mbket 08

♦Contents♦

♦Annual Report 2008♦

Content Page

Corporate Information 2

Chairman’s Statement 5

Good Corporate Governance Report 7

Shareholder Structure 22

Committees and Management Structure 24

Market and Business Conditions 42

Risk Factors 46

Audit Committee’s Report 52

Financial Performance and Financial Information 55

Report regarding the Responsibility of

The Board of Directors for Financial Report 58

Auditor’s Report 59

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♦Corporate Information♦


KIM ENG SECURITIES (THAILAND) PLC

Honorary Chairperson Mrs. Gloria Lee Kim Yew The Board of Directors Mr. Yuth Vorachattarn

Mr. Ronald Anthony Ooi Thean Yat

Mr. Montree Sornpaisarn

Mr. Judd Clark Kinne

Mr. Hwang Wei Cherng

Mr. Pusit Kaewmongkolsri

Ms. Chao Tse Yang

Dr. Paiboon Sareewiwatthana

Dr. Preecha Jarungidanan

Corporate Secretary Mr. Waranchai Jensiriwanich Auditor PricewaterhouseCoopers ABAS Limited 1. Mrs. Aunakorn Phreutithada Certified Public Accountant,

Registration No.3257 2. Mr. Kajornkiet Aroonpirodkul Certified Public Accountant,

Registration No.3445 3. Mr. Boonmee Ngodngamwong Certified Public Accountant,

Registration No.3673 Fl.15th. Bangkok City Tower 179/74-80 South Sathorn Rd. Silom, Bangrak Bangkok 10120 Tel : 66 (0) 2286 9999 66 (0) 2344 1000 Fax : 66 (0) 2286 5050

Head Office 999/9 The Offices at Central World, Fl.20th-21st, Rama 1 Road, Patumwan, Pathumwan, Bangkok 10330 Tel: 66(0)2658 6300 Fax: 66(0)2658 6301 Company Registration No. Bor Mor Jor 0107545000314 Homepage www.kimeng.co.th Securities Registration Thailand Securities Depository (Thailand) Co., Ltd. 62 The Stock Exchange of Thailand Building, Rachadapisek Road, Klongtoey, Bangkok 10110 Tel: 66 (0) 2359 1200 Company Offices • Bangkok and Vicinities Head Office 999/9 The Offices at Central World, 20th-21st Fl., Rama I Road, Patumwan, Pathumwan, Bangkok 10330 Tel: 66(0)2658 6300 Fax: 66(0)2658 6301 Phahurad Branch 125, 125/1-6, 125/19-25 The Old Siam Plaza Tower 3rd Fl. Pahurad Rd., Wangburapapirom, Pranakorn, Bangkok 10200 Tel : 0-2225-0242 Fax : 0-2225-0523 Ladpraw Branch 1693 Central Ladpraw Tower 9th Fl. 905/1 Phaholyothin Rd., Ladpraw, Jatujak, Bangkok 10230 Tel : 0-2541-1411 Fax : 0-2541-1108

Ngamwongwan Branch 30/39-50 The Mall Ngamwongwan Office Tower 14th Fl., Ngamwongwan Rd., Bangkhen, Nontaburi 11000 Tel : 0-2550-0577 Fax : 0-2550-0566 Srinakarin Branch 1145 Moo 5 Akepailin Tower 3rd Fl., Srinakarin Rd., North Samrong, Samutprakarn 10270 Tel : 0-2758-7003 Fax : 0-2758-7248 Yada Branch 56 Yada Tower 5th Fl., Silom Rd., Suriyawong, Bangrak, Bangkok 10500 Tel : 0-2632-8341 Fax : 0-2632-8395 The Emporium Branch 622 The Emporium Tower 14th Fl., Sukumvit Rd., Klongtun, Klongtoey, Bangkok 10110 Tel : 0-2664-9800 Fax : 0-2664-9811 Thapra Branch 99 The Mall Thapra Office Tower 13 Fl., Ratchadapisek-Thapra Rd., Bukkaloe, Thonburi, Bangkok 10600 Tel : 0-2876-6500 Fax : 0-2876-6531 Asoke Branch 159 Sermmit Tower 25th Fl., Soi Sukumvit 21, Asoke Rd., North Klongtoey, Wattana, Bangkok 10110 Tel : 0-2665-7000 Fax : 0-2665-7050

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Seacon Square Branch 55 Seacon Square Tower G Fl., Room 1005, Srinakarin Rd., Nongbon, Pravej, Bangkok 10260 Tel : 0-2320-3600 Fax : 0-2320-3610 Future Park Rangsit Branch 94 Future Park Rangsit Tower, GF Fl., Phaholyothin Rd., Prachatipat, Pathumthani 12130 Tel : 0-2958-0591 Fax : 0-2958-0590 Thaniya Branch 52 Thaniya Plaza Tower 20th Fl., Silom Rd., Suriyawong, Bangrak, Bangkok 10500 Tel : 0-2231-2700 Fax : 0-2231-2130 Bangkae Branch 275 Moo 1 The Mall Bangkae Tower 8th Fl., Petchkasem Rd., North Bangkae, Bangkae, Bangkok 10160 Tel : 0-2804-4232 Fax : 0-2804-4251 Yaowaraj Branch 215 Grand China Tower 4th Fl., Yaowaraj Rd., Samphantawong, Bangkok 10100 Tel : 0-2622-9412 Fax : 0-2622-9383 Pinklao Branch 7/129 Central Pinklao Tower 3rd Fl. Room 302, Baromratchonni Rd., Arunamarin, Bangkok Noi, Bangkok 10700 Tel : 0-2884-9847 Fax : 0-2884-6920

Sathorn Nakorn Branch 100/46 Sathorn Nakorn Tower 24th Fl.C North Sathorn Rd., Silom, Bangrak, Bangkok 10500 Tel : 0-2636-7550-5 Fax : 0-2636-7565 Town In Town Branch 1201/114 Ladphrao 94 Rd., (Panjamit) Wangthonglang, Bangkok 10310 Tel : 0-2935-6111 Fax : 0-2935-6070 Fashion Island Branch 5/5-6 Moo 7, Fashion Island Shopping Center BF Fl., Ramintra Rd., Kannayao, Bangkok 10230 Tel : 0-2947-5800-5 Fax : 0-2519-5040 RCA Branch 45/1 Rama 9 Rd., Soi Soonvijai, Bangkapi, Huay Kwang, Bangkok 10320 Tel : 0-2203-1800 Fax : 0-2203-1809 Silom Branch Thaniya Building 4th Fl., Silom Rd, Suriyawong, Bangrak, Bangkok 10500 Tel : 0-2231-2700 Fax : 0-2231-2418 Amarin Branch 496-502 Amarin Plaza Building., 5th Fl. Ploenchit Rd., Lumpinee, Pathumwan, Bangkok 10330 Tel : 0-2256-9373 Fax : 0-22569374

Platinum Branch 222/1321 Platinum Fashion Mall, 6th Fl., Petchburi Rd., Ratchathavee, Bangkok 10400 Tel : 0-2121-9464 Fax : 0-2121-9466 Fortune Branch 5 Fortune Town Tower, Basement Fl., Ratchadapisak Rd., Dindang, Bangkok 10400 Tel : 0-2641-0977 Fax : 0-2641-0966 The Crystal Cyber Branch 64/98-99 Praditmanutham Rd., Ladphrao, Bangkok 10230 • Other Provinces Nakon Ratchasima 1 Branch 14 Manas Rd., Nai Maung, Maung, Nakon Ratchasima 30000 Tel : 044-269-400 Fax : 044-269-410 Nakon Ratchasima 2 Branch 1242/2 The Mall Office Tower 7th Fl. Room 3 A Mittrapap Rd., Nai Maung, Maung, Nakon Ratchasima 30000 Tel : 044-288-455 Fax : 044-288-466 Surin Branch 137/5-6 Sirirat Rd., Nai Maung, Maung, Surin 32000 Tel : 044-531-600-3 Fax : 044-519-378 Ubon Ratchathani Branch 191, 193 Aupparaj Rd., Nai Maung, Maung, Ubon, Ratchathani 34000 Tel : 045-265-631-8 Fax : 045-265-639

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Chiangmai 1 Branch 244 Office Building 2nd-3rd Fl. Wowlai Rd. Haiya, Maung Chiangmai 50100 Tel : 053-284-000 Fax : 053-284-019 Chiangmai 2 Branch 201/3 Mahidol Rd., Haiya, Maung, Chiangmai 50100 Tel : 053-284-138-47 Fax : 053-202-695 Lampang Branch 48/11-12 Montri Rd., Sobtui, Maung, Lampang 52100 Tel : 054-319-211 Fax : 054-319-216 Chantaburi Branch 203 Fl. 2rd Kwang Rd., Talad, Maung, Chantaburi 22000 Tel : 039-346-626 Fax : 039-346-631 Samut Sakorn Branch 322/91 Akechai Rd., Mahachai, Maung, Samut Sakorn 74000 Tel : 034-837-190 Fax : 034-837-610 Samut Songkram Branch 74/27-28 Soi Bangjakreng 4, Rama 2 Rd., Mae Klong, Maung, Samut Songkram 75000 Tel : 034-724-062-4 Fax : 034-724-068 Chonburi Branch 57/1-2 Paspetra Rd., Bangprasroy, Maung, Chonburi 20000 Tel : 038-792-479 Fax : 038-792-493

Rayong Branch 180/1-2 Samaphan Building, 2rd Fl., Sukumvit Rd., Cherng Nern, Maung, Rayong 21000 Tel : 038-862-022-9 Fax : 038-862-043 Aranyapratej Branch 44/4 Bamrungraj Rd., Aranypratej, Srakaew 27120 Tel : 037-226-347-8 Fax : 037-266-346 Suratthani Branch 216/3 Moo 4 Chonkasem Rd., Makhamtia Rd., Maung, Suratthani 84000 Tel : 077-205-460 Fax : 077-205-475 Hat Yai 1 Branch 1, 3, 5 Soi Juti Uthit 3, Juti Anusorn Rd. Hat Yai, Songkhla 90110 Tel : 074-346-400-5 Fax : 074-239-509 Phuket Branch 22/39-40 Wanich Plaza Building, Laung Por Wat Chalong Rd., Talad Yai, Maung Phuket 83000 Tel : 076-355-730-6 Fax : 076-355-737 Yala Branch 18 Songpheenong Rd., Sateng, Maung, Yala 95000 Tel : 073-255-494-6 Fax : 073-255-498

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♦Chairman’s Statement♦



Chairman’s Statement The Year 2008 was another unpromising year, with many bad news and events occurring throughout the year. Such bad news and events had detrimental effect to the overall economy and investment sentiment. Prices of consumer products skyrocketed as a result of continuing rise in oil price that significantly pushed up domestic inflation rate during the first half of the year. Significant rise in construction material price exposed many construction contractors to serious financial burden. Despite significant fall in global oil price since the beginning of Q’4 that raised hope that the economy and domestic investment would be back on track, the economic crisis in the US dashed such hope. The financial crisis in the US had materially detrimental effect on the global economy. Wealth of many financial asset holders drastically evaporated. Shrinking consumption and economic slowdown resulted in massive layoffs in almost every country throughout the world. The following undesired result was chronic political chaos in Thailand that tended to aggravate, and this seriously dampened domestic investment sentiment. The unforeseen closure of Bangkok’s two airports further dampened an already worsening economic situation caused by slowdown in economic sectors such as tourism, import & export and domestic investment Impact from economic slowdown was clearly evidenced by sharp fall in the SET Index. The SET Index fell sharply by 47.56 % from 858.10 at the end of 2007 to 449.96 at the end of 2008, Total trading value declined by 6.80 % from Baht 4.27 trillion in 2007 to Baht 3.98 trillion in 2008. Average daily trading value declined by 7.56 % from Baht 17,436 million in 2007 to Baht 16,118 million in 2008. Although the Company’s market share in the securities brokerage business slightly increased from 8.10 % in 2007 to 8.18 % in 2008, it still maintained the highest market share for seven consecutive years, with total trading value in the Year 2008 close to that in the Year 2007. What we were so proud was that the Year 2008 was the first year in which the Company had the highest market share in both securities and derivatives trading businesses. The main factor that has contributed to the Company’s leading position in the securities business is continuous development in our trading technology and system, our convenient, fast and reliable services as well as employees’ knowledge and skills that have played an important role in enhancing our service efficiency. Our continuous development was evidenced by not only our No.1 position in the securities brokerage business in the Year 2008 but also by many distinguished awards including:

1. Best Shareholders Treatment Awards 2. Best Research House Awards for Retail Investors 3. Best Analyst Awards in Medium and Small Cap Stocks for Retail Investors 4. Best Analyst Awards in Medium and Small Cap Stocks for Institution Investors 5. Excellent Booth Awards for Information Presentation from the SET

Our desired outcomes could not be achieved without support from our clients as well as domestic and international financial institutions. The Company would like to thank all of our clients for

♦Chairman’s Statement♦


all of their support. The Company would like to apologize for any inconvenience or defects in our services. The Company is willing to continuously improve and develop our services. The Company would like to thank all of our shareholders who continuously provide their great supports. The Company would also like to thank all of our directors, management and employees who dedicate themselves for the good of the Company.

Yuth Vorachattarn Chairman

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♦Good Corporate Governance Report♦


Good Corporate Governance Report

The Board of Directors of Kim Eng Securities (Thailand) Plc. has long realized about the importance of good corporate governance. It is the belief of the Board of Directors that good corporate governance would help to prevent potential damages caused by lack of good internal control system. Good corporate governance system would also play an important role in enhancing management efficiency and improving resources utilization. This will lead to sustainable growth for the Company and create value added for shareholders and all stakeholders.

The Year 2008 was regarded as “Kim Eng’s Year of Good Corporate Governance”. The Company persuaded all employees to realize about the importance of applying good corporate governance practices in performing their day-to-day jobs. The Company urged all employees to work with carefulness and thoroughness. The Company also instituted efficient and transparent working system to create trust and confidence among shareholders, investors and all stakeholders. Thus, the Company was awarded Top Corporate Governance Award 2008 from the SET in the area of taking care of shareholders’ right. Evaluation of the Company’s compliance with good corporate governance practices in the Year 2008 indicates that the Company complied with almost all of the good corporate governance practices except that related to shareholders’ meeting. This was because some directors who are foreigners did not attend the shareholders’ meeting. Nevertheless, the Chairman, the Chief Executive Officer, the Chair of the Audit Committee, the Chair if the Remuneration Committee, the Chair of the Nomination Committee and the Chair of the Good Corporate Governance Committee attended the shareholders’ meeting.

Details of the Company’s compliance with the good corporate governance practices are as follows: Section 1 Shareholders’ Rights

The Board of Directors has formulated a written corporate governance policy comprising policies on protecting shareholders’ rights and encouraging shareholders to utilise their legal rights, including basic rights and extra rights, such as rights to: receive profit contributions in the form of dividends; obtain accurate, adequate and transparent information for making decision; vote on Company issues; express opinions in shareholders’ meeting; participate in making decisions regarding to changes in the Company; elect directors. For the Year 2008, the Company fulfilled the right of shareholders as follows:

1. Right to Receive Dividend

For the year 2008, the Company made dividend payment totaling Baht 0.80 a share, representing a dividend payout ratio of 85%. Such dividend payout ratio exceeded the Company’s dividend payout policy of at least 40 % of the Company’s earnings after deducting all legal required reserves.

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2. Right to Attend the Shareholders’ Meeting 2.1 The Company allowed its shareholders to propose meeting agendas at least

3 months prior to the date of the meeting via the Company’s website. 2.2 The Company allowed its shareholders to submit questions prior to the date

of the meeting via the Company’s website. 2.3 The Company has posted notices of shareholders’ meetings, including

relevant information such as date, time, place, and meeting agendas, via its website 33 days prior to the date of meeting.

2.4 The Company has informed its shareholders via the SET’s ELCID System that it has posted notices of its shareholders’ meetings on its website 33 days prior to the date of each meeting for thorough consideration.

2.5 The Company has asked Thailand Securities Depository (Thailand) Co., Ltd. (TSD), acting as the Company’s securities registrar, to mail notices of shareholders’ meeting to shareholders 18 days prior to the date of each meeting.

2.6 The Company has posted continually updated information on its website for shareholders’ thorough consideration.

2.7 The Board of Directors has facilitated shareholders exercising their rights in attending shareholders’ meetings by prohibiting any acts that may limit or restrict shareholders’ access to Company information or the meeting. No abrupt changes in information provided during the meeting are to be made or ad-hoc meeting agendas proposed. Shareholders who arrive late will be allowed to attend meetings.

2.8 The meeting chairman has provided shareholders convenient and adequate time to express their opinions for each agenda item and ask questions at shareholders’ meetings. The Company has disclosed minutes of meetings for shareholders’ review via its website. Details of the meeting could also be accessed via video posted on the Company’s website.

2.9 In the shareholders’ meeting, the chairman of each sub-committee, namely the Chair of the Audit Committee, the Chair of the Nomination Committee, the Chair of the Remuneration Committee and the Chair of the Good Corporate Governance Committee, attend the meeting. Shareholders are allowed to ask questions on relevant issues. The Company has disclosed the minutes of the meeting for shareholders’ review via its website. Details of the meeting can also be accessed via video posted on the Company’s website.

3. Right to Receive Information and News about the Company The Company has long

realized about importance of disseminating information and news about the Company to its shareholders so that they could know what is going on with the business of the Company for their investment consideration. The Company has disseminated information and news about its operation via Elcid System and its website. The Company has disseminated accurate, quick, fair, reliable and timely information to all stakeholders.

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Section 2 Fair and Equal Treatment to Shareholders In the Year 2008, the Company put emphasis on equal treatment to all shareholders with no discrimination to any shareholders. The Company followed the SEC & the SET guidelines of good corporate governance practices. The Company’s shareholders’ meeting was held on March 28, 2008 with details as follows:

Before the Meeting

1. The Board of Directors formulated a policy allowing minor shareholders who hold no more than 2% of total paid-up shares which is better than SET guideline that allows shareholders with 5% stake to propose additional meeting agenda items and names of persons to be elected as the Company’s directors via its website three months prior to the date of the shareholders’ meeting. For 2008, the Company will allow minor shareholders to propose additional meeting agenda items and names of persons to be elected as Company directors via the Company website during the period between October 13, 2008 and January 12, 2009. The Company posted the news on the SET ELCID System on October 13, 2008.

2. In the case minor shareholders propose additional meeting agenda items, the Board of Directors will include such agenda(s) items in the shareholders’ meeting when it deems that such agenda(s) will benefit most shareholders. However, for the 2008 AGM, no minor shareholders proposed additional meeting agenda items.

3. In case minor shareholders propose the name of person to be nominated as director, the Nomination Committee will consider the qualifications of such proposed person in accordance with the specified guidelines. In the Year 2008, no minor shareholders proposed the name of person to be nominated as director.

4. The Board of Directors allows shareholders to submit questions in advance via the Company’s website prior to the date of the shareholders’ meeting. For the Year 2008, shareholders were allowed to submit questions from February 25, 2008 to March 25, 2008. Nevertheless, no questions were submitted by shareholders.

5. In case shareholders cannot attend the meeting, the Company allows them to appoint a person or an independent director to vote on their behalf as a proxy. For the 2008 AGM, 41 shareholders, with total no. of shares of 15,516,193 or 4.4 % of total paid-up shares, delegated Mr.Yuth Vorachattarn to vote on their behalf. Shareholders with total no. of shares of 26,400 or 0.01 % of total paid-up shares, delegated Dr. Paiboon Seriwiwattana to vote on their behalf. Both of them are the Company’s independent directors.

6. The Company has publicised shareholders’ meeting information, including the date, time, place, and meeting agenda via its website 33 days prior to the date of the shareholders’ meeting.

7. The Company has informed its shareholders via the SET ELCID System that it has posted the notice of the shareholders’ meeting on its website 33 days prior to the date of the meeting for their thorough consideration.

8. The Company has asked Thailand Securities Depository (Thailand) Co., Ltd. (TSD), acting as the Company’s securities registrar, to mail the notice of the shareholders’ meeting to shareholders 18 days prior to the date of the meeting.

9. The Company has posted a newspaper advertisement for at least three consecutive days prior to the date of shareholders’ meeting to inform shareholders of the meeting.

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On the Date of the Meeting

1. The Company facilitate the meeting registration by using a computerised system to aid the registration process.

2. The Company hold the shareholders’ meeting on the date, at the time and in the place that is convenient for shareholders to attend specified in the notice of the shareholders’ meeting. There will be no abrupt changes in the meeting place so shareholders would not be able to attend the meeting.

3. The meeting chairman clarifies the quorum, explains the voting, vote-counting and balloting procedures and clearly discloses voting results on each agenda item.

4. There will be no ad-hoc meeting on agenda items to be proposed by shareholders, who are the Company’s executives.

5. The meeting chairman will convene the meeting in accordance with the order as specified in the notice of the shareholders’ meeting.

6. The meeting chairman will allow shareholders to ask questions or express their views in a reasonable and adequate way.

7. The meeting chairman will urge the use of balloting cards in each meeting agenda item for transparency in vote-counting results.

8. Each shareholder is allowed to exercise his/her rights in electing directors on an individual basis.

After the Meeting 1. The Company’s Secretary will be responsible for preparing the minutes of the

shareholders’ meeting with opinions of and questions from shareholders. The minutes of shareholders’ meeting would be re-checked for accuracy by the Company’s executives and the Chairman.

2. The Company will publicise the minutes of the shareholders’ meeting in both paper and video formats via its website 7 days after the date of the meeting, so that shareholders who did not attend the meeting, can check and acknowledge details of the meeting on an equal basis.

Preventive Policy regarding Use of Confidential Information

1. The Company has long realized that use of confidential information by insiders is unfair to shareholders. Thus, the Company formulated a formal policy and asked for cooperation from its directors, management and employees that may be exposed to the Company’s nonpublic financial information not to trade the Company’s securities 30 days prior to public dissemination of the Company’s quarterly financial performance. In the Year 2008, no directors, management and employees who may be exposed to the Company’s nonpublic financial information violated the Company’s securities trading policy.

