Description of business

2.1 Background and major development

-   The Company started its securities business operations in year 1986
    after Thai Farmers Bank Public Company Limited, Finance One Public
    Company Limited and a group of major shareholders of Finance One
    Public Company Limited acquired Goldhill Company Limited from the
    existing shareholders.

-   The Company became a member of the Stock Exchange of Thailand in May
    1987 and registered as a public company on 6 May 1993.

-   In 1997 the Company made a tender offer to acquire 100% of First
    Asia Securities Public Company Limited. After the tender offer, the
    Board of Directors of First Asia Securities Public Company Limited
    approved the delisting of First Asia Public Company Limited’s shares
    from the Stock Exchange of Thailand.

-   In 1998 the Company approved an increase of paid-up capital from
    Bt1,192mn to Bt8,192mn and allocated 280mn shares to existing
    shareholders at the ratio of 3 existing shares to 7 new shares at a
    price of Bt5 per share and allocated 420mn shares to KGI Group
    together with 700mn units of warrant no. 3 at the ratio of 1 common
    share to 1 warrant to those shareholders who subscribed for the new
    shares.

-   In 1999 the Company issued 1,500mn units of warrant no. 4 and
    allocated them to existing shareholders whose name appeared on the
    share register book as of 12 March 1999 at the ratio of 1 common
    share to 1 warrant.

-   The Company changed its name to KGI Securities One Public Company
    Limited on 12 July 1999.

-   As part of its plan to expand its securities business and investment
    banking business to other countries in the region, the Company acted
    as follows:

-   In 1999 a shareholder meeting approved the Company’s proposed
    acquisition of a securities and investment banking company in Hong
    Kong. In addition, the Company increased its paid-up capital from
    Bt9,880mn to Bt14,880mn by allocating new shares to existing
    shareholders at the ratio of 2 existing share to 1 new share at a
    price of Bt5.00 per share to be used as a source of funds in
    expanding its business overseas.

-   In December 1999 a shareholder meeting approved the Company’s plan
    to acquire a company which operated securities business in Korea.

-   Due to restrictions on the transfer of money overseas by Government
    related agencies, the Company invested in the Korea securities
    business through KGI International Holdings Limited (KGII), a
    company registered in Cayman Island, which was 46.6% owned by the
    Company.

-   In August 2000, a Board of Directors’ Meeting resolved not to ratify
    the signing of contract to acquire the securities business of
    Sassoon Group in Singapore between KGII and existing shareholders of
    Sassoon Group. Subsequently, in September 2000, KGII returned its
    assets to its shareholders proportionately to their holdings.

-   Between October and December 2000, KGII changed its capital
    structure and issued shares to other investors. Therefore, as of end
    of December 2000, the Company’s holding in KGII via HOLDCO reduced
    to 0.45%.

-   In March 2001 a shareholder meeting approved the Company’s plan to
    sell its overseas investments to KGII in exchange for convertible
    bonds and bonds issued by KGII

-   On 25 May 2001 the Company changed its name to KGI Securities
    (Thailand) Public Company Limited.

-   In August 2001, the Company increased its holding in One Asset
    Management from 75% to 100%

Significant developments from 2002 to date

2 January 2002 Pattani branch was closed

14 January 2002 Yaowaraj branch, Bangkok was opened

16 January 2002 SEC authorized the Company to act as selling agent for
mutual funds

25 February 2002 Phuket branch was closed

1 March 2002 Private fund management division was transferred to One
Asset Management Limited, a wholly owned subsidiary

15 May 2002 Board of Directors’ Meeting approved the Company to set up a
new company with registration in British Virgin Island called KGI
(Thailand) Holdings Limited (KTHL) to create a more efficient structure
to hold the Company’s overseas assets

31 May 2002 Warrant no. 3 expired. Warrant holders exercised the
warrants of 445 million units and as a result the Company received the
proceeds of approximately Bt900mn

24 June 2002 Udonthani branch was opened

8 October 2002 Silom branch, Bangkok was opened

17 October 2002 Ratchada branch, Bangkok was opened

6 November 2002 The Company cancelled its Private portfolio management
licence

14 November 2002 To facilitate the Employee Share Option Program of One
Asset Management Co, the Extraordinary General Meeting of Shareholders
of One Asset Management Co approved the increase of its capital from
Bt100 million to Bt103 million by issuing 300,000 new shares at par Bt10
to be allocated to employees and directors of One Asset Management Co.
The increase of capital was registered with Ministry of Commerce on 26
December 2002, therefore, as of 31 December 2002, the Company’s holding
had reduced from 100% to 97%.

