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 60.18% of the Company’s total revenues in
2009 are inconsistent and are affected by uncontrollable factors such as
the market situation, 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 market sentiment 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, Investment
Banking, Securities Underwriter, Debt Instrument Broker Business and
Debt Instrument Investment, Unit trust selling agent, Derivatives Agent
which is hoped that all these strategies will help reduce the risk and
boost income in the long run as well as to create opportunity for the
Company’s future business expansion while preparing to cope with the
future risk which may occur from the liberalization of securities
business and brokerage fee which had been changed to commission sliding
scale.

b) Risk from dependence on major customers: In 2009, the top 10
customers had trading volume of 41.20% 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.

c) Risk from settlement default and bad debt from securities broker
business: As of 31 December, 2009, the Company’s securities business
receivables recorded a total of 432.07 million baht consisting of cash
account receivables of 73.91 million baht, credit balance accounts
379.38 million baht and other receivables of 74.27 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 121.10 million baht or 22.98% of the total
securities business receivables. The 121.10 million Baht non-performing
loan aforementioned was classified as doubtful account for 95.53 million
Baht and the Company has already set up the allowance for such doubtful
account in full. At present, although it is under prosecution process,
the Company might not get back the completed repayment amount.

In addition, the Company has set up 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 financial status of the
customers or their ability to settle debts as well as the reviewing of
the customers’ financial status and monitoring of their trading line
usage very closely.

2. Risk of granting credit on Credit Balance 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 11,275.65 million baht or 17% of
the total trading volume of the Company. There were altogether 164
credit balance accounts with the total credit line of 4,492.90 million
baht and as of the end of 2009, the total credit balance accounts
recorded the outstanding of 379.38 million baht. The source of fund of
the Company came wholly from the shareholder’s equity.

The risk factors from granting credit on Credit Balance came
significantly from the screening of customers, determining of credit
line and evaluating of collaterals, determining of restricted securities
list (marginable securities) as well as the monitoring of the
concentration of the collaterals in which the Company, particularly, the
Risk Management Committee has set up measure and policy in order to
protect and minimize such risks.

3. Risk from Securities Dealing on Debt Instrument Trading

The Company engages in Debt Instrument Trading which includes Bill of
Exchange and Debentures, the business of which was able to earn income
of about 20.81% 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. Risk from Derivatives Agent Service

In 2009, the Company acquired revenues from Derivatives business through
TFEX for approximately 1.29% of total revenues. Despite the
insignificant portion, the Company has set up strict risk management
process to manage the risk arisen from customers’ derivatives trading
such as call margin and forced close in compliance to the time and
condition set by the regulators strictly.

5. Operational Risk

Operational risk may arise from the internal operational procedures,
human error, 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. Impact from the investment on subsidiary company

In 2009, The Company’s subsidiary company, United Advisory Management
Co.’s (UAM) performance had a net loss of 18.85 million Baht. The
Company is at a risk of not receiving return from investment within a
short period as Advisory Management business normally needs longer time
to build company’s track records to be acceptable from the clients.
However, UAM not only has been operating for a little over one year only
but also has many competitors which have a competitive advantage on
having longer historical track records. Therefore, UAM may need quite
longer time to prove its performance.

7. Risk from dominance by the major shareholder

As of 31 December, 2009, the A.P.F.Holdings Co., Ltd. group 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 all of the 4 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