2.12 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 2007- 2009, the Company appointed Ernst & Young Office
Limited, as independent auditor. The auditing team are as follows :

Mr. Sophon Permsirivallop CPA No. 3182

Ms. Sumalee Reevarabundit CPA No. 3970

Ms. Vissuta Chariyathanakorn CPA No. 3853

Mrs. Nonglak Pumnoi CPA No. 4172

(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)

+--------------------------+------+-----+------+-----+------+-----+
|                          | 2    |     | 2008 |     | 2009 |     |
|                          | 007* |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
|                          | Am   | %   | Am   | %   | Am   | %   |
|                          | ount |     | ount |     | ount |     |
+--------------------------+------+-----+------+-----+------+-----+
| Assets                   |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Cash and cash            | 24   | 1   | 22   | 1   | 108  | 8   |
| equivalents              | ,031 | .71 | ,113 | .55 | ,186 | .57 |
+--------------------------+------+-----+------+-----+------+-----+
| Long-term deposits at    | 63   | 4   | 63   | 4   | 63   | 5   |
| financial institutions   | ,144 | .49 | ,004 | .41 | ,121 | .00 |
+--------------------------+------+-----+------+-----+------+-----+
| Investments in debt and  | 341  | 24  | 694  | 48  | 533  | 42  |
| equity securities, net   | ,108 | .26 | ,289 | .57 | ,395 | .25 |
+--------------------------+------+-----+------+-----+------+-----+
| Receivable from clearing | 45   | 3   | 22   | 1   | 58   | 4   |
| house                    | ,059 | .20 | ,843 | .60 | ,998 | .67 |
+--------------------------+------+-----+------+-----+------+-----+
| Securities business      | 887  | 63  | 546  | 38  | 432  | 34  |
| receivables, net         | ,316 | .11 | ,705 | .24 | ,073 | .22 |
+--------------------------+------+-----+------+-----+------+-----+
| Premises improvement and | 20   | 1   | 23   | 1   | 13   | 1   |
| equipment, net           | ,470 | .46 | ,575 | .65 | ,903 | .10 |
+--------------------------+------+-----+------+-----+------+-----+
| Intangible assets, net   | 5    | 0   | 25   | 1   | 19   | 1   |
|                          | ,235 | .37 | ,489 | .78 | ,833 | .57 |
+--------------------------+------+-----+------+-----+------+-----+
| Other assets, net        | 19   | 1   | 31   | 2   | 33   | 2   |
|                          | ,734 | .40 | ,521 | .20 | ,029 | .62 |
+--------------------------+------+-----+------+-----+------+-----+
| Total assets             | 1    | 100 | 1    | 100 | 1    | 100 |
|                          | ,406 | .00 | ,429 | .00 | ,262 | .00 |
|                          | ,097 |     | ,539 |     | ,538 |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities and          |      |     |      |     |      |     |
| Shareholders’ equity     |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities              |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Domestic borrowings      | 80   | 5   | 70   | 4   | -    | -   |
|                          | ,009 | .69 | ,000 | .90 |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Payables to clearing     | -    | -   | 21   | -   | 10   | 0   |
| house                    |      |     |      |     | ,278 | .81 |
+--------------------------+------+-----+------+-----+------+-----+
| Securities business      | 138  | 9   | 58   | 4   | 129  | 10  |
| payables                 | ,231 | .83 | ,031 | .06 | ,495 | .26 |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities under        | 99   | 7   | 296  | 20  | 119  | 9   |
| commercial paper sold    | ,969 | .11 | ,057 | .71 | ,031 | .43 |
+--------------------------+------+-----+------+-----+------+-----+
| Corporate income tax     | 1    | 0   | -    | -   | -    | -   |
| payable                  | ,786 | .13 |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Accrued expenses         | 33   | 2   | 21   | 1   | 28   | 2   |
|                          | ,032 | .35 | ,310 | .49 | ,428 | .25 |
+--------------------------+------+-----+------+-----+------+-----+
| Provision for            | 8    | 0   | 8    | 0   | 8    | 0   |
| liabilities from         | ,688 | .62 | ,856 | .62 | ,826 | .70 |
| litigation               |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Liabilities under hire   | 160  | 0   | -    | -   | -    | -   |
| purchase agreement       |      | .01 |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Other liabilities        | 743  | 0   | 7    | 0   | 2    | 0   |
|                          |      | .05 | ,373 | .51 | ,429 | .19 |
+--------------------------+------+-----+------+-----+------+-----+
| Total liabilities        | 362  | 25  | 461  | 32  | 298  | 23  |
|                          | ,618 | .79 | ,648 | .29 | ,487 | .64 |
+--------------------------+------+-----+------+-----+------+-----+
| Shareholders’ equity     |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Issued and paid up       | 844  | 60  | 844  | 59  | 844  | 66  |
| capital                  | ,083 | .03 | ,083 | .05 | ,083 | .86 |
+--------------------------+------+-----+------+-----+------+-----+
| Premium on ordinary      | 53   | 3   | 53   | 3   | 53   | 4   |
| shares                   | ,227 | .79 | ,227 | .72 | ,227 | .21 |
+--------------------------+------+-----+------+-----+------+-----+
| Revaluation deficit on   | (11) | -   | -    | -   | -    | -   |
| investments              |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Appropriated – Statutory | 16   | 1   | 16   | 1   | 16   | 1   |
| reserve                  | ,173 | .15 | ,173 | .13 | ,173 | .28 |
+--------------------------+------+-----+------+-----+------+-----+
| Unappropriated           | 130  | 9   | 41   | 2   | 43   | 3   |
|                          | ,007 | .24 | ,781 | .93 | ,148 | .42 |
+--------------------------+------+-----+------+-----+------+-----+
| Equity attributable to   | 1    | 74  | 955  | 66  | 956  | 75  |
| the parent’s             | ,043 | .21 | ,264 | .83 | ,631 | .77 |
| shareholders             | ,479 |     |      |     |      |     |
|                          |      | -   | 12   | 0   | 7    | 0   |
| Minority interest –      | -    |     | ,627 | .88 | ,420 | .59 |
| equity attributable to   |      |     |      |     |      |     |
| minority                 |      |     |      |     |      |     |
|                          |      |     |      |     |      |     |
| shareholders of          |      |     |      |     |      |     |
| subsidiary               |      |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Total Shareholders’      | 1    | 74  | 967  | 67  | 964  | 76  |
| equity                   | ,043 | .21 | ,891 | .71 | ,051 | .36 |
|                          | ,479 |     |      |     |      |     |
+--------------------------+------+-----+------+-----+------+-----+
| Total liabilities and    | 1    | 100 | 1    | 100 | 1    | 100 |
| shareholders’ equity     | ,406 | .00 | ,429 | .00 | ,262 | .00 |
|                          | ,097 |     | ,539 |     | ,538 |     |
+--------------------------+------+-----+------+-----+------+-----+

