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 its
computer system to efficiently serve its customers. The Company also has
a policy to expand its securities business services in line with the
overall economic situation and the capital market growth via its
networks nationwide.

In 2001, the Company ranked No. 6 with a 5.11% brokerage market share.
The Company targets to increase its market share from the current 6-7%
to 10% by year-end. It is expected that in the first quarter of 2002,
the Company’s market share will increase to 8%.

The following table shows Customer’s breakdown by type

  ---------------------------- ----------- --------- --------- ----------- ---------
  Breakdown by customer type   2000                            2001        
  (Bt mn)                                                                  

                               Vol/Day (Bt % of KGI  Vol/Day               % of KGI
                               mn)                   (Bt mn)               

  - Foreign customers          171         36.5      107                   16.3

  - Institution                53          11.4      48                    7.4

  - Individual Customer        243         52.1      503                   76.4

  Total                        467         100.0     658                   100.0
  ---------------------------- ----------- --------- --------- ----------- ---------

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 February 28^(th)
2002, the Company has extensive 14 branches as follows;

+------+---------------------+-----+----------------------------------+
| 1.   | Chiang Mai          | 8.  | Pin Klao, Bangkok                |
+------+---------------------+-----+----------------------------------+
| 2.   | Nakhon Sawan        | 9.  | Chiang Rai                       |
+------+---------------------+-----+----------------------------------+
| 3.   | Nakhon Ratchasima   | 10. | Nakhon Pathom                    |
+------+---------------------+-----+----------------------------------+
| 4.   | Chon Buri           | 11. | Phetchaburi                      |
+------+---------------------+-----+----------------------------------+
| 5.   | Had Yai             | 12. | Surawongse, Bangkok              |
+------+---------------------+-----+----------------------------------+
| 6.   | Samutsakorn         | 13. | Asoke, Bangkok                   |
+------+---------------------+-----+----------------------------------+
| 7.   | Suphan Buri         | 14. | Yaowaraj, Bangkok                |
+------+---------------------+-----+----------------------------------+

Policy in accepting the Customers

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

1.  Individual with Thai nationality or foreigner

2.  Juristic persons categories as follow:

-   Local financial institutions include finance and securities
    companies, non-member securities companies

-   Foreign financial institutions

-   Juristic persons who registered in Thailand, which are partnership
    limited and company limited

-   Juristic persons who registered in aboard

For individual Customers, the Company’s marketing will consider the
preliminary qualification of the Customers based on occupations, places
of residence, years of work, revenues, financial status, and debt
service ability. For juristic person, the Company will consider
financial position and status, shareholders, and management as well as
their operations.

Policy on credit line approval for securities trading

The Company has adjusted the policy on credit line approval for
securities trading for individual Customers. There are some changes from
the former policies as follows:

1.  Guidelines on calculation of the customers’ credit line

The maximum credit line approved will not be exceeding 3 times of the
Customers’ deposits account statement (last update no longer than one
month from the date of consideration) and/or not exceeding 2 times of
the already-paid value of share in portfolio. The credit line calculated
is the line for all types of accounts.

In considering the credit line, the Company will consider the
appropriateness of the Customers’ status, trading behavior and necessity
of the usage of credit line. However, this does not mean that all will
be approved.

2.  Guidelines on calculation of the customers’ credit line

A.  Individual Customers

+-------------+--------------------------------------------------------+
| Credit line | Authorized persons                                     |
+-------------+--------------------------------------------------------+
| < Bt1.0mn   | Department Head up (Marketing Director, Branch         |
|             | manager, or Managing Director). For Internet trading,  |
| < Bt10.0mn  | Department Head from Executive Director up.            |
|             |                                                        |
|             | 1 Managing Director and Head of Credit or Operation    |
|             | (Executive Director up)                                |
|             |                                                        |
|             | 2 Managing Directors (at least 1 from Non-Equity       |
|             | Sales)                                                 |
|             |                                                        |
|             | 3 Managing Directors (at least 1 from Non-Equity       |
|             | Sales)                                                 |
+-------------+--------------------------------------------------------+

B.  Institution Customers

+-------------+--------------------------------------------------------+
| Credit line | Authorized persons                                     |
+-------------+--------------------------------------------------------+
| <Bt30.0mn   | 1 Managing Director and Head of Credit or Operation    |
|             | (Executive Director up)                                |
| <Bt100.0mn  |                                                        |
|             | 2 Managing Directors (at least 1 from Non-Equity       |
| >Bt100.0mn  | Sales)                                                 |
|             |                                                        |
|             | 3 Managing Directors (at least 1 from Non-Equity       |
|             | Sales)                                                 |
+-------------+--------------------------------------------------------+

For credit line exceeding Bt10.0mn, if the Credit Division’s
considerations are not in line with the authorized persons, the Credit
Division can propose to the Credit Risk Committee for final approval.

