bfit 06

Bangkok First Investment & Trust Public Company Limited

Annual Report 2006 _______________________________________________

Contents Page

Summary of Financial Information 1

Message from the Chairman 2

Board of Directors 4

Audit Committee’s Report 5

General Information 6

Type of Business 8

Important Changes during the Year 13

Objectives of the Company’s Business 15

Industry Situation and Competition 16

Risk Factors 22

Capital and Shareholding Structure 27

Management 28

Corporate Governance 44

Related Party Transactions 49

Explanation and Analysis of the Financial Status 51 and Operating Performance for the Year 2006

Report of the Board of Directors’ Responsibilities 63 for Financial Statements

Report and Financial Statements

Bangkok First Investment &Trust Public Company Limited

__________________________________________ Annual Report 2006 1

Summary of Financial Information

Unit : Thousand Baht 2006 2005 2004

Financial Status

Investment – net 2,732,090 2,069,141 2,742,342

Loans, receivable and accrued interest receivable – net

3,081,790 3,699,300 2,851,533

Borrowings and deposits 4,870,717 4,534,844 4,891,996

Total Assets 8,374,184 7,735,103 7,182,439

Total Liabilities 5,356,801 6,129,369 5,786,567

Shareholders’ equity 3,017,383 1,605,734 1,395,872

Paid-up capital 1,000,000 1,000,000 1,000,000

Number of shares * (Thousand shares) 200,000 200,000 100,000

Performance

Interest and dividend income 418,207 309,345 259,453

Non-interest income (Loss) 743,517 636,591 363,474

Total income 1,161,724 945,936 622,927

Net income (Loss) 931,938 786,539 530,480

Net earnings (Loss) 296,887 265,718 173,149

Financial ratio

Net profit margin (%) 25.56 28.09 27.80

Return on Equity (%) 12.84 17.71 12.95

Return on Total Assets (%) 3.69 3.56 2.39

Par value per share * (Baht per share) 5.00 5.00 10.00

Earnings (Loss) per share * (Baht per share) 1.48 1.33 1.73

Dividend per share * (Baht per share) 0.15 0.15 0.30

Book value per share * (Baht per share) 15.09 8.03 13.96

BIS Ratio (%) 28.97 28.41 23.58

Net Capital Rule Ratio (%) 497.07 75.88 322.54

* In 2005, The Company has approved the stock split from one share to two shares and the change in par value from Baht 10 per share to Baht 5 per share.


Annual Report 2006 __________________________________________

2

Message from the Chairman

Overall

Thai economy and politic had faced uncertainty throughout year

2006.

Economically, movements in foreign currency exchange caused

by international fund inflows and surplus trade balance forced the

regulator to control such movement. In turn, the capital markets

were considerably affected. Interest rate in the first half of the

year had continually surged, and then steadily decreased until the

end of the year. The decrease in rates was stemmed from a

decrease in global oil prices leading to a decrease in inflation rate.

Politically, uncertainty had started from the beginning of the year. Public movement

against telecommunication corporation ownership transfer and doubted confidence in

the previous government led to a military coup in September, then establishment of a

temporary government under sponsorship of Council of National Security.

In the midst of the conditions mentioned, the company was able to operate well. It was

a result of proper and timely adaptations and harmonized cooperation between

committees incorporated from the company’s directors and top management. In effect,

the company’s financial status was strengthened together with satisfactory performance.

One of outstanding achievements in 2006 was a successful listing of BFIT Securities

Public Company Limited, the company’s subsidiary, in the Stock Exchange of Thailand

with a symbol of BSEC. This affirms that BSEC has always contributed strength and

growth to the company.

Performance

In 2006, the company and subsidiary held total assets for the amount of 8,374 million

Baht increasing from 7,735 million Baht in the previous year or increased by 8.26

percent while shareholders’ equity significantly gained to 3,017 million Baht increasing

from 1,606 million Baht in the previous year or increased by 87.85 percent. Main

reasons were from stronger performance of the company and subsidiary and fund raised

from initial public offering of the subsidiary. As a result, financial structure of the

company and subsidiary were strengthened at total debt to equity ratio of 1.77 times

decreasing from 3.82 times in the previous year.

The company and subsidiary generated total net profit for the amount of 297 million

Baht increasing from 266 million Baht in the previous year or increased by 11.73

percent. Finance business earned net profit for the amount of 71 million Baht increasing

from 43 million Baht in the previous year or increased by 63.49 percent. Main reasons

were from profit from capital gains and decreasing operational costs that positively

offset declining net interest margin caused by continual increase in funding cost during


__________________________________________ Annual Report 2006 3

the first half of the year. This confirmed that finance business can maintain, actually improve, profitability under the adverse industrial condition. Brokerage business earned net profit for the amount of 247 million Baht increasing from 222 million Baht in the previous year or increased by 11.31 percent. This reflected management competences in the midst of volatile and revert conditions of the capital market.

Outlook toward 2007

It is extremely challenging to stand securely in the financial arena in year 2007. Economic and political factors will be volatile throughout the year. Global economy possibly faces deceleration caused by American and Chinese economic conditions. As a result, Thai economy fully standing in globalization must be affected more or less. Local politic condition will face extreme uncertainty particularly in policy settings and the national election that may occur at the end of the year. Possible changes in financial structure, such as enacting the deposit guarantee act and applying new accounting standards regarding allowance for doubtful lending and investment in subsidiary, will also tackle all financial institutes.

All challenging factors mentioned will force the company and subsidiary to properly and timely adapt in order to perform well in the industry. However, all directors and top management has thoroughly realized such challenges and prepare to face them appropriately, adequately and timely. In turn, I am utmost confident that the company and subsidiary will satisfactorily gain their strength and growth along the challenging time.

I, on behalf of the board of directors, would like to express utmost thankfulness to all investors and customers who have always supported the company and subsidiary, management and staffs who have always committed to quality and performance and state organizations who have always delivered priceless advices helping the company and subsidiary to operate business firmly and strongly.

All parties respectfully mentioned made year 2006 of the company and subsidiary another stronger and better year.

(Somchai Sakulsurarat)

Chairman of the Board


Annual Report 2006 ________________________________________________

4

Board of Directors

Mr. Somchai Sakulsurarat

Chairman of Board of Directors

Mr. Edward T. Nocco

Chairman of the Audit Committee

Mr. Thira Wipuchanin

Audit Committee

Mr. Vatana Supornpaibul

Audit Committee

Mr.Harn Chiocharn

Managing Director

Mrs.Kingthien Bang-Or

Director

Mrs.Tida Chonlavorn

Director

Mr. Suwit Ratanayanon

Director

Dr. Sakorn Suksriwong

Chairman of the Executive Committee


___________________________________________Annual Report 2006 5

Audit Committee’s Report The Audit Committee (Committee) of Bangkok First and Investment Trust Public Company Limited is comprised of three independent directors. The Committee is empowered by the Board of Directors to examine all matters relating to the financial status of the Company and its external and internal audits. The Committee pursues good corporate governance by providing advice to management regarding its risk management policies and internal control practices.

During 2006, the Committee held five meetings. Four of the meetings were held quarterly to review the Company’s consolidated financial statements which had been reviewed by the external auditor and to discuss other related activities in compliance with the rules and regulations of the Stock Exchange of Thailand. At these meetings, the Committee met independently with the management and internal and external auditors of the Company. There were reviews of accounting policies and procedures, internal and external audit findings and the audit plan. The Committee also verified and accepted the financial statements for each quarter-end during the year and recommended that the Board of Directors approve the statements. Where audit findings revealed weaknesses in internal controls, the Committee tracked such findings to ensure that corrective actions were taken. The Committee also reviewed the Independent Auditor’s Special Report on the results of the assessment of the Company’s internal audit function. The Committee requested that Management outline a course of action for each of the recommendations and the Committee tracked the implementation of the recommendations. In addition, the Committee held a fifth meeting to review Management’s response to the Bank of Thailand’s comments regarding the 2004 Special Report.

The Audit Department operates under regulations and procedures and its mandate is to review compliance with documented internal controls and to identify risks within the company. The Department follows an Audit Plan approved by the Committee at the start of each year. The regularity of visits to business and support units is determined by the perceived risks in such units and the findings obtained. The Department also ensures that recommendations to improve on or comply with controls are reviewed by management and corrective action taken. Detailed audit reports by the internal auditor and the respective management responses are reviewed by the Committee to ensure that corrective action is taken in a timely manner.

In our opinion, the internal controls of the Company were found to be effective in ensuring that the Company’s assets were safeguarded, that proper accounting records were maintained and that resources were employed effectively. The Committee has recommended to the Board of Directors that Ernst and Young Office Limited be re-appointed as the Company’s external auditors for the financial year ending December 31, 2007. The re-appointment of the audit firm and the acceptance of its fees will be subject to the approval of the shareholders at the Annual General Meeting.

Edward T. Nocco Chairman of the Audit Committee


Annual Report 2006 ___________________________________________ 6

General Information

Name and address of the Company

Bangkok First Investment & Trust Public Company Limited (BFIT)

Registration No. : 0107536000722

Type of Business Finance Business

Head Office : 23rd Floor, Bangkok Insurance Building,

25 Sathon Tai Road, Thung Mahamek, Sathon, Bangkok 10120

Tel : 0-2677-4300

Fax : 0-2677-4301

Website : www.bfit.co.th

Subsidiary

BFIT Securities Public Company Limited (BSEC)

Registration No. : 0107574700798

Type of Business Securities Business

Head Office : 14th Room A, 16th Floor, Silom Complex Building, ,

191 Silom Road, Silom, Bangrak, Bangkok 10500

Tel : 0-2200-2000

Fax : 0-2632-0191

Website : www.bfitsec.net BSEC has 5 securities trading branches as listed below:

Ploenchit Branch : 14th Floor Mercury Tower,

540 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330

Tel : 0-2264-8555

Fax : 0-2658-6232

Hat Yai Branch : 5th (mezzanine), 6th Floor, Lee Garden Plaza,

29 Prachathipat Road, Hat Yai, Hat Yai, Songkla 90110

Tel : 0-7435-3538

Fax : 0-7424-5719

Nakhon Sri Thamarat Branch

: 111, 111/1-4 Pattanakarn-Kukwang Road, Tambol Klung, Amphoe Meuang, Nakhon Sri Thammarat 80000

Tel : 0-7530-4200

Fax : 0-7530-4288

Nakornratchasima Branch

: 6th Floor Room A3, The office building of the Mall Nakornratchasima, 1242/2 Mitrapharp Road, Tambol Nai Meung, Amphoe Meung, Nakornrachasrima 30000

Tel : 0-4439-3768

Fax : 0-4439-3777


___________________________________________ Annual Report 2006 7

Chiangmai Branch : 320 Chiangmai – Lampang Road, Pa Tun, Meung, Chiangmai 50000

Tel : 0-5323-4899

Fax : 0-5323-5259

Investment in Companies (10 per cent or higher) as of 31 December 2006

Ordinary Shares: Company Name Major

Shareholder Type of Business

Amount at cost

(Mil. Baht)

Per cent of

Holding

Book Value

(Mil.Baht)

Registered Capital (Mil.Baht)

Paid-up Capital

(Mil.Baht)

BFIT Securities PCL. BFIT Securities 400.00 50.00 1,316.33 800.00 800.00

Other References

Share Registrar

Thailand Securities Depository Company Limited 62 The Stock Exchange Building, 4th, 6th -7th Floor Ratchadapisek Road Klongtoey Sub district, Klongtoey District, Bangkok 10110 Tel. 0-2229-2800 Fax. 0-2359-1259

Auditors

Mr. Sophon Permsirivallop, Certified Public Accountant (Thailand) No.3182

and/or

Mr.Narong Puntawong , Certified Public Accountant (Thailand) No. 3315

and/or

Miss Ratana Jala, Certified Public Accountant (Thailand) No. 3734

Ernst & Young Office Limited 193/136-137 Lake Rajada Office Complex New Rajadapisek Road, Bangkok 10110 Tel 0-2264-0777

Audit Fee

For Examination of the financial statements of the Company and Subsidiary for the year 2006 Baht 2,760,000 - The Company Baht 1,360,000 - The Subsidiary Baht 1,400,000

Non-Audit Fee

For Special auditing and reporting propose to the Bank of Thailand Baht 140,000

Legal advisor

- None -


Annual Report 2006 ____________________________________________ 8

Type of Business

BFIT holds four finance licenses as follows:

• Business of finance for commerce

• Business of finance for development

• Business of finance for disposition and consumption

• Business of finance for housing

Moreover, BFIT is approved to act as financial advisor, debenture holder representative, and/or trustee.