*Remark: For the year 2007, the shown data was from separate financial
statement only.

Income Statement

  (Unit: Thousand Baht)

  -------------------------- --------- -------- ---------- --------- --------- --------
                             2007*              2008                 2009      

                             Amount    %        Amount     %         Amount    %

  Revenues                                                                     

  Brokerage fee from         171,938   63.06    145,388    55.14     145,457   58.90
  securities business                                                          

  Brokerage fee from         -         -        310        0.12      3,169     1.28
  derivatives business                                                         

  Fee and service income     13,085    4.80     19,446     7.38      4,340     1.76

  Gain (Loss) on trading in  8,340     3.06     1,171      0.44      20,286    8.22
  securities                                                                   

  Interest and dividend      24,555    9.01     44,256     16.79     35,934    14.55

  Interest on margin loans   44,770    16.42    47,051     17.84     32,299    13.08

  Other income               9,990     3.65     6,055      2.29      5,468     2.21

  Total Revenue              272,678   100.00   263,677    100.00    246,953   100.00

  Expenses                                                                     

  Expenses on borrowings     6,581     2.41     19,635     7.44      9,596     3.89

  Fee and service expenses   12,617    4.63     14,345     5.44      19,549    7.92

  Bad debts and doubtful     (4,062)   (1.49)   96,137     36.46     (2,582)   (1.05)
  accounts (Reversal)                                                          

  Operating expenses                                                           

  Personnel expenses         153,970   56.47    108,784    41.26     115,754   46.87

  Premises and equipment     60,816    22.30    53,182     20.17     54,645    22.13
  expenses                                                                     

  Tax and duties             2,598     0.95     1,585      0.60      1,124     0.45

  Directors’ remuneration    2,975     1.09     39,953     15.15     32,068    12.99

  Other expenses             19,624    7.20     13,438     5.10      24,184    9.79

  Total expenses             255,119   93.56    347,059    131.62    254,338   102.99

  Income (Loss) before       17,559    6.44     (83,382)   (31.62)   (7,385)   (2.99)
  income tax                                                                   

  Corporate income tax       (2,510)   (0.92)   -          -         -         -

  Net income (Loss) for the  15,049    5.52     (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
  parent                                                                       

  Minority interests of the  -         -        (6,973)    (2.64)    (8,753)   (3.54)
  subsidiary                                                                   

                             -         -        (83,382)   (31.62)   (7,385)   (2.99)

  Basic earnings per share                                                     

  Net income (Loss) (Baht    0.09      -        (0.45)     -         0.01      -
  per share)                                                                   

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

*Remark: For the year 2007, the shown data was from separate financial
statement only.

