2.10 Financial Status and Performance

(1) Financial Statement: Summary of the Company’s financial status and
its operations for the past 3 years

  (a) Independent Auditor

During the year 2008- 2010, the Company appointed Ernst & Young Office
Limited, as independent auditor. The auditing team are as follows :

Mr. Sophon Permsirivallop CPA No. 3182

Ms. Vissuta Chariyathanakorn CPA No. 3853

  Ms. Pimjai Manitkachonkit CPA No. 4521

(b) Report of Independent Auditor

  For the past 3 years, the company’s financial statements had been
  given an unqualified opinion from the Independent Auditor every year.

Balance Sheet

  (Unit: Thousand Baht)

+--------------------------+------+-----+------+-----+------+-----+
|                          | 2008 |     | 2009 |     | 2    |     |
|                          |      |     |      |     | 010* |     |
+--------------------------+------+-----+------+-----+------+-----+
|                          | Am   | %   | Am   | %   | Am   | %   |
|                          | ount |     | ount |     | ount |     |
+--------------------------+------+-----+------+-----+------+-----+
| Assets                   |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Cash and cash            | 22   | 1   | 108  | 8   | 528  | 37  |
| equivalents              | ,113 | .55 | ,186 | .57 | ,740 | .03 |
+--------------------------+------+-----+------+-----+------+-----+
| Long-term deposits at    | 63   | 4   | 63   | 5   | 63   | 4   |
| financial institutions   | ,004 | .41 | ,121 | .00 | ,182 | .43 |
+--------------------------+------+-----+------+-----+------+-----+
| Investments in debt and  | 694  | 48  | 533  | 42  | 365  | 25  |
| equity securities, net   | ,289 | .57 | ,395 | .25 | ,911 | .63 |
+--------------------------+------+-----+------+-----+------+-----+
| Receivable from clearing | 22   | 1   | 58   | 4   | 55   | 3   |
| house                    | ,843 | .60 | ,998 | .67 | ,827 | .91 |
+--------------------------+------+-----+------+-----+------+-----+
| Securities business      | 546  | 38  | 432  | 34  | 361  | 25  |
| receivables, net         | ,705 | .24 | ,073 | .22 | ,723 | .33 |
+--------------------------+------+-----+------+-----+------+-----+
| Premises improvement and | 23   | 1   | 13   | 1   | 8    | 0   |
| equipment, net           | ,575 | .65 | ,903 | .10 | ,048 | .56 |
+--------------------------+------+-----+------+-----+------+-----+
| Intangible assets, net   | 25   | 1   | 19   | 1   | 12   | 0   |
|                          | ,489 | .78 | ,833 | .57 | ,574 | .88 |
+--------------------------+------+-----+------+-----+------+-----+
| Other assets, net        | 31   | 2   | 33   | 2   | 31   | 2   |
|                          | ,521 | .20 | ,029 | .62 | ,851 | .23 |
+--------------------------+------+-----+------+-----+------+-----+
| Total assets             | 1    | 100 | 1    | 100 | 1    | 100 |
|                          | ,429 | .00 | ,262 | .00 | ,427 | .00 |
|                          | ,539 |     | ,538 |     | ,856 |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities and          |      |     |      |     |      |     |
| Shareholders’ equity     |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities              |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Domestic borrowings      | 70   | 4   | -    | -   | 8    | 0   |
|                          | ,000 | .90 |      |     | ,315 | .58 |
+--------------------------+------+-----+------+-----+------+-----+
| Payables to clearing     | 21   | -   | 10   | 0   | 7    | 0   |
| house                    |      |     | ,278 | .81 | ,656 | .54 |
+--------------------------+------+-----+------+-----+------+-----+
| Securities business      | 58   | 4   | 129  | 10  | 175  | 12  |