BSEC holds four securities licenses as follows:

• Business of securities brokerage

• Business of securities dealing

• Business of investment advisory service

• Business of securities underwriting

In addition to the above four main securities licenses, BSEC is also approved to engage in the business of financial advisory services and securities registrar.

Group Structure

Finance Business

50%

Securities Business

Note: BFIT holds approximately 400 million of BSEC’s ordinary shares. As a result of the

conversion of the subordinate convertible debentures to 199.995 million ordinary

shares and the initial public offering of 200.005 million shares, whereas BFIT had

no additional investment in BSEC according to limitation in investing in subsidiary

as set by Bank of Thailand, then, BSEC has increased the paid-up capital from

Baht 400 million to Baht 800 million and the proportion of BFIT’s shareholding in

the subsidiary company has decreased from 100 percent to 50 percent in 4th

Quarter of 2006.

BFIT

BSEC


___________________________________________ Annual Report 2006 9

Income Structure

Consolidated Financial Statements

2006 2005 2004

Mil. Baht % Mil.

Baht

% Mil.

Baht

%

Interest and dividend income

Loans and deposits 254.45 21.90 184.97 19.55 131.43 21.10

Investments 163.76 14.10 124.37 13.15 128.02 20.55

Total Interest and dividend

income (1)

418.21 36.00 309.34 32.70 259.45 41.65

Less :

Interest expenses (246.34) (21.20) (150.85) (15.95) (107.29) (17.22)

Bad debt and doubtful accounts - - (12.70) (1.34) (10.03) (1.61)

Bad debt recovery 16.55 1.42 4.16 0.44 8.01 1.29

Reversal of allowance for

doubtful accounts

- - - - 16.86 2.71

Net Interest and dividend income 188.42 16.22 149.95 15.85 167.00 26.82

Non-interest income

Brokerage fees 693.58 59.70 606.13 64.08 173.43 27.84

Gains on investments 19.90 1.71 21.32 2.25 137.93 22.14

Fees and services income 16.26 1.40 6.80 0.72 46.55 7.48

Other income 13.78 1.19 2.34 0.25 5.56 0.89

Total Non-interest income (2) 743.52 64.00 636.59 67.30 363.47 58.35

Total Income (1) + (2) 1,161.73 100.00 945.93 100.00 622.92 100.00


Annual Report 2006 ____________________________________________ 10

Business Operation The businesses of BFIT and BSEC are separated pursuant to licenses as follows:

Bangkok First Investment & Trust PCL. (BFIT)

• Money Market Investment

• Commercial Lending

• Project Finance

• Financial Advisory Service

• Debenture Holder Representative

• Treasury and Investment in Securities

BFIT Securities PCL. (BSEC)

• Securities Brokerage Service

• Securities Underwriting Service

• Financial Advisory Service

• Securities Registrar Service

BFIT’s Financial Services

Money Market Investment BFIT provides investment in the form of deposits in promissory notes for general public, corporate entities, foundations and associations that have surplus fund in the minimum amount of Baht 10,000 upwards with interest rates that are competitive with money market conditions and with maturities ranging from call to any fixed terms. BFIT’s promissory notes can be used as collaterals for loans and are acceptable by general financial institutions.

Furthermore, in order to serve client’s needs and to offer new choice of deposit products, BFIT launched Bill of Exchange (discounted instrument) of Baht 10 million minimum denomination for deposit gathering purpose.

Commercial Lending BFIT provides a wide range of commercial loan facilities to its clients, such as loans for working capital with various short-term maturities and/or loans to finance inventory or receivables.

Medium and long term loan facilities are also available to finance expansion or capital expenditures, both through direct lending or loan syndication. Interest rates on all facilities can be established at fixed rate or floating rate through out the life of the facilities. In addition, BFIT also provides aval and guarantee facilities to its clients.

Project Finance A well-planned capital structure with acceptable debt to equity ratio is the key to a successful long term undertaking. Professional guidance, planning and structuring are important and contribute to a successful, profitable and financially sound operation.

BFIT can assist in a number of project studies, including planning and evaluation, financial structuring for newly established entities as well as expansion projects of existing


___________________________________________ Annual Report 2006 11

establishments. In addition, BFIT can also be appointed as financial advisor for the issuance of common shares, preferred shares, warrants, debentures and state enterprise bonds and as arranger, to help sell these securities to both the general public and to specific institutional investors.

BFIT’s financial services are not limited to the role of financial consultant or financial advisor. It can also extend to actual direct funding or arranging funds from other financial institutions or through syndication. The services can also be extended through BSEC for underwriting the issuance of equity shares or debts instruments, of which BFIT can act as the financial advisor to ensure the success of fund raising.

Financial Advisory Service

BFIT can provide financial advisory service for public limited companies or private limited companies who desire to raise fund from the primary market through issuing equity securities, debt instruments or other securities via the public offering or the private placement in accordance with the definition of the Securities and Exchange Commission as well as listing securities on the Stock Exchange of Thailand. These services also include performing the due diligence and advising the proper fund raising exercise.

Besides, BFIT is authorized to act as a financial advisor for the business take-over, the securities delisting, and other transactions that require an opinion of a financial advisor pursuant to the notification of the Securities and Exchange Commission and/or the Stock Exchange of Thailand, and the relevant authorities.

Debenture Holder Representative

As a debenture holder representative, BFIT offers service on behalf of debenture holders to monitor the issuer’s compliance with the terms and conditions of the debentures for the benefits of debenture holders. At present, we provide our service to listed companies for debentures amounting to Baht 13,000 million.

Treasury and Investment in Securities

BFIT invests in securities in both primary and secondary market such as common shares, government bonds, state enterprise bonds, corporate debentures, bills of exchange, and etc.

BSEC’s Securities Services

Securities Brokerage Service

BSEC provides services as a securities broker to retail investors and institutional investors both domestically and internationally who have traded securities in SET and MAI. Currently, BSEC is a member number 27 of the Stock Exchange of Thailand.

Securities Underwriting

BSEC has been granted to manage a securities underwriting business for both debt instruments and equity instruments. In 2006, BSEC was appointed to be a Lead Underwriter and Co-lead Underwriter for one company in each as Public Offering and Initial Public Offering.


Annual Report 2006 ____________________________________________ 12

Financial Advisory Service

BSEC was allowed to act as a financial advisor by the Office of SEC, its effective since 22 March 2002 to 21 March 2007. Afterward, BSEC had filed for a temporary cessation of its financial advisory operation to the Office of SEC due to its lack of the appropriate personnel. The Office of SEC had granted the permission for the temporary cessation from 3 December 2004 to 24 November 2006. However, BSEC has filed for the reactivation of the financial advisor approval to the Office of SEC because it currently has appropriate personnel for that field of work. The reactivation of the financial approval has been in effect since 24 August 2006.

BSEC offers Investment Banking services covering financial advisory and underwriting by a competent Investment Banking team in 2006. BSEC offers financial advisory service to customers by means of public offering, listing companies in the SET and MAI, raising capital by using financial instruments, private placement, right offering, restructuring, independent financial advisor, and financial advisor for other aspects.

Securities Registrar

BSEC provides securities registrar service to several entities in both private and public sectors. At present, we provide our service to state enterprises, listed and non-listed companies for state enterprises bonds and corporate debentures amounting to Baht 6,700 million.


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13

Important Changes during the Year


- The resolutions of the meeting of the Board of Directors No.2/2006 held on 10 May

2006 approved the appointment of Mr.Harn Chiocharn as the Managing Director to replace Dr.Sakorn Suksriwong which shall remain as an Authorized Director and Chairman of the Executive Committee.

- The Extraordinary General Meeting of Shareholders No.2/2006 held on 3 October 2006 considered and approved the right offering to subscribe 40,000,000 newly issued ordinary shares of BSEC, at par value of Baht 1, to all the shareholders of BFIT according to their shareholdings in the company proportionately. The company’s shareholders were entitled to subscribe BSEC newly issued ordinary shares at a ratio of 5 shares of the company to 1 BSEC newly issued ordinary share at the same price as that applied to the IPO offering price at Baht 4.20 per share.

BFIT Securities Public Company Limited (The Subsidiary)

- In July 2006, the subsidiary moved its head office to 191 Silom Complex Building

14th Fl., 16th Fl., Silom Road, Bangrak, Bangkok 10500

- In September 2006, the SEC approved the Initial Public Offering of the subsidiary company’s newly issued shares.

- In October 2006, the subsidiary’s subordinate convertible debenture holders exercised their right to convert all subordinated convertible debentures to 199,995,000 ordinary shares with par value of Baht 1 per share. The subsidiary’s paid up capital after the conversion date thus amounted to Baht 599,995,000.

- In November 2006, the subscription of 200,005,000 new ordinary shares via public investors and existing shareholders of BFIT was made at a price of Baht 4.20 per share. Consequently the subsidiary’s paid-up capital increased to Baht 800,000,000 and the SET has already approved such shares to trade in the SET as listed shares.

- As a result of the conversion of the subordinate convertible debentures and the initial public offering, the percentage of BFIT’s shareholding in the subsidiary has decreased from 100 per cent to 50 per cent.

- In December 2006, Mr. Thira Wipuchanin resigned from the directorship and chairman of the Audit Committee of BSEC, in order to be in compliance with the corporate good governance that any person should not be the director more than 5 listed companies at the same time, effective from 1 January 2007 onward. Besides, Mr. Suwit Ratanayanon also resigned from the position of director and the Chief Executive Officer and the Board of Directors appointed Mr. Prasit Srisuwan in substitution, effective from 1 January 2007 onward.


Annual Report 2006 _________________________________________ 14

Important changes after the Financial Statement Date Bangkok First Investment & Trust Public Company Limited

- In February 2007, the Board of Directors appointed Mrs. Thida Chonlavorn to be a director and a member of the Audit Committee to substitute Mr. Puck Bhengsri

BFIT Securities Public Company Limited

- In February 2007, the Board of Directors appointed Mrs. Utaiwan Dayananda to be a

director and a member of the Audit Committee to substitute Mr. Thira Wipuchanin


__________________________________________ Annual Report 2006

15

Objectives of the Company’s Business

BFIT continues to operate as a licensed finance company listed on the Stock Exchange of Thailand. The Company has a policy to concentrate on quality and liquidity of assets more than the expansion of assets. Credit Department shall expand to small and medium sized clients with good financial positions and good prospects with collateral, focusing on loans for working capital and short maturity of one to three years. Moreover, the Company has a policy to expand business to consumer finance such as retail housing loan, hire-purchase, etc. in order to expand income base, stabilize business performance and benefit the Shareholders in the long term.

