity method. Investments of less than 20% ownership are generally accounted for under the cost method unless the ability to exercise significant influence can be demonstrated.

Classification of Minority Interest

Mexico

Under Mexican FRS, noncontrolling interests in consolidated subsidiaries is presented as a separate component of stockholders’ equity in the consolidated balance sheet. In the income statement, noncontrolling interest in consolidated net income is included within consolidated net income. Amounts attributed to majority interests and noncontrolling interests are separated below consolidated net income on the face of the income statement.

United States

Through 2008, under U.S. GAAP, noncontrolling interest is excluded from stockholders’ equity and is presented between liabilities and equity in the balance sheet. In the statement of income, it is presented as a reduction of consolidated net income.

Beginning in 2009, U.S. GAAP requires presentation of noncontrolling interests in consolidated subsidiaries within stockholders' equity. In addition, consolidated net income must be adjusted to include the net income attributed to noncontrolling interests. Hence, as of January 1, 2009, U.S. GAAP requires similar presentation as that of Mexican FRS.

Capitalization of Comprehensive Financing Cost

Mexico

Under Mexican FRS, through 2006, a company was allowed, but not required, to capitalize certain comprehensive financing costs on assets under construction. Effective January 1, 2007, Mexican FRS requires certain comprehensive financing cost to be capitalized on qualifying assets (assets that require a period of time to be ready to use). Comprehensive financial results to be capitalized include interest expense, foreign currency exchange gains and losses and inflationary monetary gain or loss related to financial liabilities.

United States

Under U.S. GAAP, interest expense incurred during the construction (development) period on qualifying assets must be considered as an additional cost to be capitalized. Under U.S. GAAP, when financing is denominated in Mexican pesos, the monetary gain related to the financing is included in this computation; when financing is denominated in U.S. dollars, only the interest is capitalized and the monetary gains and losses are excluded. In all instances, foreign exchange gains and losses are excluded.

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Purchase of Noncontrolling Interest in Subsidiaries

Mexico

Under Mexican FRS, in an acquisition of minority interest, the carrying value of the net assets acquired remain, and the excess of the acquisition cost over the carrying value of the net assets acquired is recorded as a reduction of stockholders’ equity.

United States

Through 2008, under U.S. GAAP, the acquisition of a noncontrolling interest was accounted for using the purchase method. Assets and liabilities acquired were restated to fair value, and the excess of the acquisition cost over the fair value of the net assets acquired was recorded as goodwill.

Beginning in 2009, U.S. GAAP no longer permits application of the purchase method for the purchase of noncontrolling interests, and requires that such purchases be treated as capital transactions. Accordingly, the excess of acquisition cost over the carrying value of the net assets acquired must be recorded within stockholders’ equity, similar to that of Mexican FRS.

Labor Obligations

Mexico

Under Mexican FRS, entities are not required to recognize the over- or underfunded status of a defined postretirement plan. Accordingly, all unrecognized items are amortized into the liability over a specified period of time.

United States

Under U.S. GAAP, the accounting for defined benefit postretirement plans, which include seniority premiums within Mexico, was amended in 2006 such that an employer is required to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, recognizing changes in that funded status in the year in which the changes occur through other comprehensive income.

Deferred Income Tax and Statutory Employee Profit Sharing

Mexico

Mexican FRS is similar to U.S. GAAP with respect to accounting for deferred income taxes in that an asset and liability approach is required. Under Mexican FRS, (i) any deferred tax assets recorded must be reduced by a valuation allowance if it is “highly probable” that all or a portion of the deferred tax assets will not be realized and (ii) the net deferred income tax asset or liability is presented as a long-term asset or liability.

During 2007, the Mexican tax authorities issued a new Business Flat Tax or IETU. For Mexican FRS purposes, based on projections of taxable income, companies must determine whether they will be subject to regular income tax or IETU in the future and, accordingly, must recognize deferred taxes based on the tax they expect to pay. Therefore, deferred taxes are calculated by scheduling the reversal of temporary differences under each tax regime and applying either the income tax or IETU rate to such temporary differences. Under Mexican FRS, if a company determines, based on its projections, that it will be both subject to IETU and ISR in the future, the company is required to schedule out the reversal of temporary differences under each tax regime and record the amount that represents the larger liability or the smaller benefit.

Under Mexican FRS, through 2007, deferred employee profit sharing is recognized only for timing differences arising from the reconciliation between accounting and taxable income for employee profit sharing purposes, for which it may be reasonably estimated that a future liability or benefit will arise and there is no indication that the liabilities will not be paid or the benefits will not be realized. Effective January 1, 2008, Mexican FRS was modified such that it now requires a balance sheet methodology for determining deferred employee profit sharing, similar to that used for deferred income taxes.

Mexican FRS allows the recognition of a net statutory employee profit sharing asset.

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United States

Under U.S. GAAP, deferred income taxes are also accounted for using the asset and liability approach. However, under U.S. GAAP, a valuation allowance is recognized if, based on the weight of available evidence, it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. U.S. GAAP requires that deferred tax assets and liabilities be classified as current or long-term depending on the classification of the asset or liability to which the deferred relates.

