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♦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


♦Corporate Information♦ ♦Annual Report 2008♦ Honorary Chairperson Mrs. Gloria Lee Kim Yew The Board of Directors

Head Office 999/9 The Offices at Central World, Fl.20th-21st, Rama 1 Road, Patumwan, Pathumwan, Bangkok 10330

Ngamwongwan Branch 30/39-50 The Mall Ngamwongwan Office Tower 14th Fl., Ngamwongwan Rd., Bangkhen, Nontaburi 11000

Tel: 66(0)2658 6300 Fax: 66(0)2658 6301

Tel : 0-2550-0577 Fax : 0-2550-0566

Company Registration No. Bor Mor Jor 0107545000314

Srinakarin Branch 1145 Moo 5 Akepailin Tower 3rd Fl., Srinakarin Rd., North Samrong, Samutprakarn 10270

Mr. Yuth Vorachattarn Mr. Ronald Anthony Ooi Thean Yat Mr. Montree Sornpaisarn Mr. Judd Clark Kinne Mr. Hwang Wei Cherng Mr. Pusit Kaewmongkolsri

Homepage www.kimeng.co.th

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 : Fax :

66 (0) 2286 9999 66 (0) 2344 1000 66 (0) 2286 5050

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

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KIM ENG SECURITIES (THAILAND) PLC

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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♦Corporate Information♦ ♦Annual Report 2008♦ Seacon Square Branch 55 Seacon Square Tower G Fl., Room 1005, Srinakarin Rd., Nongbon, Pravej, Bangkok 10260

Sathorn Nakorn Branch 100/46 Sathorn Nakorn Tower 24th Fl.C North Sathorn Rd., Silom, Bangrak, Bangkok 10500

Tel : 0-2320-3600 Fax : 0-2320-3610

Tel : 0-2636-7550-5 Fax : 0-2636-7565

Future Park Rangsit Branch 94 Future Park Rangsit Tower, GF Fl., Phaholyothin Rd., Prachatipat, Pathumthani 12130

Town In Town Branch 1201/114 Ladphrao 94 Rd., (Panjamit) Wangthonglang, Bangkok 10310

Tel : 0-2958-0591 Fax : 0-2958-0590

Tel : 0-2935-6111 Fax : 0-2935-6070

Thaniya Branch 52 Thaniya Plaza Tower 20th Fl., Silom Rd., Suriyawong, Bangrak, Bangkok 10500

Fashion Island Branch 5/5-6 Moo 7, Fashion Island Shopping Center BF Fl., Ramintra Rd., Kannayao, Bangkok 10230

Tel : 0-2231-2700 Fax : 0-2231-2130

Tel : 0-2947-5800-5 Fax : 0-2519-5040

Bangkae Branch 275 Moo 1 The Mall Bangkae Tower 8th Fl., Petchkasem Rd., North Bangkae, Bangkae, Bangkok 10160

RCA Branch 45/1 Rama 9 Rd., Soi Soonvijai, Bangkapi, Huay Kwang, Bangkok 10320

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 : 0-2203-1800 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

Tel : 0-2884-9847 Fax : 0-2884-6920

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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KIM ENG SECURITIES (THAILAND) PLC

Platinum Branch 222/1321 Platinum Fashion Mall, 6th Fl., Petchburi Rd., Ratchathavee, Bangkok 10400

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♦Corporate Information♦ ♦Annual Report 2008♦ Chiangmai 1 Branch 244 Office Building 2nd-3rd Fl. Wowlai Rd. Haiya, Maung Chiangmai 50100 Tel : 053-284-000 Fax : 053-284-019

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

Chiangmai 2 Branch 201/3 Mahidol Rd., Haiya, Maung, Chiangmai 50100

Aranyapratej Branch 44/4 Bamrungraj Rd., Aranypratej, Srakaew 27120

Tel : 053-284-138-47 Fax : 053-202-695

Tel : 037-226-347-8 Fax : 037-266-346

Lampang Branch 48/11-12 Montri Rd., Sobtui, Maung, Lampang 52100

Suratthani Branch 216/3 Moo 4 Chonkasem Rd., Makhamtia Rd., Maung, Suratthani 84000

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

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

Chonburi Branch 57/1-2 Paspetra Rd., Bangprasroy, Maung, Chonburi 20000 Tel : 038-792-479 Fax : 038-792-493

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KIM ENG SECURITIES (THAILAND) PLC

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♦Chairman’s Statement♦ ♦Annual Report 2008♦ 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. 2. 3. 4. 5.

Best Shareholders Treatment Awards Best Research House Awards for Retail Investors Best Analyst Awards in Medium and Small Cap Stocks for Retail Investors Best Analyst Awards in Medium and Small Cap Stocks for Institution Investors 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 Pages 5

KIM ENG SECURITIES (THAILAND) PLC

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♦Chairman’s Statement♦ ♦Annual Report 2008♦ 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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KIM ENG SECURITIES (THAILAND) PLC

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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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: CorporateCommunication@kimeng.co.th. 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

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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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: ƒ 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; ƒ 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; ƒ 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; ƒ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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 subcommittees 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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 selfevaluation 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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 GuidelinesMarket 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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♦Good Corporate Governance Report♦ ♦Annual Report 2008♦ 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♦ ♦Annual Report 2008♦ 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. 2. 3. 4. 5.

KIM ENG HOLDINGS LIMITED* MORGAN STANLEY & CO.INTERNATIONAL PLC. THAI NVDR CO., LTD. TFB FOR MFC-THAI FUND INVESTMENT PLAN STATE STREET BANK AND TRUST COMPANY CITIBANK NOMINEES SINGAPORE PTE. LTD.-UBS AG LONDON BRANCH-NRBS IPB CLIENT SEG. MR. TAVEECHAT CHULANGKUL MS. NAREE TANTIWATTANA STATE STREET BANK AND TRUST COMPANY FOR AUSTRALIA OTHERS Total

315,862,471 15,255,100 13,986,234 8,511,600 5,726,502

55.88 2.70 2.47 1.51 1.01

4,958,600

0.88

3,004,700 2,633,000

0.53 0.47

2,226,500

0.39

178,162,593 565,283,200

34.16 100.00

6. 7. 8. 9. 10.

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♦Shareholder Structure♦ ♦Annual Report 2008♦ 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. 1. 2. 3 4. 5. 6. 7. 8. 9. 10. 11.

Name KIM ENG SECURITIES PTE. LTD.* HSBC (SINGAPORE) NOMINEES PTE. LTD. MR. OOI THEAN YAT RONALD DBS NOMINEES PTE. LTD. UNITED OVERSEAS BANK NOMINEES PTE. LTD. SHUN FUNG HOLDINGS (PRIVATE) LIMITED CITIBANK NOMINEES SINGAPORE PTE. LTD. MRS. GLORIA LEE KIM YEW OCBC NOMINEES SINGAPORE PTE. LTD. DBSN SERVICES PTE. LTD. OTHERS Total

No. of Shares Held

%

174,098,041 110,999,020 65,544,928 53,137,224 19,039,329

30.17 19.23 11.36 9.21

18,500,000 15,106,192 10,136,770 7,656,502 5,422,944 97,453,004 577,093,954

3.30 3.21 2.62 1.76 1.33 0.94 16.87 100.00

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♦ ♦Annual Report 2008♦ 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:

1. 2. 3. 4. 5. 6. 7. 8. 9.

Name 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

Title Chairman and Member of the Audit Committee Director Director Director Director Director Director Director and Chairman of the Audit Committee Director and Member of the Audit Committee

Mr. Waranchai Jensiriwanich acts as the Corporate Secretary.

Name Mrs. Gloria Lee Kim Yew

Title 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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.

1. 2. 3. 4. 5. 6. 7. 8. 9.

Name 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

Number of Attendance 9 4 9 6 4 9 5 9 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: 1. 2. 3. 4. 5.

