BUSINESS LINES

(1) TYPES OF BUSINESS

(A) Securities Broker

KGI Securities (Thailand) Public Company Limited, a member of the Stock
Exchange of Thailand (SET Broker seat No. 13), has developed an
efficient computer system to serve its clients. The Company also
provides research for its clients in order to support them in making
accurate and effective investment and trading decisions.

In 2006, the Company ranked No. 7 with a 3.94% equities brokerage market
share. To trade securities, clients can open a cash account and/or a
credit balance account. Clients also have the option of trading via the
internet. The commission for cash accounts and credit balance accounts
is 0.25% and the commission for internet trading is only 0.15%.

The following table shows breakdown by type of clients and type of
accounts for the past 3 years.

+--------------------+---------+-----+---------+-----+---------+----+
| Trading Volume     | 2006    | %   | 2005    | %   | 2004    | %  |
|                    |         |     |         |     |         |    |
|                    | (Baht   |     | (Baht   |     | (Baht   |    |
|                    | M       |     | M       |     | M       |    |
|                    | illion) |     | illion) |     | illion) |    |
+--------------------+---------+-----+---------+-----+---------+----+
| SET *              | 16      |     | 16      |     | 20      |    |
|                    | ,393.67 |     | ,600.71 |     | ,647.39 |    |
+--------------------+---------+-----+---------+-----+---------+----+
| The Company *      | 1       |     | 1       |     | 1       |    |
|                    | ,293.00 |     | ,236.51 |     | ,868.32 |    |
+--------------------+---------+-----+---------+-----+---------+----+
| The Company’s      | 3.94%   |     | 3.72%   |     | 4.52%   |    |
| market share (%)   |         |     |         |     |         |    |
+--------------------+---------+-----+---------+-----+---------+----+
| Breakdown by types |         |     |         |     |         |    |
| of clients         |         |     |         |     |         |    |
+--------------------+---------+-----+---------+-----+---------+----+
| - The Company’s    | 197.46  | 15  | 122.11  | 9   | 106.74  | 5. |
| portfolio          |         | .28 |         | .88 |         | 71 |
+--------------------+---------+-----+---------+-----+---------+----+
| - Fund             | 63.40   | 4   | 66.27   | 5   | 79.82   | 4. |
|                    |         | .90 |         | .36 |         | 27 |
+--------------------+---------+-----+---------+-----+---------+----+
| - Retail client    | 936.80  | 72  | 915.20  | 74  | 1       | 7  |
|                    |         | .45 |         | .01 | ,383.04 | 4. |
|                    |         |     |         |     |         | 03 |
+--------------------+---------+-----+---------+-----+---------+----+
| - Foreign client   | 95.34   | 7   | 132.93  | 10  | 298.72  | 1  |
|                    |         | .37 |         | .75 |         | 5. |
|                    |         |     |         |     |         | 99 |
+--------------------+---------+-----+---------+-----+---------+----+
| Total              | 1       | 100 | 1       | 100 | 1       | 10 |
|                    | ,293.00 | .00 | ,236.51 | .00 | ,868.32 | 0. |
|                    |         |     |         |     |         | 00 |
+--------------------+---------+-----+---------+-----+---------+----+
| Breakdown by types |         |     |         |     |         |    |
| of account         |         |     |         |     |         |    |
+--------------------+---------+-----+---------+-----+---------+----+
| - Cash account     | 1       | 92  | 1       | 91  | 1       | 9  |
|                    | ,190.72 | .09 | ,136.94 | .95 | ,750.19 | 3. |
|                    |         |     |         |     |         | 67 |
+--------------------+---------+-----+---------+-----+---------+----+
| - Credit balance   | 102.28  | 7   | 99.57   | 8   | 118.13  | 6. |
| account            |         | .91 |         | .05 |         | 33 |
+--------------------+---------+-----+---------+-----+---------+----+
| Total              | 1       | 100 | 1       | 100 | 1       | 10 |
|                    | ,293.00 | .00 | ,236.51 | .00 | ,868.32 | 0. |
|                    |         |     |         |     |         | 00 |
+--------------------+---------+-----+---------+-----+---------+----+

Note : * Trading volume referred to volume in both SET and MAI

As of 15 March 2007, the Company had 18 branches locations throughout
the country; 6 branches are located in the Bangkok area and 12 branches
are located in provincial areas.