| payables                 | ,031 | .06 | ,495 | .26 | ,761 | .31 |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities under        | 296  | 20  | 119  | 9   | 224  | 15  |
| commercial paper sold    | ,057 | .71 | ,031 | .43 | ,733 | .74 |
+--------------------------+------+-----+------+-----+------+-----+
| Corporate income tax     | -    | -   | -    | -   | 35   | 2   |
| payable                  |      |     |      |     | ,626 | .50 |
+--------------------------+------+-----+------+-----+------+-----+
| Accrued expenses         | 21   | 1   | 28   | 2   | 8    | 0   |
|                          | ,310 | .49 | ,428 | .25 | ,732 | .61 |
+--------------------------+------+-----+------+-----+------+-----+
| Provision for            | 8    | 0   | 8    | 0   | 6    | 0   |
| liabilities from         | ,856 | .62 | ,826 | .70 | ,337 | .44 |
| litigation               |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities under hire   | -    | -   | -    | -   | 467  | 32  |
| purchase agreement       |      |     |      |     | ,160 | .72 |
+--------------------------+------+-----+------+-----+------+-----+
| Other liabilities        | 7    | 0   | 2    | 0   |      |     |
|                          | ,373 | .51 | ,429 | .19 |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Total liabilities        | 461  | 32  | 298  | 23  | 844  | 59  |
|                          | ,648 | .29 | ,487 | .64 | ,083 | .12 |
+--------------------------+------+-----+------+-----+------+-----+
| Shareholders’ equity     |      |     |      |     | 53   | 3   |
|                          |      |     |      |     | ,227 | .73 |
+--------------------------+------+-----+------+-----+------+-----+
| Issued and paid up       | 844  | 59  | 844  | 66  |      |     |
| capital                  | ,083 | .05 | ,083 | .86 |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Premium on ordinary      | 53   | 3   | 53   | 4   |      |     |
| shares                   | ,227 | .72 | ,227 | .21 |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Revaluation deficit on   | -    | -   | -    | -   | 16   | 1   |
| investments              |      |     |      |     | ,371 | .15 |
+--------------------------+------+-----+------+-----+------+-----+
| Appropriated – Statutory | 16   | 1   | 16   | 1   | 47   | 3   |
| reserve                  | ,173 | .13 | ,173 | .28 | ,015 | .28 |
+--------------------------+------+-----+------+-----+------+-----+
| Unappropriated           | 41   | 2   | 43   | 3   | 960  | 67  |
|                          | ,781 | .93 | ,148 | .42 | ,696 | .28 |
+--------------------------+------+-----+------+-----+------+-----+
| Equity attributable to   | 955  | 66  | 956  | 75  | -    | -   |
| the parent’s             | ,264 | .83 | ,631 | .77 |      |     |
| shareholders             |      |     |      |     |      |     |
|                          | 12   | 0   | 7    | 0   |      |     |
| Minority interest –      | ,627 | .88 | ,420 | .59 |      |     |
| equity attributable to   |      |     |      |     |      |     |
| minority                 |      |     |      |     |      |     |
|                          |      |     |      |     |      |     |
| shareholders of          |      |     |      |     |      |     |
| subsidiary               |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Total Shareholders’      | 967  | 67  | 964  | 76  | 960  | 67  |
| equity                   | ,891 | .71 | ,051 | .36 | ,696 | .28 |
+--------------------------+------+-----+------+-----+------+-----+
| Total liabilities and    | 1    | 100 | 1    | 100 | 1    | 100 |
| shareholders’ equity     | ,429 | .00 | ,262 | .00 | ,427 | .00 |
|                          | ,539 |     | ,538 |     | ,856 |     |
+--------------------------+------+-----+------+-----+------+-----+

*Remark: For the year 2010, the shown data was from separate financial
statement only.

