TUI issues convertible bond – Maturity of five years strengthens long-term financing – Expectations for 2003 financial year confirmed

Hanover, October 7, 2003

TUI AG is today launching a convertible bond issue of approximately Euro 350 million. The bond is convertible in up to 10 per cent of TUI's share capital and has a maturity of five years. The convertible bond will be marketed with a coupon range of 3,75 per cent to 4,25 per cent and a conversion premium range of 45 per cent to 50 per cent solely to institutional investors outside the United States, Canada and Japan in reliance on Regulation S.

The final coupon, conversion premium and issue size will be determined via a bookbuilding process conducted on 7 October 2003. TUI intends to list the convertible bond on the Luxembourg stock exchange. Citigroup, HVB Corporates & Markets and WestLB AG are acting as joint lead managers and joint bookrunners to the transaction.

In relation to the convertible bond issue, TUI will simultaneously enter into a cash-settled call spread transaction with the joint lead managers with respect to TUI shares. The economic effect of the call spread transaction will be to put TUI in a position to participate in an upside potential of its shares up to the conversion price plus up to 30%.

Maturity of five years strengthens long-term financing
The proceeds from the issue will primarily be used to refinance existing indebtedness, thereby extending the company's debt maturity profile. In this context, TUI has already signed a syndicated loan of Euro 800 million with a maturity of three years early in September.

Expectations for 2003 financial year confirmed
For the 2003 financial year, confidence in earnings expectation is increasing. In tourism, backlog in booked turnover for the 2003 summer season has decreased below six per cent. In line with this development, earnings in July and August were good and preliminary results for September are promising. This means, that there is a good chance for third quarter earnings before tax and goodwill amortisation (EBTA) to come close to previous year's figures. Earnings for the fourth quarter are expected to be better than in the previous year. These expectations are based, among others, on actually booked turnover for the 2003/2004 winter season. It is more than four per cent above previous year's figures on Group level with better performance especially in the major source markets.

The logistics division continues its positive development and will also achieve a good result in the second half of the 2003 financial year. The capital gain from the divestment of the energy division will contribute significantly to higher earnings before tax and goodwill amortisation (EBTA) for the Group than in the previous year.

This communication is not an offer for the sale of any securities in the United States or any other country. Neither the bonds nor the shares into which the bonds are convertible may be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended. TUI AG does not intend to register any portion of the offering in the United States or to conduct a public offering of the bonds or the shares into which the bonds are convertible in the United States.

This communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the “Order”) or (iii) high net worth entities, and other persons to whom it may be lawfully communicated, falling within Article 49(2) of the Order (all such persons together being referred to as “relevant persons”). Any securities referred to herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Stabilisation /FSA


For further information please contact:
Björn Beroleit, phone +49 511 566-1310
Nicola Gehrt, phone +49 511 566-1435