+---+-----------------+----+--------------------+-------------------+
|   | Bangkok area    |    | Provincial areas   |                   |
+---+-----------------+----+--------------------+-------------------+
| 1 | Pin Klao        |    | North              | Central           |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
| 2 | Surawongse      | 1. | Chiang Mai         | 7. Samut Sakhon   |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
| 3 | Yaowaraj        | 2. | Chiang Rai         | 8. Suphan Buri    |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
| 4 | Silom           | 3. | Nakhon Sawan       | 9. Nakhon Pathom  |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
| 5 | Changwattana    |    |                    | 10. Phetchaburi   |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
| 6 | Rama II         |    | North East         | 11. Ayutthaya     |
| . |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+
|   |                 | 4. | Nakhon Ratchasima  |                   |
+---+-----------------+----+--------------------+-------------------+
|   |                 | 5. | Pakchong           | South             |
+---+-----------------+----+--------------------+-------------------+
|   |                 | 6. | Udon Thani         | 12. Hat Yai       |
+---+-----------------+----+--------------------+-------------------+
|   |                 |    |                    |                   |
+---+-----------------+----+--------------------+-------------------+

Internet Trading (E-Business)

KGI Securities (Thailand) Public Company Limited, one of Thailand’s
leading securities firms, offers internet trading services to its
clients. Clients can look at real time information in order to follow
price movements and can access other information 24 hours a day, 7 days
a week, wherever they are. Our Company also provides in-depth
fundamental and technical research reports issued by KGI’s research
department as decision making tools for clients.

The Company strives to maintain a high quality of service for clients.
This includes fast, consistent and accurate information combined with a
low level of commission of only 0.15% for Internet trades. In addition,
information on our website is provided in 3 different languages: Thai,
English and Chinese to serve both local and foreign clients.

As our Company aims to provide a high level of customer satisfaction, we
are continuing to develop our online trading service to make it even
more convenient, efficient and secure. Our e-business division works
closely with Settrade.com to arrange quarterly internet trading seminars
for our clients and for the general public. In these seminars, clients
are trained on how to place an order, and how to use real time
information as a decision making tool. Our objective in these seminars
is to demonstrate the ease and convenience of internet trading to new
clients and clients who have never traded online.

If you have any queries or need additional information or would like to
open an Internet Trading account with us, please visit our website:
www.kgieworld.co.th.

Policy in accepting Clients

Clients are categorized as follow:

1.  Individuals (locals and foreigners).

2.  Juristic persons:

-   Local financial institutions including finance and securities
    companies, commercial banks, finance companies, insurance companies,
    etc.

-   Foreign financial institutions.

-   Juristic persons registered in Thailand that are limited
    partnerships or limited companies.

-   Juristic persons registered abroad.

For individuals, the Company will consider their occupation, place of
residence, years of work, revenues, financial status, and debt service
ability. For juristic persons, the Company will consider financial
status, shareholders, and management as well as their business
prospects.

Account opening procedures

(1) Cash Account

    1.  The marketing officer will request documentary evidence from the
        client in order to find out the client’s investment objectives,
        knowledge and experience of investing in securities, financial
        status and debt service ability. Documentary evidence that must
        be submitted to the Company includes the following: a copy of ID
        card, a copy of house registration, a copy of company’s
        affidavit (in case of juristic person), a copy of business
        license (in case of specific business), a specimen signatures, a
        copy of bank savings book, other evidence of client’s assets, a
        copy of audited financial statements for the past 2 years (in
        case of juristic person) together with the client’s signatures
        in the application form and other agreements. The marketing
        officer will consider all the information and then make a
        recommendation, supported by the documents, to the credit
        division officer.

    2.  The credit division officer will check the client’s background
        and calculate an appropriate credit line for the client
        according to the company’s criteria, which include the financial
        status, debt service ability as well as debt service history.

