2.3 Business Characteristics of each Undertaking

(1) Business Characteristics

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

  Securities Broker Business

Market share value of the company for the past 3 years compared to the
latest updated data as at 31 December, 2006 are shown in the table
below:

Table of Market Share Value

  ---------------------------- ----------- ----------- ----------- -----------
  Securities Trading Volume    2003        2004        2005        2006

  SET (Million Baht)           4,670,281   5,024,399   4,067,181   3,983,676

  US (Million Baht)            201,645     137,802     100,529     79,273

  US Market share (%)          2.16%       1.37%       1.24%       0.99%
  ---------------------------- ----------- ----------- ----------- -----------

Source: SET Market Analysis and Reporting Tool (Setsmart)

New Securities Customer Policy

It is the Company’s policy to welcome all types of customer, domestics,
institutional as well as foreigners. At present, however, most of our
customers are domestic customers and we have set up the screening of new
customers policy according to the rules and regulations of the SEC and
the SET while focusing on minimizing the Company‘s risk.

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
credit line has been set up in relation to the securities types which
have different degrees of risk in which will be announced occasionally
as appropriate. The Company will set up the list of securities which are
qualified to be put as collaterals. Followings are the policies to be
considered before 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 of each customer
under a certain period of time. The Credit Balance Line and the credit
line for stock borrowings for short sale should be approved under one
maximum total credit line for the same customers.

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 dependant 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 will 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 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 minimum requirement value, then the Operations
Department will have to force sell on the next working day so that the
equity of the customer rises to the minimum requirement value.

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 monthly interest settlement on
margin loan account will be sent to inform the customers at least once a
month.

Securities Trading Credit Line Approval Policy

The Company has set up the securities trading credit line and appointed
the authorized signers to approve for each level of the Line for the
customers governing each activity such as Short Sell and Net Settlement
/Waive as well as the approval of the Change of order and the Company’s
Error Port. The authorized signatories and related authorities were
appointed by the Board of Directors and was last updated on 1 August,
2006 and which shown in table 1.

[]

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 marketing
officer 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. And if the late payment of any
customer happens 3 times in a year, then the account will be considered
for closing.

Securities Trading

The Company’s temporary and long-term investment activities both in
listed securities at the Stock Exchange of Thailand (SET), the Market
for Alternative Investment (MAI) or the Bond Dealers’ Club, and
non-listed equity and debt instruments are controlled by the Executive
Committee who is authorized for the trading line of not exceeding Bht
150 million to ensure that they will correspond with its investment
policy. However, since 2005, the Company set up the policy not to make
any additional investment in stocks. And in 2006, there were more
investment in debt instrument instead.

Thai Stock Market in 2006

During 2006, the Thai stock market was dominated by series of negative
factors due mainly to political instability—see chart below for details.

After sharp gain from January effect, selling of Thaksin’s 49.6% stakes
in Shin Corp worth Bt73b to Temasek Holdings on 28 Jan 06 marked an end
to the market rally as it turned out to be a hot political issue adding
angry among Thai public that started running nationwide protests against
Thaksin since 4Q05.

While protestors demanded Thaksin to step down, however, he dissolved
the House and held general election on 2 Apr 06. Because election date
was just a month after House dissolution, this was later ruled by the
court as unconstitutional.

After ebbing from the year’s high at 786pt (11May 06) to 1H06’s lowest
point at 641pt (15 Jun 06), SETI staged a comeback to retest 748pt in
early Dec. Sell-off resulting from a bloodless military coup by Council
for Democratic Reform on 19 Sep 06 was just short-lived.

Though benign for SETI, however, strong Baht was viewed as a threat for
the broad Thai economy which relies more and more on exports as an
engine of growth. On the evening of 18 Dec 06, BOT imposed a draconian
measure of 30% unremunerated reserve on capital flow. In response to
this, SETI posted the sharpest single-day loss in the Thai market
history of 14.8%, prompting SET to order a temporary trading halt in the
morning session. The market cap was wiped out by Bt800b on that single
day.

While SETI reacted positively after BOT allowed capital inflow for
equity investment to be exempted from the 30% rule, such a rebound was
quite limited. SETI ended the year at 679.84pt, posting a negative index
return of 4.7% from the close of 2005.