Name Mr. Montree Sornpaisarn Mr. Supachai Ekkul Mr. Pusit Kaewmongkolsri Ms. Boonporn Boriboonsongsilp Mr. Ong Cheow Kheng

Title Chairman of the Management Committee Member of the Management Committee Member of the Management Committee Member of the Management Committee Member of the Management Committee

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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 Dr.Paiboon Sareewiwatthana

Dr.Preecha Jarunggidanan

Mr.Yuth Vorachattarn

30/01/2008

3

3

3

2/2008

11/02/2008

3

3

3

3(Audited 2007 Financial Statements) -

3/2008

28/03/2008

3

3

3

-

4/2008

30/04/2008

3

3

3

3(Reviewed Q.1/2008 Financial Statements)

5/2008

30/06/2008

3

3

3

-

6/2008

30/07/2008

3

3

3

3(Reviewed Q.2/2008 Financial Statements)

7/2008

29/09/2008

3

3

3

-

8/2008

22/10/2008

3

3

3

3(Reviewed Q.3/2008 Financial Statements)

No.

Date of Meeting

1/2008

Pages 28

Auditor

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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:

1.

Name Dr. Preecha Jarungidanan

2.

Dr. Paiboon Sareewiwatthana

3.

Mr. Yuth Vorachattarn

4. 5.

Mr. Judd Clark Kinne Ms. Chao Tse Yang

Title Chairman of the Nominating Committee and Independent Director Member of the Nominating Committee and Independent Director Member of the Nominating Committee and Independent Director Member of the Nominating Committee 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 3 Dr. Preecha Jarungidanan 3 Dr. Paiboon Sareewiwatthana 3 Mr. Yuth Vorachattarn 3 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 1.

Dr. Paiboon Sareewiwatthana

2.

Dr. Preecha Jarungidanan

3.

Mr. Yuth Vorachattarn

4. 5.

Mr. Hwang Wei-Cherng Mr. Judd Clark Kinne

Title Chairman of the Compensation Committee and Independent Director Member of the Compensation Committee and Independent Director Member of the Compensation Committee and Independent Director Member of the Compensation Committee 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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: ƒ

To determine and set fair and clear compensation of any kind to be granted or awarded to directors and employees of the Company: ƒ 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: ƒ 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 Dr. Paiboon Sareewiwatthana Dr. Preecha Jarungidanan Mr. Yuth Vorachattarn Mr. Judd Clark Kinne Mr. Hwang Wei-Cherng

No.1/2008 on February 13, 2008 9 9 9 9 -

No.2/2008 on August 11, 2008 9 9 9 9 9

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

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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 ƒ 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: ƒ 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: ƒ 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: ƒ To establish guidelines for appropriate allocation of securities the Company acts as underwriter to local sales, institutional sales and investment banking departments: ƒ 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:

1. 2. 3. 4. 5. 6.

Name Mr. Suppachai Ekkul Mr. Judd Clark Kinne Ms. Chao Tse Yang Mr. Pusit Kaewmongkolsri Mr. Ong Cheow Kheng Mr. Supawee Thanasrisunee

Title Acting Chairman of the Risk Management Committee Member of the Risk Management Committee Member of the Risk Management Committee Member of the Risk Management Committee Member of the Risk Management Committee Member of the Risk Management Committee

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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:

1. 2. 3. 4. 5. 6.

Name Mr. Suppachai Ekkul Mr. Judd Clark Kinne Ms. Chao Tse Yang Mr. Pusit Kaewmongkolsri Mr. Ong Cheow Kheng Mr. Supawee Thanasrisunee

Number of Attendance 2 2 2 2 1 2

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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:

1.

Name Mr. Yuth Vorachattarn

2. 3. 4. 5.

Dr. Preecha Jarungidanan Dr. Paiboon Sareewiwatthana Mr. Montree Sornpaisarn Mr. Waranchai Jensiriwanich

Title Chairman of the Good Corporate Governance Committee Member of the Committee Member of the Committee Member of the Committee 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:

No. 1/2008 2/2008

Meeting Date 30/01/2008 28/03/2008

Mr.Yuth Dr.Preecha Dr.Paiboon Mr.Montree Vorachattarn Jarungidanan Sareewiwatthana Sornpaisarn 3 3 3 3 3 3 3 3

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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 8. Mr. Kosit Boonroungkaw 9. Mr. Ong Cheow Kheng 10. Mr. Wanchai Tanjasiri 11. Mr. George Huebsch

Title Deputy Managing Director, Local Securities Clients 2 Advisers and Member of the Management Committee Assistant Managing Director, Business Development and Technical Analysis Department 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦

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

Compensation for the Year 2008 2,400,000 600,000 600,000 3,600,000

Unit: Baht Gratuity for the Year 2008 2,200,000 7,500,000 7,500,000 7,500,000 7,500,000 1,400,000 1,400,000 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

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

The Outstanding Amount of Warrants Granted as at December 31, 2008 (Unit) 20,000 125,000 125,000 125,000 125,000 125,000 125,000 10,000 10,000

Pages 35

Number of Warrants Exercised during the Year 2008 50,000 218,800 218,800 218,800 218,800 218,800 218,800 10,000 10,000

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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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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♦Committers and Management Structure♦ ♦Annual Report 2008♦ 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.

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♦Committees and Management Structure♦ ♦Annual Report 2008♦ •

Personal Data of the Company’s Directors and Management

Board of Directors Name and

Age

Education

Position at the Company

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

60

Master Degree in Economics, Thammasat University

% of Share Holding as of Dec 31, 2008* (Change in No. of Shares Held during the Year)**

Family Relationship among management

0.042 (- shares)

None

Aug.02 – 2005 Jul. 01 - Mar.02

The Thai Institute of Directors Association: DCP #0

56

Certified Public Accountant, The Institute of Chartered Accountants.

Oct.02-present

Jul.03 - present Jul.04 - present Jul.05 - present

Bachelor Degree in Economics, Thammasat University

2. Mr. Ronald Ooi Thean Yat Director

Period

Jan.00-Jul.01 Feb.99-Jan 00

0.039 (- shares)

None

Aug. 98-present 1989-present

Work Experiences Position and Company

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.

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

Bachelor of Economics, University of New England, Australia

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KIM ENG SECURITIES (THAILAND) PLC

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♦Committees and Management Structure♦ ♦Annual Report 2008♦ Name and

Age

Education

Position at the Company

3. Mr. Hwang Wei-Cherng Authorized Director

46

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

% of Share Holding as of Dec 31, 2008* (Change in No. of Shares Held during the Year)**

Family Relationship among management

Period

0.039 (- shares)

None

Oct.02 - present Oct.03 - present

Jun. 2001- present

4. Mr. Judd Clake Kinne Authorized Director

64

Master of International Management

0.216 (-shares)

None

Nov 06 - present Nov 05 - present

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

5. Ms. Chao Tse Yang Director

46

Financial Laws, Cathalic University

Nov.02 - present

Jan.89 - Feb.98

0.039 (- shares)

None

Mar 05 - present May 04 - present

International Administration Central Michigan University

Pages 39

KIM ENG SECURITIES (THAILAND) PLC

Work Experiences Position and Company

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

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

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

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♦Committees and Management Structure♦ ♦Annual Report 2008♦ Name and

Age

Education

Position at the Company

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

45

Chartered Financial Analyst (CFA)

% of Share Holding as of Dec 31, 2008* (Change in No. of Shares Held during the Year)**

Family Relationship among management

Period

0.031 (425,000 shares)

None

Oct.01 - present May 08 - Present Mar. 08 - Present

MBA (Finance), Thammasat University

Apr. 07 - Present Bachelor Degree in Engineering, Chulalongkorn University

May 05 - present Feb.00 - Sept.01

The Thai Institute of Directors Association: DAP #21/2004

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

47

Master Degree in MIS, West Coast University. USA.

Sept.98 - Jan.00

0.030 (71,300 shares)

None

Jan. 03. - present Jul. 98 – Jul. 02

Bachelor Degree in Accounting, Chulalongkorn University

1982 – Feb. 98

Work Experiences Position and Company

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.