2. Directors and management are required to prepare disclosure reports of their securities holdings and changes in such holdings to the Office of the SEC in accordance with Section 59 of the Securities and Exchange Act. Directors and management are also required to submit such disclosure reports to the Board of Directors as well. In the Year 2008, all directors and management were in full compliance with such reporting requirement.

3. Any directors and management with any potential conflict of interest with the Company are required to disclose such conflict to the Board of Directors immediately. No

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directors or management with potential conflict of interest are allowed to attend the meeting approving the transaction in which the Company will enter into with its interested persons.

Section 3 Rights and Roles of Stakeholders

1. The Company shall treat all stakeholders including shareholders, employees, clients, competitors, creditors, the society and the environment fairly in accordance with applicable laws and mutual agreements they have with the Company, taking into account their basic legal right.

Shareholders: The Company puts emphasis on generating profitability to provide a good investment return to all shareholders. The Company’s dividend payment policy is to pay out at least 40% of net profit. The Company has encouraged shareholders to exercise their legal rights and will treat all shareholders equitably. Shareholders shall have the right to receive accurate and updated information about the Company’s operations via its website on a regular basis. In the Year 2008, the Company’s dividend payout ratio is 85 % that exceeded its dividend payout policy.

Clients: The Company has long put emphasis on equal and fair treatment to all clients. The Company has provided high-quality services to its clients, keep their information confidential and disseminated sufficient, accurate and timely information to them. The Company has provided variety of products and services and continued to improve and develop them to satisfy their needs. In providing services, the Company takes into account the best interests of clients. The Company’s securities trading officers urged their clients to trade with care and thoroughness and consider all relevant information carefully and thoroughly prior to making their investment decision. This helps to prevent them from investing in manipulated stocks.

Competitors: The Company has treated all of its competitors fairly and equally and strictly complied with mutual agreements and member agreements as applicable under the relevant SEC and SET rules and regulations and ASCO agreements.

Creditors: The Company fully complied with all conditions and terms under loan agreements and other agreements it entered into. The Company will never take advantage and try to create trust and support from all stakeholders.

Employees: The Company has provided fair and equal treatment and fair compensation that conforms to its operating performance and macroeconomic condition to its employees. The Company has provided its employees with good working environment and safety. The Company regularly provides its employees with knowledge about new products and services. Back-and front office employees are equipped with knowledge about new financial products and services so that they could continue to provide good services and products to clients.

Society and environment: The Company regularly contributes to the good of the society and the environment. Regarding to contribution to the society, the Company has regularly provided knowledge about investment and savings so that solid financial foundation could be created for the Thai society. In regard to contribution to the environment, the Company engaged in many activities aimed to protect environment and to support social and religious activities.

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o In the Year 2008, the Company complied with its policy to support social and

environmental activities as follows: 1. Social Activities

1.1 The Company provided knowledge about the capital market to 1,000 TU students on July 1, 2008.

1.2 The Company allowed students from the Faculty of Law from Bangkok University to visit the Company on July 3, 2008.

1.3 The Company provided support to charity concert, “Power of Mind” held at Siam Pawalai Theater at Siam Paragon Shopping Complex on March 28, 2008.

2. Religious Supporting Activities

On January 4, 2008, the cartoon movies called “Buddha” are showed to the Company’s clients and staffs at Siam Pawalai Theater at Siam Paragon Shopping Complex. The aim was to disseminate the biography of the Lord Buddha in the modern form.

3. Human Supporting Activities

3.1 The Company donated clothes and dried foods to persons who suffered from natural disasters via the Stock Exchange of Thailand on May 16, 2008.

3.2 The Company’s staff made blood donation in memory of His Majesties the King’s eightieth birthday on March 25, 2008, June 24, 2008, September 23, 2008 and December 23, 2008.

4. Environment

4.1 The Company donated used milk packages and boxes for the “Save Energy” Program for producing books, tables and chairs for poor children who lack education opportunities.

4.2 The Company supported the energy saving program by shutting down electricity for one hour on March 20, 2008 from 8.00-9.00 p.m.

In the Year 2008, the Company had no disputes with any group of stakeholder and was in full compliance with its operating policy.

2. The Board of Directors has formulated and implemented clear policies and procedures in

regard to potential fraudulent activities. Anyone who faces or sees potential fraudulent activities must inform the Compliance Department of these and they will in turn report them to the Audit Committee. All complaints will be kept confidential and the names of persons who make complaints will not be publicly disclosed. However in Year 2008 there is no complaint in this case.

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Section 4 Information Disclosure and Transparency The Company has put emphasis on disclosing accurate, sufficient and timely financial

data and other necessary information to the public and all stakeholders on a fair and equal basis via various channels. In doing so, the Company did as follows:

1. Efficiency of Information Disclosure Process in accordance with the Rules of Listed Companies

The Company has disclosed information in accordance with relevant rules via the SET ELCID System, 56-1 Form, 56-2 Form (Annual Report) and its website in both Thai and English. The Company continually updates such information. For 2008, the Company strictly complied with relevant disclosure rules and was not penalised or sanctioned by relevant regulatory bodies due to improper disclosure of information.

2. Quality of Financial Reports The Board of Directors prepared the Report regarding the Responsibility of the Board of Directors for Financial Reports that was accompanied by the Auditor’s Report in the Annual Report. This report is signed by the Chairman, the Chief Executive Officer and the Chief Operating Officer. The Company has disclosed such information on the Company’s website.

3. Investor Relations

3.1 The Board of Directors has set up an Investor Relations Unit that is under the direct control of the Corporate Communications Department. The Investor Relations Unit is responsible for disseminating accurate, complete and timely data and news regarding the Company’s activities to its shareholders, investors, securities analysts and the general public via various forms of media such as brochures, newspaper, radio, television, meetings and the website. The Investor Relations Unit also helps to facilitate shareholders in case they have difficulty contacting the Company. Investors can contact the Investor Relations Unit at Phone No.0-2658-6300 ext. 7401 - 7402 or by E-mail: [email protected].

3.2 In 2007, the Company’s executives and the Investor Relations Unit provided the Company’s information via 4-5 meetings with local and foreign institutional investors, 4 meetings with investors, securities analysts and mass media during operating results periods and in the annual operating plan announcements, public interview 4-5 times, as well as in 20 phone conversations.

Section 5 Responsibilities of the Board of Directors 1. Composition of the Board of Directors

1.1 The Board of Directors consists of 9 directors which composed of: 2 executive directors 7 non-executive directors (3 of whom are independent directors)

The Company has long realized the importance of the appropriate composition of the

Board of Directors, and nominates its directors in such a manner that there is a balance

mailto:[email protected]

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of power between executive and non-executive directors. The composition of the Board of Directors is such that independent directors will co-work with directors who represent the major shareholder and executive directors. The number of independent directors accounts for one-third of the total no. of directors, thus being in line with those as specified in good corporate governance principles as prescribed by the SET. The Chairman is also an independent director. The number of non-executive directors (7 persons) is higher than that of the executive directors (2 persons), so that independent directors can freely express their opinion and make decisions and the Board of Directors can perform their duties efficiently.

The Board of Directors appoints one secretary to the Board of Directors and one company secretary. The names of directors and duties & responsibilities of the Board of Directors are shown in the topic “the Board of Directors and Management Structure” on P. 24

1.2 The Board of Directors consists of experts in many fields who possess a variety of knowledge, capability, professional experience, business moral and loyalty. They are willing to dedicate themselves for the good of the Company.

1.3 Each independent director has terms of holding office of 3 years each. Each independent director cannot hold terms of more three terms, or more than 9 years. There is an exception in case it deems to shareholders or the Board of Directors that some directors play an important role in growth and success of the Company. In such case, terms of office of such directors can be extended as appropriate. The Company policy regarding directors’ terms of office is clearly specified in its corporate governance policy.

1.4 The Board of Directors specified qualifications of “Independent Directors” that are in line with new rules and stricter that those required by the SEC and the SET. They are as follows:

Holding shares not more than 0.5% of all voting rights of the Company, any companies in the Kim Eng Group or its associated companies;

Not being a member of management, employee, staff member or advisor who receives a regular compensation from the Company, or controlling person of the Company, any company in the Kim Eng Group and its associated companies, or person with potential conflict of interest for at least one year prior to nomination;

Having no business relationship or direct or indirect potential conflict of interest in terms of financial and general management of the Company, any company in the Kim Eng Group, its associated companies and other persons with potential conflict of interest that may interrupt his independent discretion or opinion on the Company’s operations;

Not being a person who has legal registered relationship in the form of close relative, major shareholder or controlling person of the Company, any company in the Kim Eng Group, its associated companies, persons with potential conflict of interest, or persons who are nominated to take care of the interest of major shareholder.

1.5 No directors of the Company can hold a directorship in more than 5 other listed companies. In case it is necessary for any director of the Company to hold a directorship in more than 5 other listed companies, he must obtain an approval from the Board of Directors beforehand. Details regarding holding directorships of directors are disclosed in the topic “the Board of Directors and Management

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Structure” on p. 38 For 2008, no directors of the Company held directorships in more than 5 other listed companies.

1.6 There has been a separation of the position between the Chairman and the Chief Executive Officer to create a checks and balances mechanism, so that no one has absolute power. The Company has clearly specified roles, powers and duties of each person, such that the Chairman shall be an independent director and the leader in policy and corporate governance. The Chief Executive Officer shall be the leader in corporate and business management.

1.7 In case of an expiry in terms for holding office of any director, the Company allows minor shareholders to propose name(s) or person(s) to be nominated as a director (s), provided that such person(s) has the qualifications in line with the Company’s rules. When complete information about the person(s) proposed to be the Company’s director(s) is obtained, the Nomination Committee will consider their qualifications prior to proposing to the shareholders’ meeting for nomination. For the year 2007, no minor shareholders proposed the name(s) of person(s) to be nominated as the Company’s director(s).

2. The Sub-Committees

For transparency and independence in performing their duties, most members of the sub-committees are independent directors. Independent directors are appointed as the chair of each sub-committee. Details regarding sub-committees are showed in the topic “the Board of Directors and Management Structure” on p.24

3. Roles, Duties and Responsibilities of the Board of Directors

3.1 In 2008, the Board of Directors considered and approved important matters in relation to the Company’s operation such as formulation of its vision, mission, strategy, financial objective, risk, operation plan and budget. The Board of Directors supervised, controlled and monitored the management to ensure they have run the Company in accordance with the specified policy and plan efficiently and effectively to enhance sustainable economic value for the Company, its shareholders and all stakeholders. Evaluation of the Company’s operating result indicates that despite unfavorable conditions of the Thai stock market, the Company still managed to maintain a market share of 8-9 %.

3.2 The Board of Directors communicated the Company’s strategy, objectives and operating result to directors/executives/staff throughout the organisation. The Company held a meeting to communicate its strategy, objectives and operating result to executives and management so that they could communicate the message to the departments under their supervision. The Company also communicated important messages via its Intranet System (Keplanet) and E-mail system.

3.3 The Board of Directors also formulated and approved the Company’s written policy on corporate governance. In October 2006, the Board of Directors reviewed such policy. Evaluation of the Company’s compliance with good corporate governance principles indicated that the Company complied with most of the principles, with details as discussed earlier.

3.4 The Board of Directors formulated a written business ethics and professional conduct to be used as reference by directors, executives and staffs in managing

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the Company’s business. Compliance with such written business ethics and professional conduct is closely monitored. For the Year 2008, no market officers were found to violate the specified Code of Conduct.

3.5 The Board of Directors developed and implemented clear policy regarding conflict of interest. Good corporate governance policy shall be fully adhered to and accurate information shall be disclosed.

3.6 The Board of Directors developed and implemented risk management policy for the entire organization. Risk management team shall monitor relevant risk factors and report to the Board of Directors every month. Including risk review and assessment at least once a year.

3.7 The Board of Directors developed and implemented internal control and audit systems. The Board of Directors assigned and authorized the Compliance Unit to conduct audit and report result of audit to the Audit Committee prior to reporting to the Board of Directors.

4. Meeting of the Board of Directors

4.1 The Company’s secretary sets up a meeting schedule for the whole year in advance and informs each director such meeting schedule so that they can arrange time to join the meeting.

4.2 The Board of Directors’ meeting will be held every other month. In the year 2008, the Board of Directors’ meetings were held 9 times. Details of the Board meeting are showed in the topic “the Board of Directors and Management Structure” on p.25

4.3 The Chairman and the Chief Executive Officer will co-consider determine meeting agenda items to be proposed for the Board of Directors’ meeting. Each director could propose a meeting agenda item independently. Each director may propose a meeting agenda to the Chairman via the company secretary or may propose a meeting agenda to the Board of Directors prior to the meeting.

4.4 Related document will be sent to all member of the Board of Directors at least 3 days prior to the date of meeting. Especially, for the important agendas the relevant documents shall be submitted to directors prior to the meeting for an adequate time to consider.

4.5 The Board of Directors can invite any involved executive or personnel for inquiry during the meeting. In the Year 2008, it was found that executive directors are the persons who were in charge of the matters and knew all information. Thus, the Board of Directors inquired directly from the in-charge executive directors. After the meeting, the secretary to the Board of Directors will prepare clear and precise minutes of the meeting and inform relevant department(s) the resolution(s) of the meeting so that they can implement policy(s) or plan(s) as specified. Results of implementation will be later notified to the Board of Directors.

4.6 After the Board of Director’s meeting, the corporate secretary will arrange the distinctive minute of the meeting and notify to the related functions for their further actions and report the result of such actions to the Board again for their acknowledgement.

4.7 In each meeting, the Chairman lets each director express his opinion extensively and freely. Each director thus may express his opinion extensively and listen to others’ opinions. Each decision is made rationally and thoroughly. Although the

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Chairman allows each director to express opinion in the meeting extensively, each director presents his opinion concisely. Thus, it normally takes no more than 3 hours on average to run the meeting, which the Board of Directors considers that it is sufficient to consider each meeting agenda item thoroughly.

4.8 Good corporate governance report must be approved by the Board of Directors.

On October 18, 2007, the Board of Directors’ meeting reached a resolution to appoint the Corporate Governance Committee that is responsible for formulating good corporate governance principles, monitoring, evaluating and promoting compliance with the Company’s good corporate governance principles. Thus, the Good Corporate Governance Committee regarded the Year 2008 as “KIM ENG’s good corporate governance year.” The good corporate governance campaign was initiated by various activities to persuade employees to be in compliance good corporate governance principles.

5. Self-Evaluation by the Board of Directors 5.1 The Board of Directors conducts self-evaluation once a year. Such self-

evaluation will be conducted on an overall basis rather than a person-by-person one. Evaluation will be conducted on the following areas:

• Structure and Qualifications of the Board of Directors • Roles, duties and responsibilities of the Board of Directors • The Meeting of the Board of Directors • Performance of Duties by the Board of Directors • Relationship with Management • Self-Development of Directors and Management Development

The company secretary is responsible for collecting and summarize results of evaluation before providing them to the Chairman. The Chairman will inform the results to the meeting of the Board of Directors and consult with all other directors to correct and improve any deficiencies or weaknesses found from the evaluation.

5.2 For the Year 2008, the Board of Directors conducted self-evaluation on October 22, 2008. The result of evaluation indicates that most of the areas evaluated are rated good or excellent, except the area regarding the meeting of the Board of Directors that is rated fair. This could be improved by submission of supporting documents to directors prior to the meeting.

5.3 To improve such deficiency, for the meeting of the Board of Directors next year, all supporting documents required for the meeting shall be submitted to the Board of Directors at least 7 days prior to the date of meeting, except the urgent agendas.

6. Remuneration and Compensation

6.1 Directors’ remuneration and compensation are determined based upon 4 criteria, namely 1) Comparison with the level of remuneration and compensation made to directors of other firms in the securities brokerage business 2) Role and responsibility of each director 3) the Company’s overall operating performance and 4) Dividend payment made to shareholders. Director remuneration shall be

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considered by the Remuneration Committee and proposed to the Board of Directors and meeting of shareholders. Details of remuneration and compensation made to directors are showed in the topic “the Board of Directors and Management Structure” on p35.

6.2 Compensation and remuneration made to the Chief Executive Officer, determined based upon his duties, responsibilities, performance and the Company’s operating performance, must be considered and approved by the Board of Directors. The Board of Directors evaluates performance of the Chief Executive Officer by comparing with the stated operating goals and objectives on an annual basis. During any operating year, the Management will compare the Company’s actual operating performance with the stated operating goals and objectives and present the result of comparison in each Board of Directors’ meeting and prior to preparing operating budget for the next year. The Board of Directors will evaluate performance of the Chief Executive Officer on an annual basis.

7. Corporate Governance Policy and Business Ethics The Board of Directors has put emphasis on good corporate governance system. The Good Corporate Governance Committee was established to determine and specify monitoring and evaluation guidelines and to promote implementation of and compliance with good corporate governance policies. The good corporate governance policies can be classified into 5 sections as follows:

• Shareholder Right • Equal Treatment to Shareholders • Roles of Stakeholders • Disclosure and Transparency • Responsibilities of the Board of Directors

The Company has disseminated its good corporate governance policies via its website to show its intent to operate under the good corporate governance practices to ensure its operation transparency. Employees are given a written good corporate governance manual and urged to work ethically and be in compliance with good corporate governance policies.

In the Year 2008, the Good Corporate Governance Committee reviewed the good corporate governance policies and working ethics. The Good Corporate Governance Committee asked the compliance unit to review, amend and add the good corporate governance policies and working ethics as necessary prior to resubmission for consideration by the Good Corporate Governance Committee. The good corporate governance policies and working ethics were prepared in written form as a reference for reference by all employees. In the Year 2008, compliance with good corporate governance policies was evaluated. The result of evaluation indicates that the Company was in compliance with most of the specified guidelines and policies, except in the area of shareholders’ meeting. This was because some foreign directors did not attend the shareholders’ meeting. However, the Chairman, the Chief Executive Officer, the Chair of the Audit Committee, the Chair of the Remuneration Committee, the Chair of the Nomination Committee and the Chair of the Good Corporate Governance Committee attended the meeting.

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8. Internal Control and Audit System The Board of Directors has put emphasis on having an efficient and effective internal control system. Approval and operation authorities are developed in written form. Operations of the back and the front office are clearly segregated. The compliance unit, which is under the direct control of the Audit Committee, shall monitor and ensure the Company has and is in compliance with the prescribed policies and guidelines regarding operating control, financial reporting, information technology as well as applicable rules and regulations as required by competent authorities. The compliance unit shall determine an audit plan that fully covers operation of all functions, and such plan shall be evaluated at least once a year. Sufficiency of internal control system shall also be evaluated at least once a year as well. In the Year 2008, the Company was in full compliance with its operating policies and applicable rules, regulations and guidelines as prescribed by competent authories.

9. Conflict of Interest The Board of Directors set up clear policy regarding consideration and approval of matters that may cause conflict of interest. Any interested directors shall disclose their conflict of interest prior to the meeting. Any interested directors are not allowed to attend or vote in the meeting. In case there may be any transactions or matters with material conflict of interest, the Board of Directors may assign the Audit Committee to consider and propose their opinion to the Board of Directors. In case the Audit Committee has no expertise in considering and providing their opinion regarding the transaction, the Board of Directors may assign an independent expert or the auditor to provide their opinion regarding the transaction for final consideration and approval by the Board of Directors or the shareholders’ meeting as the case may be. In the year 2008, there was one related transaction, and such transaction was initially considered by the Audit Committee was later proposed to the Board of Directors for consideration. Such related transaction was disclosed on the financial statements.

10. Risk Management Policy The Company may face both internal and external business risks in its operation. To deal with such risks, the Company has continually developed and implemented risk management system as follows:

Overview of Risk Management

• Risk management at both policy and operating level shall be under the responsibility of each sub-committee.

• Operation of the Company is under the organizational structure, with check and balance mechanisms.

• Risk management policies and guidelines in each area are in written form for reference by management and employees.

Such risk management system is developed on the basis of care and continual improvement, taking into account the best interest of shareholders, clients, employees and the society.

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Credit Risk

• Authority to extend margin loans is assigned to some particular authorized persons and committees. Margin loan extension will be evaluated on an annual and case-by-case basis.

• Create a unit that is independent from the Front Office to create check & balance mechanisms;

• In extending securities margin to trading clients, the Company will take into account the clients’ financial positions as well as collateral the clients put with the Company;

• The Company will not extend securities margin to risky clients. The Company developed and implemented clear policies in evaluating and selecting the clients to whom securities margin will be extended. Policies regarding initial margin and marginable securities are also clearly specified.

• The Company has put emphasis on debt collection.

Market Risk: They can be classified into three categories, namely:

Price Risk

• This is the risk that the value of the Company’s investment portfolio may decline due to decline in the value of debt and equity securities the Company invests in. To deal with this kind of risk, the Company has developed and implemented the so-called “Risk Management Policies and Guidelines-Market Risk” with the aim to specify clear policies regarding securities investment and market risk management. Such policies have specified roles, duties and responsibilities of directors and management regarding investment management, policies regarding securities investment, investment risk diversification, investment loss limit and etc.

• The Company has also developed and implemented the so-called “risk ceiling level”, level of warning signs and stop-loss trigger actions.

Interest Rate Risk • This is the risk caused by mismatch between the time gap before interest

rates can be reset (for floating-rate contracts) and the term of contracts (for fixed-rate contracts). To deal with this risk, the Financial Department shall be responsible for monitoring changes and movements in interest rates as announced by many financial institutions and report to the Chief Operating Officer and other involved officers. This will allow the Company to reset its interest rates in line with changes in market interest rates.

Exchange Rate Risk

• The Company has no material assets or liabilities denominated in foreign currencies.

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Liquidity Risk • In regard to management of liquidity risk, it is realized that NCR is an important tool

for measuring and monitoring the Company’s liquidity risk. NCR is also used in specifying scope of transactions. Thus, the Risk Management Department is assigned to be responsible for closely monitoring NCR figures as prepared by the Accounting Department.