[]

Thai Stock Market Outlook in 2007

We expect that politics would likely remain the backdrop of the stock
market outlook in 2007. A recent survey of expatriate executives showed
that respondents see risks to be rising sharply in Thailand due to
continuing political conflicts and possibilities of social unrests.

When will Thailand return to democracy is also another key concern, most
investors still feel unconfident whether or not the caretaker government
could held elections by the year-end as promised by the junta
previously.

With limited fiscal stimulus and infrastructure projects, macro momentum
would rely more on monetary easing. Thanks to peaking of US interest
rates and subsiding cost pressure from falling crude oil prices, this
would bode well for BOT’s monetary policy to shift to accommodative
stance this year. Growth would also come from exports should it do so
well as in 2006 despite stronger Baht. In our view, real GDP growth of
3.5~4% is seen as satisfactory without fiscal stimulus.

Pre-election rallies might be seen again in 2H07 if the Constitution
Drafting Assembly finishes its job and the drafted constitution is
endorsed by the public. In our views, no matter who will win the next
election, mega projects that have been shelved for years will restart
again, despite somewhat difference in project details.

Competition in Securities Business

In Nov 2006, SEC approved the blueprint for the liberalization of
securities business licensing within five years, giving lead time for
securities firms to prepare themselves for international competition.

Starting from Jan 2012, SEC will accept unlimited applications for new
securities companies, providing that the applicants meet the
requirements for each category of licenses being sought for. License fee
for full services and boutique services are set at Bt20m and Bt5m,
respectively.

Furthermore, 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 seek to engage in a specific
category of securities businesses, e.g. debt, derivatives, and asset
management, will also be able to apply for “boutique services” license.
However, only full services providers are allowed to do stock broking
business.

To allow lead time for adjustments, SEC Board also approved a temporary
extension of the current minimum brokerage fee for another three years
and set at timeframe for the liberalization of brokerage fees within
five years, as follows:

-   During the first three years, from Jan 2007 to Dec 2009, current
    minimum stock brokerage fee of 25 basis points will apply.

-   During the next two years, from Jan 2010 to Dec 2011, stock
    brokerage fee will be based on a sliding scale where fee will be
    lower as trading volume increases. Once trading volume reaches a
    certain level, the fee will become negotiable.

-   From Jan 2012 onwards, securities brokerage fees will be fully
    negotiable.

-   Notwithstanding the aforesaid brokerage fee liberalization, starting
    Jan 2007, the minimum internet trading fee shall be set at 60% of
    normal stock brokerage fee or a minimum of 15 basis points.

In view of this, we expect that:

-   Price competition among securities firms in the next few years will
    become fiercer again. In response to this, securities firms must
    diversify their revenues sources other than conventional brokerage
    commission.

-   More instruments with increasing varieties and complexity, e.g.
    futures, options, ETF and so forth, will be available in the Thai
    capital market thereby creating new opportunities for traders and
    new risk management tools for investors.

-   Starting from Jan 2012, 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 aforementioned. Ones with paid-up capital less than
    the threshold must either recapitalize or merge with others to meet
    this new rule.

  ------------ ---------- ----------------------- ------ ---------- -----------------
  [][][]List                                                        
  of all                                                            
  Securities                                                        
  Companies                                                         
  and their                                                         
  market Share                                                      
  FY 2005-2006                                                      

  Rank         Company    FY 2005 (%)             Rank   Company    FY 2006 (%)