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

The Thai Institute of Directors Association: DAP #11/2004

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♦Committees and Management Structure♦ ♦Annual Report 2008♦ Name and

Age

Education

Position at the Company

8. Dr. Preecha Jarungidanan Director and Audit Committee Member

63

Ph. D in Economics, University of MissouriColumbia, USA.

% of Share Holding as of Dec 31, 2008* (Change in No. of Shares Held during the Year)**

Family Relationship among management

Period

0.002 (30,000 shares)

None

Oct.02 - present Present

Master of Economics, California State University, Long Beach, USA. Mar.01 - present

Work Experiences Position and Company

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

Bachelor of Economics, Thammasat University The Thai Institute of Directors Association: DAP #9/2004

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

55

Ph. D in Finance, University of Mississippi, USA.

0.007 (-)

None

Oct.02-present Feb.01-present

The Thai Institute of Directors Association: DCP #12/2001

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♦ ♦Annual Report 2008♦ 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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♦Market and Business Conditions♦ ♦Annual Report 2008♦ 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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KIM ENG SECURITIES (THAILAND) PLC

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♦Market and Business Conditions♦ ♦Annual Report 2008♦ 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 Pages 44

KIM ENG SECURITIES (THAILAND) PLC

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♦Market and Business Conditions♦ ♦Annual Report 2008♦ 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♦ ♦Annual Report 2008♦ 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 Pages 46

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♦Risk Factures♦ ♦Annual Report 2008♦ 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 Pages 47

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♦Risk Factures♦ ♦Annual Report 2008♦ 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 Pages 48

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♦Risk Factures♦ ♦Annual Report 2008♦ 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♦ ♦Annual Report 2008♦ 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♦ ♦Annual Report 2008♦ •

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♦ ♦Annual Report 2008♦ 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

Dr.Paiboon Sareewiwatthana

Dr.Preecha Jarungidanan

Mr.Yuth Vorachattarn

1/2008 30/01/2008

3

3

3

2/2008 11/02/2008

3

3

3

3(Auditing 2007 Financial Statements) -

3/2008 28/03/2008

3

3

3

-

No.

Date of Meeting

4/2008 30/04/2008

3

3

3

5/2008 30/06/2008

3

3

3

6/2008 30/07/2008

3

3

3

7/2008

3

3

3

29/9/2008

8/2008 22/10/2008

3

3

3

Auditor

3(Reviewing Q1/2008 Financial Statements) 3(Reviewing Q2/2008 Financial Statements) 3(Reviewing Q3/2008 Financial 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 Pages 52

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♦Audit Committee’s Report♦ ♦Annual Report 2008♦ 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 fullcooperation 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.

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♦Audit Committee’s Report♦ ♦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♦ ♦Annual Report 2008♦ 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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KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦Annual Report 2008♦ 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 2006 5,514,547 1,501,052 4,013,495 1,476,562*

Total Assets Total Liabilities Total Shareholders’ Equity Securities Brokerage and Derivatives Receivables Total Revenue Net Profit EPS Weighted Average No. of Shares (Thousands of Shares) (Diluted)**

1,970,406 532,799 0.95 560,292

Unit: Thousands of Baht 2007 2008 6,796,295 5,342,035 2,623,608 1,129,534 4,172,687 4,212,501 3,126,765 1,554,032 1,971,159 551,359 0.98 563,325

1,964,686 533,234 0.94 565,649

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.

Pages 56

KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦Annual Report 2008♦ Selected Financial Ratios 2006

2007

2008

Profitability Ratio Gross Profit Margin (%) Net Profit Margin (%) Return on Equity (%) Return on Investment (%)

95.76 27.04 13.22 60.18

94.97 27.97 13.47 35.56

93.65 27.14 12.72 43.29

Efficiency Ratio Return on Total Assets (%) Total Assets Turnover (x)

9.00 0.33

8.96 0.32

8.79 0.32

Financial Policy Ratio Liquid Assets to Total Assets (%) Earning Asset to Total Assets (%) Debt-to-Equity Ratio (x) Dividend Payout Ratio (%)

46.74 76.71 0.37 89

31.03 76.81 0.63 89

52.31 81.63 0.27 N/A

7.66 247.35

5.81 154.41

4.83 376.41

Other Ratios Investment to Total Assets (%) Net Liquid Capital Ratio (Calculated in accordance with the SEC’s rules)

Pages 57

KIM ENG SECURITIES (THAILAND) PLC

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♦Financial Performance and Financial Information♦ ♦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 Chairman

Montree Sornpaisarn Chief Executive Officer

Pages 58

KIM ENG SECURITIES (THAILAND) PLC

Pusit Kaewmongkolsri 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 Company Limited

I have audited the accompanying consolidated and company balance sheets as at 31 December 2008 and 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 Company Limited and its subsidiary and of Kim Eng Securities (Thailand) Public Company Limited, respectively. The company’s management is responsible for the correctness and completeness of information in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits.

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

In my opinion, the consolidated and company financial statements referred to above present fairly, in all material respects, the consolidated and company financial position as at 31 December 2008 and 2007, and the consolidated and company results of operations, and cash flows for the years then ended of Kim Eng Securities (Thailand) Public Company Limited and its subsidiary and of Kim Eng Securities (Thailand) Public Company Limited, respectively, in accordance with generally accepted accounting principles.

Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 PricewaterhouseCoopers ABAS Limited Bangkok 12 February 2009


Kim Eng Securities (Thailand) Public Company Limited Balance Sheets As at 31 December 2008 and 2007 Consolidated

The company only

2008

2007

2008

2007

Baht

Baht

Baht

Baht

3

2,863,169,077

2,131,883,037

2,762,191,634

2,107,843,130

4

1,344,965

2,487,974

1,344,965

2,487,974

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

1,554,032,524

3,126,765,198

1,554,032,524

3,126,765,198

250,781,098

244,115,188

250,781,098

244,115,188

Notes Assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt and equity securities, net

Securities and Derivatives business receivables

8, 9

Loans to employees under welfare program 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

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

Foreclosed properties

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


Kim Eng Securities (Thailand) Public Company Limited Balance Sheets As at 31 December 2008 and 2007 Consolidated Notes

The company only

2008

2007

2008

2007

Baht

Baht

Baht

Baht

73,910,472

39,316,777

73,910,472

39,316,777

746,361,569

2,137,234,714

746,361,569

2,137,234,714

34,944,685

35,022,605

34,944,685

35,022,605

141,024,897

218,695,379

141,024,897

218,695,379

72,644,233

131,302,800

72,217,023

131,294,431

Liabilities and shareholders’ equity Liabilities Payables to Clearing House Securities and Derivatives business payables Provisions

12

Accrued bonus expenses Accrued corporate income tax 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

2,861,250,000

2,861,250,000 2,861,250,000

2,861,250,000

2,826,935,500

2,781,808,500 2,826,935,500

2,781,808,500

Shareholders’ equity Share capital Authorised share capital 572,250,000 ordinary shares of Baht 5 each

14

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) Premium on share capital Share subscriptions received in advance

512,715,929

494,777,529

512,715,929

494,777,529

-

281,000

-

281,000

212,678,288

180,633,241

212,678,288

180,633,241

667,123,888

715,206,116

665,554,737

715,186,588

(5,383,355)

-

(5,383,355)

-

Retained earnings Appropriated - Legal reserve

15

Unappropriated Less Treasury Stock

14

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

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 3


Kim Eng Securities (Thailand) Public Company Limited Statements of Income For the years ended 31 December 2008 and 2007

Notes

Consolidated 2008 Baht

2007 Baht

The company only 2008 2007 Baht Baht

Revenues Brokerage fees Brokerage fees from Securities Business Brokerage fees from Derivatives Business Fees and services income Gain (losses) on trading in securities Losses on trading in derivatives Interest and dividend income Interest on margin loans Other income

