2.12 Financial Status and Performance

(1) Financial Statement: The company’s financial status and performance
    for the past 3 years are summarized below:

  (a) Independent Auditor

In the years 2000 and 2001, the company appointed Ernst & Young Office
Limited as an independent Auditor. The auditing team consisted of

Miss Rungnapa Lertsuwankul CPA No.3516

Mr. Ruth Chaowangawi CPA No.3247

Mr. Sophon Permsiriwallop CPA No.3182

In the year 1999, the KPMG Audit(Thailand) Limited was appointed as the
company’s independent auditor. The auditing team consisted of:

Miss Somboon Supasiripinyo CPA No. 3731

Mr.Athipong Skulkran CPA No. 3500

Mr. Supot Singsanae CPA No.2826

(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.

  Table below summarizes the Company and consolidated Financial
  Statement. (Unit : Baht)

+---------------------+-------------------+--------+--------+----------+
| Consolidated        |                   | 1999   | 2000   | 2001     |
+---------------------+-------------------+--------+--------+----------+
| Financial Status    |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Cash and deposits   |                   | 179,7  | 49,9   | 59       |
| in financial        |                   | 51,555 | 95,157 | ,226,798 |
| institutions        |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Loans to financial  |                   | 40,0   | -      | 30       |
| institutions        |                   | 31,507 |        | ,007,534 |
+---------------------+-------------------+--------+--------+----------+
| Net investment on   |                   | 46,5   | 106,3  | 106      |
| securities          |                   | 55,404 | 76,375 | ,515,086 |
+---------------------+-------------------+--------+--------+----------+
| Trading             |                   | 46,8   | 42,5   | 79       |
| transactions with s |                   | 62,280 | 53,860 | ,333,002 |
| ecurities companies |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Securities Business |                   | 340,1  | 288,3  | 187      |
| Receivables and     |                   | 55,386 | 87,158 | ,654,620 |
| Accrued Interest    |                   |        |        |          |
| Receivables         |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Allowance fo        |                   | (      | (      | (93,     |
| r Doubtful Accounts |                   | 240,01 | 213,29 | 558,083) |
|                     |                   | 8,267) | 4,205) |          |
+---------------------+-------------------+--------+--------+----------+
| Net Securities      |                   | 100,1  | 75,0   | 94       |
| Business Receivable |                   | 37,119 | 92,953 | ,096,537 |
| and Accrued         |                   |        |        |          |
| Interest            |                   |        |        |          |
| Receivables         |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Total Assets        |                   | 440,8  | 348,8  | 414      |
|                     |                   | 45,466 | 84,738 | ,833,533 |
+---------------------+-------------------+--------+--------+----------+
| Borrowings          |                   | -      | 3,6    | -        |
|                     |                   |        | 44,126 |          |
+---------------------+-------------------+--------+--------+----------+
| Securities Business |                   | 157,2  | 105,3  | 174      |
| Payable             |                   | 62,979 | 19,130 | ,564,858 |
+---------------------+-------------------+--------+--------+----------+
| Total Liabilities   |                   | 190,1  | 135,3  | 184      |
|                     |                   | 58,500 | 95,629 | ,474,532 |
+---------------------+-------------------+--------+--------+----------+
| Paid-up shares      |                   | 258,3  | 258,3  | 304      |
| capital             |                   | 73,570 | 74,000 | ,373,570 |
+---------------------+-------------------+--------+--------+----------+
| Retained loss       |                   | (8,12  | (45,19 | (54,     |
|                     |                   | 7,452) | 6,259) | 331,524) |
+---------------------+-------------------+--------+--------+----------+
| Shareholders Equity |                   | 250,6  | 213,4  | 230      |
|                     |                   | 86,966 | 89,109 | ,359,001 |
+---------------------+-------------------+--------+--------+----------+
| Operations Results  |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Securities Business |                   | 388,8  | 173,6  | 104      |
| Income              |                   | 29,727 | 48,302 | ,532,246 |
+---------------------+-------------------+--------+--------+----------+
| Securities Business |                   | 4      | 1,8    | 591,522  |
| Expenses            |                   | 24,548 | 55,791 |          |
+---------------------+-------------------+--------+--------+----------+
| Bad debt and        |                   | (3,39  | 2,9    | (        |
| doubtful accounts   |                   | 9,222) | 72,211 | 500,505) |
+---------------------+-------------------+--------+--------+----------+
| Net Securities      |                   | 385,0  | 174,7  | 103      |
| Business Income     |                   | 05,957 | 64,722 | ,440,219 |
| after bad debts and |                   |        |        |          |
| doubtful accounts   |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+
| Other Income        |                   | 5,8    | 3      | 6        |
|                     |                   | 72,376 | 97,046 | ,815,806 |
+---------------------+-------------------+--------+--------+----------+
| Operating Expenses  |                   | 211,3  | 211,7  | 117      |
|                     |                   | 59,650 | 06,336 | ,693,118 |
+---------------------+-------------------+--------+--------+----------+
| Net Profit (Loss)   |                   | 179,5  | (37,06 | (9,      |
|                     |                   | 18,683 | 8,807) | 135,265) |
+---------------------+-------------------+--------+--------+----------+
| Basic Earnings      |                   | 5.30   | (0.72) | (0.16)   |
| (Loss) per share    |                   |        |        |          |
+---------------------+-------------------+--------+--------+----------+