In 2007, BSEC, the subsidiary, has a policy to spread out its income base aside from brokerage business. Previously, the subsidiary relied solely on brokerage income in which 91.06 per cent of its total income was from commission fee in 2006. Thus, the subsidiary will increase income from Investment Banking (IB) business, for example, being a financial advisor and underwriter. It will increase the income proportion from IB business this year from only 1.1 per cent of total income in 2006. Moreover, in order to reduce the risk of dependence on brokerage business, the subsidiary has a plan to invest in securities for subsidiary’s portfolio by having a budget approval from the subsidiary Board of Directors of 500 million Baht. To prevent possible risks, the subsidiary has issued a regulation regarding criteria, conditions, and method of investment for subsidiary’s portfolio. Risk management policies for handling the subsidiary’s portfolio are setting investment proportion according to expected holding period and types of securities together with proper liquidity and stop-loss management. The subsidiary expects to start the process in 2nd quarter of 2007.

Beside enlarging income base to other businesses as mentioned initially, the subsidiary also focuses on increasing income from brokerage business. The subsidiary aims to increase the proportion of institution customers from 0.41 per cent in 2006. Furthermore, to be complied with the change of minimum commission fee for the Internet trading from 0.20 per cent to 0.15 per cent in 2007, the subsidiary has a plan to increase market share from the internet trading from 12.73 per cent in 2006 to 15 per cent in 2007. To achieve such goal, the subsidiary had arranged several trainings of the use of internet trading for customers, marketing officers, and interested persons throughout the year 2006. It also improved the Internet system to be most effective for individual customers. The subsidiary will enlarge customer base by aiming to increase market share to 4 per cent in 2007 and maintain its status as a top-ten securities companies in Thailand. To establish a firm individual customer base, the subsidiary will focus on improving the quality of marketing officers by arranging trainings, making qualified analysis reports that cover every industry, and improving service quality to achieve highest customer satisfaction. For the branch expansion, the subsidiary does not have a definite plan to increase the number of branches in 2007, however, it still holds on to the same policy which is considering the worth of investment before making any decisions.


Annual Report 2006 ____________________________________________ 16

Industry Situation and Competition

Finance Industry in 2006 and Outlook in 2007

Finance Industry in 2006

In 2006, the number of finance companies dropped from 10 to 6 finance companies previously operating in the industry amid the strong waves of mergers and acquisitions in the sector to upgrade their business to become either a universal bank or a retail commercial bank. This was in line with the Financial Sector Master Plan and its objective of guiding the financial institutions to be stronger and more efficient in its operations.

As at the end of 2006, there were 6 finance companies which have a combined total asset of Baht 81.15 billion, or a decrease of 62.43 per cent from Baht 216.01 billion as of the end of 2005. Total finance companies’ outstanding loans as of the end of 2006 amounted to Baht 58.97billion, or a decrease of 63.61 per cent from Baht 162.06 billion as of the end of 2004. The decline in the number of finance companies was the result of the business mergers and the subsequent upgrading to become a universal bank and a retail bank.

In classifying the types of loans available in the industry as at the end of 2006, it was found that the highest proportion were Hire Purchase loans about 78.11 percent. The proportion of Corporate loans about 17.50 percent and Housing loans about 1.97 percent. All types of loans were smaller in size as the result of the finance companies implemented their assets transfer to the upgraded status of a commercial bank.

Lending as classified by the type of borrowers at the end of 2006 indicated that borrowings by individuals amounted to Baht 42.98 billion. This group made up the largest proportion of lending, or 72.89 per cent. However, based on the loans classified by maturity, the majority of debtors preferred to borrow on the basis of one to five years of the loans, of which this accounted for 79.01per cent.

On the operating performance of business sector in finance companies that reported interest and dividend income of Baht 10.04 billion in 2006. The income came from hire purchase and leasing business about 68.46 percent. Total net profit of the finance companies amounted to Baht 1.43 billion.

In 2007, the trend indicates that the majority of finance companies’ income will come from hire purchase and leasing business. However, there is a trend indicating that the growth of the hire purchase and leasing business will slow down with the expected decrease of vehicle sales in 2007 amid the rising in oil price and economic slow down.

Interest Rate Movement in 2006

The Bank of Thailand’s policy interest rate had been steadily increasing in the first half of 2006 from 4.00% in January to 5.00% in June. The rate, then, had been stable until December. The increases were mainly due to the movements of inflation rate that correlated to crude oil prices in the global markets.

Yields of Government and state-owned enterprises’ debt securities which are the references of corporate debt securities had been volatile throughout 2006. The yields maintained in the first quarter, surged for 60 – 70 basis points in the second quarter, then dropped continuously for 50 – 100 basis points until the end of the year. Government securities, in particular, seesawed in December for 40-60 basis points due to the regulator’s control over international fund flows.


___________________________________________ Annual Report 2006 17

It is noticeable that the policy rates stayed still in the second half of the year. Government securities’ yields, however, steadily dropped during such period. One of main reasons was probably because of a downward trend expectation in inflation rates as global crude oil prices slumped significantly from roughly 78 US dollars per barrel in August to about 60 US dollars per barrel in December.

The average deposit interest rated of commercial banks had also moved upward throughout the year; from 2.03 percent in the last quarter of 2005 to 2.89 percent in the last quarter of 2006. The rate jumped rapidly in-line with the policy rate during the first and second quarter from 2.09 percent to 2.63 percent.

Interest Rate Outlook in 2007

The Bank of Thailand’s policy interest rate faces the downward trend in 2007 as inflation rates has been steadily decreasing, local currency has been at high value against US dollars in the range of 35-36 Thai Baht per US Dollars and the overall economic condition is expected to decelerate. Theoretically, loosening monetary policy through rat cuts would probably weaken local currency value and stimulate overall economy.

Yields of Government and corporate debt securities should be in-line with the policy rate. However, volatility caused by economic conditions and regulators’ actions is possible. Both risk and opportunity, consequently, comes with Investment in debt securities along the year. Investors are possible to gain from higher value in securities under downward interest rate era while face reinvestment risk at lower yields compared with those of 2006.

It is also anticipated that private sectors that need low-cost funds would pay more attention in issuing debt securities after the upward trend ended. In turn, this would be the alternative investment for risk-adverse investors who seek higher yields than bank deposits.

Non-Performing Loans

Outstanding non-performing loans of finance companies in 2006 were at Baht 2.26 billion or about 4.03 per cent of total loans. This amount decreased significantly from year 2004’s outstanding NPLs of Baht 5.93 billion. The overall decrease in the NPLs of finance companies was attributed to various reasons such as principal repayment, write-off from losing right of claim, selling of debt, and transferring to performing loan category.

Outlook for Finance Industry

As the results of the Financial Sector Master Plan, the finance companies went through with mergers and acquisitions to upgrade their business to become either a universal bank or a retail commercial bank. The number of finance companies decreased from 10 to only 6 finance companies at the end of 2006 (5 finance companies in March 2007). The Outlook for finance business will have high proportion in hire-purchase. There are intensively competition in lending business from both Large Financial Institution and Leasing Company. Moreover, lending business still continue to lend in retail clients and concentrate on medium size of business.

Securities Business Situation in 2006 and Outlook in 2007

Securities Business in 2006

The Stock Exchange of Thailand (SET)’s average securities trading value in 2006 was 16,281 million Baht per day reduced by 1.05% compared with 16,454 million Baht per day in 2005 as a result of fluctuated investment situation throughout the year from the following factors.


Annual Report 2006 ____________________________________________ 18

1. Political unrest such as the Parliament dissolve, the cancellation of the election result, and the coup d'état on 19 September 2006.

2. The issuance of 30% reserve measure for foreign short-term investment to prevent Thai Baht speculation.

3. The adjustment of interest rates both domestically and internationally.

4. Movement of foreign stock market.

Such factors made SET Index greatly fluctuated almost the whole year 2006 by SET Index increased from 713.73 points at the beginning of the year to its peak at 785.38 points or 10.04% increase and reached its lowest at 622.14 points or 12.83% decrease and closed at 679.84 points. Totally, the index decreased since the beginning of the year until 29 December 2006 by 33.89 points. This was the main reason that brought down the SET’s total value by 0.52% from 5,105 billion Baht in 2005 to 5,079 billion Baht in 2006. Though there were registrations of IPO stocks in the SET, total value of IPO stocks in 2006 amounted to 120 billion Baht that was not very high.

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Source: SET Smart - The Stock Exchange of Thailand and the Company’s research

There were 12 companies bringing their IPO stocks to list in the SET in 2006 accounted for 120 billion Baht total market value at IPO price. The biggest IPO stocks were RRC, GSTEEL, and BMCL respectively while there were 4 listed companies withdrawn from the SET in 2006. Total listed companies as of year end 2006 were 476 companies from 468 companies in 2005. Energy industry had highest total market value at IPO price in the IPO stocks group that could register in 2006 or accounted for 41.98% of IPO stock total value. RRC’s IPO stocks in energy industry had total market value as high as 50,309 million Baht. The next industry was property development and construction materials industry which held 34.02% of IPO’s total market value in 2006.

The decrease of total market value according to decreased stock price and the fluctuation throughout the year 2006 from many negative factors were main reasons that lessened investors’ confidence in investment in the stock market till affected the decrease of brokerage fees of some securities companies. Plus, some companies that were going to trade their IPO stocks in the market suspended their registration plan which affected some securities companies’ income from brokerage fee.

The highly competitive situation among securities companies in 2006 was one of the reasons that caused changes in market share of some companies’ brokerage business. Instable investment climate and a harsh down turn of stock market at some point in time led to higher variation of market share of some securities companies that lacked of good customer base’s distribution than those with better distribution of customer base. However, the reduced liquidity in the stock market of domestic investors due to losses from investment affected securities companies that had foreign investors and institution investors as customers more than individual investor customers have higher market share

Average Trading Value per day YTD

16,454 20,916

18,339 16,509 16,281

0

5,000

10,000

15,000

20,000

25,000

2548 3M49 6M49 9M49 2549

Million baht / Day

SET Index & Trading Value in 2006

500

550

600

650

700

750

800

1Q49 2Q49 3Q49 4Q49

SET Index

- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Trading Value Million baht


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in 2006. Market share of brokerage business of securities companies that was most increased when compared with total market was SCBS (+1.22%) next were CS (+1.10%), PHATRA (+0.82%), ACLS (+0.75%), AND TNS (+0.70%) respectively. On the other hand, securities companies that have lower market share were KEST (-1.64%), GLOBLEX (-1.24%), FINANSA (-1.03%), ASP (-0.96%) and SYRUS (-0.69%).

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Source: SET Smart - The Stock Exchange of Thailand and the Company’s research

Investment Banking Business in 2006, the value of capital raise was reduced from 2005 as a result of political uncertainty, the fluctuation of oil price, and continuingly increases of interest rate that did not support the capital gathering and registration in the stock market. Many potential companies had to suspend their registration plan. Consequently, the number of listed companies in 2006 reduced more than half compared with 2005. In 2006, there were 12 companies registering with the SET and 6 companies registering with MAI. Total capital gathering value of newly registered companies was 17,014 million Baht and 821 million Baht respectively.

