2.3 Business Characteristics of each Service

(1) Business Characteristics

The characteristics of each of the Company’s business are classified as
follows:

Securities Broker Business

Market share values of the Company for the past 3 years from 2008 to
2010 are shown in the table below:

Table of Market Share Value

  --------------------------------- ------------ ------------ ------------
  Securities Trading Volume         2008         2009         2010

  SET (Million Baht)                3,981,230    4,428,979    7,033,947

  US (Million Baht)                 59,718       66,736       103,552

  US Market share (%)               0.75%        0.77%        0.84%
  --------------------------------- ------------ ------------ ------------

Source: SET Market Analysis and Reporting Tool (Setsmart)

New Account Opening Policy

It is the Company’s policy to welcome all types of customer both retail
and institutional which consists of domestics as well as foreigners. At
present, most of our customers are retail customers and the Company has
set up the screening of new account opening policy according to the
rules and regulations of the SEC and the SET. The Company has amend its
rule regarding the practice of Know Your Customer and Customer Due
Diligence (KYC/CDD) to be more prudent and be able to efficiently reduce
the Company’s risks. In this regard, for the new account opening process
for the customer wishing total trading line of more than 5 million Baht,
which is considered significant, the investor contact, accompanied by
Legal Officer or non-marketing staff, is requested to do face-to-face
meeting with the customer in order to interview and verify the original
documents for account opening. Also, the customer has to sign in
presence of Legal Officer or non-marketing staff. Such KYC/CDD process
must be applied by the existing customer wishing to increase their
trading line to higher than 5 million Baht.

For the new internet trading customers not having reference person known
by the Company, the Company limits their stock purchase not exceeding
the deposited cash (Cash Balance) for at least 6 months to allow the
Company to evaluate their ability to repay debt and trading behavior.
Subsequently, the customer will be able to trade via internet and the
Company shall determine the customer’s trading line by depositing
minimum collateral of 15% of each purchasing amount and settled within
the due date(T+3).

In the year 2010, the Company has set additional guidelines to determine
new account opening so that its risk control system is more efficient by
stipulating the guidelines for determination of securities and/or
derivatives trading line for juristic person customers as well as
criteria for consideration of high volume customers’ qualifications that
the Company is allowed to sell some types of bill of exchange to make
clear of the rules.

Loan for Securities Trading Policy

Since 26 June, 2002, the Company has provided loan to customers in form
of Credit Balance under Credit Balance Financing project. The amount of
initial margin rate has been set up individually for each stock
differently depending on the degree of risk in which will be announced
occasionally as appropriate. Followings are the process and the practice
of granting Credit Balance to customers:

1. Marketing staff should know their customers in person so that they
can evaluate the investment objectives, financial position or
limitations as well as the basic investment knowledge of their customers
clearly.

2. Determine appropriate maximum limit of credit line for each customer
under a certain period of time considering from the ability to repay
debt in which the trading line is determined aggregately from all types
of accounts that a customer has with the Company.

3. Disclose the relationships between marketing staff and the customers
or between the Company and the customers to notify the Company’s
compliance to the Code of Ethics like that of a professional company,
and which is considered to be a provision in the Compliance manual to be
strictly obeyed.

4. Approved authority of the credit line is dependent on the Executive
Board.

5. The marketing staff have to certify that the person who makes the
buying and selling decision is the eligible person and not a nominee and
that the payment should be settled by that particular person. The
Company is therefore, forbidden to approve any credit line to the
nominee of other persons intentionally or unintentionally.

6. In opening a securities trading account, the customers have to make
deposit in cash first before trading can be made at the amount not less
than the initial margin regulated by the Stock Exchange of Thailand (at
present it is 50%).

7. The Company is forbidden to approve for any margin on securities
trading to the customers exceeding their purchasing limit during a
certain period.

