3. Description of business

1.  Significant Development

KGI Securities (Thailand) Public Company Limited, formerly Securities
One Company Limited which began its securities business operations in
1986, KGI Group became the major shareholder of the Company in 1998. The
Company's significant developments in its businesses in the three
preceding years were as follows.

  --------- ----------- --------------------------------------------------
  2007      February    1) The Company joined a group led by One Asset
                        Management Limited (97% owned by the Company) and
                        won the right to launch Thailand’s first Equity
                        Exchange Traded Fund (ETF).

                        2) The Company won the “Best House of the Year
                        2006”, which was given to the futures brokerage
                        firm with the most 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.

            September   The Company was the first and only service
                        provider of Market Maker (MM) and Participating
                        Dealer (PD) for ThaiDEX SET50 ETF (TDEX),
                        Thailand’s first equity exchange traded fund.

            October     The Company started to provide trading in SET50
                        Index Options, giving more alternatives to
                        investors.

  2008      June        TRIS Rating Co., Ltd. announced the company rating
                        of KGI Securities (Thailand) Public Company
                        Limited at “BBB+”

            September   The Company started providing OTC Equity
                        Derivatives on foreign equity underlying covering
                        markets; Hong Kong, Japan, Singapore, Australia,
                        USA, and Europe.

            November    The Company started to provide trading in Single
                        Stock Futures, increasing the alternatives for
                        investors.

  2009      January     The Company moved its Head Office from United
                        Center Building on Silom Road to Asia Centre
                        Building on South Sathorn Road

            February    The Company started to provide trading in Gold
                        Futures, increasing the alternatives for
                        investors.

            June        1) The Company was the first securities company in
                        Thailand to launch Derivative Warrants (DW). The
                        first DW of the Company was Call Warrants on PTT
                        issued by KGI # A or PTT13CA. The Company also
                        acted as Market Maker (MM) of this DW.

                        2) TRIS Rating Co., Ltd. affirmed the company
                        rating of KGI Securities (Thailand) Public Company
                        Limited at “BBB+”
  --------- ----------- --------------------------------------------------

+--------+----------+--------------------------------------------------+
|        | August   | 1) The Company joined a group led by One Asset   |
|        |          | Management Limited (97% owned by the Company) to |
|        |          | launch ThaiDEX FTSE Set Large Cap ETF (TFTSE).   |
|        |          | The Company acts as Market Maker (MM), providing |
|        |          | liquidity in the secondary market and as         |
|        |          | Participating Dealer (PD), facilitating the      |
|        |          | creation and redemption of TFTSE in the primary  |
|        |          | market.                                          |
+--------+----------+--------------------------------------------------+
|        |          | 2) The Company launched the second DW, warrants  |
|        |          | on KBANK issued by KGI # A or KBAN13CA. The      |
|        |          | Company also acted as Market Maker (MM) of this  |
|        |          | DW.                                              |
+--------+----------+--------------------------------------------------+
|        | October  | 1)  The Company launched the third DW, warrants  |
|        |          |     on PTTEP issued by KGI # A or PTTE13CA. The  |
|        |          |     Company also acted as Market Maker (MM) of   |
|        |          |     this DW.                                     |
+--------+----------+--------------------------------------------------+
| 2010   | January  | The Company launched the fourth DW, warrants on  |
|        |          | PTT issued by KGI # B or PTT13CB. The Company    |
|        |          | also acted as Market Maker (MM) of this DW.      |
+--------+----------+--------------------------------------------------+

1.  Overview of the Company’s business

KGI Securities (Thailand) Public Company Limited was incorporated as a
public limited company under the Public Limited Companies Act. The
Company operates its business in Thailand with five securities licenses;
securities brokerage, securities dealing, investment advisory,
securities underwriting and securities borrowing and lending services.
In addition, the Office of the Securities and Exchange Commission (SEC)
has granted the Company licenses to operate securities registrar
business and derivatives broker business and approved to operate
financial advisory business, Over-the-Counter (OTC) derivative business
and to act as a sales agent for unit trusts in designed areas as
specified by SEC.

