2. Nature of the Business

  2.1 Company History

  Laguna Resorts & Hotels Public Company Limited (“The Company”) was
  formerly named Thai Wah Resorts Development Public Company Limited and
  founded in 1983. It shortly thereafter acquired a large parcel of land
  on the site of an abandoned tin mine at Bangtao Bay, Phuket, Thailand
  which was later developed to become the Laguna Phuket integrated
  resort complex.

  Milestones

+---------+------------------------------------------------------------+
| 1987    | Dusit Thani Laguna Phuket (formerly known as Dusit Laguna  |
|         | Resort) opened.                                            |
+---------+------------------------------------------------------------+
| 1991    | Laguna Beach Resort opened.                                |
+---------+------------------------------------------------------------+
| 1992    | Sheraton Grande Laguna Phuket and the Laguna Phuket Golf   |
|         | Club opened.                                               |
+---------+------------------------------------------------------------+
| 1993    | The Company listed on Stock Exchange of Thailand. Property |
|         | Sales operations commenced with the Allamanda condominium  |
|         | units.                                                     |
+---------+------------------------------------------------------------+
| 1995    | The resort’s flagship hotel, Banyan Tree Phuket opened.    |
+---------+------------------------------------------------------------+
| 1998    | Laguna Holiday Club commenced operations.                  |
+---------+------------------------------------------------------------+
| 2002    | The Company acquired a large parcel of land adjacent to    |
|         | Laguna Phuket for future development opportunities.        |
+---------+------------------------------------------------------------+
| 2005    | The Company acquired Thai Wah Plaza Limited which houses   |
|         | Banyan Tree Bangkok and commercial offices.                |
+---------+------------------------------------------------------------+
| 2006    | Banyan Tree Lijiang, People’s Republic of China and Laguna |
|         | Holiday Club Phuket Resort opened.                         |
+---------+------------------------------------------------------------+
| 2008    | The Company entered into an agreement to acquire           |
|         | additional land adjacent to Laguna Phuket for future       |
|         | development.                                               |
+---------+------------------------------------------------------------+
| 2009    | The Company invested in the Banyan Tree Indochina          |
|         | Hospitality Fund which is developing an integrated resort  |
|         | in Hue, Vietnam.                                           |
|         |                                                            |
|         | Outrigger Laguna Phuket Resort & Villas commenced          |
|         | operations in December.                                    |
+---------+------------------------------------------------------------+
| 2010    | Divestment of Dusit Thani Laguna Phuket Hotel in October.  |
+---------+------------------------------------------------------------+
| 2011    | Divestment of Laguna Beach Resort in May.                  |
|         |                                                            |
|         | Closure of the former Sheraton Grande Laguna Phuket in mid |
|         | 2011 for a major renovation and rebranding to Angsana      |
|         | Laguna Phuket                                              |
+---------+------------------------------------------------------------+

  2.2 Type of Businesses and Income Structure

  2.2.1 Type of Businesses

  The key businesses of the Company are hotels, property development and
  office rental. The Company’s major business investment largely
  revolves around the operation and management of the integrated resort
  of Laguna Phuket, located on the island of Phuket in Thailand, as well
  as its Banyan Tree hotel and office tower located in Bangkok.

  Segment information

  The companies engaged in each of the key business segments are set out
  below.

  2.2.2 Income Structure

  The percentage of income generated by each individual line of business
  is detailed as follows:

(Unit: Thousand Baht)

  ---------------------- ----------- ------- ----------- ------- ----------- -------
                         2011        %       2010        %       2009        %

                                                                             

  Revenue from Hotels    2,828,313   78.6    3,097,224   52.0    2,826,056   65.7

  Revenue from Property  576,750     16.0    1,063,073   17.9    1,309,564   30.4
  Development                                                                

  Revenue from Office    55,509      1.6     45,460      0.8     58,938      1.4
  Rental                                                                     

  Other Income           137,449     3.8     1,746,316   29.3    108,060     2.5

  Total Revenue          3,598,021   100.0   5,952,073   100.0   4,302,618   100.0

                                                                             
  ---------------------- ----------- ------- ----------- ------- ----------- -------

  The most significant lines of business of the Group are hotels and
  property development operations for which further details are provided
  below. Note 39 to the financial statements of the Company for the year
  ended 31 December 2011 (note 33 and 30 for the year ended 31 December
  2010 and 2009 respectively) discloses the operating results by
  business segment in accordance with accounting standards and
  principles.