Remarks : 1. Year 1999 is the Company Only data.

2. Year 2000 and 2001 is the Consolidated data.

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

 Unit : Percentage

+---------------+----+----+----------+---+------+---------+----------+
|               | F  |    |          | 1 |      | 2000    | 2001     |
|               | in |    |          | 9 |      |         |          |
|               | an |    |          | 9 |      |         |          |
|               | ci |    |          | 9 |      |         |          |
|               | al |    |          |   |      |         |          |
|               | R  |    |          |   |      |         |          |
|               | at |    |          |   |      |         |          |
|               | io |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Profit        |    |    |          |   |      |         |          |
| ability Ratio |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Gross Profit  |    |    |          | 9 |      | 98.93   | 99.43    |
| Margin        |    |    |          | 9 |      |         |          |
|               |    |    |          | . |      |         |          |
|               |    |    |          | 8 |      |         |          |
|               |    |    |          | 9 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Net Profit    |    |    |          | 4 |      | (21.30) | (8.20)   |
| Margin        |    |    |          | 5 |      |         |          |
|               |    |    |          | . |      |         |          |
|               |    |    |          | 4 |      |         |          |
|               |    |    |          | 8 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Return on     |    |    |          | 1 |      | (15.97) | (4.12)   |
| Equity        |    |    |          | 2 |      |         |          |
|               |    |    |          | 5 |      |         |          |
|               |    |    |          | . |      |         |          |
|               |    |    |          | 0 |      |         |          |
|               |    |    |          | 8 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Return on     |    | .  |          | 3 |      | 10.90   | 4.97     |
| Investment    |    |    |          | . |      |         |          |
|               |    |    |          | 7 |      |         |          |
|               |    |    |          | 1 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Effi          |    |    |          |   |      |         |          |
| ciency Ratios |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Return on     |    |    |          | 5 |      | (9.39)  | (2.39)   |
| Assets        |    |    |          | 7 |      |         |          |
|               |    |    |          | . |      |         |          |
|               |    |    |          | 7 |      |         |          |
|               |    |    |          | 3 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Assets        |    |    |          | 1 |      | 0.44    | 0.29     |
| turnover      |    |    |          | . |      |         |          |
| Ratio         |    |    |          | 2 |      |         |          |
|               |    |    |          | 7 |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Fin           |    |    |          |   |      |         |          |
| ancial Ratios |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Liquid Assets |    |    |          |   | -    | 42.91   | -        |
| to total      |    |    |          |   |      |         |          |
| Borrowing     |    |    |          |   |      |         |          |
| Ratio         |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Performing    |    |    |          |   | -    | 49.80   | -        |
| Assets to     |    |    |          |   |      |         |          |
| total         |    |    |          |   |      |         |          |
| Borrowings    |    |    |          |   |      |         |          |
| Ratio         |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Liquid Assets |    |    |          |   | 6    | 44.82   | 47.19    |
| to Total      |    |    |          |   | 0.41 |         |          |
| Assets Ratio  |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Performing    |    |    |          |   | 4    | 52.01   | 55.59    |
| Assets to     |    |    |          |   | 2.35 |         |          |
| Total Assets  |    |    |          |   |      |         |          |
| Ratio         |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Debt to       |    |    |          |   | 0.76 | 0.63    | 0.80     |
| Equity Ratio  |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Other Ratios  |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Net           |    |    |          |   | 1    | 30.49   | 25.68    |
| Investment in |    |    |          |   | 0.56 |         |          |
| Securities to |    |    |          |   |      |         |          |
| total Assets  |    |    |          |   |      |         |          |
| Ratio         |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+
| Net Liquid    |    |    |          |   | 11   | 187.56  | 112.27   |
| Capital to    |    |    |          |   | 6.18 |         |          |
| Total         |    |    |          |   |      |         |          |
| Liabilities   |    |    |          |   |      |         |          |
|               |    |    |          |   |      |         |          |
| (Calculated   |    |    |          |   |      |         |          |
| according to  |    |    |          |   |      |         |          |
| the SEC’s Net |    |    |          |   |      |         |          |
| Capital       |    |    |          |   |      |         |          |
| Rules)        |    |    |          |   |      |         |          |
+---------------+----+----+----------+---+------+---------+----------+