3.  Adjustment of credit lines

The marketing officers will be responsible for providing all Customers
information or documents in credit line adjustment. The officers have to
review whether the Customers recently had bounced cheques or delay
payment. Currently, the marketing officers can approval interim credit
line of not exceeding Bt10.0mn and not exceeding 5 working days.

Policy for loan on securities trading – credit balance

In 1999, the Company introduced the credit balance account to clients.
With this type of account, the Company has set up strict systems of risk
control and risk management. In order to reduce risk, clients are
required to provide cash or other securities, as determined by the
Company, as collateral. The Company believes that these systems
effectively manage the risk of loss from such lending.

The Company sets the approval of credit line for loan on securities
trading – credit balance similar to the approval of cash account. The
Company has plan for a strict system control and risk management.

B.  Securities dealer

The Company will invest in the government securities, state enterprises,
public company’s fixed income and equity. The Company has set credit
line and risk management control for each type of investment and will
review the policy and strategy every year. As of December 31^(st) 2001,
the Company’s total investment was Bt4,731.79mn (14.7% in debt
securities due within one year, 66.2% in held-to-maturity debt
securities, and 19.1% in others). The Company has no policy to hold
securities for long-term investment but concentrates on high-liquidity,
high-return securities.

C.  Financial advisory and underwriting

The Company has been granted an approval from the Office of Securities
and Exchange Commission (SEC) to conduct a financial advisory business
under the rules and regulations stipulated by the SEC. This includes a
financial advisory on initial public offerings (IPO) and underwriter.
The company provides the underwriting services to any companies
intending to issue bot fixed income and equity securities.

Major issues on financial advisory services

+-----+------------------------------------------+--------------------+
| Y   | Name of Customers                        | Type of financial  |
| ear |                                          | advisory           |
+-----+------------------------------------------+--------------------+
| 1   | Land and Houses Plc.                     | Debt restructuring |
| 999 |                                          |                    |
|     | Thai Farmers Bank Plc.                   | Public offering    |
|     |                                          |                    |
|     | Quality Houses Plc.                      | Finding joint      |
|     |                                          | venture            |
|     | SG Asia Credit Plc.                      |                    |
|     |                                          | Auction on         |
|     |                                          | Preferred Shares   |
+-----+------------------------------------------+--------------------+
| 2   | Hipro Electronics Plc.                   | Tender Offer       |
| 000 |                                          |                    |
|     | Semiconductor Venture International Plc. | Public Offering    |
+-----+------------------------------------------+--------------------+
| 2   | - None -                                 | - None -           |
| 001 |                                          |                    |
| ^   |                                          |                    |
| (*) |                                          |                    |
+-----+------------------------------------------+--------------------+

^(*) pending financial advisory business in the first half of 2001 and resume the business since September 27^(th) 2001

Major issues on underwriting services

+-------+--------------+-----------------+----------------------------+
| Year  | Type of      | Name            | Type of underwriter        |
|       | securities   |                 |                            |
+-------+--------------+-----------------+----------------------------+
| 1999  | - None -     | - None -        | - None -                   |
+-------+--------------+-----------------+----------------------------+
| 2000  | - None -     | - None -        | - None -                   |
+-------+--------------+-----------------+----------------------------+
| 2001  | Common       | Brooker Group   | Underwriter                |
|       | stocks       | Plc.            |                            |
|       |              |                 | Underwriter                |
|       | Common       | PTT Plc.        |                            |
|       | stocks       |                 | Underwriter                |
|       |              | Nava Leasing    |                            |
|       | Common       | Plc.            |                            |
|       | stocks       |                 |                            |
+-------+--------------+-----------------+----------------------------+

D.  Securities registrar

The Company granted an approval for conducting securities registrar
business in June 14^(th) 1994. As of December 31^(st) 2001, the Company
was a securities registrar for debentures and warrants of 4 companies.

E.  Private Portfolio Management

The Company began a private portfolio management business in November in
1998. As of December 31^(st) 2001, the Company managed 7 private funds
with total asset of Bt180.69mn.

