2. Nature of the Business

  2.1 Company History

  Laguna Resorts & Hotels Public Company Limited was formerly named Thai
  Wah Resorts Development 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 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. The Allamanda
  Laguna Phuket opened and property sales operations commenced with the
  Allamanda condominium units.

  1995 The resort’s flagship hotel, Banyan Tree Phuket opened.

  1998 Laguna Holiday Club (formerly known as Allamanda Vacation 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.

  2.2 Type of Businesses and Income Structure

  2.2.1 Type of Businesses

Hotel Operations

  Within Laguna Phuket, there are 5 hotels which the Company either owns
  or has an ownership stake:

  Banyan Tree Phuket, opened in 1995 features 148 exclusive villas. The
  resort is managed by Banyan Tree Hotels & Resorts Pte. Ltd.

  Dusit Laguna Resort, opened in 1987, offers beachfront accommodation
  in 226 rooms and suites, managed by Dusit Hotels and Resorts Company
  Limited.

  Sheraton Grande Laguna Phuket, opened in 1992, features 419 rooms,
  suites and villas and is a member of the Starwood Luxury Collection.
  It is managed by Sheraton Overseas Management Corporation.

  Laguna Beach Resort, opened in 1991 features 254 rooms and suites and
  is owner operated.

  Laguna Holiday Club Phuket Resort, opened in 2006 as a dedicated
  resort for members of the Laguna Holiday Club. It comprises 79 suites
  in three room types and is owner-operated,

  In addition to these core properties, Laguna Phuket also provides the
  following facilities:

  Allamanda Laguna Phuket, opened in 1993, is a condominium-style resort
  and features 205 one and two bedroom suites and duplexes. It is
  managed by Banyan Tree Hotels & Resorts Pte. Ltd.

  Laguna Phuket Golf Club, opened in 1992, is a resort style 18-hole,
  par-71 golf course managed by Banyan Tree Hotels & Resorts Pte. Ltd.

  Quest Laguna Phuket Adventure, opened in 1994, offering dynamic
  programs for corporate training. The facility is managed by Sheraton
  Overseas Management Corporation.

  Canal Village Laguna Shopping, opened in 1994, as an owner-managed
  boutique shopping centre with more than 50 leased outlets.

  Banyan Tree and Angsana Gallery, a chain of retail outlets
  specialising in indigenous handicrafts and spa products, operates 14
  outlets located within Laguna Phuket at the hotels, spas, and Canal
  Village shopping centre.

  Laguna Wedding Chapel is Thailand's first resort wedding chapel
  offering comprehensive wedding packages. Opened in early 2005, the
  facility is owner-managed.

  Laguna Service Company Limited, established in 1991, provides laundry,
  water supply, inter-resort transport and other centralised services
  for the Laguna Phuket hotels and ancillary operations.

The Company also owns hotels and resorts outside of Phuket, Thailand as follows:

  Banyan Tree Bangkok, purchased in 2005, features 216 suites and is
  managed by Banyan Tree Hotels & Resorts Pte. Ltd. The hotel is located
  in the central business district of Bangkok.

  Banyan Tree Lijiang, opened in 2006, features 55 exclusive villas and
  is managed by Banyan Tree Hotels & Resorts Pte. Ltd. The resort is
  located in Yunnan Province, People’s Republic of China. The Group has
  a 49.04 percent ownership interest in this project.

 

Property Development Operations

  Property Sales offers a range of residential and vacation properties
  such as condominium, semi-detached and detached villas including hotel
  residences such as the high-end Dusit Pool Villas and Banyan Tree
  Residences that are situated within a resort or hotel property.

  Laguna Holiday Club, previously known as Allamanda Vacation Club,
  commenced operations in 1998, selling holiday club memberships that
  entitle participants to annual vacations at the various club
  properties as well as at over 4,000 resorts in more than 100 countries
  through reciprocal arrangements with RCI and Interval International.

  The Company also owns land in Chiang Mai and Chiang Rai which has
  future development potential.

Office Rental

  The Company owns a number of units in Thai Wah Tower I, a 24-storey
  building located on Sathorn Road in Bangkok which is rented as
  commercial offices.