1,511,003,839 177,947,389 36,072,025 (6,624,939) (571,760) 151,846,102 75,861,489 22,436,204

1,618,629,848 89,543,900 24,635,434 6,913,993 (156,340) 138,977,779 62,380,958 30,636,779

1,511,003,839 177,947,389 36,072,025 (6,624,939) (571,760) 148,563,289 75,861,489 22,435,304

1,618,629,848 89,543,900 24,635,434 6,913,993 (156,340) 138,574,698 62,380,958 30,636,779

Total revenues

1,967,970,349

1,971,562,351

1,964,686,636

1,971,159,270

42,543,648 83,102,720 (1,817,666) -

36,316,447 68,463,594 (11,180,511) 4,076,566

42,543,648 82,602,720 (1,817,666) -

36,316,447 68,463,594 (11,180,511) 4,076,566

742,262,150 246,934,475 3,184,134 36,230,209 29,205,126 67,683,468

743,919,369 244,224,083 6,847,923 39,819,208 27,392,036 73,782,126

742,118,417 246,929,179 3,183,653 36,230,209 29,203,521 67,221,776

743,919,369 244,223,756 6,834,411 39,819,208 27,392,036 73,420,781

1,249,328,264

1,233,660,841

1,248,215,457

1,233,285,657

Profit before income tax Income tax

718,642,085 183,858,630

737,901,510 186,522,896

716,471,179 183,237,347

737,873,613 186,514,527

Net profit for the year

534,783,455

551,378,614

533,233,832

551,359,086

Expenses Expense on borrowings Fees and services expenses Bad debts and doubtful accounts (reversal) Bad debts write off Operating expenses Personnel expenses Premises and equipment expenses Taxes and duties Directors' remuneration and others Information and technology Other expenses Total expenses

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

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 4


Kim Eng Securities (Thailand) Public Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2008 and 2007 Consolidated Legal and Share subscriptions Treasury stock received in advance reserve Baht Baht

Issued and paid-up share capital Baht

Premium on share capital Baht

Unappropriated retained earnings Baht

Beginning balance at 1 January 2008 Net profit for the year Increase (decrease) in share capital Appropriation of legal reserve (Note 15) Treasury stock (Note 14) Appropriation of treasury stock (Note 14) Dividends (Note 17)

2,781,808,500 45,127,000 -

494,777,529 17,938,400 -

281,000 (281,000) -

180,633,241 26,661,692 5,383,355 -

715,206,116 534,783,455 (26,661,692) (5,383,355) (550,820,636)

- 4,172,706,386 534,783,455 62,784,400 (5,383,355) (5,383,355) - (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

Treasury stock Baht

Total Baht

Consolidated Issued and paid-up share capital Baht

Premium on share capital Baht

Beginning balance at 1 January 2007 Net profit for the year Increase in share capital Appropriation of legal reserve (Note 15) Dividends (Note 17)

2,740,435,500 41,373,000 -

478,144,729 16,632,800 -

Ending balance at 31 December 2007

2,781,808,500

494,777,529

Legal reserve Baht

Unappropriated retained earnings Baht

72,000 209,000 -

153,065,287 27,567,954 -

641,776,860 551,378,614 (27,567,954) (450,381,404)

- 4,013,494,376 551,378,614 58,214,800 - (450,381,404)

281,000

180,633,241

715,206,116

- 4,172,706,386

Share subscriptions received in advance Baht

Treasury stock Baht

Total Baht

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 5


Kim Eng Securities (Thailand) Public Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2008 and 2007 The company only

Beginning balance at 1 January 2008 Net profit for the year Increase (decrease) in share capital Appropriation of legal reserve (Note 15) Treasury stock (Note 14) Appropriation of treasury stock (Note 14) Dividends (Note 17) Ending balance at 31 December 2008

Issued and paid-up share capital Baht

Premium on share capital Baht

2,781,808,500 45,127,000 -

494,777,529 17,938,400 -

281,000 (281,000) -

-

-

2,826,935,500

512,715,929

Share subscriptions received in advance Baht

Legal reserve Baht

Unappropriated retained earnings Baht

180,633,241 26,661,692 -

715,186,588 533,233,832 (26,661,692)

-

5,383,355 -

(5,383,355) (550,820,636)

-

212,678,288

665,554,737

Treasury stock Baht

Total Baht

- 4,172,686,858 533,233,832 62,784,400 (5,383,355) -

(5,383,355) (550,820,636)

(5,383,355) 4,212,501,099

The company only Issued and paid-up share capital Baht

Premium on share capital Baht

Beginning balance at 1 January 2007 Net profit for the year Increase in share capital Appropriation of legal reserve (Note 15) Dividends (Note 17)

2,740,435,500 41,373,000 -

478,144,729 16,632,800 -

Ending balance at 31 December 2007

2,781,808,500

494,777,529

Legal reserve Baht

Unappropriated retained earnings Baht

72,000 209,000 -

153,065,287 27,567,954 -

641,776,860 551,359,086 (27,567,954) (450,381,404)

- 4,013,494,376 551,359,086 58,214,800 - (450,381,404)

281,000

180,633,241

715,186,588

- 4,172,686,858

Share subscriptions received in advance Baht

Treasury stock Baht

Total Baht

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 6


Kim Eng Securities (Thailand) Public Company Limited Statements of Cash Flows For the years ended 31 December 2008 and 2007 Consolidated

The company only

2008

2007

2008

2007

Baht

Baht

Baht

Baht

718,642,085

737,901,510

716,471,179

737,873,613

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

(77,920)

3,333,948

(77,920)

3,333,948

(1,817,666)

(11,180,511)

(1,817,666)

(11,180,511)

-

4,076,566

-

4,076,566

Cash flows from operating activities Net profit before income tax for the year Adjustments to reconcile net profit to cash (paid) provided by operating activities: Depreciation and amortisation

Retirement benefit (reversal) Bad debts and doubtful accounts (reversal) Bad debts write off

14,333,141

(7,989,888)

14,333,141

(7,989,888)

(Gains) losses on disposal of equipment

(Gains) losses on revaluation of investments

218,618

(424,466)

218,618

(424,466)

Amortisation of interest expenses financial lease

939,493

2,589,329

939,493

2,589,329

628,854,711

643,662,527

629,963,186

644,037,711

1,143,009

10,491,321

1,143,009

10,491,321

322,812,889

35,583,884

322,812,889

35,583,884

Operating profit before changes in operating assets and liabilities (Increase) decrease in operating assets Long-term deposits at financial institutions Short-term investments Receivables from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Deposits Other assets

466,706,956

(105,923,164)

466,706,956

(105,923,164)

1,570,397,263

(1,640,938,831)

1,570,397,263

(1,640,938,831)

(6,665,910)

2,746,298

(6,665,910)

2,746,298

1,177,840

(3,248,750)

1,177,840

(3,248,750)

(9,060,674)

(5,943,325)

(9,023,849)

(5,873,325)

34,593,695

39,316,777

34,593,695

39,316,777

995,843,359 (1,390,873,145)

995,843,359

Increase (decrease) used in operating liabilities Payables to Clearing House Securities and Derivatives business payables Accrued bonus expenses Accrued other expenses Other liabilities

(1,390,873,145) (77,670,482)

43,678,022

(77,670,482)

43,678,022

3,298,488

(29,887,125)

3,280,476

(29,969,135)

(2,164,132)

(467,577)

(2,167,239)

(467,594)

1,542,550,508

(15,086,584)

1,543,674,689

(14,723,427)

Cash generated from used inoperating before received (paid) interest and income tax 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)

(242,517,197)

(128,733,160)

(242,314,755)

(128,733,160)

1,473,478,484

18,030,026

1,471,522,295

17,990,102

Income tax paid Net cash received from operating activities

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 7


Kim Eng Securities (Thailand) Public Company Limited Statements of Cash Flows For the years ended 31 December 2008 and 2007 Consolidated

The company only

2008

2007

2008

2007

Baht

Baht

Baht

Baht

(38,380,070)

(31,225,416)

(38,361,470)

(31,225,416)

(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)

(240,048,760)

(32,454,668)

(315,030,107)

(56,454,651)

(8,730,893)

(5,377,169)

(8,730,893)

(5,377,169)

Cash flows from investing activities Purchases of equipment Purchases of intangible assets

Net cash used in investing activities Cash flows from financing activities Cash paid for financial lease Increase in share capital Dividend paid Cash paid for treasury stock Net cash used in financing activities

62,784,400

58,214,800

62,784,400

58,214,800

(550,813,836)

(450,370,984)

(550,813,836)

(450,370,984)

(5,383,355)

-

(5,383,355)

-

(502,143,684)

(397,533,353)

(502,143,684)

(397,533,353)

731,286,040

(411,957,995)

654,348,504

(435,997,902)

2,131,883,037

2,543,841,032

2,107,843,130

2,543,841,032

2,863,169,077

2,131,883,037

2,762,191,634

2,107,843,130

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, at beginning of the year Cash and cash equivalents, at end of the year

Non cash items During the year ended 31 December 2008, the company had vehicles amounting to Baht 8 million under the long-term lease agreement.

