3. BUSINESS LINES

(1) TYPES OF BUSINESS

(A) 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. As of 31 December 2008, the Company has 14
branches locations throughout the country (see branches information in
page 81). The Company has experienced teams of marketing officers and
analysts to offer advisory services on both fundamental and technical
basis. Clients can access the trading information on a real time basis,
technical analysis, and other knowledge for investors on the Company’s
website, www.kgieworld.co.th, in order to support them in making
accurate and effective investment and trading decisions. In 2008, the
Company ranked No. 11 with a 3.75% equities brokerage market share.

Clients can place trading orders through marketing officers or internet
trading at www.kgieworld.co.th. The commission for trading orders
through marketing officers is 0.25% and the commission for internet
trading is only 0.15%-0.20%.

Internet Trading (E-Business)

KGI Securities (Thailand), one of Thailand’s leading securities
companies, provides Internet trading services and also Derivatives
online trading services. Clients can see the real time information to
follow up the movement of price for 24 hours a day, 7 days a week, via
Streaming program, technology from Settrade.com Co., Ltd, which help
internet trading to be convenient, effective and updated information for
making decision for investment. The company also employed high
technology enabling clients to trade stock trading via mobile phone and
Pocket PC. Investors are being updated with various important
information, they can trade, get an updates about stock prices and check
their portfolio anywhere anytime online. The commission rates for
trading online are low at only 0.15% for Cash Deposit account and 0.20%
for Non-deposit account.

Our company aims at providing services with high level of customer
satisfaction. Our E-business division cooperates closely with
Settrade.com Co., Ltd, to develop Internet trading program in order to
facilitate our investors to access the trading via internet. The Company
offer clients research paper both of fundamental analysis and technical
analysis brought by KGI Research Institute in order to be instrument for
making decision in investment. We also offer seminars and trainings 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 enquiry, 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 our
E-business Division at Hotline : 02-658-8555 or email :
ebusiness@kgi.co.th

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.

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

+-------------------+---------+----+----------+----+----------+-----+
| Trading Volume    | 2008    | %  | 2007     | %  | 2006     | %   |
|                   |         |    |          |    |          |     |
|                   | (Baht   |    | (Baht    |    | (Baht    |     |
|                   | M       |    | Million) |    | Million) |     |
|                   | illion) |    |          |    |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| SET *             | 16      |    | 1        |    | 1        |     |
|                   | ,118.31 |    | 7,435.95 |    | 6,393.67 |     |
+-------------------+---------+----+----------+----+----------+-----+
| The Company *     | 1       |    | 1,458.82 |    | 1,293.00 |     |
|                   | ,208.45 |    |          |    |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| The Company’s     | 3.75%   |    | 4.18%    |    | 3.94%    |     |
| market share (%)  |         |    |          |    |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| Breakdown by      |         |    |          |    |          |     |
| types of clients  |         |    |          |    |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| - The Company’s   | 377.06  | 3  | 459.91   | 3  | 197.46   | 15  |
| portfolio         |         | 1. |          | 1. |          | .28 |
|                   |         | 20 |          | 53 |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| - Fund            | 60.02   | 4. | 82.52    | 5. | 63.40    | 4   |
|                   |         | 97 |          | 66 |          | .90 |
+-------------------+---------+----+----------+----+----------+-----+
| - Retail and      | 736.30  | 6  | 839.89   | 5  | 936.80   | 72  |
| corporate clients |         | 0. |          | 7. |          | .45 |
|                   |         | 93 |          | 57 |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| - Foreign clients | 35.07   | 2. | 76.50    | 5. | 95.34    | 7   |
|                   |         | 90 |          | 24 |          | .37 |
+-------------------+---------+----+----------+----+----------+-----+
| Total             | 1       | 10 | 1,458.82 | 10 | 1,293.00 | 100 |
|                   | ,208.45 | 0. |          | 0. |          | .00 |
|                   |         | 00 |          | 00 |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| Breakdown by      |         |    |          |    |          |     |
| types of account  |         |    |          |    |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| - Cash account    | 1       | 9  | 1,366.91 | 9  | 1,190.72 | 92  |
|                   | ,122.21 | 2. |          | 3. |          | .09 |
|                   |         | 86 |          | 70 |          |     |
+-------------------+---------+----+----------+----+----------+-----+
| - Credit balance  | 86.24   | 7. | 91.91    | 6. | 102.28   | 7   |
| account           |         | 14 |          | 30 |          | .91 |
+-------------------+---------+----+----------+----+----------+-----+
| Total             | 1       | 10 | 1,458.82 | 10 | 1,293.00 | 100 |
|                   | ,208.45 | 0. |          | 0. |          | .00 |
|                   |         | 00 |          | 00 |          |     |
+-------------------+---------+----+----------+----+----------+-----+