Operational Risk

• As operational risk is embedded in every kind of risk, the Company thus put emphasis on this kind of risk and has developed and implemented some measures to deal with it.

• The organizational structure with clear scope of authority and responsibility of each department and check and balance mechanisms are implemented.

• Standard working procedures in written form are developed and implemented, with the independent Compliance Unit under the direct control of the Audit Committee be responsible for auditing tasks.

• Creation and implementation of business continuity planning - BCP The Company has also prevented and transferred operating risks via insurance policies initiated with well-known insurance firms with strong financial positions. 11. Development of Directors and Executives

11.1 In 2008, no new director was appointed. In case a new director is appointed, the Company’s secretary will prepare relevant documents and information that are important and necessary to the newly appointed director in acting in the capacity of directorship such as articles of association, rules and regulations regarding roles and duties of directors as specified by competent authorities. Information related to the Company’s business characteristics and operating philosophies would be provided to the newly appointed director so that he can understand his role and duty as a director and overview of the Company’s operation and scope of business.

11.2 The Company has prepared a succession plan for the Chairman and the Chief Executive Officer on both ad-hoc and permanent basis. On an ad-hoc basis, other executives will act in such capacity on a temporary basis. On a permanent basis, the Nomination Committee will consider and appoint qualified personnel later. In the year 2007, the succession plan was implemented on an ad-hoc basis when the Chairman and the Chief Executive Officer were both on annual leave.

11.3 The Company encourages and facilitates training and development for its staff. In 2007, it sent the Company’s secretary, legal officers and compliance officers to attend a training course regarding corporate governance. The Company urged its directors to attend the class aimed to improve and develop their knowledge and understanding the roles, duties and responsibilities of directors.

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♦Shareholder Structure♦


Shareholder Structure 1. Share Capital of the Company

As at December 31, 2008, the Company had a total registered share capital of Baht 2,861,250,000, with total paid-up capital of Baht 2,826,935,500 comprised of 565,387,100 ordinary shares at par value Baht 5 each. In the Year 2008, KEST established a Treasury Stock plan. As of December 31, 2008, the total number of shares KEST reacquired was 782,100.

2. Shareholders

The Company’s major shareholder is Kim Eng Holdings Ltd. that held 55.88 % of the Company’s total paid-up capital. The followings are details on the Company’s shareholders as at September 4, 2008 the latest book closing date.

No. Name No. of Shares Held

%

1. KIM ENG HOLDINGS LIMITED* 315,862,471 55.88 2. MORGAN STANLEY & CO.INTERNATIONAL PLC. 15,255,100 2.70 3. THAI NVDR CO., LTD. 13,986,234 2.47 4. TFB FOR MFC-THAI FUND INVESTMENT PLAN 8,511,600 1.51 5. STATE STREET BANK AND TRUST COMPANY 5,726,502 1.01

6. CITIBANK NOMINEES SINGAPORE PTE. LTD.-UBS AG LONDON BRANCH-NRBS IPB CLIENT SEG. 4,958,600 0.88

7. MR. TAVEECHAT CHULANGKUL 3,004,700 0.53 8. MS. NAREE TANTIWATTANA 2,633,000 0.47

9. STATE STREET BANK AND TRUST COMPANY FOR AUSTRALIA 2,226,500 0.39

10. OTHERS 178,162,593 34.16 Total 565,283,200 100.00

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♦Shareholder Structure♦


Kim Eng Holdings Limited has a total 600,082,954 shares. Kim Eng Holdings Limited has total paid-up shares of 600,082,954. It bought back (Treasury Stock) in the total of 22,989,000 shares. Thus, the total number of shares outstanding is 577,093,954. The top-10 major shareholders are as follows:

No. Name No. of Shares Held

%

1. KIM ENG SECURITIES PTE. LTD.* 174,098,041 30.17 2. HSBC (SINGAPORE) NOMINEES PTE. LTD. 110,999,020 19.23 3 MR. OOI THEAN YAT RONALD 65,544,928 11.36 4. DBS NOMINEES PTE. LTD. 53,137,224 9.21 5. UNITED OVERSEAS BANK NOMINEES PTE.

LTD. 19,039,329

3.30 6. SHUN FUNG HOLDINGS (PRIVATE) LIMITED 18,500,000 3.21 7. CITIBANK NOMINEES SINGAPORE PTE. LTD. 15,106,192 2.62 8. MRS. GLORIA LEE KIM YEW 10,136,770 1.76 9. OCBC NOMINEES SINGAPORE PTE. LTD. 7,656,502 1.33 10. DBSN SERVICES PTE. LTD. 5,422,944 0.94 11. OTHERS 97,453,004 16.87

Total 577,093,954 100.00

Remark: * 168.48 million of Kim Eng Holdings Limited (“KEH”) shares registered in name of Kim Eng Securities Pte. Ltd. are beneficially held by Yuanta Securities Asia Financial Services Limited ("YSAF") and 5.62 million by other customers respectively. Yuanta Financial Holding Co., Ltd. ("YFHCL") and Yuanta Securities Co., Ltd. ("YSCL") are deemed to be interested in 168.48 KEH million shares beneficially held by YSAF. YSCL is a wholly-owned subsidiary of YFHCL and YSAF in turn is a wholly-owned subsidiary of YSCL.

3. Dividend Payment Policy

The Company has the policy of making dividend payment at a rate not less than 40% of its net profit after deduction of all reserves as specified by the Company. Dividend payment made each year depends upon the Company’s investment plan, necessity and situation in the future. The Board of Directors can propose the final dividend payment during its board meeting and present to shareholders during a shareholders’ meeting for approval. The Board of Directors is authorised to decide an interim dividend payment, but needs to inform the shareholders at the next shareholders’ meeting.

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♦Committers and Management Structure♦


Committees and Management Structure

The Company’s management structure is comprised of the Board of Directors, the Management Committee, the Audit Committee and the Risk Management Committee. All of the Company’s directors and management are qualified in accordance with Section 68 of the Public Limited Companies Act B.E.2535 and the Notification of the Securities & Exchange Commission No. Kor Jor 12/2543 regarding Obtaining for Approval and Approval for Issuance of Ordinary Shares dated March 22, 2000. The Company’s management structure consists of the following sub-committees:

1. The Board of Directors As at December 31, 2008, the Company’s Board of Directors comprised of 9 directors as

follows: Name Title

1. Mr. Yuth Vorachattarn Chairman and Member of the Audit Committee 2. Mr. Ronald Anthony Ooi Thean Yat Director 3. Mr. Montree Sornpaisarn Director 4. Mr. Judd Clark Kinne Director 5. Mr. Hwang Wei-Cherng Director 6. Mr. Pusit Kaewmongkolsri Director 7. Ms. Chao Tse Yang Director 8. Dr. Paiboon Sareewiwatthana Director and Chairman of the Audit Committee 9. Dr. Preecha Jarungidanan Director and Member of the Audit Committee

Mr. Waranchai Jensiriwanich acts as the Corporate Secretary.

Name Title

Mrs. Gloria Lee Kim Yew Honorary Chairperson Authorised Directors who can sign on behalf of the Company Authorised directors who can sign and bind the Company are any two of the following four directors, provided that they jointly sign with the Company’s seal affixed: Mr. Montree Sornpaisarn, Mr. Judd Clark Kinne, Mr. Hwang Wei-Cherng and Mr. Pusit Kaewmongkolsri.

Scope of Power and Duties of the Board of Directors

1. To manage the Company’s operations to ensure compliance with the objectives and articles of association of the Company and resolutions of the Company’s meeting of shareholders with honesty and due care for the interests of the Company.

2. To set goals, guidelines, policies, operating plans and budget of the Company, control and supervise the administration of the Management Committee to ensure the management performs competently and complies with the policies prescribed in an efficient manner. Exceptions to this are transactions such as increase/decrease of capital, issuance of debentures, selling or transferring the business of the Company in whole or

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in major part, buying or taking control of other companies, amending the memorandum of association or articles of association, and giving benefits to directors. In such matters, the Board of Directors needs to obtain approval from a shareholders meeting prior to carrying out such transactions.

3. The Board of Directors may, as deemed appropriate, elect some directors and management as the Management Committee, provided that they shall have power and duties to conduct the Company’s business as designated by the Board of Directors. The Board of Directors shall elect one member of the Management Committee as Chairman of the Management Committee.

In the year 2008, the Board of Directors held 9 meetings. For the Company’s best practice, there must be at least two-thirds of the Board of Directors’ members attending each session.

Details of the Board of Directors’ Meeting.

Name Number of Attendance 1. Mr. Yuth Vorachattarn 9 2. Mr. Ronald Anthony Ooi Thean Yat 4 3. Mr. Montree Sornpaisarn 9 4. Mr. Judd Clark Kinne 6 5. Mr. Hwang Wei-Cherng 4 6. Mr. Pusit Kaewmongkolsri 9 7. Ms. Chao Tse Yang 5 8. Dr. Paiboon Sareewiwatthana 9 9. Dr. Preecha Jarungidanan 9

Scope of Duties and Responsibilities of the Corporate Secretary 1. Prepare and maintain the following documents:

a. Directors' Registry b. Notices for the Board of Directors' Meetings, Minutes of the Board of Directors’

Meetings and Annual Report of the Board of Directors c. Notices for the Shareholders' Meetings and Minutes of the Shareholders’

Meetings 2. Maintain the Report on Stake Holding of Directors and Management. 3. Carry out other tasks as assigned by the Board of Directors.

2. Management Committee

As at December 31, 2008, the Company’s Management Committee is comprised of 5 directors as follows:

Name Title

1. Mr. Montree Sornpaisarn Chairman of the Management Committee 2. Mr. Supachai Ekkul Member of the Management Committee 3. Mr. Pusit Kaewmongkolsri Member of the Management Committee 4. Ms. Boonporn Boriboonsongsilp Member of the Management Committee 5. Mr. Ong Cheow Kheng Member of the Management Committee

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Scope of Power and Duties of the Management Committee

1. To set the Company’s goals, policies, operating plans and annual budget as proposed by the management prior to submitting to the Board of Directors for approval, including approval for amendment and addition of the Company’s annual operating budget in the amount not to exceed Baht 1 million, when there is no Board of Directors’ meeting to approve such matters before informing all directors in the next meeting:

2. The Company’s management that is responsible for conducting matters related to the Company’s operation must report the following matters to the Management Committee from time to time:

2.1 Audit report from the SEC 2.2 Audit report from the SET 2.3 Internal audit report 2.4 Quality control report of the Company 2.5 Performance report as related to the Company’s operating plan

3. To approve expenditures that are in excess of the amount that could be approved by authorized management. Such approval must be in line with the guidelines as set forth by the Board of Directors:

4. To approve major capital expenditures as specified in the Company’s annual budget, or that approved by the Board of Directors:

5. To approve opening of securities trading accounts and other transactions related to securities brokerage business. The Management Committee could sub-grant power to grantee, provided that such sub-granting is in line with the scope of power as authorised by the Board of Directors:

6. To approve in principal investment for business expansion and business venture with other firms and to inform such matters in the next Board of Directors’ meeting:

7. To provide advice to management in regards to financial, marketing, human resources management policies and other matters related to securities brokerage, securities underwriting, and investment banking businesses as well as new businesses:

8. To allocate allowances, benefits and compensations as approved by the Board of Directors to the Company’s employees and any other persons who work for the Company:

9. To approve change of conditions of credit or settle debtors’ obligations:

10. To approve acquisition of office equipment, land and land improvement in the amount exceeding Baht 500,000. Such approval must be in accordance with scope of power as designated by the Board of Directors:

11. To approve appointment, transferal and termination of employment of management-level employees:

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12. To perform any act as authorized by the Company’s Board of Directors from time to time.

The Management Committee does not have the power to approve any transactions or

matters where there is a conflict of interest with the Company or its subsidiary (if any). Disclosure of transactions with conflict of interest must be made to the Board of Directors for consideration.

Scope of Power and Duties of the Management Committee is in accordance with guidelines for granting power by the Board of Directors that was authorized by the Board of Directors’ meeting No.12/2545 held on October 17, 2002.

Any matters that are beyond the scope as specified above, the Management Committee cannot conduct such matters, except in case approval and assignment by the Board of Directors on a case-by-case basis.

For the Year ended December 31, 2008, the Management Committee held meetings 42 times, and in each meeting, at least two-thirds of the Management Committee attended the meeting.

3. Audit Committee The Audit Committee comprises of 3 directors as follows:

Name Title 1. Dr. Paiboon Sareewiwatthana Chairman of the Audit Committee

2. Dr. Preecha Jarungidanan Member of the Audit Committee 3. Mr. Yuth Vorachattarn Member of the Audit Committee

Scope of Duties and Responsibilities of the Audit Committee

1. Review the Company’s financial reports to ensure their accuracy and sufficient disclosure of information by coordinating with external auditors and management responsible for preparing quarterly and yearly financial reports. The Audit Committee may suggest issues or matters to be included for review or audit by the external auditors while auditing of the Company is proceeding:

2. Review the adequacy and effectiveness of the internal control systems and internal audit functions by coordinating with the external auditors and internal auditors:

3. Review the Company’s compliance with the Securities and Stock Exchange Act, rules and regulations of the Stock Exchange of Thailand or other laws relating to securities businesses:

4. Consider and advise on an appointment of the external auditors of the Company, including the audit fee by considering the credibility, the adequacy of existing resources, the firm’s performance and experience of its professional staff:

5. Consider proper and full disclosure of information on connected transactions or conflict of interest:

6. Conduct any other matters assigned by the Board of Directors and agreed by the Audit Committee such as reviewing the Company’s financial and risk management policies,

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reviewing compliance with the Code of Conduct by the management and reviewing all important reports in conjunction with the management to be disclosed to the public as required by law (e.g. management report and management, discussion and analysis (MD&A)):

7. Report activities of the Audit Committee in the Company’s annual report signed by the Chairman of the Audit committee. Such reports should include the following information:

- Opinion on accuracy, completeness and reliability of the Company’s process of reporting and disclosing financial information;

- Opinion on sufficiency of the Company’s internal control system; - Supporting reasons whether or not the Company’s external auditors should be

re-appointed; - Opinion on the Company’s compliance with the Securities and Stock Exchange Act,

rules and regulations of the Stock Exchange of Thailand or other laws relating to its businesses;

- Other reports deemed appropriate to be disclosed to shareholders and general investors as assigned by the Board of Directors.

In 2008, the Audit Committee held 8 meetings, with details as follows:

Meeting

No. Date of Meeting

Dr.Paiboon Sareewiwatthana

Dr.Preecha Jarunggidanan

Mr.Yuth Vorachattarn Auditor

1/2008 30/01/2008 (Audited 2007

Financial Statements)

2/2008 11/02/2008 -

3/2008 28/03/2008 -

4/2008 30/04/2008 (Reviewed

Q.1/2008 Financial Statements)

5/2008 30/06/2008 -

6/2008 30/07/2008 (Reviewed


7/2008 29/09/2008 -

8/2008 22/10/2008 (Reviewed


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4. The Nominating Committee The Nominating Committee was set up in accordance with the resolution of the Board of

Directors’ meeting No.2/2549 held on February 21, 2006. The Nominating Committee is comprised of 5 directors as follows:

Name Title

1. Dr. Preecha Jarungidanan Chairman of the Nominating Committee and Independent Director

2. Dr. Paiboon Sareewiwatthana Member of the Nominating Committee and Independent Director

3. Mr. Yuth Vorachattarn Member of the Nominating Committee and Independent Director

4. Mr. Judd Clark Kinne Member of the Nominating Committee 5. Ms. Chao Tse Yang Member of the Nominating Committee

Scope of Duties and Responsibilities of the Nominating Committee are as follows: 1. To nominate qualified candidates as new directors or CEO.

2. To determine the procedures and criteria for nomination of Company’s directors or CEO to ensure transparency.

In 2008, the Nominating Committee held 1 meeting, with details as follows: Name No.1/2008 on February 13, 2008

Dr. Preecha Jarungidanan Dr. Paiboon Sareewiwatthana Mr. Yuth Vorachattarn Mr. Judd Clark Kinne Ms. Chao Tse Yang -

5. Other Committees

5.1 The Compensation Committee The Company’s Compensation Committee is comprised of 5 directors as follows:

Name Title

1. Dr. Paiboon Sareewiwatthana Chairman of the Compensation Committee and Independent Director

2. Dr. Preecha Jarungidanan Member of the Compensation Committee and Independent Director

3. Mr. Yuth Vorachattarn Member of the Compensation Committee and Independent Director

4. Mr. Hwang Wei-Cherng Member of the Compensation Committee 5. Mr. Judd Clark Kinne Member of the Compensation Committee

The Compensation Committee is responsible for formulating the Company’s policies

with regard to employment and compensation for employment or termination of employment to

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be granted or awarded to the Company’s employees or directors, and determining the level of compensation and other remunerations to be granted to employees and directors.

The Compensation Committee has scope of power and duties as follows:

To determine and set fair and clear compensation of any kind to be granted or awarded to directors and employees of the Company:

To consider granting or awarding compensation of any kind to management as appropriate, including payment of bonus and payment in the form of securities granting:

To conduct any activities deemed necessary and appropriate in conforming with compensation policy regarding form, procedures and details about allocating of securities to employees.

The Chairman of the Compensation Committee would be responsible for providing any information necessary for conducting research in regard to employment to external advisors freely.

The Compensation Committee would be responsible for controlling expenses incurred to employ such independent external advisors as well as considering and reviewing appropriate compensation rate, taking into account all relevant factors.

The Compensation Committee would specify compensation base, increase in compensation and the overall compensation policy. The Compensation Committee will report such matters directly to the Board of Directors and provide opinion on the compensation to be made to senior management.

The Compensation Committee would accept and listen to opinion as provided by the CEO and the COO, and provide recommendations to the Board of Directors for approval.

In the year 2008, the Compensation Committee held two meetings, with details as follows:

Name No.1/2008 on

February 13, 2008 No.2/2008 on

August 11, 2008 Dr. Paiboon Sareewiwatthana Dr. Preecha Jarungidanan Mr. Yuth Vorachattarn Mr. Judd Clark Kinne Mr. Hwang Wei-Cherng -

5.2 The Underwriting Committee

The Underwriting Committee was set up in accordance with the resolution of the Board of Directors’ meeting No.11/2545 held on September 20, 2002. The Underwriting Committee, with authority and duties in approving the Company to act as lead underwriter or co-underwriter for both debt and equity securities, comprised of;

Chief Executive Officer (CEO) Chief Financial Officer (CFO) Managing Director-Credit and Risk Control Department Managing Director-Retail Client Department

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Composition of the Committee

Must consist of at least three members, one of whom must be the CEO who acts as the Chairman of the Underwriting Committee and is responsible for monitoring the activities of the Underwriting Committee.

Scope of Power and Duties of the Underwriting Committee

To consider and approve the securities that include both debt and equity instruments the Company will act as lead underwriter or co-underwriter by considering Authorisation for Placement & Underwriting Commitment Form that includes details about characteristics of instruments, business nature and operation of issuers as prepared by the Investment Banking Department:

To consider and approve the Company’s acting as the lead underwriter or co-lead underwriter. The majority of members of the Underwriting Committee must approve and vote for the transaction prior to the Company’s acting as the lead underwriter or co-lead underwriter:

To consider the impact of the Company’ commitment to firm underwriting of securities on financial risk, liquidity and Net Capital Rule (NCR) to ensure the Company’s NCR will not fall below the level required the SEC:

To establish guidelines for appropriate allocation of securities the Company acts as underwriter to local sales, institutional sales and investment banking departments:

To perform any acts as designated by the Management Committee.

The Underwriting Committee does not have the power to approve any transactions or matters where there is a conflict of interest with the Company or its subsidiary (if any). Disclosure of transactions with conflict of interest must be made to the Board of Directors for consideration.

5.3 The Risk Management Committee The Risk Management Committee was set up in accordance with the Board of Directors’

resolution no. 7/2005 held on July 14, 2005. Its members consist of the Company’s directors and management as follows:

Name Title 1. Mr. Suppachai Ekkul Acting Chairman of the Risk Management Committee 2. Mr. Judd Clark Kinne Member of the Risk Management Committee 3. Ms. Chao Tse Yang Member of the Risk Management Committee 4. Mr. Pusit Kaewmongkolsri Member of the Risk Management Committee 5. Mr. Ong Cheow Kheng Member of the Risk Management Committee 6. Mr. Supawee Thanasrisunee Member of the Risk Management Committee

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Scope of Duties and Responsibility of the Risk Management Committee

The Risk Management Committee’s duties and responsibilities are as follows:

1. To designate a person(s) with authority to grant credit line approval as well as the authority to do so;

2. To consider and approve operation of business in accordance with specific credit manuals;

3. To consider deviation in various matters as well as authorised persons;

4. To consider other issues related to the Company’s risk factors as assigned by the Board of Directors.

The Risk Management Committee also has authority in the following areas:

1. To determine and review policies, guidelines, procedures in regard to managing all risk factors affecting the Company’s operating performance such as credit risk, market risk, operational risk etc;

2. To consider and approve credit line for securities trading and investment in financial instruments such as Futures and Option and review such amount of credit line;

3. To consider and make a decision on disputed amount of credit line in accordance with normal approval procedures;

4. To identify and specify list of highly risky securities as well as additional conditions clients need to fulfill prior to submission of trading orders for such securities;

5. To consider and approve any exceptional cases in relation to risk management issues.

In 2008, the Risk Management Committee held 2 meetings, with details as follows:

Name Number of Attendance 1. Mr. Suppachai Ekkul 2 2. Mr. Judd Clark Kinne 2 3. Ms. Chao Tse Yang 2 4. Mr. Pusit Kaewmongkolsri 2 5. Mr. Ong Cheow Kheng 1 6. Mr. Supawee Thanasrisunee 2

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5.4 The Good Corporate Governance Committee The Good Corporate Governance Committee was set up in accordance with the resolution

of the Board of Directors’ meeting No.6/2006 held on November 18, 2007. The Good Corporate Governance Committee consists of the members as follows:

Name Title

1. Mr. Yuth Vorachattarn Chairman of the Good Corporate Governance Committee

2. Dr. Preecha Jarungidanan Member of the Committee 3. Dr. Paiboon Sareewiwatthana Member of the Committee 4. Mr. Montree Sornpaisarn Member of the Committee 5. Mr. Waranchai Jensiriwanich Secretary of the Committee

Scope of Duties and Responsibilities of the Good Corporate Governance Committee

1. Determine good corporate governance principles and business ethics & professional conducts of directors, executives and employees;

2. Monitor, evaluate the result of conformance with good corporate governance principles and business ethics & professional conduct by of directors, executives and employees and provide any suggestions regarding such matters;

3. Arrange any activities to encourage directors, executives and employees to understand more about good corporate principles and realise the necessity to conform with specified business ethics and professional conduct;

4. To ensure full and fair disclosure of conformance with good corporate governance principles in the Company’s annual report.