8. Purchases exceeding the purchasing limit can be allowed only if the
customers increase their collaterals amount, either by cash or
securities, to the amount not less than the initial margin of the
exceeded volume purchased before purchasing can be done.

9. The Company has set up the marginable list of securities (including
those right offering shares of the listed companies), initial margin
rate, maintenance margin rate and the minimum requirement rate for each
securities in writing and informed related staff and customer at least
once a month.

10. In case the customers’ equity falls below that of the Maintenance
Margin, written notice will be sent to inform them to fill in the
collateral on the next working day so that the customers’ equity is not
lower than the Maintenance Margin.

11. In case the equity of any customer has decreased to be equivalent to
or lower than the Maintenance Margin, the Risk Management Dept. is
responsible in monitoring and informing the Investor Contact to ask the
customer to place more collaterals and to force sell on the next working
day so that the equity of the customer rises to over the Maintenance
Margin. On the settlement due date, if the equity of the customer is
equal to or lower than the minimum requirement value again, the Risk
Management Dept. has to force sell until the equity is higher than the
Maintenance Margin. Moreover, the Risk management Dept. has to control
the margin loan for any securities concentrated above 85% level of MAX X
(the concentration level of securities set by the Company) by increasing
the level of the former Maintenance Margin from which force selling is
exercised at 25% to 30% for the customers’ account that has the stock
values in MAX X total from 80% of the aggregate stock values of the
customers in order to be able to make faster force selling.

12. Interest on margin loan should be charged to the customers and the
Company will also pay interest to the customers calculated on
collaterals remaining in their margin loan account base on the daily
outstanding amount under the agreed rate. The settlement of interest
will be done by adjusting the margin level of each customer at least
once a month.

13. Report on the outstanding balance and collaterals on margin loan
account will be sent to inform the customers at least once a month.

In 2010, the Company has increased intensity of control measures of risk
may result from continuous client loan for trading securities with
collateral in a concentrated manner which was initiated in 2009 by
boosting the level of call margin from 50 percent to 55 percent and
raise the force selling level from 35 percent to 40 percent for customer
whose account contains concentrated stocks of more than 50 percent of
the outstanding stocks and is charged the maximum loan interest rate of
15 percent p.a. This measure was in effect since 1 December, 2010.

Securities Trading Credit Line Approval Policy

The Company has set up the securities trading credit line approval
authority for new customers and the review of the credit line (which
already includes all types of accounts for each customer), the net
settlement approval (per client), the changing of order (per
transaction) and the transferring of error into the Company’s portfolio
(per transaction) by appointing the authorized signers as showed in
Table No. 1 which was reviewed and updated effective 9 July, 2007. And
updated the short sell approval line effective 7 August, 2007 as showed
in Table No. 2 below:

In addition, in the year 2009, the Risk Management Committee has
determined criteria in decreasing securities trading line of account
which has been checked by the regulators twice and three times in one
month for 25% and 30%, respectively. For non-active account within 3
years, the Company will annually decrease trading line for10% of the
outstanding amount. For non-active account within 5 years, the Company
will close the account, except for those which have outstanding stocks
and interest, the trading line will be reduced to 1 Baht. In this
regard, the Risk Management Department will inform such customer list to
the investor contact to consider and proceed according to the
aforementioned criteria.

Furthermore, the Risk Management Committee has also set up criteria to
determine the trading line of derivative account for the customer who
already has cash account and wishes to open derivative account without
presenting financial evidence to the Company by decreasing trading line
in cash account and increasing line in derivative account in the ratio
of 5 : 1. as the trading of derivatives is riskier than securities.
Consequently, derivatives trading line is set lower. In this regard, the
total trading line of all types of accounts must not exceed the total
line calculated in accordance with what determined by the Company.

On 16 June, 2010, the Company’s executive board resolved the additional
criteria for trading line transfer among customer’s own accounts which
allows credit line in Credit Balance account to trading line in Cash
account ratio as 1:1, with conditions as follows:

  1) The customer must deposit cash or stock as collateral into the
  account whose trading line is wished to be increased (all account
  types).

