4. Business Lines 

4.1 Types of Business

4.1.1 Securities Broker

KGI Securities (Thailand) Public Company Limited, a member of the Stock
Exchange of Thailand (SET Broker seat No. 13), provides broking services
to both local and foreign investors and to both individual and
institutional investors.

The Company's daily trading volume increased from Baht 1,208.45 million
in 2008 to Baht 1,380.80 million in 2009 and the Company’s market share
increased from 3.75% in 2008 to 3.88% in 2009.

In 2009, The Company's daily trading volume breakdown by types of
clients comprised of 65.19% for retail and corporate clients, 6.05% for
fund, 3.36% for foreign clients, and 25.40% for the Company’s portfolio.

The Company’s daily trading volume breakdown by types of account
comprised of Cash account, which were traded through marketing officers
and internet trading at 86.61% and 5.14%, respectively, and Credit
balance account which was 8.25%. The Company had no dependence on any
client over 30% of the Company’s total income.

The following table shows market share, a breakdown by type of clients
and type of accounts for the past 3 years.

+--------------------------+-------+-----+-------+-----+-------+-----+
| Daily Trading Volume     | 2009  | %   | 2008  | %   | 2007  | %   |
+--------------------------+-------+-----+-------+-----+-------+-----+
| SET (Baht Million)*      | 17,7  |     | 16,1  |     | 17,4  |     |
|                          | 77.00 |     | 18.31 |     | 35.95 |     |
| The Company (Baht        |       |     |       |     |       |     |
| Million)*                | 1,3   |     | 1,2   |     | 1,4   |     |
|                          | 80.80 |     | 08.45 |     | 58.82 |     |
| The Company’s market     |       |     |       |     |       |     |
| share (%)                | 3.88% |     | 3.75% |     | 4.18% |     |
|                          |       |     |       |     |       |     |
| 1) Clients               | 2.89% |     | 2.59% |     | 2.87% |     |
|                          |       |     |       |     |       |     |
| 2) The Company’s         | 0.99% |     | 1.16% |     | 1.31% |     |
| portfolio                |       |     |       |     |       |     |
+--------------------------+-------+-----+-------+-----+-------+-----+
| Breakdown by types of    | 83.63 | 6   | 60.02 | 4   | 82.52 | 5   |
| clients                  |       | .05 |       | .97 |       | .66 |
|                          | 9     |     | 7     |     | 8     |     |
| (Baht Million)           | 00.09 | 65  | 36.30 | 60  | 39.89 | 57  |
|                          |       | .19 |       | .93 |       | .57 |
| 1) Fund                  | 46.41 |     | 35.07 |     | 76.50 |     |
|                          |       | 3   |       | 2   |       | 5   |
| 2) Retail and corporate  |       | .36 |       | .90 |       | .24 |
| clients                  |       |     |       |     |       |     |
|                          |       |     |       |     |       |     |
| 3) Foreign clients       |       |     |       |     |       |     |
+--------------------------+-------+-----+-------+-----+-------+-----+
| Total clients volume     | 1,0   | 74  | 8     | 68  | 9     | 68  |
|                          | 30.13 | .60 | 31.39 | .80 | 98.91 | .47 |
+--------------------------+-------+-----+-------+-----+-------+-----+
| 4) The Company’s         | 3     | 25  | 3     | 31  | 4     | 31  |
| portfolio                | 50.67 | .40 | 77.06 | .20 | 59.91 | .53 |
+--------------------------+-------+-----+-------+-----+-------+-----+
| Total                    | 1,3   | 100 | 1,2   | 100 | 1,4   | 100 |
|                          | 80.80 | .00 | 08.45 | .00 | 58.82 | .00 |
+--------------------------+-------+-----+-------+-----+-------+-----+
| Breakdown by types of    | 1,1   | 86  | 1,0   | 83  | 1,2   | 84  |
| accounts                 | 95.93 | .61 | 07.52 | .37 | 38.40 | .89 |
|                          |       |     |       |     |       |     |
| (Baht Million)           | 70.96 | 5   | 1     | 9   | 1     | 8   |
|                          |       | .14 | 14.69 | .49 | 28.51 | .81 |
| 1) Cash account          | 1     |     |       |     |       |     |
|                          | 13.91 | 8   | 86.24 | 7   | 91.91 | 6   |
| 1.1) Trading via         |       | .25 |       | .14 |       | .30 |
| marketing officers       |       |     |       |     |       |     |
|                          |       |     |       |     |       |     |
| 1.2) Trading via         |       |     |       |     |       |     |
| internet trading         |       |     |       |     |       |     |
|                          |       |     |       |     |       |     |
| 2) Credit balance        |       |     |       |     |       |     |
| accounts                 |       |     |       |     |       |     |
+--------------------------+-------+-----+-------+-----+-------+-----+
| Total                    | 1,3   | 100 | 1,2   | 100 | 1,4   | 100 |
|                          | 80.80 | .00 | 08.45 | .00 | 58.82 | .00 |
+--------------------------+-------+-----+-------+-----+-------+-----+

