2.3 Business Characteristics of each Service

(1) Business Characteristics

The characteristics of each of the Company’s business are classified as
follows:

Securities Broker Business

Market share values of the Company for the past 3 years from 2007 to
2009 are shown in the table below:

Table of Market Share Value

  --------------------------------- ------------ ------------ ------------
  Securities Trading Volume         2007         2008         2009

  SET (Million Baht)                4,271,819    3,981,230    4,428,979

  US (Million Baht)                 69,890       59,718       66,736

  US Market share (%)               0.82%        0.75%        0.77%
  --------------------------------- ------------ ------------ ------------

Source: SET Market Analysis and Reporting Tool (Setsmart)

New Account Opening Policy

It is the Company’s policy to welcome all types of customer both retail
and institutional which consists of domestics as well as foreigners. At
present, however, most of our customers are retail customers and the
Company has set up the screening of new account opening policy according
to the rules and regulations of the SEC and the SET. In 2009, the
Company’s rule regarding the practice of Know Your Customer and Customer
Due Diligence (KYC/CDD) were revised to be more prudent and be able to
efficiently reduce the Company’s risks. In this regard, for the new
account opening process for the customer wishing total trading line of
more than 5 million Baht, which is considered significant, the investor
contact, accompanied by Legal Officer or non-marketing staff, is
requested to do face-to-face meeting with the customer in order to
interview and verify the original documents for account opening. Also,
the customer has to sign in presence of Legal Officer or non-marketing
staff. In addition, starting from 1 May 2009, for the existing customer
of any type of account with trading line lower than 5 million Baht and
had never met face-to-face with the Company’s officer, and later wishes
to increase their trading line to higher than 5 million Baht, the same
way of face-to-face meeting is also compulsory.

Furthermore, the Company has set up additional practice for new internet
account opening of customer not having reference person known by the
Company. In this regard, such customer is requested to purchase stocks
not exceeding the deposited cash (Cash Balance) for at least 6 months to
allow the Company to evaluate his or her ability to repay debt and
trading behavior. Subsequently, the customer will be able to trade via
internet and the Company shall determine the customer’s trading line by
depositing collateral amounted 15% of each purchasing amount and settled
within the due date(T+3).

Loan for Securities Trading Policy

Since 26 June, 2002, the Company has provided loan to customers in form
of Credit Balance under Credit Balance Financing project. The amount of
initial margin rate has been set up individually for each stock
differently depending on the degree of risk in which will be announced
occasionally as appropriate. Followings are the process and the practice
of granting Credit Balance to customers:

1. Marketing staff should know their customers in person so that they
can evaluate the investment objectives, financial position or
limitations as well as the basic investment knowledge of their customers
clearly.

2. Determine appropriate maximum limit of credit line for each customer
under a certain period of time considering from the ability to repay
debt in which the trading line is determined aggregately from all types
of accounts that a customer has with the Company.

3. Disclose the relationships between marketing staff and the customers
or between the Company and the customers to notify the Company’s
compliance to the Code of Ethics like that of a professional company,
and which is considered to be a provision in the Compliance manual to be
strictly obeyed.

4. Approved authority of the credit line is dependant on the Executive
Board.

5. The marketing staff have to certify that the person who makes the
buying and selling decision is the eligible person and not a nominee and
that the payment should be settled by that particular person. The
Company is therefore, forbidden to approve any credit line to the
nominee of other persons intentionally or unintentionally.

6. In opening a securities trading account, the customers have to make
deposit in cash first before trading can be made at the amount not less
than the initial margin regulated by the Stock Exchange of Thailand (at
present it is 50%).

7. The Company is forbidden to approve for any margin on securities
trading to the customers exceeding their purchasing limit during a
certain period.

8. Purchases exceeding the purchasing limit can be allowed only if the
customers increase their collaterals amount, either by cash or
securities, to the amount not less than the initial margin of the
exceeded volume purchased before purchasing can be done.

9. The Company has set up the marginable list of securities (including
those right offering shares of the listed companies), initial margin
rate, maintenance margin rate and the minimum requirement rate for each
securities in writing and informed related staff and customer at least
once a month.

10. In case the customers’ equity falls below that of the Maintenance
Margin, written notice will be sent to inform them to fill in the
collateral on the next working day so that the customers’ equity is not
lower than the Maintenance Margin.