The Company's registered office is located at 173 Asia Centre Building,
8^(th)-11^(th) Floor, South Sathorn Road, Thungmahamek Sub-District,
Sathorn District, Bangkok 10120. As at 31 December 2009, the Company had
13 branches in Bangkok and provincial as follows.

  ----------------------- ----------------------- -----------------------
  Bangkok                 Provincial              

  1) Pin klao             1) Chiang Rai           5) Samut Sakhon

  2) Changwattana         2) Nakhon Sawan         6) Suphan Buri

  3) Thapra               3) Nakhon Ratchasima    7) Nakhon Pathom

  4) Silom Center         4) Udon Thani           8) Phetchaburi

                                                  9) Hat Yai
  ----------------------- ----------------------- -----------------------

Note: During 2009, the Company closed its Chiang Mai Branch

KGI Securities (Thailand)’s shareholding in subsidiaries

(Subsidiary companies included in consolidated financial statements) 

As of 31 December 2009

+---------------------------+-------------------+-------------+-------+
| Company                   | Country           | Bu          | %     |
|                           |  of Incorporation | siness Type | ho    |
|                           |                   |             | lding |
+---------------------------+-------------------+-------------+-------+
| One Asset Management      | Thailand          | Fund        | 97    |
| Limited                   |                   | Management  |       |
+---------------------------+-------------------+-------------+-------+
| KGI Securities (Thailand) | Hong Kong         | Investment  | 100   |
| International             |                   |             |       |
|                           |                   |             |       |
| Holdings Limited          |                   |             |       |
+---------------------------+-------------------+-------------+-------+
| KGI (Thailand) Holdings   | British Virgin    | Investment  | 100   |
| Limited                   | Islands           |             |       |
+---------------------------+-------------------+-------------+-------+

(See details of investments in subsidiary companies in section 9 of the notes to financial statements)

Subsidiary companies included in consolidated financial statements

One Asset Management Limited (ONEAM)

ONEAM was established on March 19, 1992 with registered capital of Baht
100 million (fully paid-up). At the beginning, the company has been
granted a license from the Ministry of Finance for mutual fund
management only. Later, the company has acquired additional licenses for
private fund management and provident fund management.

ONEAM has increased its registered capital to Baht 105 million (fully
paid-up) with KGI Securities (Thailand) holding 97%, ONEAM’s directors
and employees holding 3% of outstanding shares.

ONEAM offers many types of funds to provide its clients with investment
alternatives to suit their diversified investment requirements. The
mutual funds under ONEAM are as follows:

1.  Equity Fund 6. Foreign Investment Fund

2.  Fixed Income Fund 7. Country Fund

3.  Mixed Fund 8. Special Fund

4.  Retirement Mutual Fund 9. SMEs Venture Capital Fund

5.  Long Term Equity Fund

ONEAM has built up a strong reputation with both individual and
institutional investors and has total asset size under management of
Baht 73.98 billion (as of 31 December 2009). Investment performance has
been good, stable and suitable to each investor under acceptable risk
level.

KGI Securities (Thailand) International Holdings Limited (HOLDCO)

Formerly known as “KGI Securities One International Holdings Limited”, a
wholly owned offshore subsidiary established in Hong Kong. Its name was
changed to “KGI Securities (Thailand) International Holdings Limited” on
December 7, 2001.

KGI (Thailand) Holdings Limited (KTHL)

KGI (Thailand) Holdings Limited (KTHL), a wholly owned offshore
subsidiary established in British Virgin Islands.

Policy for group operations

The Company and its subsidiaries have hired professional managers and
the Company also appointed persons to be directors for setting policies
of its subsidiaries.