Note : * Trading volume referred to volume in both SET and MAI

Information for year 2009 Jan – Oct including the Company’s portfolio

Nov – Dec excluding the Company’s portfolio

Internet Trading (E-Business)

KGI Securities (Thailand), one of Thailand’s leading securities
companies, provides internet trading services and also Futures online
trading services. Clients can see real time information to follow price
movements 24 hours a day, 7 days a week, wherever they are. We provides
in-depth research for fundamental analysis and technical analysis. The
reports issued by its research institute can be used as decision making
tools for clients.

The Company provides the foremost high quality services that are fast
and accurate. The Company also employs high technology enabling clients
to trade stock trading via mobile phones and Pocket PCs.

Investors are being updated with various important information, they can
trade, get updates on stock prices and check their portfolios anywhere
and anytime online. The commission rates for trading online are lower
than through a marketing representative.

Our company aims at providing services with a high level of customer
satisfaction. We continue to develop our internet trading services so
they become even more convenient, efficient and secure for our clients.
The Company cooperates closely with Settrade.com Co., Ltd, to develop
internet trading programs in order to allow our investors to trade via
the internet. We also offer seminars and training for clients and
investors. In these seminars, clients learn to use the internet trading
program to trade both equity and derivatives products.

If you have any questions, need additional information or would like to
open an Internet Trading account with our company, please visit our
website : www.kgieworld.co.th or contact us at Hotline : 02 658 8555 or
email : CorporateSale@kgi.co.th

In 2010, the Company plans to enhance the Company’s website trading
support features for futures and options traders and further support the
growth of TFEX.

Account opening procedures

Both groups of clients who trading orders through marketing officers or
internet trading can open accounts with the Company by divided into 2
types of accounts, as follows:

(1) Cash Accounts:

    1.  Cash account is the account that client can trade by deposit
        collateral of 15% of the amount at which clients may transact
        the purchase, with compliance to the regulations of the SET.
        Clients have to pay the purchasing within the third business day
        following the date of purchase and the Company has to pay to the
        clients for the selling securities within the third business day
        following the date of selling.

  1.2 Cash Balance Account: The company will set the buying power of the
  client according to the amount of funds deposited by client. When the
  client sells, the money form selling will be kept in the client’s
  account for setting the new buying power.

  (2) Credit Balance Account: Clients can borrow money from the Company
  to purchase the securities by deposit money and/or other assets for
  collateral at least 50% or any percent that the SET required.

Policy in accepting Clients

Clients are categorized as follow:

1.  Individuals (locals and foreigners).

2.  Juristic persons:

  - Local financial institutions including finance and securities
  companies, commercial banks, finance companies, insurance companies,
  etc.

  - Foreign financial institutions.

  - Juristic persons registered in Thailand that are limited
  partnerships or limited companies.

  - Juristic persons registered abroad.

For individuals, the Company will consider their occupation, place of
residence, years of work, revenues, financial status, and debt service
ability. For juristic persons, the Company will consider financial
status, shareholders, and management as well as their business
prospects.

Account opening procedures

(1) Cash Accounts

    1.  The marketing officer will request documentary evidence from the
        client in order to find out the client’s investment objectives,
        knowledge and experience of investing in securities, financial
        status and debt service ability. Documentary evidence that must
        be submitted to the Company includes the following: a copy of ID
        card, a copy of house registration, a copy of company’s
        affidavit (in case of juristic person), a copy of business
        license (in case of specific business), a specimen signatures, a
        copy of bank savings book, other evidence of client’s assets, a
        copy of audited financial statements for the past 2 years (in
        case of juristic person) together with the client’s signatures
        in the application form and other agreements. The marketing
        officer will consider all the information and then make a
        recommendation, supported by the documents, to the credit
        division officer.

    2.  The credit division officer will check the client’s background
        and calculate an appropriate credit line for the client
        according to the company’s criteria, which include the financial
        status, debt service ability as well as debt service history.