  2.2.2 Income Structure

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

  (unit: Thousand Baht)

  -------------------- ----------- ------- ----------- ------- ----------- -------
                       2007        %       2006        %       2005        %

                                                                           

  Revenue from Hotel   4,122,245   57.7    3,589,807   58.3    2,305,533   71.9
  operations                                                               

  Revenue from         2,819,733   39.5    2,327,818   37.8    750,134     23.4
  Property operations                                                      

  Revenue from Office  67,558      0.9     80,764      1.3     100,867     3.2
  Rental operations                                                        

  Interest and other   136,845     1.9     157,263     2.6     49,345      1.5
  income                                                                   

  Total revenue        7,146,381   100.0   6,155,652   100.0   3,205,879   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 31 to the financial statements of the Company for the year
  ended 31 December 2007 (note 29 and 26 for the year ended 31 December
  2006 and 2005 respectively) discloses the operating results by
  business segment in accordance with accounting standards and
  principles.

  Hotel Operations - Overall

  --------------------------- ------------- -------------- ---------------
                              2007          2006           2005

  Occupancy (%)                                            

  Banyan Tree Phuket          66            61             53

  Dusit Laguna Resort         76            72             55

  Laguna Beach Resort         69            60             50

  Sheraton Grande Laguna      71            59             46
  Phuket                                                   

  Banyan Tree Bangkok         67            77             73

  Banyan Tree Lijiang         -             50             -

  Occupancy - Average         70            65             54
  --------------------------- ------------- -------------- ---------------

  -------------------------- -------------- -------------- ---------------
                             2007           2006           2005

  Average Rate (Baht)                                      

  Banyan Tree Phuket         18,450         18,587         14,121

  Dusit Laguna Resort        5,012          4,458          3,303

  Laguna Beach Resort        4,227          3,972          3,330

  Sheraton Grande Laguna     5,614          5,113          4,278
  Phuket                                                   

  Banyan Tree Bangkok        5,177          5,023          4,811

  Banyan Tree Lijiang        -              10,636         -

  Average Rate - Average     6,649          6,254          5,054

                                                           

  Room Revenue per Available                               
  Room (Baht)                                              

  Banyan Tree Phuket         12,168         11,316         7,537

  Dusit Laguna Resort        3,801          3,216          1,801

  Laguna Beach Resort        2,929          2,370          1,673

  Sheraton Grande Laguna     3,983          3,016          1,988
  Phuket                                                   

  Banyan Tree Bangkok        3,461          3,853          3,502

  Banyan Tree Lijiang        -              5,270          -

  Room Revenue per Available 4,665          4,050          2,744
  Room - Average                                           

                                                           

  Total Revenue (Baht 000's)                               

  Banyan Tree Phuket         970,850        787,469        478,689

  Dusit Laguna Resort        513,726        434,919        252,434

  Laguna Beach Resort        422,217        356,908        267,801

  Sheraton Grande Laguna     887,633        687,274        430,178
  Phuket                                                   

  Banyan Tree Bangkok        705,017        707,021        516,513

  Banyan Tree Lijiang        -              85,253         -

  Total                      3,499,443      3,058,844      1,945,615

  Other                      165,372        158,099        112,767

  Total Revenue of Hotel     3,664,815      3,216,943      2,058,382
  Operations                                               
  -------------------------- -------------- -------------- ---------------

Revenues generated from each hotel are detailed as follows.

 Banyan Tree Phuket

  ------------------------ ---------------- -------------- ---------------
                           2007             2006           2005

  Available Rooms –        148              131            118
  average                                                  

  Occupancy %              66               61             53

  Average Rate (Baht)      18,450           18,587         14,121

  Room Revenue Per         12,168           11,316         7,537
  Available Room (Baht)                                    
  ------------------------ ---------------- -------------- ---------------

+------------------------+-------+-----+-------+-----+--------+-----+
|                        | 2007  |     | 2006  |     | 2005   |     |
+------------------------+-------+-----+-------+-----+--------+-----+
|                        | Baht  | %   | Baht  | %   | Baht   | %   |
|                        | 000’s |     | 000’s |     | 000’s  |     |
+------------------------+-------+-----+-------+-----+--------+-----+
| Room Revenue           | 65    | 6   | 54    | 6   | 3      | 6   |
|                        | 9,156 | 7.9 | 1,227 | 8.7 | 23,777 | 7.6 |
+------------------------+-------+-----+-------+-----+--------+-----+
| F&B Revenue            | 27    | 2   | 21    | 2   | 1      | 2   |
|                        | 7,147 | 8.5 | 8,519 | 7.8 | 36,640 | 8.5 |
+------------------------+-------+-----+-------+-----+--------+-----+
| Other Revenue          | 3     | 3.6 | 2     | 3.5 | 18,272 | 3.9 |
|                        | 4,547 |     | 7,723 |     |        |     |
+------------------------+-------+-----+-------+-----+--------+-----+
| Total Revenue          | 97    | 10  | 78    | 10  | 4      | 10  |
|                        | 0,850 | 0.0 | 7,469 | 0.0 | 78,689 | 0.0 |
+------------------------+-------+-----+-------+-----+--------+-----+