  2) New credit line in Credit Balance account must not exceed the old
  one which was specified in the contract with the Company.

  3) In case of overdue, the Risk Management Department will consider
  decreasing customer’s trading line for 50%.

4) All cases must be approved by the Executive Committee.

Bill of Exchange Trading Line Approval Policy

In 2010, the Company stipulated the authorized persons and criteria for
bill of exchange trading account opening categorized by types of
customers both retail and juristic person customers.

Authorized persons for bill of exchange trading line

+----------------------------------+-----------------------------------+
| Trading line                     | Authorized person                 |
+----------------------------------+-----------------------------------+
| Not exceed 50 million Baht       | Senior Vice President – Fixed     |
|                                  | Income Department                 |
+----------------------------------+-----------------------------------+
| Not exceed 200 million Baht      | Managing Director                 |
+----------------------------------+-----------------------------------+
| Not exceed 400 million Baht      | Executive Committee               |
+----------------------------------+-----------------------------------+
| Over 400 million Baht            | Board of Director                 |
+----------------------------------+-----------------------------------+

Table 1: The Approval Authorities for Securities and Derivatives
Business

[]

Table 2 : The Approval Line for Short Sell Transactions

Marketing staff should get approval for their customers’ short sell
transactions from the authorized signers showed in the table below:

+-----------------+----------+---------+---------+---------+---------+
| Position        | not      | not     | not     | not     | exceed  |
|                 | exceed 5 | exceed  | exceed  | exceed  | 20 MN   |
|                 | MN       | 10      | 15 MN   | 20 MN   |         |
|                 |          |         |         |         |         |
|                 |          | MN      |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Manager /       |         | *       | *       | *       | *       |
|                 |          |         |         |         |         |
| Assistant Vice  |          |         |         |         |         |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Vice President  |         | *       | *       | *       | *       |
| /               |          |         |         |         |         |
|                 |          |         |         |         |         |
| Senior Vice     |          |         |         |         |         |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Executive Vice  |         |        | *       | *       | *       |
| President /     |          |         |         |         |         |
|                 |          |         |         |         |         |
| First Executive |          |         |         |         |         |
| Vice President  |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Senior          |         |        |        | *       | Co-a    |
| Executive Vice  |          |         |         |         | pproval |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Executive       |         |        |        |        |         |
| Director -      |          |         |         |         |         |
|                 |          |         |         |         |         |
| Thai Marketing  |          |         |         |         |         |
| / Managing      |          |         |         |         |         |
|                 |          |         |         |         |         |
| Director        |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Remark         |          |         |         |         |         |
| means the trans |          |         |         |         |         |
| action can be a |          |         |         |         |         |
| pproved by the  |          |         |         |         |         |
| Department Head |          |         |         |         |         |
|                 |          |         |         |         |         |
| * means the     |          |         |         |         |         |
| Department Head |          |         |         |         |         |
| can only        |          |         |         |         |         |
| acknowledge but |          |         |         |         |         |
| cannot approve  |          |         |         |         |         |
| the transaction |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+

Settlement Control Policy

The Company has set up a strictly control policy over the customers’
settlement in order to comply with the rules and regulations of SET as
follows:

Payment for securities purchased should be settled on time. Late payment
or cheque default cases will be followed up by the Company’s investor
contact in order to urge the customers to make payment either by cash or
by depositing into the Company’s account and to warn them to be more
careful in the future. Late payment or late submission of share
certificates will subject to a fine. If the late payment of any customer
happens 3 times in a year, then trading line of his or her account will
be decreased for 50%. And if the late payment of any customer happens 4
times in a year, then the account will be considered for closing. The
Risk Management Department will be the one who proposes the default on
settlement cases for prior approval by the Risk Management Committee.

