Business Lines

(1) Types of services

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 customers. The Company also
provides research for its clients in order to support them in making
accurate and effective investment and trading decisions.

In 2002, the Company ranked No. 4 with a 7.56% equities brokerage market
share. For trading in equities, clients can open either a cash account
or a credit balance account . Cash account clients also have the option
to trade through internet trading system.

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

  ---------------------- ---------- -------- ---------- -------- ---------- --------
  Trading Volume         2000       %        2001       %        2002       %

  SET (Bt mn)            3,705.93            6,439.82            8,414.86   

  The Company (Bt mn)    467.30              658.28              1,272.73   

  The Company’s market   6.30%               5.11%               7.56%      
  share (%)                                                                 

  Breakdown by types of                                                     
  clients                                                                   

  - The Company’s        -          -        -          -        -          -
  portfolio                                                                 

  - Local institution    53.12      11.37    48.42      7.36     83.83      6.59

  - Sub broker           -          -        -          -        -          -

  - Retail client        243.39     52.08    502.64     76.36    1,015.50   79.79

  - Foreign client       170.79     36.55    107.22     16.28    173.40     13.82

  Total                  467.30     100.00   658.28     100.00   1,273.73   100.00

  Breakdown by types of                                                     
  account                                                                   

  - Cash account         464.11     99.32    650.57     98.83    1,203.68   94.57

  - Credit balance       3.19       0.68     7.71       1.17     69.05      5.43
  account                                                                   

  Total                  467.30     100.00   658.28     100.00   1,273.73   100.00
  ---------------------- ---------- -------- ---------- -------- ---------- --------

To better reflect the current economic circumstances and the growth of
capital market, the company has a policy to expand its business by
expanding its network throughout the country. As of 31 December 2002,
the Company had 16 branches as follows;

+------+---------------------+-----+----------------------------------+
| 1.   | Chiang Mai          | 9.  | Petchburi                        |
+------+---------------------+-----+----------------------------------+
| 2.   | Nakhon Ratchasima   | 10. | Surawongse, Bangkok              |
+------+---------------------+-----+----------------------------------+
| 3.   | Samutsakorn         | 11. | Asoke, Bangkok^(/1)              |
+------+---------------------+-----+----------------------------------+
| 4.   | Supanburi           | 12. | Yaowaraj, Bangkok                |
+------+---------------------+-----+----------------------------------+
| 5.   | Nakornsawan         | 13. | Had Yai                          |
+------+---------------------+-----+----------------------------------+
| 6.   | Pin Klao, Bangkok   | 14. | Udonthani                        |
+------+---------------------+-----+----------------------------------+
| 7.   | Nakorn Pathom       | 15. | Silom                            |
+------+---------------------+-----+----------------------------------+
| 8.   | Chiang Rai          | 16. | Ratchada, Bangkok                |
+------+---------------------+-----+----------------------------------+

  Note: /1 Asoke branch was closed on 17 March 2003

(The Company opened Ratchadapisek branch on 8 January 2003)

Policy in accepting the Clients

Types of clients opening the account with the Company are as follows:

1.  Individual who may be a Thai national or a foreigner

2.  Juristic persons categorized as follows:

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

-   Foreign financial institutions

-   Juristic persons registered in Thailand, which are a limited
    partnership or a limited company

-   Juristic persons registered abroad

For individual clients, in deciding whether to accept a client and the
credit line to be given to that client, the Company will consider the
occupation, place of residence, years of work, revenues, financial
status, and debt service ability of the client. For juristic persons,
the Company will consider financial position and status, shareholders,
and management as well as their operations.

Account opening procedures

(1) Cash Account

    1.  If a client would like to open an account with the Company, a
        marketing officer will request sufficient documentary evidence
        from the client in order to understand the client’s investment
        objectives, their understanding and experience of investing in
        securities, the client’s financial status and debt service
        ability. Documentary evidence which must be submitted to the
        Company include; copy of ID card, copy of house registration,
        copy of company’s affidavit (in case of juristic person), copy
        of business license (in case of specific business), specimen
        signatures (in case of juristic person), copy of bank book,
        other evidence showing client’s assets, copy of audited
        financial statements for the past 2 years (in case of juristic
        person) together with 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 risk management officer to grant a credit
        line for the client.

    2.  The risk management 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,
        and then propose to the appropriate authorised persons to
        approve the credit line.

(2) Loan for trading in credit balance account and Company’s policy on
    margin securities

  2.1 The Company provides loans for trading in credit balance accounts
  with the same criteria of credit line issuing as in cash accounts.

  2.2 The Company produces a list of marginable securities which have
  good fundamentals and high liquidity in the market. The Company will
  specify the initial margin of each security and review the list of
  marginable securities at least once a month. However, the margin of
  each security will not be lower than the margin specified by SEC or
  SET.

  2.3 The Company has a very strict plan in controlling and managing
  loans and has a system that alerts the company when cash or other
  assets are required from client to meet the collateral requirement.
  Therefore, the Company believes that the risk from providing loans for
  trading can be minimized.