  The Banyan Tree Phuket hotel is owned by Laguna Banyan Tree Limited in
  which Laguna Resorts & Hotels Public Company Limited has a 100 percent
  ownership interest. Revenue was well up against the prior year,
  reflecting the higher occupancies and a full year of operations for 22
  Double Pool Villas which came on line in the second half of 2006.
  However, occupancies were impacted by construction disruptions
  including 5 Spa Pool Villas which were closed for most of the year due
  to construction of an adjacent property development. In addition,
  several Double Pool Villas and Two-Bedroom Pool Villas were closed in
  the third quarter due to the commencement of construction of new
  phases of Double Pool Villas and Two-Bedroom Pool Villas. Average rate
  growth was impacted by the strong Baht and lower than expected rates
  achieved on the Double Pool Villas during the low season due to
  construction disruption. The hotel is located at 33 Moo 4 Srisoonthorn
  Road, Cherngtalay District, Amphur Talang, Phuket Province.

Dusit Laguna Resort

  -------------------------------- ------------- ------------ ------------
                                   2007          2006         2005

  Available Rooms – average        226           226          224

  Occupancy %                      76            72           55

  Average Rate (Baht)              5,012         4,458        3,303

  Room Revenue Per Available Room  3,801         3,216        1,801
  (Baht)                                                      
  -------------------------------- ------------- ------------ ------------

+--------------+----------+------+----------+------+----------+------+
|              | 2007     |      | 2006     |      | 2005     |      |
+--------------+----------+------+----------+------+----------+------+
|              | Baht     | %    | Baht     | %    | Baht     | %    |
|              |          |      |          |      |          |      |
|              | 000’s    |      | 000’s    |      | 000’s    |      |
+--------------+----------+------+----------+------+----------+------+
| Room Revenue | 313,576  | 61.1 | 265,252  | 61.0 | 147,384  | 58.4 |
+--------------+----------+------+----------+------+----------+------+
| F&B Revenue  | 166,182  | 32.3 | 150,825  | 34.7 | 91,466   | 36.2 |
+--------------+----------+------+----------+------+----------+------+
| Other        | 33,968   | 6.6  | 18,842   | 4.3  | 13,584   | 5.4  |
| Revenue      |          |      |          |      |          |      |
+--------------+----------+------+----------+------+----------+------+
| T            | 513,726  | 1    | 434,919  | 1    | 252,434  | 1    |
| otal Revenue |          | 00.0 |          | 00.0 |          | 00.0 |
+--------------+----------+------+----------+------+----------+------+

  The Dusit Laguna Resort is directly owned by Laguna Resorts & Hotels
  Public Company Limited. Revenue was well up against the prior year
  reflecting the higher occupancies and average room rates. Occupancy
  improvements were due to a very strong first quarter and good levels
  being maintained throughout the year despite ongoing construction of
  the 28 Dusit Pool Villas and refurbishment of 70 rooms in the north
  wing during the third quarter. The growth in the average rate was
  mainly due to a full year of operations of the higher rated Dusit Club
  rooms coupled with higher rates achieved during the low season. The
  hotel is located at 390 Srisoonthorn Road, Cherngtalay District,
  Amphur Talang, Phuket Province.

 Laguna Beach Resort

  ----------------------------- ------------- ------------- -------------
                                2007          2006          2005

  Available Rooms – average     252           252           253

  Occupancy %                   69            60            50

  Average Rate (Baht)           4,227         3,972         3,330

  Room Revenue Per Available    2,929         2,370         1,673
  Room (Baht)                                               
  ----------------------------- ------------- ------------- -------------