1 December 2002 Cholburi branch was closed

8 January 2003 Ratchadapisek branch, Bangkok was opened

9 January 2003 The Extraordinary General Meeting of shareholders no.
1/2003 approved the following:

-   Approved the Company to reduce capital by cancellation of unissued
    shares previously reseved to accommodate exercise by the holders of
    Warrant #1, Warrant #2 and Warrant #3 (which already expired).

-   Approved the Company to transfer its general, legal and share
    premium reserves to compensate for certain of its accumulated
    losses.

-   Approved the Company’s capital restructuring plan as follows:

-   Approved sale of convertible bonds and straight bonds issued by KGII

-   Approved the Company’s capital reduction by way of reducing par
    value from Bt10.00 to Bt7.50 per share and a subsequent return of
    Bt2.50 per share to all shareholders proportionate to their holdings
    (book closure date to determine the shareholders who are entitled to
    receive capital return was 17 March 2003)

-   Acknowledged the formula for adjustment of the terms and conditions
    of Warrant #4 upon the capital reduction and return of capital.

11 February 2003 SEC granted an approval to the Company to operate OTC
derivative business

14 February 2003 SEC granted an approval of the Company’s capital
reduction from Baht 17,332.5 million to Baht 12,999.4 million by way of
reducing par value from Bt10.00 to Bt7.50 per share

17 March 2003 Asoke branch, Bangkok was closed

21 March 2003 Capital reduction registered with Ministry of Commerce by
way of reducing par value from Bt10.00 to Bt 7.50 per share and return
of capital of Bt2.50 per share to all shareholders proportionately to
their holdings.

9 April 2003 The Company returned the capital to all shareholders
proportionately to their holdings

  2.2 The Company’s business overview

KGI Securities (Thailand) Public Company Limited has licenses issued by
Ministry of Finance as follows:

1)  Securities broker

2)  Securities dealer

3)  Investment advisory ^(/1)

4)  Securities underwriting

5)  Private portfolio management^(/2)

6)  Securities borrowing and lending

Note: /1 In year 2002 this business was inactive

  /2 The Company transferred this business to One Asset Management in
  March 2002 and cancelled this licence in November 2002.

In addition, the Company also has a license from SEC to operate
Securities Registrar business and SEC also granted the Company approval
to operate financial advisory business, OTC derivative business and to
act as a selling agent of unit trusts.

KGI Securities (Thailand)’s shareholding in subsidiaries

As of 31 December 2002

+--------------------------------------+---------+------------+-------+
| Company                              | Incor   | Bus        | %     |
|                                      | porate  | iness Type | ho    |
|                                      | country |            | lding |
+--------------------------------------+---------+------------+-------+
| KGI E-World Co., Ltd. ^(/1)          | T       | Investment | 1     |
|                                      | hailand |            | 00.00 |
+--------------------------------------+---------+------------+-------+
| One Asset Management Co., Ltd.       | T       | Fund       | 97.09 |
|                                      | hailand | Management |       |
+--------------------------------------+---------+------------+-------+
| KGI Securities (Thailand)            | Hong    | Investment | 1     |
| International Holdings Limited ^(/2) | Kong    |            | 00.00 |
+--------------------------------------+---------+------------+-------+
| KGI (Thailand) Holdings Limited      | British | Investment | 1     |
|                                      | Virgin  |            | 00.00 |
|                                      | Island  |            |       |
+--------------------------------------+---------+------------+-------+
| KGI S-One Corporation Plc. ^(/3)     | T       | Investment | 1     |
|                                      | hailand |            | 00.00 |
+--------------------------------------+---------+------------+-------+
| Ace Capital Co., Ltd. ^(/4)          | T       | Leasing    | 50.00 |
|                                      | hailand |            |       |
+--------------------------------------+---------+------------+-------+

^(/1) holds website address, formerly known as Thanyathada Co., Ltd.