Cash flow statements

  (Unit: Thousand Baht)

  -------------------------------------- ----------- ---------- ----------
                                         2007*       2008       2009

  Cash flows from operating activities                          

  Net income (Loss)                      17,559      -83,382    -7,385

  Adjustments to reconcile net income                           
  (loss) to net cash                                            

  provided by (paid for) operating       -1,077      92,340     -12,283
  activities;-                                                  

  Decrease (increase) in operating                              
  assets                                                        

  Long-term deposit at financial         -5,136      139        -117
  institutions                                                  

  Short-term investments                 3,779       -360,561   164,772

  Receivable from clearing house         -31,433     22,216     -36,154

  Securities business receivables        -169,262    244,474    117,214

  Other assets                           901         -11,577    -1,553

  Increase (Decrease) in operating                              
  liabilities                                                   

  Payable to clearing house              -28,374     21         10,257

  Securities business payables           32,004      -80,200    71,464

  Liabilities under commercial papers    100,000     200,000    -180,000
  sold                                                          

  Other liabilities                      7,201       -11,728    2,176

  Cash flows from operating activities   -73,838     11,742     128,391

  Cash received from interest            23,145      43,489     32,377

  Cash paid for expenses on borrowing    -6,639      -23,551    -6,622

  Cash paid for income tax               -724        -2,637     -281

  Net cash flows from operating          -58,056     29,043     153,865
  activities                                                    

  Cash flows from investing activities                          

  Cash received from dividend            1,134       1,407      -

  Cash received from disposal equipment  11,248      1,478      600

  Cash paid for purchase of equipment    -3,450      -14,578    -1,165

  Cash paid for purchase of intangible   -3,326      -17,042    -228

  Net cash flows from (used in)          5,606       -28,735    -793
  investing activities                                          

  Cash flows from financing activities                          

  Increase(decrease) in domestic         9,805       -10,009    -70,000
  borrowing                                                     

  Dividend payment                       -           -11,817    -

  Proceed from paid-up share capital                            
  from minority                                                 

  shareholders of subsidiary             -           19,600     3,000

  Net cash flows from financing          9,805       -2,226     -67,000
  activities                                                    

  Net increase (decrease) in cash and    -42,645     -1,918     86,073
  cash equivalents                                              

  Cash and cash equivalents at beginning 66,676      24,031     22,113
  of the year                                                   

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

*Remark: For the year 2007, the shown data was from separate financial
statement only.

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

 Unit: Percentage

+------------------------------------+----------+----------+----------+
| Financial Ratios                   | 2007     | 2008     | 2009     |
+------------------------------------+----------+----------+----------+
| Profitability Ratio                |          |          |          |
+------------------------------------+----------+----------+----------+
| Gross Profit Margin                | 94.24    | 49.90    | 89.00    |
+------------------------------------+----------+----------+----------+
| Net Profit Margin                  | 5.52     | (29.98)  | 0.55     |
+------------------------------------+----------+----------+----------+
| Return on Equity                   | 1.45     | (8.00)   | 0.14     |
+------------------------------------+----------+----------+----------+
| Return on Investment               | 9.59     | 4.39     | 9.16     |
+------------------------------------+----------+----------+----------+
| Efficiency Ratio                   |          |          |          |
+------------------------------------+----------+----------+----------+
| Return on Assets                   | 1.32     | (5.39)   | 0.10     |
+------------------------------------+----------+----------+----------+
| Assets Turnover                    | 0.20     | 0.19     | 0.18     |
+------------------------------------+----------+----------+----------+
| Financial Ratio                    |          |          |          |
+------------------------------------+----------+----------+----------+
| Liquid assets to Loan              | 1.09     | 1.22     | N/A      |
+------------------------------------+----------+----------+----------+
| Performing assets to Loan          | 15.35    | 17.73    | N/A      |
+------------------------------------+----------+----------+----------+
| Liquid Assets to Total Assets      | 6.02     | 6.00     | 13.57    |
+------------------------------------+----------+----------+----------+
| Performing Assets to Total Assets  | 87.36    | 86.64    | 76.47    |
+------------------------------------+----------+----------+----------+
| Debt to Equity                     | 0.35     | 0.48     | 0.31     |
+------------------------------------+----------+----------+----------+
| Dividend Payment                   | -        | -        | -        |
+------------------------------------+----------+----------+----------+
| Other Ratios                       |          |          |          |
+------------------------------------+----------+----------+----------+
| Net Investment in Securities to    | 24.26    | 48.57    | 42.25    |
| total Assets                       |          |          |          |
+------------------------------------+----------+----------+----------+
| Net Capital Ratio                  | 230.20   | 94.90    | 178.95   |
|                                    |          |          |          |
| (based on SEC’s Net Capital Rules) |          |          |          |
+------------------------------------+----------+----------+----------+

