Fellow Owners,

As previously mentioned, the State of Hawaii is attempting to increase one of the taxes paid by timeshares in the state by 385%. The State sees no downside to increasing taxes on timeshare owners as nearly all timeshare owners are Non-Hawaii residents and don’t vote. However, every Sands of Kahana owner is a Hawaii landowner and spends significant money to visit Maui on a yearly basis. Continuing to increase the ownership burden on timeshare owners will have a detrimental effect on the State and this fact is being raised with the committees that are considering these increases.

Several bills were introduced in the State Legislature that proposed to increase the room taxes paid by timeshare projects. As of this date, the bill to increase the fair market rental value from 50% to 150% of the daily maintenance fees paid by owners has been set aside and appears to have been abandoned. However, as many of you know, nothing in politics is ever dead until the Legislature is done with their work on May 5th.

Another bill proposed an increase in the rate of tax paid by timeshare projects from 7.25% to 9.25% based on the fair market rental value. This bill was not passed by a Senate committee after a House committee had passed it; however, in an attempt to force the Senate to pass the increase, the House committee amended another bill to include the proposed tax increase. The new revised bill has not been sent to the Senate so no further action has been taken as of yet. This battle will continue.

On another front, the Mayor of Maui recently proposed a 40% increase in the real property tax rate for timeshares while proposing much smaller increases for all other types of properties except single family homes (no increase). The Sands of Kahana Vacation Club Board and your management company, Consolidated Resorts Management, are working with the other timeshare resorts in Maui, the American Resort Development Association (“ARDA”) and the ARDA-Resort Owners Coalition to defeat this substantial increase. The Mayor has described this proposal as a cost neutral increase to timeshare owners as the decrease in the property value will offset the increase in the tax rate. In other words, timeshare owners will just pay the same amount of taxes as they do now but the calculation will be different. We want one simple thing: to keep the savings in the taxes for the benefit of the timeshare owners. One thing for sure, this proposal has united the entire Maui timeshare community to fight this unreasonable increase.

Once again, increased taxes are timeshare’s major opponent in 2011. The Board and your Management Company will continue to oppose these proposed increases and will keep you informed of the status.

Lastly, during the Annual Meeting this year, a slide presentation was used to highlight the accomplishments from 2010 and to establish the objectives of the Board. A copy of the presentation is available for you to view at www.sandsbod.com.

Thank you for your time.

Kevin Blair