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 1992-2004 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 &
    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.

-   During 2004 the Allamanda Vacation Club changed its name to the
    Laguna Holiday Club, and the construction of a new facility of the
    Wedding Chapel was completed in December 2004.

-   On 8 March 2005, the group purchased the Banyan Tree Bangkok, Thai
    Wah Tower I and Thai Wah Tower II via the purchase of the equity
    interest in Thai Wah Plaza Limited, Thai Wah Tower Company Limited
    and Thai Wah Tower (2) Company 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 LRH either owns or has
  an ownership stake:

-   Banyan Tree Phuket – 115 exclusive villas, 44 with Jacuzzis and 71
    of which 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 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 & 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 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 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 were
  also fully sold out in 2004.

  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 &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 changed its name to Laguna Holiday Club in
  2004, and 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, Sheraton
  Golf Villas and Angsana Resort & 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

-   The Wedding Chapel was completed at the end of 2004.

  Income Structure

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

+--------------------+---------+-----+---------+----+---------+-----+
|                    | 2004    | %   | 2003    | %  | 2002    | %   |
|                    |         |     |         |    |         |     |
|                    | Baht    |     | Baht    |    | Baht    |     |
|                    | 000’s   |     | 000’s   |    | 000’s   |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Hotel operations   | 2,      | 7   | 2,      | 79 | 2,      | 8   |
|                    | 803,597 | 0.8 | 443,246 | .9 | 557,132 | 9.1 |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Property sales     | 1,      | 2   | 541,407 | 17 | 278,008 | 9.7 |
|                    | 051,814 | 6.6 |         | .7 |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Interest and other | 104,041 | 2.6 | 74,484  | 2  | 33,749  | 1.2 |
| income             |         |     |         | .4 |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Total revenue      | 3,      | 10  | 3,      | 1  | 2,      | 10  |
|                    | 959,452 | 0.0 | 059,137 | 00 | 868,889 | 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 26 to the financial statements of
  the company for the year ended 31^(st) December 2004 (note 25 for the
  year ended 31^(st) December 2003) discloses the operating results of
  the hotel operations and property sales in accordance with accounting
  standards and principles.

Banyan Tree Phuket

  --------------------- ---------------- ---------------- ---------------
                        2004             2003             2002

  Available Rooms       120              121              120

  Occupancy %           70               67               68

  Average Rate (Baht)   18,368           17,639           17,585
  --------------------- ---------------- ---------------- ---------------

+--------------------+---------+-----+---------+-----+---------+----+
|                    | 2004    |     | 2003    |     | 2002    |    |
+--------------------+---------+-----+---------+-----+---------+----+
|                    | Baht    | %   | Baht    | %   | Baht    | %  |
|                    | 000’s   |     | 000’s   |     | 000’s   |    |
+--------------------+---------+-----+---------+-----+---------+----+
| Room Revenue       | 568,651 | 7   | 519,693 | 7   | 521,527 | 72 |
|                    |         | 2.5 |         | 4.1 |         | .6 |
+--------------------+---------+-----+---------+-----+---------+----+
| F&B Revenue        | 189,591 | 2   | 160,883 | 2   | 174,194 | 24 |
|                    |         | 4.2 |         | 2.9 |         | .2 |
+--------------------+---------+-----+---------+-----+---------+----+
| Other Revenue      | 25,836  | 3.3 | 21,012  | 3.0 | 22,684  | 3  |
|                    |         |     |         |     |         | .2 |
+--------------------+---------+-----+---------+-----+---------+----+
| Total Revenue      | 784,078 | 10  | 701,588 | 10  | 718,405 | 1  |
|                    |         | 0.0 |         | 0.0 |         | 00 |
|                    |         |     |         |     |         | .0 |
+--------------------+---------+-----+---------+-----+---------+----+

The Banyan Tree Phuket hotel is owned by Laguna Banyan Tree Limited in
which LRH has a 100% ownership interest. The increase in revenues as
compared to last year was due to the poor first half performance of 2003
when the Iraq War and SARS had a significant impact on occupancies. The
recovery that commenced in the second half of 2003 continued throughout
2004. The hotel is located at 33 Moo 4 Srisoonthorn Road, Cherngtalay
District, Amphur Talang, Phuket Province. The management of the Banyan
Tee Phuket hotel is contracted out to Banyan Tree Hotels & Resorts Pte.
Ltd.