^(/2) Formerly known as “KGI Securities One International Holdings
Limited” (HOLDCO)

^(/3) In liquidation, not consolidated in Company’s financial statement

^(/4) Formerly known as “ S-One Capital Co., Ltd., not consolidated in Company’s financial statement

Subsidiary companies included in consolidated financial statements 

KGI E-World Co., Ltd.

It was formerly known as “Thayathada Co., Ltd.”, a wholly owned
subsidiary. Its name was changed to “KGI E-World Co., Ltd.”. This
company holds a Website address.

One Asset Management Limited

One Asset Management Limited is incorporated in Thailand, the Company
holds 97% of its shares, and its business is fund management. The funds
managed include Mutual Funds (including; Equity Fund, Fixed Income Fund,
Property Fund, Country Fund, SMEs Venture Capital Fund, Foreign
Investment Fund and Retirement Mutual Fund), Private Fund. One Asset
Management Limited also hold a licence to manage Provident Fund.

KGI Securities (Thailand) International Holdings Limited (HOLDCO)

It was formerly known as “KGI Securities One International Holdings
Limited,” a wholly owned subsidiary established in Hong Kong. Its name
was changed to “KGI Securities (Thailand) International Holdings Limited
(HOLDCO)” since December 7, 2001. HOLDCO holds 0.32% of KGI
International Holdings Limited (KGII).

KGI (Thailand) Holdings Limited (KTHL)

It is the Company’s wholly owned subsidiary in the British Virgin
Islands. The purpose of the subsidiary was to create a more efficient
structure to hold the Company’s overseas assets.

Policy for group operations

KGI Securities (Thailand) Plc. and subsidiaries have hired professional
managers and appointed directors who are responsible for setting
policies for the Company and its subsidiaries.

  2.3 Revenue Structure

The Company’s revenue comes primarily from; securities business,
overseas investments, and fund management business. During the year
2002, the Company’s major revenue was derived from securities business
in Thailand.

Revenue structure for 2002 (As of 31 December 2002)

  --------------- ------------ ------------ ------------ -------- ------- ------------ ------------ ------------ -------- -------
                                            Year 2002                                               Year 2001             

                  Securities   Investment   Fund         Contra   Total   Securities   Investment   Fund         Contra   Total
                  business     (Hong Kong   Management                    business     (Hong Kong)  Management            
                  (Thailand)   and BVI)     (Thailand)                    (Thailand)                (Thailand)            

  Brokerage fees  714          -            -            -        714     234          -            -            -        234

  Fees & service  13           -            186          (6)      193     8            -            191          (2)      197
  income                                                                                                                  

  Gain/(loss) on  262          -            -            -        262     18           -            -            -        18
  securities                                                                                                              
  trading                                                                                                                 

  Interest &      240          181          5            (135)    291     173          145          6            (63)     261
  dividend (net)                                                                                                          

  Interest        8            -            -            -        8       1            -            -            -        1
  received from                                                                                                           
  credit balance                                                                                                          
  (net interest                                                                                                           
  expenses)                                                                                                               

  Interest        13           -            -            -        13      29           -            -            -        29
  receipt from                                                                                                            
  debt                                                                                                                    
  restructuring                                                                                                           
  (net of                                                                                                                 
  provision)                                                                                                              

  Share of profit 202          -            -            (202)    -       184          -            -            (184)    -
  from subsidiary                                                                                                         
  & associated                                                                                                            
  companies                                                                                                               

  Other income    23           0            5            -        28      30           60           6            -        96

  Total           1,475        181          196          (343)    1,508   677          205          203          (249)    836
  --------------- ------------ ------------ ------------ -------- ------- ------------ ------------ ------------ -------- -------

Remark: Total securities business income per F/S 1,518.38 million baht

Other income 27.64 million baht

Total income 1,546.02 million baht

Less Interest expense in respect of credit balance only (1.24) million
baht

Less Provision for bad debt (36.60) million baht

Total income per above 1,508.18 million baht

  2.4 Business goal for next 3-5 years

The Company’s goal is to provide a full range of services. It seeks to
maintain a market share which will rank it amongst the top 5 brokers in
Thailand, and also to develop its investment banking business as well as
new businesses especially Stock Borrowing and Lending business and
Derivative business.