A. Risk Factors

Risk Management

KTP’s risk management efforts are focused on strengthening existing
activities to ensure that risks accompanying the Company and its
subsidiaries’ business activities are well mitigated.

Commencing in 2004, initiatives were taken to raise awareness and
training was carried out throughout the year for heads of department and
frontline staff. Training was directed at establishing a high standard
of professionalism and excellence in undertaking operational risk
management activities, inculcating a better understanding of the
components of Keppel Land’s risk framework and in-depth learning of new
techniques. In 2005, KTP continued to strengthen its strategic risk
management and the development of quantitative risk management tools.
This will enable, it to prioritize its risks and focus on the key
drivers of risks.

Traditionally, risk management has focused on the conventional business
risks that influence shareholders’ value which is affected by an
interrelated group of factors including competition risk (market
condition), financial risk (interest rates & credit) and property
selection risk. However, its focus has been broaden to include the
management of continuing risks of its core business activities should
any unforeseen circumstances occur. The Company has established
Information Technology (IT) Recovery and Security Plans to protect its
vital business and information resources, integrated guide to handle
crises, including the provision of vital public and management
communication, and the recovery of the business to operational status
within the shortest possible time frame.

Competition Risk

In 2005, the overall pace of development slowed with the market in a
consolidation phase. Rising interest rates caused increasing
construction costs, and weakened consumer confidence. Financial
Institutions turn cautious and selective in extending funds to projects
and developers. These difficult conditions fueled the reduction in the
number of active developers and resulted in a smaller pool of
specialized and professional developers with stronger financial
standing. KTP’s challenge is to establish itself as the developer of
choice by focusing on quality housing products that are driven by
customer needs. KTP will continue to ramp up on its efforts to build
brand awareness, trust and recognition.

Financial Risk

Key interest rates continue to move upward. The Bank of Thailand has
raised its benchmark 14-day repurchase rate up to 4.50 per cent per
annum in March 2006. Current inflation is higher than interest rates,
effectively giving a negative return on savings. Coupled with other
negative factors, including fuel price, declining confidence in business
and investment, domestic interest rates are expected to rise by 1.5 per
cent on average this year.

Rising inflationary pressures fueled by higher oil prices have been
expectedly building up going forward as production costs have
continuously increased. Interest rate hikes are needed to ease the
inflationary pressure on the Thai economy, which in turn will increase
our cost of capital and exert pressure on the company’s liquidity and
leverage position.

Property Selection Risk

Developers will continue to launch new residential projects during 2006.
However, new land acquisitions are becoming more focussed and intensive
around potential high growth areas surrounding new highways and other
mass transport infrastructure. Under the current political tension, the
implementation of mega-projects would be delayed and developers need to
wait and see a clear direction of investment in mega-projects

KTP will continue to seek out well-located and reasonably priced sites
for development, both within the greater Bangkok metropolis and in
downtown areas. The Company will also actively pursue strategic
partnerships with landowners and other developers.