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 1992-2005 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 Phuket 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^(th) 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^(th) August 2002, the group purchased 27 units in Angsana Spa &
    Resort Bintan, Indonesia with a view to commencing a timeshare
    operation in this resort.

-   On 22^(nd) 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^(th) 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.

-   In November 2005 the Laguna Holiday Club opened its timeshare
    operation in Angsana Spa & Resort in Bintan, Indonesia.

  * 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 – 127 exclusive villas, 44 with Jacuzzis and 83
    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 – 362 rooms, suites and villa’s
    managed by Sheraton Overseas Management Corporation.

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

In addition LRH 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.

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 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 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,
  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 100
  Laguna Townhomes, 23 Laguna Residences and 36 villa’s.

  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 were completed in
  2005 of which 10 had been sold by year end. The individual owners may
  earn a return on their investment by contracting Banyan Tree Hotels &
  Resorts Pte. Ltd. to manage their villa for them.

  Two further property sales projects scheduled for release in 2006 are
  the Double Pool Villas at the Banyan Tree Phuket and the Pool Villas
  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 Co., Ltd.
  respectively to manage their villas for them.

  The Laguna Holiday 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,
  Sheraton Golf Villas and Angsana Resort & Spa Bintan and is building
  its own dedicated resort in Laguna Phuket consisting of 79 units which
  is scheduled to open in July 2006.

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

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

-   Office rental in Bangkok (purchased as part of the acquisition of
    Thai Wah Plaza Limited in March 2005).

-   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:

+--------------------+---------+-----+---------+----+---------+-----+
|                    | 2005    | %   | 2004    | %  | 2003    | %   |
|                    |         |     |         |    |         |     |
|                    | Baht    |     | Baht    |    | Baht    |     |
|                    | 000’s   |     | 000’s   |    | 000’s   |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Hotel operations   | 2,      | 7   | 2,      | 70 | 2,      | 7   |
|                    | 305,533 | 1.9 | 803,597 | .8 | 443,246 | 9.9 |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Property sales     | 750,134 | 2   | 1,      | 26 | 541,407 | 1   |
|                    |         | 3.4 | 051,814 | .6 |         | 7.7 |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Office rental      | 100,867 | 3.2 | -       | -  | -       | -   |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Interest and other | 49,345  | 1.5 | 104,041 | 2  | 74,484  | 2.4 |
| income             |         |     |         | .6 |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
|                    |         |     |         |    |         |     |
+--------------------+---------+-----+---------+----+---------+-----+
| Total revenue      | 3,      | 10  | 3,      | 1  | 3,      | 10  |
|                    | 205,879 | 0.0 | 959,452 | 00 | 059,137 | 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 2005 (note 26 for the
  year ended 31^(st) December 2004) discloses the operating results of
  the hotel operations and property sales in accordance with accounting
  standards and principles.

Banyan Tree Phuket

  --------------------- ---------------- ---------------- ---------------
                        2005             2004             2003

  Available Rooms –     118              120              121
  average                                                 

  Occupancy %           53%              70%              67%

  Average Rate (Baht)   14,121           18,368           17,639
  --------------------- ---------------- ---------------- ---------------

+--------------------+---------+-----+---------+-----+---------+----+
|                    | 2005    |     | 2004    |     | 2003    |    |
+--------------------+---------+-----+---------+-----+---------+----+
|                    | Baht    | %   | Baht    | %   | Baht    | %  |
|                    | 000’s   |     | 000’s   |     | 000’s   |    |
+--------------------+---------+-----+---------+-----+---------+----+
| Room Revenue       | 323,777 | 6   | 568,651 | 7   | 519,693 | 74 |
|                    |         | 7.6 |         | 2.5 |         | .1 |
+--------------------+---------+-----+---------+-----+---------+----+
| F&B Revenue        | 136,640 | 2   | 189,591 | 2   | 160,883 | 22 |
|                    |         | 8.5 |         | 4.2 |         | .9 |
+--------------------+---------+-----+---------+-----+---------+----+
| Other Revenue      | 18,272  | 3.9 | 25,836  | 3.3 | 21,012  | 3  |
|                    |         |     |         |     |         | .0 |
+--------------------+---------+-----+---------+-----+---------+----+
| Total              | 478,689 | 10  | 784,078 | 10  | 701,588 | 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 significant decrease in revenue as compared to
last year was related to the Tsunami in the Indian Ocean on 26^(th)
December 2004 which had an adverse effect on the tourism industry of
Phuket in 2005. The recovery in the last quarter of 2005 is well under
way and is expected to be complete by the second half of 2006. The hotel
is located at 33 Moo 4 Srisoonthorn Road, 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

  --------------------- ----------------- ---------------- ----------------
                        2005              2004             2003

  Available Rooms –     224               224              224
  average                                                  

  Occupancy %           55%               78%              68%

  Average Rate (Baht)   3,303             3,883            3,755
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2005     |    | 2004    |    | 2003    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 147,384  | 58 | 247,505 | 59 | 209,394 | 58 |
|                    |          | .4 |         | .5 |         | .6 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 91,466   | 36 | 148,647 | 35 | 127,123 | 35 |
|                    |          | .2 |         | .7 |         | .6 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 13,584   | 5  | 19,828  | 4  | 20,955  | 5  |
|                    |          | .4 |         | .8 |         | .8 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 252,434  | 1  | 415,980 | 1  | 357,472 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Dusit Laguna Resort is directly owned by Laguna Resorts & Hotels
Public Company Limited. The significant decrease in revenue as compared
to last year was related to the Tsunami in the Indian Ocean on 26^(th)
December 2004 which severely reduced tourist arrivals in 2005. The
recovery in the last quarter of 2005 is well under way and is expected
to be complete by the second half of 2006. 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