Income Statement

  (Unit: Thousand Baht)

  -------------------------- ---------- --------- --------- -------- --------- --------
                             2008                 2009               2010      

                             Amount     %         Amount    %        Amount    %

  Revenues                                                                     

  Brokerage fee from         145,388    55.14     145,457   58.90    201,156   66.30
  securities business                                                          

  Brokerage fee from         310        0.12      3,169     1.28     12,202    4.02
  derivatives business                                                         

  Fee and service income     19,446     7.38      4,340     1.76     4,471     1.47

  Gain (Loss) on trading in  1,171      0.44      20,286    8.22     12,896    4.25
  securities                                                                   

  Interest and dividend      44,256     16.79     35,934    14.55    33,609    11.08

  Interest on margin loans   47,051     17.84     32,299    13.08    35,611    11.74

  Other income               6,055      2.29      5,468     2.21     3,458     1.14

  Total Revenue              263,677    100.00    246,953   100.00   303,403   100.00

  Expenses                                                                     

  Expenses on borrowings     19,635     7.44      9,596     3.89     9,957     3.28

  Fee and service expenses   14,345     5.44      19,549    7.92     25,188    8.30

  Bad debts and doubtful     96,137     36.46     (2,582)   (1.05)   (6,024)   (1.98)
  accounts (Reversal)                                                          

  Operating expenses                                                 28,500    9.39

  Personnel expenses         108,784    41.26     115,754   46.87              

  Premises and equipment     53,182     20.17     54,645    22.13    136,591   45.02
  expenses                                                                     

  Tax and duties             1,585      0.60      1,124     0.45     49,854    16.43

  Directors’ remuneration    39,953     15.15     32,068    12.99    1,221     0.40

  Other expenses             13,438     5.10      24,184    9.79     33,281    10.98

  Total expenses             347,059    131.62    254,338   102.99   24,794    8.17

  Income (Loss) before       (83,382)   (31.62)   (7,385)   (2.99)   303,362   99.99
  income tax                                                                   

  Corporate income tax       -          -         -         -        41        0.01

  Net income (Loss) for the  (83,382)   (31.62)   (7,385)   (2.99)   -         -
  year                                                                         

  Net income (Loss)                                                            
  attributed to:                                                               

  Equity holders of the      (76,409)   (28.98)   1,368     0.55     4,064     1.34
  parent                                                                       

  Minority interests of the  (6,973)    (2.64)    (8,753)   (3.54)   (4,023)   (1.33)
  subsidiary                                                                   

                             (83,382)   (31.62)   (7,385)   (2.99)   41        0.01

  Basic earnings per share                                                     

  Net income (Loss) (Baht    (0.45)     -         0.01      -        0.02      -
  per share)                                                                   

  Weighted average number of 168,817              168,817            168,817   
  ordinary shares (Thousand                                                    
  shares)                                                                      
  -------------------------- ---------- --------- --------- -------- --------- --------

Cash flow statements

  (Unit: Thousand Baht)

  -------------------------------------- ----------- ----------- ----------
                                         2008        2009        2010

  Cash flows from operating activities                           

  Net income (Loss)                      (83,382)    (7,385)     41

  Adjustments to reconcile net income                            
  (loss) to net cash                                             

  provided by (paid for) operating       92,340      (12,283)    14,251
  activities;-                                                   

  Decrease (increase) in operating                               
  assets                                                         

  Long-term deposit at financial         139         (117)       (61)
  institutions                                                   

  Short-term investments                 (360,561)   164,772     143,368

  Receivable from clearing house         22,216      (36,154)    3,171

  Securities business receivables        244,474     117,214     76,374

  Other assets                           (11,577)    (1,553)     (530)

  Increase (Decrease) in operating                               
  liabilities                                                    

  Payable to clearing house              21          10,257      (2,622)

  Securities business payables           (80,200)    71,464      46,265

  Liabilities under commercial papers    200,000     (180,000)   105,000
  sold                                                           

  Other liabilities                      (11,728)    2,176       11,876

  Cash flows from operating activities   11,742      128,391     397,093

  Cash received from interest            43,489      32,377      29,281

  Cash paid for expenses on borrowing    (23,551)    (6,622)     (9,254)

  Cash paid for income tax               (2,637)     (281)       (256)

  Net cash flows from operating          29,043      153,865     416,863
  activities                                                     

  Cash flows from investing activities                           

  Cash received from dividend            1,407       -           -

  Cash received from disposal equipment  1,478       600         (1,644)

