2 Nature of the business

2.1 Company History

  Laguna Resorts & Hotels Public Company Limited (“LRH”) was formerly
  named Thai Wah Resorts Development Public Company Limited (“TWRD”)
  which was a subsidiary of Thai Wah Public Company Limited (“TWC”). The
  operations of the TWC Group of Companies involved the manufacturing
  and exporting of commodities as well as investing in hotels, resorts &
  property through TWRD plus other affiliated companies in the group.

  On 5^(th) March, 1993 TWRD ameliorated its structure and increased its
  share capital to expand the hotel business, as well as property
  development, by investing in TWC’s subsidiaries where the hotel
  businesses were involved. TWRD’s operational policy was revealed
  whereby the operations of TWRD were separated from TWC and it was
  agreed that hotel resort businesses in Thailand would be handled by
  TWRD and located at Bangtao Bay, Phuket. TWC on the other hand, would
  only run hotel businesses within city areas.

  In November 1993 TWRD was listed on the Stock Exchange of Thailand.
  The significant events between 1992-2003 are listed as follows:

-   In late 1992 Sheraton Grande Laguna Phuket opened with 327 rooms
    including 59 villas.

-   The Allamanda Phase I opened in September 1993 with 94 apartments. *

-   Banyan Tree Phuket opened in May 1995 with 86 villas. An additional
    12 villas were added in 1997.

-   The Canal Village shopping complex opened in 1994 on 10 Rai of land
    with 52 shops.

-   Development of Laguna Homes Chiangrai commenced in 1994 - the real
    estate development at Ban Ging Praow, Tambol Janwa, Chiangrai
    occupies a 901 Rai site. This project was suspended in 1997 due to
    the Asian economic crisis.

-   Opening of Quest Laguna Phuket Adventure in 1994 as a corporate
    outdoor management training program. In 1996, it was expanded to
    include Camp Laguna for children aged 8 – 15.

-   In late 1996, Allamanda Phase II and III opened with a further 141
    apartments. *

-   In 1996 the Laguna Royale project was started with 184 apartments
    but was subsequently suspended due to the regional economic crisis
    in 1997.

-   In late 1997, 12 two-bedroom pool villas at Banyan Tree were opened.

-   On May 15, 1998, TWRD changed its name to Laguna Resorts & Hotels
    Public Company Limited.

-   In December 1999 the agency of Laguna Tours and Travel commenced
    which provides guests of Laguna Phuket access to high quality tours.

-   From 1999 to 2001 the refurbishment program of the rooms and
    facilities of the hotels in Laguna Phuket was performed.

-   There was a significant change in the Company’s shareholding
    structure in the second half of 2000 following Banyan Tree Holdings
    Pte., Ltd.’s (BTHL) 30% acquisition of the Company’s total issued
    and paid up ordinary shares from certain shareholders. This
    acquisition caused BTHL to undertake a mandatory tender offer for
    all remaining shares in the Company from which BTHL purchased an
    additional 1.2%.

-   At the end of September 2001, LRH purchased the 15.5% minority
    shareholding in Laguna Grande Limited through its 100% owned
    subsidiaries.

-   During 2001 the Banyan Tree Phuket constructed 14 new Spa Pool
    villas which were completed and available for use in January 2002.

-   On 8 January 2002 LRH purchased the remaining 49% in Laguna Banyan
    Tree Limited, which resulted in the group now having a 100%
    ownership interest in the operations of the Banyan Tree Phuket.

-   On 8 August 2002, the group purchased 27 units in Angsana Spa and
    Resort Bintan with a view to commencing a timeshare operation in
    this resort.

-   On 22 November 2002 LRH purchased 763 Rai of land directly and a
    controlling interest in a company owning 379 Rai of land, both of
    which are adjacent to Laguna Phuket. The purchase of this land
    provides significant future development opportunities.

-   During 2003 the Company purchased a further 10% of the minority
    shareholding in Laguna Beach Club Limited.

  * The Allamanda Laguna Phuket is not owned or managed by LRH as these
  condominiums have been sold through the groups property sales
  division.