    3.  As of 1 January 2007, the Company has introduced new and
        improved “Know Your Client” and “Client Due Diligence”
        processes, covering new account openings and regular client
        reviews.

    4.  Once all necessary steps have been completed, a credit officer
        will then propose to the appropriate authorized persons to
        approve the credit line.

(2) Credit balance account

  The Company provides credit balance account using the same credit line
  issuing system as that of cash accounts. The Company produces a list
  of marginable securities that have good fundamentals and high
  liquidity in the market. The Company reviews the list of marginable
  securities and makes the necessary adjustments to the list on a
  monthly basis at minimum. The margin of each security will not be
  lower than the margin specified by the SEC and/or SET. The Company
  announces the list on a regular basis and the clients will always be
  informed whenever there is a change.

Authority in approving credit line for trading accounts

The company has set different levels of authority for persons authorized
to approve credit lines for cash accounts and credit balance accounts
from marketing division heads up to the Chief Operating Officer. The
policy covering credit line approval has been set up by the Credit Risk
Sub-committee for Brokerage Business, under the Risk Management
committee’s guidance.

4.1.2 Securities Dealer

The Proprietary Trading Department and Fixed Income Department are
responsible for stock, bond, and derivatives, futures and option,
selection and investment allocation according to the established policy,
while the Risk Management Department will closely track those
departments’ exposure to control the Company’s overall risks.

The Company pays serious attention to conflict of interests, especially
the misuse of inside information. The Company regards such departments
as investors; therefore, such departments have no right to receive
information or research that differs from other clients of the Company.

4.1.3 Investment Advisory

SEC granted an approval to the Company to operate investment advisory
business on 6 January 2004, allowing the Company to provide a full range
of services.

4.1.4 Financial advisory and securities underwriting

The SEC has granted the Company approval to operate financial advisory
business under the scope specified by the SEC which covers the full
range of Investment Banking Services, including fund raising, IPOs and
secondary market placements, mergers and acquisitions, firm valuations,
loan arrangements, debt restructuring and other advisory works. In
addition, the Company provides a securities underwriting service to
those companies intending to issue securities including debt, equity,
and equity-linked products.

In 2009, the stock market was very volatile, resulting from the negative
impact of the US and Global economic crisis, as well as the domestic
political conflict which caused investors to lose confidence in
investment in the stock market while the performance of companies mostly
declined following the slowdown of the economy. As a result, many
companies delayed their listing plans, which led to fewer-than-expected
companies being listed on the stock market.

During the year 2009, the Company acted as co-underwriter on 7 IPOs and
act as financial advisor and lead underwriter on 4 IPOs. One of those
clients has already been granted approval from the SEC to launch IPO but
later decided to postpone IPO to 2010. While others were also delayed
their listing plans. Furthermore, the Company successfully diversified
its source of revenues to provide other financial advisory services,
including Financial Advisor for TDR issuance, Private placements, M&A,
valuation, Independent Financial Advisor, etc.

With our group of experienced staff and expertise in financial
engineering to structure products that suit our clients' needs and with
our regional group network, KGI's investment banking team can provide a
full line of products and services in both the domestic and foreign
markets.

4.1.5 Securities Registrar

The Company received approval to conduct securities registrar business
on 14 June 1994, and the Company continues to maintain its securities
registrar license in order to support its derivatives products in the
future.

4.1.6 Fixed Income Business

The Company is a member of Bond Electronic Exchange (BEX) and Thai Bond
Market Association (ThaiBMA), provides trading fixed income securities
services to the Company’s clients. Investors can open an account for
fixed income trading together with opening an account for securities
trading. The Company has an experienced staff that is proficient in
providing services and advice that allow clients to make investment
decisions in their best interest.

In 2009, the Company was ranked No. 1 in bond outright trading among
securities brokers, with total trading value of Baht 65,188 million
while KGI was ranked No. 3 in corporate bond trading among total
dealers, with total trading value of Baht 10,963 million.

4.1.7 Private Repo Business

KGI Securities (Thailand), pioneered Private Repo to corporate and high
net-worth clients, providing a new alternative investment. The Company
was ranked No. 1 in terms of Repo volume among securities firms in 2009.
Moreover, it was the first and the only one to provide Repo agreement in
Thai version, approved by SEC, to offer clients with more convenience.