11. In case the equity of any customer has decreased to be equivalent to
or lower than the Maintenance Margin, the Risk Management Dept. is
responsible in monitoring and informing the Investor Contact to ask the
customer to place more collaterals and to force sell on the next working
day so that the equity of the customer rises to over the Maintenance
Margin. On the settlement due date, if the equity of the customer is
equal to or lower than the minimum requirement value again, the Risk
Management Dept. has to force sell until the equity is higher than the
Maintenance Margin. Moreover, the Risk management Dept. has to control
the margin loan for any securities concentrated above 85% level of MAX X
(the concentration level of securities set by the Company) by increasing
the level of the former Maintenance Margin from which force selling is
exercised at 25% to 30% for the customers’ account that has the stock
values in MAX X total from 80% of the aggregate stock values of the
customers in order to be able to make faster force selling.

12. Interest on margin loan should be charged to the customers and the
Company will also pay interest to the customers calculated on
collaterals remaining in their margin loan account base on the daily
outstanding amount under the agreed rate. The settlement of interest
will be done by adjusting the margin level of each customer at least
once a month.

13. Report on the outstanding balance and collaterals on margin loan
account will be sent to inform the customers at least once a month.

Moreover, since the year 2009, the Company has determined the control
criteria of concentration risk, which is the risk of the loan for
securities trading concentrating on only a particular security. The
Company will increase maintenance margin rate of the customer depositing
collateral with concentration of more than 80% of the concentration
level set by the Company (Max X level) from 35% to 40% which requires
the customer to deposit additional cash or asset in order to sustain the
collateral’s value not to be lower than maintenance margin. In addition,
the minimum requirement rate for force selling, has been changed from
25% to 30% for force selling in earlier stage, In this regard, the Risk
Management Department informs the list of customer, who needs to deposit
additional collateral and / or whose stock must be forced sold, to the
head of Operations Department to proceed and complete the process within
the opening of stock market in the morning of next day. Moreover, the
Risk Management Committee has determined additional criteria for
customer whose outstanding in account is concentrated stock of more than
50% of the outstanding stocks that every month the Company will charge
additional 1% p.a. of interest rate previously calculated in the next
month but not exceeding 15% p.a.

Securities Trading Credit Line Approval Policy

The Company has set up the securities trading credit line approval
authority for new customers and the review of the credit line (which
already includes all types of accounts for each customer), the net
settlement approval (per client), the changing of order (per
transaction) and the transferring of error into the Company’s portfolio
(per transaction) by appointing the authorized signers as showed in
Table No. 1 which was reviewed and updated effective 9 July, 2007. And
updated the short sell approval line effective 7 August, 2007 as showed
in Table No. 2 below :

In addition, in the year 2009, the Risk Management Committee has
determined criteria in decreasing securities trading line of account
which has been checked by the regulators twice and three times in one
month for 25% and 30%, respectively. For non-active account within 3
years, the Company will annually decrease trading line for10% of the
outstanding amount. For non-active account within 5 years, the Company
will close the account, except for those which have outstanding stocks
and interest, the trading line will be reduced to 1 Baht. In this
regard, the Risk Management Department will inform such customer list to
the investor contact to consider and proceed according to the
aforementioned criteria.

Furthermore, the Risk Management Committee has also set up criteria to
determine the trading line of derivative account for the customer who
already has cash account and wishes to open derivative account without
presenting financial evidence to the Company by decreasing trading line
in cash account and increasing line in derivative account in the ratio
of 5 : 1. as the trading of derivatives is riskier than securities.
Consequently, derivatives trading line is set lower. In this regard, the
total trading line of all types of accounts must not exceed the total
line calculated in accordance with what determined by the Company.

Table 1

[]

Table 2 The Approval Line for Short Sell Transactions

Marketing staff should get approval for their customers’ short sell
transactions from the authorized signers showed in the table below:

+-----------------+----------+---------+---------+---------+---------+
| Position        | not      | not     | not     | not     | ex      |
|                 | e        | ex      | ex      | ex      | ceeding |
|                 | xceeding | ceeding | ceeding | ceeding | 20 MN   |
|                 | 5 MN     | 10      | 15 MN   | 20 MN   |         |
|                 |          |         |         |         |         |
|                 |          | MN      |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Manager /       |         | *       | *       | *       | *       |
|                 |          |         |         |         |         |
| Assistant Vice  |          |         |         |         |         |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Vice President  |         | *       | *       | *       | *       |
| /               |          |         |         |         |         |
|                 |          |         |         |         |         |
| Senior Vice     |          |         |         |         |         |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Executive Vice  |         |        | *       | *       | *       |
| President /     |          |         |         |         |         |
|                 |          |         |         |         |         |
| First Executive |          |         |         |         |         |
| Vice President  |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Senior          |         |        |        | *       | Co-a    |
| Executive Vice  |          |         |         |         | pproval |
| President       |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Executive       |         |        |        |        |         |
| Director -      |          |         |         |         |         |
|                 |          |         |         |         |         |
| Thai Marketing  |          |         |         |         |         |
| / Managing      |          |         |         |         |         |
|                 |          |         |         |         |         |
| Director        |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+
| Remark         |          |         |         |         |         |
| means the trans |          |         |         |         |         |
| action can be a |          |         |         |         |         |
| pproved by the  |          |         |         |         |         |
| Department Head |          |         |         |         |         |
|                 |          |         |         |         |         |
| * means the     |          |         |         |         |         |
| Department Head |          |         |         |         |         |
| can only        |          |         |         |         |         |
| acknowledge but |          |         |         |         |         |
| cannot approve  |          |         |         |         |         |
| the transaction |          |         |         |         |         |
+-----------------+----------+---------+---------+---------+---------+

Settlement Control Policy

The Company has set up a strictly control policy over the customers’
settlement in order to comply with the rules and regulations of SET as
follows:

Payment for securities purchased should be settled on time. Late payment
or cheque default cases will be followed up by the Company’s investor
contact in order to urge the customers to make payment either by cash or
by depositing into the Company’s account and to warn them to be more
careful in the future. Late payment or late submission of share
certificates will subject to a fine. If the late payment of any customer
happens 3 times in a year, then trading line of his or her account will
be decreased for 50%. And if the late payment of any customer happens 4
times in a year, then the account will be considered for closing. The
Risk Management Department will be the one who proposes the default on
settlement cases for prior approval by the Risk Management Committee.

Securities Dealing

The Company runs Securities Dealing business and the Executive Committee
was assigned to establish a policy and control the Company’s investment.
The Company has invested in securities for both equity and debt
instruments of the securities listed in the Stock Exchange of Thailand,
securities listed in the Market for Alternative Investment (MAI),
securities registered in the Thai Bond Market Association (ThaiBMA) and
non-registered securities such as the Bill of Exchange which was aval or
guaranteed payment by commercial banks. However, due to the fluctuation
of the stock market, economic situation and instability of politics, the
Company has carefully rationalized in its investment. In addition, the
Company has not focused in equity instruments since 2005. For the
securities dealing of debt instruments, the Company has expanded the
volume of such business which has been a type of business that could
earn more profits other than the main income from brokerage fees.

Unit Trust Selling Agent

The Company is a unit trust selling agent for 15 asset management
companies in order to provide services for the investors who would like
to invest in unit trust so that they could have various alternatives of
such investment. Besides, this business could meet the investors’
requirements and be another channel of investment for the customers.

Investment Banking Business

In 2009, the Company provided accounting advisory service to A.P.F.
Holdings Co., Ltd. under the name of “Project Accent” and received a fee
of 3.30 million baht.

Financial Advisory Business

In 2009, the Company provided advisory service as an Independent Advisor
concerning the relaxation of tender offer of Solartron Pcl. according to
the company’s shareholders’ meeting resolution and received 500,000 Baht
advisory fee.

Derivatives Business

In year 2009, the very first year of the Company’s to operate
Derivatives business starting from its license acquisition in late 2008,
the Company had trading volume of over 10,000 contracts or approximately
40 contracts daily. Moreover, the Company has launched additional
underlying asset which is Gold Futures in February and has extended the
underlying assets of more firms in Single Stock Futures namely PTT,
PTTEP, ADVANC, BANPU, BAY, BBL, ITD, KBANK, KTB, LH, QH, SCB, SCC and
TTA in mid 2009. Presently, the Company has full capacity to trade all
types of underlying assets tradable in Thailand permitted by TFEX.

During the past year, the Company joined the Futures Industry Club and
the Association of Securities Companies to determine the initial margin
calculation which is greatly beneficial to customers. In addition, it
also has enhanced stability and speed of the online derivatives trading
system via internet, from which the customers are able to trade
derivatives, check real time price and monitor their own portfolios by
themselves anytime and anywhere.

(2) Market Outlook and Competition

Thai Stock Market in 2009

Contrary to the deep-seated bearish sentiment in the preceding year, the
year 2009 saw one of the strongest annual returns in Thai stock market
history. SETI that recovered from its previous close at 449.96 to end
the year at 734.54, or 63.2% per annum, resulted in a proportionate
increase of total market capitalization from Bt3.6tr to Bt5.9tr.