2.2 Type of businesses and income structure

Hotels

  Within Laguna Phuket, there are 4 hotels which Laguna Resorts and
  Hotels Plc either owns or has an ownership stake:

-   Banyan Tree Phuket – 121 exclusive villas, 50 with Jacuzzis and 71
    of which their own swimming pools. The resort is managed by Banyan
    Tree Hotels and Resorts Pte. Ltd.

-   Dusit Laguna Resort – 226 rooms and suites, managed by Dusit Hotels
    and Resorts Co., Ltd.

-   Sheraton Grande Laguna Phuket – 343 rooms and suites, managed by
    Sheraton Overseas Management Corporation.

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

Property

  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 are for sale to the public. The
  individual owners may earn a return on their investment by contracting
  Banyan Tree Hotels and Resorts Pte. Ltd. to manage their unit for
  them. As most of the condominiums have been sold, the Allamanda Laguna
  Phuket is neither owned or managed by Laguna Resorts and Hotels Plc.

  Laguna Homes is a housing plot development. There are 54 land plots
  located around the golf course. The land plots have been sold to the
  public. Twenty 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.

  Banyan Tree Two Bedroom Pool Villas are a luxury development project
  attached to the Banyan Tree Phuket. All of the twelve villa’s in Phase
  I have been sold to the public. A further 14 villas are currently
  being constructed and are available for sale. The individual owners
  may earn a return on their investment by contracting Banyan Tree
  Hotels and Resorts Pte. Ltd. to manage their unit for them.

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

  The Allamanda Vacation Club sells memberships that entitle
  participants to annual vacations, for at least one week, at the
  participating member resorts of Allamanda Laguna Phuket, Sheraton
  Grande Laguna Phuket, Laguna Townhomes and Angsana Resort and Spa
  Bintan.

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

  Income Structure

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

+--------------------+---------+-----+---------+----+---------+-----+
|                    | 2003    | %   | 2002    | %  | 2001    | %   |
|                    |         |     |         |    |         |     |
|                    | Baht    |     | Baht    |    | Baht    |     |
|                    | 000’s   |     | 000’s   |    | 000’s   |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Hotel operations   | 2,      | 8   | 2,      | 89 | 2,      | 8   |
|                    | 443,246 | 0.6 | 557,132 | .1 | 629,787 | 7.6 |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Property sales     | 541,407 | 1   | 278,008 | 9  | 312,057 | 1   |
|                    |         | 7.8 |         | .7 |         | 0.4 |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Interest and other | 47,888  | 1.6 | 33,749  | 1  | 59,221  | 2.0 |
| income             |         |     |         | .2 |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Total revenue      | 3,      | 10  | 2,      | 1  | 3,      | 10  |
|                    | 032,541 | 0.0 | 868,889 | 00 | 001,065 | 0.0 |
|                    |         |     |         | .0 |         |     |
+--------------------+---------+-----+---------+----+---------+-----+

  The most significant line of business of the group is the hotel
  operations for which further details are provided below on an
  operation by operation basis. Note 25 to the financial statements of
  the company for the year ended 31^(st) December 2003 (note 24 for the
  year ended 31^(st) December 2002) discloses the operating results of
  the hotel operations and property sales in accordance with accounting
  standards and principles.

Banyan Tree Phuket

  --------------------- ---------------- ---------------- ---------------
                        2003             2002             2001

  Available Rooms –     121              120              109
  average                                                 

  Occupancy %           67%              68%              73%

  Average Rate (Baht)   17,639           17,585           16,279
  --------------------- ---------------- ---------------- ---------------

+--------------------+---------+-----+---------+-----+---------+----+
|                    | 2003    |     | 2002    |     | 2001    |    |
+--------------------+---------+-----+---------+-----+---------+----+
|                    | Baht    | %   | Baht    | %   | Baht    | %  |
|                    | 000’s   |     | 000’s   |     | 000’s   |    |
+--------------------+---------+-----+---------+-----+---------+----+
| Room Revenue       | 519,693 | 7   | 521,527 | 7   | 473,633 | 71 |
|                    |         | 4.1 |         | 2.6 |         | .8 |
+--------------------+---------+-----+---------+-----+---------+----+
| F&B Revenue        | 160,883 | 2   | 174,194 | 2   | 163,514 | 24 |
|                    |         | 2.9 |         | 4.2 |         | .8 |
+--------------------+---------+-----+---------+-----+---------+----+
| Other Revenue      | 21,012  | 3.0 | 22,684  | 3.2 | 22,065  | 3  |
|                    |         |     |         |     |         | .4 |
+--------------------+---------+-----+---------+-----+---------+----+
| Total              | 701,588 | 10  | 718,405 | 10  | 659,212 | 1  |
|                    |         | 0.0 |         | 0.0 |         | 00 |
|                    |         |     |         |     |         | .0 |
+--------------------+---------+-----+---------+-----+---------+----+