  Hotel Operations – Overall

  ----------------------------------------- --------- --------- ---------
                                            2011      2010      2009

  Occupancy (%)                                                 

  Laguna Beach Resort                       79        67        57

  Angsana Laguna Phuket                     64        60        57

  Banyan Tree Phuket                        57        61        65

  Banyan Tree Bangkok                       58        41        49

  Average – LRH Hotels                      62        56        56

                                                                

  Average Room Rate (Baht)                                      

  Laguna Beach Resort                       4,767     3,825     3,800

  Angsana Laguna Phuket                     4,635     4,441     4,048

  Banyan Tree Phuket                        15,226    15,108    14,758

  Banyan Tree Bangkok                       3,711     3,919     4,667

  Average – LRH Hotels                      6,480     5,967     6,004

                                                                

                                                                

                                                                
  ----------------------------------------- --------- --------- ---------

  ----------------------------------------- ----------- ----------- -----------
                                            2011        2010        2009

  Total Revenue (Thousand Baht)                                     

  Laguna Beach Resort                       174,340     358,221     308,804

  Angsana Laguna Phuket                     488,780     744,915     694,746

  Banyan Tree Phuket                        790,124     839,469     798,717

  Banyan Tree Bangkok                       644,502     552,459     589,439

  Total LRH Hotels                          2,097,746   2,495,064   2,391,706

  Gallery operations                        288,887     234,496     183,292

  Other hotel-related operations            441,680     367,664     251,058

  Total Revenue of Hotel Operations         2,828,313   3,097,224   2,826,056
  ----------------------------------------- ----------- ----------- -----------

* Angsana Laguna Phuket is formerly known as Sheraton Grande Laguna
Phuket

Hotel Operations -Overall

  Revenue was 9% lower than prior year mainly due to the sale of Laguna
  Beach Resort in May and the closure of the Sheraton Grande Laguna
  Phuket for 5-6 months from mid-year for a major renovation which was
  rebranded to the Angsana Laguna Phuket upon re-opening in
  mid-December. In addition, other factors that affected their
  performance were:

-   The continuing volatile and uncertain global economy, strength of
    the Thai Baht, and increased supply of upscale hotels, has resulted
    in ongoing room rate pressures, particularly with our traditional
    European high season markets and in Bangkok.

-   The impact of the political protests in the prior year and the lead
    up to national elections resulted in continuing security concerns,
    particularly for corporate and MICE business segments.

-   Natural disasters which also had an impact throughout the year,
    initially with the Japan tsunami and later with the massive floods
    in Bangkok and surrounding areas. Both of these events had
    significant international media coverage which adversely impacted
    business levels.

  Laguna Beach Resort

  Revenue of the hotel was lower as it only included just over four
  months of operations until it was sold on 10 May 2011, as compared to
  a full year of operations for 2010 and 2009.

  Angsana Laguna Phuket

  Revenue was 34% below prior year due to the closure of the property
  during the second half of the year for a major renovation.

  Banyan Tree Phuket

  Revenue was 6% below prior year mainly due to lower occupancy levels
  as a result of reduced demand in the luxury segment.

  Banyan Tree Bangkok

  Revenue was up 17% on prior year due to improved occupancies after the
  recovery of business levels after the political protests in the prior
  year. However, performance was also impacted during the later part of
  the year when major floods engulfed Bangkok and the surrounding areas.