    3.  As of 1 January 2007, the Company has introduced new and
        improved “Know Your Client” and “Client Due Diligence”
        processes, covering new account openings and regular client
        reviews.

    4.  Once all necessary steps have been completed, a credit officer
        will then propose to the appropriate authorized persons to
        approve the credit line.

(2) Credit balance account

  The Company provides credit balance account using the same credit line
  issuing system as that of cash accounts.

(3) Futures trading account

  The Company provides futures trading account using the same credit
  line issuing system as that of cash accounts.

(4) Trading via the Internet

  The Company provides trading via the Internet using the same credit
  line issuing system as that of cash accounts.

Authority in approving credit line for trading accounts

The company has set different levels of authority for persons authorized
to approve credit lines for cash accounts, credit balance accounts, and
Internet accounts from marketing division heads up to the Chief
Operating Officer. The policy covering credit line approval has been set
up by the Credit Risk Sub-committee for Brokerage Business, under the
Risk Management committee’s guidance.

(B) Securities Dealer

The Company’s proprietary trading portfolios faced a difficult operating
environment in 2006 due to poor market conditions in both the equity and
the fixed income markets. The SET index was very volatile, reaching a
high of 785 in May before falling to hit a low of 622 in December.

Although the Proprietary Trading Department and Fixed Income Department
paid close attention to their portfolios, the Company still suffered
from the volatile markets, and the Company suffered a loss from trading
of securities of Baht 78 million.

(C) Investment Advisory

SEC granted an approval to the Company to operate investment advisory
business on 6 January 2004, allowing the Company to provide a full range
of services.

(D) Financial advisory and securities underwriting

The SEC has granted the Company approval to operate financial advisory
business under the scope specified by the SEC which covers the full
range of Investment Banking Services, including fund raising, IPOs and
secondary market placements, mergers and acquisitions, firm valuations,
loan arrangements, debt restructuring and other advisory works. In
addition, the Company also provides a securities underwriting service to
those companies intending to issue securities including debt, equity,
and equity-linked products.

In 2006, the stock market was very volatile, primarily as a result of
rising of interest rates, rising oil prices, political uncertainty and
FX related regulations. As a result, fewer than expected companies were
listed on the stock market. Despite the difficult market environment,
our Company acted as a financial advisor and a lead underwriter for 1
IPO, and acted as co-underwriter in 6 other IPOs. Besides IPO and
listing services, KGI offered other services to its clients, including;
private placements, loan arrangements, M&A related services, debt
restructuring, underwriting services, and other advisory work.

Our ability to leverage on KGI’s expertise in financial engineering to
structure products that suit clients needs is a significant asset. Since
we have experience with various financial instruments such as debt,
equity, equity-linked securities and a regional financial network, the
Company’s investment banking team is well positioned to provide a full
range of services to clients in both the domestic and foreign capital
markets.

(E) Securities Borrowing and Lending (SBL)

The Ministry of Finance granted the Company approval to conduct
securities lending and borrowing business on February 26, 1999. The
Company was the first broker to act as a principal and agent assisting
all types of clients who want to lend or borrow securities:
1.Institutional Lenders, 2.Institutional Borrowers, 3.Retail Lenders,
and 4. Retail Borrowers. This service will help increase liquidity and
price stability to the Thai market, which will benefit all parties and
help to further develop the Thai equity market.

(F) Securities Registrar

The Company received approval to conduct securities registrar business
on 14 June 1994, and the Company continues to maintain its securities
registrar license in order to support its derivatives products in the
future.

(G) Selling Agent of Unit Trust

The Company’s fixed income department has been appointed as a selling
agent for asset management firms such as One Asset Management Limited,
Krungthai Asset Management Public Company Limited, SCB Asset Management,
ING Funds (Thailand) Co., Ltd., TMB Asset Management Co., Ltd., Aberdeen
Asset Magement Co., Ltd., MFC Asset Management Public Company Limited,
Kasikorn Asset Management Co., Ltd., and PrimaVest Asset Management Co.,
Ltd. All clients are advised on the appropriate fund based on their risk
tolerance and investment return requirements.