4.1.8 Selling Agent of Unit Trust Business

The Company received a selling agent of unit trust approval from SEC on
16 January 2002, and at the end of 2009 the Company was appointed as a
selling agent of unit trust for 20 asset management firms.

Total net asset value (NAV) of mutual funds at the end of 2009 was Baht
1.8 trillion, increasing 20.88% from 2008 (2008 NAV was Baht 1.5
trillion). The grand total of mutual funds at the end of 2009 was 1,264
funds (increasing by 159 funds from 2008). The NAV of the Equity Fund
increased 34.65%, which is a result of the increase in stock indexes
around the world since March 2008. The NAV of the Fixed Income Fund
increased 21.31%, driven by an increase in the number of investors who
preferred to invest in safe haven assets, such as Fixed Income Fund and
Property Fund (Type 1) etc.

Furthermore, when we consider just special funds, we find that at the
end of 2009, FIF fund’s NAV rose a significant 89.01% from 2008. FIF
fund’s return was better than the deposit rate and onshore bonds.
Moreover, investors can get more profit from the foreign exchange for
example dollar/baht and dollar/won (in the case of investing in Korean
bonds). RMF fund’s NAV and LTF fund’s NAV also increased 48.12% and
88.06%, respectively. The rise in the Thai index at the beginning of
2009 was one of the reasons and the other was that investors buy funds
to get tax benefits.

4.1.9 Futures Business

The Company received a license to conduct futures business from the
Securities and Exchange Commission (SEC) and also got approval to act as
a futures broker from the Thailand Futures Exchange Plc. (TFEX) and the
Thailand Clearing House Co., Ltd. (TCH). Futures trading started on 28
April 2006.

The Company won the “Best House of the Year 2006”, which was given to
the futures brokerage firm with the outstanding performance and best
service quality, and won the “Most Active House 2006”, which was given
to the futures brokerage firm with the most active futures derivatives
business, at the TFEX Best Awards 2006.

Currently, the Company provides trade on the following derivative
products:

● SET50 Index Futures

● SET50 Index Options

● Single Stock Futures

● Gold Futures

In addition to Futures retail brokerage business, the Company also
trades futures in Proprietary Trading and furthermore acted as a Market
Maker to increase and stabilize trading liquidity and volume of SET50
Index Futures, SET50 Index Options, Single Stock Futures, and Derivative
Warrants in Thailand Futures Exchange (TFEX) and Stock Exchange of
Thailand. In 2009, the Company was ranked No. 3 with market share of
7.78% of TFEX market.

On February 2, 2009, TFEX launched gold futures (50 baht contract). In
order to expand the gold traded client base, KGI introduced the
Introducing Agent product (AI). This scheme will give, in return,
incentives to goldsmith shops who introduce their clients to trade gold
futures with KGI.

In November 2009, the company launched a TFEX trading campaign. Three
lucky clients received package tours to Japan worth Baht 334,000. The
campaign was successful in attracting investors.

4.1.10 Securities Borrowing and Lending (SBL)

The Company was the first broker to act as a principal and agent
assisting of clients who want to lend or borrow securities: 1.
Institutional Lenders, 2. Local and Foreign Institutional Borrowers, 3.
Retail Borrowers. This service will help increase liquidity and price
stability to the Thai capital market.

In 2009, SBL gained popularity due to the volatile stock market. SBL was
popular among local and foreign institutional clients. Especially retail
clients, SBL volume increased double from 2008 resulting from campaign
“Short Selling for Children” by Equity Derivatives Department. This
campaign summarized total SBL volume from 3 September - 30 December 2009
from retail borrowers. Every SBL volume of Baht 1 million, the Company
donated amount for children 100 Baht. The total donation amount equaled
to 16,400 Baht and donated to Pakkred Babies' Home and the Foundation
for the Welfare of the Mentally Retarded of Thailand. This campaign
aimed to contribute to social. In 2010, the Company plans to expand its
SBL business as follows:

1.  Reduce SBL fee to handle with new sliding commission rate and to
    repay the Company’s clients and also introduce SBL to new clients
    who never borrow securities before.

2.  Expand client base, especially foreign institutional clients who are
    increasingly interested in borrowing and lending Thai securities.

3.  Consider to develop internal system to support SEC’s relaxation on
    regulations. Among the relaxation is the allowance of SBL on cash
    account over than only credit balance account in the past.

4.  Consider to develop internal system to support SBL on DMA for local
    and foreign institutional clients. Moreover the Company plans to
    develop SBL on internet to make retail clients more convenient.

