Assets used for business

  5.1 Fixed assets of the Company and its subsidiaries

  A. Assets used in the Company’s business are as follows:

Fixed assets of KGI Securities (Thailand) Public Company Limited 

+-------------------------+-------------+------------+---------------+
| Description             | Net book    | Ownership  | Collater      |
|                         | value (Bt)  |            | al/obligation |
| (As of December 31^(st) |             |            |               |
| 2002)                   |             |            |               |
+-------------------------+-------------+------------+---------------+
| 1.  Land (Supanburi     | 1,820,000   | Company’s  | N.A.          |
|     branches)           |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 2.  Building (Supanburi | 1,851,259   | Company’s  | N.A.          |
|     branches)           |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 3.  Office furniture    | 42,162,017  | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 4.  Office equipment    | 79,677,278  | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 5.  Vehicles            | 19,896,714  | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 6.  Leased vehicles     | 8,440,225   | Leasing,   | Collateral of |
|                         |             | Hire       | leasing       |
|                         |             | Purchase   | agreement     |
+-------------------------+-------------+------------+---------------+
| 7.  Work in process     | 28,604,832  | Company’s  |               |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
|                         | 185,452,325 |            |               |
+-------------------------+-------------+------------+---------------+

  B. Assets used for subsidiaries’ business are as follows:

+-------------------------+-------------+------------+---------------+
| Description             | Net book    | Ownership  | Collater      |
|                         | value (Bt)  |            | al/obligation |
| (As of December 31^(st) |             |            |               |
| 2002)                   |             |            |               |
+-------------------------+-------------+------------+---------------+
| 1.  Building Renovation | 8,092,030   | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 2.  Office furniture    | 1,676,334   | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 3.  Office equipment    | 10,191,811  | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
| 4.  Vehicles            | 4,369,179   | Company’s  | N.A.          |
|                         |             | asset      |               |
+-------------------------+-------------+------------+---------------+
|                         | 24,329,354  |            |               |
+-------------------------+-------------+------------+---------------+

  5.2 Rental area

  The Company rents the following space to operate business at head
  office and branches

+---------------------+-------------------------------+----------------+
| Branch              | Lessor                        | Remaining      |
|                     |                               | period of      |
|                     |                               | lease as at 31 |
|                     |                               | December 2002  |
+---------------------+-------------------------------+----------------+
| 1. Head office      | United Center Co., Ltd.       | 3 years 1      |
|                     |                               | month          |
+---------------------+-------------------------------+----------------+
| 2. Chiang Mai       | Pornping Pavilion Co., Ltd.   | 2 years 1      |
|                     |                               | month          |
+---------------------+-------------------------------+----------------+
| 3. Nakorn           | Individual                    | 1 year         |
| Ratchasima          |                               |                |
+---------------------+-------------------------------+----------------+
| 4. Samutsakorn      | A.T. Asset Co., Ltd.          | 1 year 6       |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 5. Nakorn Sawan     | Individual                    | 2 years 8      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 6. Pin Klao         | Central Pattana Co., Ltd.     | 1 year 10      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 7. Nakhon Pathom    | Individual                    | 2 years 6      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 8. Chiang Rai       | Individual                    | 2 years 8      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 9. Petchaburi       | Individual                    | 5 months       |
+---------------------+-------------------------------+----------------+
| 10. Surawongse      | Alliance Co., Ltd.            | 2 years        |
+---------------------+-------------------------------+----------------+
| 11. Asoke^(/1)      | Thai Realty Complex Co., Ltd. | 10 months      |
+---------------------+-------------------------------+----------------+
| 12. Yaowaraj        | Yawawong Co., Ltd.            | 1 year 11      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 13. Had Yai         | Lee Garden Hotel Co., Ltd.    | 1 year 11      |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 14. Udonthani       | Udonphonetech Partnership     | 1 year 6       |
|                     |                               | months         |
+---------------------+-------------------------------+----------------+
| 15. Silom           | Silom Building and Service    | 2 years 9      |
|                     | Co., Ltd.                     | months         |
+---------------------+-------------------------------+----------------+
| 16. Ratchada        | Chatchwal Joint-venture       | 1 year 9       |
|                     | Co.,Ltd.                      | months         |
+---------------------+-------------------------------+----------------+

Note: /1 Asoke branch was closed on 17 March 2003 and lease was
transferred to another leasee.

  5.3 Loans for securities trading in credit balance accounts

  As of 31 December 2002, the Company’s loans for securities trading in
  credit balance accounts were Bt216mn with the details of the business
  as follows

A.  Policy on loans for securities trading in credit balance

The provision of loans for securities trading in credit balance accounts
is based on a system that considers the value of a client’s portfolio on
a mark to market basis. A client who intends to trade in a credit
balance account must deposit cash with the Company of not less than
initial margin rate set by the Company before he executes his first
trade. The client may only buy securities included in the Company’s
marginable securities list. The Company will adjust the value of
securities, using the market price, each day. This may result in
changing the client’s purchasing power and margin calls as the value of
collateral changes with the market value.