In addition, with respect to IETU, similar to Mexican FRS, companies must determine whether they will be subject to regular income tax or IETU in the future based on company projections, and accordingly recognize deferred taxes based on the tax they expect to pay in each period. However, if a company's projections indicate that it will be subject to both IETU and ISR in the future, it is required to record deferred taxes based on what they expect to pay in each future year, which could potentially result in the recognition of a deferred tax asset or liability that includes both income tax and IETU effects.

U.S. GAAP also requires the use of the balance sheet methodology when calculating deferred employee profit and requires that a related liability be recorded for all temporary differences. U.S. GAAP does not allow the recognition of net deferred employee profit sharing assets.

Impairment of Long-Lived Assets

Mexico

Under Mexican FRS, long-lived assets with definite lives, such as property and equipment, are evaluated periodically in order to determine whether there is an indication of potential impairment. The calculation of impairment losses requires the determination of the recoverable value of the assets, which is defined as the greater of the net selling price of a cash generating unit and its value in use, which is the present value of discounted future net cash flows.

In addition, under certain limited circumstances, the reversal of previously recognized impairment losses is permitted. Any recorded impairment losses are presented as non-ordinary expenses.

United States

U.S. GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of an asset is not recoverable when the estimated future undiscounted cash flows expected to result from the use of the asset are less than the carrying value of the asset. The impairment loss is measured as the difference between the carrying value of the asset and its fair value. Any impairment loss recorded for an asset to be held and used establishes a new cost basis and, therefore, cannot be reversed in the future. Any recorded impairment losses are presented in operating expenses.

Recognition and Measurement of Provisions

Mexico

Under Mexican FRS, provisions are recognized for current obligations that result from a past event, are likely to result in the use of economic resources and can be reasonably estimated. The provision is valued as the best estimate of the expenditure required to settle the present obligation. If a provision is comprised of a large population of items, all possible outcomes should be weighed, considering their associated probabilities; if the provision is a single obligation, the individual most likely outcome may be used.

Provisions are discounted if the effect of the time value of money is material.

United States

Under U.S. GAAP, an estimated loss from a loss contingency is recognized when it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of estimates is present and no amount in the range is more likely than any other amount, the liability should be recognized at the lowest amount of the range. Certain amounts recorded as provisions are not discounted.

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U.S. GAAP also requires the recognition of a liability at the inception of certain guarantees for the fair value of the obligation taken in issuing the guarantee as well as requires specific disclosures regarding the company’s obligations under certain guarantees that it has issued.

Elimination of Intercompany Balances and Transactions

Mexico

Mexican FRS considers that all intercompany balances and transactions should be eliminated for the presentation of consolidated financial statements. Posadas` management has determined that the fair presentation of its income statement should not include the elimination of revenue from management fees related to non-third party properties and an equal amount related to hotel operation general expenses. Posadas` management believes that it has complied with Mexican FRS requirements in this regard by disclosing the effects of elimination of intercompany balances and transactions in Note 2.c to the consolidated financial statements.

United States

U.S. GAAP requires the elimination of all intercompany balances and transactions for the presentation of consolidated financial statements.

Financing of Vacation Club Ownership Receivables

Mexico

Posadas has established financing agreements with large, creditworthy Mexican financial institutions whereby receivables from the sale of vacation club ownership interests are assigned to trusts in exchange for cash. NIF C-2, Financial Instruments requires Posadas to present the secured borrowings net of the assigned vacation club ownership receivables on its consolidated balance sheet. Consequently, as Posadas reflects the cash received under the financing arrangements, the related receivables are derecognized from the balance sheet.

United States

U.S. GAAP does not allow Posadas to net the assigned receivables against the related debt on its consolidated balance sheet. The accounting treatment for secured borrowings under U.S. GAAP would require that the cash received under the financing agreements be reflected as a liability. The assigned vacation club ownership receivables would be identified separately on Posadas` balance sheet from other assets not so encumbered.

Statement of Changes in Financial Position

Mexico

Through December 31, 2007, Mexican FRS required the presentation of a statement of changes in financial position, which presented sources and uses of resources, determined based on the change in assets and liabilities in the balance sheet in constant pesos. Accordingly, changes in financial position not affecting cash were excluded from the statement of changes in financial position. Monetary position results and unrealized foreign exchange gains and losses were included in operating activities. Also, no supplemental disclosures were required.

Beginning January 1, 2008, new Mexican FRS standards require the presentation of a cash flow statement, using either the direct or indirect method, presented in nominal pesos.

United States

U.S. GAAP requires a statement of cash flows describing the cash flows provided by or used in operating, investing and financing activities, similar to that presented under Mexican FRS beginning January 1, 2008. Non-cash transactions are excluded from the statement of cash flows. Supplemental disclosure of interest and income taxes paid must be disclosed.