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

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.

(B) Securities Dealer

The Proprietary Trading Department and Fixed Income Department are
responsible for stock and bond 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.

(C) 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.

(D) 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 2008, 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. As a result, many companies delayed
their listing plans, which led to fewer-than-expected companies being
listed on the stock market. However, in 4Q08, the Stock Exchange of
Thailand extended the period for granting tax privileges for companies
intending to list within 2009 to stimulate the number of listing
companies. Hence, many companies expressed interest and submitted
listing applications to list on the Stock Exchange of Thailand within
2009 in order to reserve the right to obtain tax privileges.

During the year 2008, the Company acted as co-lead underwriter on one
IPO and as co-underwriter on five IPOs and was appointed to act as
financial advisor and lead underwriter on six IPOs. In addition, the
Company acted as the financial advisor for IPO and listing to six
companies. One of those clients has already been granted approval from
the SEC to launch IPO. Furthermore, the Company successfully diversified
its source of revenues and was appointed by seven companies to provide
other financial advisory services, including private placements, M&A,
valuation, feasibility study, 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.

(E) Securities Borrowing and Lending (SBL)

The Ministry of Finance granted the Company approval to conduct
securities borrowing and lending business on February 26, 1999. The
Company was the first broker to act as a principal and agent assisting
all types of clients who want to lend or borrow securities: 1.
Institutional Lenders, 2. Institutional Borrowers, 3. Retail Lenders,
and 4. Retail Borrowers. This service will help increase liquidity and
price stability to the Thai capital market, which will benefit all
parties and further develop the Thai capital market.

In 2008, SBL gained in popularity due to the volatile stock market.
Moreover, SEC has announced SEC’s relaxation on regulations such as
revising definition of Institutional Investors following Derivatives Act
B.E. 2546, allowing short selling in cash account, allowing foreign
securities borrowing and lending, allowing cash in any foreign currency
apart from U.S. dollar as collateral, etc. Consequently, KGI’s SBL
accumulated volume reached Baht 15,000 million by year end. In 2009, the
Company plans to expand its SBL business as follows:

1.  Continue to develop and improve its internal system to support SEC’s
    relaxation on regulations. Among the relaxation is the allowance of
    borrowing and lending of listed stocks in SET, allowing cash in any
    foreign currency apart from U.S. dollar as collateral, etc. This
    increases flexibility, variety and speed as well as reduces
    transaction cost.

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

(F) 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.

(G) Selling Agent of Unit Trust

The Company’s fixed income department has been appointed as a selling
agent for asset management firms such as:

+---------------------------------------+------------------------------+
| -   One Asset Management Limited      | -   Ayudhya Fund Management  |
|                                       |     Co., Ltd                 |
+---------------------------------------+------------------------------+
| -   Krungthai Asset Management Public | -   BT Asset Management      |
|     Company Limited                   |     Co.,Ltd                  |
+---------------------------------------+------------------------------+
| -   SCB Asset Management Co.,Ltd      | -   Finansa Asset Management |
|                                       |     Ltd                      |
+---------------------------------------+------------------------------+
| -   ING Funds (Thailand) Co.,Ltd      | -   Phillip Asset Management |
|                                       |     Co.,Ltd                  |
+---------------------------------------+------------------------------+
| -   TMB Asset Management Co., Ltd     | -   Siam City Asset          |
|                                       |     Management Co.,Ltd       |
+---------------------------------------+------------------------------+
| -   Aberdeen Asset Management Co.,    | -   Seamico Asset Management |
|     Ltd                               |     Co.,Ltd                  |
+---------------------------------------+------------------------------+
| -   MFC Asset Management Public       | -   Thanachart Fund          |
|     Company Limited                   |     Management Co.,Ltd       |
+---------------------------------------+------------------------------+
| -   Kasikorn Asset Management Co.,    | -   TISCO Asset Management   |
|     Ltd                               |     Co., Ltd                 |
+---------------------------------------+------------------------------+
| -   PrimaVest Asset Management Co.,   | -   UOB Asset Management     |
|     Ltd                               |     Co., Ltd                 |
+---------------------------------------+------------------------------+
| -   Asset Plus Fund Management        |                              |
|     Co.,Ltd                           |                              |
+---------------------------------------+------------------------------+

All clients are advised on the appropriate fund based on their risk
tolerance and investment return requirements.

(H) Futures

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
product:

-   SET50 Index Futures

-   SET50 Index Options

-   Stock Futures

-   Gold Futures

Not only the Futures retail brokerage business, The Company also trades
futures in Proprietary Trading and further more acted as a Market Maker
to increase and stabilize trading liquidity and volume of SET50 Index
Futures, SET50 Index Options, and Single Stock Futures in Thailand
Futures Exchange (TFEX). In 2008, the Company was ranked No.4 with
market share of 8.95% of TFEX market.

(I) 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. 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. The clients may choose to invest in
  derivatives for two purposes: a). to reduce risk, and b). to enhance
  return on their investment portfolio. The Company’s OTC Equity
  Derivatives volume reached Baht 7,000 million by year end. 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 2008, 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 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. In 2008, the Company offered 3 new
  types of ELN, ELN-StepUP, ELN-KO, and ELN-Accumulator.

  ThaiDEX SET50 ETF (TDEX)

The Company joined a group led by One Asset Management Limited 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. 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.

During the IPO period, August 21-29, 2007, Asset Under Management (AUM)
of TDEX was Baht 1,011 million or 178 million units. By the end of 2008,
AUM was Baht 2,133 million, showing growth of 110% and total number of
units was 654 million units, growing 267%, and TDX reached its largest
size at Baht 4,000 million in June 2008. The average trading value was
around Baht 100 million per day and TDEX exceeded the 2008 target.

In 2009, The Company expects AUM of TDEX to reach Baht 4,000 million.
The Company believes it can achieve such target due to its capabilities,
Thai market recovery and increasing popularity of TDEX.

(2) MARKET OVERVIEW AND COMPETITION

Market Overview

In 2008, Thailand's stock market plunged sharply. The SET Index fell by
48.4%, its largest annual percentage loss since the 1997 Asian financial
crisis. The diffusion of the collapse of the sub-prime market in the US
to real economic activities around the globe triggered a huge
de-leveraging of foreign investors out of emerging markets, including
Thailand. Moreover, political unrest in Thailand exacerbated the
negative investment sentiment. The standoff between anti-Thaksin and
pro-Thaksin groups resulted in a number of violent clashes and the
announcements of a state of emergency in Bangkok. Last but not least,
the seizures of two international airports in 4Q08 significantly weighed
on the exports and tourism sectors in the country.