(3) Cash trading through internet system

  3.1 The Company provides an internet trading service (Internet
  Trading) with the same criteria of credit line issuing as for cash
  accounts.

  3.2 Once the account has been opened, according to the Company’s
  regulations, the Company will inform the client of the user password
  to access to the system and after that will send a trading password
  (in sealed envelope) to the client. In the envelope there will be no
  user password to protect the client. The first time the client
  accesses the system, the client must key in his/her own trading
  password before accessing the trading system.

Authority in approving credit line for cash accounts, credit balance
accounts and internet accounts

The company has implemented “different levels of authority” of persons
authorized to approve credit lines for cash accounts, credit balance
accounts and internet accounts. The level starts from marketing division
head up to Chief Operating Officer).

For a substantial credit line, it is required that 1 managing directors
and Chief Operating Officer must sign the approval . The policy on
credit line approval has been set up by the Credit Risk Sub-committee.

  (B). Trading in securities

The Company invests in government bonds, state enterprise bonds,
corporate bonds and equity instruments. For each type of investment, the
investment line and policy on risk control are specified and reviewed
monthly or when appropriate. As of 31 December 2002, the Company’s net
investment was Bt5,668 million (54% in securities held for sale, 25% in
trading securities, 20% in debt securities due within one year and 1% in
others). The Company focuses on investments in securities with high
liquidity and good return.

  (C). Financial advisory and securities underwriting

The SEC has granted the Company approval to operate a financial advisory
business under the scope specified by SEC that covers acting as a
financial advisor in a securities public offering. The Company also
provides a securities underwriting service to those firms intending to
issue both fixed income and equity securities.

In the year 2002, the Company acted as underwriter for 8 firms; Bangkok
Aviation Fuel Services Plc., Traffic Corner Holdings Plc., Shun Thai
Rubber Gloves Industry Plc., Aapico Hitech Plc., Krungthai Card Plc.,
Lalin Property Plc., Siam Future Development Plc. and President Bakery
Plc. Moreover, the Company acted as financial advisor for 3 firms and as
an advisor for 1 property fund.

  (D). Securities registrar

The Company received approval to conduct securities registrar business
on 14 June 1994. As of 31 December 2002, the Company was a securities
registrar for debentures and warrants of 3 companies; debentures of
Quality House Plc., warrants of Minor Corporation Plc., and warrants of
Royal Garden Resort Plc.

  (E). Private portfolio management

The Company began a private portfolio management business in November
1998. As of 31 December 2001, the Company acted as private portfolio
manager for 7 portfolio with asset value of Bt180.69mn.

The Board of Directors’ Meeting No. 1/2002 held on 21 February 2002
acknowledged the transfer of Private Portfolio Management (PPM) business
to One Asset Management Limited (OAM), a the97% owned subsidiary (as of
31 December 2002). By transferring the PPM business to OAM the Company
benefited from economies of scale by sharing resources with OAM, which
also has its own private fund business. The transfer of customers’
assets and fund manager to OAM was completed on March 7 and 11, 2002,
respectively.

As OAM’s profits are consolidated, the Company’s profits will not be
significantly affected by this transfer.

(F). 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 can act as a principal or as an agent of the lender or borrower.
As of 31 December 2002, the Company had securities receivables of SBL
business totaling Bt340 million.

  (G) Selling Agent

In year 2002, the SEC approved the Company to act as a selling agent of
mutual funds. As of 31 December 2002, the Company had been appointed as
a selling agent by 5 leading asset management companies.. The 5 asset
management companies are:

-   Aberdeen Asset Management Co., Ltd.

-   Ayudhaya JF Asset Management Co., Ltd.

-   SCB Asset Management Co., Ltd.

-   ING Mutual Funds Management (Thailand) Co., Ltd.

-   One Asset Management Co., Ltd.

The Company offers various investment alternatives to ensure that
clients can make an investment that is suitable to them given their
expected return and acceptable level of risk.

(2) Market and competition

Industry overview

In 2002, the macro trading situation was better than in 2001. The market
daily average turnover surged 29.8% from Bt6.44bn in 2001 to Bt8.36bn in
2002. The SET index at the first trading day of 2002 was 304.00 and on
the last day closed at 356.48 points, yielding a 17.36% return for the
full year. This return made the Thai market the best performing stock
market in the region. Two different trends were apparent during the
year; a distinct up-trend in the first half of 2002, followed by a
moderate downtrend in the second half of 2002 as Middle East tensions
dampened the market sentiment.

During the first half of 2002, the outlook for the SET index was
positive due to an improving Dow Jones index. Additionally, a strong
domestic economy improved investor confidence, especially amongst
foreign investors. Commercial banks cut interest rates by 25bps in
February helping to boost the purchasing power of consumers, in line
with the Government stimulus policy. The SET index reached the highest
point of the year on June 14, 2002 at 430.67, or a 41.6% increase from
the beginning of the year.

It should be noted that the index in 2002 was less volatile than in
2001. The domestic outlook was still positive throughout the rest of the
year. Listed companies earnings throughout the year tended to be
stronger than expected. Also, the GDP growth consensus was revised
upwards many times due to the improving outlook for the Thai economy,
driven by rising domestic consumption and exports.