The Board of Directors Meeting No. 1/2002 on February 21^(st) 2002
acknowledged the transfer of Private Portfolio Management (PPM) business
to One Asset Management Limited (OAM), a wholly owned subsidiary. By
transferring the PPM business to OAM, the Company will benefit from
economies of scale by sharing resources with OAM, which also has its own
private fund business. The transfers of customers’ assets and Fund
Manager to OAM were completed on March 7^(th) and 11^(th) 2002,
respectively.

However, the transfer will have no impact on the Company’s business, as
OAM is a wholly owned by the Company and its result will be picked up in
the consolidated financial statement.

F.  Securities lending and borrowing

The Company was granted an approval from the Ministry of finance to
conduct securities lending and borrowing business on February 26^(th)
1999. The Company will act as a mediator in securities lending and
borrowing as its own agent or an agent of lender and borrower and party
of lender and borrower.

(2) Market and competition

Industry overview

In 2001, the securities trading situation in the stock market was much
better than in 2000. The average daily trading volume rose from Bt3.7bn
in 2000 to approximately Bt6.4bn at end-2001 or increased by 60%. In
January 2001, as a result of the election and the new cabinet, the SET
index recovered 6.5% from year-end 2000 to 339.68 points with trading
volume of Bt23,055mn before softening due to concern on the US economy,
MSCI weighting reduction and concern on the Prime Minister’s asset
concealment. These resulted in a reduction in investment by all
investors.

During April to September, the SET index was extremely volatile due
primarily to a slowdown in the Thai economy in tandem with the
unprecedented depth of the global slowdown. Owing to a global slowdown,
Thai foreign trade, particularly exports, was hit hard. Furthermore,
global oil prices continued to rise and the non-performing loans of
financial institutions remained substantially high. As a result, the SET
index reached its bottom for the year at 278.25 on April 9^(th) 2001. At
the end of 3Q2001, there was hope that the US economy had reached its
bottom and would begin to recover in 4Q2001. This in addition to the
reduced political uncertainty that came with the Constitutional Court’s
verdict of not guilty in the Prime Minister’s asset concealment case,
helped the market to gradually recover to its highest level of the year
at 342.56 points on September 6^(th) 2001.

However, the September 11^(th) terrorist attack in the US caused stock
markets throughout the world to fall, with the SET index dropping 6.7%.
The attacks also delayed the expected recovery of the US and world
economies by another 6 months.

In 4Q2001, the SET index remained volatile. After the implementation of
the new spread, the market fell to 265.22 points on November 7, 2001, a
level below what it was immediately following the terrorist attacks.
However, trading volume did increase with the successful launching of
Thailand’s largest private enterprise initial public offerings (IPO),
PTT, which began trading on December 6^(th) 2001. In addition, the Stock
Exchange of Thailand and securities companies agreed to implement a
fixed commission rate (from free-floating rate). The index closed on
December 28^(th) 2001, at 303.85 points.

Stock market

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

  Total trading value (Bt mn)   855,168.74     1,609,697.99   923,696.83     1,571,337.38

  Avg. daily trading value (Bt  3,504.79       6,570.20       3,739.66       6,413.62
  mn)                                                                        

  Total market capitalization   1,268,198.50   2,193,067.04   1,279,223.84   1,607,309.60
  (Bt mn)                                                                    

  SET index (year-end)          355.81         481.92         269.19         303.85

  Dividend rate (%)             1.34           0.61           1.78           2.06

  P/E ratio (times)             10.04          14.70          5.52           4.92

  P/BV ratio (times)            1.05           1.72           1.11           1.29

  No. of listed companies       418            392            381            382
  ----------------------------- -------------- -------------- -------------- --------------

Source: The Stock Exchange of Thailand

At year-end, the SET index closed at 303.85 points. The average daily
trading volume was Bt6.4bn. Retail investors were net buyers of
Bt6.96bn, while foreign investors were net sellers of Bt6.43bn. Local
institutional investors were net sellers of Bt537.57bn.

Competition

In 2001, the liberalization of securities commission rates resulted in
intense competition. The average commission rate declined from 0.50% to
0.14%, dropping 72%. Most securities companies competed fiercely by
cutting commission fees and focusing on retail customers by expanding
branches both in Bangkok and provincial cities to increase their retail
customer base. Reduction of cost was considered as a way to maintain
operations. The competition led to more consolidation.

Internet trading in 2001 continued to expand at a slower pace than
earlier expected. It accounted for approximately 0.4% of total trading
value. Currently, there are 13 Internet trading providers in the market.
Internet trading is expected to continue expanding following the
country’s growth in the number of Internet users.

Other revenues of securities companies such as investment advisory
remained slow and resulted in most companies generating operating
losses.