  --------------------- ----------------- ---------------- ----------------
                        2005              2004             2003

  Available Rooms –     253               254              254
  average                                                  

  Occupancy %           50%               81%              69%

  Average Rate (Baht)   3,330             3,710            3,653
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2005     |    | 2004    |    | 2003    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 154,453  | 57 | 279,554 | 61 | 234,939 | 61 |
|                    |          | .7 |         | .4 |         | .5 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 94,697   | 35 | 149,560 | 32 | 124,231 | 32 |
|                    |          | .4 |         | .9 |         | .5 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 18,651   | 6  | 25,780  | 5  | 22,590  | 6  |
|                    |          | .9 |         | .7 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 267,801  | 1  | 454,894 | 1  | 381,760 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Laguna Beach Resort is owned by Laguna Beach Club Ltd. in which LRH
has a 50% effective ownership interest. The significant decrease in
revenue as compared to last year was due to the Tsunami reducing tourist
arrivals to Phuket. The recovery in the last quarter of 2005 is well
under way and is expected to be complete by the second half of 2006. 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 Co., Ltd. and its joint venture partner, Pacific Resort
(Thailand) Co. Ltd.

 

Sheraton Grande Laguna Phuket 

  --------------------- ----------------- ---------------- ----------------
                        2005              2004             2003

  Available Rooms –     289               289              289
  average                                                  

  Occupancy %           46%               75%              73%

  Average Rate (Baht)   4,278             5,164            4,393
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2005     |    | 2004    |    | 2003    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 209,355  | 48 | 410,079 | 56 | 338,977 | 55 |
|                    |          | .6 |         | .4 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 179,206  | 41 | 267,721 | 36 | 233,911 | 37 |
|                    |          | .7 |         | .8 |         | .9 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 41,617   | 9  | 49,475  | 6  | 44,010  | 7  |
|                    |          | .7 |         | .8 |         | .1 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 430,178  | 1  | 727,275 | 1  | 616,898 | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

The Sheraton Grande Laguna Phuket is owned by Bangtao Grande Limited in
which Laguna Resorts & Hotels Public Co., Ltd. has a 100% ownership
interest. The significant decrease in revenue as compared to last year
was due to the impact the Tsunami in the Indian Ocean on 26^(th)
December 2004 severely impacting the tourism industry in Phuket. The
recovery in the last quarter of 2005 is well under way and is expected
to be complete by the second half of 2006. 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.

Banyan Tree Bangkok

  --------------------- ----------------- ---------------- ----------------
                        2005              2004             2003

  Available Rooms –     216               -                -
  average                                                  

  Occupancy %           73%               -                -

  Average Rate (Baht)   4,811             -                -
  --------------------- ----------------- ---------------- ----------------

+--------------------+----------+----+---------+----+---------+----+
|                    | 2005     |    | 2004    |    | 2003    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Room Revenue       | 231,454  | 44 | -       | -  | -       | -  |
|                    |          | .8 |         |    |         |    |
+--------------------+----------+----+---------+----+---------+----+
| F&B Revenue        | 260,240  | 50 | -       | -  | -       | -  |
|                    |          | .4 |         |    |         |    |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 24,819   | 4  | -       | -  | -       | -  |
|                    |          | .8 |         |    |         |    |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 516,513  | 1  | -       | -  | -       | -  |
|                    |          | 00 |         |    |         |    |
|                    |          | .0 |         |    |         |    |
+--------------------+----------+----+---------+----+---------+----+

The Banyan Tree Bangkok is owned by Thai Wah Plaza Limited in which
Laguna Resorts & Hotels Public Co.,Ltd has owned a 100% ownership
interest since March 2005. The hotel is located at 21/100 South Sathorn
Road, Tungmahamek, Sathorn, Bangkok. The management of the Banyan Tree
Bangkok is contracted out to Banyan Tree Hotels and Resorts Pte. Ltd.

Laguna Phuket Golf Club

+--------------------+----------+----+---------+----+---------+----+
|                    | 2005     |    | 2004    |    | 2003    |    |
+--------------------+----------+----+---------+----+---------+----+
|                    | Baht     | %  | Baht    | %  | Baht    | %  |
|                    | 000’s    |    | 000’s   |    | 000’s   |    |
+--------------------+----------+----+---------+----+---------+----+
| Green Fees         | 22,611   | 52 | 36,263  | 61 | 33,224  | 62 |
|                    |          | .6 |         | .8 |         | .9 |
+--------------------+----------+----+---------+----+---------+----+
| Retail Revenue     | 7,330    | 17 | 8,868   | 15 | 7,954   | 15 |
|                    |          | .0 |         | .1 |         | .1 |
+--------------------+----------+----+---------+----+---------+----+
| Other Revenue      | 13,085   | 30 | 13,569  | 23 | 11,613  | 22 |
|                    |          | .4 |         | .1 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+
| Total              | 43,026   | 1  | 58,700  | 1  | 52,791  | 1  |
|                    |          | 00 |         | 00 |         | 00 |
|                    |          | .0 |         | .0 |         | .0 |
+--------------------+----------+----+---------+----+---------+----+

  The Laguna Phuket Golf Club is owned by Laguna Grande Limited in which
  Laguna Resorts & Hotels Public Co., Ltd. has owned a 100% ownership
  interest. The decrease in revenues in 2005 was due to poor performance
  of the hotel opertions in Laguna Phuket which resulted in a decrease
  in revenue in the Golf operation. 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. Ltd.

[]

ABBREVIATIONS

AVCI = PT. AVC Indonesia

BGL = Bangtao Grande Limited

BTD = Bangtao Development Company 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 Company Limited

PSD = Pai Samart Development Company Limited

TLDC = Talang Development 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