3.  Business Operations

  Properties Development

1.  Product Description

  Business operations of the Company and its subsidiaries

  3.1.1 Jewellery Centre, a 34-storey commercial tower

  covering a total area of 42,833.78 sqm for sale and lease, located at
  138 Nares Road, Sipraya, Bangkok. The retained interest as of 31
  December 2006 was a total area of 12,145.64 sqm or 28.36 percent of
  the total gross floor area.

  3.1.2 Sattahip Land, a residential plot awaiting development with a
  total area of 222-1-99 rai, located at Highway 332, Bangsare Sub-
  district, Sattahip District, Chonburi Province.

  3.1.3 Sukhapiban 3 Mansion, a 19-storey residential condominium with
  1,024 units, located at 22/1 Sukhapihan 3 Road, Huamark, Bangkok. The
  retained interest as at 31 December 2006 was 2 units with a total area
  of 119.91 sqm.

  3.1.4 Chiang Mai VIP Tower, a 4-storey commercial building in which
  KTP has a retained interest of 4 units with totaling 890.88 sqm. The
  development is located at 188/1-2 and 188/5-6 Moo 1 Huay Kaew Road,
  Changpueng Sub-District, Muang District, Chiang Mai Province.

  3.1.5 Watcharapol Project, 78-0-46 rai of freehold land which will
  yield 270 units of two-storey detached houses when completed.

  3.1.6 Srinakarin Project, 101-1-82 rai freehold land which will yield
  367 units of two-story detached houses when completed.

  3.1.7 Granite Factory, located at 1 Moo 5, Mai Ngam Sub-District,

  Muang District, Tak Province. The granite operation has ceased since
  2000. The machinery has been divested in early 2002 while the land
  will be either sold or leased.

2.  Review of the Property Market

  Economic review and outlook

  2006 was a difficult year for the Thai economy with political strife,
  rising inflation, and high interest rates dampening consumer
  sentiments for most of the year. The September military coup brought a
  momentary spell of optimism, however, the Bank of Thailand’s capital
  control measures and the New Year’s Eve bombings have undermined
  economic confidence.

  Despite the situation, the Thai economy in 2006 managed to post an
  estimated 5.1% GDP growth, up from 4.5% in 2005. Thailand’s economic
  fundamentals remained sound, with the current account returning to a
  surplus, and exports achievinga 17.4% growth year-on-year.

  The Thai economy is expected to grow by 4.0-5.0% in 2007, with a
  forecast inflation rate of 3.0-3.5%, cooling down from 2006, due to
  the effects of policy rate interventions, a strong baht, and expected
  oil price decline. Export growth should stabilise, with an estimated
  current account surplus of 0.1-0.5% of GDP. The unemployment rate is
  expected to remain low throughout 2007.

  Continued threat of bombings, proposed amendments to the Foreign
  Business Act, and further changes to government policies could
  introduce new complications to Thailand’s risk profile and impact the
  economy.

  However, should the interim government succeeds in conducting a smooth
  transition into elections, the improving economic conditions would
  encourage domestic consumption and revitalize demand for homes
  particularly in the second half of 2007.

  Property market review and outlook

  The Bangkok property market was more subdued but proved to be
  resilient in 2006, despite the ongoing political strife, rising oil
  prices, and interest rate hikes. A shift in demand away from higher
  priced luxury homes to middle and lower priced condominium units is
  noted.

  [][]

  Residential demand, particularly for mid-to-low priced units, remained
  generally healthy in the face of stiff competition, new supply in the
  market and more cautious homebuyers. Young urbanites continue to seek
  new units close to mass transit routes, pointing to rising demand in
  lower to middle income sectors. Meanwhile, the luxury sector has seen
  a shift away from suburban housing although high-end downtown
  condominiums continued to do well.

  [][]

  The sentiments in Bangkok’s property market are expected to improve in
  2007.

  A number of factors support the optimistic outlook. Interest rates
  have remained stable over the latter half of 2006 and are expected to
  fall over 2007. Fuel prices have declined steadily from the high
  levels in 2006, benefiting the overall economy and the property
  sector. Rising construction costs have also been moderated in 2006 and
  are expected to plateau in 2007.

Housing

  New residential supply for the first 10 months of 2006 was 66,131
  units, up 9% from 60,734 units registered since the beginning of the
  year. Self-built housing is still the dominant source of new supply,
  representing 42% of total new units; this is followed by
  developer-built housing at 31%, and Apartments and Condominiums at
  27%, respectively.

  New Housing in Bangkok Metropolis and Vicinity 2006

  []

  Source: Bank of Thailand

  2006 saw a shift in demand for detached houses to the middle and lower
  price segments, with units selling below baht 5 million on average.
  Industry sources indicate that detached houses in the price range of
  Baht 3 to 5 million had the strongest average sales rate and greatest
  number of units launched. Housing units priced above Baht 5 million
  generally saw a slowdown in sales, although well-established projects
  with recognized brands continued to post healthy sales rates.

  Future planned housing units are moving away from traditional Northern
  suburbs towards the Eastern part of Bangkok around the Suvarnbhumi
  International Airport and other new infrastructure. The Eastern part
  of Bangkok will also have a wider range of residential products
  ranging from lower priced condominium units to luxury villas.

Condominium

  In 2006, there were roughly 8,000 new condominium units launched in
  downtown Bangkok areas, representing a 64% surge from 4,869 units
  launched in 2005. An estimated 17,000 downtown condominium units are
  presently in the total supply pipeline to be completed over the next
  few years at an average of 5,000 to 6,000 units per year.

  Expected downtown condominium units in pipeline over the next few
  years
  (as of 3Q06)

  []

  Source: CB Richard Ellis

  On the periphery areas of Bangkok’s downtown, a proliferation of mid
  to low price projects are expected to continue in 2007, particularly
  in areas with easy access to the MRTA and BTS routes and their planned
  extensions. The significant increases in the number of projects and
  units launched in peripheral areas of Bangkok have made the middle to
  low end condominium sector extremely competitive.

  Meanwhile, luxury projects, particularly those in the downtown areas
  of Ploenchit and Sukhumvit continue to perform well due to
  increasingly scarce land and relatively high demand from both local
  and international buyers. 2006 saw Grade A pricing hit new highs in
  downtown districts, at an average price of Baht 91,242 psm, prime
  downtown prices increased 7.4% year-on-year as of 3Q06. The Sukhumvit
  district saw the highest increase in average Grade A prices with 16.7%
  increase year-on-year during the same period.