2.1 Risk Factors

From the securities business characteristics of the Company there are
probably some risk factors which may have some impact on the Company’s
future operations as follows:

1. Risk as a securities broker

a) Risk from dependence on Brokerage fee income : The brokerage fee
income which accounted for 74.16% of the Company’s total revenues in the
year 2006. Brokerage fees are inconsistent and are affected by
uncontrollable factors such as the currency exchange rate, interest
rates, political stability and unexpected changes in the rules and
regulations by the government and other related entities in relation to
the Stock Exchange of Thailand such as the policy to liberalize the
securities trading commission rate within the next 5 years which may
affect the investment mood of the stock market as the brokerage fee
income is dependent upon the trading volume of the Company’s customers.
In order to reduce this risk, the Company has attempted to take up other
possible businesses so that its income will not depend wholly on
brokerage fee income, for example, the Financial Advisory business, Debt
Instrument Broker Business and Debt Instrument Investment so that it
provides more variety of products to the customers. It is hoped that all
these strategies will help boost income in the long run.

b)  Risk from Opening Branches : In 2006, the Company opened 4 branches
    in order to expand its brokerage fee based business, namely Asoke,
    Yala, Baetong and Sakonnakorn Branches so that altogether there were
    12 branches and resulted to 34.70% of the Company’s total securities
    trading volume. However, the opening of new branches also
    constitutes to the risk of having more fixed and variable costs. If
    the branches cannot contribute more income as targeted, the Company
    has to inevitably bare the increased costs. The Company, therefore,
    has the policy to consistently review its branches performance and
    consider the cost against income of the branches more carefully and
    take into consideration whether to open a new branch or to continue
    or terminate the present branches.

c)  Risk from dependence on high volume customers : In 2006, the top 10
    customers had trading volume of 18.43% of the total trading volume
    of the Company. Therefore, if the Company loses these customers, its
    brokerage income will be affected. However, to mitigate this risk,
    the Company is trying to expand the retail customer base. As the
    Company tries to enlarge its customer base, all efforts will be made
    to retain existing high volume customers.

d)  Risk from settlement default and bad debt : As of 31 December, 2006,
    the Company’s securities business receivables recorded a total of
    723.42 million baht consisting of cash account receivables of 92.19
    million baht, credit balance accounts 620.97 million baht and other
    receivables of 10.26 million baht. The accrued interest receivables
    was 0.32 million baht and both the securities business receivables
    and interest receivables were classified as non-performing loan for
    9.75 million baht or 1.35% of the total securities business
    receivables. All of the non-performing loans aforementioned was put
    under allowance for doubtful account. Although the Company has set
    up the allowance for doubtful account in full, it also has the
    policy to minimize the risk that arisen from settlement default and
    bad debts by emphasizing on the process of screening of new
    customers and the fixing of appropriate trading line to be in
    accordance with the collateral or the financial status of the
    customers as well as the reviewing of the customers’ financial
    status and monitoring of their trading line usage very closely.

2.  The risk relating to the Credit Balance System

At present, the company has provided Credit Balance System service for
securities trading to customers and the total volume from credit balance
accounts was 14,790.32 million baht or 18.66% of the total trading
volume of the Company. There were altogether 136 credit balance accounts
with the total credit line of 4,131.80 million baht and the total credit
balance accounts of 620.96 million baht. The source of fund of the
Company came from the shareholder’s equity of 1,028 million baht and
borrowings of 70.20 million baht. . The Credit Balance System is under
strict governance of the Risk Control Committee who will be responsible
for the determination and revision of credit line, collateral evaluation
and the determination of restricted securities list, etc. for risk
prevention.

3. The risk from dominance by the major shareholder

As at 31 December, 2006, the A.P.F.Holdings Co., Ltd. which is the
Company’s major shareholder holding 78.59% of the total paid-up capital
common shares of the Company. As a consequence of holding over 75% of
the shares, the major shareholder is able to control or dominate the
shareholder’s resolution in the shareholders’ meeting especially the
appointment of Directors or any other proposed matters which require
majority vote. Therefore, the other shareholders shall have the risk of
not being able to gather the votes in order to oppose the matters
proposed by the major shareholder. However, from the total of 9 members
of the Board of Directors, there are only 2 directors representing the
major shareholders and the rest are 3 Executives and 4 independent
directors of which 3 are also the Audit Committee who have
responsibilities to govern and examine and at the same time, provide
advice on the Company’s operations. To a large extent this ensures
transparency and fair treatment to all shareholders.

4. The Impact from other future businesses

According to the year 2006’s plan, the Company is aiming to expand its
business line to become more of a full-service business. The license for
doing Securities Borrowing & Lending business will be applied through
which it is hoped higher income will be earned. However, related risks
may also occur in which the company always aware of and is preparing for
risk management in advance to prevent any adverse impact.