  The Company’s policy on managing its risk in credit balance accounts
  are as follows:

1.  The Company calculates the purchasing power from the excess equity
    of that account

2.  Clients are not allowed to buy securities with a value greater than
    their purchasing power at the time.

3.  Clients are not allowed to sell the securities which they do not
    possess.

4.  In the case where there is a change in securities included in the
    marginable securities list, and it is found that a client has
    already bought securities removed from the list, the Company will
    transfer those securities out of the credit balance accounts. If
    after the transfer, the client’s assets are reduced to a point where
    the Company has to call for additional collateral, the client must
    deposit cash or other assets with the Company in order to meet the
    minimum requirement.

5.  The Company will announce the list of marginable securities on a
    regular basis. Clients will be informed whenever there is a change.

B.  Policy on revenue recognition

  Interest is recognized over the term of the loans based on the amount
  of principal outstanding. No accrual has been made for certain loans
  which, under Notification No. Kor. Thor. 33/2543 dated 25 August 2002,
  and updated by Notification No. Kor. Thor. 5/2544 dated 15 February
  2001 of the SEC, are not qualified for recognition of interest on an
  accrual basis.

  (C). Policy on type of acceptable collateral

  The types of asset to be accepted as collateral when calculating the
  purchasing power in credit balance accounts are:

1.  Cash

2.  Securities allowed by the Company to be bought or sold in credit
    balance accounts

  (D). Policy on control and follow up debts

6.  

7.  

8.  

9.  

10. 

11. In the case where there is bad debt from credit balance accounts,
    the Company has a policy to control and follow up the debts as
    follows:

1.  Operations Department will inform Head of Legal Division about the
    default after the due date.

2.  Legal Division will then collect all the documents relating to the
    default and investigate and get more details from marketing officer.

3.  Legal Division will then negotiate with default client regarding the
    repayment to the Company:

    1.  In the case where default client agrees to repay, Legal Division
        will prepare the repayment agreement to be signed by default
        client.

    2.  In the case where the negotiation fails, Legal Division will
        issue legal notice of demand to the default client.

4.  In the case where Legal Division has issued the legal notice and
    there is still no repayment made by default client, Legal Division
    will prosecute the case in the court.

  (E). Policy on provision for doubtful accounts

  The Company provides an allowance for doubtful debts based on a review
  of debtor’s ability to make repayment, taking into consideration
  recovery risk and the value of the collateral. Such debt
  classifications and provisions are made in accordance with the
  guidelines laid down in Notification No. Kor. Thor. 33/2543 dated 25
  August 2000, updated by Notification No. Kor. Thor. 5/2544 dated 15
  February 2001 of the SEC, and consideration of other relevant factors.
  However, during the first quarter of the year 2002, the Company has
  set up an additional general provision of Bt20 million.

  5.4 Investment

  As of 31December 2002, the Company had net investments of Bt5,668mn
  which consisted of Bt3,080mn in securities held for sale (bonds and
  convertible bonds) (see detail in item 8(E) Re: bonds and convertible
  bonds), Bt1,397mn in trading securities, Bt1,120mn in debt securities
  due within 1 year, Bt63mn in other securities and Bt8mn in
  held-to-maturity securities

(A) Investment in securities

The Company reviews its investment policy periodically. The relevant
departments will propose investment policies to the Proprietary
Investment Committee for consideration and approval. Such policies
include the department’s view of the market and the macro environment,
types of asset class or securities, holding period, portfolio line, and
risk management controls

 (B) Risk management of investments

The Company’s Risk Management Division follows up and reviews on a daily
basis the risks associated with each type of investment (see detail in
roles and responsibilities of Proprietary Investment Committee and Risk
Management Committee).

(C) Policy on provision for reduction in investment value

  The Company has policy on provision for reduction in investment value
  as follows:

  a) Investments in securities held for trading are shown at fair value.
  Gains or losses arising from changes in the carrying amount of
  securities are included in determining earnings.

b) Investments in available-for-sale securities are determined at fair
value. Changes in the carrying amount of securities are recorded as a
separate items in the shareholders’ equity until securities are sold,
the changes are then included in determining earnings.

c) Investments in debt securities both due within one year or expected
to be held-to-maturities are determined at cost after amortisation.

d) Investments in non-marketable equity securities, which the Company
classify as other investments, are valued at cost.

e) Investment in subsidiary company and associated company are accounted
for under the equity method.

Fair value of marketable securities is based on the latest bid price of
the last working day of the year as quoted on the Stock Exchange of
Thailand and other factors. Fair value of government bonds, state
enterprise securities and private debt instruments is determined by
based on yield rate quoted by the Thai Bond Dealing Center. The fair
value of unit trust is valued at net assets value.

Losses on impairment of investments (if any) are included in determining
earnings. Allowance for loss on the impairment of other investments is
based on the net book value of ordinary share and other relevant
factors.

  The weighted average method is used for computation of the cost of
  investments.

(D) Investment in subsidiary companies

The Company’s policy is to maximize value for its shareholders and its
investments in subsidiaries are made with that objective in mind. The
Company will send representatives to the Board of Directors of the
subsidiaries to ensure that the Company’s interest is protected.