2.1 Risk Factors

From the securities business characteristics of the Company there are
probably some risk factors which may have some impact on the Company’s
future operations as follows:

1. Risk as a securities broker

a) Risk from dependence on Brokerage fee income : The brokerage fee
income which accounted for 54.87% of the Company’s total revenues in
2008 are inconsistent and are affected by uncontrollable factors such as
the currency exchange rate, interest rates, political stability and
unexpected changes in the rules and regulations by the government and
other related regulators in relation to the Stock Exchange of Thailand
which may affect the investment mood of the stock market as the
brokerage fee income is dependent upon the trading volume of the
Company’s customers. In order to reduce this risk, the Company has
attempted to take up other possible businesses so that its income will
not depend wholly on brokerage fee income, for example, Investment
Banking, Financial Advisory business, Securities Underwriter, Debt
Instrument Broker Business and Debt Instrument Investment, Unit trust
selling agent, Derivatives Agent which is hoped that all these
strategies will help reduce the risk and boost income in the long run as
well as to create opportunity for the Company’s future business
expansion while preparing to cope with the future risk which may occur
from the liberalization of securities business.

b) Risk from Branches’ Operation: The Company opened a new branch in the
end of year 2008, so there were altogether 4 branches namely, Rangsit,
Nakornpathom, Nakornsawan and Wireless Road. These four branches have
contributed to the income portion of 16.72% of the total trading volume
of the Company and have emphasized on the acquisition of new retail
customers to expand customer base while trying to retain the existing
customer base.

c) Risk from dependence on high volume customers: In 2008, the top 10
customers had trading volume of 23.02% of the total trading volume of
the Company. Therefore, if the Company loses these customers, its
brokerage income will be affected. However, to mitigate this risk, the
Company is trying to expand the retail customer base. While the Company
tries to enlarge its customer base, all efforts will be made to retain
existing high volume customers.

d) Risk from settlement default and bad debt: As of 31 December, 2008,
the Company’s securities business receivables recorded a total of 546.70
million baht consisting of cash account receivables of 62.28 million
baht, credit balance accounts 538.28 million baht and other receivables
of 41.32 million baht. The accrued interest receivables was 0.04 million
baht and both the securities business receivables and interest
receivables were classified as non-performing loan for 130.50 million
baht or 20.23% of the total securities business receivables. 98.93
million Baht of 130.50 million Baht non-performing loans aforementioned
was put under allowance for doubtful account. Although the Company has
set up the allowance for doubtful account in full, it also has the
policy to minimize the risk that arisen from settlement default and bad
debts by emphasizing on the process of screening of new customers and
the fixing of appropriate trading line to be in accordance with the
collateral or the financial status of the customers as well as the
reviewing of the customers’ financial status and monitoring of their
trading line usage very closely.

2. Risk of granting credit for securities purchasing

At present, the Company has provided credit service for the customers
under Credit Balance System for securities purchasing and the total
volume from credit balance accounts was 13,131.64 million baht or 21.99%
of the total trading volume of the Company. There were altogether 179
credit balance accounts with the total credit line of 5,153 million baht
and the total credit balance accounts of 538 million baht. The source of
fund of the Company came from the shareholder’s equity of 468.27 million
baht and borrowings of 70.00 million baht. The Credit Balance System is
under strict governance of the Risk Management Committee who are
responsible for the determination and revision of credit line measures,
collateral evaluation and the determination of restricted securities
list, etc. for risk prevention.

3. Risk from Securities Dealing on Debt Instrument Trading

The Company has engaged in Debt Instrument Trading which includes Bill
of Exchange and Debentures, the business of which was able to earn
income of about 12.45% of the total income of the Company. However,
there is a credit risk here from the issuer of the Bill of Exchange or
Debentures. Therefore, the issuer was accurately evaluated in term of
debt payment capability and rating of the debentures. As for the Bill of
Exchange, the Company set up trading limit of B/E for each customer as
well as the aval limit of each bank. Moreover, the auditing system was
also set up to investigate the aval process.

4. Risk from Derivatives Service

The Company has acquired derivatives agent license from the SEC and
registered as a member of the Thailand Futures Exchange Public Company
Limited (TFEX) and the Thailand Clearing House (TCH). Since 22
September, 2008, the derivatives service has been operated and
contributed the derivatives trading fee as additional income to the
Company.

The Company has the policy to manage the risk arisen from customers’
derivatives trading by determining the strict process since account
opening and continuous monitoring of their trading periodically.

5. Operational Risk

Operational risk may arise from the internal operational procedures,
human error, Information Technology or any external events which may
affect the Company’s income and capital including its reputation and
reliability.

The Company had set up effective internal control system and regular
improvement of internal operation procedures to facilitate and comply
with the provided financial services pattern to be more efficient and to
be able to control the risks within the acceptable level.

6. Impact from the Company’s Subsidiary Investment

Risk may arise from investment in term of joint venture to open up a
subsidiary company to undertake private fund business by investing 51%
of the registered capital of 40 million Baht. However, the Company has
prepared in all aspects such as marketing, financing, risk management as
well as the various supporting systems and personnel for the subsidiary
company to prevent possible risks.

7. Risk from dominance by the major shareholder

As of 31 December, 2008, the A.P.F.Holdings Co., Ltd. is the Company’s
major shareholder holding 78.59% of the total paid-up capital common
shares of the Company. As a consequence of holding over 75% of the
shares, the major shareholder is able to control or dominate the
shareholder’s resolution in the shareholders’ meeting especially the
appointment of Directors or any other proposed matters which require
majority vote. Therefore, the other shareholders shall have the risk of
not being able to gather the votes in order to oppose the matters
proposed by the major shareholder. However, from the total of 9 members
of the Board of Directors, there are only 2 directors representing the
major shareholders and the rest are 3 Executives and 4 independent
directors of which all of the 4 are also the Audit Committee who have
responsibilities to govern and examine and at the same time, provide
advice on the Company’s operations. To a large extent this ensures
transparency and fair treatment to all shareholders

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