Securities Dealing

The Company runs Securities Dealing business and the Executive Committee
was assigned to establish a policy and control the Company’s investment.
The Company has invested in securities for both equity and debt
instruments of the securities listed in the Stock Exchange of Thailand,
securities listed in the Market for Alternative Investment (MAI),
securities registered in the Thai Bond Market Association (ThaiBMA) and
non-registered securities such as the Bill of Exchange which was aval or
guaranteed payment by commercial banks. However, due to the fluctuation
of the stock market, economic situation and instability of politics, the
Company has carefully rationalized in its investment. In addition, the
Company has not focused in equity instruments since 2005. In 2011, the
Company planned to expand the securities dealing of debt instruments
such as government bond, treasury bill and central bank bond, etc. in
order to increase volume of such business which has been a type of
business that could earn more profits other than the main income from
brokerage fees.

Unit Trust Selling Agent

The Company is a unit trust selling agent for 15 asset management
companies in order to provide services for the investors who would like
to invest in unit trust so that they could have various alternatives of
such investment. Besides, this business could meet the investors’
requirements and be another channel of investment for the customers.

Derivatives Business

The Company has started operating Derivatives business since its
license, “Derivatives Agent”, acquisition in late 2008 from the Ministry
of Finance in accordance with the Futures Contract Act, B.E. 2546. At
present, there are 5 key commodities in the Derivative Market namely
SET50 Index Futures, SET50 Index Option, Single Stock Futures, Gold
Futures and Interest Rate Futures.

Market conditions and competition in the derivatives agent business –
the company's trading in the derivative market is continuously growing
with trading volume totaled 59,945 contracts or 244 contracts per day in
average, increased 5.5 times comparing with those of the year 2009.
Moreover, Mini Gold Futures and Interest Rate Futures have been added as
new underlying assets, trading of which started on 2 August, 2010 and 18
October, 2010 respectively and have received attention from investors as
well.

The company also developed derivatives trading system through Internet
and mobile phones at all time to ensure its stability and accuracy. In
order to meet the market conditions in all situations, the Company has
maximum availability of derivatives services to its clients. In
addition, the Company will remain committed and stay focused on
expanding investor base in the Derivative Market. Since long-term
success of the Company’s derivatives agent business is that its
customers have good understanding in risks and rewards of derivatives,
the Company has prepared and published both fundamental and technical
daily analysis which the investors can download from the company's
website.

(2) Market Outlook and Competition

Thai Stock Market in 2010

By all yardsticks, 2010 was one of the best years in the Thai stock
market history. In terms of market index, SETI closed at 1,032.76pt, up
40.6%, which was the second best performer in Asian markets after
Indonesia. Market capitalization hit record high at Bt8.57b on Dec 8,
2010 while average daily turnover was busiest in five years at Bt29.06b,
or 59.47% heavier than a year earlier. Internet trading reached 24.56%
of market and average derivatives trading reached 18,676 contracts per
day.

The key reasons that supported Thai Stock market in 2010 are summarized
as follows:

1)  Despite weak US economy and Europe’s debt crisis, Asian economy
    still grew well. Especially, Thailand’s robust growth helped offset
    the negative impacts of political crisis in 1H10

2)  Commodity prices saw a continued broad-based rise. Crude oil price
    rose from $64 to retest its highest level in the past couple of
    years at $92. This resulted in earnings turnaround of
    commodities-related stocks that had experienced losses or small
    profits in 2009.

3)  Continued weakening dollar helped attract fund flow to emerging
    markets. During the year, THB/USD was strengthened from 33.34 to
    29.44.

However, the broad market also saw certain negative factors that from
time to time resulted in somewhat throwbacks being depicted in the chart
shown below:

[]

Thai Stock Market Outlook in 2011

We remain bullish on the market outlook in 2011, which was attributable
to the positive factors as follows:

1)  The global economy had bottomed out in 2009 and would see a
    continued recovery based on most likely scenario of u-shaped growth
    trajectory.