(2) Management Discussion and Analysis on Consolidated Financial
Statements

1.  Operation Overview During the Past Year

In 2009, the situation of securities trading in the stock exchange was
highly volatile, which had been influenced by both domestic and
international factors. For example, the financial crisis in USA which
affected the domestic stock exchange and Thai political problems which
affected the securities business. However, comparing with the previous
year, the Company’s securities brokerage income of Baht 145 million was
unchanged while its derivatives brokerage income was increased by Baht 3
million since the Company had acquired derivatives license in 2008 and
started derivatives brokerage service in quarter 4 of 2008.
Nevertheless, the Company and its subsidiary still have some gain on fee
and service income, gain on trading in securities and interest and
dividend income, which had been decreased from Baht 112 million in 2008
to Baht 93 million in 2009. However, since a decrease of other incomes
of the Company and its subsidiary was lower than an increase of
brokerage income, the Company and its subsidiary had a net loss of Baht
7.4 million.

2.  Operation Results

Incomes

In 2009, the Company’s brokerage incomes raised by 6.34% compared with
the year 2008, resulting from 921.94% increase of derivatives brokerage
income with respect to the previous year, thus making the Company’s
brokerage income improved and increased its market share from 0.75% in
2008 to 0.77% in 2009.

Expenses

Total expenses of the Company and its subsidiary for the year 2009 was
Baht 254.34 million reduced from Baht 347.06 million in 2008 or
decreased by 26.72% due to the allowance for doubtful accounts amounted
Baht 96.17 million in 2008.

Net Income (Loss)

Despite of the decrease in total expense of the Company and its
subsidiary from Baht 347 million in 2008 to Baht 254 million in 2009,
their net income still dropped from Baht 264 million in 2008 to Baht 246
million in 2009, and had operated a net loss of Baht 7 million.

3. Financial Status

Total Assets

In 2009, the Company and its subsidiary had total assets of Baht 1,263
million dropped by Baht 167 million or 11.68% from the previous year
resulted from 23% decrease in the investment in securities and 21%
decrease in securities business receivables.

Investment in Securities

The Company’s and its subsidiary’s net investment in securities for the
year 2009 was Baht 533. 4 million reduced by 23% from the year 2008,
which was mainly caused from an decrease of the available for sale
investment.

Net Securities Business Receivables

The net securities business receivables declined by Baht 114.6 million,
from Baht 546.7 million in 2008 to Baht 432.1 million in 2009. Such
declining was due to the decrease in receivables on margin loans by Baht
126.8 million and the Baht 8.6 million increase in receivables on cash
accounts from Baht 65.3 million in 2008 to Baht 73.9 million in 2009.
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 2009, the Company and its
subsidiary had a net cash flows raised by Baht 86.1 million resulting
from the Baht 153.9 million increase in operating activities, mostly
from the increase of investment in securities, the decrease of
securities business receivables and liabilities under commercial paper
sold. The cash flows from financing activities dropped by Baht 67
million resulting from the loan repayment and the receivable from minor
shareholders of the subsidiary.

Sources of Capital

Liabilities

In 2008, there was a short-term loan of Baht 70.00 million with the
Thailand Securities Depository Co., Ltd. and for working capital of the
firm. Such borrowing was paid back in full. However, the company had no
short-term loan in 2009.

The net capital ratio of the Company as at December 31, 2009 was 178.95%
which considerably exceeded the 7% of minimum rate regulated by the SEC.

Shareholders’ Equity

The shareholders’ equity of the Company and its subsidiary for the year
2009 was Baht 956.6 million increased from Baht 955.3 million in 2008
resulting from Baht 1.4 million net profit of operating results in 2009.

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. In addition, there is also an initiation on
liberalization of securities business expected in the year 2012.

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 and its subsidiary had paid the
following fees:

  3.1 Audit fee: Baht 1,120,000 and the out-of-pocket expenses of Baht
  5,703.

  3.2 Non-audit fee : -None-