The index was adversely affect by a decline in US stock markets from May
2002 in part due to corporate governance problems arising in the USA,
starting with Enron and Worldcom. More importantly, fears of a second
gulf war grew in the second half of 2002. US President Gorge W. Bush
charged that Iraq had violated UN security council orders by
accumulating hazardous chemical and biological weapons, and if Iraq
would not disarm, the US would use military force against Iraq.

During the last 2 months of 2002, SET index recovered moderately due to
improving confidence of investors, both foreign and local, after the
3^(rd) quarter GDP growth surprised on the upside at 5.8% indicating the
strong recovery of the economy. Also, a number of new listed companies
entered the SET during this period. Thus, at the end of 2002 the index
closed at 356.48pts, or up 17.36% for the year, making Thailand as one
of the best performing markets globally.

Stock market

  ----------------------------- -------------- -------------- -------------- --------------
                                1999           2000           2001           2002

  Total trading value (Bt mn)   855,168.74     1,609,697.99   1,577,757.97   2,047,442.23

  Avg. daily trading value (Bt  3,504.79       6,570.20       6,439.83       8,356.91
  mn)                                                                        

  Total market capitalization   1,268,198.50   2,193,067.04   1,607,309.60   1,986,236.47
  (Bt mn)                                                                    

  SET index (year-end)          355.81         481.92         303.85         356.48

  Dividend rate (%)             1.34           0.61           2.06           2.72

  P/E ratio (times)             10.04          14.70          4.92           6.98

  P/BV ratio (times)            1.05           1.72           1.29           1.36

  No. of listed companies       418            392            382            389
  ----------------------------- -------------- -------------- -------------- --------------

Source: The Stock Exchange of Thailand

Competition

Since January 14, 2002, a minimum brokerage commission rate of 0.25% of
trading value for all types of investors and 0.2% for Internet trading
investors has been put into effect. The focus of securities industry
competition therefore changed from commission rate, popular in 2001, to
the acquisition of new customer accounts through the hiring of marketing
personnel from rival firms. In addition in 2002 the number of securities
companies increased from 27 in 2001 to 36 in 2002, intensifying the
level of competition.

Increasing competition from new entrants is fragmenting the industry and
reducing existing brokers’ market share. The market share of the top ten
companies fell from 65.14% in 2001 to 60.32% in 2002.

Top 10 securities brokers (2002)

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

  1        Kim Eng Securities (Thailand) Plc.  KIMENG      12.67

  2        Seamico Securities Plc.             ZMICO       7.90

  3        ABN AMRO Asia Securities Plc.       AST         7.85

  4        KGI Securities (Thailand) Plc.      KGI         7.58

  5        Capital Nomura Securities Plc.      CNS         4.94

  6        UOB Kay Hian Securities (Thailand)  UOBKHST     4.31
           Co.,Ltd.                                        

  7        TISCO Securities Co.,Ltd.           TISCO       3.92

  8        Merrill Lynch Phatra Securities     MLP         3.86
           Co.,Ltd.                                        

  9        DBS Vickers Securities (Thailand)   DBSV        3.73
           Co.,Ltd.                                        

  10       Phillip Securities (Thailand)       PHILLIP     3.56
           Co.,Ltd.                                        

           Others                                          39.68

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

Source: The Stock Exchange of Thailand

Securities industry trend in 2003

Global stock markets, including the SET, are currently clouded by
tensions between the USA and Iraq. The critical consequences of these
concerns are twofold, firstly, daily trading volumes have decreased with
investors waiting for a clear conclusion to the situation. Secondly, the
stagnant stock market conditions have forced companies and state
enterprises that want to list on the SET to delay their IPO or PO, thus
hurting another important income stream of Thai brokers.

However, once war tensions pass, and if the US can resolve the Iraq
issue quickly, the Thai stock market is likely to be supported by its
many positive factors, such as strong economic growth, low interest
rates and cheap valuations. Once the Middle East conflict is resolved we
expect foreign funds flows and domestic switching out of bank deposits
and bonds to lift both the market index and market volumes.

(3) Products and services

A.  Source of funds

As of 31 December 2002, the Company had outstanding foreign debts of
Bt561 million, which belonged to HOLDCO. The loan was repaid on 21 March
2003. If the Company should require new funds, the Company’s policy will
be 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 fund.

B.  Proportion of funding or giving loans through party related to
    management or major shareholder

Besides the loans and advances from related companies as disclosed in
item no. 11 Re: Connected Transactions, the Company has no other funding
or loans to/from through parties related to management or major
shareholder.

C.  Net capital adequacy ratio

The Office of Securities and Exchange Commission requires that all
Securities Companies should maintain a net capital adequacy ratio (NCR)
of at least 7% of total liabilities, with effect from 2001. Currently,
the Company’s net capital adequacy ratio (NCR) exceeds the SEC’s
requirement i.e. as of 31 December 2002, the Company’s NCR was 497.53%.

D.  Liquidity management policy

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