The key reasons that helped the market make a comeback are summarized as
follows:

1)  Despite severe financial meltdown in the past couple of years,
    concerted fiscal and monetary stimulus actions by the government and
    central banks from all over the world successfully pulled the
    economy out of recession since 2H09.

2)  Against the backdrop of anticipated quick recovery of the global
    economy, commodities prices saw broad-based rebound due to
    speculation known as “reflation trade”. Crude oil prices, for
    instance, bounced back from $32 to retest $82 during the year.
    Broad-based rebound of other commodities prices resulted in earnings
    turnaround of commodities-related stocks that had posted sharp
    losses in 2008.

3)  Continued weakening dollar helped attract fund flow o emerging
    markets. During the year, THB/USD was weakened from 36.31 to 33.

However, the market also saw certain negative factors that from time to
time resulted in somewhat throwbacks being depicted in the chart shown
below:

[]

Thai Stock Market Outlook in 2010

Thai Stock Market Outlook in 2010

We expect that the stock market in 2010 would likely remain bullish but
quite volatile. This is attributable to a mixed combination of positive
and negative factors as follows:

1)  According to current consensus, most economists agree that the
    global economy has bottomed out and expect to see sustained recovery
    in 2010;

2)  In view of sustained recovery down the road, this will eventually
    result in a more broad-based stock market rally;

3)  Quality of corporate earnings is expected to improve in 2010.
    Bottom-line growth would be driven by top-line growth, not just from
    inventory gain as envisaged in 2009;

4)  Governments in many countries have been in a heavy indebted
    position. So, they might not be able to sustain their fiscal
    stimulus for long;

5)  Recovery might derail if the government failed to solve the problems
    of many projects in Map Ta Phut, that were stalled due to suspension
    order by Administrative Court, within a reasonable period. Also
    added to this is political problem of which investor’s confidence
    might be impacted should social unrest happen as in last Songkran.

Competition in Securities Business

Starting from 2010, securities companies in Thailand will enter the
first phase of gradual liberalization according to SEC’s policy. Stock
brokerage fee will be based on a sliding scale. Fee will be lower as
trading volume increases and negotiable once trading volume reaches a
certain level as follows:

+---------------+---------------+-----------+--------------------------+
| Trading       | Offline       | Online    |                          |
| Volume        | Trading (%)   | Trading   |                          |
|               |               | (%)       |                          |
| (Bt m/day)    |               |           |                          |
+---------------+---------------+-----------+--------------------------+
|               |               | Cash      | Cash Balance/Credit      |
|               |               |           | Balance                  |
+---------------+---------------+-----------+--------------------------+
| X ≤ 5         | > 0.25~1      | > 0.20~1  | > 0.15~1                 |
+---------------+---------------+-----------+--------------------------+
| 5 < X ≤ 10    | > 0.22~1      | > 0.18~1  | > 0.13~1                 |
+---------------+---------------+-----------+--------------------------+
| 10 < X ≤ 20   | > 0.18~1      | > 0.15~1  | > 0.11~1                 |
+---------------+---------------+-----------+--------------------------+
| X >20         | Negotiable    |           |                          |
|               | and not       |           |                          |
|               | exceeding 1%  |           |                          |
+---------------+---------------+-----------+--------------------------+

From Jan 2012 onwards, stock brokerage fee will be freely negotiable and
SEC will accept unlimited applications for new securities companies,
providing that the applicants meet the requirements for each category of
licenses being sought for.

SEC will replace current “multiple licenses” with “single license” that
will allow license holders to engage in a full range of securities
business. Applicants who see to engage in a specific category of
securities business, e.g. debt, derivatives, and asset management, will
be able to apply for “boutique services” license. However, only full
service providers are allowed to do stock broking license. License fee
for full services and boutique services are set at Bt20m and Bt5m,
respectively.

In view of the aforementioned, we expect that:

1)  Competition among securities companies will become fiercer. In view
    of this, more merger and acquisition in the industry is expected.

2)  More financial instruments with increasing varieties and complexity,
    e.g. futures, options, ETF, derivative warrants and so forth, would
    be available in the market thereby creating new opportunities for
    traders and new risk management tools for investors.

3)  Starting from Jan 2012, SEC stipulates that providers of full
    services and boutique services must have a minimum paid-up capital
    of Bt500m and Bt100m, respectively. However, many stock brokers
    still have paid-up capital less than the aforesaid levels. Ones with
    paid-up capital less than the threshold must either recapitalize or
    merge with others to meet this new rule.