In the year 2008, the Good Corporate Governance Committee held two meeting with

details as follows:

Meeting No. Date

Mr.Yuth Vorachattarn

Dr.Preecha Jarungidanan


Mr.Montree Sornpaisarn

1/2008 30/01/2008 2/2008 28/03/2008

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6. Management

As of December 31, 2008, the Company has 11 members of management as follows: Name Title

1. Mr. Montree Sornpaisarn Chief Executive Officer 2. Mr. Pusit Kaewmongkolsri Chief Operating Officer Acting Chief Financial Officer 3. Mr. Suppachai Ekkul Managing Director, Risk Management and Credit Control Department 4. Mrs. Boonporn Boriboonsongsilp Managing Director, Local Securities Clients 1 5. Mr. Vikas Chandra Kawatra Managing Director, Foreign Institution Sales Department 6. Ms. Aim-On Pinthawiruth Senior Vice President, Accounting Department 7. Ms. Wimol Chaipatikarn Vice President, Finance Department

Management who are not under SEC definition

Name Title 8. Mr. Kosit Boonroungkaw Deputy Managing Director, Local Securities Clients 2 9. Mr. Ong Cheow Kheng Advisers and Member of the Management Committee 10. Mr. Wanchai Tanjasiri Assistant Managing Director, Business Development

and Technical Analysis Department 11. Mr. George Huebsch Executive Vice President, Research Department

Mr. Boonchai Sripratyaanun as Managing Director, Investment Banking Department, Appointed on February 1, 2008 and resigning on May 1, 2008.

7. Management Compensation

A. Monetary Compensation

Director’s Compensation

Director’s compensation has been determined on a fair and reasonable basis. The Remuneration Committee reviewed director’s compensation, taking into account responsibility of each director, the Company’s financial condition as well as level of compensation paid relative to those made by other companies in the same industry. Director’s compensation consisted of meeting allowance and gratuity that were authorised and approved by the shareholders’ meeting.

For the year ended December 31, 2008, the Company’s Board of Directors was comprised of 9 directors, and the Company made compensation to all directors in the form of meeting allowances in the total amount of Baht 3,600,000 and a director gratuity for a total amount of Baht 35,000,000. For the total amount of director gratuity, Baht 5,000,000 of which was made to 3 members of the Audit Committee, and the remaining amount was made to other directors. Details of director’s compensation are as follows:

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Unit: Baht

Compensation for the Year 2008

Gratuity for the Year 2008

1. Mr. Yuth Vorachattarn 2,400,000 2,200,000 2. Mr. Ronald Anthony Ooi Thean Yat - 7,500,000 3. Mr. Montree Sornpaisarn - - 4. Mr. Judd Clark Kinne - 7,500,000 5. Mr. Hwang Wei-Cherng - 7,500,000 6. Mr. Pusit Kaewmongkolsri - - 7. Ms. Chao Tse Yang - 7,500,000 8. Dr. Preecha Jarunggidanan 600,000 1,400,000 9. Dr. Paiboon Sareewiwatthana 600,000 1,400,000

Total 3,600,000 35,000,000

Management’s Compensation

For the year 2008 ended December 31, 2008, the Company made compensation to 6 management (under the SEC definition) (excluding Senior Vice President of the Accounting Department and the Finance Department) and Mr. Ong Cheow Kheng (as a member of the Management Committee) in the form of salary and bonus for the total amount of Baht 147.02 million and contribution to the provident fund for a total amount of Baht 0.89 million.

Other Compensation

The Company’s extraordinary shareholders’ meeting held on December 6, 2005 reached a resolution to approve the issuance and grant of warrants in the total amount of 27,250,000 units to the Company’s directors and employees (with an exercise ratio of 1:1 and an exercise price of Baht 7 a share). Grantees could exercise warrants on the last business day of each month, commencing in August 2006. The outstanding amount of warrants granted to each director as at December 31, 2008 are as follows:

Director Name The Outstanding Amount of Warrants

Granted as at December 31, 2008 (Unit)

Number of Warrants Exercised

during the Year 2008

1. Mr. Yuth Vorachattarn 20,000 50,000 2. Mr. Ronald Anthony Ooi Thean Yat 125,000 218,800 3. Mr. Hwang Wei-Cherng 125,000 218,800 4. Mr. Judd Clark Kinne 125,000 218,800 5. Mr. Montree Sornpaisarn 125,000 218,800 6. Mr. Pusit Kaewmongkolsri 125,000 218,800 7. Ms. Chao Tse Yang 125,000 218,800 8. Dr. Preecha Jarunggidanan 10,000 10,000 9. Dr. Paiboon Sareewiwatthana 10,000 10,000

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Total 790,000 1,382,800

8. Corporate Governance

The Board of Directors has a policy to adhere strictly to the Code of Best Practices for Directors of Listed Company as prescribed by the Stock Exchange of Thailand.

The Company applies Principles of Good Corporate Governance throughout the organisation. It also set up good corporate governance culture starting by providing knowledge and understanding of good corporate governance to employees through various means so that the employees will realize the importance of such culture and integrate them into their work to ensure transparency and standardisation. This will be a basic principle before moving on to further development. The Company’s progress in implementing good corporate governance will be evaluated periodically.

9. Protection of Usage of Inside Information The Company has a policy to prohibit management from using inside information

regarding its operation result and financial condition yet to be disclosed to the public for securities trading and for their own interests. The Company informed its management their obligations in regard to disclosure of their holdings of securities of the Company in accordance with Section 59 and penalties as set out in Section 275 of the SEC Act B.E. 2535

As well, the Company also implemented other preventive measures with regard to usage of inside information including:

1. The Compliance Department will closely check and monitor Investment Banking Department Staffs (IB Staffs) possessing material nonpublic information yet to be disclosed to the public. Names of the clients’ firms to which such sensitive information belongs will be put under “Watch List”. As well, any IB staffs who possess material nonpublic information regarding their corporate clients are prohibited from divulging such information to outsiders and trading on such securities (in case corporate clients are listed firms).

2. In case the Company acts as the financial advisor for public offering of shares or for acquiring listed firms, names of client firms will be notified to the Compliance Department, and all IB staff will be prohibited from trading securities of such client firms.

3. The Company has a policy to put a “Chinese Wall” between the Investment Banking Department and other departments. IB staff are prohibited from divulging nonpublic information regarding corporate clients to securities marketing officers and securities research staff prior to an appropriate time.

4. In case the Company’s Research Department has prepared research reports based on interviews with listed firms’ management, the Compliance Department will put the names of listed firms for which the Research Department has prepared research reports under a “Watch List” to check whether any involved persons take advantage of inside information.

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5. In case the Research Department has prepared research reports for any listed firms, the Compliance Department will put the names of listed firms for which the Research Department has prepared research reports under “Restricted List”, and all the Company’s staff will be prohibited from trading such securities three days prior to public dissemination of such reports.

6. The Company’s management are required to disclose their holdings of securities of the Company in accordance with Section 59 and penalties as set out in Section 275 of the SEC Act B.E. 2535

7. Any Company’s management or departments who obtain inside information regarding the Company are prohibited from divulging such information to outsiders or uninvolved persons, and from trading in the Company’s securities one month prior to public dissemination of the Company’s financial statements.

♦Committees and Management Structure♦


• Personal Data of the Company’s Directors and Management Board of Directors

Work Experiences Name and

Position at the Company

Age Education % of Share Holding

as of Dec 31, 2008*

(Change in No. of Shares Held during the

Year)**

Family Relationship among management Period Position and Company

1. Mr. Yuth Vorachattarn Chairman and Mmember of the Audit Committee

60

Master Degree in Economics, Thammasat University Bachelor Degree in Economics, Thammasat University The Thai Institute of Directors Association: DCP #0

0.042

(- shares)

None

Oct.02-present Jul.03 - present Jul.04 - present Jul.05 - present Aug.02 – 2005 Jul. 01 - Mar.02 Jan.00-Jul.01 Feb.99-Jan 00

Chairman and Member of the Audit Committee, Kim Eng Securities (Thailand) Plc. Chairman, Siam Panich Leasing Plc. Chairman, Preecha Group Plc. Chairman of the Audit Committee, Saha Thai Steel Pipe Plc. Chairman, Family Know How Co., Ltd. Managing Director, Bangkok Metropolitan Bank. Manager, MAI. ASVP, Government Savings Bank.

2. Mr. Ronald Ooi Thean Yat Director

56

Certified Public Accountant, The Institute of Chartered Accountants. Bachelor of Economics, University of New England, Australia

0.039

(- shares)

None

Aug. 98-present 1989-present

Director, Kim Eng Securities (Thailand) Plc. Director, Kim Eng Holdings Limited.

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as of Dec 31, 2008*


Year)**


3. Mr. Hwang Wei-Cherng Authorized Director

46

MBA (Finance), University of California, Riverside, USA

0.039

(- shares)

None

Oct.02 - present Oct.03 - present Jun. 2001- present

Director, Kim Eng Securities (Thailand) Plc. Director, Yuanta Securities Asia Financial Service Limited Director, Yuanta Core Pacific Securities (Hong Kong) Company Limited Director, Kim Eng Holdings Limited

4. Mr. Judd Clake Kinne Authorized Director

64

Master of International Management

American Graduate School of International Management, Glendale, Arizona, USA

0.216

(-shares)

None

Nov.02 - present Nov 06 - present Nov 05 - present Jan.89 - Feb.98

Director, Kim Eng Securities (Thailand) Plc. Director, KE Strategic Pte. Ltd Director, Kim Eng Holdings Limited Peregrine Securities Singapore Pte. Ltd.

5. Ms. Chao Tse Yang Director

46

Financial Laws, Cathalic University

International Administration Central Michigan University

0.039

(- shares)

None

Mar 05 - present May 04 - present

Director, Kim Eng Securities (Thailand) Plc. Director, ATR Kim Eng Financial Corporation Director, ATR-Kim Eng Capital Partners Inc.

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as of Dec 31, 2008*


Year)**


6. Mr. Montree Sornpaisarn Chief Executive Officer and Authorized Director

45

Chartered Financial Analyst (CFA) MBA (Finance), Thammasat University Bachelor Degree in Engineering, Chulalongkorn University The Thai Institute of Directors Association: DAP #21/2004

0.031

(425,000 shares)

None

Oct.01 - present May 08 - Present Mar. 08 - Present Apr. 07 - Present May 05 - present Feb.00 - Sept.01 Sept.98 - Jan.00

Director and Chief Executive Officer, Kim Eng Securities (Thailand) Plc. Director, The Stock Exchange of Thailand Director and Member of Audit Committee, CVD Entertainment Plc. Director, Thailand Listed Companies Association Executive Director, Association of Securities Companies Managing Director (Investment Banking), Vickers Ballas (Thailand) Ltd. SVP, Investment Banking, SG Asia Finance and Securitieis Company Plc.

7. Mr. Pusit Kaewmongkolsri Chief Operating Officer, Acting Chief Financial Officer, Authorized Director

47

Master Degree in MIS, West Coast University. USA. Bachelor Degree in Accounting, Chulalongkorn University The Thai Institute of Directors Association: DAP #11/2004

0.030

(71,300 shares)

None

Jan. 03. - present Jul. 98 – Jul. 02 1982 – Feb. 98

Director and Chief Operating Officer, Kim Eng Securities (Thailand) Plc. Director, DBS Vickers (Thailand) Co.,Ltd AVP, Cmic Finance and Securities Co.,Ltd

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as of Dec 31, 2008*


Year)**


8. Dr. Preecha Jarungidanan Director and Audit Committee Member

63

Ph. D in Economics, University of Missouri-Columbia, USA. Master of Economics, California State University, Long Beach, USA. Bachelor of Economics, Thammasat University The Thai Institute of Directors Association: DAP #9/2004

0.002

(30,000 shares)

None

Oct.02 - present Present Mar.01 - present

Director and Audit Committee Member, Kim Eng Securities (Thailand) Plc. Director The Public Sector Development Commission Director and Audit Committee Member Thai-German Products Plc., Stars Microelectronics (Thailand) Plc. Expert in Business Economic, NIDA

9. Dr. Paiboon Sareewiwatthana Director and Chairman of the Audit Committee

55

Ph. D in Finance, University of Mississippi, USA. The Thai Institute of Directors Association: DCP #12/2001

0.007

(-)

None

Oct.02-present Feb.01-present 1984 – present

Director and Chairman of Audit Committee, Kim Eng Securities (Thailand) Plc. Member of the Audit Committee, Team Precision, Plc. Professor Level 9, NIDA

*Determined based on the no. of shares outstanding after taking into account the no. of repurchase shares.

**Change in no. of shares outstanding during the year does not include new shares from exercising share warrants.

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♦Market and Business Conditions♦



Market and Business Conditions

♦ Brokerage Business

2008 proved to be a very difficult year for the Thai stock market, as it did for equity markets worldwide due to the sub-prime financial meltdown in the US and Europe, a global economic slowdown and extreme fluctuations in energy and other commodity prices. The Thai stock market’s SET Index fell by nearly half, or 47.56%, from 858.10 on 28 December 2007 to 449.96 on 30 December 2008. The SET index peaked at 884.19 on 21 May 2008 and hit a five-year low of 384.15 on 29 October 2008. Major equity markets did not fare much better: the Dow Jones Industrial Average fell by 35.15%, NASDAQ by 42.02% and Japan’s Nikkei 225 by 42.12%. Within the region, Hong Kong’s Hang Seng index dropped 47.99%, Singapore’s Straits Times by 48.39%, Malaysia’s Kuala Lumpur Composite by 39.07%, the Philippines’ PSE by 48.29%, Indonesia’s Jakarta Composite by 50.64%, India’s BSE Sensex by 51.92%, and China’s Shanghai Composite by 65.16%. The developed markets in the US and Europe were initially hit the hardest by the sub-prime credit crisis, plummeting housing prices, rising mortgage defaults and big-name bank failures. This turned into a worldwide financial confidence crisis until US and European financial authorities began putting together massive banking sector bailout/rehabilitation schemes from the first quarter of the year in an urgent bid to restore confidence in the global financial system. Furthermore, extreme fluctuations in oil and other commodity prices hit consumer purchasing power through sharply higher inflation up until mid-year. Crude oil prices rose 63.84% from US$89.68/barrel on 31 December 2007 to a peak of US$146.94/barrel on 14 July 2008. Slowing global demand, however, allowed oil prices to fall back to US$38.23/barrel at year end (24 December 2008). Similarly, the consumer price index in Thailand rose to a peak of 9.2% in the month of July before sliding back to 0.4% at year end (December). In general, financial institutions in Thailand were quite safe from the global financial crisis as Thailand had just weathered a severe financial crisis in 1997. Thai corporates and banks promoted a “sufficiency economy” philosophy, and thus were generally prudent and conservative. The latest crisis differed significantly from 1997. Non-bank listed companies in Thailand had an average debt-equity ratio of approximately 2.1x in mid-1997, which increased to 5.1x by the end of 1997. The leverage ratio in mid-2008, however, was only 1.1x and 1.2xby the end of 2008. However, the confluence of negative global factors resulted in a recession in the US starting at the end of 2007 and a sharp slowdown in the global economy during the course of 2008. This, in turn, began to be felt in export-oriented Asian economies, such as Thailand, particularly in the last quarter of the year. Local politics also played a part in further dampening an already worsening economic situation and stock market sentiment in Thailand. During 2008, Thailand had four prime ministers, including Gen. Surayud Chulanont, Samak Sundaravej, Somchai Wongsawat, and Abhisit Vejjajiva. Political tensions steadily worsened up to the eight-day closure of Bangkok’s two airports at the end of November and early December.

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The toll on the economy began to be more apparent near the end of the year with Thailand’s preliminary GDP growth estimates falling from 5.97% in 1Q08, 5.28% in 2Q08, to 3.96% in 3Q08. Economic growth is widely believed to have turned negative in the last quarter of the year largely due to the sudden and sharp fall-off in export growth from the slowing global economy, weakening domestic demand, as well as the negative consequences of the temporary shutdown of Bangkok’s airports. The Bank of Thailand’s Monetary Policy Committee raised its benchmark policy rate by 25bps twice – in July and August – to counter rising inflationary pressure from sharply higher energy prices, but reversed course with a 100bp rate cut at its final meeting of the year as the focus shifted from fighting inflation to supporting a quickly slowing economy. Thai commercial banks followed suit, raising interest rates on special deposits in August and then cutting rates back in December. Despite the late year weakness in exports, Thailand incurred a trade surplus of US$237mn and a slight current account deficit of US$178mn in the year 2008. . Due to strong foreign fund inflows, particularly in the first quarter, Thailand registered a balance of payments surplus of US$24,693mn in the year 2008, allowing the country’s international reserves to rise to US$110,892mn at year end. The Thai baht strengthened against the dollar in the first quarter of the year on anticipation of an improving political, business and stock market outlook, peaking at Bt31.16/US$ on 19 March 2008. However, as the global financial confidence crisis worsened in the second quarter, particularly after the shocking closure of Lehman Brothers, there was an international flight to quality – to US Treasury Bills. The baht then steadily weakened to a low of Bt35.74/US$ on 1 December, before slightly strengthening back to close the year at Bt34.80/US$. Performance and trading volume on the Thai stock market reflected improving market / economic / political sentiment in the first quarter and then suffered through very poor second and third quarters to rally again at year end. Average daily turnover for the year slipped to Bt 15,870 mn from Bt 17,098 mn in 2007. Foreign investors accounted for 29.54% of total trading value in 2008 versus 32.95% in 2007. Local institutions increased their proportion of trading value to 17.13% from 14.51% the previous year, while retail investors’ value slightly improved to 53.33% from 52.54%. Foreigners were net sellers by Bt 162,346 mn in 2008 with February being the only month of net foreign buying by Bt 31,334 mn. Most notably, foreigners were large net sellers by Bt 72,240 mn in May, Bt 36,545 mn in June and Bt 35,855 mn in July – the worst months of the global financial confidence crisis. Meanwhile, local institutions and retail investors were net buyers by Bt 46,100 mn and Bt 116,246 mn respectively. The energy sector accounted for 35.57% of total 2008 trading value and 34.45% of the Thai stock market’s year-end market capitalisation. The banking sector accounted for 22.04% of trading value and 14.92% of market capitalisation. Brokerage market share of Kim Eng Securities (Thailand) Plc. improved only slightly in 2008 to 8.18% from 8.10% in 2007. The Company remained the most active member broker of the SET for 10 months in the year.

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Even with the economic slowdown and political uncertainty, the earnings performance of listed companies was not negative. In the first nine months of the year, aggregate earnings of all listed companies increased by 26.12% to Bt 394,172mn. If we exclude the banking sector, which had large provisionings in 2007, total earnings growth would have still increased by 9.89% to Bt 322,783 mn. Thai listed companies are in a relatively strong financial position and have been able to maintain relatively generous dividend payouts. According to KELIVE research’s universe of stock coverage, representing about 85% of the market’s overall capitalisation, the SET index, at the year end close of 449.96, was trading on a 2008 price-earnings ratio of 6.66x, price-to-book value of 1.53x and average dividend yield of 6.76%.

♦ Business of Trading Debt Instruments

Trading activities of debt instruments in the primary market increased continuously from the year 2007. The total value of new Domestic Bond including Bill of Exchange is approximately Baht 11,231.70 billion, an increase by 78.85% from that in the year 2008. The outstanding debt instruments increased. As of 30 December, 2008, total outstanding registered bonds on ThaiBMA stood at Baht 4,854.62 billion, an increase by 3.31% from that in the year 2007. The most outstanding debt instrument government bonds with the outstanding trading volume Baht 1,808.39 billion, an increase of 5.31%. The Bank of Thailand bonds with the outstanding volume of Baht 1,465.66 billion, an increase of 2.82%, Corporate Debenture, with the trading volume of Baht 938.34 billion, an increase of 4.51%. Total outstanding of treasury bill stood at Baht 81billion, a decrease by 28.95% from that in the year 2007. Trading activities of debt instruments in the secondary market in the year 2008 increased compared with those in 2007, with the total trading volume of Baht 17,631.27 billion or an average daily trading volume of Baht 70.29 billion, an decrease by 65% (excluding short-term debt instruments with maturity less than 1 year) or short-term BOT bond (outstanding maturity is 14 days). The total trading volume is Baht 1,585.17 billion, an decrease of 6.8% from that in the year 2007. Total fund raising of corporate bonds in the Thai Bond Market Association increased compared with those in 2007, with total trading volume of Baht 260.85 billion, an increase by 33.89%. Total fund raising of commercial paper stood at Baht 979.21 billion, the same amount from those in the year 2007. Total fund raising of Baht Bond and Foreign Bond was Baht 18.09 billion, an increase of 85.06%.