(H) Derivatives

The company is recognized as one of the leaders in innovation in the
development of derivative products in Thailand. The Company has spent
more than 10 years preparing for issuing and trading of derivatives
products. The major shareholder, the KGI Group has also provided
valuable assistance by transferring knowledge and technology to the
Company. The KGI Group sent derivatives experts to train our staff to be
ready for this new market in Thailand. At the same time, the Company
sent staff to its related companies in Taiwan and Hong Kong to closely
study their sophisticated derivatives markets.

The Company adopts the same program and software as those used in Taiwan
and Hong Kong. The software is widely recognized in developed
derivatives markets in many countries and should be effective in the
Thai market as well. Such system will greatly enhance the risk
management capability of the Company in hedging our derivatives
positions. The Company is ready to provide services relating to
derivatives products to clients. At the moment, the Company focuses
mainly on institutional clients who have better understanding about the
risks and rewards of such products.

1. OTC Equity Derivatives

  OTC Equity Derivatives products are tailor-made, and designed
  according to client’s request. The clients may choose to invest in
  derivatives for two purposes: a). to reduce risk; and b). to enhance
  return on their investment portfolio.

  a). Most of the clients who wish to reduce risk of their portfolio are
  long term equity investors. They’d like to protect against loss on
  their portfolio by, for example, buying (long) put options.

  A put option grants buyer the right to sell stock at agreed price
  (strike price) at the specified time. Therefore, if market price of
  such equity is lower than the strike price, buyer has the right to
  sell such equity at a higher price than the market price

  b). Clients who want to enhance return on investment may buy call
  options which requires less investment than buying the stock directly.
  With this leverage, the return on investment in call options can be
  much higher than the return on investment in stock.

  A call option gives the holder a right to buy the underlying stock at
  the agreed price (strike price) and time. If the stock price increases
  and exceeds the strike price, call option holder can buy the stock at
  the agreed price which is lower than the market price of the stock.

  The Company would in return reduce its risk by hedging its exposure.

  Apart from the basic option as mentioned earlier, the Company has been
  launching more complex derivatives, such as Put Spread, Asian Call
  Spread and Digital Call Options, and will innovate more and more to
  match clients’ risk and return profiles in the future. The Company
  will regularly organize training/seminars to ensure that our clients
  thoroughly understand the products before investing in equity
  derivatives with us and that our equity derivatives products would
  help reduce risk and/or enhance return of clients’ portfolio.

2. Structured Products

  In 2006, the Company focused on developing structured products which
  combines equity derivatives with money market instruments to serve
  those clients who want to invest in both equity market and money
  market. In this first stage, the Company offered two types of
  structured products exclusively to institutional clients who have good
  understanding and knowledge of derivatives. The two structured
  products are:

  2.1 Principal Protected Note: To serve the needs of clients who
  require principal protection on their investment (can not tolerate
  loss), and also a high return from investment in equity market;

  2.2 Equity Linked Note (ELN): To serve the needs of the clients who
  prefer investment in short term money market with high yield and who
  can invest in equity market. At present, we provide various types of
  ELN with maximum term of 270 days, whose return is linked to the price
  of a SET-listed stock or basket of stocks with good fundamental and
  high trading volume (Blue chip Stock), including ELN-Vanilla,
  ELN-Up&Out, ELN-Down&Gain, ELN-Buffer and ELN-4U

(I) Futures Business

The Company set up a new department, the Futures Department, to act as
an agent for clients who wish to trade futures. The Company received a
license to conduct futures business from the Securities and Exchange
Commission (SEC) and also got approval to act as a futures broker from
the Thailand Futures Exchange Plc. (TFEX) and the Thailand Clearing
House Co., Ltd. (TCH). Futures trading started on 28 April 2006.

The Company itself also trades futures. Further, it also acted as one of
the first three market makers to help increase the liquidity of the
Thailand Futures Exchange (TFEX).

In 2006, the Company ranked No. 1 with 16.53% of the SET 50 Index market
shares. The Company won the “Best House of the Year 2006”, which was
given to the futures brokerage firm with the outstanding performance and
best service quality, and won the “Most Active House 2006”, which was
given to the futures brokerage firm with the most active futures
derivatives business, at the TFEX Best Awards 2006.