(2) Explanations and Analysis on Company’s Financial Status and
Operations Results

Since 1999, the company has been operating under rehabilitating stage of
economics with fluctuating capital market and very high competitions.
However, the company has been well prepared to cope with the various
problems and has been quite successful, as appeared in its better
financial status and operations results, as follows:

1.Operations Results

Securities Business Income

The Company ‘s Securities Business Income for the past 3 years has had a
consistent downward trend from 388.83 million baht in 1999 to 173.64
million baht in the year 2000. 99% of the company’s total volume of
24,692 million baht were derived from domestic investors not the
institutional investors and such brokerage fee income was substantially
low when compared to the income in the year 1999. The main reasons were
because of the inactive turnover of the stock market in the year 2000
itself, together with the company’s policy of not competing on brokerage
fee or to dump down the brokerage fee for the customers. However, the
company had substituted the brokerage fee income with the trading of
Debts instrument over the counter which totaled to 5,135 million baht
thus had increased the company’s income to some extent.

In the year 2000, the competition condition was still high and the
company had a total securities business income of 104 million baht which
partly derived from the Investment Banking business which had good
potential to become the substitution income of the decreasing income
from brokerage fee.

Securities Business Expenses

The Securities Business Expenses consisting of Borrowing Cost and the
fees and services expenses were still low because the company had
reorganized its financial structure by increasing its capital to redeem
the bond before its maturity date which could release the obligations on
borrowing fund and interest expenses considerably.

Bad Debts and Doubtful Accounts

The company’s Bad Debts and Doubtful Accounts in year 1999 were 3.40
million Baht and in year 2000, there was a payback of debts which had
already been write off as bad debts which resulted in a plus of 2.97
Million Baht in the Bad Debts and Doubtful Accounts. The decreasing of
the Bad Debts and Doubtful Accounts was caused by the company ‘s risk
management policy concerning customers screening process, settlement
process and the policy of not providing any margin account. And for the
year 2001, the company’s Bad Debts and Doubtful Debts was only 0.5
million Baht.

Operating Expenses

The Company’s operating expenses were 211.36 million Baht and 211.70
million Baht for the years 1999 and 2000, respectively. The expenses
which had been increased were arisen from the incentives expenses to the
Marketing in proportion to the volume made and the compensation expenses
paid for the employees lay-off in order to save the personnel expenses
in the long run. Besides, the company also incurred more Premises &
Equipment expense from the new branches’ office. However, in year 2001,
the operating expenses had decreased to 117.69 million Baht which
resulted from the decrease in personnel expenses, premises & equipment
and Directors remunerations.

Net Profit(Loss)

In 1999, the company had operated a net profit of 179.52 million Baht.
However, in the following 2 years, i.e. the years 2000 and 2001, the
company had a net loss of 37.06 million baht and 9.13 million baht,
respectively. The losses were resulted largely from the considerable
decrease in brokerage income from the slow down of the stock market and
from the aggressive competition of the securities business. However, the
company had solved the problem by getting into other field of securities
business such as Financial Advisory, trading of Debenture instrument or
investment in debentures so that the company’s income will not rely
singly on securities brokerage income.

2. An Overview of the Past Years Performance

Because of the aggressive competition in securities brokerage business
together with the decreasing commission rate during the commission
liberalization, the company’s brokerage income had drastically decreased
from 131.5 million Baht in year 2000 to 49.8 million Baht in year 2001.
However, the company had a substitution income from fees and services
which increased from 33.7 million Baht to 49.4 million Baht while the
operating costs were considerably low and was decreasing from 211.7
million Baht to only 117.6 million Baht. Consequently, the company’s
loss had been decreased from 37 million Baht to 9 million Baht.