2004 2005 2006

The Stock Exchange of Thailand

SET index (point)

Number of newly registered companies in SET

Capital raise value of newly registered companies (million Baht)

Number of registered companies

Total securities value as market price (million Baht)

668.10

36

36,224

439

4,521,894

713.73

36

17,934

468

5,105,113

679.84

12

17,014

476

5,078,705

MAI

MAI index (point)

Number of newly registered companies in MAI

Capital raise value of newly registered companies (million Baht)

Number of registered companies

Total securities value as market price (million Baht)

188.07

14

1,400

24

11,703

158.23

14

1,414

36

14,314

193.43

6

821

42

21,810

Source: The Stock Exchange of Thailand (end of year)

As of 31 December 2006, there were 71 companies that got the agreement from SEC to be financial advisors. Among such financial advisors, there are 40 securities companies

Changes in Market share of brokerage business of Securities CompaniesYear 2006 compare with year 2005

(2.00) (1.50) (1.00) (0.50) 0.00 0.50 1.00 1.50 (%)


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that got the underwriting license. Obviously, the competition is much tensed in the market due to many competitors. Presently, most companies focus on quality, services, the efficiency of personnel in providing helps and suggestions to customers, and presenting new financial products that can satisfy customers’ needs to build long-term relationship with customers.

Impacts of political uncertainty and fluctuation of oil price in 2006 will still be important factors that pressure capital raise and registration in SET in 2007. Expectedly, number of companies and capital gathering value in SET and MAI in 2007 will be reduced from 2006.

Securities business outlook in 2007

The change of brokerage fee for internet trading will have an impact on average brokerage fee of securities business to some extend in 2007. SEC has a resolution to remain minimum brokerage fee for securities trading at 0.25% for the next 3 years but will terminate this minimum rate in the next 5 years. It concludes that there will be a liberalization of securities business in 2012. After that SEC will issue license for securities business unlimitedly. Details are as follow.

Period Normal brokerage fee rate

14 January 2007 – 13 January 2010 0.25%

14 January 2010 – 31 December 2011 Sliding Scale in which SET will propose

brokerage fee formula to SEC

1 January 2012 onward Liberalize securities business

Therefore, normal brokerage fee for securities trading will remain unchanged in 2007. However, SEC launched the change of minimum brokerage fee for internet trading from 0.20% to 60% of brokerage fee for normal securities trading or 0.15% of securities trading value since 1 January 2007. This might affect average brokerage fee of securities companies since brokerage fee for internet trading at 0.15% is less than brokerage fee for normal securities trading at 0.25%. Thus, investors may change securities trading method to reduce commercial cost. Nonetheless, it is expected that such reduction of brokerage fee won’t have a significant impact on securities companies’ performance in 2007 because:

1. Some investors have to take time to learn and build confidence with internet trading.

2. Presently, proportion of investors who send trading order through internet system is considered small, thus securities companies that have internet trading customers won’t be affected extensively from the change of brokerage fee from 0.20% to 0.15%.

3. Some securities companies might need to take time in developing internet trading system, thus customers of such companies have to wait till the internet trading system is completely developed.

Political factor will remain the major factor that affects stock market and securities companies’ performance in 2007. Expectedly, the most important factor that will affects performance tendency of securities companies in 2007 will be political factor and others are supplemented factors. In sum, factors that have an impact on securities business directly and indirectly are as follow.

1. Political factor: Political factor will affect the investment fluctuation in stock market especially in the consideration time of important political case in the beginning of 2007 and should continuingly affect till the end of the year before the


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general election. Investment situation in the stock market should be better in the end of the year 2007 before the general election since the stock market might be up before the election which will positively affect securities companies in the short term if securities trading value increases for a long time. Mid-term and long-term impacts still depend on the result of the election as who will get elected to be the Prime Minister and who will hold critical economic positions and whether the announced list of cabinet will create confidence to investors in a great extend or small extend.

2. Economic situation: Economic factor in 2007 will be more affected by political factor than macro factors since political stability will affect the investment confidence and private consumption. However, positive sign of global oil price will lessen the pressure of domestic inflation and will lead to interest rate adjustment which will stimulate investment and consumption including the investment climate in the stock market.

3. Government’s policies: Government’s policies about investment of foreign investors will affect the capital in-flow from foreign countries of which one part will flow into the stock market and consequently will result in securities trading value as a whole and income from brokerage fee of securities companies.

4. Interest rate: Interest rate that tends to decrease in 2007 will support the investment climate in the stock market since decreased interest rate will result in better performance of companies in the stock market and will positively affect the securities companies’ income.

5. Rules: The changes of rules may be a variable that affects securities companies only if such changes have a significant impact on securities companies’ turnover, especially the increase of licenses allowing securities companies to offer full services in the future. Securities companies may choose to do boutique services or full services. However, the increase of licenses needs to get an approval from the authorities which have to take time. Expectedly, the permission for securities companies’ customers to trade in foreign stock market should get the approval first.

It is expected that political factors are still a major factor that will affect the securities companies’ turnover, especially if the political situations are prolonged and more serious. Moreover, the government’s policies regarding the investment support of foreign investors and risks of terrorism will affect economic situations and investment in the stock market till result in securities companies’ income from brokerage fee, fees from investment banking business, and profits from investment. In addition, most of IPO stocks that will register in the stock market in 2007 are expected to be small compared with those registered in 2006. Therefore, average income from underwriting fees in 2007 tends to be less than 2006 in which major income from fees in 2007 should come from financial advisory business.


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Risk Factors The following risk factors might impact the business of the Company.

1. Credit Risk

1.1 Lending Risk

This arises from loans that default in payment of interest or principal, effectively becoming a non-performing loan resulting from losses incurred by the debtor due to several factors including an economic slump, the fall of purchasing power of consumers, or excess production capacity.

Hence, the Company has to adopt a conservative lending policy and concentrate on good quality assets covering all its lending activities. Lending is focused on medium corporations, which normally have lesser financial risks than the small business operators and individual borrowers. The Company utilizes its credit analysts who scrutinize the customers’ financial status and make proposals to the credit committee for final credit approval. The line of authority and credit approval process is clearly defined. In order to reduce the concentration of risk in any particular industry, the Company lends to industries that have high growth potential only. This credit policy is to reduce the lending limit of each borrower, to aim on loans with working capital and short maturity and also to be in line with the rules and regulations as stipulated by the Bank of Thailand.

Notwithstanding, the Company has been adopting a proactive policy in risk management through a credit committee, whereby all doubtful accounts are closely monitored. The Company’s debt restructuring committee is ready to resolve and speed up the recovery of non-performing loans and to provide assistance for all doubtful accounts. If the Company needs to set aside provisions it will carry out this strictly in accordance with the Bank of Thailand requirements. At present, the Company has even surpassed the requirement of setting the provision, which indicates its proactive and conservative role in taking on such action.

1.2 Risk arising from deteriorating quality of loans.

Non-performing loans can be classified into substandard, doubtful and doubtful of loss that can be affected to the company’s earnings and capital funds of. As 31 December 2006, the company’s non-performing loan amounted to 127 million baht, accounting for 4.17 percent of loans, receivables and accrued interest receivables. It’s decreased from the end of year 2005 which amounted to 141 million baht.

The company concentrates on quality of loans by set up a conservative lending policy which concentrates on quality of loans and assets. Moreover, as a safeguard against losses from current non-performing loans and expectant non-performing loans, the company has set the reserve for non-performing loans amounted to 212.80 million baht that higher than the reserves required by the Bank of Thailand about 51.36 million baht, accounting for 131.81 percent of criterion by Bank of Thailand.

2. Market Risk

2.1 Interest Rate Volatility Risk

Interest rate volatility can normally affect the interest spread. The larger the interest spread the higher the net earnings for the Company. If the interest spread is low due to excess liquidity and when lending must be carefully monitored, the Company will have lower bargaining power, and hence can also have negative impacts on the


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23

earnings. Nevertheless, the Company is closely monitoring the interest rate movement in order to effectively set the most suitable strategy of fixing both the lending and deposit rates.

Interest rate volatility also affects investments in debt instruments such as bonds and debentures. If the market interest rates move higher, the expected returns on the investments in bonds would also increase. Hence, the market price of the bonds would fall. Under such situation, the Company might choose to reduce its risks exposure via adjustment to the duration of the bonds portfolio and selecting good quality bonds that have liquidity for trading.

As at the end of 2006, the Company’s investments for sales in both short-term and long-term bonds at market value excluding accrued interest were 1,661.72 million baht. If the market interest rates rise by 1.00 percent it would affect the market value of the bonds for sale portfolio by 1 percent of the investment value in opposite direction. However, if the Company holds the bonds for sale until maturity the cost of the investment in the bonds will not be affected by the interest rate volatility.

In addition, at the end of 2006, the Company also has investments in bonds that are intended to hold until redemption worth 754.13 million baht. In this case, interest rate volatility does not have any effect on the Company’s accounting. The yield of the investment will be equivalent to the rate of return on the investment.

2.2 Price Risk

Price risk is a risk from change in bonds prices and securities prices which directly affect net income and capital funds of the Financial Institution.

The company has invested in listed securities that have risk from volatility in stock exchange market price. As 31 December 2006, domestic marketable equity securities amounted to 43.46 million baht, accounting for 1.66 percent of total investments. However, the company does not have a large number of investments in listed securities. Most of investment will focus on listed securities with well-fundamental and highly dividend payment. Moreover, the investment committee also has a policy to stop loss whenever a listed securities share price falls below a designated level.

The company has Domestic non-marketable equity securities after allowance for impairment loss amounted to 43.96 million baht. The company has no policy to increase investment in non-listed securities but concentrated on quality of securities and sells the securities at designated level.

In debt instruments, the volatility of price caused from change in interest rate which mentioned on (2.1) Interest rate volatility risk.

3. Liquidity Risk

A liquidity risk will arise when the Company cannot make payment on its debt when it is due. The Company utilizes a risk control system that complies with the Bank of Thailand requirement that states that liquid assets must be maintained at not less than 6 percent of the Company’s total borrowings from the public, both domestic and overseas. These liquid assets can be cash deposits with the Bank of Thailand, government and state enterprise bond holdings and cash deposits at locally-registered financial institutions. The excessive liquidity could expand to loan and investment which raised Company’s earning.

When there is a need for cash, for example in case of debt repayment on the promissory notes at expiration or expansion of new credits, the responsible department will know in advance and will maintain sufficient liquidity for such matters. By reviewing the daily financial status report, the Company is able to


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effectively manage its liquidity. However, in an emergency case or there is no advance notice, the Company was established an emergency backup account with financial institution to provide liquidity.

From the balance sheet, as 31 December 2006 the Company’s financial assets and financial liabilities classify by maturity are followings:

* Excluded Non-performing loans

The Company had risk from Maturity Mismatch. The Majors Source of Funds came from short term borrowings and deposits which were usual structure of deposit. However, a majority of them are rolled over automatically upon maturity. Notwithstanding, the majors investment funds both short term and long term were domestic securities and loan from financial institution that could be sufficiency for liquidity problem. Moreover, the Company was established an emergency liquidity plan for liquidity crisis which included emergency liquidity manual.

As 31 December 2006, the Company had liquidity assets accounted for 21.54 percent of Total borrowings and deposits which exceeded the requirement of the Bank of Thailand.

4. Operation Risk

4.1 Management Risk

The majority of management executives has been employed with the Company for a long time and possesses high experience and knowledge about the nature of the business. The fact that the management has steered the Company through the economic crisis of the past few years has been evident. In accordance with the Company policy of decentralization the management has continued to provide and transfer knowledge and experience to the mid-level management officers in attempting to reduce risks.