  1            KIMENG     10.2                    1      KIMENG     8.57

  2            ASP        7.14                    2      SCBS       6.38

  3            SCBS       5.15                    3      ASP        6.19

  4            PHATRA     4.97                    4      PHATRA     5.79

  5            ZMICO      4.28                    5      CS         5.13

  6            CS         4.03                    6      UBS        4.63

  7            UBS        4.00                    7      KGI        3.94

  8            KGI        3.72                    8      ZMICO      3.77

  9            BLS        3.29                    9      BFITSEC    3.64

  10           BFITSEC    3.19                    10     BLS        3.54

  11           TSC        2.96                    11     CLSA       3.32

  12           DBSV       2.93                    12     TNS        3.31

  13           GLOBLEX    2.92                    13     TSC        3.21

  14           CNS        2.84                    14     AYS        3.00

  15           CLSA       2.83                    15     DBSV       2.84

  16           UOBKHST    2.81                    16     JPM        2.79

  17           AYS        2.70                    17     TMBMACQ    2.72

  18           NATSEC     2.61                    18     CNS        2.56

  19           JPM        2.34                    19     ASL        2.56

  20           TMBMACQ    2.17                    20     UOBKHST    2.51

  21           FINANSA    2.13                    21     ACLS       2.17

  22           SICSEC     2.05                    22     SICSEC     2.13

  23           FES        2.02                    23     PST        1.74

  24           ASL        1.99                    24     GLOBLEX    1.64

  25           KKS        1.94                    25     FES        1.49

  26           PST        1.91                    26     KKS        1.48

  27           TRINITY    1.82                    27     TRINITY    1.47

  28           SYRUS      1.60                    28     BTSEC      1.12

  29           IVS        1.47                    29     FINANSA    1.11

  30           ACLS       1.42                    30     IVG        1.09

  31           US         1.24                    31     US         0.99

  32           BTSEC      1.11                    32     SYRUS      0.89

  33           APEX       0.51                    33     KTBS       0.69

  34           SCIBS      0.51                    34     SCIBS      0.56

  35           BNPPP      0.43                    35     KSEC       0.51

  36           TSEC       0.41                    36     PSS        0.29

  37           PSS        0.24                    37     MERCHANT   0.22

  38           KSEC       0.12                                      

  39           MERCHANT   0.00                                      
  ------------ ---------- ----------------------- ------ ---------- -----------------

Underwriting Business

  In the year 2006, the Company engaged in Underwriting deals either as
  lead underwriter or co-underwriter of the IPO Securities of 4
  companies totaling 59.41 million baht, as follows :

  City Steel PCL. RICH Asia Steel PCL.

  FORT Corporation PCL. Union Petrochemical PCL.

  Moreover, there were 2 Tender offer deals, namely Siam Agro Industry
  Pineapple and Others PCL and Kaew Song (2548) PCL, totaling 24.93
  million baht.

  Financial Advisory Business

The Company provides financial advisory services, shareholders’
restructuring, fund mobilization through the issuance of debt and
equities such as ordinary shares, preferred shares, debentures,
warrant-cum-debentures and etc. and the listing of such instruments and
securities in the SET and the MAI.

  In 2006, the Company provided financial advisory service to the
  A.P.F.Holdings Co., Ltd. by providing advisory services in connection
  of its intention to acquire assets and increase returns for its
  investors under the name of “Project Evergreen” and received a fee of
  4 million baht.

Competition in the Financial Advisory Business

Competition in the financial advisory business and the securities
underwriting business will become fiercer in the future as several
securities companies especially medium to small companies start to focus
more on these businesses to provide supporting incomes to securities
trading business while at the same time creating revenues from financial
fees to compensate those from securities business. However, the business
of financial advisory and securities underwriting remains volatile
according to the SET’s regulatory directions. For us, we believe that we
have experienced teams of financial advisors to compete with our
competitors.

Regarding target customers, the Company focuses both on listed customers
in the stock exchange and companies in general which want to mobilize
funds from both equity and money market. We aim to win new underwriting
deals and at the same time focus on customers who may need financial
advisory services for other non-securities businesses such as financial
restructuring, non-IPO deal and merges and acquisitions.

(3) Procurement of Products or Services

Sources of Capital

For the past 2 years the company had not engaged in any outside source
of capital. Most capital came from the shareholders’ equity and was
utilized on investment of debt instrument, and underwriting of common
stocks and debt instrument and the rest was used as working capital. The
loan from other financial institution, if any, would be short term . The
sources of capital 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 2006, the Company had allowed securities trading loan under the
Credit Balance system. Towards year end, the total Credit Balance line
was 4,131 million baht with the total outstanding balance of 621 million
baht. The Company exercises the greatest care when extending credit
under the Credit Balance system.

The Maintenance of Net Capital Rule

The Company will maintain its Net Capital Rule (NCR) to be up to the
Securities & Exchange Commission’s standard on a daily basis. The types
of assets and the capital 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 FY2006 year end was 370.22% of general liabilities. As for
the Company’s NCR management policy, the company has arranged for
various sources of capital such as to up credit lines with some
financial institutions or the sources of capital from shareholders’
equity through increasing of company’s capital by rights issue or Public
offering through the SET at the right timing and through the most
suitable financial instruments.