4.1.11 OTC Derivatives

The Company is recognized as one of the leaders in innovation in the
development of derivatives products in Thailand. The Company has spent
more than 10 years preparing for issuing and trading of derivatives
products. The major shareholder, the KGI Group has also provided
valuable assistance by transferring knowledge and technology to the
Company. The KGI Group sent derivatives experts to train our staffs to
be ready for this new market in Thailand. At the same time, the Company
sent staff to its related companies in Taiwan and Hong Kong to closely
study their sophisticated derivatives markets.

The Company adopts the same program and software as those used in Taiwan
and Hong Kong. The software is widely recognized in developed
derivatives markets in many countries and should be effective in the
Thai market as well. Such system will greatly enhance the risk
management capability of the Company in hedging our derivatives
positions. The Company is ready to provide services relating to
derivatives products to clients. KGI Group and the Company always
develop such system to handle every market situation. The Company is
completely ready for OTC Derivatives. At the moment, the Company focuses
mainly on institutional clients who have better understanding about the
risks and rewards of such products.

1. OTC Equity Derivatives

  OTC Equity Derivatives products are tailor-made, and designed
  according to client’s request.

  In 2009, OTC Equity Derivatives gained popularity due to the volatile
  stock market. OTC Equity Derivatives was popular among local and
  foreign institutional clients including Private Fund, purposely to
  manage their risk and gain their return. The Company provides three
  types of OTC Equity Derivatives,

  1) Basic Options, which are Call Options and Put Options

  2) Combination Options, which are Call Spread Options, Put Spread
  Options, and Strangle, etc.

  3) Exotic Options, apart from the basic options and combination
  options, the Company has been launching more complex derivatives, such
  as Asian Call Spread Options and Digital Call Options, Auto Redemption
  Options, Forward Start Options, and Himalaya Options and will innovate
  more and more to match clients’ risk and return profiles in the
  future.

  In 2010, the Company views the market is still volatile from both
  internal and external factors including low interest rate trend, so
  the Company expects OTC Equity Derivatives will maintain its
  popularity. The Company formed a partnership with reputed foreign
  banks in the area of OTC Equity Derivatives on foreign equity
  underlying covering markets; Hong Kong, Japan, Singapore, Australia,
  USA, and Europe. The Company will regularly organize training/seminars
  to ensure that our clients thoroughly understand the products before
  investing in equity derivatives with us and that our equity
  derivatives products would help reduce risk and/or enhance return of
  clients’ portfolios.

2. Structured Products

  The Company is focusing on developing structured products that combine
  equity derivatives with money market instruments to serve clients who
  want to invest in both the equity market and money market. The Company
  offers structured products exclusively to institutional clients and
  private funds with a good understanding and knowledge of derivatives.
  The structured product that the Company provides is:

  Equity Linked Note (ELN): To serve the needs of the clients who prefer
  investment in short term money market with high yield and who can
  invest in equity market. At present, the Company provides various
  types of ELN with maximum term of 270 days, whose return is linked to
  the price of a single stock and TDEX , TFTSE or basket of stocks with
  good fundamental and high trading volume (Blue chip Stock) or Index.
  Examples of ELN the Company provides are ELN-Vanilla, ELN-Buffer,
  ELN-Up&Out, ELN-4U, and ELN-D&G, ELN-StepUP, ELN-KO, and
  ELN-Accumulator.

  In 2009, the Company formed a partnership with reputed domestic banks
  to issue Structured Products to fulfill need of bank-base clients who
  need higher return than interest from deposit.

  In 2010, the Company will continue to develop new types of Structured
  Products that attractive and serve the needs of our value clients.

  4.1.12 Equity Exchange Traded Fund (Equity ETF)

The Company joined a group led by One Asset Management Limited (97%
owned by the Company) and four other leading securities companies as
well as a foreign fund advisor that won the right to launch Thailand’s
first equity exchange traded fund (Equity ETF) in the name of ThaiDEX
SET50 ETF or TDEX since 2007. The Company acts as Market Maker (MM),
providing liquidity in the secondary market and as Participating Dealer
(PD), facilitating the creation and redemption of TDEX in the primary
market. By the end of 2009, Asset Under Management (AUM) of TDEX was
Baht 2,547 million, showing growth of 152% from Baht 1,011 million at
inception in August 2007.