4.2 Information Technology System Risk

A modern IT system-linked database with high accuracy and timely service is very crucial to the decision-making process for the day-to-day business operation amid the intense competition in the industry. Such system is categorized as follows:

Not more than one year

Over one year

Financial assets

- Cash and deposits at financial institutions

- Loans to Financial institutions – net

- Securities purchased under resale agreements

- Net investments

- Financial business loans and receivables

47.8

49.8

506.0

1,046.1

1,703.3

-

-

-

2,890.8

1,217.7

Total Financial assets 3,353.3 4,108.5

Financial liabilities

- Borrowings and deposits

- Securities business payables

4,966.4

0.1

140.8

-

Total Financial liabilities 4,966.5 140.8


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25

4.2.1 Workflow and Database: These have been developed internally by the Company’s staffs that have been responsible for the efficiency and effectiveness of the systems to provide support for all the needs of the end-users. Concurrently, the IT system is being upgraded on a continual basis and in line with local industry standards to cope with the increasing demand and competitive edge of the securities business.

4.2.2 System Hardware: The Company has set up a contingency back-up plan for all its computer hardware including the peripheral equipment. A back-up system has been developed to safeguard the Company’s databases. A set of stand-by computer system is available in the event that the central computer system fails so that the daily business operation would not be affected.

4.2.3 System Network: A modern local area network (LAN) system is currently in use to provide interactive on-line access for all users within the Company. A network firewall is also in place to prevent any illegal entry. Moreover, the Company's system network has the capability to link up with other outside sources such as the Stock Exchange of Thailand and the Bank of Thailand. A contingency plan and a back-up system network have been prepared and would be ready to provide support and ensure that the daily business operation can run smoothly should the existing LAN network faces a link-up difficulty with the external sources.

4.2.4 Trained Staffs: The Company has well-trained and skilled IT staffs who continue to receive support from the management in terms of training and workshop attendance in order to enhance each staff member's efficiency and knowledge about this fast-changing global technology.

4.3 Risk arising from key personnel

The majority of staffs has been employed with the Company for a long time and has accumulated extensive professional experience. However, given the highly competitive nature of the Company's business amid the fast-changing investment conditions over the past few years, some staffs might find it difficult to adjust to the changes. Hence, the Company has introduced a policy to provide training and orientation for further development of its human resources. New staffs with special skills and knowledge are also being recruited to help lift the efficiency of the business operation.

5. Strategic Risk

5.1 Capital Adequacy Risk

The Company’s capital fund is primarily used for extending new credits and for making further investments through the most proper and effective allocation of funds. The Company maintains a capital-to-risk assets ratio higher than that required by the Bank of Thailand. The capital adequacy risk factor is closely monitored on a daily basis by the responsible credit control section of the loan and placement department which checks and re-examines the outstanding balance to ensure that they are in line with the approved credit.

The Company’s investments in equity are monitored so that the value of the initial investment cost does not exceed 60 percent of the capital fund at any one time, excluding that equity that has been derived from debt restructuring. To control the single credit risk factor, the Company also factors in the investment in equity and debts instrument with credit extension. The responsible credit officer must make sure that the total exposure to each customer does not exceed that required by the Bank of Thailand.


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As at the end of 2006, the Company’s capital-to-risk assets ratio was at a high level of 28.97 percent, in comparison with the Bank of Thailand’s requirement of 8.0 percent. Hence, there is more than sufficient capital for new lending and further investments, including provisions for assets deterioration in the foreseeable future. Moreover, the present Company’s capital-to-risk assets ratio calculated follow to BASEL II standards will be sufficient also.

5.2 Regulation Risk

The risk arises from improvements or changes in regulations, law or requirements of the authorities concerned which might affect the Company’s business operations.

At the end of 2006, the Bank of Thailand was changed the announcement about regulation, loan classifies, reserves and appraisal which was related to an International Accounting Standard (IAS) No.39: Financial Instruments: Recognition and Measurement. The Bank of Thailand was expected to regulate IAS no.39 in year 2008 which announced this regulation for Financial Institutions to prepare. If the company adopts IAS no.39, the company will increase reserves to 100 percent of non-performing loans subtract present value of expecting cash flow from sale collateral assets. This change is more regulate in non-performing loans. However, it’s not significant effect from this change because the company has non-performing loans in a small amount and the company was set the reserves higher than the criterion by Bank of Thailand.

Moreover, changes in Thai accounting standard No.44 regarding investment in subsidiaries from recognize subsidiary’s business operation by portion of equity shares (equity method) to recognize whenever subsidiary’s dividend payment (cost method) which affected the company’s recognition in business operation of subsidiaries. This change regulated since 2007. However, the consolidate balance was not affected from this change.

5.3 Risk from investment in subsidiary

The risk from investment in subsidiaries that the company’s earnings or capital funds are adversely affected by recognition of losses from its investment in the subsidiary, as a result of theirs negative performance.

As fourth quarter 2006, BSEC (the subsidiary) was listed in Stock Exchange of Thailand by offering newly ordinary shares to the existing shareholder of BFIT and public.

As a result of increase equity capital of BSEC, its affect the company’s equity which was decreased from 100 percent to 50 percent of total stock offered by BSEC. So, the company’s recognize gain and loss in subsidiary decreased to 50 percent.

The mainly income of BSEC come from brokerage fees that related to economic condition, money market and capital market condition. Moreover, competition risks in securities business which finding quality marketing officer, large customer base. It’s importance subsidiary’s risk. In addition, they have the risk of default in payment or securities transferring by customers.

For the details of risk in BSEC could find in the Annual Report (Form 56-2) of BSEC.


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Capital and Shareholding Structure

Capital

Registered capital Baht 1,500 million, divided into 300 million shares of Baht 5 par value

Issued and paid-up capital Baht 1,000 million, divided into 200 million shares of Baht 5 par value

Major Shareholders

Top ten major shareholders as of October 19, 2006 are as follows:

Name Number of shares % of Holding

1. UBS AG SINGAPORE, BRANCH-PB SECURITIES CLIENT CUSTODY

10,214,000 5.11

2. Ms. Kanoknuj Cholwanit 9,970,000 4.99

3. Ms. Saowakon Limaksorn 9,940,000 4.97

4. Mr. Vorajate Indamra 9,920,000 4.96

5. Mr. Somyos Vinitchaikul 9,901,000 4.95

6. Mr. Siritaj Rojanapruk 9,881,000 4.94

7. Mr. Luchai Phukhuan-Anadha 9,820,000 4.91

8. Ms.Supida Chatrapiruk 9,740,000 4.87

9. Mrs. Phirada Indamra 9,734,000 4.87

10. Mrs. Tassanee Indamra 9,700,000 4.85

Source: Thailand Securities Depository Co.,Ltd.

Dividend Policy The Company has the policy of paying dividend at an appropriated rate by considering economic condition and the Company’s financial position. As for the year 2006, BFIT had declared the dividend of Baht 0.15 per share or totaling Baht 30 million.

BSEC has the policy of paying dividend at approximately 50 percent of net profit after deduction any reserves according to its Article of Association of and the laws provided that there is no need for the use of fund internally and that the dividend payment shall not adversely affect its normal performance. As for the year 2006, BSEC had declared the dividend of Baht 0.15 per share or totaling Baht 120 million.


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Organization Chart

Board of Directors

Managing Director

Investment Advisory Dept.

Trustee Dept.

Corporate Finance Dept.

Business Development

Legal Dept. Personnel Dept. Operations Dept.

Information Technology Dept.

Credit Dept.

Assistant Managing Director

Treasury & Investment Dept.

Risk Management Dept.

Audit Committee

Nomination and Remuneration Committee

Audit Dept.

Executive Committee

Investment Committee

Risk Management Committee

Asset and Liability Management Committee

Credit Committee

Debt Restructuring Committee


__________________________________________ Annual Report 2006 29

Management

Management Structure

The company’s management structure comprises 4 committees of directors i.e. The company’s Board of Directors, Audit Committee, Nomination and Remuneration Committee and Executive Committee.

The company also has numerous committees responsible for each business or important functions i.e. Debt Restructuring Committee, Credit Committee, Investment Committee, Risk Management Committee and Assets and Liabilities Management Committee. These committees have the authorities within the scope that stipulated by the company’s Board of Directors with management teams to oversee that the conducting of each business or each function is appropriate and in line with the rules, regulations and relevant law and also in accordance with plan and policy that approved by the company’s Board of Directors.

Authority of Board of Directors

The Board of Directors, in conducting the business of the Company, shall comply with laws, objectives of the Company, articles of association of the Company, and resolutions of the shareholders’ meetings, and summon general meetings of the shareholders of the Company, both ordinary and extraordinary unless in such cases that relevant regulations or laws stipulated that the shareholders approval must be obtained then the Board of Directors shall comply with such rules and regulations.

As of December 31, 2006, the Company’s Board of Directors comprising 8 directors as listed below:-

1. Mr. Somchai Sakulsurarat Chairman of Board of Directors (Independent Director)

2. Dr. Sakorn Suksriwong Director

3. Mr. Harn Chiocharn *1 Director

4. Mrs.Kingthien Bang-Or Director

5. Mr. Suwit Ratanayanon Director

6. Mr. Edward Nocco Independent Director

7. Mr. Vatana Supornpaibul Independent Director

8. Mr. Thira Wipuchanin Independent Director

Secretary of Board of Directors is Mr.Vichai Kulsomphob

Note : *1.Appointed in substitution of Mr.Sithi Sethavirawat (resigned on May 2, 2006) as approved by the Company’s 2/2006 BOD meeting, held on May 10, 2006.

2 The Company’s 1/2007 BOD Meeting held on February 20, 2007 has appointed Mrs.Tida Chonlavorn as the substitute director replacing Mr.Puck Bhengsri (resigned on November 13, 2006)

Authority and Responsibilities of Audit Committee

The Audit Committee has the scope of duties and responsibilities as set forth by the Board of Directors as follows:

• To review and assure that the Company’s financial reports to be correct, complete, sufficient and credible;

• Ensure that the Company has adequate and effective internal control system;

• Consider and propose the appointment of auditors and their remuneration to the Annual General Meeting of Shareholders for approval;


Annual Report 2006 ___________________________________________ 30

• Ensure that the Company performs in compliance with all relevant laws and regulations;

• Ensure that the Company does not engage in any activities that may lead to a possible conflict of interest.

• Perform any duties assigned by the Board of Directors; and

• Prepare an Audit Committee report and disclose in the Company’s annual report.

As of December 31, 2006, the Audit Committee comprised 3 members as follows:

1. Mr. Edward Nocco Chairman of the Audit Committee

2. Mr. Vattana Supornpaibul Member of the Audit Committee

3. Mr. Thira Wipuchanin Member of the Audit Committee

Authority and Responsibilities of Nomination and Remuneration Committee

The Nomination and Remuneration Committee is appointed by the Board of Directors consisting of the Company’s Directors and high level management from Vice President level upwards of 3 persons by which all of the members that are the Company’s Directors are not Executive Directors. Its duties and responsibilities are:-

1. Stipulate policy, guideline and procedure to nominate directors and high level management from Assistant Managing Director upwards in order to present to the Company’s Board of Directors to consider for approval.

