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 63.06% of the Company’s total revenues in
2007 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 regulators in relation to the Stock Exchange of Thailand
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 and in addition, securities analysis has also improved so
that they provide more variety of products to the customers. It is hoped
that all these strategies will help reduce this risk and boost income in
the long run as well as to create opportunity for the Company’s future
business expansion.

b)  Risk from Branches’ Operation : 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. Consequently, in 2007 the Company
    terminated 10 branches and kept only 3 branches, namely Rangsit
    branch, Nakornprathom and Nakornsawan Branches. And all of the
    remaining 3 branches contributed the income to a portion of 22.08%
    of the total trading volume of the Company.

c)  Risk from dependence on high volume customers : In 2007, the top 10
    customers had trading volume of 13.98% 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. While 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, 2007,
    the Company’s securities business receivables recorded a total of
    887.34 million baht consisting of cash account receivables of 101.55
    million baht, credit balance accounts 785.73 million baht and other
    receivables of 2.09 million baht. The accrued interest receivables
    was 0.04 million baht and both the securities business receivables
    and interest receivables were classified as non-performing loan for
    2.10 million baht or 0.24% 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 of granting credit for securities purchasing

At present, the Company has provided credit service for the customers
under Credit Balance System for securities purchasing and the total
volume from credit balance accounts was 16,431.61 million baht or 23.50%
of the total trading volume of the Company. There were altogether 163
credit balance accounts with the total credit line of 4,838.40 million
baht and the total credit balance accounts of 785.73 million baht. The
source of fund of the Company came from the shareholder’s equity of
705.73 million baht and borrowings of 80.00 million baht. The Credit
Balance System is under strict governance of the Risk Management
Committee who are 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 Securities Dealing on Debt Instrument Trading

The Company has engaged in Debt Instrument Trading which includes Bill
of Exchange and Debentures, the business of which was able to earn
income of about 6.97% of the total income of the Company. However, there
is a credit risk here from the issuer of the Bill of Exchange or
Debentures. Therefore, the issuer was accurately evaluated in term of
debt payment capability and rating of the debentures. As for the Bill of
Exchange, the Company set up trading limit of B/E for each customer as
well as the aval limit of each bank. Moreover, the auditing system was
also set up to investigate the aval process.

  4. The risk in Underwriting Business

Most of the Company’s underwriting agreements were generally of the Firm
Commitment type. Thus, the Company may have to risk on price dropping of
the unsold underwriting shares which had to be put into the Company’s
portfolio. However, the Underwriting Risk is taken care of by Risk
Management Committee and the Company is very selective about choosing to
underwrite only shares with good fundamentals and should be the shares
of high interest to the investors in order to minimize risk. Moreover,
the Company will strictly comply to the rules and regulations governing
the underwriting activities in order to avoid risks. Before accepting
any underwriting deal, sufficiency of the Company’s Net Capital Rules
(NCR) will always be in concern.

5. Operational Risk

Operational risk is the risk arising from the lack of good governance or
auditing system and inefficient internal control system. This concerns
the internal operational procedures, human, Information Technology or
any external events which may affect the Company’s income and capital
including its reputation and reliability.

The Company had set up effective internal control system and regular
improvement of internal operation procedures to facilitate and comply
with the provided financial services pattern to be more efficient and to
be able to control the risks within the acceptable level.

6. The Impact from other future businesses

According to the year 2007’s plan, the Company is aiming to expand its
business line to become more of a full-service business. The licenses
for doing Derivatives and Securities Borrowing & Lending businesses will
be applied through which it is hoped that 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.

7. The Impact from the Company’s Subsidiary Investment

Risk may arise from investment in term of joint venture to open up a
subsidiary company to undertake private fund business by investing 51%
of the registered capital of 25 million Baht. However, the Company has
prepared in all aspects such as marketing, financing, risk management as
well as the various supporting systems and personnel for the subsidiary
company to prevent possible risks.

8. The risk from dominance by the major shareholder

  As of 31 December, 2007, the A.P.F.Holdings Co., Ltd. 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.