♦ Financial Advisory and Securities Underwriting Business

Thailand Stock Market in the year 2008 experienced the high fluctuation and bearish market from both external factors starting from Sub-Prime housing loan and financial collapse in the USA and Europe that the US Federal Bank and Ministry of Finance must inject so much money to support continuously until the vehicles manufacturing industry requested for the governmental rescue. In addition, Thailand also faced with the negative factors, which affected Thailand economic growth. The decrease of public consumption requirement affects the real manufacturing sector, leading to the reduction of production capacity, production cost, and workforce, which caused an increasing unemployment and affected debt repayment capacity, high risk of bad debt including the unstable internal politic. The sluggish domestic consumption and investment affected the stock price fluctuated in subsequence from 858.10 as of 31 December, 2007 to 449.96 as of 31 December, 2008. The total amount of equity issuance in the

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year continued decelerated. In 2008, there were only 12 new listings, with total amount of fund raised of Baht 71,080.53 million. There were 9 new listings on the SET, with total amount of fund raised of Baht 69,745.53 million and 3 new listings on the MAI, with total amount of fund raised of Baht 1,605 million. As of 31 December, 2008, there were the total of 476 SET-listed and 49 MAI-listed companies respectively. For the period of 2006-2008, KEST engaged in more financial advisory business and acted as co-underwriter for some initial public offerings and an investment fund. In the year, the Investment Banking Department’s total income was Baht 30.70 million compared with Baht 22.90 million or the increase of 34%.

♦ The Derivatives Agent Business The Company was granted by the Ministry of Finance a license to operate business as a derivatives agent in accordance with the Derivatives Act B.E. 2546 (2003). As a derivatives agent, the Company is allowed to obtain from and submit on behalf of their clients trading orders to the Derivatives Exchange. It was selected as one of the first twenty members of both Thailand Futures Exchange (TFEX) that was launched on April 28, 2006 to provide services of trading derivatives to individual and institutional clients and Thailand Clearing House (TCH) that has provided services related to the registering, clearing and settling of transactions executed on the exchange, the guaranteeing of contracts and the managing of risks of its members.

For the Year 2008, the total volume on TFEX was 2,148,620 contracts, representing the total trading value of Baht 937,782 million. The average daily volume of SET 50 Index Futures in the year was 8,652 contracts, an increase of 72.59% compared with that in 2007 that was 5,013 contracts. For SET 50 Index Options, the average daily volume was 185 contracts. For the new product, namely Single Stock Futures that were launched on November 24, 2008, the average daily volume was 154 contracts. Investors in the derivatives market could be classified into three groups, namely domestic individual investors that accounted for 57% of total volume, domestic institutional investors that accounted for 26% of total volume and foreign institutional investors that accounted for 17% of total volume. For 2008, the Company ranked No.1 in term of market shares that accounted for 12.92% of the total volume in the derivatives market. The total volume for derivatives contracts traded via the Company was 555,351, representing the total value of Baht 238,925 million. In addition, the total company’s volume is from operating derivative agent business only because the company has no proprietary trading or market making activities. The Company has long emphasized expanding its investor base in the derivatives market. It has continuously provided variety of training courses related to derivatives instruments to its clients and general investors. This is because the Company has long realized that its long-term success in the derivatives business depends upon investors’ knowledge and understanding in derivatives trading strategies, return & risk related to derivatives investment and their abilities to apply derivatives instruments for investing and hedging purposes. The Company aims to grow concurrently with continuous expansion in its investor and client bases. The Company will continue to prepare and publicize daily research related to derivatives and their investment strategies in both visual and audio forms via KELIVE TV to which clients can access via the Internet.

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♦Risk Factures♦



Risk Factors

• Fluctuations in the conditions of international and domestic economies, money markets and capital markets could materially affect the Company’s revenue.

Brokerage fees from securities and derivatives businesses that have been KEST’s major source of revenue are directly related with economic condition, movements of money and capital markets, trading volume on the Stock Exchange of Thailand (SET) and investor confidence, all of which are the factors that have been beyond control of the Company. For the years 2005, 2006 and 2007, average daily trading values on the SET were Baht 16,601 million, Baht 16,327 million and Baht 17,436 million, respectively. In 2008, the average daily trading value on the SET was Baht 16,118 million, a decrease of 7.56 % compared with that of 2007 due to many internal and external factors that caused detrimental effects to investors’ confidence. In 2006, 2007 and 2008, KEST’s brokerage fees from securities and derivatives businesses stood at Baht 1,645.15 million, Baht 1,618.63 million and Baht 1,511 million, respectively.

Fluctuations in the economy, the money market and the capital market may be caused by a large number of factors that are beyond control of KEST, including civil unrest in the three most southern provinces of Thailand and political uncertainties. Such factors would negatively affect confidence of both domestic and foreign investors and, as a consequence, may adversely affect the volume of trading on the SET and the MAI, including the amount of funds to be raised and the number of new listings on the SET and the MAI. This could have a material adverse effect on KEST’s business, financial condition and result of operation.

KEST has mitigated such risk by providing some parts of compensation made to marketing officers and securities traders that vary with trading volume on the SET to reduce its fixed operating costs, expanding its brokerage client base to include both individual and institutional clients and generating revenue from variety of financial advisory services including securities offering, M & A, business takeovers, project feasibility studies, business valuation and securities underwriting. KEST also engages in other businesses to generate additional sources of revenue such as asset management, private fund management and securities borrowing & lending (SBL).

• The Company operates in a highly competitive business.

The securities business in Thailand is a highly competitive, especially in the area securities brokerage that has generated a major portion of KEST’s operating revenue. The Stock Exchange of Thailand (“the SET”) changed the structure of securities brokerage commissions by specifying the minimum brokerage rate of 0.25% of total brokerage transaction value, effective from January 14, 2002 until January 13, 2007. Later on December 25, 2006, the SET approved a temporary extension of the current minimum securities brokerage fee for another five years. Such extension period can be divided into two sub-periods. For the first three years (Jan 1, 2007-Dec 31, 2009), the minimum securities brokerage fee of 0.25% remains in effect. For the next two years (Jan 1, 2010-Dec 31, 2011), the calculation of securities brokerage fee will be based upon a sliding scale methodology in which securities brokerage rate to be applied will move in the opposite direction to securities trading transaction size. Thus, for the period between Jan 1, 2007-Dec 31, 2011, securities brokerage houses in Thailand will compete with one another on the basis of quality of services rather than securities brokerage fees. Nevertheless, competition in terms of service quality still exists, especially in the area of Internet trading. This is because

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♦Risk Factures♦



brokerage fees for Internet trading are lower than regular fees (Brokerage fees for Internet trading are 60% of regular fees). KEST has long focused on providing high-quality services with the aim to maintaining and expanding the existing client base. KEST has done so by increasing the quality of research publications, improving and developing skills and capabilities of staff in providing services and recommendations to clients. The Company has continuously upgraded its information system to well respond and satisfy fast-changing client needs. All of these have enabled the Company to be in a good position and well prepared for liberalisation of the brokerage commission structure that will be effective on January 1, 2012, and thus intensify competition in the securities brokerage industry.

Financial advisory and investment banking services and fees have also been competitive in terms of both service quality and advisory fee levels. KEST has provided variety of financial advisory services including securities offering, independent financial advisory, fund raising, M & A, business takeovers, business valuations etc, focusing on provision of high-quality services. The Company has continuously developed and upgraded advisory skills of its IB staff, and this enables it to provide high-quality financial advisory services to clients on a continuous basis.

KEST was also granted a license to operate business as a derivatives agent in accordance with the Derivatives Act B.E. 2546. It was selected as a member of Thailand Futures Exchange (TFEX) that was launched on April 28, 2006 and Thailand Clearing House (TCH) to operate business as a derivatives agent. This has helped to expand the Company’s source of revenue.

• In its securities brokerage business, the Company is highly dependent on a small number of large clients.

The Company’s top 10 trading clients accounted for 25.75% of total securities brokerage fee income in the year 2007 and 21.17% in 2008. Had KEST lost such big trading clients, its securities brokerage fees for 2007 and 2008 would have fallen by 27.16% and 22.46%, respectively. However, one of the Company’s top 10 trading clients was the Kim Eng Holdings Group that is also the major shareholder. Thus, it is quite unlikely that it will lose such a client. As KEST has long realised concentration risks, it has thus aimed to increase the number of trading accounts in order to expand its client base. For the year ended December 31, 2007 and 2008, the total number of KEST’s client trading accounts was 58,400 and 65,700, respectively. For 2008, 84.33% of the Company’s securities brokerage fees were from retail trading business and the remainder from local and foreign institutions. Another source of the Company’s operating revenue was from financial advisory and securities underwriting businesses that generated total revenue of Baht 29.98 million, a rise of 31.20 % from the 2007 level. This has helped to generate another source of operating revenue for the Company and allowed it to rely less on securities brokerage business.

• Clients may default or delay payment for or transfer of securities and collateral for taking position in futures

For the year ending December 31, 2008, the Company’s securities brokerage receivables totaled Baht 1,827.62 million, consisting of clients’ accounts of Baht 757.82 million, margin loans of Baht 788.40 million, securities borrowing and lending accounts of Baht 2.76 million and other receivables of Baht 278.64 million, with unearned interest revenue of Baht 21.70 million In addition, the Company had derivatives business receivables amounting Baht 1.39 million outstanding. It classified such securities and derivatives brokerage receivables as doubtful debt in the amount of Baht 296.72 million, accounting for 16.03% of its total securities and derivatives

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♦Risk Factures♦



brokerage receivables. Of the total amount of doubtful debt, Baht 290.50 million, of which belonged to Nithiphat Securities Co., Ltd., was incurred prior to acquisition of the ordinary shares of that company by Kim Eng Holdings Limited in 1998, and Baht 6.22 million of which was incurred after the share acquisition by Kim Eng Holdings. The Company tries to collect all doubtful debts as fast as possible, and if it cannot do so, it will file a lawsuit against the defaulting receivables.

For the total doubtful debt of Baht 296.72 million, Baht 14.44 and 282.28 million of which were classified as substandard and doubtful debts. The Company established an allowance for doubtful debt in the total amount of Baht 296.67 million, or 100% of the total doubtful debt.

In the derivatives agent business, the Company may face the risk that collateral clients put up may not be sufficient to satisfy their debt obligations with TCH. Thus, KEST, as a derivatives agent, is obligated to follow and collect more collateral from clients to satisfy debts incurred as a result of loss from holding a position in futures. Nevertheless, KEST has implemented many policies aimed to mitigate default risk as a result of securities and derivatives trading. It has done so by focusing on selecting high-quality clients and specifying trading limits for securities and derivatives that well correspond to securities collateral amount, clients’ financial status, their abilities to repay debts, liquidity conditions and investment experience. KEST has regularly reviewed and closely monitored the receivables’ status. The Company’s risk management policy for the derivatives trading business has put emphasis on close and continuous monitoring. For institutional clients, the Company shall evaluate and monitor their financial status closely and regularly. In case they experience financial difficulties or lack of liquidity, the Company shall reserve the right to adjust or change level of margin, required collateral or their holdings position as necessary. For individual investors, the Company shall regularly monitor their financial status. The Company shall monitor closely any clients that are required to put additional collateral or close their positions.

• Default Risk Associated with Margin Account in the Credit Balance System In the securities margin business, the Company is exposed to the risk that some margin clients may default their margin payments, especially in case that collateral value falls below the outstanding margin amount. This is not a regular case under the credit balance system, as margin clients are required to put additional collateral in case their maintenance margin levels are breached. In case the maintenance margin level is breached, margin call and forced sell procedures shall apply. However, there may be some irregular cases that may cause price of securities that are put as collateral to drop quickly and drastically such that the maintenance margin mechanisms fails to deal with them effectively. To deal with this issue, the Company has developed and implemented policy regarding specification of the level of initial margin for authorized securities. No securities margin is allowed to be extended for trading of risky securities. The Company also specifies the ceiling securities margin amount for each particular securities for each particular client.

• Any failure in computer systems may disrupt the Company’s securities brokerage business operations

To operate its securities brokerage business, the Company relies heavily on its computer systems. Main computer systems that have supported the Company’s operation of securities trading are comprised of 1) HiTrade that is connected to the SET for securities trading on a real-time basis. It

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♦Risk Factures♦



enables securities marketing officers and clients to closely monitor share price movement, to submit trading orders and check trading order status. HiTrade is connected to the Internet, thus allowing clients to monitor share price movement and submit trading orders via the Internet as well. 2) The computer system that is connected to TFEX and enables securities marketing officers to submit trading orders for futures contracts on behalf of their clients and the computer system that is connected to SET Trade that allows clients to submit their trading orders via the Internet. 3) Share settlement systems for transactions between clients and TSD, namely the Securities Back Office Automation, or SBA. If the Company’s computer systems fail, the operation of the Company in the securities brokerage service will be materially affected.

To mitigate such risk, the Company set up a backup system as well as back ups of important information, both of which enable the Company to operate smoothly in case of a failure of the main system. To connect the main office’s computer system and those of the branch offices, the Company has a back up leased line that can switch when the leased-line fails. As well, the Company has a contingency plan that allows the use of a back-up computer system when contingency plans are implemented. • As an underwriter, the Company is required to subscribe for unsubscribed securities

that may expose it to large losses

In relation to investment banking business in which the Company acts as an underwriter, it assumes an underwriting risk that may require it to purchase any unsubscribed securities for its own account. This may be due to inappropriate pricing and fluctuations in both money and capital markets. If, in the future, the Company is required to purchase underwritten securities for its own account, it may result in significant losses that could have a material adverse effect on its financial condition, particularly the net capital ratio, and its results on operations.

To mitigate this risk, prior to participating as an underwriter for any securities, the Company conducts a study and analysis of the business potential of issuers as well as client interest, and the Company will act as underwriter for securities only with minimal risk of securities under subscription. In case the Company acts as underwriter for securities at significant amounts, approval for securities underwriting from the Underwriting Committee needs to be obtained prior to the Company’s acting as underwriter. In acting as underwriter and/or financial advisor, the Company has put emphasis on selecting clients. Prior to accepting any new clients, the Company will conduct a preliminary assessment and due diligence on the business potential as well as financial performance of the clients. The Company’s IB staff are well accustomed with relevant applicable law and regulations, and this enables them to provide high-quality and accurate services to clients.

• The Company’s business may be affected by an error or the misconduct of an employee that is difficult to check and prevent

The Company’s business is highly dependent upon its reputation and the trust of its clients. Employees are regularly in direct contact with clients and have knowledge of, or access to, the clients’ assets or information. Accordingly, when an employee does not carry out his or her duties in accordance with a client’s orders or acts beyond his or her authority or does not act in compliance with the Company’s rules and regulations including its compliance manual or commits misconduct in managing client’s assets or uses the client’s information without permission or other actions that may harm client interests, the Company’s reputation and the trust

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♦Risk Factures♦



of other clients may be adversely affected. The Company may also become liable for the losses incurred by the clients in question.

In addition, certain actions may be made in breach of relevant laws or regulations and may result in the Company becoming liable to pay fines, losing its license or being subject to litigation, all of which may have a materially adverse effect on the Company’s financial condition and result of operations. To deal with this risk, the Company has regularly monitored working activities of employees and will punish any employee who violates these Company’s rules. In the Year 2008, there was no case such that the Company’s staff failed to comply with or violated applicable rules and regulations that may cause detrimental effects to the Company’s operation.

• The Company operates its businesses under stringent laws and regulations, including regulations that impose liability on its operations that could have an adverse effect on its results of operations and financial condition

The securities business is strictly controlled by laws and regulations from government authorities, the Office of the SEC and the SET. As a result, any establishment or change of government policy or of the supervisory roles of the relevant regulatory bodies may affect the Company’s goals, competitiveness and business and could have a materially adverse effect on the business, financial condition and result of operations of the Company. Moreover, the Company may incur liabilities resulting from the operation of its business, such as from mistakes arising from the performance of its duties as financial advisor or underwriter or from its failure to comply with steps in accepting securities purchase or sales orders from clients. The Company can not insure that if the Company became liable, it would not face serious liability or a possible business license risk, either of which could have serious a material effect on its business and its reputation.

To mitigate this risk, the Company’s Internal Audit Department has closely monitored changes in laws and regulations relevant to the Company’s businesses, and will closely control and check operations of each department in the Company to ensure they are in conformance with applicable laws and regulations. It will inform of changes in relevant regulations to all involved departments.

• The Company is highly dependent on staff

The Company relies on experienced, knowledgeable and skilled employees in its business operations. At present, in a highly competitive business, with a limited number of experienced and skilled staff, there is intense competition to recruit appropriate qualified staff. To the extent that the Company is unable to retain these staff, the Company’s business continuity may be affected to the detriment of its financial condition and result of operations.

To counter this risk, the Company has provided its staff with good employee welfare, and long put emphasis on providing training courses for employees with the aim of enhancing employee skills. In addition, the Company has allocated warrants for staff in order to attract a very qualified workforce to continue working for the Company over the long term. In the Year 2008, the Company faced no problem regarding significant turnover of its staff.

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♦Risk Factures♦



• The Company’s operations are under the control of the major shareholder

As at September 4, 2008, Kim Eng Holdings Limited, the Company’s major shareholder, held a 55.88% equity stake in the Company’s paid-up capital. Thus, Kim Eng Holdings Limited remains able to control shareholders’ resolutions in relation to key matters that are required by laws or articles of association of the Company to be passed by a majority vote of shareholders attending the meetings and entitled to vote, except for matters that are required by laws or articles of association of the Company to be passed by a three-fourths vote of shareholders. Therefore, other shareholders may not obtain sufficient votes to balance those of Kim Eng Holdings Limited. Nevertheless, the Company has appointed three independent directors that account for 30% of the Company’s Board of Directors. They are responsible for monitoring and providing advice on the Company’s operation to ensure it has operated transparently and accurately.

Moreover, as a subsidiary of Kim Eng Holdings that has long been well known for its securities business with subsidiaries in Asia, Europe and the United States, KEST has been widely accepted by retail and institutional trading clients for its expertise and experience in the securities business.

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♦Audit Committee’s Report♦



Audit Committee’s Report The Audit Committee of Kim Eng Securities (Thailand) Plc., appointed by the Board of Directors, comprises of 3 independent directors qualified under the Stock Exchange of Thailand’s requirement. They are namely; Name Title

1. Dr. Paiboon Sareewiwatthana Chairman of the Audit Committee 2. Dr. Preecha Jarungidanan Member of the Audit Committee 3. Mr. Yuth Vorachattarn Member of the Audit Committee

For the Year 2008, the Audit Committee held 8 meetings reviewing the Company’s operating performance and other activities as designated by the Board of Directors. All members of the Audit Committee participated in all meetings. The attendance details are as follows:

Meeting

No. Date of Meeting


Dr.Preecha Jarungidanan

Mr.Yuth Vorachattarn Auditor

1/2008 30/01/2008 (Auditing

2007 Financial Statements)

2/2008 11/02/2008 -

3/2008 28/03/2008 -

4/2008 30/04/2008

(Reviewing Q1/2008 Financial

Statements) 5/2008 30/06/2008 -

6/2008 30/07/2008


Statements) 7/2008 29/9/2008 -

8/2008 22/10/2008


Statements) In certain important Audit Committee meetings, the Management and/or external auditors were invited to attend the meetings. The results from the meetings were reported to the Board of Directors. The major activities of the Audit Committee in the year 2008 were as follows:

- The Audit Committee reviewed 2007 audited financial statements, Q1/2008 reviewed

financial statements, Q2/2008 reviewed financial statements and Q3/2008 reviewed financial statements. The Audit Committee and PRICEWATERHOUSE COOPERS ABAS Limited, the Company’s external auditor, held a meeting to review and consider the audit result. The audit result indicates that the Company’s financial statements are prepared in accordance with generally accepted accounting principles and provide sufficient disclosure. The Company’s external auditor provided

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independent opinion and suggestion regarding the matter the Company needs to improve and develop.

- The Audit Committee reviewed and approved the internal audit plan for 2008. The

Audit Committee gave recommendations and comments to the audit observation and provided guidelines for good corporate governance.

- The Audit Committee evaluated the Company’s annual internal control system for

completeness, acknowledged and monitored the audit results. The Audit Committee was satisfied with the Company’s internal audit program. All departments gave full-cooperation to the audit program. The Management fully supported the internal audit program and asked all departments to rectify weaknesses reported and as a result the Company’s operational effectiveness improved.

- The Audit Committee reviewed the Company’s compliance with the rules, regulations

and requirements of the SEC and the SET and the Company’s operating policies. The Audit Committee found no material deficiencies regarding compliance with applicable regulations and the Company’s operating policies.

- The Audit Committee reviewed the Company’s financial statements for the year 2007,

Q1/2008, 6-months and Q3/2008 financial statements. The Audit Committee, together with the external auditor (PWC), evaluated the audit results according to general accounting principles to ensure accuracy, completeness, and adequacy of the disclosed statements. The external auditor also gave the opinion on areas for improvement.

- The Audit Committee instructed the Company to conduct risk assessment based on the

Risk-Based Approach (RBA) in general operations; information system; risk monitoring etc. to ensure all areas were properly operated. The Audit Committee verified the Company’s compliance with relevant securities & exchange regulations and evaluated the Company’s related party transactions to ensure they were conducted fairly and transparently. The Audit Committee reported their audit results regularly to the Board of Directors.

- The Audit Committee selected and appointed an independent external auditor that has

no relationship or interests with the Company, its subsidiary, its management, its major shareholder or any of their related persons. The Audit Committee proposed the external auditor for consideration by the Board of Directors prior to being nominated by the meeting of shareholders. The Audit Committee and the external auditor held a meeting to consider and approve the Company’s financial statements with no management participating in such meeting.

- The Audit Committee reviewed and provided opinion regarding connected

transactions and transactions with potential conflict of interest in accordance with the requirement of the SEC and the SET. It is the opinion of the Audit Committee that those transactions are fair and conducted on an arm’s length basis and sufficient disclosure is provided in the Company’s notes to financial statements.

- The Audit Committee managed important information disclosure about the Company,

the Management and major events via the Company’s website (http://www.kimeng.co.th) for investors and interested general public. This is to support good corporate governance principles of the Company.

http://www.kimeng.co.th/


♦ ♦Annual Report 2008

The Audit Committee has given the opinion that the Company compiled with the accounting standards as prescribed by the Association of Thai Accountants and regulations of the Stock Exchange of Thailand. The Audit Committee has closely monitored the Company’s operation to ensure transparency, which is consistent with good corporate governance. The Audit Committee ensured the Company has appropriate internal control systems. The Audit Committee found no material deficiencies in the Company’s operation and internal controls and systems, and this is consistent with the external auditor’s opinion. The Company has provided sufficient information to all shareholders and interested persons, emphasised on developing internal control system and audit to ensure maximum benefit to all shareholders and stakeholders.