2. Screen and submit the names of persons that are qualified for the following positions in order to nominate to the Board of Directors:-

2.1 Directors 2.2 Higher level management from Assistant Managing Director upwards.

3. Oversee that the size and structure of the Board of Directors are adapt to the organization and can be adjusted to the changing environment by which the Board of Directors comprises of knowledgeable, capable and experienced persons in various fields.

4. Stipulate the policy of remuneration and other benefits including the amount of remuneration and other benefits providing to the Directors and high level management from Assistant Managing Director upwards with clear and transparent criteria in order to propose to the Company’s Board of Directors for consideration.

5. Oversee that the Company’s Directors and higher level management from Assistant Managing Director upwards receive the remuneration that match with their duties and responsibilities to the Company and those that entrusted with higher responsibilities and duties receive an increase in remuneration in relevant to their extended burdens.

6. Lay down the direction for the appraisal of the Directors and higher level management from Assistant Managing Director upwards to determine their annual remuneration by taking into considerations their responsibilities and relevant risks including the emphasizing of the added value to shareholders in the long run.

As of December 31, 2006, the Nomination and Remuneration Committee comprised 3 members as follows:

1. Mr. Somchai Sakulsurarat Chairman of the Nomination and Remuneration Committee

2. Mr. Edward Nocco Member of the Nomination and Remuneration Committee

3. Mr. Thira Wipuchanin Member of the Nomination and Remuneration Committee


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Authority and Responsibilities of Executive Committee

The Executive Committee is appointed by the Company’s Board of Directors and comprises the Company’s Directors and senior management from Assistant Managing Director level upwards of which the Executive Committee may appoint additional members as it deems appropriate.

The Executive Committee has the authority to manage and operate the business within the scope that the Board of Directors had specified i.e.:-

1. The Executive Committee is authorized to manage business and oversee overall operation of the Company except some cases that the Company’s Articles of Association had stipulated that they must be approved by the Company’s Board of Directors or matters that the Board of Directors had already regulated specific authority such as the approval of credit line and investment.

2. To consider the alteration of the authorized persons and condition of the signing of the authorized persons.

3. To consider the appointment of the members of the Assets and Liabilities Committee, Risk Management Committee, Investment Committee and Credit Committee in case the members’ term expired and report to the Board of Directors for acknowledgement.

4. To stipulate and review the ratio of the holding of liquid assets of the Company.

5. To consider an approval of the extending the credit line of not more than Baht 150 million per case.

6. Authority to approve an investment line for equity securities, warrants and forward contracts which are trading or expected to be traded in secondary markets up to the amount of 100 million Baht per company.

7. Authority to approve an investment in debt securities which have credit rating below investment grade up to 100 million Baht per company. The aggregate investment in such debt securities will be not over 10 percent of total debt securities portfolio value.

As of December 31, 2006, the Executive Committee comprised 4 members as follows:

1. Dr. Sakorn Suksriwong Chairman of Executive Committee

2. Mrs. Kingthien Bang-Or Member of Executive Committee

3. Mr. Harn Chiocharn Member of Executive Committee

4. Miss Aruvarn Tiewtranon Member of Executive Committee

Executives

As of December 31, 2006, the Company’s Executives consisted of:-

1. Mr. Harn Chiocharn Managing Director

2. Miss Aruvarn Tiewtranon Assistant Managing Director

3. Mr. Ovart Phanprechakij Vice President Head of Credit Dept.

4. Mr. Manop Himakorn Vice President Head of Operation Dept.

5. Mrs. Vannipha Donavanik Vice President Head of Investment Advisory Dept.

6. Mr. Wichain Proongpanish Vice President Head of Corporate Finance Dept.

7. Mr. Vichai Kulsomphob Vice President Business Development.

8. Mr. Thanasarn Ampatemee Assistant Vice President Credit Department

9. Mrs. Choochit Teyateeti Assistant Vice President Credit Department

10.Mrs. Numpetch Sabaichai Assistant Vice President Head of Personnel Dept.


Annual Report 2006 ___________________________________________ 32

11.Miss Wimon Chiramongkolgarn Assistant Vice President Head of Information Technology Dept.

12.Miss Yuphadee Tulanonda Assistant Vice President Head of Treasury Dept.

13.Mrs.Sirisook Chutanondha Manager Head of Trustee Dept.

14.Mr. Kanokporn Liewsuwan Manager Head of Legal Dept.

15.Mr. Yingyong Sunkatiprapha Manager Head of Audit Dept.

The Nomination of Directors and Executives

The Company has set up the Nomination and Remuneration Committee to perform the duty of screening and nominate the names of qualified persons to the Board of Directors for the consideration of the appointment to hold the position of directors and high level management from Assistant Managing Director upwards.

The nomination and appointment in the Directorate level

The Nomination and Remuneration Committee will scrutinize the selection and screening of individuals that will become the Company’s directors and independent directors from qualified persons that are capable, knowledgeable and experienced in various fields by considering the size of the assembly that will fit with the organization, good corporate governance including the adjustment to conform with the changing environment. The selected candidates will be nominated to the Board of Directors for the appointment in case that the director positions are vacated due to the expiration of the terms or other reasons or for the appointment of additional directors by which the Company’s Articles of Association stipulates that the Company can have no more than 9 directors and not less than half of the directors must reside in Thailand.

The appointment of the directors that present to the shareholders meeting. The directors shall be elected at the general meeting of shareholders, provided that each shareholder shall have a number of votes equal to one share per one vote. Each shareholder shall exercise all the votes he has to elect one or more persons as directors but he shall not split his votes in favor of any candidates. The person receiving the highest number of votes in the respective order of the votes shall be elected as directors up to the total number of directors required or to be elected at such time. In the event that a number of persons received an equal number of votes for the last directorship exceeds the number of directors the Company required or to be elected at such time, the chairman of the meeting shall have a casting vote. At every annual general meeting, one-third, or the number nearest to one-third, of the directors shall retire from office.

As for the selection of Independent Directors, the Independent Directors must maintain their independence qualifications not less than the minimum requirements of Independent Directors as stipulated in the notifications of the SEC and the SET. The major qualifications of Independent Directors can be summarized as follow:-

1. Must have no part in the management and is not an employee, staff member or advisor who receives regular salary or other benefits from the company, affiliated company, associated company, or related companies.

2. Holding shares no more than 5.0 per cent of paid up capital of the company, affiliated company, associated company, or related companies, which shall be inclusive of the shares held by related persons in accordance with Section 258 of Securities Law.

3. Be able to take care the interest of every shareholder equally.

4. Be able to prevent the conflict of interest between the company and the management, major shareholders, or other companies that have the same group of management or major shareholders.


__________________________________________ Annual Report 2006 33

5. Be able to attend the company’s Board of Directors meeting and make decision in the company’s important matters.

The nomination and appointment of Assistant Managing Director or Higher Level

The Nomination and Remuneration Committee will screen and nominate the name of persons that are qualified to the Board of Directors for the appointment.

The Meeting attendance of the members of the Board of Directors

In 2006 a total of 5 meetings were held. The meeting attendance records of the members of the Board of Directors are as follows:

Name Attendance / Number of Meetings (times)

1. Mr. Somchai Sakulsurarat 5 / 5

2. Mr. Edward Nocco 5 / 5

3. Mr. Puck Bhengsri * 5 / 5

4. Mr. Thira Wipuchanin 5 / 5

5. Mr. Suwit Ratanayanon 5 / 5

6. Dr. Sakorn Suksriwong 5 / 5

7. Mrs.Kingthien Bang-Or 5 / 5

8. Mr. Vatana Supornpaibul 5 / 5

9. Mr. Harn Chiocharn 3 / 3

10. Ms. Sithi Sethavirawat * 1 / 1

Note : *Directors No.3, 10 had resigned.


Annual Report 2006 __________________________________________________ 34

Board of Directors as of December 31, 2006

Name Education Experience

1. Mr. Somchai Sakulsurarat - Director Certification Program 2005 - present Chairman & CEO

Chairman of the Board Thai Institute of Directors Association PAE (Thailand) Pcl.

(Independent Director) - Master of Management 2004 - present Chairman of the Board

Sasin Graduate Institute of Business Administration, Bangkok First Investment & Trust Pcl.

Chulalongkorn University 2004 - present Chairman

- B.A. in Economics (English Program) Chumporn Palm Oil Industry Pcl.

Thammasat University 2004 - present Executive Chairman & CEO

Thai Agro Exchange Co.,Ltd.

2003 - present Chairman

S.Khonkaen Food Industry Pcl.

2002 - present Chairman & CEO

Thansettakij Co.,Ltd.

2002 - present Chairman

SCJ & Associates Co.,Ltd.

2001 – 2002 Chairman

Central Credit Information Service Co.,Ltd.

2000 – 2002 President & C.E.O.

Thai Military Bank Pcl.

1997 – 2000 President & C.E.O.

Bangkok Metropolitan Bank Pcl.

2. Dr.Sakorn Suksriwong - Director Certification Program 2005 - present - Director

Director Thai Institute of Directors Association - Managing Director

- D.B.A. Bangkok First Investment & Trust Pcl.

University of South Australia, Australia 1997 – present - Director

- M.B.A. (International Business) - Managing Director

The George Washington University, Prida Pramote Co.,Ltd.

Washington D.C., U.S.A. 1994 - present - Director

- B.B.A. (Banking and Finance) - Managing Director

Chulalongkorn University, Bangkok - Project Director

- Advance Management Program Com-Link Co.,Ltd.

Harvard Business School, Boston Massachusetts 2004 – present Director

U.S.A. Beijing Huamao Surapan

- Certificate Program in Business Law Hotel Development Co.,Ltd.

Assumption University 2003 - present Director

- Executive Leadership Program Surapanthavanij Co.,Ltd.

NIDA and Wharton School, University of 2003 – present - Director

Pennsylvania, U.S.A. - Managing Director

Rakthai Technology and Business

Administration

2001 - present Director

Phu Fa (Occupational Incentive Project Under

the Initiation of Her Royal Highness Princess

Maha Chakri Sirindhorn)

1995 – present Director

Excel Link Co.,Ltd.

2004 – 2005 Chairman

Global Utility Service Co., Ltd.

2004 – 2005 Director

Total Industrial Services Co., Ltd.

2003 - 2005 Director & Audit Committee Member

Industrial Estate Authority of Thailand


I-Tower Co., Ltd.


Online Asset Co.,Ltd.


Trinity Wattana Pcl.


__________________________________________________ Annual Report 2006 35



Girola (Thailand) Co., Ltd.


A.N.T. (Thailand) Co.,Ltd.


PV Hitech Co.,Ltd.


Celular Vision (Thailand) Pcl.


Windmill Co.,Ltd.


Jintasap Co.,Ltd.

3. Mr.Harn Chiocharn - Director Accreditation Program 2006 – present Director and Managing Director

Director Thai Institute of Directors Association Bangkok First Investment & Trust Pcl.

- Bachelor of Law 2005 – present Director

Thammasat University Market Organization Ministry of the Interior

- Diploma 2005 – present Director and Member of Audit Committee

National Defence College of Thailand Thai Industry and Engineering Service Pcl.

2005 – present Director and Member of Audit Committee

Siamgas and Petrochemicals Pcl.

2004 – present Member of The Board of Activity Promotion

Mae Fah Luang University

1999 - 2005 - Vice President

- Assistant Managing Director

- Acting Managing Director

- Deputy Managing Director and Acting Managing Director

Asset Management Corporation

1989 – 1998 - Acting Assistant Managing Director

- Assistant Managing Director

- Senior Assistant Managing Director

Laemthong Bank

4. Mrs.Kingthien Bang-Or - Director Certification Program 2005 – present Director

Director - Director Accreditation Program 2005 – 2005 Acting Managing Director

Thai Institute of Directors Association Bangkok First Investment & Trust Pcl.