The Banyan Tree Phuket hotel is owned by Laguna Banyan Tree Limited in
which Laguna Resorts & Hotels Public Company Limited has a 100%
ownership interest. The slight reduction in revenues as compared to 2002
was all related to the first half of the year when the Iraq War and SARS
had a significant impact on occupancies. A sharp bounce back in the
second half enabled a similar result to 2002 to be achieved. The hotel
is located at 33 Moo 4 Cherngtalay District, Amphur Talang, Phuket
Province. The management of the Banyan Tree Phuket hotel is contracted
out to Banyan Tree Hotels and Resorts Pte. Ltd.

 

Dusit Laguna Resort

  --------------------- ----------------- ---------------- ----------------
                        2003              2002             2001

  Available Rooms –     224               224              224
  average                                                  

  Occupancy %           68%               63%              65%

  Average Rate (Baht)   3,755             4,912            5,251
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2003     |    | 2002    |    | 2001    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 209,394  | 58 | 252,227 | 64 | 277,093 | 63 |
|                    |          | .6 |         | .0 |         | .9 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 127,123  | 35 | 122,364 | 31 | 133,560 | 30 |
|                    |          | .6 |         | .0 |         | .8 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 20,955   | 5  | 19,520  | 5  | 23,000  | 5  |
|                    |          | .8 |         | .0 |         | .3 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 357,472  | 1  | 394,111 | 1  | 433,653 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Dusit Laguna Resort is directly owned by Laguna Resorts & Hotels
Public Company Limited. The improvement in occupancy was more than
offset by a significant reduction in average room rate. The reduction in
average room rate is a result of lower rated markets being obtained in
order to stimulate a quick and sustained rebound of business volumes in
the second half of the year subsequent to SARS. The hotel is located at
390 Srisoonthorn Road, Cherngtalay District, Amphur Talang, Phuket
Province. The management of the Dusit Laguna Resort is contracted out to
Dusit Hotels and Resorts Co., Ltd.

Laguna Beach Resort

  --------------------- ----------------- ---------------- ----------------
                        2003              2002             2001

  Available Rooms –     254               252              252
  average                                                  

  Occupancy %           69%               64%              69%

  Average Rate          3,653             4,507            4,779
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2003     |    | 2002    |    | 2001    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 234,939  | 61 | 266,217 | 64 | 303,436 | 64 |
|                    |          | .5 |         | .0 |         | .5 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 124,231  | 32 | 125,884 | 30 | 139,630 | 29 |
|                    |          | .5 |         | .3 |         | .7 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 22,590   | 6  | 23,932  | 5  | 27,710  | 5  |
|                    |          | .0 |         | .7 |         | .8 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 381,760  | 1  | 416,033 | 1  | 470,776 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Laguna Beach Resort is owned by Laguna Beach Club Limited in which
Laguna Resorts & Hotels Public Company Limited has a 50% effective
ownership interest. The improvement in occupancy was more than offset by
a significant reduction in average room rate. The reduction in average
room rate is a result of lower rated markets being obtained in order to
stimulate a quick recovery subsequent to SARS. As a result high
occupancies at low rates were achieved in the second half of the year.
The hotel is located at 323 Moo 2 Srisoonthorn Road, Cherngtalay
District, Amphur Talang, Phuket Province. The management of the Laguna
Beach Resort is jointly performed by the management of Laguna Resorts &
Hotels Public Company Limited and its joint venture partner, Pacific
Resort (Thailand) Co. Ltd.