3.3 Credit Rating

TRIS Rating Co.,Ltd affirmed the company rating of the Company as of 29
June 2009 at BBB+. The rating reflects the firm’s capable management
team with a proven track record, strong market position in derivative
business, as well as sufficient liquidity and stable revenue
contribution from One Asset Management Limited (97% owned by the
Company). See Rating report at www.kgieworld.co.th.

3.4 Revenue Structure

The majority of the operations of the Company and its subsidiary
companies involve the single business segment of securities related
business, including mutual fund management, the Company’s revenue
structure as of 31 December 2009 is as follow.

+------------------------+--------+-----+------+----+------+------+
|                        | O      | %   | In   | Co | T    | % of |
|                        | perate | Sh  | come | nt | otal | t    |
|                        | By     | are | of   | ra | In   | otal |
|                        |        | H   | 2009 |    | come | in   |
|                        |        | old |      |    | of   | come |
|                        |        | ing | (be  |    | 2009 |      |
|                        |        |     | fore |    |      |      |
|                        |        | By  | con  |    | (a   |      |
|                        |        | C   | tra) |    | fter |      |
|                        |        | omp |      |    | con  |      |
|                        |        | any |      |    | tra) |      |
+------------------------+--------+-----+------+----+------+------+
| 1. Brokerage fee from  | the    | -   | 57   | -  | 57   | 44   |
| securities business    | C      |     | 0.99 |    | 0.99 | .25% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 2. Brokerage fee from  | the    | -   | 8    | -  | 8    | 6    |
| derivatives business   | C      |     | 0.23 |    | 0.23 | .22% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 3. Fees and services   | the    | -   | 2    | -  | 2    | 1    |
| income^(/1)            | C      |     | 0.18 |    | 0.18 | .56% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| Fees and services      | ONEA   | 97% | 18   | (2 | 18   | 13   |
| income^(/1)            | M^(/2) |     | 3.26 | .7 | 0.53 | .99% |
|                        |        |     |      | 3) |      |      |
+------------------------+--------+-----+------+----+------+------+
| 4. Gain (loss) on      | the    | -   | (331 | -  | (331 | (25. |
| trading in securities  | C      |     | .15) |    | .15) | 67)% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 5. Gain (loss) on      | the    | -   | 62   | -  | 62   | 48   |
| trading derivatives    | C      |     | 7.62 |    | 7.62 | .64% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 6. Interest and        | the    | -   | 13   | (  | 10   | 7    |
| dividends              | C      |     | 3.05 | 31 | 1.53 | .87% |
|                        | ompany |     |      | .5 |      |      |
|                        |        |     |      | 2) |      |      |
+------------------------+--------+-----+------+----+------+------+
| Interest and dividends | ONEA   | 97% | 3.22 | -  | 3.22 | 0    |
|                        | M^(/2) |     |      |    |      | .25% |
+------------------------+--------+-----+------+----+------+------+
| 7. Interest on margin  | the    | -   | 2    | -  | 2    | 2    |
| loans                  | C      |     | 8.09 |    | 8.09 | .18% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 8 . Share of profit    | the    | -   | 2    | (  | -    | -    |
| from subsidiary        | C      |     | 6.95 | 26 |      |      |
|                        | ompany |     |      | .9 |      |      |
| Companies accounted    |        |     |      | 5) |      |      |
| for                    |        |     |      |    |      |      |
|                        |        |     |      |    |      |      |
| Under equity method    |        |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| 9. Other income        | the    | -   | 9.01 | -  | 9.01 | 0    |
|                        | C      |     |      |    |      | .71% |
|                        | ompany |     |      |    |      |      |
+------------------------+--------+-----+------+----+------+------+
| TOTAL INCOME           |        |     | 1,35 | (  | 1,29 | 100  |
|                        |        |     | 1.45 | 61 | 0.25 | .00% |
|                        |        |     |      | .2 |      |      |
|                        |        |     |      | 0) |      |      |
+------------------------+--------+-----+------+----+------+------+

Note /1 See note of financial statements No. 23: Fees and Services
Income.

/2 ONEAM: One Asset Management Limited, 97% owned by the Company.