PART I EXECUTIVE SUMMARY

1. Core business

  The business of Laguna Resorts & Hotels Public Company Limited (“LRH”)
  largely revolves around the integrated resort of Laguna Phuket,
  located on the island of Phuket in Thailand. The operations of the
  group are summarised as follows:

Hotels

Within Laguna Phuket, there are 4 hotels which LRH either owns or has an
ownership stake:

-   Banyan Tree Phuket – 148 exclusive villas, 32 with Jacuzzis and 116
    of which have their own swimming pools. The resort is managed by
    Banyan Tree Hotels & Resorts Pte. Ltd.

-   Dusit Laguna Resort – 226 rooms and suites, managed by Dusit Hotels
    and Resorts Company Limited

-   Sheraton Grande Laguna Phuket – 415 rooms, suites and villa’s
    managed by Sheraton Overseas Management Corporation.

-   Laguna Beach Resort – 254 rooms and suites and is owner operated.

These hotels are five star properties and compete with the other upper
end hotels in Phuket (of which there is still a limited number of
competitors). Phuket as a holiday destination competes with other beach
holiday destinations, in particular Bali in South-East Asia. Despite the
disasters that have hit Phuket and its tourism industry in recent years,
the popularity of Phuket as a tourist destination remains strong and is
expected to continue to remain popular into the future.

LRH also owns the Banyan Tree Bangkok which has 216 suites and is
managed by Banyan Tree Hotels & Resorts Pte. Ltd. which was purchased in
March 2005. The Banyan Tree Bangkok is also a five star property and
competes with a large number of upper tier properties in the Bangkok
market which results in significant price competition.

LRH also invests in selected overseas properties. Banyan Tree Lijiang,
opened in 2006, a joint venture company incorporated in the People's
Republic of China between Laguna Banyan Tree Limited ("LBTL"), a wholly
owned subsidiary of the Company, and Banyan Tree Holdings Limited
("BTH"). The property features 55 luxurious villas, restaurants, bar,
spa complex, gallery shop, gym, treks and tours

Property

  Property development in and around Laguna Phuket has also turned into
  a core business in recent years with the property developments
  completed to date and planned in the near future listed as follows:

-   The Island Villas are a small condominium project attached to the
    Sheraton Grande Laguna Phuket. The units have been sold to the
    public. The individual owners may rent their units to the Group
    which in turn contracts Sheraton Overseas Management Corporation to
    manage the units, and in doing so earn a return on their investment.

-   The Allamanda Laguna Phuket is a large condominium project. It is
    not attached to any other hotel. The units have been sold to the
    public and the individual owners may earn a return on their
    investment by contracting Banyan Tree Hotels & Resorts Pte. Ltd. to
    manage their unit for them. As the condominiums have been sold, the
    Allamanda Laguna Phuket is neither owned nor managed by LRH.

-   Laguna Homes is a housing plot development. There are 54 land plots
    located around the golf course. The land plots have been fully sold
    to the public. Twenty additional land plots were reserved for the
    sale of Laguna Residences, a “house and land” package, that was
    introduced in 2001 and was sold out in 2003. A new development,
    Laguna Townhomes, was introduced in the last quarter of 2002 and was
    sold out in 2004. Further developments of Laguna Residences and
    Laguna Townhomes continue to be constructed and sold on land both
    within Laguna Phuket and land contiguous to Laguna Phuket. The
    latest development released for sale is phase I of Laguna Village
    which will comprise of 36 Laguna Village Villas, 56 Laguna Townhomes
    and 49 Laguna Residences.

-   Banyan Tree Two Bedroom Pool Villas are a luxury development project
    attached to the Banyan Tree Phuket. All of the 12 villas in Phase I
    have been sold to the public. Phase 2 comprising a further 14 villas
    were completed in 2005 and have also been sold to the public. The
    individual owners may earn a return on their investment by
    contracting Banyan Tree Hotels & Resorts Pte. Ltd. to manage their
    villa for them.

-   Banyan Tree Double Pool Villas are a luxury development of 22 villas
    attached to the Banyan Tree Phuket. Eight of these villas were sold
    to the public during 2006. Construction commenced on 28 Dusit Laguna
    Villas which are available for sale to the public at the Dusit
    Laguna Resort. In both of these projects the individual owners may
    earn a return on their investment by contracting Banyan Tree Hotels
    & Resorts Pte. Ltd. and Dusit Hotels and Resorts Company Limited
    respectively to manage their villas for them.

-   The Laguna Holiday Club sells memberships that entitle participants
    to annual vacations at the participating member resorts of Laguna
    Holiday Club Phuket resort (a member-dedicated 79 suite resort which
    was completed in October 2006), Allamanda Laguna Phuket, Sheraton
    Grande Laguna Phuket, Sheraton Private Pool Residences, Angsana
    Resort & Spa Bintan, Springfield Cha-am and Chiang Mai Twin Peaks.

-   Located in Chiangrai is another housing plot development called
    Laguna Homes Chiangrai. This project has been suspended.

  The property market in Phuket continues to prosper, and this growth is
  expected to continue as more and more developers enter the market.