 

Sheraton Grande Laguna Phuket 

  --------------------- ----------------- ---------------- ----------------
                        2003              2002             2001

  Available Rooms –     289               289              289
  average                                                  

  Occupancy %           73%               64%              68%

  Average Rate          4,393             5,600            6,422
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2003     |    | 2002    |    | 2001    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 338,977  | 55 | 377,620 | 57 | 460,775 | 56 |
|                    |          | .0 |         | .4 |         | .7 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 233,911  | 37 | 233,362 | 35 | 292,338 | 36 |
|                    |          | .9 |         | .5 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 44,010   | 7  | 46,733  | 7  | 59,021  | 7  |
|                    |          | .1 |         | .1 |         | .3 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 616,898  | 1  | 657,715 | 1  | 812,134 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Sheraton Grande Laguna Phuket is owned by Bangtao Grande Limited in
which Laguna Resorts & Hotels Public Company Limited has a 100%
ownership interest. The reduction in the revenue as compared to the
previous year was due to significantly lower average room rates which
was very much consequence of the low rates put into the market
subsequent to the out break of SARS. The low rates stimulated good
volumes in the second half of the year resulting in significantly higher
occupancies than in the previous year. The hotel is located at 10 Moo 4
Cherngtalay District, Amphur Talang, Phuket Province. The management of
the Sheraton Grande Laguna Phuket is contracted out to Sheraton Overseas
Management Corporation.

Laguna Phuket Golf Club

+--------------------+----------+----+---------+----+---------+----+
|                    | 2003     |    | 2002    |    | 2001    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Green Fees         | 33,224   | 62 | 30,652  | 51 | 33,504  | 52 |
|                    |          | .9 |         | .2 |         | .3 |
+--------------------+----------+----+---------+----+---------+----+
| Retail Revenue     | 7,954    | 15 | 10,713  | 17 | 12,212  | 19 |
|                    |          | .1 |         | .9 |         | .1 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 11,613   | 22 | 18,520  | 30 | 18,313  | 28 |
|                    |          | .0 |         | .9 |         | .6 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 52,791   | 1  | 59,885  | 1  | 64,029  | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Laguna Phuket Golf Club is owned by Laguna Grande Limited in which
Laguna Resorts & Hotels Public Company Limited has a 100% ownership
interest. The reduction in revenue in 2003 was primarily due to a
reduction in retail sales and the cessation of the subsidy by the hotels
which resulted in a sharp reduction in other revenue as compared to
2002. The Laguna Phuket Golf Club is located at 34 Moo 4 Cherngtalay
District, Amphur Talang, Phuket Province. The management of the Laguna
Phuket Golf Club is contracted out to Banyan Tree Golf Club Limited.

[]

  --------------- ---------------------------------------------------------
  ABBREVIATIONS   

  AVC             = Allamanda Vacation Club Limited

  AVCI            = PT AVC Indonesia

  BGL             = Bangtao Grande Limited

  BTD             = Bangtao Development Company Limited

  BTGS            = Banyan Tree Gallery (Singapore) Limited

  BTGT            = Banyan Tree Gallery (Thailand) Limited

  BT1             = Bantao (1) Limited

  BT2             = Bantao (2) Limited

  BT3             = Bangtao (3) Limited

  BT4             = Bantao (4) Limited

  CGL             = Cheer Golden Limited

  HHBR            = Hua Hin Beach Resort Company Limited

  LBC             = Laguna Beach Club Limited

  LBTL            = Laguna Banyan Tree Limited

  LBTH            = Lijiang Banyan Tree Hotel Company Limited

  LCL             = Laguna Central Limited

  LGL             = Laguna Grande Limited

  LRH             = Laguna Resorts & Hotels Public Company Limited

  LSC             = Laguna Service Company Limited

  LSL             = Laguna Sports Limited

  L1              = Laguna (1) Company Limited

  L3              = Laguna (3) Limited

  MCP             = Mae Chan Property Company Limited

  OPS             = Ownrep Project Services Limited

  PCD             = PCD Limited

  PKRD            = Phuket Resort Development Company Limited

  PSD             = Pai Samart Development Company Limited

  TLDC            = Talang Deveopment Company Limited

  TRL             = Tropical Resort Limited

  TRLI            = TRL Investments Limited

  TWC             = Thai Wah Public Company Limited

  TWDC            = Twin Waters Development Company Limited

  TWR-H           = TWR-Holdings Limited

  WEN             = Wenco-Thai Limited
  --------------- ---------------------------------------------------------