Paiboon Sareewiwattana

Chairman of the Audit Committee

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♦Financial Performance and Financial Information♦



Financial Performance and Financial Information For the Year 2008 beginning from January 1 to December 31, 2008, the Company’s total net profit stands at Baht 533.23 million, or an EPS of Baht 0.95. The Company’s net earnings in the Year 2008 slightly declined by 3.29 % compared to that of the Year 2007 in which it had total net profit of Baht 551.36 million, or an EPS of Baht 1.00. This was because of a decline in total trading volume during the last quarter caused by domestic political chaos and the global impact of the financial crisis in the US. In the Year 2008, the Company’s brokerage fee totaled Baht 1,511 million, a decline by Baht 107.63 million or 6.65 % compared to that in the Year 2007. The Company’s average daily trading value in the Year 2008 was Baht 2,638 million, a decline from that in the Year 2007 in which its average daily trading value was Baht 2,826 million. Nevertheless, the Company was still ranked No.1 for 7 consecutive years in the securities brokerage business. In the Year 2008, the Company’s market share in the securities brokerage business was 8.18 %. Additionally, in the Year 2008, the Company’s derivatives brokerage fee was Baht 177.95 million, an increase by Baht 88.41 million from that in the Year 2007 that stood at Baht 89.54 million. In the Year 2008, the Company’s average daily trading volume in the derivatives business was 2,248 contracts, compared to that in the Year 2007 that stood at 1,108 contracts. In the Year 2008, the Company’s services and underwriting fee was Baht 36.07 million, an increase by 46.39 % from that in the Year 2007 that stood at Baht 24.64 million. Due to unfavorable market condition caused by the global impact of the financial chaos in the US, foreign institutional investors continued to sell off their investments in the Thai stock market, and this substantially depressed the price of Thai shares. Many of the Company’s IPO clients decided to postpone their listings until the situation in the stock market improves. In the Year 2008, the Company’s interest and dividend revenues totaled Baht 148.56 million, an increase by Baht 9.99 million from that in the Year 2007 that stood at Baht 138.57 million, thanks to an upward trend in domestic interest rate during the first half of the Year. The Company’s total assets as of December 31, 2008 stood at Baht 5,342.04 million, a decline by 21.40 % from that as of December 31, 2007 thanks to decrease in securities and derivatives receivables. This was mainly due to a decline in securities trading volume during the last three trading days of the Year 2008 relative to that during the last three trading days of the Year 2007. Such decline in trading volume was due to the impact of domestic and global economic recession that adversely affected confidence of both domestic and foreign investor confidence. The Company’s asset base mainly consisted of cash & cash equivalent that accounted for 51.71 % of its total asset base and securities and derivatives receivables that accounted for 29.09 % of its total asset base.

As of December 31, 2008, the Company’s liabilities and shareholders’ equity stood at Baht 1,129.53 and Baht 4,212.50 million. Its debt-to-equity ratio as of December 31, 2008 stood at 0.27 x, whereas that as of December 31, 2007 stood at 0.63 x. Substantial portion of the Company’s liabilities was securities brokerage and derivatives payables that arose during the last three trading days of the Year 2008. They may vary from year to year, depending upon trading volume in the stock market. The Company’s debt-to-equity ratios (excluding securities brokerage and derivatives payables) for the Years ended December 31, 2006, 2007 and 2008 were 0.09, 0.11 and 0.07 x respectively. The Company’s return on equity ratios for the Years 2006, 2007 and 2008 were 13.22 %, 13.47 % and 12.72 % respectively.

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As the Company granted ESOP warrants to its directors, executives and employees, the total number of shares outstanding, determined on a fully diluted basis (assumed that all warrants are exercised), was 565,649,137 shares, and its fully diluted basic EPS for the year 2008 was Baht 0.94. The weighted average number of shares outstanding for 2008 was 561,504,295 shares, and the Company’s basic EPS for the year 2008 was Baht 0.95 a share. In determining the Company’s fully diluted EPS, the Company’s increasing revenue and profit should also be taken into account.

As at December 31, 2008 the Company had a total cash flow from operations of Baht 1,471.52 million. Its major portions of cash flow from operations were an increase in operating profit for the total amount of Baht 629.96 million, a decrease in securities & derivatives business payables for the total amount of Baht 1,390.87 million and a decrease in securities & derivatives business receivables for the total amount of Baht 2,037.11 million. The Company had total cash flows used in investing activities for the total amount of Baht 315.03 million. The cash flow was used mainly for investment in corporate debt and the Company’s subsidiary. The Company had total cash flows used in financing activities for the total amount of Baht 502.14 million. A major portion of the cash flow was used in financing activities consisting dividend payments and proceeds from exercised warrants.

Financial Summary • Financial Statements

Unit: Thousands of Baht 2006 2007 2008 Total Assets 5,514,547 6,796,295 5,342,035Total Liabilities 1,501,052 2,623,608 1,129,534Total Shareholders’ Equity 4,013,495 4,172,687 4,212,501Securities Brokerage and Derivatives Receivables

1,476,562* 3,126,765 1,554,032

Total Revenue 1,970,406 1,971,159 1,964,686Net Profit 532,799 551,359 533,234EPS 0.95 0.98 0.94Weighted Average No. of Shares (Thousands of Shares) (Diluted)**

560,292 563,325 565,649

Remark: * The Company first engaged in the derivatives business in 2006. ** The Company’s extraordinary shareholder’s meeting No.1//2005 held on December 6,

2005 approved the issuance of ESOP warrants to directors and/or employees, with the offering amount not to exceed 27.25 million units. Important features of the ESOP warrants include an offering price of Baht 0 a unit, the exercise price of Baht 7 a share, and the exercise ratio of 1:1. Warrant holders are entitled to exercise their warrants on the last business day of every month during the warrant tenure of 4 years. Warrant holders were first allowed to exercise their warrants on August 31, 2006.

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Selected Financial Ratios

2006 2007 2008 Profitability Ratio Gross Profit Margin (%) 95.76 94.97 93.65 Net Profit Margin (%) 27.04 27.97 27.14 Return on Equity (%) 13.22 13.47 12.72 Return on Investment (%) 60.18 35.56 43.29 Efficiency Ratio Return on Total Assets (%) 9.00 8.96 8.79 Total Assets Turnover (x) 0.33 0.32

0.32

Financial Policy Ratio Liquid Assets to Total Assets (%) 46.74 31.03 52.31 Earning Asset to Total Assets (%) 76.71 76.81 81.63 Debt-to-Equity Ratio (x) 0.37 0.63 0.27 Dividend Payout Ratio (%) 89 89 N/A Other Ratios Investment to Total Assets (%) 7.66 5.81 4.83 Net Liquid Capital Ratio (Calculated in accordance with the SEC’s rules)

247.35 154.41 376.41


♦ ♦Annual Report 2008

Report regarding the Responsibility of the Board of Directors for Financial Report

The Board of Directors of Kim Eng Securities (Thailand) Plc. is responsible for the Company’s financial statements and financial information as shown in its annual report for the year 2008. The Company’s financial reports and information are prepared in compliance with the Generally Accepted Accounting Principles, with due care and carefulness. The Company has provided sufficient disclosure of important information in the notes to financial statements for the benefit of shareholders and general investors.

For the purpose of preparing reliable and accurate financial statements and information, the Board of Directors has set up a risk management system to ensure accurate, complete and sufficient recording of accounting data for the purpose of asset custody and prevention of any fraud and unusual activities. As well, the Company set up an Audit Committee to review its accounting policies, sufficiency of the internal control systems, auditing and disclosure of financial data to ensure accurate, reliable and reasonable data regarding its financial status, revenue, expenses and cash flow.

The Company’s financial statements were audited by PricewaterhouseCoopers ABAS Limited. In auditing the Company’s financial statements, the Board of Directors and the management provided data and documents necessary for the auditor to perform the auditing tasks and provide the opinion in accordance with applicable auditing standards. The auditor’s opinion already appears on the Company’s annual report.

It is the Board of Directors’ opinion that the financial statements of Kim Eng Securities (Thailand) Plc. ending December 31, 2008 are prepared in line with generally accepted accounting principles and relevant rules and regulations.

Yuth Vorachattarn Montree Sornpaisarn Pusit Kaewmongkolsri Chairman Chief Executive Officer Chief Operating Officer

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KIM ENG SECURITIES (THAILAND)PUBLIC COMPANY LIMITED

CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

31 DECEMBER 2008

AUDITOR’S REPORT

To the Shareholders and the Board of Directors of Kim Eng Securities (Thailand) Public CompanyLimited

I have audited the accompanying consolidated and company balance sheets as at 31 December 2008and 2007, and the related consolidated and company statements of income, changes in shareholders’equity and cash flows for the years then ended of Kim Eng Securities (Thailand) Public CompanyLimited and its subsidiary and of Kim Eng Securities (Thailand) Public Company Limited,respectively. The company’s management is responsible for the correctness and completeness ofinformation in these financial statements. My responsibility is to express an opinion on thesefinancial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standardsrequire that I plan and perform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. I believe that my audits provide a reasonable basis formy opinion.

In my opinion, the consolidated and company financial statements referred to above present fairly, inall material respects, the consolidated and company financial position as at 31 December 2008 and2007, and the consolidated and company results of operations, and cash flows for the years thenended of Kim Eng Securities (Thailand) Public Company Limited and its subsidiary and of Kim EngSecurities (Thailand) Public Company Limited, respectively, in accordance with generally acceptedaccounting principles.

Unakorn PhruithithadaCertified Public Accountant (Thailand) No. 3257PricewaterhouseCoopers ABAS Limited

Bangkok12 February 2009

Kim Eng Securities (Thailand) Public Company LimitedBalance SheetsAs at 31 December 2008 and 2007

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements.2

Consolidated The company only

2008 2007 2008 2007

Notes Baht Baht Baht Baht

Assets

Cash and cash equivalents 3 2,863,169,077 2,131,883,037 2,762,191,634 2,107,843,130

Long-term deposits at financial

institutions 4 1,344,965 2,487,974 1,344,965 2,487,974

Investments in debt and equity

securities, net 5 258,008,157 395,154,187 258,008,157 395,154,187

Investments in subsidiary 6 - - 99,999,930 24,999,983

Receivables from Clearing House 7 171,792,745 638,499,701 171,792,745 638,499,701

Securities and Derivatives business

receivables 8, 9 1,554,032,524 3,126,765,198 1,554,032,524 3,126,765,198

Loans to employees under

welfare program 250,781,098 244,115,188 250,781,098 244,115,188

Equipment, net 10 101,941,380 121,533,942 101,926,211 121,533,942

Intangible assets 11 19,505,074 20,220,650 18,505,074 19,220,650

Foreclosed properties 9,756,500 9,756,500 9,756,500 9,756,500

Deposits 39,414,892 40,592,732 39,414,892 40,592,732

Other assets 74,388,480 65,395,788 74,281,655 65,325,788

Total assets 5,344,134,892 6,796,404,897 5,342,035,385 6,796,294,973

Kim Eng Securities (Thailand) Public Company LimitedBalance SheetsAs at 31 December 2008 and 2007



2008 2007 2008 2007


Liabilities and shareholders’ equity

Liabilities

Payables to Clearing House 73,910,472 39,316,777 73,910,472 39,316,777

Securities and Derivatives business

payables 746,361,569 2,137,234,714 746,361,569 2,137,234,714

Provisions 12 34,944,685 35,022,605 34,944,685 35,022,605

Accrued bonus expenses 141,024,897 218,695,379 141,024,897 218,695,379

Accrued corporate income tax 72,644,233 131,302,800 72,217,023 131,294,431

Accrued other expenses 32,035,592 30,046,753 31,935,570 29,964,743

Liabilities under long-term lease 13 10,528,365 11,307,322 10,528,365 11,307,322

Dividend payable 17 916,404 909,604 916,404 909,604

Other liabilities 17,698,425 19,862,557 17,695,301 19,862,540

Total liabilities 1,130,064,642 2,623,698,511 1,129,534,286 2,623,608,115

Shareholders’ equity

Share capital

Authorised share capital

572,250,000 ordinary shares of

Baht 5 each 14 2,861,250,000 2,861,250,000 2,861,250,000 2,861,250,000

Issued and paid-up share capital

565,387,100 ordinary shares of

Baht 5 each

(2007: 556,361,700 ordinary shares of

Baht 5 each) 2,826,935,500 2,781,808,500 2,826,935,500 2,781,808,500

Premium on share capital 512,715,929 494,777,529 512,715,929 494,777,529

Share subscriptions received in advance - 281,000 - 281,000

Retained earnings

Appropriated - Legal reserve 15 212,678,288 180,633,241 212,678,288 180,633,241

Unappropriated 667,123,888 715,206,116 665,554,737 715,186,588

Less Treasury Stock 14 (5,383,355) - (5,383,355) -

Total shareholders’ equity 4,214,070,250 4,172,706,386 4,212,501,099 4,172,686,858

Total liabilities and shareholders’ equity 5,344,134,892 6,796,404,897 5,342,035,385 6,796,294,973

Kim Eng Securities (Thailand) Public Company LimitedStatements of IncomeFor the years ended 31 December 2008 and 2007



2008 2007 2008 2007


Revenues

Brokerage fees

Brokerage fees from Securities Business 1,511,003,839 1,618,629,848 1,511,003,839 1,618,629,848

Brokerage fees from Derivatives Business 177,947,389 89,543,900 177,947,389 89,543,900

Fees and services income 36,072,025 24,635,434 36,072,025 24,635,434

Gain (losses) on trading in securities (6,624,939) 6,913,993 (6,624,939) 6,913,993

Losses on trading in derivatives (571,760) (156,340) (571,760) (156,340)

Interest and dividend income 151,846,102 138,977,779 148,563,289 138,574,698

Interest on margin loans 75,861,489 62,380,958 75,861,489 62,380,958

Other income 22,436,204 30,636,779 22,435,304 30,636,779

Total revenues 1,967,970,349 1,971,562,351 1,964,686,636 1,971,159,270

Expenses

Expense on borrowings 42,543,648 36,316,447 42,543,64836,316,447

Fees and services expenses 83,102,720 68,463,594 82,602,720 68,463,594

Bad debts and doubtful accounts (reversal) (1,817,666) (11,180,511) (1,817,666) (11,180,511)

Bad debts write off - 4,076,566 - 4,076,566

Operating expenses

Personnel expenses 742,262,150 743,919,369 742,118,417743,919,369

Premises and equipment expenses 246,934,475 244,224,083 246,929,179 244,223,756

Taxes and duties 3,184,134 6,847,923 3,183,653 6,834,411

Directors' remuneration and others 36,230,209 39,819,208 36,230,209 39,819,208

Information and technology 29,205,126 27,392,036 29,203,521 27,392,036

Other expenses 67,683,468 73,782,126 67,221,776 73,420,781

Total expenses 1,249,328,264 1,233,660,841 1,248,215,457 1,233,285,657

Profit before income tax 718,642,085 737,901,510 716,471,179 737,873,613

Income tax 183,858,630 186,522,896 183,237,347 186,514,527

Net profit for the year 534,783,455 551,378,614 533,233,832 551,359,086

Basic earnings per share (Baht) 19 0.95 1.00 0.95 1.00

Diluted earnings per share (Baht) 19 0.95 0.98 0.94 0.98

Kim Eng Securities (Thailand) Public Company LimitedStatements of Changes in Shareholders’ EquityFor the years ended 31 December 2008 and 2007


ConsolidatedIssued and Premium Legal and Unappropriated

paid-up on share Share subscriptions Treasury stock retained Treasuryshare capital capital received in advance reserve earnings stock Total

Baht Baht Baht Baht Baht Baht Baht

Beginning balance at 1 January 2008 2,781,808,500 494,777,529 281,000 180,633,241 715,206,116 - 4,172,706,386Net profit for the year - - - - 534,783,455 - 534,783,455Increase (decrease) in share capital 45,127,000 17,938,400 (281,000) - - - 62,784,400Appropriation of legal reserve (Note 15) - - - 26,661,692 (26,661,692) - -Treasury stock (Note 14) - - - - - (5,383,355) (5,383,355)Appropriation of treasury stock (Note 14) - - - 5,383,355 (5,383,355) - -Dividends (Note 17) - - - - (550,820,636) - (550,820,636)

Ending balance at 31 December 2008 2,826,935,500 512,715,929 - 212,678,288 667,123,888 (5,383,355) 4,214,070,250

ConsolidatedIssued and Premium Unappropriated

paid-up on share Share subscriptions Legal retained Treasuryshare capital capital received in advance reserve earnings stock Total


Beginning balance at 1 January 2007 2,740,435,500 478,144,729 72,000 153,065,287 641,776,860 - 4,013,494,376Net profit for the year - - - - 551,378,614 - 551,378,614Increase in share capital 41,373,000 16,632,800 209,000 - - - 58,214,800Appropriation of legal reserve (Note 15) - - - 27,567,954 (27,567,954) - -Dividends (Note 17) - - - - (450,381,404) - (450,381,404)

Ending balance at 31 December 2007 2,781,808,500 494,777,529 281,000 180,633,241 715,206,116 - 4,172,706,386

Kim Eng Securities (Thailand) Public Company LimitedStatements of Changes in Shareholders’ EquityFor the years ended 31 December 2008 and 2007


The company onlyIssued and Premium Unappropriated



Beginning balance at 1 January 2008 2,781,808,500 494,777,529 281,000 180,633,241 715,186,588 - 4,172,686,858Net profit for the year - - - - 533,233,832 - 533,233,832Increase (decrease) in share capital 45,127,000 17,938,400 (281,000) - - - 62,784,400Appropriation of legal reserve (Note 15) - - - 26,661,692 - (26,661,692) - -

Treasury stock (Note 14) - - - - - (5,383,355) (5,383,355)Appropriation of treasury stock (Note 14) - - - 5,383,355 (5,383,355) - -Dividends (Note 17) - - - - (550,820,636) - (550,820,636)

Ending balance at 31 December 2008 2,826,935,500 512,715,929 - 212,678,288 665,554,737 (5,383,355) 4,212,501,099

The company onlyIssued and Premium Unappropriated



Beginning balance at 1 January 2007 2,740,435,500 478,144,729 72,000 153,065,287 641,776,860 - 4,013,494,376Net profit for the year - - - - 551,359,086 - 551,359,086Increase in share capital 41,373,000 16,632,800 209,000 - - - 58,214,800Appropriation of legal reserve (Note 15) - - - 27,567,954 (27,567,954) - -Dividends (Note 17) - - - - (450,381,404) - (450,381,404)

Ending balance at 31 December 2007 2,781,808,500 494,777,529 281,000 180,633,241 715,186,588 - 4,172,686,858

Kim Eng Securities (Thailand) Public Company LimitedStatements of Cash FlowsFor the years ended 31 December 2008 and 2007



2008 2007 2008 2007

Baht Baht Baht Baht

Cash flows from operating activities

Net profit before income tax for the year 718,642,085 737,901,510 716,471,179 737,873,613

Adjustments to reconcile net profit to cash (paid)

provided by operating activities:

Depreciation and amortisation 68,090,216 78,638,503 68,086,785 78,638,503

Interest income (213,077,411) (198,638,476) (209,794,599) (198,235,395)

Interest expense 41,604,155 35,356,012 41,604,155 35,356,012

Retirement benefit (reversal) (77,920) 3,333,948 (77,920) 3,333,948

Bad debts and doubtful accounts (reversal) (1,817,666) (11,180,511) (1,817,666) (11,180,511)

Bad debts write off - 4,076,566 - 4,076,566

(Gains) losses on revaluation of investments 14,333,141 (7,989,888) 14,333,141 (7,989,888)

(Gains) losses on disposal of equipment 218,618 (424,466) 218,618 (424,466)

Amortisation of interest expenses financial lease 939,493 2,589,329 939,493 2,589,329

Operating profit before changes in operating

assets and liabilities 628,854,711 643,662,527 629,963,186 644,037,711

(Increase) decrease in operating assets

Long-term deposits at financial institutions 1,143,009 10,491,321 1,143,009 10,491,321

Short-term investments 322,812,889 35,583,884 322,812,889 35,583,884

Receivables from Clearing House 466,706,956 (105,923,164) 466,706,956 (105,923,164)

Securities and Derivatives business receivables 1,570,397,263 (1,640,938,831) 1,570,397,263 (1,640,938,831)

Loans to employees under welfare program (6,665,910) 2,746,298 (6,665,910) 2,746,298

Deposits 1,177,840 (3,248,750) 1,177,840 (3,248,750)

Other assets (9,060,674) (5,943,325) (9,023,849) (5,873,325)

Increase (decrease) used in operating liabilities

Payables to Clearing House 34,593,695 39,316,777 34,593,695 39,316,777

Securities and Derivatives business payables (1,390,873,145) 995,843,359 (1,390,873,145) 995,843,359

Accrued bonus expenses (77,670,482) 43,678,022 (77,670,482) 43,678,022

Accrued other expenses 3,298,488 (29,887,125) 3,280,476 (29,969,135)

Other liabilities (2,164,132) (467,577) (2,167,239) (467,594)

Cash generated from used inoperating before

received (paid) interest and income tax 1,542,550,508 (15,086,584) 1,543,674,689 (14,723,427)

Interest received 217,298,470 196,445,047 214,015,658 196,041,966

Interest paid (43,853,297) (34,595,277) (43,853,297) (34,595,277)

Income tax paid (242,517,197) (128,733,160) (242,314,755) (128,733,160)

Net cash received from operating activities 1,473,478,484 18,030,026 1,471,522,295 17,990,102

Kim Eng Securities (Thailand) Public Company LimitedStatements of Cash FlowsFor the years ended 31 December 2008 and 2007



2008 2007 2008 2007

Baht Baht Baht Baht

Cash flows from investing activities

Purchases of equipment (38,380,070) (31,225,416) (38,361,470) (31,225,416)

Purchases of intangible assets (5,515,978) (3,349,342) (5,515,978) (2,349,342)

Cash paid for long - term investments (200,000,000) (416,660) (200,000,000) (416,660)

Proceeds from disposals of equipment 3,847,288 2,536,750 3,847,288 2,536,750

Cash paid for investment in subsidiary - - (74,999,947) (24,999,983)

Net cash used in investing activities (240,048,760) (32,454,668) (315,030,107) (56,454,651)

Cash flows from financing activities

Cash paid for financial lease (8,730,893) (5,377,169)(8,730,893) (5,377,169)

Increase in share capital 62,784,400 58,214,800 62,784,400 58,214,800

Dividend paid (550,813,836) (450,370,984) (550,813,836) (450,370,984)

Cash paid for treasury stock (5,383,355) - (5,383,355) -

Net cash used in financing activities (502,143,684) (397,533,353) (502,143,684) (397,533,353)

Net increase (decrease) in cash and cash

equivalents 731,286,040 (411,957,995) 654,348,504 (435,997,902)

Cash and cash equivalents, at beginning

of the year 2,131,883,037 2,543,841,032 2,107,843,130 2,543,841,032

Cash and cash equivalents, at end of the year 2,863,169,077 2,131,883,037 2,762,191,634 2,107,843,130

Non cash items

During the year ended 31 December 2008, the company had vehicles amounting to Baht 8 million under the long-termlease agreement.