The notes to financial statements on pages 9 to 35 form an integral part of these financial statements. 8


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007 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 generally accepted accounting principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Accounting Profession Act B.E. 2547, and the financial reporting requirements of 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 cost convention except as disclosed in the accounting policies below. The preparation of consolidated and company financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates. An English version of the consolidated and company financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation 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 and amendments to Thai Accounting Standard (“TAS”) as follows: Revised standards TAS 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”

9


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

2.2

New accounting standard and amendments to accounting standards (Cont’d) New standard TAS 51 “Intangible Assets” The amendments to accounting standards and the new accounting standard are effective for the period beginning on or after 1 January 2008 except TAS 29 which is effective for the lease contract started on or after 1 January 2008. The Company’s management has determined that the revised standard and new standard will not significantly impact the financial statements being presented. Revised standards and new standard that are effective for financial statements begin on or after 1 January 2009 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 financial statements 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 operating policies generally accompanying a shareholder of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiary is consolidated from the date on which control 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 are eliminated; unrealised loss are also eliminated unless cost cannot be recovered. Where necessary accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by 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 and the 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. The company started preparing the consolidated financial statements on 18 May 2007, when KEST Guardian Asset 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. 10


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

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 interest method. Dividend income from investments is recognised when the right to receive payment is established. Interest on credit balance transactions Interest on credit balance transaction is recognised as income on the time proportion basis except for interest income from certain securities business receivables, which is recognised on a collection basis in accordance with an announcement of the office of the Securities and Exchange Commission, dated 15 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 flow statement, cash and cash equivalents comprise cash on hand, current and saving deposits, negotiable certificates of deposits, promissory notes, and other short-term highly liquid investments with original maturing within 3 months or under. Bank overdrafts, if any, are included under borrowings in current liabilities 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. General investments. 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 reevaluates such designation on a regular basis. 1.

2. 3. 4.

Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments for the purpose of these financial statements short term is defined as three months. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity. Investments intended to be held for an indefinite period of time, which may be sold in response to liquidity needs or changes in interest rates, are classified as available-for-sale. Investments in non-marketable equity securities are classified as general investments.

11


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

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 for impairment (if any) in the balance sheet. Unrealised gains or losses resulting from changes in fair values of investment in available-for-sale securities and trading securities are included in the shareholders’ equity and in the statement of income, respectively. Fair value are calculated on the following basis: -

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

-

For marketable equity securities, fair values are calculated by referencing to last bid prices quoted on the 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 the Securities and Exchange Commission’s Notification dated 15 February 2001, regarding the accounting for sub-standard loans. The announcement requires the company to classify its loan portfolio into 3 categories subject to different levels of provisioning. The announcement also imposes policies regarding the collateral valuation for the purpose of setting allowance for doubtful accounts. Moreover, the considerations of the financial position of each debtor based on the experience and opinion of the management are also performed. Bad debts written off or bad debts recovered are recorded as a decrease or an increase in the allowance for doubtful accounts.

2.8

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

12


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

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 residual value over the estimated useful lives. Building improvement Furniture fixtures & equipment Motor vehicles

5 years 3 and 5 years 5 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference will be recorded as impairment loss in the statement of income. Repairs and maintenance are charged to the income statement during the financial year in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. The company depreciated the asset over the remaining useful life 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 are included in operating profit.

2.10 Foreclosed properties Foreclosed properties consist of immovable properties, which are stated at the lower of cost and recoverable amount. The excess of the carrying amount over recoverable amount is recognised as an impairment loss in statement of income. Gains or losses on disposals of such properties are recognised in the statement of income at the date of disposal.

2.11 Intangible assets Expenditure on acquired intangible assets is capitalised and amortised using the straight-line method over 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 reviewed annually 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-term deposits at financial institutions, investments in debt securities, Receivables from Clearing House, Securities and Derivatives business receivable, and loans to employees under welfare program. Significant financial liabilities carried on the balance sheet include Payables to Clearing House, Securities and Derivatives business payables liabilities under long-term lease. The particular recognition methods adopted 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 to other financial instruments which are not recognised in the financial statements. 13


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

2.13 Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are 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 individuals owning, directly or indirectly, an interest in the voting power of the company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the company and close members of the family of these individuals and companies associated with these individuals also constitute related parties.

2.14 Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable 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 provision has been settled.

2.15 Provident fund The company established a contributory registered provident fund for those employees who indicate their willingness to join, in accordance with the Provident Fund Act B.E. 2530. The company operates a provident fund that the asset for which are held in a separate trustee-administered fund managed by independent fund manager. The provident fund is funded by payments from employees at the amount equal to 2% - 3% of the employees’ basic salary and by the company at the amount equal to 2% - 8% of the employees’ basic salary depending on years of services. The contributions to the provident fund are charged 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. The amount 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 cash outflows using interest rates which have terms to maturities approximating the terms of the related liabilities.

2.17 Treasury Stocks Where the Company or its subsidiaries purchases the Company’s equity share capital, the consideration paid including any attributable incremental external costs net of income taxes is deducted from total shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, 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 weightedaverage 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 of weighted average number of ordinary share to be issued for conversion of all dilutive potential ordinary shares into ordinary shares. The calculation assumes that conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued. 14


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

2

Accounting policies (Cont’d)

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 are classified as operating leases. Payment made under operating lease (net of any incentives received from the 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 be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes 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 as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability 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 experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Property, plant and equipment and intangible assets Management determines the estimated useful lives and residual values for the Group’s property, plant and equipment and intangible assets. Management will revise the depreciation charge where useful lives and residual values are different to previously estimated, or its will write off or write down technically 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. The present value of employee benefit liabilities recognised in balance sheet is determined on the present value of estimated future cash outflows. The assumptions used in determining the net year cost for employee benefits includes the salary and years of services of respective employees which are payable in the future year and discount rate. Any changes in these assumptions will impact the net year cost recorded for employee benefits. On a quarterly basis the company determines the appropriate discount rate, which represents the interest rate that should be used to determine the present value of future cash flows 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 going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal 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 to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt obligations.