  ----------- ---------------- -------- -- -------- ---------------- --------
  Broker                                                             
  Ranking by                                                         
  Market                                                             
  Share in                                                           
  2008-2009                                                          

  2008                                     2009                      

  Rank        Broker           %           Rank     Broker           % *

                                                                     

  1           KIMENG           8.18        1        KIMENG           10.68

  2           PHATRA           5.96        2        ASP              5.71

  3           ASP              5.38        3        KTZ              5.47

  4           CS               4.81        4        PST              5.11

  5           ZMICO            4.60        5        CGS              4.83

  6           BFITSEC          4.04        6        PHATRA           4.45

  7           TNS              3.98        7        TNS              4.38

  8           BLS              3.97        8        BLS              4.08

  9           UBS              3.86        9        KGI              3.88

  10          AYS              3.81        10       CS               3.36

  11          KGI              3.75        11       AYS              3.29

  12          SCBS             3.64        12       BFITSEC          2.99

  13          PST              3.17        13       UBS              2.84

  14          MACQ             2.85        14       CNS              2.60

  15          CNS              2.67        15       TSC              2.54

  16          TSC              2.62        16       SCBS             2.50

  17          JPM              2.49        17       KS               2.39

  18          CLSA             2.48        18       GLOBLEX          2.27

  19          ACLS             2.36        19       MACQ             2.19

  20          CGS              2.31        20       FSS              2.15

  21          TRINITY          2.23        21       DBSV             2.01

  22          DBSV             2.14        22       UOBKHST          2.00

  23          FINANSA          1.72        23       AIRA             1.77

  24          UOBKHST          1.67        24       CLSA             1.74

  25          SICSEC           1.50        25       KKS              1.57

  26          KS               1.47        26       JPM              1.49

  27          AIRA             1.43        27       SICSEC           1.49

  28          FES              1.43        28       ACLS             1.46

  29          GLOBLEX          1.40        29       TRINITY          1.31

  30          KKS              1.31        30       SCIBS            1.29

  31          SCIBS            1.07        31       FES              1.06

  32          KTZ              1.06        32       ZMICO            1.04

  33          FSS              0.98        33       IVG              0.86

  34          CIMBS            0.91        34       MERCHANT         0.82

  35          IVG              0.87        35       FINANSA          0.79

  36          MERCHANT         0.77        36       US               0.77

  37          US               0.75        37       CIMBS            0.72

  38          CIMB-GK          0.34        38       CIMB-GK          0.10

  Total                        100.00      Total                     100.00

  Source:                                                            
  Stock                                                              
  Exchange of                                                        
  Thailand                                                           
  ----------- ---------------- -------- -- -------- ---------------- --------

* From Nov 09, proprietary trading volume was excluded.

Competition in Investment Banking Business

Competition in the Investment Banking business and the securities
underwriting business will become fiercer in the future as several
securities companies especially medium to small companies start to focus
more on these businesses. As such the Company will be very selective in
the areas where we offer our services and the clients which we service.

Regarding target customers, in order to continuously enhance the
performance of securities trading business, the Company focuses both on
listed customers in the stock exchange and companies in general which
want to mobilize funds from both equity and money market. We aim to win
new underwriting deals and at the same time focus on customers who may
need financial advisory services for other non-securities businesses
such as financial restructuring and merger and acquisitions.

(3) Procurement of Products or Services

Sources of Fund

For the past 3 years the Company had engaged mostly in short term loan
from local financial institution as well as the shareholders’ equity as
the source of fund. The capital was utilized on investment in debt
instrument and loan for securities trading and the rest was used as
working capital. The loan from other financial institution, if any,
would be short term. The sources of fund policy is to choose the source
which is more suitable in relation to the business activities and its
objectives and which will not affect the ratio between total liabilities
and shareholders’ equity as well as the NCR ratio.

Securities Trading Loan Policy

In 2009, the Company had provided securities trading loan under the
Credit Balance system. Towards year end, the total Credit Balance line
was 4,492.70 million baht with the total outstanding balance of 379
million baht. The Company exercises the greatest care when extending
credit under the Credit Balance system.

The Maintenance of Net Capital Ratio

The Company will maintain its Net Capital Ratio (NCR) to be up to the
Securities & Exchange Commission’s standard on a daily basis. The types
of liquid assets and the liabilities of the Company will be evaluated
everyday in order to control the Company’s NCR to be in line with the
standard rate and in a timely manner. The NCR as of FY2009 year end was
178.95% of general liabilities.