2)  In view of such a sustained recovery, earnings and dividend are
    expected to further improve in 2011.

3)  Projects in Map Ta Phut stalled due to suspension order by
    Administrative Court a year ago would resume their operations in
    4Q10/1Q11.

4)  Quantitative easing by Fed, ECB and BOJ would induce foreign fund
    flow to emerging markets.

5)  According to PM, Thailand is gearing up for general election.
    Statistically speaking, there might be “pre-election market rally”
    that SETI would likely see an average rise of 10% during 3 months
    before the election date.

6)  Unlike 2009-2010, less polarization trend and general election would
    help reduce risk of political unrest in 2011.

However, the stock market still has three major risks as follows:

1)  PBOC’s tightening monetary policy might pressure commodity prices.

2)  In view of US recovery, fund managers might pull their investment
    out of Asian emerging markets.

3)  Amid uncertainties, investors might switch to hold US dollar as
    safe-haven asset. This would result in weakening THB/USD trend.

Competition in Securities Business

Starting from 2010, securities companies in Thailand have entered the
first phase of gradual liberalization according to SEC’s policy. At the
beginning of the year, we could see the fiercer competition and leading
to a price war. But after a strong foreign inflow and trading volume
dramatically increase, the competition has waned.

In 2011, the second year of liberalization, stock brokerage fee still
base on a sliding scale. Fee will be lower as trading volume increases
and negotiable once trading volume reaches a certain level as in the
table below. This sliding scale fee will be effective from January 1,
2010 to December 31, 2011.

+---------------+---------------+-----------+--------------------------+
| Trading       | Offline       | Online    |                          |
| Volume        | Trading (%)   | Trading   |                          |
|               |               | (%)       |                          |
| (Bt m/day)    |               |           |                          |
+---------------+---------------+-----------+--------------------------+
|               |               | Cash      | Cash Balance/Credit      |
|               |               |           | Balance                  |
+---------------+---------------+-----------+--------------------------+
| X ≤ 5         | > 0.25~1      | > 0.20~1  | > 0.15~1                 |
+---------------+---------------+-----------+--------------------------+
| 5 < X ≤ 10    | > 0.22~1      | > 0.18~1  | > 0.13~1                 |
+---------------+---------------+-----------+--------------------------+
| 10 < X ≤ 20   | > 0.18~1      | > 0.15~1  | > 0.11~1                 |
+---------------+---------------+-----------+--------------------------+
| X >20         | Negotiable    |           |                          |
|               | and not       |           |                          |
|               | exceeding 1%  |           |                          |
+---------------+---------------+-----------+--------------------------+

From Jan 2012 onwards, stock brokerage fee will be freely negotiable and
SEC will accept unlimited applications for new securities companies,
providing that the applicants meet the requirements for each category of
licenses being sought for.

SEC will replace current “multiple licenses” with “single license” that
will allow license holders to engage in a full range of securities
business. Applicants who see to engage in a specific category of
securities business, e.g. debt, derivatives, and asset management, will
be able to apply for “boutique services” license. However, only full
service providers are allowed to do stock broking license. License fee
for full services and boutique services are set at Bt20m and Bt5m,
respectively.

In view of the aforementioned, we expect that:

1)  Competition among securities companies will become fiercer. In view
    of this, more merger and acquisition in the industry is expected.

2)  More financial instruments with increasing varieties and complexity,
    e.g. silver, oil futures, derivative warrants including extended
    trading period of gold futures, would create new opportunities for
    traders and new risk management tools for investors. So the
    securities companies who issue new financial instrument can earn
    more income.

3)  Starting from Jan 2012, SEC stipulates that providers of full
    services and boutique services must have a minimum paid-up capital
    of Bt500m and Bt100m, respectively. However, many stock brokers
    still have paid-up capital less than the aforesaid levels. Ones with
    paid-up capital less than the threshold must either recapitalize or
    merge with others to meet this new rule.