+--------------+----------+------+----------+------+----------+------+
|              | 2007     |      | 2006     |      | 2005     |      |
+--------------+----------+------+----------+------+----------+------+
|              | Baht     | %    | Baht     | %    | Baht     | %    |
|              |          |      |          |      |          |      |
|              | 000’s    |      | 000’s    |      | 000’s    |      |
+--------------+----------+------+----------+------+----------+------+
| Room Revenue | 269,376  | 63.8 | 217,998  | 61.1 | 154,453  | 57.7 |
+--------------+----------+------+----------+------+----------+------+
| F&B Revenue  | 134,617  | 31.9 | 120,252  | 33.7 | 94,697   | 35.4 |
+--------------+----------+------+----------+------+----------+------+
| Other        | 18,224   | 4.3  | 18,658   | 5.2  | 18,651   | 6.9  |
| Revenue      |          |      |          |      |          |      |
+--------------+----------+------+----------+------+----------+------+
| T            | 422,217  | 1    | 356,908  | 1    | 267,801  | 1    |
| otal Revenue |          | 00.0 |          | 00.0 |          | 00.0 |
+--------------+----------+------+----------+------+----------+------+

  The Laguna Beach Resort is owned by Laguna Beach Club Limited in which
  Laguna Resorts & Hotels Public Company Limited has a 50 percent
  effective ownership interest. Revenue was well up against the prior
  year mainly reflecting higher occupancies. Renovations on 80 rooms in
  the south wing were performed during the second and third quarters
  which had an impact on the hotel operations. Despite the strong Baht,
  average rate growth was still achieved. The hotel is located at 323
  Moo 2 Srisoonthorn Road, Cherngtalay District, Amphur Talang, Phuket
  Province.

 Sheraton Grande Laguna Phuket 

  -------------------------------- ------------ ------------ -------------
                                   2007         2006         2005

  Available Rooms – average        334          323          289

  Occupancy %                      71           59           46

  Average Rate (Baht)              5,614        5,113        4,278

  Room Revenue Per Available Room  3,983        3,016        1,988
  (Baht)                                                     
  -------------------------------- ------------ ------------ -------------

+----------------+----------+------+---------+------+---------+------+
|                | 2007     |      | 2006    |      | 2005    |      |
+----------------+----------+------+---------+------+---------+------+
|                | Baht     | %    | Baht    | %    | Baht    | %    |
|                |          |      |         |      |         |      |
|                | 000’s    |      | 000’s   |      | 000’s   |      |
+----------------+----------+------+---------+------+---------+------+
| Room Revenue   | 485,574  | 54.7 | 355,431 | 51.7 | 209,355 | 48.6 |
+----------------+----------+------+---------+------+---------+------+
| F&B Revenue    | 347,088  | 39.1 | 281,662 | 41.0 | 179,206 | 41.7 |
+----------------+----------+------+---------+------+---------+------+
| Other Revenue  | 54,971   | 6.2  | 50,181  | 7.3  | 41,617  | 9.7  |
+----------------+----------+------+---------+------+---------+------+
| Total Revenue  | 887,633  | 1    | 687,274 | 1    | 430,178 | 1    |
|                |          | 00.0 |         | 00.0 |         | 00.0 |
+----------------+----------+------+---------+------+---------+------+

  The Sheraton Grande Laguna Phuket is owned by Bangtao Grande Limited
  in which Laguna Resorts & Hotels Public Company Limited has a 100
  percent ownership interest. Performance was well up against the prior
  year reflecting both the high occupancies and average room rates. All
  of the hotel rooms had been fully renovated by the end of 2006 which
  assisted demand for the resort coupled with increased levels of
  business during the low season, particularly from the Australian
  market. The increase in average rate was achieved due to higher
  contracted wholesale rates, particularly in the Australian market
  segment who are contracted in Baht as compared to US dollars for most
  overseas market segments. The hotel is located at 10 Moo 4
  Srisoonthorn Road, Cherngtalay District, Amphur Talang, Phuket
  Province.

Banyan Tree Bangkok

  ----------------------------- ------------- ------------- -------------
                                2007          2006          2005

  Available Rooms – average     209           202           216

  Occupancy %                   67            77            73

  Average Rate (Baht)           5,177         5,023         4,811

  Room Revenue Per Available    3,461         3,853         3,502
  Room (Baht)                                               
  ----------------------------- ------------- ------------- -------------