From great success of TDEX in 2007-2008, the Company joined a group led
by One Asset Management Limited and five other leading securities
companies to launch Thailand’s third equity ETF in the name of ThaiDEX
FTSE SET Large Cap ETF or TFTSE. During the IPO period, July 20-28,
2009, Asset Under Management (AUM) of TFTSE was Baht 166 million or 22
million units.

In 2010, The Company expects AUM of TDEX and TFTSE to reach Baht 4,000
million and Baht 200 million respectively. The Company believes it can
achieve such target due to its capabilities, Thai market recovery and
increasing popularity of TDEX and TFTSE.

  4.1.13 Derivative Warrants (DW)

More than 5 years, the Company has been developing its infrastructure
and workforce and expects to launch Derivative Warrants (DW).

In 2009, the Company was the first securities company in Thailand to
launch DW. The Company launched three DW i.e. PTT13CA, KBAN13CA and
PTTE13CA since June 2009. All 3 DW were highly successful and get great
response from investors at IPO period and trading on the exchange, which
total IPO subscription amount of all three DW was around Baht 150
million.

DW is new investment product in Thailand. The Company plans to educate
investors for the deeper understanding, enhancing knowledge and build
confidence in DW investment. The Company plans to roadshow to local and
foreign institutional investors to publicize new financial products and
attract new clients to invest in Thai Capital Market. The Company
launched the first website in Thailand, www.thaiwarrant.com. This
website provides information of all DW in Thailand which is useful for
investors who are interested in DW.

DWs issued by the Company

In 2009, the Company has issued DWs as follows;

+---+-----------------------+----------------------+-------------------+
|   | Name of DW            | IPO Period           | Maturity Date     |
+---+-----------------------+----------------------+-------------------+
| 1 | PTT13CA               | 22 - 30 June 2009    | 18 December 2009  |
| . |                       |                      |                   |
|   |                       |                      |                   |
|   |                       |                      |                   |
+---+-----------------------+----------------------+-------------------+
| 2 | KBAN13CA              | 10 - 21 August 2009  | 19 February 2010  |
| . |                       |                      |                   |
|   |                       |                      |                   |
|   |                       |                      |                   |
+---+-----------------------+----------------------+-------------------+
| 3 | PTTE13CA              | 19 - 30 October 2009 | 30 April 2010     |
| . |                       |                      |                   |
|   |                       |                      |                   |
|   |                       |                      |                   |
+---+-----------------------+----------------------+-------------------+

4.2 MARKET OVERVIEW AND COMPETITION

(A) The Company Marketing Project in 2009

1. The Company has launched new products as investment alternatives for
the Company’s clients and investors. In 2009, the Company researched and
developed the following new products:

1.1 The Company services Gold Futures to be another investment
alternative for investors to make profits, diversify risk, and increase
liquidity for making profits both in the increase and decrease of gold
price.

  1.2 The Company develops structured products by combining equity
  derivatives with money market instruments (Equity Derivatives) to
  serve clients who want to invest in both the equity market and money
  market.

  1.3 The Company was the first securities firm launching Derivative
  Warrants (DWs). In 2009, the Company launched three DWs and the
  Company is member of IB Club’s working group to launch DW Direct
  Listing regulations which will make issuing process faster and follow
  the international standard. SET, SEC, and IB Club’s working group are
  currently pushing Direct Listing regulations which are expected to be
  done in first quarter 2010.

  1.4 Thailand’s first equity ETF (Equity Exchange Traded Fund), TDEX,
  and TFTSE have been a great success. The Company, as one of consortium
  members of TDEX and TFTSE, foresees opportunity in other equity ETFs.
  The Company is confident that with its extensive experience and
  technology it will play a major role in other equity ETFs such as
  equity ETF on SET Bank Sector, equity ETF linked to foreign Index and
  Gold ETF.

2. The Company held seminars to educate clients and investors on topics
such as Internet Trading, Securities Fundamental and Technical Analysis,
and Derivative Warrants Knowledge. The seminars not only educated the
clients and investors, they also expanded the Company’s customer base.

3. The Company held marketing promotions to support trading futures and
options. The Company held a “TFEX Campaign” that offered clients the
opportunity to win one of three packages to Japan with a total value of
Baht 334,000. The campaign was well received and gained a lot of
interest from investors.

  4. The Company developed its systems to support new business
  transactions such as Equity Exchange Traded Fund (Equity ETF),
  Derivative Warrants, and TMS (Interest rate swap). Furthermore, the
  Company has developed its computer systems to be more efficient, such
  as Risk Management Control System, Computer Assets, and Synchronize
  Clients Account, etc. The Company also enhanced a new network,
  Multiprotocol Label Switching (MPLS) which is very accurate and has a
  lower cost to support the Company’s operations.