In 2001, the market share of the top ten securities companies totaled
65.14% of total trading value compared to 60.6% in 2000.

Top 10 securities brokers (2001)

  -------- ----------------------------------- ----------- ---------------
                                                           Market share
                                                           (%)

  1        Yuanta Securities (Thailand) Ltd.   YUANTA      10.64

  2        ABN Amro Asia Securities Plc.       AST         8.94

  3        Seamico Securities Plc.             ZMICO       7.98

  4        Kim Eng Securities (Thailand) Plc.  KIMENG      7.84

  5        Jardine Flemming Thanakom           JFT         7.61
           Securities Plc.                                 

  6        KGI Securities (Thailand) Plc.      KGI         5.11

  7        Adkinson Securities Plc.            ASL         4.75

  8        Capital Nomura Securities Plc.      CNS         4.64

  9        Kiatnakin Securities Plc.           KKS         3.83

  10       National Securities Co., Ltd.       NATSEC      3.80

           Others                                          34.86

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

Source: The Stock Exchange of Thailand

Securities industry trend in 2002

The effect of the world economy, particularly the US and Japan, which
are the major traders in the export market and source of foreign
capital, caused the overall Thai economy to show no signs of recovery
until the second half of 2002. Therefore, market sentiment as well as
companies’ ability to raise funds in the stock market will be adversely
impacted.

The government realizes the importance of the capital market and has set
up several policies to support it such as the relaxation of newly issued
shares, Corporate income tax incentives, as well as privatization. These
should help increase the number of qualified listed companies in the
Thai stock market. Furthermore, the issuance of new financial
instruments such as Non-Voting Depository Receipts (NVDR) and Index
Options will ease investor risks. The amendment of the Public Company
Act as well as the adjustment of par value, treasury stocks, and the
implementation of stock premiums and other reserves to clear up all
retained losses will help attract both domestic and foreign investors.

The implementation of the minimum brokerage commission rate of 0.25% of
the trading value for all types of investors and 0.20% for Internet
trading (under the Internet Service Provider (ISP) only), effective on
January 14^(th) 2002, will be positive factors helping to boost
securities companies’ earnings. However, the increased cost to customers
will slow trading transactions for a short time, particularly
speculative investors.

Apart from the restructuring of new commission rates, the Stock Exchange
of Thailand has encouraged sub-brokers to transform into brokers by
establishing the installment of membership fees (seat). The SET hopes
that the transformation of sub-brokers into brokers will improve overall
industry standards.

The merger and acquisition of securities companies is expected to be
delayed for a while as a result of the implementation of the minimum
brokerage rate which should help all securities brokerage companies to
survive.

(4) Products and services

A.  Source of fund

As of December 31^(st) 2001, the Company had outstanding foreign debts
of Bt1,140mn, which belonged to HOLDCO, a wholly owned subsidiary. In
seeking future source of fund, the Company has policy to borrow money
without collateral and diversified its source of fund and maturity. The
Company will not depend upon one source of fund. To maintain the
Company’ s liquidity by keeping domestic and foreign source of fund and
to seek new sources are the Company’s major policies. The Company will
consider the appropriateness of need for the usage of fund and cost of
fund. Providing sources of fund will not violate the by-laws, rules, and
regulations.

B.  Investment

 Investment in securities

The Company will review its policy in investment periodically. Related
departments will propose investment policy to the Proprietary Investment
Committee for consideration and approval. Such policy includes details
of securities, each allocation of securities, credit line, and risk
management control in investment.

Risk management in investment

The Company has a unit who will follow up and review all risks in
investment.

C.  Source of fund allocation/lending through related person or major
    shareholders

The Company has no source of fund or lending through related person to
management or major shareholders.

D.  Net capital adequacy ratio

The Office of Securities and Exchange Commission required that any
Securities Company maintain its net capital adequacy ratio (NCR) at 5%
of total liabilities in 1998 and increase to 7% afterwards. In 2001, the
Company’s net capital adequacy ratio (NCR) was 185.79%, sufficient as to
the requirement.

E.  Liquidity management policy

The Company has a plan to provide appropriate sources and uses of fund
by considering the suitability of financial instrument and maturity of
fund.

F.  Investment in subsidiary and associated companies policy

The Company has policy to invest in subsidiary and associated companies
by considering appropriate return depending on each business. Each
subsidiary and associated company has its own policy to manage business
and consider the maximum value of shareholders as a major policy.
Furthermore, the Company will bring in its representative in managing
subsidiary and associated companies. The Company will, on a case by case
basis, consider for joint venture.