While the market correction in 2008 was huge, the downturn did not happen that early. During 1H08, the Thai market actually remained solid. In the first half of the year investors had still expected the US sub-prime problem to be limited to the related parties such as financial institutions and investment banks. Economic data on the US side and other major economies remained resilient, leading to foreign investors raising their risk appetites in emerging equities. Moreover, Thailand's stock market in 1H08 enjoyed the optimism from the general election in December 2007. The local bourse also benefited from the unbelievable rally in oil prices, as supply concerns drove US WTi oil price to a historic high of US$145.3/bbl on July 3, 2008. With the energy sector being the largest sector in SET with more than 30.0% weighting in total capitalization, the commodity tension pushed the Thai market up strongly. SET Index closed 1H08 at 768.59, down only 10.4% from YE07's close at 858.10. 

However, the situation got much worse starting in 3Q08. Liquidity problems appeared to have a widespread contagion across the continents, and a large number of major financial institutions faced a high degree of credit freeze as the moral hazard issue clouded the global credit markets, making the search for funding extremely difficult. The most noted victims included Lehman Brothers, which filed for bankruptcy, and AIG, which had to ask for financial support from the US government. Drastic de-leveraging occurred and resulted in stock markets plunging around the world. The SET Index dove to its lowest level in 2008 at 384.15 on October 29, 2008. 

In addition to the global economic and financial turmoil, the escalation of local political tension, due to the protests to oust PM Samak and PM Somchai, led to the announcements of a state of emergency in Bangkok. Investment sentiment reached its worst level when the two international airports in Bangkok were seized and the tourism industry became paralyzed. However, after Thailand's Constitution Court dissolved the People’s Power Party (PPP) and banned PM Somchai from Thai politics, the tension quickly eased, as protestors withdrew from the airports and ended all demonstrations. In December 2008, Thailand's political poles changed with the Democrat party becoming the coalition leader. 

On the economic front, the economic figures in the first three quarters of 2008 did not yet reflect the global recession scenarios, as Thai exports still had support from old shipment orders and there was the resilience of soft commodity prices. Meanwhile, 1Q08, 2Q08 and 3Q08 GDP grew 6.0%, 5.3%, and 4.0%, respectively. However, it is widely expected that 4Q08 economic growth will be near zero, while the growth in 2009 should be low between 0.0-2.0%. 

In 2008, the daily average turnover stood at Bt15.9bn, down from Bt17.4bn recorded in 2007. Due to all of the negative factors mentioned, foreign investors net sold Bt162bn of Thai stocks during 2008 and market capitalization fell to Bt3.57trn, down 46.2% from Bt6.64trn at the end of 2007. 

Stock Exchange of Thailand 

+--------------------------+--------+--------+--------+--------+-------+
|                          | 2004   | 2005   | 2006   | 2007   | 2008  |
+--------------------------+--------+--------+--------+--------+-------+
|   Total trading value*   | 5,0    | 4,0    | 3,9    | 4,2    | 3,9   |
|   (Baht million)         | 35,816 | 31,240 | 74,561 | 71,820 | 81230 |
+--------------------------+--------+--------+--------+--------+-------+
|   Avg. daily trading     | 20,388 | 16,454 | 16,394 | 17,436 | 1     |
|   value* (Baht million)  |        |        |        |        | 6,118 |
+--------------------------+--------+--------+--------+--------+-------+
|   Total market           | 4,5    | 5,1    | 5,0    | 6,6    | 3,5   |
|   capitalization (Baht   | 21,894 | 05,113 | 78,705 | 36,069 | 68223 |
|   million)               |        |        |        |        |       |
+--------------------------+--------+--------+--------+--------+-------+
|   SET Index (year-end)   | 668.1  | 713.7  | 679.8  | 858.1  | 450.0 |
+--------------------------+--------+--------+--------+--------+-------+
|   Dividend yield (%)     | 2.75   | 3.37   | 4.23   | 3.31   | 6.57  |
+--------------------------+--------+--------+--------+--------+-------+
|   P/E ratio (times)      | 9.4    | 9.4    | 8.1    | 12.6   | 7.01  |
+--------------------------+--------+--------+--------+--------+-------+
|   P/BV ratio (times)     | 2.0    | 1.91   | 1.65   | 2.0    | 0.98  |
+--------------------------+--------+--------+--------+--------+-------+
|   No. of listed          | 439    | 468    | 476    | 475    | 476   |
|   companies              |        |        |        |        |       |
+--------------------------+--------+--------+--------+--------+-------+