  5. The Company is continually developing its website to provide
  information to all clients and investors. The Company always updates
  information and news to ensure it is useful to clients and investors.
  Furthermore, the Company posts its research papers, news, special
  activities and seminars. The Company has also created the first
  website about Derivatives Warrant (DW) named www.thaiwarrant.com. The
  website collects all DW information in Thailand, making it more
  convenient for investors to find all relevant DW information at one
  location.

(B) Market Overview and Competition

In the year 2009, the Thai market rallied strongly, reversing the trend
of economic contraction which had been the case for both Thailand and
the global economy. The spectacular rise in the Thai market was actually
in tandem with equity markets around the world. It is widely accepted
that in this US-led financial crisis, governments and major central
banks reacted faster than in previous crisis. Ultra-low interest rate
policies and the injection of emergency liquidity to financial systems
were conducted since late 2008. Hence, the problems were contained
faster than originally expected. Therefore, equity prices around the
world began to rally in the second quarter of 2009, as investors
believed the worst was seen in the first quarter.

Meanwhile, the near-zero interest rate policy on the US side also drove
the allocation of investment funds to high-yielding assets in Asia,
which have a stronger growth outlook than the West. Not only did stock
prices rise sharply, the price of gold also moved up significantly in
2009 as investors viewed it as a contra-US dollar play. For the Thai
stock market, the SET Index rose by 284.58 points or 63.2% in 2009, the
second strongest rise since the 1997 Asian financial crisis. Meanwhile,
the strongest year was in 2003 when the SET Index rose by 116%.

Local political conditions have been moderately stable. While there have
been a number of political gatherings by the anti-government group,
violence took place only once in April 2009 during the Songkran
festival. Street violence was seen both in Bangkok and Chonburi
province, and the government had to call off the ASEAN Summit on
security concerns. However, the government was able to control the
situation relatively quickly. In the second half of the year, things
went more smoothly. There was no political violence and the government,
under the coalition platform, fared relatively well.

On economic issues, Thailand's economy contracted in 2009. Although the
stock market began to rally in the second quarter, real economic figures
still suffered from the dramatic contraction in export demand, which led
to de-stocking in manufacturing space. Confidence in labor, consumption
and also investment markets deteriorated. In the first and second
quarters, Thai GDP contracted by 7.1% YoY and 4.9% YoY, respectively.
The situation improved a bit in the third quarter, as GDP eased only
2.8% YoY. Meanwhile, the country's GDP is widely expected to expand YoY
in the fourth quarter, following the global economic recovery and the
low base effect from 4Q08 when the economy was hit by the local
political stalemate and the closures of Bangkok's two international
airports.

In 2009, the daily average turnover stood at Bt1.78bn, increasing 10.29%
from Bt1.61bn in 2008. Foreign investors returned to a net buying
position of Bt3.8bn in 2009, after heavily net selling Bt162bn of Thai
stocks during 2008. The market capitalization rose to Bt5.87trn at the
end of 2009, up 64.6%, from Bt3.57trn at the end of 2008.

 

Stock Exchange of Thailand

+---------------------------------+----------+-----------+-----------+
|                                 | 2552     | 2551      | 2550      |
+---------------------------------+----------+-----------+-----------+
|   Total trading value* (Baht    | 4        | 3,981,230 | 4,271,820 |
|   million)                      | ,355,318 |           |           |
+---------------------------------+----------+-----------+-----------+
|   Avg. daily trading value*     | 17,777   | 16,118    | 17,436    |
|   (Baht million)                |          |           |           |
+---------------------------------+----------+-----------+-----------+
|   Total market capitalization   | 5        | 3,568,223 | 6,636,069 |
|   (Baht million)                | ,873,101 |           |           |
+---------------------------------+----------+-----------+-----------+
|   SET Index (year-end)          | 734.54   | 449.96    | 858.10    |
+---------------------------------+----------+-----------+-----------+
|   Dividend yield (%)            | 3.7      | 6.6       | 3.3       |
+---------------------------------+----------+-----------+-----------+
|   P/E ratio (times)             | 25.6     | 7.0       | 17.0      |
+---------------------------------+----------+-----------+-----------+
|   P/BV ratio (times)            | 1.6      | 1.0       | 2.0       |
+---------------------------------+----------+-----------+-----------+
|   No. of listed companies       | 475      | 476       | 475       |
+---------------------------------+----------+-----------+-----------+

*including MAI

As for new listings, there were 17 new companies listed in Thailand’s
stock markets (both SET and MAI) in 2009, compared to only 11 new
listings in 2008. It is worth noting that, in 2009, 14 out of the 17
companies were listed after the month of March, as the Thai stock market
started to recover.