  ----------- ---------------- -------- -- -------- ---------------- --------
  Broker                                                             
  Ranking by                                                         
  Market                                                             
  Share in                                                           
  2010-2009                                                          

  2009                                     2010                      

  Rank        Broker           %           Rank     Broker           %

                                                                     

  1           KIMENG           10.68       1        KIMENG           12.76

  2           ASP              5.71        2        CGS              5.94

  3           KTZ              5.47        3        ASP              5.26

  4           PST              5.11        4        KGI              4.65

  5           CGS              4.83        5        PST              4.61

  6           PHATRA           4.45        6        KTZ              4.60

  7           TNS              4.38        7        FSS              4.53

  8           BLS              4.08        8        TNS              4.51

  9           KGI              3.88        9        BLS              4.37

  10          CS               3.36        10       PHATRA           4.20

  11          AYS              3.29        11       CS               4.00

  12          BFITSEC          2.99        12       UBS              3.53

  13          UBS              2.84        13       KS               3.47

  14          CNS              2.60        14       SCBS             3.23

  15          TSC              2.54        15       TSC              2.69

  16          SCBS             2.50        16       UOBKHST          2.58

  17          KS               2.39        17       DBSV             2.53

  18          GLOBLEX          2.27        18       CNS              2.38

  19          MACQ             2.19        19       MACQ             2.22

  20          FSS              2.15        20       GLOBLEX          2.15

  21          DBSV             2.01        21       AYS              2.12

  22          UOBKHST          2.00        22       CLSA             1.87

  23          AIRA             1.77        23       KKS              1.51

  24          CLSA             1.74        24       SICSEC           1.48

  25          KKS              1.57        25       JPM              1.29

  26          SICSEC           1.49        26       BFITSEC          1.16

  27          JPM              1.49        27       TRINITY          1.13

  28          ACLS             1.46        28       AIRA             1.06

  29          TRINITY          1.31        29       CIMBS            0.93

  30          SCIBS            1.29        30       SCIBS            0.86

  31          FES              1.06        31       US               0.84

  32          ZMICO            1.04        32       FES              0.73

  33          IVG              0.86        33       IVG              0.62

  34          MERCHANT         0.82        34       ACLS             0.16

  35          FINANSA          0.79        35       MERCHANT         0.03

  36          US               0.77                                   

  37          CIMBS            0.72                                   

  38          CIMB-GK          0.10                                   

  Total                        100.00      Total                     100.00

  Source:                                                            
  Stock                                                              
  Exchange of                                                        
  Thailand                                                           
  ----------- ---------------- -------- -- -------- ---------------- --------

(3) Procurement of Products or Services

Sources of Fund

For the past 3 years the Company had engaged mostly in short term loan
from local financial institution as well as the shareholders’ equity as
the source of fund. The capital was utilized on investment in debt
instrument and loan for securities trading and the rest was used as
working capital. The loan from other financial institution, if any,
would be short term. The sources of fund policy is to choose the source
which is more suitable in relation to the business activities and its
objectives and which will not affect the ratio between total liabilities
and shareholders’ equity as well as the NCR ratio.

Securities Trading Loan Policy

In 2010, the Company had provided securities trading loan under the
Credit Balance system. Towards year end, the total Credit Balance line
was 779.07 million baht with the total outstanding balance of 251
million baht. The Company exercises the greatest care when extending
credit under the Credit Balance system.

The Maintenance of Net Capital Ratio

The Company will maintain its Net Capital Ratio (NCR) to be up to the
Securities & Exchange Commission’s standard on a daily basis. The types
of liquid assets and the liabilities of the Company will be evaluated
everyday in order to control the Company’s NCR to be in line with the
standard rate and in a timely manner. The NCR as of FY2010 year end was
134.30% of general liabilities.