 Property Development Operations

(Unit: Thousand Baht)

  ----------------------- --------- ------- ----------- ------- ----------- -------
                          2011      %       2010        %       2009        %

  Property Sales business 379,734   65.8    815,433     76.7    990,213     75.6

  Holiday Club business   197,016   34.2    247,640     23.3    319,351     24.4

  Total Revenue –         576,750   100.0   1,063,073   100.0   1,309,564   100.0
  Property Development                                                      
  Operations                                                                
  ----------------------- --------- ------- ----------- ------- ----------- -------

  Property Sales business

  The resort investment property market remained soft during 2011 mainly
  due to the continuing global economic uncertainty and volatility, and
  the local political uncertainty in the lead up to the national
  elections. Buyers, many of whom are foreign, have seen their personal
  wealth decline due to a decrease in asset and equity prices, and
  discretionary spend on vacation homes has been curtailed.

  Holiday Club business

  The holiday club business has also been affected by the continuing
  global economic and local political uncertainty. In addition, hotels
  and resorts have seen significant room rate pressures, which has
  temporarily impaired the financial logic of the company’s product
  offering. This has resulted in lower levels of consumer confidence and
  translated to lower discretionary spend on products such as holiday
  club memberships. In this operating environment, business has been
  scaled back through the closure of some branches and reduced headcount
  until the situation improves.

Other Income

(Unit: Thousand Baht)

  ----------------------------------------- --------- ----------- ---------
                                            2011      2010        2009

  Interest Income                           42,889    54,779      62,083

  Foreign Exchange Gain                     6,844     -           5,063

  Insurance Claim                           -         56,335      23,360

  Gain on Sale of Investment                45,207    -           -

  Gain on the Sale of Dusit Thani Laguna    -         1,601,371   -
  Phuket                                                          

  Others                                    42,509    33,831      17,554

  Total Other Income                        137,449   1,746,316   108,060
  ----------------------------------------- --------- ----------- ---------

  Other income in 2011 mainly comprised the gain on sale of investment
  in Laguna Beach Club Limited and interest income.

  Other income in 2010 mainly comprised the gain on sale of Dusit Thani
  Laguna Phuket and the final settlement of the tsunami insurance claim
  for business interruption of Laguna Phuket hotels.

  Other income in 2009 mainly comprised an insurance settlement relating
  to business interruption arising from an illegal blockade of Laguna
  Phuket in February 2009 and interest income on installment plans of
  property buyers and holiday club memberships.

Corporate Structure as at 31 December 2011

[]

  --------------------- -------------------------------------------------
  Abbreviations         Company Name in Full

  AVCI                  PT. AVC Indonesia

  BGL                   Bangtao Grande Limited

  BI                    Bibace Investments Ltd

  BT1                   Bangtao (1) Limited

  BT2                   Bangtao (2) Limited

  BT3                   Bangtao (3) Limited

  BT4                   Bangtao (4) Limited

  BTD                   Bangtao Development Limited

  BTG(S)                Banyan Tree Gallery (Singapore) Pte Ltd

  BTG(T)                Banyan Tree Gallery (Thailand) Limited

  CGL                   Cheer Golden Limited

  HHBR                  Hua Hin Beach Resorts Company Limited

  L3                    Laguna (3) Limited

  LBTG                  Lijiang Banyan Tree Gallery Trading Company
                        Limited

  LBTH                  Lijiang Banyan Tree Hotel Co., Ltd.

  LBTL                  Laguna Banyan Tree Limited

  LCL                   Laguna Central Limited

  LEL                   Laguna Excursions Limited

  LGL                   Laguna Grande Limited

  LHC                   Laguna Holiday Club Limited

  LLL                   Laguna Lakes Limited

  LRH                   Laguna Resorts & Hotels Public Company Limited

  LSC                   Laguna Service Company Limited

  LVL                   Laguna Village Limited

  MCP                   Mae Chan Property Company Limited

  PKRD                  Phuket Resort Development Limited

  PSD                   Pai Samart Development Company Limited

  TLDC                  Talang Development Company Limited

  TRL                   Tropical Resorts Limited

  TWDC                  Twin Waters Development Company Limited

  TWPL                  Thai Wah Plaza Limited

  TWRH                  TWR-Holdings Limited

  TWT                   Thai Wah Tower Company Limited

  TWT2                  Thai Wah Tower (2) Company Limited

  USC                   Universal Starch Public Company Limited
  --------------------- -------------------------------------------------