A-7

Vacation Expense

Mexico

Through December 31, 2007, under Mexican FRS, vacation expense and other paid absences were recognized only when paid, rather than during the period in which they were earned by employees. Beginning January 1, 2008, vacation expense and other paid absences must be accrued during the period in which they are earned by employees.

United States

Under U.S. GAAP, the amount of the outstanding vacation liability and other compensated absences are accrued at the balance sheet date.

Fair Value of Financial Instruments

Mexico

Mexican FRS defines fair value as the amount an interested and informed market participant would be willing to exchange for the purchase or sale of an asset or to assume or settle a liability in a free market. This definition can consider either an entry or an exit price.

United States

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This definition only considers an exit price, and requires the consideration of the principal and most advantageous market and the highest and best use of the asset. Additionally, U.S. GAAP prioritizes the inputs to valuation techniques used to measure fair value into three different levels, depending on whether or not the input is observable in an active market.

Lease Accounting

Mexico

Under Mexican FRS, lease accounting is described using broad terms. Mexican FRS sets forth four criteria described in more general terms as follows: (i) the lease transfers ownership of the property to the lessee by the end of the lease term; (ii) the lease contains a bargain purchase option; (iii) the lease term is substantially equal to the estimated economic life of the leased property; or (iv) the present value of the minimum lease payments is substantially equal to the leased property market price.

If none of the lease criteria are met, then the lease is required to be classified as an operating lease. Additionally, if there is reasonable certainty about the transfer of the ownership at the end of the lease contract, the registered asset will be depreciated over the lease term. Otherwise, the asset shall be amortized in a manner consistent with the lessee’s normal depreciation policy for owned assets.

United States

U.S. GAAP lease accounting is a complex area given that it is a rule-based approach applied to specific facts and circumstances of each transaction. In addition to the basic standard, there exists numerous other authoritative guidance on practical application issues. In general terms, U.S. GAAP sets forth four criteria, any of which identifies a lease as a capital lease to the lessee. The four criteria are: (i) automatic transfer of title; (ii) bargain purchase option; (iii) lease term equals or exceeds 75.0% of the remaining economic useful life; or (iv) the present value of minimum lease payments equals or exceeds 90.0% of the fair value of leased property over any related investment tax credit.

If none of the lease criteria are met, then the lease is required to be classified as an operating lease. Additionally, under U.S. GAAP, if the lease meets the criterion of either (i) or (ii) noted above, the asset shall be amortized in a manner consistent with the lessee’s normal depreciation policy for owned assets. If the lease does not meet either criterion (i) or (ii) noted above, the asset shall be amortized in a manner consistent with the lessee’s normal depreciation policy, except that the period of amortization shall be the lease term.

A-8

Presentation of Amounts within the Financial Statements

Various differences exist in the presentation of items in the financial statements. More particularly, in the statement of operations, gains and losses on sales of fixed assets and statutory employee profit sharing are presented within other income (expense) under Mexican FRS, while such amounts are included within operating income under U.S. GAAP. In the balance sheet, deferred credits related to the Vacation Club are presented as a mezzanine item (between liabilities and equity) under Mexican FRS, while such amounts are presented within liabilities under U.S. GAAP.

REGISTERED OFFICE OFGRUPO POSADAS, S.A.B. de C.V.

Attention: Corporate Finance DepartmentPaseo de la Reforma No. 155

Colonia Lomas de ChapultepecMexico, D.F., Mexico 11000

TRUSTEE, REGISTRAR, TRANSFER AGENT AND PRINCIPAL PAYING AGENTThe Bank of New York Mellon

101 Barclay Street, 4th Floor EastNew York, New York 10286

United States

LUXEMBOURG LISTING AGENT, TRANSFER AGENT ANDPAYING AGENT

The Bank of New York Mellon (Luxembourg) S.A.Corporate Trust Services

Aerogolf Center, 1AHoehenhof, L-1736

Senningerberg, Luxembourg

LEGAL ADVISOR TO GRUPO POSADAS, S.A.B. de C.V.As to U.S. law

Gibson, Dunn & Crutcher LLP200 Park Avenue

New York, New York 10166-0193United States

As to Mexican lawRomo, Pailles y Guzman, S.C.

Blvd. Manuel Avila Camacho No. 24, piso 4Colonia Lomas de Chapultepec

Mexico, D.F., Mexico 11000

LEGAL ADVISOR TO THE INITIAL PURCHASERAs to U.S. law

Davis Polk & Wardwell LLP450 Lexington Avenue

New York, New York 10017United States

As to Mexican lawRitch Mueller, S.C.

Blvd. Manuel Avila Camacho No. 24, piso 20Colonia Lomas de Chapultepec

Mexico, D.F., Mexico 11000

INDEPENDENT AUDITORSGalaz, Yamazaki, Ruiz Urquiza, S.C.Paseo de la Reforma No. 489, Piso 6

Colonia CuauhtemocMexico D.F., Mexico 06500

28NOV200902355264

Grupo Posadas, S.A.B. de C.V.