  Cash paid for purchase of equipment    (14,578)    (1,165)     14

  Cash paid for purchase of intangible   (17,042)    (228)       (1,643)

  Net cash flows from (used in)          (28,735)    (793)       (1,351)
  investing activities                                           

  Cash flows from financing activities                           (4,625)

  Increase(decrease) in domestic         (10,009)    (70,000)    
  borrowing                                                      

  Dividend payment                       (11,817)    -           8,315

  Proceed from paid-up share capital                             -
  from minority                                                  

  shareholders of subsidiary             19,600      3,000       -

  Net cash flows from financing          (2,226)     (67,000)    8,315
  activities                                                     

  Net increase (decrease) in cash and    (1,918)     86,073      420,554
  cash equivalents                                               

  Cash and cash equivalents at beginning 24,031      22,113      108,186
  of the year                                                    

  Cash and cash equivalents at the end   22,113      108,186     528,740
  of the year                                                    
  -------------------------------------- ----------- ----------- ----------

(c) Significant Financial Ratio which reflects the Company’s financial
    Status and Securities Business Operation Results.

 Unit: Percentage

+------------------------------------+----------+----------+----------+
| Financial Ratios                   | 2008     | 2009     | 2010     |
+------------------------------------+----------+----------+----------+
| Profitability Ratio                |          |          |          |
+------------------------------------+----------+----------+----------+
| Gross Profit Margin                | 49.90    | 89.00    | 90.29    |
+------------------------------------+----------+----------+----------+
| Net Profit Margin                  | (29.98)  | 0.55     | 1.34     |
+------------------------------------+----------+----------+----------+
| Return on Equity                   | (8.00)   | 0.14     | 0.42     |
+------------------------------------+----------+----------+----------+
| Return on Investment               | 4.39     | 9.16     | 10.34    |
+------------------------------------+----------+----------+----------+
| Efficiency Ratio                   |          |          |          |
+------------------------------------+----------+----------+----------+
| Return on Assets                   | (5.39)   | 0.10     | 0.30     |
+------------------------------------+----------+----------+----------+
| Assets Turnover                    | 0.19     | 0.18     | 0.23     |
+------------------------------------+----------+----------+----------+
| Financial Ratio                    |          |          |          |
+------------------------------------+----------+----------+----------+
| Liquid assets to Loan              | 1.22     | N/A      | 71.18    |
+------------------------------------+----------+----------+----------+
| Performing assets to Loan          | 17.73    | N/A      | 87.5     |
+------------------------------------+----------+----------+----------+
| Liquid Assets to Total Assets      | 6.00     | 13.57    | 41.46    |
+------------------------------------+----------+----------+----------+
| Performing Assets to Total Assets  | 86.64    | 76.47    | 50.96    |
+------------------------------------+----------+----------+----------+
| Debt to Equity                     | 0.48     | 0.31     | 0.49     |
+------------------------------------+----------+----------+----------+
| Dividend Payment                   | -        | -        | -        |
+------------------------------------+----------+----------+----------+
| Other Ratios                       |          |          |          |
+------------------------------------+----------+----------+----------+
| Net Investment in Securities to    | 48.57    | 42.25    | 25.63    |
| total Assets                       |          |          |          |
+------------------------------------+----------+----------+----------+
| Net Capital Ratio                  | 94.90    | 178.95   | 134.30   |
|                                    |          |          |          |
| (based on SEC’s Net Capital Rules) |          |          |          |
+------------------------------------+----------+----------+----------+

(2) Management Discussion and Analysis on Consolidated Financial
Statements

1.  Operation Overview During the Past Year

In 2010, the situation of securities trading in the stock exchange had
some positive factors so that the overall SETI increased despite the
political problem. It, therefore, resulted in the increase in brokerage
income and derivatives when compare to the year 2009 of 65 million Baht
or an increase of 44%. However, Fees and services income, gain on
securities trading as well as interest and dividend income of the
Company and its subsidiary had decreased from 93 million Baht in the
year 2009 to 87 million Baht in 2010. However, since the provision on
impairment of investment of the Company has been set as high as 28.5
million Baht, the Company and its subsidiary’s operation result showed a
net profit of only 0.04 million Baht.

