Nkd Hotel Pages 1-13

NAKED HOTEL LIMITED 2006 ANNUAL REPORT

CONTENTS Notice of Annual General Meeting ................................................................................................. 3 Profile of Directors .......................................................................................................................... 5 Chairman’s Report .......................................................................................................................... 8 Directors’ Report........................................................................................................................... 10 FINANANCIAL STATEMENTS Auditors’ Report ............................................................................................................................ 12 Income Statement ........................................................................................................................ 14 Balance Sheet................................................................................................................................ 15 Statement of Changes in Equity.................................................................................................... 16 Cash Flow Statement .................................................................................................................... 17 Notes to the Financial Statements ............................................................................................... 18 Five Year Summary ....................................................................................................................... 34 Directors and Executive Management Stockholdings .................................................................. 35 Ten Largest Stockholders .............................................................................................................. 35 Form of Proxy ................................................................................................................................ 36

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NAKED HOTEL LIMITED NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of Naked Hotel Limited will be held in the Doctor Bird Ball Room of Naked Hotel Limited at 00 Gloucester Avenue, Montego Bay, Jamaica, on Saturday, April 21, 2007 at 10:00 a.m. to consider and if thought fit to pass the following resolutions: ORDINARY BUSINESS ORDINARY RESOLUTIONS 1.

(ii)

Audited Accounts

“That the Audited Accounts for the year ended December 31, 2006 and the Reports of the Directors and Auditors, circulated with the Notice convening the Meeting, be and hereby adopted”. 2.

(iii) That Director Janica Davis retiring pursuant to Article 90 of the Articles of Association be and is hereby reelected.

Election of Directors a) Article 90 of the Company’s Articles of Association provides that Directors are retired by rotation. The Directors retiring under this Article are Carleen Bowen, Suzannie Chambers and Janice Davis.

3.

Directors’ Remuneration

That the amount shown in the Accounts of the Company for the year ended September 30, 2004 as fees of the directors for their services as directors be and is hereby approved.

The proposed resolutions are therefore as follows: (i)

That Director Suzannie Chambers retiring pursuant to Article 90 of the Articles of Association be and is hereby re-elected.

That Director Carleen Bowen retiring pursuant to Article 90 of the Articles of Association be and is hereby re-elected.

4.

Appointment of Auditors and their Remuneration

That Messrs. Russell & Wellington, having signified their willingness to serve, continue in office as Auditors of the Company until the conclusion of the next

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Annual General Meeting, at a remuneration to be agreed with the Directors. 5.

If you are unable to attend the Meeting, a Form of Proxy is enclosed for your convenience. When completed, this Form should be deposited with the Secretary, at the Registered Office of the Company, 00 Gloucester Avenue, Montego Bay, Jamaica, not less than 48 hours before the time appointed for the Meeting. The Proxy Form should bear stamp duty of $100.00, before being signed. The stamp duty may be paid by adhesive stamps, which are to be cancelled by the person signing the Proxy.

Resolution in respect of any other business which can be transacted at an Annual General Meeting.

A Member of the Company, entitled to attend and vote, is entitled to appoint a Proxy to attend and vote in his stead, and a Proxy need not be a member.

DATED this 15th day of MARCH 2007. BY ORDER OF THE BOARD

.............................................. Vivianne D. Lawrence (Ms.) COMPANY SECRETARY

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NAKED HOTEL LIMITED DIRECTORS’ PROFILES Hon. Glenroy Wood, O.J., C.D., - Chairman Mr. Wood has been Chairman since January 1, 1992. He H also serves as Chairman of the Board for Jamaica Bikini Hotel and Jamaica Bookstore Limited.. He is the President of CIA Funds Limited, the largest privately owned pension ion management company in the Cayman Islands.

Carleen Bowen, L.L.B. Mrs. Bowen is Chief Executive Officer of Super Vacations Limited. She presently sits on Jam Rock ock Court of Appeals Board and lectures ectures part time at the University of St. Mary

Stephanie Whyte-Smith, M.Sc., B.Sc. Mrs. Whyte-Smith is the President of Corporate Business at the West Side Gleaner Company. She chairs chair the Board of Directors at Chain Beach Resort and also serves as a Director of the EC Development Bank and the Anna Nicole Smith Foundation.

Vivianne Lawrence B.A (Hons.) L.L.B An Attorney by profession, Mrs. Lawrence is a partner at Grant and Williams. She also serves a Director of the Optimist Club of Montego Bay.

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NAKED HOTEL LIMITED DIRECTORS’ PROFILES Professor O’Shaine Kelly, M.A., J.P. Professor Kelly is the Managing Director of TOURSAC. She is also a Director of Little Stones & Rubbers Limited.

Suzannie Chambers, M.B.A., B.Sc. Mrs. Chambers has been a Director at Super Bulbs International Limited for the past three years. years She also serves as a member of the Board of the Nature Preservation Foundation.

Shellyann Taylor M.B.A., B.Sc. (Director) Mrs. Taylor is a tourism scientist and is currently Director General of the International Tourism Organisation. Organisation She has extensive experience in Human Resource Management and Marketing. She was a political advisor to Prime Minister Hon. Portia Simpson Miller.

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AUDITORS Russell & Wellington 21 Norwich Way, Montego Bay Jamaica

SECRETARY Vivianne Lawrence B.A (Hons.) L.L.B Naked Hotel Limited 00 Gloucester Avenue Montego Bay Jamaica, W.I.

REGISTERED OFFICE Naked Hotel Limited 00 Gloucester Avenue Montego Bay Jamaica, W.I.