Kim Eng Securities (Thailand) Public Company LimitedNotes to the Financial StatementsFor the years ended 31 December 2008 and 2007

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1 General information

Kim Eng Securities (Thailand) Public Company Limited (“the company”) is a public limited company incorporated and resident in Thailand. The company is listed on the Stock Exchange of Thailand. The address of its registered office is as follows:

999/9 The Offices at Central World, 20th - 21st Floor, Rama I Road, Pathumwan, Bangkok, 10330.

The company has 8 licenses for the securities business, which are brokering, trading, underwriting, investment advisory, corporate finance advisory, securities registrant, TFEX license and securities borrowing and lending.

These company financial statements have been approved for issue by Board of Directors on12 February 2009.

2 Accounting policies

The principal accounting policies adopted in the financial statements are set out below:

2.1 Basis of preparation

The consolidated and company financial statements are prepared in accordance with the Thai generallyaccepted accounting principles under the Accounting Act B.E. 2543, being those Thai AccountingStandards issued under the Accounting Profession Act B.E. 2547, and the financial reporting requirementsof the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535.

The consolidated and company financial statements have been prepared under the historical costconvention except as disclosed in the accounting policies below.

The preparation of consolidated and company financial statements in conformity with Thai generallyaccepted accounting principles requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date ofthe financial statements and the amounts of revenues and expenses in the reported period. Althoughthese estimates are based on management’s best knowledge of current events and actions, actual resultsmay differ from those estimates.

An English version of the consolidated and company financial statements has been prepared from thestatutory financial statements that are in the Thai language. In the event of a conflict or a difference ininterpretation between the two languages, the Thai language statutory financial statements shall prevail.

2.2 New accounting standard and amendments to accounting standards

During 2008, the Federation of Accounting Profession (“FAP”) has announced new standard andamendments to Thai Accounting Standard (“TAS”) as follows:

Revised standardsTAS 25 “Cash Flow Statements”TAS 29 “Leases”TAS 31 “Inventories”TAS 33 “Borrowing Cost”TAS 35 “Presentation of Financial Statements”TAS 39 “Accounting Policies, Changes in Accounting Estimates and Errors”TAS 41 “Interim Financial Reporting”TAS 43 “Business Combination”TAS 49 “Construction Contracts”


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2 Accounting policies (Cont’d)

2.2 New accounting standard and amendments to accounting standards (Cont’d)

New standardTAS 51 “Intangible Assets”

The amendments to accounting standards and the new accounting standard are effective for the periodbeginning on or after 1 January 2008 except TAS 29 which is effective for the lease contract started on orafter 1 January 2008.

The Company’s management has determined that the revised standard and new standard will notsignificantly impact the financial statements being presented.

Revised standards and new standard that are effective for financial statements begin on or after 1 January2009 and which have not been early adopted by the Group.

TAS 36 “Impairment of Assets”TAS 54 “Non-current Assets Held for Sale and Discontinued Operations”

TAS 36 and TAS 54 are not expected by management to have a material impact on the financialstatements being presented.

2.3 Group accounting - investment in subsidiary

Subsidiary is the entity over which the Group has the power to govern the financial and operatingpolicies generally accompanying a shareholder of more than one half of the voting rights. The existenceand effect of potential voting rights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. Subsidiary is consolidated from the date on whichcontrol is transferred to the Group and is no longer consolidated from the date the control ceases.

Intercompany transactions, balances and unrealised gains on transactions between group companies areeliminated; unrealised loss are also eliminated unless cost cannot be recovered. Where necessaryaccounting policies of subsidiaries have been changed to ensure consistency with the policies adoptedby the Group.

In the company’s separate financial statements, investment in subsidiary is reported by using the cost method less impairment, if any.

These consolidated financial statements include the balance sheets as at 31 December 2008 and 2007 andthe related statements of income for the years ended 31 December 2008 and 2007 of Kim Eng Securities(Thailand) Public Company Limited (“the company”) and the KEST Guardian Asset Management Ltd.(“the Subsidiary”). The Subsidiary registered under Thai law and engaged in managing a fund. Thecompany started preparing the consolidated financial statements on 18 May 2007, when KEST GuardianAsset Management Ltd. registered the business with Ministry of Commerce.

2.4 Income and expenses recognition

General income and expenses are recognised on an accrual basis.

Brokerage fees

Brokerage income is recognised when the underlying transaction is contracted.

Fees and service income

Fees and service income are recognised as income when the service has been substantially rendered.


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2.4 Income and expenses recognition (Cont’d)

Underwriting income

Underwriting income is recognised as income when securities are allotted.

Interest and dividend income

Interest income from investments is recognised on a time proportion basis using the effective interestmethod. Dividend income from investments is recognised when the right to receive payment isestablished.

Interest on credit balance transactions

Interest on credit balance transaction is recognised as income on the time proportion basis except forinterest income from certain securities business receivables, which is recognised on a collection basis inaccordance with an announcement of the office of the Securities and Exchange Commission, dated15 February 2001, regarding the accounting for sub-standard loans.

2.5 Cash and cash equivalents

Cash and cash equivalents are carried on the balance sheet at cost. For the purposes of the cash flowstatement, cash and cash equivalents comprise cash on hand, current and saving deposits, negotiablecertificates of deposits, promissory notes, and other short-term highly liquid investments with originalmaturing within 3 months or under. Bank overdrafts, if any, are included under borrowings in currentliabilities on the balance sheet.

2.6 Investments in debt and equity securities

Investments other than investments in subsidiary are classified into the following four categories:1. Trading investments, 2. Held-to-maturity investments, 3. Available-for-sale investments and 4. Generalinvestments. The classification is dependent on the purpose for which the investments were acquired.Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.

1. Investments that are acquired principally for the purpose of generating a profit from short-termfluctuations in price are classified as trading investments for the purpose of these financial statementsshort term is defined as three months.

2. Investments with fixed maturity that the management has the intent and ability to hold to maturity areclassified as held-to-maturity.

3. Investments intended to be held for an indefinite period of time, which may be sold in response toliquidity needs or changes in interest rates, are classified as available-for-sale.

4. Investments in non-marketable equity securities are classified as general investments.


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2.6 Investments in debt and equity securities (Cont’d)

Investments in available-for-sale and trading securities are presented at fair value less allowance forimpairment (if any) in the balance sheet. Unrealised gains or losses resulting from changes in fairvalues of investment in available-for-sale securities and trading securities are included in theshareholders’ equity and in the statement of income, respectively. Fair value are calculated on thefollowing basis:

- For debt securities, fair values are calculated by referencing to the last bid prices on the last businessday of the year. The rates are announced by the Thai Bond Market Association (Thai BMA). Fairvalues of other debt securities are calculated by referencing to the risk-free yield curve, adjusted bythe appropriate risk premium.

- For marketable equity securities, fair values are calculated by referencing to last bid prices quoted onthe stock exchange on the last business day of the year.

Held-to-maturity debt securities are initially recognised at fair value plus transaction costs and subsequently accounted for at amortised cost using effective interest method, less allowance for impairment (if any).

Investment in non-marketable equity securities is classified as general investment and is stated at cost, less allowance for impairment (if any).

An impairment review is carried out when there is a factor indicating that such investment might be impaired. If the carrying amount of the investment is higher than its recoverable amount, impairment loss is charged to the statement of income.

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income.

When a particular investment in securities is partly disposed, the carrying amount of the disposed portion is determined on the weighted average basis.

2.7 Allowance for doubtful accounts

Allowance for doubtful accounts is determined based on the conditions in announcement of the office of theSecurities and Exchange Commission’s Notification dated 15 February 2001, regarding the accounting forsub-standard loans. The announcement requires the company to classify its loan portfolio into 3 categoriessubject to different levels of provisioning. The announcement also imposes policies regarding thecollateral valuation for the purpose of setting allowance for doubtful accounts. Moreover, the considerationsof the financial position of each debtor based on the experience and opinion of the management are alsoperformed.

Bad debts written off or bad debts recovered are recorded as a decrease or an increase in the allowancefor doubtful accounts.

2.8 Loans to employees under welfare program

Loans to employees under welfare program are recognized initially at cash granted to employees. Loansto employees are subsequently stated at amortised cost using the contract interest rate. The returned isrecognised in the statement of income over the period of loan.


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2.9 Equipment and depreciation

Equipment is initially recorded at cost and is subsequently shown at cost less accumulated depreciation.

Depreciation is calculated on the straight line method to write off the cost of each asset to its residualvalue over the estimated useful lives.

Building improvement 5 yearsFurniture fixtures & equipment 3 and 5 yearsMotor vehicles 5 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is writtendown immediately to its recoverable amount and the difference will be recorded as impairment loss inthe statement of income.

Repairs and maintenance are charged to the income statement during the financial year in which theyare incurred. The cost of major renovations is included in the carrying amount of the asset when it isprobable that future economic benefits in excess of the originally assessed standard of performance ofthe existing asset will flow to the Group. The company depreciated the asset over the remaining usefullife of the related asset. Repair and maintenance costs are recognised as an expense when incurred.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and areincluded in operating profit.

2.10 Foreclosed properties

Foreclosed properties consist of immovable properties, which are stated at the lower of cost andrecoverable amount. The excess of the carrying amount over recoverable amount is recognised as animpairment loss in statement of income.

Gains or losses on disposals of such properties are recognised in the statement of income at the date ofdisposal.

2.11 Intangible assets

Expenditure on acquired intangible assets is capitalised and amortised using the straight-line methodover their useful lives, generally over 5 years, except for TFEX member fee and mutual fund license,which are not amortised.

Such intangible assets are not revalued. The carrying amount of each intangible asset is reviewedannually and adjusted for impairment where it is considered necessary.

2.12 Financial instruments transactions

Significant financial assets carried on the balance sheet include cash and cash equivalents, long-termdeposits at financial institutions, investments in debt securities, Receivables from Clearing House,Securities and Derivatives business receivable, and loans to employees under welfare program. Significantfinancial liabilities carried on the balance sheet include Payables to Clearing House, Securities andDerivatives business payables liabilities under long-term lease. The particular recognition methodsadopted are disclosed in the individual policy statements associated with each item.

The company does not trade or speculate in any financial instruments. The company is not party toother financial instruments which are not recognised in the financial statements.


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2.13 Related parties

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, orare controlled by, or are under common control with, the company, including holding companies,subsidiaries and fellow subsidiaries are related parties of the company. Associates and individualsowning, directly or indirectly, an interest in the voting power of the company that gives them significantinfluence over the enterprise, key management personnel, including directors and officers of thecompany and close members of the family of these individuals and companies associated with theseindividuals also constitute related parties.

2.14 Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result ofpast events, it is probable that an outflow of resources will be required to settle the obligation, and areliable estimate of the amount can be made. Where the company expects a provision to be reimbursed,the reimbursement is recognised as a separate asset but only when it is virtually certain after provisionhas been settled.

2.15 Provident fund

The company established a contributory registered provident fund for those employees who indicatetheir willingness to join, in accordance with the Provident Fund Act B.E. 2530. The company operatesa provident fund that the asset for which are held in a separate trustee-administered fund managed byindependent fund manager. The provident fund is funded by payments from employees at the amountequal to 2% - 3% of the employees’ basic salary and by the company at the amount equal to 2% - 8% ofthe employees’ basic salary depending on years of services. The contributions to the provident fund arecharged to the statement of income in the year to which they relate.

2.16 Employee benefits

The company provides for post employment benefits, payable to employees under Thai labour law. Theamount payable in the future depends on the salary and years of services of the respective employees.The liability arising as a result of Thai labour law recorded as the present value of estimated future cashoutflows using interest rates which have terms to maturities approximating the terms of the relatedliabilities.

2.17 Treasury Stocks

Where the Company or its subsidiaries purchases the Company’s equity share capital, the considerationpaid including any attributable incremental external costs net of income taxes is deducted from totalshareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold orreissued, any consideration received is included in shareholders’ equity

2.18 Earnings (loss) per share

Basic earnings (loss) per share amount is computed by dividing net income (loss) for the year by weighted-average number of paid-up ordinary shares in issue during the year.

Diluted earnings (loss) per share is calculated by dividing net income (loss) for the year by sum ofweighted average number of ordinary share to be issued for conversion of all dilutive potential ordinaryshares into ordinary shares. The calculation assumes that conversion took place either at the beginningof the year or on the date the potential ordinary shares were issued.


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2.19 Operating leases - where the company is the lessee

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payment made under operating lease (net of any incentives received fromthe lessor) is charged to the statement of income on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to bemade to the lessor by way of penalty is recognised as an expense in the period in which terminationtakes place.

2.20 Financing leases - where a company is the lessee

Leases of vehicles which substantially transfer all the risks and rewards of ownership are classified asfinance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value ofthe leased property and the present value of the minimum lease payments. Each lease payment isallocated to the principal and to the finance charges so as to achieve a constant rate on the financebalance outstanding. The outstanding rental obligations, net of finance charges, are included in otherlong-term payables. The interest element of the finance cost is charged to the statement of income overthe lease period so as to achieve a constant periodic rate of interest on the remaining balance of theliability for each period. The vehicle under finance leases is depreciated over the life of the asset.

2.21 Critical accounting estimates, assumption and judgements

Estimates, assumption and judgements are continually evaluated and are based on historical experienceand other factors, including expectations of future events that are believed to be reasonable under thecircumstances.

Property, plant and equipment and intangible assets

Management determines the estimated useful lives and residual values for the Group’s property, plantand equipment and intangible assets. Management will revise the depreciation charge where usefullives and residual values are different to previously estimated, or its will write off or write downtechnically obsolete or assets that have been abandoned or sold.

Employee benefits

The company has commitment on post-retirement benefits to employee on reaching retirement age. Thepresent value of employee benefit liabilities recognised in balance sheet is determined on the presentvalue of estimated future cash outflows. The assumptions used in determining the net year cost foremployee benefits includes the salary and years of services of respective employees which are payablein the future year and discount rate. Any changes in these assumptions will impact the net year costrecorded for employee benefits. On a quarterly basis the company determines the appropriate discountrate, which represents the interest rate that should be used to determine the present value of future cashflows currently expected to be required to settle the employee benefits.

2.22 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintain anoptimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid toshareholders, return capital to shareholders, issue new shares or sell assets to reduce debt obligations.


16

3 Cash and cash equivalentsConsolidated The company only2008 2007 2008 2007Baht Baht Baht Baht

Cash on hand 371,000 362,000 371,000 362,000Current and saving deposits 314,138,678 501,423,131 312,261,235 501,283,224Promissory notes with remaining maturity less than 3 months 5,029,100,000 3,178,900,000 4,930,000,000 3,155,000,000Less Deposits on behalf of customers(2,480,440,601) (1,548,802,094) (2,480,440,601) (1,548,802,094)

Total cash and cash equivalents 2,863,169,077 2,131,883,037 2,762,191,634 2,107,843,130

The company’s deposits on behalf of customers relate to cash deposited by customers which the company has the obligation to repay to the customers on demand. In accordance with notification No. Sor Thor 44/2543 dated 12 September 2000, issued by the office of the Securities and Exchange commission, this amount was excluded from cash and cash equivalents held by the company.

As at 31 December 2008, deposits on behalf of customers include amount due to Kim Eng Securities Pte Ltd. of Baht 0.06 million (As at 31 December 2007, deposits on behalf of customers include amount due to Kim Eng Securities Pte Ltd. Baht 0.05 million).

4 Long-term deposits at financial institutions

Consolidated The company only2008 2007 2008 2007Baht Baht Baht Baht

Fixed deposit 3,089 1,131,042 3,089 1,131,042Restricted cash 1,341,876 1,356,932 1,341,876 1,356,932

Total long-term deposits at financial institutions 1,344,965 2,487,974 1,344,965 2,487,974

As at 31 December 2008, fixed deposits of Baht 1 million (31 December 2007: Baht 1 million) are pledged as collateral to local banks for letter of guarantees.

5 Investments in debt and equity securities, net

Consolidated and Consolidated andthe company only the company only

2008 2007Cost/ Cost/

Amortised cost Fair value Amortised cost Fair valueBaht Baht Baht Baht

Short-term investmentsTrading equity securities 38,156,501 32,468,440 969,390 1,334,422Unit trust - - 360,000,000 368,280,048

Total 38,156,501 32,468,440 360,969,390 369,614,470Less Revaluation adjustments (5,688,061) - 8,645,080 -

Total short-term investments, net 32,468,440 32,468,440 369,614,470 369,614,470

Long-term investmentsGeneral investments 23,991,160 7,251,213 23,991,160 43,861,171Held-to-maturity debt securities 201,548,557 204,522,825 1,548,557 1,548,557

Total long-term investments, net 225,539,717 211,774,038 25,539,717 45,409,728

Total investments in debt and equity securities 258,008,157 244,242,478 395,154,187 415,024,198

As at 31 December 2008, the company has investments in equity, which is used as collateral in court andclassified as general investments, amounting to Baht 7,622,000 (31 December 2007: Baht 7,622,000).


17

5 Investments in debt and equity securities, net (Cont’d)

Cost and amortised cost of debt securities according to their maturities.

At 31 December 2008 BahtConsolidated and the company only

Mature within (year)1 2 - 5 6 - 10 over 10

Held-to-maturity debt securities - 201,548,557 - -

- 201,548,557 - -

At 31 December 2007 BahtConsolidated and the company only

Mature within (year)1 2 - 5 6 - 10 over 10

Held-to-maturity debt securities - 1,548,557 - -

- 1,548,557 - -

6 Investment in subsidiary

The company’s investment in its subsidiary, which is company registered under Thai laws and operating in Thailand, as at 31 December 2008 is summarised below:

InvestmentPaid-up share capital Percentage of holding Cost method

Type of Type of 2008 2007 2008 2007 2008 2007Name of company business relationship Million Baht Million Baht % % Million Baht Million Baht

KEST Guardian Asset Asset Subsidiary 100 25 99.99 99.99 100 25 Management Company Limited.

management

7 Receivables from Clearing House


Receivables from Thai Securities Depositing Co., Ltd. (TSD) 171,792,545 638,499,701 171,792,545 638,499,701Receivables from Thai Clearing House Co., Ltd (TCH) 127,538,940 86,815,740 127,538,940 86,815,740Less Receivables from Clearing

House on behalf of customers (127,538,740) (86,815,740) (127,538,740) (86,815,740)

Total 171,792,745 638,499,701 171,792,745 638,499,701


18

8 Securities and Derivatives business receivables

Balance of Securities business receivable as at 31 December 2008 and 2007 are as follows:


Customers’ cash accounts 757,820,674 1,417,006,353 757,820,674 1,417,006,353Credit balance transactions 788,398,919 1,693,949,013788,398,919 1,693,949,013Securities borrowing and lending 2,760,000 - 2,760,000 -Other receivables 278,645,066 280,405,376 278,645,066 280,405,376

Total securities business receivables 1,827,624,659 3,391,360,742 1,827,624,659 3,391,360,742Add Accrued interest receivables 21,695,357 25,848,434 21,695,357 25,848,434Less Allowance for doubtful

accounts (Note 9) (296,674,772) (298,492,438) (296,674,772) (298,492,438)

Net securities business receivables and accrued interest receivables 1,552,645,244 3,118,716,738 1,552,645,244 3,118,716,738

As at 31 December 2008, the company had loans and receivables totalling approximately Baht 297 million(31 December 2007: Baht 299 million) for which recognition of interest income had been discontinued inaccordance with the Office of the Securities and Exchange Commission’s notification dated 15 February 2001.

Balance of Derivatives business receivables as at 31 December 2008 and 2007 are as follows:


Derivative business receivables 1,387,280 8,048,460 1,387,280 8,048,460Less Allowance for doubtful

accounts (Note 9) - - - -

Derivative business receivables, net 1,387,280 8,048,460 1,387,280 8,048,460

Total securities and derivatives

business receivables 1,554,032,524 3,126,765,198 1,554,032,524 3,126,765,198


19

8 Securities and Derivatives business receivables (Cont’d)

The company has classified Securities and Derivatives business receivables in accordance with the notificationof the Office of the Securities and Exchange Commission dated 15 February 2001, regarding the accountingfor sub-standard loans as follows:

Consolidated and the company only2008

Allowance for doubtful accountsTotal debts Amount set up Amount

(including accrued by the requiredinterest receivables) company by SEC

Classifications Million Baht Million Baht Million Baht

Normal debts 1,553.99 - -Substandard debts 14.44 14.44 -Doubtful debts 282.28 282.28 282.28

Total 1,850.71 296.72 282.28

Consolidated and the company only2007

Allowance for doubtful accountsTotal debts Amount set up Amount

(including accrued by the requiredinterest receivables) company by SEC

Classifications Million Baht Million Baht Million Baht

Normal debts 3,126.67 - -Substandard debts 15.67 15.57 -Doubtful debts 282.92 282.92 282.92

Total 3,425.26 298.49 282.92

The company had set up the allowance for doubtful debts based on the receivables classification at the ratehigher than the minimum rate as suggested by the Office of the Securities and Exchange Commission ofThailand, and also by reviewing the individual debtor’s repayment ability, taking into consideration therecovery risk and the value of the collateral.