- M.B.A. (Business Administration) 1991 - present Advisor

Thammasat University 2004 – 2005 Vice President

- B.B.A. (Accounting) Com-Link Co., Ltd.

Thammasat University 2005 – present Member of Audit Committee

SEC. Auto Sale Co., Ltd.

2004 – present Chairman of the Board of Director

BFIT Securities Pcl.

2004 - present Director

Hi-Tech Network Co.,Ltd.


Piyanee Co.,Ltd.


P.V. Hitech Co.,Ltd.


Biz and Fun Co., Ltd.


Patthanawatasilp Co., Ltd.


SME Franchise Management Co., Ltd.


Rakthai Technology and Business

Administration Co., Ltd.


Annual Report 2006 __________________________________________________ 36



Tier I Network Co., Ltd.


Boon Anek Co., Ltd.


Minor System and Technologies Co., Ltd.


Supiti Co. Ltd.

2004 – present Member of Audit Committee

Thai Wire Product Pcl.

2004 – present Member of Audit Committee

Thai Film Industries Pcl.


Beijing Huamao Surapan Hotel Development Co., Ltd.


Jirola ( Thailand) Co., Ltd.


Surapanthavanij Co., Ltd.

5. Mr.Suwit Ratanayanon - Director Accreditation Program 2005 – present Director

Director Thai Institute of Directors Association Bangkok First Investment & Trust Pcl.

- M.B.A. (Business Administration) 2004 – present Vice Chairman & CEO.

University of Southern Mississippi, U.S.A BFIT Securities Pcl.

2003 - 2004 Deputy Managing Director

Finansa Securities Co.,Ltd.

2002 – 2003 Deputy Managing Director

United Securities Pcl.

1998 - 2002 Vice President

Indosuez W.I.Cars Securities Co.,Ltd.

6. Mr.Edward Nocco - Director Certification Program 2004 – present Director

Independent Director Thai Institute of Directors Association Bangkok First Investment & Trust Pcl.

Chairman of the Audit - M.B.A. 2004 – 2005 Managing Director

Committee Pace University, U.S.A. Asian Advisory Group, Financial

- B.S. (Business Administration) Advisory Service - Singapore

St. Francis College, U.S.A. 2003 – 2005 Senior Advisor

HernonFung & Ng Pte.

1973 – 2002 Managing Director and Branch Manager

(Thailand Branch)

JP Morgan Chase Bank (Chase Manhattan Bank)

7. Mr.Vatana Supornpaibul - Director Accreditation Program 2005 – present Director

Independent Director - Finance for Non-Finance Director Bangkok First Investment & Trust Pcl.

Member of the Audit Thai Institute of Directors Association 2004 – present Director

Committee - M.M. (Management) Amata Power Co.,Ltd.

Sasin Graduate School of Business 2001 – 2003 Director

Administration The Metropolitan Electricity Authority

Chulalongkorn University, Bangkok 2001 – 2002 Director

- M.S.E.E. (Electrical Engineering) Expressway and Rapid Transit Authority

University of Texas, U.S.A. Of Thailand

- B.Eng. (Hons, Electrical Engineering)

Chulalongkorn University, Bangkok

- B.Eng. (Industrial Engineering)

Chulalongkorn University, Bangkok

- B.Econs. (1 st. Class Hon.)

Sukhothai Thamathirat University

- Diploma

National Defense College of Thailand


__________________________________________________ Annual Report 2006 37


8. Mr.Thira Wipuchanin - Director Certification Program Jan.2005 – present Director

Independent Director - Audit Committee Program Bangkok First Investment & Trust Pcl.

Member of the Audit Thai Institute of Directors Association Jun.2005 – present Director & Chairman of the Audit Committee

Committee - B.Sc. In Economics and Business BFIT Securities Pcl.

Administration 2003 – present Director

University of Wisconsin – Steven Point, U.S.A. Siam Macro Pcl.


Precious Shipping Pcl.

1995 – present Director & Chairman of the Audit Committee

Union Palm Oil Industry Pcl.

1998 – 2004 Deputy Managing Director

Export-Import Bank of Thailand


Annual Report 2006 __________________________________________________ 38

Executive as of December 31, 2006

Name / Position

Education

Experience

1. Mr.Harn Chiocharn - Director Accreditation Program Jun.2006 – present Director and Managing Director

Managing Director Thai Institute of Directors Association Bangkok First Investment & Trust Pcl.

- Bachelor of Law 2005 – present Director

Thammasat University Market Organization Ministry of the Interior

- Diploma 2005 – present Director and Member of Audit Committee

National Defence College of Thailand Thai Industry and Engineering Service Pcl.

2005 – present Director and Member of Audit Committee

Siamgas and Petrochemicals Pcl.

2004 – present Member of The Board of Activity Promotion

Mae Fah Luang University

Jan.1999 - Sep.2005 Vice President


Acting Managing Director

Deputy Managing Director and Acting Managing Director

Asset Management Corporation

1989 – 1998 Acting Assistant Managing Director


Senior Assistant Managing Director

Laemthong Bank

2. Miss Aruvarn Tiewtranon - B.S. in B.A. (Accounting) 2000 - present - Assistant Managing Director

Assistant Managing Youngstown State University, - Senior Vice President / Head of Department

Director Ohio, U.S.A. - Vice President / Head of Department

- Assistant Vice President

- Investment Advisory Officer

Investment Advisory Department

Bangkok First Investment & Trust Pcl.

3. Mr.Ovart Phanprechakij - M.B.A. (Finance) 2000 - present - Vice President / Head of Department

Vice President Roosvelt University of Chicago, - Assistant Vice President

Illinois, U.S.A. - Account Officer

- B.A. – Commerce (Finance and Banking) Credit Department

Thammasat University Bangkok First Investment & Trust Pcl.

4. Mr.Manop Himakorn - B.A. (Accounting) 2000 - present Vice President / Head of Department

Vice President - B.A. (Commerce) Operation Department

Thammasat University Bangkok First Investment & Trust Pcl. 5. Mrs.Vannipha Donavanik - B.A. (Laws) – Honor 2005 – present Vice President / Head of Department

Vice President Thammasat University Investment Advisory Department


1997 – 2005 - Assistant Vice President

Wealth Product Sales

Private Banking

Bank of Asia

6. Mr.Wichian Proongpanish - M.B.A. 2005 – present Vice President / Head of Department

Vice President Thammasat University Corporate Finance Department

- B.A. (Accounting) Bangkok First Investment & Trust Pcl.

Thammasat University 2004 – 2005 Vice President

Business Development Department

Finansa Asset Management Co.,Ltd.

2002 – 2004 Vice President

Corporate Finance Department

BFIT Securities Pcl.

1991 – 2002 - Assistant Vice President

- Securities Analyst

Corporate Finance Department



__________________________________________________ Annual Report 2006 39

Name / Position

Education

Experience

7. Mr.Vichai Kulsomphob - Executive Leadership Program 2006 – present Vice President

Vice President Wharton Business School, University of Business Development

Business Development Pennsylvania, U.S.A., & NIDA. Bangkok First Investment & Trust Pcl.

- Director Certification Program 2006 – present Independent Director

Thai Institute of Directors Association Castle Peak Holdings Co., Ltd.

- M.B.A. (Marketing) 2003 – Jan.2006 Executive Advisor

Thammasat University Tukcom Co., Ltd.

- Exchange Program M.B.A. 2000 – Jan.2001 Investment Planner

(International Business) SCB Asset Management Co., Ltd.

Norwegian School of Economics and Business 1998 – 2000 Marketing Executive

Administration, Norway Siam Cement Group

- B.S. (Business Administration)

Chulalongkorn University

8. Mr.Thanasarn Ampatemee - M.B.A. (Finance) 2000 - present - Assistant Vice President

Assistant Vice President University of Detroit, U.S.A. - Account Officer

- B.S. (Economics and Business - Credit Analyst

Administration) Credit Department

Mc Pherson College, U.S.A. Bangkok First Investment & Trust Pcl.

9. Mrs.Choochit Teyateeti - M.B.A. (Business) 2000 - present - Assistant Vice President

Assistant Vice President University Of Missouri, Columbia, U.S.A. - Account Officer

- B.A. (Accounting) Credit Department

Thammasat University Bangkok First Investment & Trust Pcl.

10. Mrs.Numpetch Sabaichai - B.A. – Commerce (Finance and Banking) 2000 – present - Assistant Vice President / Head of Department

Assistant Vice President Thammasat University Personnel Department


11. Miss Wimon Chiramongkolgarn - M.S. (CIS) 2000 - present - Assistant Vice President / Head of Department

Assistant Vice President Assumption University - Supervisor

- B.S. (Statistics) - Programmer

Thammasat University Information Technology Department

Bangkok First Investment & Trust Pcl. 12. Miss Yuphadee Tulanonda - B.A. (Economics) 2000 - present - Assistant Vice President / Head of Department

Assistant Vice President Thammasat University - Treasury Officer

- Secretary to Deputy Managing Director

Treasury Department


13. Mrs.Sirisook Chutanondha - Bachelor of Laws 2000 - present - Manager / Head of Department

Manager Ramkhamhaeng University Trustee Department

- B.A. (Economics) - Head of Credit Review Division

Thammasat University Operations Department


14. Mr.Kanokporn Liewsuwan - Bachelor of Laws 2000 - present - Manager / Head of Department

Manager Ramkhamhaeng University - Legal Officer

Legal Department


15. Mr. Yingyong Sunkatiprapha - B.A. (Accounting) 2000 - present - Manager / Head of Department

Manager Thammasat University - Internal Auditor

Audit Department

- Head of Securities Registrar Division

Operations Department



Annual Report 2006 __________________________________________ 40

Shareholding in the Company of Board of Directors

Number of shareheld

Name

As of Dec. 31, 2006

Increase (Decrease) During the year

1. Mr.Somchai Sakulsurarat - -

2. Dr.Sakorn Suksriwong - -

3. Mr.Harn Chiocharn - -

4. Mrs.Kingthien Bang-Or - -

5. Mr.Suwit Ratanayanon - -

6. Mr.Edward Terrence Nocco - -

7. Mr.Vatana Supornpaibul - -

8. Mr.Thira Wipuchanin - -

Shareholding in the Company of Executives

Number of shareheld Name

As of

Dec. 31,2006 Increase (Decrease)

During the year

1. Mr.Harn Chiocharn - -

2. Miss Aruvarn Tiewtranon 240,000 -

3. Mr.Ovart Phanprechakij - -

4. Mr.Manop Himakorn - -

5. Mrs. Vannipha Donavanik - -

6. Mr. Wichian Proongpanish - (40)

7. Mr. Vichai Kulsomphob - -

8. Mr.Thanasarn Ampatemee 54 -

9. Mrs.Choochit Teyateeti - -

10. Mrs.Numpetch Sabaichai - -

11. Miss Wimon Chiramongkolgarn 2,000 -

12. Miss Yuphadee Tulanonda - -

13. Mrs.Sirisook Chutanondha 1,400 -

14. Mr.Kanokporn Liewsuwan - -

15. Mr. Yingyong Sunkatiprapha - -


__________________________________________ Annual Report 2006

41

41

Board of Directors and Executives of the subsidiary of the Company BFIT Securities Public Company Limited

Board of Directors

As of December 31, 2006, the Board of Directors comprised seven directors as follows:

1. Mrs. Kingthien Bang-or Chairman of Board of Directors (Non-authorized)

2. Mr. Suwit Ratanayanon 1 Vice Chairman of Board of Directors

3. Mr. Sithi Sethavirawat Director

4. Mrs. Siriporn Maneepan Director

5. Mr. Thira Wipuchanin 2 Independent Director and Chairman of Audit Committee

6. Mr. Supasak Chirasavinuprapand Independent Director and Member of Audit Committee

7. Mr. Wetang Phuangsup Independent Director and Member of Audit Committee

Note : 1. Mr. Suwit Ratanayanon resigned from the position of director and the Chief Executive Officer and the Board of Directors appointed Mr. Prasit Srisuwan in substitution, effective from 1 January 2007 onward.