15


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

3

Cash and cash equivalents Consolidated 2008 Baht Cash on hand Current and saving deposits Promissory notes with remaining maturity less than 3 months Less Deposits on behalf of customers Total cash and cash equivalents

371,000 314,138,678

2007 Baht

362,000 501,423,131

The company only 2008 2007 Baht Baht 371,000 312,261,235

362,000 501,283,224

5,029,100,000 3,178,900,000 4,930,000,000 3,155,000,000 (2,480,440,601) (1,548,802,094) (2,480,440,601) (1,548,802,094) 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 2008 Baht

2007 Baht

The company only 2008 2007 Baht Baht

Fixed deposit Restricted cash

3,089 1,341,876

1,131,042 1,356,932

3,089 1,341,876

1,131,042 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 the company only 2008 Cost/ Amortised cost Fair value Baht Baht

Consolidated and the company only 2007 Cost/ Amortised cost Fair value Baht Baht

Short-term investments Trading equity securities Unit trust

38,156,501 -

32,468,440 -

969,390 1,334,422 360,000,000 368,280,048

Total Less Revaluation adjustments

38,156,501 (5,688,061)

32,468,440 -

360,969,390 369,614,470 8,645,080 -

Total short-term investments, net

32,468,440

32,468,440

369,614,470 369,614,470

Long-term investments General investments Held-to-maturity debt securities

23,991,160 7,251,213 201,548,557 204,522,825

23,991,160 1,548,557

43,861,171 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 and classified as general investments, amounting to Baht 7,622,000 (31 December 2007: Baht 7,622,000). 16


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

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

1 Held-to-maturity debt securities

At 31 December 2007

1 Held-to-maturity debt securities

6

Baht Consolidated and the company only Mature within (year) 2-5 6 - 10 over 10 -

201,548,557

-

-

-

201,548,557

-

-

Baht Consolidated and the company only Mature within (year) 2-5 6 - 10 over 10 -

1,548,557

-

-

-

1,548,557

-

-

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:

Name of company KEST Guardian Asset Management Company Limited.

7

Type of business

Type of relationship

Asset management

Subsidiary

Paid-up share capital 2008 2007 Million Baht Million Baht 100

25

Percentage of holding 2008 2007 % % 99.99

Investment Cost method 2008 2007 Million Baht Million Baht

99.99

100

25

Receivables from Clearing House Consolidated 2008 Baht Receivables from Thai Securities Depositing Co., Ltd. (TSD) Receivables from Thai Clearing House Co., Ltd (TCH) Less Receivables from Clearing House on behalf of customers Total

2007 Baht

The company only 2008 2007 Baht Baht

171,792,545

638,499,701

171,792,545

638,499,701

127,538,940

86,815,740

127,538,940

86,815,740

(127,538,740)

(86,815,740)

(127,538,740)

(86,815,740)

171,792,745

638,499,701

171,792,745

638,499,701

17


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

8

Securities and Derivatives business receivables

Balance of Securities business receivable as at 31 December 2008 and 2007 are as follows: Consolidated 2008 Baht Customers’ cash accounts Credit balance transactions Securities borrowing and lending Other receivables Total securities business receivables Add Accrued interest receivables Less Allowance for doubtful accounts (Note 9) Net securities business receivables and accrued interest receivables

2007 Baht

The company only 2008 2007 Baht Baht

757,820,674 788,398,919 2,760,000 278,645,066

1,417,006,353 1,693,949,013 280,405,376

757,820,674 788,398,919 2,760,000 278,645,066

1,417,006,353 1,693,949,013 280,405,376

1,827,624,659 21,695,357

3,391,360,742 25,848,434

1,827,624,659 21,695,357

3,391,360,742 25,848,434

(296,674,772)

(298,492,438)

(296,674,772)

(298,492,438)

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 in accordance 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: Consolidated 2008 Baht

2007 Baht

The company only 2008 2007 Baht Baht

Derivative business receivables Less Allowance for doubtful accounts (Note 9)

1,387,280

8,048,460

1,387,280

8,048,460

-

-

-

-

Derivative business receivables, net

1,387,280

8,048,460

1,387,280

8,048,460

1,554,032,524

3,126,765,198

1,554,032,524

3,126,765,198

Total securities and derivatives business receivables

18


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

8

Securities and Derivatives business receivables (Cont’d)

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

Classifications

Consolidated and the company only 2008 Allowance for doubtful accounts Total debts Amount set up Amount (including accrued by the required interest receivables) company by SEC Million Baht Million Baht Million Baht

Normal debts Substandard debts Doubtful debts

1,553.99 14.44 282.28

14.44 282.28

282.28

Total

1,850.71

296.72

282.28

Classifications

Consolidated and the company only 2007 Allowance for doubtful accounts Total debts Amount set up Amount (including accrued by the required interest receivables) company by SEC Million Baht Million Baht Million Baht

Normal debts Substandard debts Doubtful debts

3,126.67 15.67 282.92

15.57 282.92

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 rate higher than the minimum rate as suggested by the Office of the Securities and Exchange Commission of Thailand, and also by reviewing the individual debtor’s repayment ability, taking into consideration the recovery risk and the value of the collateral. The substandard and doubtful debts (receivables and accrued interest receivables) are classified by aging as follows: Consolidated 2008 2007 Million Baht Million Baht

The company only 2008 2007 Million Baht Million Baht

Up to 3 months Over 3 months to 6 months Over 6 months to 9 months Over 9 months to 12 months Over 1 year to 3 years Over 3 years

0.12 1.21 295.39

0.06 0.07 1.16 297.30

0.12 1.21 295.39

0.06 0.07 1.16 297.30

Total

296.72

298.59

296.72

298.59

19


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

9

Allowance for doubtful accounts Consolidated 2008 Baht

10

The company only 2008 2007 Baht Baht

2007 Baht

Beginning balance of the year Add Doubtful accounts Less Bad debt written-off Reversal of doubtful accounts

298,492,438 186,101 (2,003,767)

309,672,949 173,481 (4,603,120) (6,750,872)

298,492,438 186,101 (2,003,767)

309,672,949 173,481 (4,603,120) (6,750,872)

Ending balance of the year

296,674,772

298,492,438

296,674,772

298,492,438

Equipment, net Consolidated

At 31 December 2007 Cost Less Accumulated depreciation Net book amount For the year ended 31 December 2008 Opening net book amount Additions Transfer Disposals, net Depreciation charge Net book amount At 31 December 2008 Cost Less Accumulated depreciation Net book amount

Building improvement Baht

Furniture fixtures & equipment Baht

Motor vehicles Baht

206,424,064

401,392,359

288,205

14,583,026

(148,176,336)

(347,999,253)

(64,081)

(5,211,565)

58,247,728

53,393,106

224,124

9,371,461

297,523

121,533,942

58,247,728 3,185,406 4,254,137 (949,172) (23,007,682)

53,393,106 29,243,540 1,826,914 (200,628) (33,223,656)

224,124 (57,609)

9,371,461 7,951,936 (2,916,106) (5,569,715)

297,523 5,951,124 (6,081,051) -

121,533,942 46,332,006 (4,065,906) (61,858,662)

41,730,417

51,039,276

166,515

8,837,576

167,596

101,941,380

206,300,087

427,719,672

288,205

19,157,410

167,596

653,632,970

(164,569,670)

(376,680,396)

(121,690)

(10,319,834)

41,730,417

51,039,276

166,515

8,837,576

Financial Construction lease in progress Baht Baht

297,523

Total Baht

622,985,177

- (501,451,235)

- (551,691,590) 167,596

101,941,380

Initial cost of asset, which has already fully depreciated as at 31 December 2008, is Baht 403 million. The balance consists of building improvement Baht 91 million, furniture & fixture Baht 55 million, and computer Baht 257 million. Initial cost of asset, which has already fully depreciated as at 31 December 2007, is Baht 357 million. The balance consists of building improvement Baht 92 million, furniture & fixture Baht 50 million, and computer Baht 215 million.