(2) MARKET OVERVIEW AND COMPETITION

Market Overview

Thailand’s stock market was extremely volatile in 2006. By the end of
the year, the market had fallen by 4.8% following a 6.8% gain in the
previous year. The key reason for the market volatility and relatively
poor performance was the deteriorating political situation. Starting
with the dissolution of parliament in February 2006 and the snap
election in April 2006, the situation became more uncertain as the Thai
courts nullified that election, leading to a political vacuum. On Sep
19, the military staged a peaceful coup d’etat and set up a new interim
government.

After that, Thai market conditions improved significantly, and the SET
Index posted sharp gains from October to November. However, in December,
in order to try and curb the strengthening of the Thai baht, the Bank of
Thailand imposed controls on short-term capital flows. The impact on the
stock market was devastating, and despite the measures being partially
withdrawn the following day, the new FX regulations resulted in a
decline in the SET for the full year.

On the economic side, Thai GDP grew strongly, increasing by 6.1% in
1Q06. However, the main reason was the low base effect from 1Q05. During
2Q06 and 3Q06, Thai economic growth remained solid at 4.9% and 4.7%.
However, the relatively good economic performance was overshadowed by
the political issues described above.

In 2006, daily average turnover was Bt16.4bn, slightly lower than
Bt16.5bn in 2005. Meanwhile, foreign investors were net buyers of Bt85bn
for the year as a whole. Market capitalization of SET stood at Bt5.08trn
at the year end, a decline of just 0.69% compared with Bt5.11trn in
2005.

Stock Exchange of Thailand 

+--------------------------+--------+--------+--------+--------+-------+
|                          | 2002   | 2003   | 2004   | 2005   | 2006  |
+--------------------------+--------+--------+--------+--------+-------+
|   Total trading value    | 2,0    | 4,6    | 5,0    | 4,0    | 3,97  |
|   (Baht million)         | 47,442 | 70,281 | 35,816 | 31,240 | 4,561 |
+--------------------------+--------+--------+--------+--------+-------+
|   Avg. daily trading     | 8,357  | 18,908 | 20,388 | 16,454 | 1     |
|   value* (Baht million)  |        |        |        |        | 6,394 |
+--------------------------+--------+--------+--------+--------+-------+
|   Total market           | 1,9    | 4,7    | 4,5    | 5,1    | 5,07  |
|   capitalization (Baht   | 86,236 | 89,857 | 21,894 | 05,113 | 8,705 |
|   million)               |        |        |        |        |       |
+--------------------------+--------+--------+--------+--------+-------+
|   SET Index (year-end)   | 356.5  | 772.2  | 668.1  | 713.7  | 679.8 |
+--------------------------+--------+--------+--------+--------+-------+
|   Dividend yield (%)     | 2.72   | 1.81   | 2.75   | 3.37   | 4.23  |
+--------------------------+--------+--------+--------+--------+-------+
|   P/E ratio (times)      | 7.0    | 13.7   | 9.4    | 9.4    | 8.1   |
+--------------------------+--------+--------+--------+--------+-------+
|   P/BV ratio (times)     | 1.36   | 2.71   | 2.0    | 1.91   | 1.65  |
+--------------------------+--------+--------+--------+--------+-------+
|   No. of listed          | 389    | 407    | 439    | 468    | 486   |
|   companies              |        |        |        |        |       |
+--------------------------+--------+--------+--------+--------+-------+

Note : * Year 2002-2005: Not including MAI, Year 2006 : Include both SET
and MAI

During 2006, there were not many new listings due to the uncertainties
surrounding Thai politics. Including the Market for Alternative
Investment (MAI), 18 companies were listed on the Thai equity markets in
2006.