  3. Financial Status

Total Assets

The Company’s total assets had remained unchanged since 1999 at the
amount of 440.85 million Baht and at 348.88 million Baht in year 2000
until the year 2001, the total assets was at 414.83 million Baht. The
company was able to maintain the stability of the assets by maintaining
an appropriate proportion of the company’s Working Capital.

Investment on Securities

Investment on Securities in the years 1999, 2000, and 2001 was 46.56
million Baht 106.37 million Baht and 106.51 million Baht, respectively.
Most of the investment on securities were short-term investment of
approximately 93.74 million Baht and approximately 12.77 million was a
long-term investment. The yield from such investments were in
appropriate with the investment cost and considered to be at the
satisfactory level. Nevertheless, the company had set an allowance of
0.14 million Baht for loss on impairment of the invested securities
which were listed in the Exchange and about 8.5 million Baht for
unlisted securities total of which were considered to be sufficient.

Securities Business Receivables and Accrued Interest Receivables

Securities Business Receivables and Accrued Interest Receivables dropped
from 340.16 million Baht in year 1999 to 288.38 million Baht in year
2000 and 187.65 million Baht in the year 2001. The receivables accounts
consisted of the accounts overdued over 6 months totaling 93.30 million
Baht which amount had been set as allowance for doubtful accounts and
these debtors had already been put under legal action. The rest amount
from the Receivables accounts would vary in relation to the amount of
trading volume of the company as those were the amount due for
settlement for 3 days after trading date under normal cash basis
trading. As for the methods of setting the allowance for doubtful
accounts for the cash basis trading which had 3 days period to settle,
the company will consider on a case –by-case basis according to the
forecasted late payment amount. And the allowance will be set on a 100%
basis of the total debts. If the debtors have sufficient collateral then
the allowance will not be necessary.

Borrowings

The total borrowings had been zero since the year 1999 because the
company had made a financial restructure by increasing its capital
during the years 1998 and 1999 when the debts were gradually paid back
and the debentures were all redeemed before its maturity date in year
1999.

Liquidity

In 1999, there were cash flows on investment of 109.20 million Baht
which derived from investment on the opening of new branches. But for
the year 2000, the operating cash flows was minus 129.76 million Baht
due to the decreasing of income from securities brokerage yet expenses
were still hight. After improvement, however, the company was able to
lower down its operating cost and the cash flows in the year 2001 had
increased for 9.23 million Baht.

Sources of Capital

In 1999, the company had decreased its Paid-up Capital from 310.05
million to 258.37 million Baht in order to cut down the retained loss
and leaving 8.13 million Baht with total Shareholders’ Equity of 250.69
million Baht. For the year 2000, the company had operated a net loss
which resulted in the decreasing of the Shareholders’ Equity to 213.48
million Baht. The Liabilities to Shareholders’ Equity ratio had improved
from 3.98 in the year 1998 to be only 0.76 and 0.63 in the years 1999
and 2000, respectively. This was because shareholders’ Equity was the
only source of Capital while the liabilities came from the obligations
arising from the company’s normal securities trading business in which
cash flow should be kept as working capital for the related amount to
the trading volume.

In year 2001, the company had increased its Registered Capital in order
to list its shares into the Stock Exchange and that there would be more
fund to run a wider rage of businesses.

It was noticed from the financial structure that the company’s sources
of capital were mostly long-term capital while the utilization of fund
were mostly short-term working capital. As the company’s future
strategies are to invest on debts instrument and securities underwriting
which require a medium to long-term sources of capital, therefore, the
company plans to raise its fund by issuing some financial instrument and
offering IPO shares in the stock Exchange in order to balance between
the sources of capital and the utilization of funds.

As for the company’s Net Capital Ratio, as at 31 December 2001 the
company had an NCR of 112.27%, which was significantly higher than the
minimum rate of 5% regulated by the SEC.

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

The significant factors that may have an influence on the company’s
future operations and financial status are the stability of Thai
Economics and the political stability which will not only have much
impact on the investment decision of the investors but also on the
volume of the stock market as a whole. And while the competition in
securities business are still fierce, all factors abovementioned may
also have considerable influence on the profit and financial status of
the company.

The company has realized on such problems and has prepared to expand its
business to Investment Banking Business, investment in financial
instrument especially debts instrument and to the securities
underwriting business in order to earn sufficient income to survive in
its businesses.