20


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

10

Equipment, net (Cont’d) The company only

At 31 December 2007 Cost Less Accumulated depreciation

Building improvement Baht

Furniture fixtures & equipment Baht

Motor vehicles Baht

206,424,064

401,392,359

288,205

14,583,026

(148,176,336)

(347,999,253)

(64,081)

(5,211,565)

58,247,728

53,393,106

224,124

9,371,461

297,523

121,533,942

58,247,728 3,185,406 4,254,137 (949,172) (23,007,682)

53,393,106 29,224,940 1,826,914 (200,628) (33,220,225)

224,124 (57,609)

9,371,461 7,951,936 (2,916,106) (5,569,715)

297,523 5,951,124 (6,081,051) -

121,533,942 46,313,406 (4,065,906) (61,855,231)

41,730,417

51,024,107

166,515

8,837,576

167,596

101,926,211

206,300,087

427,701,072

288,205

19,157,410

167,596

653,614,370

(164,569,670)

(376,676,965)

(121,690)

(10,319,834)

41,730,417

51,024,107

166,515

8,837,576

Net book amount For the year ended 31 December 2008 Opening net book amount Additions Transfer Disposals, net Depreciation charge Net book amount At 31 December 2008 Cost Less Accumulated depreciation Net book amount

Financial Construction lease in progress Baht Baht

297,523

Total Baht

622,985,177

- (501,451,235)

- (551,688,159) 167,596

101,926,211

Initial cost of asset, which has already fully depreciated as at 31 December 2008, is Baht 403 million. The balance consists of building improvement Baht 91 million, furniture & fixture Baht 55 million, and computer Baht 257 million. Initial cost of asset, which has already fully depreciated as at 31 December 2007, is Baht 357 million. The balance consists of building improvement Baht 92 million, furniture & fixture Baht 50 million, and computer Baht 215 million.

11

Intangible assets

Beginning balance Baht

Consolidated 2008 Transfer Addition in/out Baht Baht

Amortised amount Baht

Ending balance Baht

Computer software Software under installation TFEX member fee Mutual fund license

14,015,784 1,884,318 3,320,548 1,000,000

1,827,757 3,688,221 -

77,970 (77,970) -

(6,231,554) -

9,689,957 5,494,569 3,320,548 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.

21


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

11

Intangible assets (Cont’d)

Beginning balance Baht

The company only 2008 Transfer Addition in/out Baht Baht

Amortised amount Baht

Ending balance Baht

Computer software Software under installation TFEX member fee

14,015,784 1,884,318 3,320,548

1,827,757 3,688,221 -

77,970 (77,970) -

(6,231,554) -

9,689,957 5,494,569 3,320,548

Total

19,220,650

5,515,978

-

(6,231,554)

18,505,074

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

Beginning balance Baht

Consolidated 2007 Transfer Addition in/out Baht Baht

Amortised amount Baht

Ending balance Baht

Computer software Software under installation TFEX member fee Mutual fund license

18,743,772 2,263,392 4,320,548 -

1,186,842 1,162,500 1,000,000

1,541,574 (1,541,574) -

(7,456,404) (1,000,000) -

14,015,784 1,884,318 3,320,548 1,000,000

Total

25,327,712

3,349,342

-

(8,456,404)

20,220,650

Initial cost of computer software, which has already fully depreciated as at 31 December 2007, is Baht 38 million.

Beginning balance Baht

The company only 2007 Transfer Addition in/out Baht Baht

Amortised amount Baht

Ending balance Baht

Computer software Software under installation TFEX member fee

18,743,772 2,263,392 4,320,548

1,186,842 1,162,500 -

1,541,574 (1,541,574) -

(7,456,404) (1,000,000)

14,015,784 1,884,318 3,320,548

Total

25,327,712

2,349,342

-

(8,456,404)

19,220,650

Initial cost of computer software, which has already fully depreciated as at 31 December 2007, is Baht 38 million.

22


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

12

Provisions Consolidated 2008 Baht

2007 Baht

The company only 2008 2007 Baht Baht

Opening balance Increase (decrease) during the year

35,022,605 (77,920)

31,688,657 3,333,948

35,022,605 (77,920)

31,688,657 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 Capital Public Co., Ltd. (“Nithipat�), the former parent company, of approximately Baht 10.63 million in case that Nithipat cannot collect their securities debts which have not been transferred as mentioned in the Asset Transfer Letter dated 14 August 1996. Additional provision is set up for the notification of approximately Baht 15.70 million from a customers’ account of Yuanta Securities (Thailand) Limited demanding the company to 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 labor law for Bath 8.61 million (31 December 2007: Baht 8.70 million) which the company has recorded in the financial statements.

13

Liabilities under long-term lease

Liabilities under long-term lease contracts represent finance lease for vehicles. The balance as at 31 December 2008 and 2007 comprise; Consolidated 2008 Baht Minimum lease payments obligation under long-term lease contracts Less Deferred interest

Current portion due within one year Portion due after one year

2007 Baht

The company only 2008 2007 Baht Baht

11,976,281 (1,447,916)

12,660,444 (1,353,122)

11,976,281 (1,447,916)

12,660,444 (1,353,122)

10,528,365

11,307,322

10,528,365

11,307,322

3,034,954 7,493,411

5,150,085 6,157,237

3,034,954 7,493,411

5,150,085 6,157,237

10,528,365

11,307,322

10,528,365

11,307,322

23


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

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 with a par value of Baht 5 per share to 545 million ordinary shares with a par value of Baht 5 per share. The company 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 for director and/or staff, from 545 million ordinary shares with a par value of Baht 5 per share to 572.25 million ordinary shares with a par value of Baht 5 per share. The company registered the increase share capital 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 share capital increase for 9,025,400 shares. On 8 October 2008, the Board of Directors approved to buy back 56,000,000 ordinary shares (representing not more 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. The repurchase period should be done during 24 October 2008 to 24 April 2009. The method and period for selling of the treasury shares will be decided by the Board of Directors after the completion date of the buy back 6 months, but not more than 3 years and such sale will be made at a price of not less than 85 percent of the average 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. 016/2548 dated 4 February 2005, it requires public limited companies that treasury shares to have retained earnings not less than the amount of the treasury shares remaining in the account. In the event the retained earnings is used to 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 shares schemes 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 shares outstanding on the date when the Board resoluted the share repurchase. The total treasury shares are Baht 5.38 million and the company has appropriated the retained earnings as the treasury shares reserve for the whole amount

Number of shares Shares

Consolidated and the company only Share subscription Ordinary Share received in shares premium advance Baht Baht Baht

Total Baht

At 1 January 2007 Issue of shares

548,087,100 2,740,435,500 8,274,600 41,373,000

478,144,729 16,632,800

72,000 3,218,652,229 209,000 58,214,800

At 31 December 2007 Issue of shares Less Treasury shares

556,361,700 2,781,808,500 9,025,400 45,127,000 (782,100) (5,383,355)

494,777,529 17,938,400 -

281,000 3,276,867,029 63,065,400 (5,383,355)

At 31 December 2008

564,605,000 2,821,552,145

512,715,929

- 3,334,549,074

24


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

15

Legal reserve Consolidated 2008 Baht

2007 Baht

The company only 2008 2007 Baht Baht

Opening balance Appropriation during the year Increase treasury shares reserve

180,633,241 26,661,692 5,383,355

153,065,287 27,567,954 -

180,633,241 26,661,692 5,383,355

153,065,287 27,567,954 -

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 the registered 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 the issuance of warrants to purchase the company’s ordinary shares to its directors and/or staff at the maximum of 27.25 million units, free of charge. The exercise price of warrant is Baht 7 per share and they are exercisable in a ratio of 1 warrant to 1 ordinary share. The exercise date is at the last working day of each month throughout 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 December 2008, 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 the Board 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 Ordinary Shareholder’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 the Board 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).