2.  Operation Results

Incomes

In 2010, the Company’s brokerage incomes raised by 43.92% compared with
the year 2009, resulting from 58.82% increase in the total market volume
which resulted in the increase in the Company’s brokerage income from
the increase in total trading volume. Thus resulted in the increase in
the Company’s market share from 0.77% in the year 2009 to 0.84% in 2010.

Expenses

Total expenses of the Company and its subsidiary for the year 2010 was
Baht 303.4 million increased from Baht 254.3 million in 2009 or
increased by 19.3% due to the provision on impairment of investment
amounted Baht 28.5 million in 2009.

Net Income (Loss)

Since the Company and its subsidiary’s total income had been increased
from 246 million Baht in the year 2009 to 303 million Baht in 2010 and
the total expenses increased from 254 million in 2009 to 303 million
Baht in 2010, the Company and its subsidiary had a profit from operation
only 0.04 million Baht.

3. Financial Status

Total Assets

In 2010, the Company had total assets of Baht 1,428 million increased by
Baht 165 million or 13.06% from the previous year resulted from the
decrease in investment in securities of 167 million Baht and the
decrease in securities business receivables of 71 million Baht and the
increase of cash and cash equivalent of 420 million Baht.

Investment in Securities

The Company’s net investment in securities for the year 2010 was Baht
365.9 million reduced by 31% from the year 2009, which was mainly caused
from an decrease of the available for sale investment.

Net Securities Business Receivables and securities and derivatives
business Receivables

The net securities business receivables declined by Baht 70.4 million,
from Baht 432.1 million in 2009 to Baht 361.7 million in 2010. Such
declining was due to the decrease in receivables on margin loans and
other receivables by Baht 93 million and the Baht 16.9 million increase
in receivables on cash accounts from Baht 73.9 million in 2009 to Baht
90.8 million in 2010. The receivables on cash accounts occurred by the
overdue settlement later than 3 working days after trading date and
their overdue balances from securities cash accounts would change in
accordance with securities trading value of the last 3 working days
which was the normal changes of securities business.

The policy on provision for bad debts and doubtful accounts for
securities business receivables which should be settled within 3 days
was set according to the amount which were expected to be uncollectible
by setting aside the allowance for doubtful debts every month at 100% of
the debts not fully covered by collaterals otherwise such allowance will
not be necessary.

Liquidity

Regarding the liquidity for the year 2010, the Company had a net cash
flows raised by Baht 420.6 million resulting from the Baht 416.9 million
increase in operating activities, mostly from the decrease of investment
in securities, the decrease of securities business receivables and the
increase in liabilities under commercial paper sold.

Sources of Capital

Liabilities

In 2009, there was no short-term loan but in 2010 the Company had a
short term loan used for settlement with the Thailand Securities
Depository Co., Ltd. and for working capital of 8.3 million Baht and
such loan had been repaid.

The net capital ratio of the Company as at December 31, 2010 was 134.3%
which considerably exceeded the 7% of minimum rate regulated by the SEC.

Shareholders’ Equity

The shareholders’ equity of the Company for the year 2010 was Baht 960.7
million increased from Baht 956.6 million in 2009 resulting from the net
income from the operating result attributable to equity holders of Baht
4.1 million.

4. Significant Factors that influence the Future Operations and
Financial Status

The significant factors that may influence the Company’s future
operation and financial status are economic and political stabilities of
Thailand which impact not only on the investment decision of the
investors but also on the stock market as a whole. And while the
competition in securities business is still fierce, all aforementioned
factors may also have considerable influence on profits and financial
status of the Company.

The Company has realized on such problems and prepared to expand its
customer base and to invest more in debt instrument in order to earn
sufficient income to continue growing in this business.

(3) Auditor’s Remunerations

From the past fiscal year, the Company had paid the following fees:

  3.1 Audit fee: Baht 870,000 and the out-of-pocket expenses of Baht
  1,624.

  3.2 Non-audit fee: -None-