IPO Stocks in 2009

  ------------------- ------------------- --------------------------------
  Stock               First trading date  IPO size (Baht million)

  AIM                 19-Feb-2009         88

  AGE                 26-Feb-2009         227.5

  TPOLY               4-March-2009        168

  HTECH               27-March-2009       61.12

  QLT                 9-June-2009         76

  TTCL                16-June-2009        552.5

  JMART               25-June-2009        135

  SENA                29-July-2009        346.5

  GLOBAL              19-Aug-2009         663

  2S                  2-Sep-2009          114

  SMT                 24-Sep-2009         455.4

  BLA                 25-Sep-2009         2,700

  MOONG               1-Oct-2009          64.4

  KIAT                21-Oct-2009         180

  JUBILE              9-Nov-2009          98

  NBC                 11-Nov-2009         188.5

  THANA               15-Dec-2009         87.5
  ------------------- ------------------- --------------------------------

Competition among Thai Broker

In regards to competition in the brokerage business, more balance was
seen between Thai brokers and brokers who are foreign-related or have
foreign research affiliates. In 2008, the brokers that were connected to
foreign partners posted outstanding performances as heavy selling by
foreign investors dominated the market. Meanwhile, the sum of the market
share of the top 10 brokers increased from 48.73% in 2008 to 51.86% in
2009.

Top 10 securities brokers (2009)

  ------- ------------------------------------ -------------- ------------
  Rank    Company Name                         Name           Market
                                                              Shares (%)

  1       Kim Eng Securities (Thailand) Plc.   KEST           10.68

  2       Asia Plus Securities Plc             ASP            5.71

  3       KT ZMICO Securities Company Limited  KTZ            5.47

  4       Phillip Securities (Thailand) Plc.   PST            5.11

  5       Country Group Securities Plc.        CGS            4.83

  6       Phatra Securities Plc.               PHATRA         4.45

  7       Thanachart Securities Plc.           TNS            4.38

  8       Bualuang Securities Plc.             BLS            4.08

  9       KGI Securities (Thailand) Plc.       KGI            3.88

  10      Credit Suisse (Thailand) Ltd.        CS             3.36

          The sum of market share of the top                  51.95
          10 brokers                                          

          Others                                              48.05

          Total                                               100.00
  ------- ------------------------------------ -------------- ------------

Industry trend in 2010

Competition among brokerages should be intense in 2010, since the SET
has announced a cascade calculation policy for commission, the first
step toward full liberalization of brokerage fees in 2012. Therefore,
investors would not only care about service and the quality of research
reports, like in the past, they would also look at the pricing factor.
Therefore, it is crucial to monitor the direction of major brokerages in
Thailand and how aggressive each one will be in order to retain its
market share.

Thailand's stock market should remain positive this year, but with much
greater volatility, as the current stock prices have recovered close to
the levels before the crisis took place. More or less, the economic and
earnings outlooks are still on upward trends while there is still ample
system liquidity. Therefore, we believe foreign investors’ interest in
Asia and Thailand's market will remain. Last but not least, the key risk
factor for investing in the Thai market is the local political
uncertainty, which is invariably difficult to predict in the present
context.

4.3 Funding for Products and Services

4.3.1 Source of funds

  If the Company requires new funds, the Company’s policy is to try to
  procure the cheapest source of funds available, and to match the
  duration of any loan to its needs. As far as possible, the Company
  will not depend upon one source of funds.

4.3.2 Subordinated Loans from Subsidiary

  The Company has subordinated loans amounting to Baht 1,700 million
  from an overseas subsidiary company. These are unsecured, interest
  free Baht loans with an original maturity in September 2010. During
  year 2009, the Company and the subsidiary company agreed to extend the
  maturity date to 21 March 2011 and the Board of Directors’ Meeting No.
  1/2010 of the Company held on 25 February 2010 approved the extension
  of the maturity date of the subordinated loans form 21 March 2011 to
  21 September 2011.

4.3.3 Liquidity management policy

  The Company analyses its cash flow needs on a daily basis and tries to
  match its funding and investment in money market instruments to its
  needs as forecasted.