IPO stocks in 2006

  -------------------- ----------------------- --------------------------
  Stock                First trading date      IPO size (Baht million)

  GSTEEL               25 Jan 06               2,400

  CITY                 23 Feb 06               265

  TRT                  10 May 06               173

  TOG                  16 May 06               190

  SECC                 18 May 06               300

  RRC                  5 Jun 06                25,155

  AKR                  7 Aug 06                491

  DSGT                 10 Aug 06               241

  RICH                 31 Aug 06               225

  FORTH                8 Sep 06                470

  JTS                  18 Sep 06               560

  BMCL                 21 Sep 06               3,610.94

  TIES                 28 Sep 06               98

  BSEC                 22 Nov 06               840

  UKEM                 27 Nov 06               86

  BROCK                28 Nov 06               240

  ETG                  29 Nov 06               85

  DEMCO                14 Dec 06               153
  -------------------- ----------------------- --------------------------

Overall equity trading in 2006 faced high volatility whilst turnover was
flat compared to the previous year and foreign investors increased their
share of market turnover. As a result, competition between securities
firms, especially local firms, remained fierce. The increased foreign
participation resulted in a slightly higher market share for the top 10
securities firms, and most of which concentrated on foreign clients. The
market share of the top 10 brokers edged up from 50.1% in 2005 to 51.6%
in 2006.

Top 10 securities brokers (2006)

  --------- ---------------------------------- ----------- ---------------
  Rank      Company Name                       Name        Market Shares
                                                           (%)

  1         Kim Eng Securities (Thailand) Plc. KIMENG      8.55

  2         SCB Securities Plc                 SCBS        6.40

  3         Asia Plus Securities Plc           ASP         6.19

  4         Phatra Securities Plc.             PHATRA      5.83

  5         CSFB Securities (Thailand) Ltd.    CSFB        5.16

  6         UBS Securities (Thailand) Ltd.     UBS         4.66

  7         KGI Securities (Thailand) Plc      KGI         3.94

  8         Seamico Securities Plc             ZMICO       3.76

  9         BFIT Securities Co.,Ltd            BFIT        3.61

  10        Bualuang Securities Plc.           BLS         3.54

            Others                                         48.36

            Total                                          100.00
  --------- ---------------------------------- ----------- ---------------

Source: The Stock Exchange of Thailand

Industry trend in 2007

It’s likely that the Thai stock market in 2007 will face continued high
volatility as it did during the end of 2006. Foreign investor sentiment
towards the Thai market has deteriorated as a result of regulatory
issues, particularly the partial capital control and the amendment of
the Foreign Business Act. Investors are also concerned about security in
the Thailand capital following a series of year-end bomb explosions.

However, there is a good chance that stock market conditions will
improve in 2Q07, as the Thai economy is expected to improve in the
second half of this year. A key fundamental for the economy, the oil
price, has been trending downtrend. This should ease inflation pressure
and act as downside cushion for Thai consumption. Coupled with expected
increased public expenditure, Thai GDP growth for 2007 should be in the
4.5-5% range. Lastly, daily average turnover in 2007 should be very
close to that in 2006, around Bt16bn.

(3) Funding for Products and Services

(A) Source of funds

  If the Company requires new funds, the Company’s policy is to try to
  procure the cheapest source of funds available, and to match the
  duration of any loan to its needs. As far as possible, the Company
  will not depend upon one source of funds.

(B) Subordinated Loans from Subsidiary

  The Company has subordinated loans from an overseas subsidiary
  company. These loans are unsecured, interest free Baht loans maturing
  in September 2008. During the year of 2006, the Company received
  dividends from this overseas subsidiary company with total amounting
  to Baht 325 million, and used this to offset against loans borrowed
  from the subsidiary. As of 31 December 2006, the outstanding balance
  of the subordinated loan is approximately Baht 1,720 million.

(C) Net capital adequacy ratio

  The Office of Securities and Exchange Commission requires that all
  securities companies should maintain a Net Liquid Capital Rule (NCR)
  ratio of at least 7% of total liabilities. Currently, the Company’s
  NCR ratio exceeds the SEC’s requirement. As of 31 December 2006, the
  Company’s NCR was 39.20%.

(D) Liquidity management policy

  The Company analyses its cash flow needs on a daily basis and tries to
  match its funding and investment in money market instruments to its
  needs as forecasted.