Note : * Year 2004-2005: not included MAI, Year 2006-2007 : included
both SET & MAI

As for new listings, there were only 12 companies listed in Thailand's
stock markets, including both SET and MAI, in 2008, as external
deceleration and political conflicts weighed heavily on investment
sentiment. It is also worth noting that all of those IPOs were done in
the first half of 2008. In the second half of the year, when the bear
market materialized, no IPOs were released.

IPO stocks in 2008

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

  DIMET                21-Jan-08               40

  LHK                  24-Jan-08               221

  CRANE                13-Feb-08               280

  BSM                  14-Feb-08               55

  ESSO                 6-May-08                9,304

  SABINA               15-May-08               336

  TTW                  22-May-08               4,200

  PM                   27-May-08               667

  AS                   29-May-08               900

  SGP                  3-Jun-08                2,240

  SYNEX                16-Jun-08               522
  -------------------- ----------------------- --------------------------

Competition among Thai brokerages remained fierce in 2008. Generally,
foreign brokers or brokers with foreign partners continued to gain a
competitive advantage from a market share perspective. This can be
explained by the activity of foreign investors in the year. Huge selling
pressure from foreign investors drove the market shares of those
foreign-related houses. The sum of market share of the top 10 brokers
fell from 49.3% in 2007 to 48.7% in 2008.

Top 10 securities brokers (2008)

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

  1        Kim Eng Securities (Thailand)     KEST       8.12
           Plc.                                         

  2        Phatra Securities Plc.            PHATRA     6.04

  3        Asia Plus Securities Plc          ASP        5.39

  4        Credit Suisse (Thailand) Ltd.     CS         4.88

  5        Seamico Securities Plc            ZMICO      4.59

  6        BFIT Securities Plc.              BFITSEC    4.01

  7        Bualuang Securities Plc.          BLS        3.97

  8        Thanachart Securities Plc.        TNS        3.97

  9        UBS Securities (Thailand) Ltd.    UBS        3.92

  10       Ayudhaya Securities Ltd.          AYS        3.84

           The sum of market share of the               48.73
           top 10 brokers                               

           Others                                       51.27

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

Industry trend in 2009

During the first half of 2009, the stock market should remain very
volatile. Although Thailand has a new government and faces less
political tension, the upside for the stock market should still be
limited by recession-like economic data. This should result in a lack of
conviction buying from investors and lock the stock market in a tight
trading range. However, at the same time, it is unlikely that the market
would plunge sharply like in 2008 as valuations are already at rock
bottom.

The investment climate is poised to improve starting in 2H09, as the
economic stimulus, both fiscal and monetary, from the new government
should see their materialization in economic figures. Moreover, the
major economies in the world have the scope to gradually improve in the
second half of the year. Therefore, investor interest in Thailand's
bourse, which actually trades at highly attractive valuations, should
increase. At present, Thai stocks are trading at valuation multiples
near the levels seen in the 1997 financial crisis, so the significant
upside could be expected once foreigner risk appetite resumes.

(3) Funding for Products and Services

(A) 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.

(B) 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 2009. During the year, the
Company and the subsidiary company agreed to extend the maturity date to
21 March 2010. And the Board of Directors’ Meeting of the Company held
on 18 February 2009 approved the extension of the maturity date of the
subordinated loans form 21 March 2010 to 21 September 2010.

(C) Net capital adequacy ratio

The Office of Securities and Exchange Commission requires that all
securities companies should maintain a Net Liquid Capital Rule (NCR)
ratio of at least 7.0% of total liabilities. Currently, the Company’s
NCR ratio exceeds the SEC’s requirement. As of 31 December 2008, the
Company’s NCR was 425.64%.

(D) 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.