+--------------+----------+------+----------+------+----------+------+
|              | 2007     |      | 2006     |      | 2005     |      |
+--------------+----------+------+----------+------+----------+------+
|              | Baht     | %    | Baht     | %    | Baht     | %    |
|              |          |      |          |      |          |      |
|              | 000’s    |      | 000’s    |      | 000’s    |      |
+--------------+----------+------+----------+------+----------+------+
| Room Revenue | 264,953  | 37.6 | 283,567  | 40.1 | 231,454  | 44.8 |
+--------------+----------+------+----------+------+----------+------+
| F&B Revenue  | 409,848  | 58.1 | 392,276  | 55.5 | 260,240  | 50.4 |
+--------------+----------+------+----------+------+----------+------+
| Other        | 30,216   | 4.3  | 31,178   | 4.4  | 24,819   | 4.8  |
| Revenue      |          |      |          |      |          |      |
+--------------+----------+------+----------+------+----------+------+
| T            | 705,017  | 1    | 707,021  | 1    | 516,513  | 1    |
| otal Revenue |          | 00.0 |          | 00.0 |          | 00.0 |
+--------------+----------+------+----------+------+----------+------+

  The Banyan Tree Bangkok is owned by Thai Wah Plaza Limited in which
  Laguna Resorts & Hotels Public Company Limited has had a 100 percent
  ownership interest since March 2005. Performance in 2007 was adversely
  impacted by the New Year’s Eve bombing and the subsequent security
  concerns and the major renovation works taking place at the property
  to convert former offices into additional hotel suites and luxury
  apartments resulting in lower occupancy. However, average rate growth
  was still achieved due to a higher proportion of business which was
  contracted in Baht. The hotel is located at 21/100 South Sathorn Road,
  Tungmahamek, Sathorn, Bangkok.

 Property Operations

+-----------------+--------+-----+---------+------+----------+------+
|                 | 2007   |     | 2006    |      | 2005     |      |
+-----------------+--------+-----+---------+------+----------+------+
|                 | Baht   | %   | Baht    | %    | Baht     | %    |
|                 | 000’s  |     |         |      |          |      |
|                 |        |     | 000’s   |      | 000’s    |      |
+-----------------+--------+-----+---------+------+----------+------+
| Property Sales  | 2,3    | 8   | 1,      | 83.1 | 574,943  | 76.6 |
| business        | 35,305 | 2.8 | 933,971 |      |          |      |
+-----------------+--------+-----+---------+------+----------+------+
| Holiday Club    | 4      | 1   | 393,847 | 16.9 | 175,192  | 23.4 |
| business        | 84,428 | 7.2 |         |      |          |      |
+-----------------+--------+-----+---------+------+----------+------+
| Total Revenue   | 2,8    | 10  | 2,      | 1    | 750,134  | 1    |
|                 | 19,733 | 0.0 | 327,818 | 00.0 |          | 00.0 |
+-----------------+--------+-----+---------+------+----------+------+

  Property sales operations are conducted by Laguna Resorts & Hotels
  Public Company Limited and through certain subsidiary companies. The
  business has grown significantly in recent years. The increase in
  revenue as compared to the prior year is mainly due to sales and
  recognition of new

  projects including Laguna Village Villas, Laguna Residences and Dusit
  Pool Villas partially offset by lower sales of Banyan Tree Double Pool
  Villas.

  Holiday Club operations are conducted through Laguna Holiday Club
  Limited for operations in Thailand and PT AVC Indonesia for operations
  in Indonesia. The increase in revenue as compared to the prior year is
  mainly due to continued growth of Thailand operations including the
  commencement of new branch operations during the year.

[]

ABBREVIATIONS

AVCI = PT. AVC Indonesia

BGL = Bangtao Grande Limited

BI = Bibace Investments Ltd (Formerly known as TRL Investments Ltd)

BTD = Bangtao Development Limited

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

BTG(T) = Banyan Tree Gallery (Thailand) Limited

BT1 = Bangtao (1) Limited

BT2 = Bangtao (2) Limited

BT3 = Bangtao (3) Limited

BT4 = Bangtao (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 Co. Ltd

LCL = Laguna Central Limited

LEL = Laguna Excursions Limited

LGL = Laguna Grande Limited

LHC = Laguna Holiday Club Limited

LRH = Laguna Resorts & Hotels Public Company Limited

LSC = Laguna Service Company Limited

L1 = Laguna (1) Limited

L3 = Laguna (3) Limited

MCP = Mae Chan Property Company Limited

OPS = Ownrep Project Services Pte Ltd

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

TWRH = TWR-Holdings Limited

TWPL = Thai Wah Plaza Limited

TWT = Thai Wah Tower Company Limited

TWT2 = Thai Wah Tower (2) Company Limited

USC = Universal Starch Public Company Limited (Formerly known as Thai
Wah Public Company Limited)