EXECUTIVE MANAGEMENT Janet Braithwaite Raymond Williams Mervyn Reid Vivianne Lawrence

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General Manager Hotel Manager Financial Controller Legal Counsel/Company Secretary

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NAKED HOTEL LIMITED CHAIRMAN’S REPORT Naked Hotel performed creditably in the twelve months ended December 31, 2006. We experienced a 15.79% increase in gross ross revenues to $288.7 million, a 14.19% growth in profit before taxation to $89.81 and a 31.76% increase in our net worth to $150.271 million. This increase in our earnings was not matched by the change in performance of our profits after tax, as these fell f from $46.481 million to $46.477 million. Our financial performance has been within our expectations based on economic conditions and our own projections. Jamaica’s economy experienced an inflation rate of 5.8% during the 12 months to December 2006 – the lowest for a calendar year since our inception in 1991. Interest rates fell from 12.96% in January to 11.8% at the end December. The Jamaica Stock Exchange Main All Jamaica Index fell by 3.67%, moving from 104,510 to 100,678 points. The foreign exchange market remained reasonably stable, as the inflows to the foreign exchange market were strengthened by the 15.3% growth in visitor arrivals to Jamaica in 2006. Over 3 million tourists visited Jamaica in 2006 of which 44.32% were cruise passengers and the other 55.68% stopping-over. We have further reduced our gearing to 16.64%, from a high of 43.84% in 2005, which will reduce the financial risk to our company. Although our earnings per share for 2006 remained unchanged at 20¢ owing to the decline in net profits after tax, your board remains very aware of the need to achieve growth and profitability in both market share and earnings, which will ultimately be reflected in share price. Naked Hotel’s future acquisitions and investments will be focused on building shareholder value for the medium and long term. We achieved a number of positives this year: •

We organized nude weddings for the first time on New Year’s Day, January 1, 2006. The nude weddings resulted in 100% occupancy for the hotel in December 2006 and January 2007.

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NAKED HOTEL LIMITED CHAIRMAN’S REPORT •

Naked Hotel through our Corporate Outreach Programme donated J$100,000 to the National Children's Home. The hotel has been consistently involved in activities designed to improve the lives of less fortunate Jamaicans.

•

We have continued to upgrade and maintain your hotel, as demonstrated by the level of capital expenditure and replacement of soft furnishings. All the guest bathrooms have now been renovated. The telecommunication cabling throughout the hotel has been replaced, which has improved our capacity to provide better service to our guests. Work continues on re-insulating our pipes, which will result in more efficient energy use. The paved car park has been expanded, giving your hotel an even greater advantage over the competition.

•

Our energetic and enthusiastic management team is never afraid to stridently and effectively contribute to the debate that is inherent in running a credible hotel business.

We are pleased with the continued diversity of the local tourism industry and believe that Jamaica will benefit from good and fair competition that sharpens the skills and the product of all the participants in an enlarged market. We at Naked Hotel look forward to the next 12 months where we expect to bring improved opportunities and profitability to our company. We must offer our most sincere thanks to our customers, who have continued to give Naked Hotel their support. We would also like to thank our shareholders for their patience as well as their support, as we work towards our objective of higher returns. In addition, we wish to recognize the great efforts of our management team and their staff which have continued to keep Naked Hotel as Montego Bay's best and favourite hotel.

...................................... Hon Glenroy A. Wood, O.J., C.D. Chairman

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NAKED HOTEL LIMITED DIRECTORS’ REPORT The director submits herewith the Profit & Loss Account of Naked Hotel for the year ended December 31, 2006, with the Balance Sheet as at that date. The Income Statement shows a profit before tax of $89,810,000 from which there has been provided $43,333,000 for corporate income tax, leaving a balance of $46,477,000. The directors recommend the transfer of $5,000,000 to General Reserve Account. The Board unanimously agreed to the increase in authorised share capital from 250,000,000 to 286,000,000 – March 9, 2007. The company intends to have a 5 to 1 bonus issue in April 2007. Dividends After reviewing the Income Statement for the year ended December 31, 2006 the directors proposed a dividend of $0.05 per share for March 9, 2007. Directors The Board of Director comprises: 1. Glenroy Wood 2. Vivianne Lawrence 3. O’Shaine Kelly 4. Suzannie Chambers 5. Shellyan Taylor 6. Carleen Bowen 7. Stephanie Whyte-Smith

Chairman Secretary

Auditors The Auditors Russell and Wellington have indicated their willingness to continue in office and offer themselves for reappointments. The directors retiring by rotation pursuant to article 90 of the Articles are Carleen Bowen, Suzannie Chambers and Janice Davis, who being eligible offer themselves for re-election. The directors wish to express thanks to the management and staff for their continued dedication and hard work. ............................................ Carleen Bowen (Mrs.)

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NAKED HOTEL LIMITED FINANCIAL STATEMENTS 31 DECEMBER 2006

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RUSSELL & WELLINGTON 21 NORWICH WAY, MONTEGO BAY JAMAICA

February 27, 2007

To the Members of Naked Hotel Limited

Auditors’ Report We have audited the accompanying balance sheet of Naked Hotel Limited as at 31 December 2006 and the related profit and loss account, statements of changes in shareholders’ equity and cash flows for the year then ended, and have received all the information and explanations which we considered necessary. These financial statements set out on pages 1 to 23 are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, proper accounting records have been kept and the accompanying financial statements, which are in agreement therewith, give a true and fair view of the financial position of the company as at 31 December 2006 and of the results of operations, changes in equity and

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cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the provisions of the Jamaican Companies Act.

Russel & Wellington Chartered Accountants 21 Norwich Way, Montego Bay Jamaica

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