Dusit Laguna Resort

  --------------------- ----------------- ---------------- ----------------
                        2004              2003             2002

  Available Rooms       224               224              224

  Occupancy %           78                68               63

  Average Rate (Baht)   3,883             3,755            4,912
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2004     |    | 2003    |    | 2002    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 247,505  | 59 | 209,394 | 58 | 252,227 | 64 |
|                    |          | .5 |         | .6 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 148,647  | 35 | 127,123 | 35 | 122,364 | 31 |
|                    |          | .7 |         | .6 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 19,828   | 4  | 20,955  | 5  | 19,520  | 5  |
|                    |          | .8 |         | .8 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| Total Revenue      | 415,980  | 1  | 357,472 | 1  | 394,111 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Dusit Laguna Resort is directly owned by LRH. The improvement in
occupancy and slight increase in average room rate as compared to last
year was due to the SARS and Iraq War impacted 2003 performance. No such
events occurred in 2004 resulting in significantly higher occupancies.
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

  --------------------- ----------------- ---------------- ----------------
                        2004              2003             2002

  Available Rooms       254               254              252

  Occupancy %           81                69               64

  Average Rate          3,710             3,653            4,507
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2004     |    | 2003    |    | 2002    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 279,554  | 61 | 234,939 | 61 | 266,217 | 64 |
|                    |          | .4 |         | .5 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 149,560  | 32 | 124,231 | 32 | 125,884 | 30 |
|                    |          | .9 |         | .5 |         | .3 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 25,780   | 5  | 22,590  | 6  | 23,932  | 5  |
|                    |          | .7 |         | .0 |         | .7 |
+--------------------+----------+----+---------+----+---------+----+
| Total Revenue      | 454,894  | 1  | 381,760 | 1  | 416,033 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Laguna Beach Resort is owned by Laguna Beach Club Limited in which
LRH has a 50% effective ownership interest. The improvement in occupancy
and slight increase in average room rate as compared to last year was
due to the SARS and Iraq War impacted 2003 performance. No such events
occurred in 2004 resulting in significantly higher occupancies. 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 LRH and its joint
venture partner, Pacific Resort (Thailand) Co. Ltd.

 

Sheraton Grande Laguna Phuket 

  --------------------- ----------------- ---------------- ----------------
                        2004              2003             2002

  Available Rooms       289               289              289

  Occupancy %           75                73               64

  Average Rate          5,164             4,393            5,600
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2004     |    | 2003    |    | 2002    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 410,079  | 56 | 338,977 | 55 | 377,620 | 57 |
|                    |          | .4 |         | .0 |         | .4 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 267,721  | 36 | 233,911 | 37 | 233,362 | 35 |
|                    |          | .8 |         | .9 |         | .5 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 49,475   | 6  | 44,010  | 7  | 46,733  | 7  |
|                    |          | .8 |         | .1 |         | .1 |
+--------------------+----------+----+---------+----+---------+----+
| Total Revenue      | 727,275  | 1  | 616,898 | 1  | 657,715 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Sheraton Grande Laguna Phuket is owned by Bangtao Grande Limited in
which LRH has a 100% ownership interest. The increase in revenues as
compared to last year was due to an increase in average room rate. The
first half of 2003 was adversely impacted by SARS and the Iraq War, and
the strong rebound in the second half was due to lower room rates
offered. In 2004 this hotel concentrated on maintaining the 2003
occupancy levels whilst increasing the average room rate. The hotel is
located at 10 Moo 4 Srisoonthorn Road, 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

+--------------------+----------+----+---------+----+---------+----+
|                    | 2004     |    | 2003    |    | 2002    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Green Fees         | 36,263   | 61 | 33,224  | 62 | 30,652  | 51 |
|                    |          | .8 |         | .9 |         | .2 |
+--------------------+----------+----+---------+----+---------+----+
| Retail Revenue     | 8,868    | 15 | 7,954   | 15 | 10,713  | 17 |
|                    |          | .1 |         | .1 |         | .9 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 13,560   | 23 | 11,613  | 22 | 18,520  | 30 |
|                    |          | .1 |         | .0 |         | .9 |
+--------------------+----------+----+---------+----+---------+----+
| Total Revenue      | 58,691   | 1  | 52,791  | 1  | 59,885  | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

  The Laguna Phuket Golf Club is owned by Laguna Grande Limited in which
  LRH has a 100% ownership interest. The improvement in revenue in 2004
  was due to the better performance of the hotel opertions in Laguna
  Phuket. The Laguna Phuket Golf Club is located at 34 Moo 4
  Srisoonthorn Road, Cherngtalay District, Amphur Talang, Phuket
  Province. The management of the Laguna Phuket Golf Club is contracted
  out to Banyan Tree Hotels & Resorts Pte. Limited.

[]

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ABBREVIATIONS

AVCI = PT. AVC Indonesia

BGL = Bangtao Grande Limited

BTD = Bangtao Development Company Limited

BTGS = Banyan Tree Gallery (Singapore) Pte Limited

BTGT = Banyan Tree Gallery (Thailand) Ltd

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

LHC = Laguna Holiday Club Limited

LRH = Laguna Resorts & Hotels Public Company Limited

LSC = Laguna Services Company Limited

LSL = Laguna Sports Limited

L1 = Laguna (1) Company Limited

L3 = Laguna (3) Company 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 Resorts Limited

TRLI = TRL Investments Limited

TWC = Thai Wah Public Company 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

WTL = Wenco-Thai Limited