The substandard and doubtful debts (receivables and accrued interest receivables) are classified by aging as follows:

Consolidated The company only2008 2007 2008 2007

Million Baht Million Baht Million Baht Million Baht

Up to 3 months 0.12 - 0.12 -Over 3 months to 6 months - 0.06 - 0.06Over 6 months to 9 months - - - -Over 9 months to 12 months - 0.07 - 0.07Over 1 year to 3 years 1.21 1.16 1.21 1.16Over 3 years 295.39 297.30 295.39 297.30

Total 296.72 298.59 296.72 298.59


20

9 Allowance for doubtful accounts


Beginning balance of the year 298,492,438 309,672,949298,492,438 309,672,949Add Doubtful accounts 186,101 173,481 186,101 173,481Less Bad debt written-off - (4,603,120) - (4,603,120)

Reversal of doubtful accounts (2,003,767) (6,750,872) (2,003,767) (6,750,872)

Ending balance of the year 296,674,772 298,492,438 296,674,772 298,492,438

10 Equipment, net

ConsolidatedFurniture

Building fixtures & Motor Financial Constructionimprovement equipment vehicles lease in progress Total

Baht Baht Baht Baht Baht Baht

At 31 December 2007Cost 206,424,064 401,392,359 288,205 14,583,026 297,523 622,985,177Less Accumulated depreciation (148,176,336) (347,999,253) (64,081) (5,211,565) - (501,451,235)

Net book amount 58,247,728 53,393,106 224,124 9,371,461 297,523 121,533,942

For the year ended 31 December 2008Opening net book amount 58,247,728 53,393,106 224,124 9,371,461 297,523 121,533,942Additions 3,185,406 29,243,540 - 7,951,936 5,951,124 46,332,006Transfer 4,254,137 1,826,914 - - (6,081,051) -Disposals, net (949,172) (200,628) - (2,916,106) - (4,065,906)Depreciation charge (23,007,682) (33,223,656) (57,609) (5,569,715) - (61,858,662)

Net book amount 41,730,417 51,039,276 166,515 8,837,576 167,596 101,941,380


Net book amount 41,730,417 51,039,276 166,515 8,837,576 167,596 101,941,380

Initial cost of asset, which has already fully depreciated as at 31 December 2008, is Baht 403 million. Thebalance consists of building improvement Baht 91 million, furniture & fixture Baht 55 million, and computerBaht 257 million.



21

10 Equipment, net (Cont’d)

The company onlyFurniture

Building fixtures & Motor Financial Constructionimprovement equipment vehicles lease in progress Total

Baht Baht Baht Baht Baht Baht


Net book amount 58,247,728 53,393,106 224,124 9,371,461 297,523 121,533,942

For the year ended 31 December 2008Opening net book amount 58,247,728 53,393,106 224,124 9,371,461 297,523 121,533,942Additions 3,185,406 29,224,940 - 7,951,936 5,951,124 46,313,406Transfer 4,254,137 1,826,914 - - (6,081,051) -Disposals, net (949,172) (200,628) - (2,916,106) - (4,065,906)Depreciation charge (23,007,682) (33,220,225) (57,609) (5,569,715) - (61,855,231)

Net book amount 41,730,417 51,024,107 166,515 8,837,576 167,596 101,926,211


Net book amount 41,730,417 51,024,107 166,515 8,837,576 167,596 101,926,211



11 Intangible assets

Consolidated2008

Beginning Transfer Amortised Endingbalance Addition in/out amount balance

Baht Baht Baht Baht Baht

Computer software 14,015,784 1,827,757 77,970 (6,231,554) 9,689,957Software under installation 1,884,318 3,688,221 (77,970) - 5,494,569TFEX member fee 3,320,548 - - - 3,320,548Mutual fund license 1,000,000 - - - 1,000,000

Total 20,220,650 5,515,978 - (6,231,554) 19,505,074

Initial cost of computer software, which has already fully depreciated as at 31 December 2008, is Baht 47 million.


22

11 Intangible assets (Cont’d)

The company only2008



Computer software 14,015,784 1,827,757 77,970 (6,231,554) 9,689,957Software under installation 1,884,318 3,688,221 (77,970) - 5,494,569TFEX member fee 3,320,548 - - - 3,320,548

Total 19,220,650 5,515,978 - (6,231,554) 18,505,074


Consolidated2007



Computer software 18,743,772 1,186,842 1,541,574 (7,456,404) 14,015,784Software under installation 2,263,392 1,162,500 (1,541,574) - 1,884,318TFEX member fee 4,320,548 - - (1,000,000) 3,320,548Mutual fund license - 1,000,000 - - 1,000,000

Total 25,327,712 3,349,342 - (8,456,404) 20,220,650


The company only2007



Computer software 18,743,772 1,186,842 1,541,574 (7,456,404) 14,015,784Software under installation 2,263,392 1,162,500 (1,541,574) - 1,884,318TFEX member fee 4,320,548 - - (1,000,000) 3,320,548

Total 25,327,712 2,349,342 - (8,456,404) 19,220,650



23

12 Provisions


Opening balance 35,022,605 31,688,657 35,022,605 31,688,657Increase (decrease) during the year (77,920) 3,333,948 (77,920) 3,333,948

Closing balance 34,944,685 35,022,605 34,944,685 35,022,605

As at 31 December 2008 and 2007, the provision comprised the obligations of the company to Nithipat CapitalPublic Co., Ltd. (“Nithipat”), the former parent company, of approximately Baht 10.63 million in case thatNithipat cannot collect their securities debts which have not been transferred as mentioned in the AssetTransfer Letter dated 14 August 1996. Additional provision is set up for the notification of approximatelyBaht 15.70 million from a customers’ account of Yuanta Securities (Thailand) Limited demanding the companyto pay for damage claims from the event occurred before the customer were transferred to the company.

As at 31 December 2008 the company has post employment benefits, payable to employees under the Thai laborlaw for Bath 8.61 million (31 December 2007: Baht 8.70 million) which the company has recorded in thefinancial statements.

13 Liabilities under long-term lease

Liabilities under long-term lease contracts represent finance lease for vehicles. The balance as at 31 December2008 and 2007 comprise;


Minimum lease payments obligation under long-term lease contracts 11,976,281 12,660,444 11,976,281 12,660,444Less Deferred interest (1,447,916) (1,353,122) (1,447,916) (1,353,122)

10,528,365 11,307,322 10,528,365 11,307,322

Current portion due within one year 3,034,954 5,150,085 3,034,954 5,150,085Portion due after one year 7,493,411 6,157,237 7,493,411 6,157,237

10,528,365 11,307,322 10,528,365 11,307,322


24

14 Share capital

On 6 December 2005, the shareholders at the Extraordinary Meeting passed a resolution to approve to following:

- Decrease of authorised share capital, reserved for public offering, from 560 million ordinary shares witha par value of Baht 5 per share to 545 million ordinary shares with a par value of Baht 5 per share. Thecompany registered the decrease share capital with the Ministry of Commerce on 9 December 2005.

- Increase of authorised share capital, reserved for the exercise of employee stock option issued fordirector and/or staff, from 545 million ordinary shares with a par value of Baht 5 per share to 572.25million ordinary shares with a par value of Baht 5 per share. The company registered the increase sharecapital with the Ministry of commerce on 13 December 2005.

During the year ended 31 December 2008, the warrant holders exercise their own rights, then the issued sharecapital increase for 9,025,400 shares.

On 8 October 2008, the Board of Directors approved to buy back 56,000,000 ordinary shares (representing notmore than 10% of the issued shares) at a price equivalent to the bid prices on the Stock Exchange of Thailand,within a total budget of no more than Baht 672 million, not exceed the company’s retained earning. Therepurchase period should be done during 24 October 2008 to 24 April 2009. The method and period for sellingof the treasury shares will be decided by the Board of Directors after the completion date of the buy back6 months, but not more than 3 years and such sale will be made at a price of not less than 85 percent of theaverage closing prices of the 5 working days prior to the selling date.

According to the Federation of Accounting Professions’ announcement no. Sor.Sor.Vor.Bor.Chor. 016/2548dated 4 February 2005, it requires public limited companies that treasury shares to have retained earnings notless than the amount of the treasury shares remaining in the account. In the event the retained earnings is usedto pay dividends, the retained earnings after the dividend payment should not be less than the treasury shares.This is to comply with the announcement of the Judicial Council, which deliberated the issue of treasury sharesschemes under Section 66/1(2) of the Public Limited Companies Act B.E. 2535.

The Company had treasury shares of 782,100 shares representing 0.14 percent of the total sold sharesoutstanding on the date when the Board resoluted the share repurchase. The total treasury shares are Baht 5.38million and the company has appropriated the retained earnings as the treasury shares reserve for the wholeamount

Consolidated and the company onlyShare

subscriptionNumber of Ordinary Share received in

shares shares premium advance TotalShares Baht Baht Baht Baht

At 1 January 2007 548,087,100 2,740,435,500 478,144,729 72,000 3,218,652,229Issue of shares 8,274,600 41,373,000 16,632,800 209,000 58,214,800

At 31 December 2007 556,361,700 2,781,808,500 494,777,529 281,000 3,276,867,029Issue of shares 9,025,400 45,127,000 17,938,400 - 63,065,400Less Treasury shares (782,100) (5,383,355) - - (5,383,355)

At 31 December 2008 564,605,000 2,821,552,145 512,715,929 - 3,334,549,074


25

15 Legal reserve


Opening balance 180,633,241 153,065,287 180,633,241 153,065,287Appropriation during the year 26,661,692 27,567,954 26,661,692 27,567,954Increase treasury shares reserve 5,383,355 - 5,383,355 -

Closing balance 212,678,288 180,633,241 212,678,288 180,633,241

Under the Public Companies Act B.E. 2535, the company is required to set aside as a legal reserve at least 5%of its net income after accumulated deficit brought forward (if any) until the reserve is not less than 10% of theregistered share capital. The reserve is non-distributable as dividends.

16 Warrants

On 6 December 2005, the shareholders at an Extraordinary General Meeting of Shareholders approved theissuance of warrants to purchase the company’s ordinary shares to its directors and/or staff at the maximum of27.25 million units, free of charge. The exercise price of warrant is Baht 7 per share and they are exercisablein a ratio of 1 warrant to 1 ordinary share. The exercise date is at the last working day of each monththroughout the 4 years term of warrants. The first exercisable date will be on 31 August 2006.

During the year ended 2008, the warrants were exercised amounting to 8,969,200 units. As at 31 December2008, the outstanding warrants, which have been allotted but not exercised, are 6,862,900 units.

17 Dividends

An interim dividend of Baht 0.30 per share amounting to a total of Baht 169.58 million was approved at theBoard of Director’s Meeting on 11 August 2008. The dividend was paid on 11 September 2008.

A dividend of Baht 0.68 per share amounting to a total of Baht 381.24 million was approved at the OrdinaryShareholder’s Meeting on 28 March 2008. The dividend was paid on 9 April 2008.

An interim dividend of Baht 0.20 per share amounting to a total of Baht 110.54 million was approved at theBoard of Director’s Meeting on 8 August 2007. The dividend was paid on 31 August 2007.

A dividend of Baht 0.62 per share amounting to a total of Baht 339.84 million was approved at the Ordinary Shareholding’s Meeting on 20 March 2007. The dividend was paid on 2 April 2007.

18 Provident fund

For the year ended 31 December 2008, the company’s contribution was amounting to Baht 19,084,282 (31 December 2007: Baht 17,116,004).


26

19 Reconciliation of dilutive earnings per share

ConsolidatedWeighted average

Net earnings number of ordinary shares Earnings per share2008 2007 2008 2007 2008 2007Baht Baht Shares Shares Baht Baht

Basic earnings per shareNet profit for the year 534,783,455 551,378,614 561,504,295 552,654,222 0.95 1.00Effect of dilutive potential ordinary sharesWarrants - - 4,144,842 10,671,042 - (0.02)

Diluted earnings per shareNet earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares 534,783,455 551,378,614 565,649,137 563,325,264 0.95 0.98

The company onlyWeighted average

Net earnings number of ordinary shares Earnings per share2008 2007 2008 2007 2008 2007Baht Baht Shares Shares Baht Baht

Basic earnings per shareNet profit for the year 533,233,832 551,359,086 561,504,295 552,654,222 0.95 1.00Effect of dilutive potential ordinary sharesWarrants - - 4,144,842 10,671,042 (0.01) (0.02)

Diluted earnings per shareNet earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares 533,233,832551,359,086 565,649,137 563,325,264 0.94 0.98


27

20 Financial instruments

Interest rate risk

Interest rate risk is the exposure to the risk associated with the effects of fluctuations in prevailing levels of market interest rates on the Company’ s financial instruments. As at 31 December 2008 and 31 December 2007, the outstanding balances of financial statements classified by type of interest rate are as follows:

Million BahtConsolidated

2008Fixed interest rate Non

Remaining period before maturity Without performingdate or repricing date interest debts Total Interest rate (%)

Floating Less than Over 5 Floating Fixedinterest rates 1 year 1 - 5 years years rate rate

Financial assetsCash and cash equivalents 2,650 - - - 213 - 2,863 0.13-2.65 -Long-term deposits at financial institutions - 1 - - - - 1 - 2.00-2.50Investments in debt securities - - 200 - - 2 202 - 4.11Receivable from Clearing House - - - - 172 - 172 - -Securities and Derivatives business receivables 788 - - - 762 279 1,829 5.50-5.75 -Loans to employees under welfare program 251 - - - - - 251 2.87 -

Total 3,689 1 200 - 1,147 281 5,318

Financial liabilitiesPayable to Clearing House - - - - 74 - 74 - -Securities and Derivatives business payables - - - - 746 - 746 - -Liabilities under long-term lease - 3 8 - - - 11 - 6.50-9.00

Total - 3 8 - 820 - 831


28

20 Financial instruments (Cont’d)

Interest rate risk (Cont’d)

Million BahtThe company only




Financial assetsCash and cash equivalents 2,549 - - - 213 - 2,762 0.13-2.65 -Long-term deposits at financial institutions - 1 - - - - 1 - 2.00-2.50Investments in debt securities - - 200 - - 2 202 - 4.11Receivable from Clearing House - - - - 172 - 172 - -Securities and Derivatives business receivables 788 - - - 762 279 1,829 5.50-5.75 -Loans to employees under welfare program 251 - - - - - 251 2.87 -

Total 3,588 1 200 - 1,147 281 5,217

Financial liabilitiesPayable to Clearing House - - - - 74 - 74 - -Securities and Derivatives business payables - - - - 746 - 746 - -Liabilities under long-term lease - 3 8 - - - 11 - 6.50-9.00

Total - 3 8 - 820 - 831


29






Floating Less than Over 5 Floating Fixedinterest rates 1 year 1 – 5 years years rate rate

Financial assetsCash and cash equivalents 1,472 250 - - 410 - 2,132 0.125-3.25 2.75Long-term deposits at financial institutions - 2 - - - - 2 - 2.00-2.25Investments in debt securities - - - - - 2 2 - -Receivable from Clearing House - - - - 638 - 638 - -Securities and Derivatives business receivables 1,694 - - - 1,425 280 3,399 5.75-6.00 -Loans to employees under welfare program 244 - - - - - 244 2.33 -

Total 3,410 252 - - 2,473 282 6,417

Financial liabilitiesPayable to Clearing House - - - - 39 - 39 - -Securities and Derivatives business payables - - - - 2,137 - 2,137 - -Liabilities under long-term lease - 5 6 - - - 11

Total - 5 6 - 2,176 - 2,187 - -


30







Financial assetsCash and cash equivalents 1,448 250 - - 410 - 2,108 0.125-3.25 2.75Long-term deposits at financial institutions - 2 - - - - 2 - 2.00-2.25Investments in debt securities - - - - - 2 2 - -Receivable from Clearing House - - - - 638 - 638 - -Securities and Derivatives business receivables 1,694 - - - 1,425 280 3,399 5.75-6.00 -Loans to employees under welfare program 244 - - - - - 244 2.33 -

Total 3,386 252 - - 2,473 282 6,393

Financial liabilitiesPayable to Clearing House - - - - 39 - 39 - -Securities and Derivatives business payables - - - - 2,137 - 2,137 - -Liabilities under long-term lease - 5 6 - - - 11

Total - 5 6 - 2,176 - 2,187 - -


31


Credit risk

Credit risk is the exposure to the risk that the counterparties might discharge their obligations whichcould cause the company to incur financial loss. The main financial assets that potentially subject to thecompany to credit risk are securities and derivatives business receivables. The risk is managed bysetting up appropriate credit limits and terms which are granted to each type of customers.

Liquidity risk

The maturity dates of financial instruments held as of 31 December 2008 and 31 December 2007,counting from the balance sheet date, are as follows:


2008Non

Within Over 5 performingAt call 1 year 1 - 5 years years debts Total

Financial assetsCash and cash equivalents 2,863 - - - - 2,863Long-term deposits at financial institutions - 1 - - - 1Investments in debt securities - - 200 - 2 202Receivables from Clearing House - 172 - - - 172Securities and Derivatives business receivables 788 762 - - 279 1,829Loans to employees under welfare program - 28 88 135 - 251

Total 3,651 963 288 135 281 5,318

Financial liabilitiesPayables to Clearing House - 74 - - - 74Securities and Derivatives business payables - 746 - - - 746Liabilities under long-term lease - 3 8 - - 11

Total - 823 8 - - 831


32


Liquidity risk (Cont’d)


2008Non


Financial assetsCash and cash equivalents 2,762 - - - - 2,762Long-term deposits at financial institutions - 1 - - - 1Investments in debt securities - - 200 - 2 202Receivables from Clearing House - 172 - - - 172Securities and Derivatives business receivables 788 762 - - 279 1,829Loans to employees under welfare program - 28 88 135 - 251

Total 3,550 963 288 135 281 5,217

Financial liabilitiesPayables to Clearing House - 74 - - - 74Securities and Derivatives business payables - 746 - - - 746Liabilities under long-term lease - 3 8 - - 11

Total - 823 8 - - 831


2007Non


Financial assetsCash and cash equivalents 1,882 250 - - - 2,132Long-term deposits at financial institutions - 2 - - - 2Investments in debt securities - - - - 2 2Receivables from Clearing House - 638 - - - 638Securities and Derivatives business receivables 1,694 1,425 - - 280 3,399Loans to employees under welfare program - 29 84 131 - 244

Total 3,576 2,344 84 131 282 6,417

Financial liabilitiesPayables to Clearing House - 39 - - - 39Securities and Derivatives business payables - 2,137 - - - 2,137Liabilities under long-term lease - 5 6 - - 11

Total - 2,181 6 - - 2,187


33


Liquidity risk (Cont’d)


2007Non


Financial assetsCash and cash equivalents 1,858 250 - - - 2,108Long-term deposits at financial institutions - 2 - - - 2Investments in debt securities - - - - 2 2Receivables from Clearing House - 638 - - - 638Securities and Derivatives business receivables 1,694 1,425 - - 280 3,399Loans to employees under welfare program - 29 84 131 - 244

Total 3,552 2,344 84 131 282 6,393

Financial liabilitiesPayables to Clearing House - 39 - - - 39Securities and Derivatives business payables - 2,137 - - - 2,137Liabilities under long-term lease - 5 6 - - 11

Total - 2,181 6 - - 2,187

Fair value

The management believe that the fair value of the company’s financial assets and liabilities does notmaterially differ from their carrying value.

21 Related party transactions

Information with respect to related parties is as follows:

Nature of relationship

Kim Eng Holdings Limited Parent companyYuanta Securities Asia Financial Shareholding in the parent company Service LimitedKim Eng Securities Pte Ltd. Fellow subsidiaryKim Eng Securities (Hong Kong) Limited Fellow subsidiaryKEST Guardian Asset Management Company Limited Subsidiary


34

21 Related party transactions (Cont’d)

During the years ended 31 December 2008 and 2007, the company had significant business transactions with related companies. These transactions can be summarised as follows:

Consolidated The company only Transfer price policies2008 2007 2008 2007


Brokerage fee income - Kim Eng Securities Pte Ltd. 158 246 158 246 At the rate set by the

Kim Eng Securities (Hong Kong) Limited 16 - 16 -

Stock Exchange ofThailand

Information technology service expenses - Kim Eng Holdings Limited 3 3 3 3 At the price agreed upon by

both parties referencing themarket price.

Dividends - Kim Eng Holdings Limited 310 259 310 259

Cash paid for investing- KEST Guardian

Asset management Company Limited - - 75 25

The outstanding balances of the above transactions, as presented in the balance sheets are as follows:



Securities business receivables - Kim Eng Securities Pte Ltd. 13 290 13 290

Securities business payables - Kim Eng Securities Pte Ltd. 36 20 36 20

As at 31 December 2008, the company has provided loans amounting to approximately Baht 1 million(31 December 2007: Baht 3 million) to employees under the definition of the Securities and ExchangeCommission. Interest is charged at the rate charged to other employees under the same scheme.

On 1 July 2003, the company signed the information technology service agreement with the parentcompany for a period of 1.5 years and has been committed to pay fee at the rate specified in theagreement. If no termination is made by either party when due, the agreement is automatically renewedfor another year.

As at 31 December 2008, Kim Eng Holdings Limited guaranteed the overdraft facilities amounting toBaht 30 million. There is no outstanding balance as at 31 December 2008.


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22 Operating lease commitment

The company entered into the long-term lease agreements for office and services and motor vehicles. The future aggregate minimum lease payments under these agreements are as follows:



No later than 1 year 70 70 70 70Later than 1 year but not later than 2 years 56 47 56 47Later than 2 years 13 37 13 37

Total 139 154 139 154

23 Business/geographical segment information

The company’s operation involves mainly in Securities brokering and service provision and is operated only inThailand, accordingly, no business/geographical area segment information is presented.

mbket 08

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