25


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

19

Reconciliation of dilutive earnings per share

Net earnings 2008 Baht Basic earnings per share Net profit for the year Effect of dilutive potential ordinary shares Warrants Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares

Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares

Earnings per share 2008 2007 Baht Baht

534,783,455

551,378,614

561,504,295

552,654,222

0.95

1.00

-

-

4,144,842

10,671,042

-

(0.02)

534,783,455

551,378,614

565,649,137

563,325,264

0.95

0.98

Net earnings 2008 Baht Basic earnings per share Net profit for the year Effect of dilutive potential ordinary shares Warrants

2007 Baht

Consolidated Weighted average number of ordinary shares 2008 2007 Shares Shares

2007 Baht

The company only Weighted average number of ordinary shares 2008 2007 Shares Shares

Earnings per share 2008 2007 Baht Baht

533,233,832

551,359,086

561,504,295

552,654,222

0.95

1.00

-

-

4,144,842

10,671,042

(0.01)

(0.02)

533,233,832

551,359,086

565,649,137

563,325,264

0.94

0.98

26


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

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 Baht

Floating interest rates Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

Consolidated 2008 Fixed interest rate Remaining period before maturity Without interest date or repricing date Less than Over 5 1 year 1 - 5 years years

Non performing debts

Total

Interest rate (%) Floating Fixed rate rate

2,650

-

-

-

213

-

2,863

0.13-2.65

-

-

1 -

200 -

-

172

2 -

1 202 172

-

2.00-2.50 4.11 -

788

-

-

-

762

279

1,829

5.50-5.75

-

251

-

-

-

-

-

251

2.87

-

3,689

1

200

-

1,147

281

5,318

-

3

8

-

74 746 -

-

74 746 11

-

6.50-9.00

-

3

8

-

820

-

831

27


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

20

Financial instruments (Cont’d)

Interest rate risk (Cont’d) Million Baht

Floating interest rates Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

The company only 2008 Fixed interest rate Remaining period before maturity Without date or repricing date interest Less than Over 5 1 year 1 - 5 years years

Non performing debts

Total

Interest rate (%) Floating Fixed rate rate

2,549

-

-

-

213

-

2,762

0.13-2.65

-

-

1 -

200 -

-

172

2 -

1 202 172

-

2.00-2.50 4.11 -

788

-

-

-

762

279

1,829

5.50-5.75

-

251

-

-

-

-

-

251

2.87

-

3,588

1

200

-

1,147

281

5,217

-

3

8

-

74 746 -

-

74 746 11

-

6.50-9.00

-

3

8

-

820

-

831

28


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

20

Financial instruments (Cont’d)

Interest rate risk (Cont’d) Million Baht

Floating interest rates Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

Consolidated 2007 Fixed interest rate Remaining period before maturity Without date or repricing date interest Less than Over 5 1 year 1 – 5 years years

Non performing debts

Total

Interest rate (%) Floating Fixed rate rate

1,472

250

-

-

410

-

2,132

0.125-3.25

2.75

-

2 -

-

-

638

2 -

2 2 638

-

2.00-2.25 -

1,694

-

-

-

1,425

280

3,399

5.75-6.00

-

244

-

-

-

-

-

244

2.33

-

3,410

252

-

-

2,473

282

6,417

-

5

6

-

39 2,137 -

-

39 2,137 11

-

-

-

5

6

-

2,176

-

2,187

-

-

29


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

20

Financial instruments (Cont’d)

Interest rate risk (Cont’d) Million Baht

Floating interest rates Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivable from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payable to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

The company only 2007 Fixed interest rate Remaining period before maturity Without date or repricing date interest Less than Over 5 1 year 1 - 5 years years

Non performing debts

Total

Interest rate (%) Floating Fixed rate rate

1,448

250

-

-

410

-

2,108

0.125-3.25

2.75

-

2 -

-

-

638

2 -

2 2 638

-

2.00-2.25 -

1,694

-

-

-

1,425

280

3,399

5.75-6.00

-

244

-

-

-

-

-

244

2.33

-

3,386

252

-

-

2,473

282

6,393

-

5

6

-

39 2,137 -

-

39 2,137 11

-

-

-

5

6

-

2,176

-

2,187

-

-

30


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

20

Financial instruments (Cont’d)

Credit risk Credit risk is the exposure to the risk that the counterparties might discharge their obligations which could cause the company to incur financial loss. The main financial assets that potentially subject to the company to credit risk are securities and derivatives business receivables. The risk is managed by setting 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: Million Baht Consolidated 2008

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivables from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payables to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

1 - 5 years

Over 5 years

Non performing debts

Total

-

-

-

-

2,863

-

1

-

-

-

1

-

-

200

-

2

202

-

172

-

-

-

172

788

762

-

-

279

1,829

-

28

88

135

-

251

3,651

963

288

135

281

5,318

-

74

-

-

-

74

-

746 3

8

-

-

746 11

-

823

8

-

-

831

At call

Within 1 year

2,863

31


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007 20

Financial instruments (Cont’d) Liquidity risk (Cont’d) Million Baht The company only 2008

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivables from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payables to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

1 - 5 years

Over 5 years

Non performing debts

Total

-

-

-

-

2,762

-

1

-

-

-

1

-

-

200

-

2

202

-

172

-

-

-

172

788

762

-

-

279

1,829

-

28

88

135

-

251

3,550

963

288

135

281

5,217

-

74

-

-

-

74

-

746 3

8

-

-

746 11

-

823

8

-

-

831

At call

Within 1 year

2,762

Million Baht Consolidated 2007

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivables from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payables to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

1 - 5 years

Over 5 years

Non performing debts

Total

250

-

-

-

2,132

-

2

-

-

-

2

-

-

-

-

2

2

-

638

-

-

-

638

1,694

1,425

-

-

280

3,399

-

29

84

131

-

244

3,576

2,344

84

131

282

6,417

-

39

-

-

-

39

-

2,137 5

6

-

-

2,137 11

-

2,181

6

-

-

2,187

At call

Within 1 year

1,882

32


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

20

Financial instruments (Cont’d)

Liquidity risk (Cont’d) Million Baht The company only 2007

Financial assets Cash and cash equivalents Long-term deposits at financial institutions Investments in debt securities Receivables from Clearing House Securities and Derivatives business receivables Loans to employees under welfare program Total Financial liabilities Payables to Clearing House Securities and Derivatives business payables Liabilities under long-term lease Total

1 - 5 years

Over 5 years

Non performing debts

Total

250

-

-

-

2,108

-

2

-

-

-

2

-

-

-

-

2

2

-

638

-

-

-

638

1,694

1,425

-

-

280

3,399

-

29

84

131

-

244

3,552

2,344

84

131

282

6,393

-

39

-

-

-

39

-

2,137 5

6

-

-

2,137 11

-

2,181

6

-

-

2,187

At call

Within 1 year

1,858

Fair value The management believe that the fair value of the company’s financial assets and liabilities does not materially 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 Yuanta Securities Asia Financial Service Limited Kim Eng Securities Pte Ltd. Kim Eng Securities (Hong Kong) Limited KEST Guardian Asset Management Company Limited

Parent company Shareholding in the parent company Fellow subsidiary Fellow subsidiary Subsidiary

33


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

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 2008 2007 Million Baht Million Baht Brokerage fee income - Kim Eng Securities Pte Ltd. Kim Eng Securities (Hong Kong) Limited

The company only 2008 2007 Million Baht Million Baht

158

246

158

16

-

16

Information technology service expenses - Kim Eng Holdings Limited

3

3

3

Dividends - Kim Eng Holdings Limited

310

259

310

259

-

-

75

25

Cash paid for investing - KEST Guardian Asset management Company Limited

Transfer price policies

246 At the rate set by the Stock Exchange of - Thailand

3 At the price agreed upon by both parties referencing the market price.

The outstanding balances of the above transactions, as presented in the balance sheets are as follows: Consolidated The company only 2008 2007 2008 2007 Million Baht Million Baht Million Baht Million Baht 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 Exchange Commission. 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 parent company for a period of 1.5 years and has been committed to pay fee at the rate specified in the agreement. If no termination is made by either party when due, the agreement is automatically renewed for another year. As at 31 December 2008, Kim Eng Holdings Limited guaranteed the overdraft facilities amounting to Baht 30 million. There is no outstanding balance as at 31 December 2008.

34


Kim Eng Securities (Thailand) Public Company Limited Notes to the Financial Statements For the years ended 31 December 2008 and 2007

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: The company only Consolidated 2008 2007 2008 2007 Million Baht Million Baht Million Baht Million Baht No later than 1 year Later than 1 year but not later than 2 years Later than 2 years Total

23

70 56 13

70 47 37

70 56 13

70 47 37

139

154

139

154

Business/geographical segment information

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

35


Mbket 08