Others

  In addition to the above there are the following facilities in Laguna
  Phuket:

-   18-hole golf course

-   An outdoor management training program

-   Canal Village shopping complex

-   Banyan Tree Gallery retail outlets

-   The Wedding Chapel

  LRH also generates income from office rental in Bangkok (purchased as
  part of the acquisition of Thai Wah Plaza Limited in March 2005).

2.  Major Risk Factors

  The risk factors impacting the business and financial performance of
  LRH are set out in Part II, section 1. These are summarised as being
  as follows:

-   currency fluctuation

-   economy and tourism in Thailand

-   competition

    -   destination

    -   hotels

    -   low season

-   operating risks inherent in the hospitality industry

-   management risk

-   land title risk

-   Thai labour laws

3.  Group Structure

  The LRH group is predominately owned by two shareholders:

-   Banyan Tree Holdings Limited and its subsidiaries which owns 48.39
    percent; and

-   Thai Wah Public Company Limited which owns 34.78 percent.

  The Company has a number of subsidiary companies and the group
  structure is set out on page 16. Most of the subsidiary companies are
  100 percent owned with the main operating subsidiaries that are not
  fully owned being:

-   Laguna Beach Club Limited and its subsidiaries (50 percent effective
    ownership interest)

-   Banyan Tree Gallery (Thailand) Limited (51 percent effective
    ownership interest)

-   Banyan Tree Gallery (Singapore) Pte Limited (51 percent effective
    ownership interest)

-   Lijiang Banyan Tree Hotel Co., Ltd. (70 percent effective ownership
    interest) – Note: effective 1^(st) January 2007, the equity interest
    ratio of Laguna Banyan Tree Limited in Lijiang Banyan Tree Hotel
    Co., Ltd. in which the Company indirectly held decreased from 70.00
    percent to 49.04 percent.

-   Laguna Service Company Limited (89.2 percent effective ownership
    interest)

  During the year, the Company had significant business transactions
  with its subsidiaries, associated and related companies (related by
  way of shareholding, common shareholders, directors and/or
  management). LRH by the nature of its product and its complex group
  structure has a large number of related party transactions. Laguna
  Phuket is an integrated resort with a number of hotels and associated
  resort services being incorporated in different companies within the
  group. This in itself results in a significant number of related party
  transactions which are considered to be necessary and reasonable for
  the operation of Laguna Phuket. The nature, pricing and agreements of
  these transactions are summarised in section 11, as well as a detailed
  description of the main related party transactions.

4.  Financial Performance

  A summary of the performance of the year ended 31^(st) December 2006
  is included as follows:

  --------------------------- -------------- -------------- --------------
                              2006           2005           2004

  Revenues                                                  

  Hotel Operations            3,590          2,306          2,804

  Property development        2,328          750            1,052
  operations                                                

  Office rental               81             101            -

  Interest income             27             9              12

  Other income                130            40             91

                              6,156          3,206          3,959

  Earnings before interest    1,565          162            1,202
  expenses and income tax                                   

                                                            

  Interest expense            (202)          (138)          (40)

  Corporate income tax        (228)          (46)           (157)

  Minority shareholders       (22)           (12)           (79)
  interest                                                  

  Extraordinary item          -              14             (41)

                                                            

  Net earnings                1,113          (20)           885

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

  The net profit attributable to the shareholders of Baht 1,113 million
  for the year ended 31^(st) December 2006 was Baht 1,133 million higher
  than the prior year. The reason for the increase in profit was due to
  the business recovery from the Tsunami which severely affected tourism
  to Phuket in 2005 coupled with a record performance from the property
  sales and holiday club divisions.

  This was partially offset by the start-up losses incurred by Banyan
  Tree Lijiang hotel which commenced operations in April 2006 and losses
  from the office rental operations in Thai Wah Tower II in Bangkok due
  to a number of leases being terminated for planned conversion to hotel
  suites.

  Other points of note are:

-   interest income increased by Baht 18 million due to the higher
    number of holiday club memberships sold with deferred payment plans.

-   selling and administrative expenses increased by Baht 13 million
    primarily due to an increase in salary and wages and legal costs.
    The increase in legal costs primarily related to the insurance claim
    for property damage and business interruption from the Tsunami and
    land related cases.

-   a foreign exchange gain of Baht 88 million which was due to the
    appreciation of the Baht vs the US dollar during 2006.

-   an increase of depreciation of Baht 56 million which was due to the
    new Banyan Tree Lijiang hotel, a 45 room extension to the Sheraton
    Laguna Grande Hotel Phuket and a full year of depreciation of Banyan
    Tree Bangkok and Thai Wah Tower I and Thai Wah Tower II (acquired in
    March 2005).

-   an increase in interest costs of Baht 64 million which was due to
    the loans taken out resulting from the acquisition of Thai Wah Plaza
    Limited, loans taken out to fund the construction of additional room
    inventory in Laguna Phuket and the construction of Banyan Tree
    Lijiang, and an increase in interest rates during the year.

-   taxation was Baht 182 million higher than prior year due to the
    significant increase in operating profit in 2006.

-   net earnings of minority interest in subsidiaries was higher than
    the prior year due to the increase in net income during the year for
    the respective hotel and gallery operations.

  For the reasons stated above, the Company has shown an increase in net
  earnings as compared to the same period last year.