2. Mr. Thira Wipuchanin resigned from the director, effective from 1 January 2007 onward and the Board of Directors appointed Mrs.Utaiwan Dayananda in substitution, effective from 14 February 2007 onward.

Executives

As of December 31, 2006, all of Executives are as follows:

1. Mr. Suwit Ratanayanon 1 Chief Executive Officer

2. Mr. Prasit Srisuwan Deputy Chef Executive Officer

3. Mr. Sithi Sethavirawat Managing Director of Supporting Business Function

4. Mrs.Punnee Thakengkiat Managing Director of Securities Trading Business

5. Mr. Vichien Uasanguankul Managing Director of Investment Banking Business

Note : 1. Mr. Suwit Ratanayanon resigned from the position of director and the Chief Executive Officer and the Board of Directors appointed Mr. Prasit Srisuwan in substitution, effective from 1 January 2007 onward.


Annual Report 2006 ___________________________________________

42

42

Remuneration of the year 2006

Remuneration to Members of the Board of Directors

Bangkok First Investment & Trust PCL.

Remuneration (Baht)

Board of Directors Audit Committee Nomination and Remuneration

Committee Names of Directors

Annual Fee Meeting Fee Meeting Fee Annual Fee Annual Fee Meeting Fee

1. Mr. Somchai Sakulsurarat 800,000.00 250,000 - - 50,000 -

2. Dr. Sakorn Suksriwong 280,000.00 125,000 - - - -

3 Mr. Harn Chiocharn 163,333.31 75,000 - - - -

4. Mrs Kingthien Bang-or 280,000.00 125,000 - - - -

5. Mr. Suwit Ratanayanon 280,000.00 125,000 - - - -

6 Mr. Edward Terrence Nocco 280,000.00 125,000 100,000 125,000 50,000 -

7. Mr. Vatana Supornpaibul 280,000.00 125,000 50,000 125,000 - -

8. Mr. Thira Wipuchanin 280,000.00 125,000 50,000 125,000 50,000 -

9. Mr. Puck Bhengsri 244,999.97 125,000 - - - -

10. Mr. Sithi Sethavirawat 93,333.32 25,000 - - - -

Total 2,981,666.60 1,225,000 200,000 375,000 150,000 -

Directors No.9-10 had resigned.


Remuneration (Baht)

Names of Directors Board of Directors Audit Committee

Annual Fee Meeting Fee Annual Fee Meeting Fee

1. Mrs.Kingthien Bang-or 800,000 400,000 - -

2. Mr. Suwit Ratanayanon 280,000 150,000 - -

3. Mr. Sithi Sethavirawat 280,000 150,000 - -

4. Mrs.Siriporn Maneepan 280,000 150,000 - -

5. Mr. Thira Wipuchanin 280,000 150,000 100,000 105,000

6. Mr. Supasak Chirasavinuprapand 280,000 150,000 50,000 105,000

7. Mr. Wetang Phuangsup 280,000 135,000 50,000 105,000

Total 2,480,000 1,285,000 200,000 315,000

The current director fees of the Company and subsidiary that were approved by the shareholders meeting of each company are as follows:


Board of Directors

Annual Fee (Baht) Meeting Fee (Baht)

Chairman 800,000 50,000

Directors 280,000 25,000


__________________________________________ Annual Report 2006

43

43

Audit Committee


Chairman 100,000 25,000

Members 50,000 25,000

Nomination and Remuneration Committee


Chairman 50,000 No fee

Members 50,000 No fee


Board of Directors


Chairman 800,000 40,000

Directors 280,000 15,000

Audit Committee


Chairman 100,000 15,000

Members 50,000 15,000

Remuneration to Executives of the year 2006


Salary and Bonus (16 persons) 23,496,902.00 Baht

Contributions to Provident Fund (7 persons) 597,384.00 Baht

Others 64,460.44 Baht

Total 24,158,746.44 Baht


Salary and Bonus (5 persons) 57,178,547.70 Baht

Contributions to Provident Fund (5 persons) 686,695.80 Baht

Others 145,212.84 Baht

Total 58,010,456.34 Baht

Other Remuneration of the year 2006

- None -

Interest of Directors in any Contracts Made by the Company during the Year 2006

- None -


Annual Report 2006 ___________________________________________ 44

Corporate Governance

Corporate Governance The Board of Directors concentrated on management by good corporate governance for business operation efficiently, transparently, well audited and equitably to all related parties under the following guidelines:-

Policy on Corporate Governance

The Company has set up the policy for good corporate governance in order to make a confidence to clients, employees, shareholders and all related parties. The policy of the Board of Directors includes in risk management, duty, composition and practice of the Board of Directors, relationship with related parties and code of ethics

Shareholders’ Right and Shareholder’s Meeting

All of the shareholders have equitable right in joining and voting in shareholder’s meetings. The notice of the meeting and all relevant documents are delivered to the shareholders not less than 7 days prior to the meeting day as required by law (or not less than 14 days prior to the meeting date in accordance with the relevant regulation of the Office of Securities and Exchange Commission or the Stock Exchange of Thailand). The notice calling for the meeting was published in the newspaper for 3 consecutive days and at least 3 days prior to the meeting date. So, the shareholders have time to consider about the agenda and the Board of Directors’ opinion. Each agenda will have specified clearly that for acknowledgment, consideration or approval. If the shareholders could not able to attend the meeting may, they could commit to others or Independent Directors who are not the management and shareholders of the Company, as a proxy to attend and vote in the meeting.

The shareholders’ meeting proceeded through the agenda and encourage the shareholders to express their opinions or make a questions that were explained by the directors or related management. . The meeting will have concluded the resolution by voting. The voting in each agenda, questions, recommendations and explanations will be noted in writing to disclose in the minutes.

Various Groups of Stakeholders’ Right

The Company is the financial institution and listed in the Stock Exchange of Thailand, so there are related various groups such as clients, employees, shareholders, investors, business partners and regulators. The Board of Directors supervises and believes that legal rights of all groups of stakeholders will be fairly and carefully treated as specified in the code of ethics.

Shareholders

The Company intentionally develops and operates its business to be growth, stable and deliver an appropriated benefit to the shareholders. In addition, the Company takes responsibility to protect all assets as well as possible. The Company regularly reports and completes operation detail authentically. Moreover, the Company discloses all information and clearly conflict of interest and also regularly dividend payment.

Clients

The Company honestly and fairly operates and gives the right information to client. Any complaint was promptly served the need and serviced for client’s satisfaction.


___________________________________________ Annual Report 2006 45

Employees

Employees are valuable resources to lead the Company being successfully. The Company has trained and developed the employees’ competence in order to enhance their knowledge and performance. Employees are given opportunities to participate in setting the operation and development directions. The Company provides benefit to the employees appropriated for competence, responsibility and performance. The good atmosphere over working place is considered for the employees’ safety health and assets. The fringe benefits are provided to employees such as:

- Provident fund for future saving.

- Group life insurance and medical care treatment.

- Staff loan.

- Inside and Outside training.

Business partners

The Company deals business with business partners according to the terms and conditions in adding value to its business and services. The correct information is given with no request or special support apart from the business deal is done.

Regulators

The Company intends to run business with transparence, honesty and operate in compliance with rules or notifications of the regulators such as Ministry of Finance, Bank of Thailand, Office of Securities and Exchange Commission and the Stock Exchange of Thailand. The Company collaborates extremely with these regulators.

The Board of Directors

Directors’ structure

The Board of Directors comprises eight qualified directors and well-balanced in the proportion. There are four independent non-executive directors which one of them is the Chairman. The proportion of independent director is more than one-third of the Board of Directors, so it is certainly that the Board of Directors has balance of power by independent non-executive directors.

Leadership and Vision

Each directors have expertise, competency and experience beneficially operates the Company’s business. In addition, the Company encourages the directors to attend the courses held by the Institute of Director Association or other institute to increase their expertise.

The Subcommittee

The Board of Directors established various committees for well-manage the businesses efficiently. The subcommittee comprised the Audit Committee, the Nomination and Remuneration committee, the Risk Management Committee, the Credit Committee, the Debt Restructuring Committee, the Investment Committee, the Asset and Liability Management Committee and the Executive Committee.

The Committees mentioned above consisted of directors and or the management who related to the Committees’ work.

Unification or Segregation of Position

The Board of Directors assigns and clearly defines the roles and responsibilities of each committee. The authority between the Chairman who is independent, non-executive and non share holds and the Managing Director was clearly separated. It is the Company’s policy that no director is granted unlimited power.


Annual Report 2006 ___________________________________________ 46

Remuneration for Directors and Management

The Nomination and Remuneration Committee which comprises of 3 independent directors will consider the remuneration of the directors and the high-level management from Assistant Managing Director. The remuneration of the directors will be proposed for approval of the Shareholders’ Meeting. The remuneration of high level management will be approved by the Board of Directors.

Board of Directors’ Meetings

The schedule of the Board of Directors’ Meeting will be set in advance and at least once a quarter to consider the business operation, including approval of the financial statements which was reviewed or audited by the independent auditor and considered by the Audit Committee. The Board of Directors has to oversee the Company to reach the target under business plan. During 2006, the Board of Directors held 5 meetings.

Each meeting the secretary of the Company sent the invitation letters which specify the agenda with accompanying documents to the directors at least 7 days prior to the meeting date for studying. In the meeting, the directors can freely express their opinions, making decisions and have enough time for discussion. The minutes will be performed in writing by the secretary of the Company in order to be proposed for approval in the next meeting. The approved minutes will be kept for examination or consideration from related regulators. The Board of Directors’ resolutions related to the Company’s operation will be informed to the Management and staff for acknowledge and practice. (the number of attendance of each director specified in the topic “Management”)

Conflict of Interests

The Company has a policy to avoid any conflict of interest as specified in writing in the Code of Ethics by fair treatment, disclose in any possible conflict of interests and keep customer’s secretive information. In addition, the Company defines work regulation to prohibit employees’ action that may cause conflict of interest with the Company or clients. For example, forbid to use the company’s name for personal benefit, forbid to seek any benefit from clients, forbid to favor the business related to employees, forbid to borrow from clients or lend to clients, forbid to borrow which clients are guarantor or guarantee clients. The employee who was infringed the regulation will be penalized by regulation.

Code of Ethics

The Company intends to operate the business with transparence morality and responsibility for stakeholders. Moreover, the Company collaborates in any activity that provides prosperity to the society.

The Code of Ethics prescribes to:

- To honestly and transparently direct, manage, and administer the corporate for the benefits of all shareholders.

- To enhance and widen profession skill and knowledge so that directors, the management and employees can properly and carefully perform his/her appropriate duty and responsibility.

- To ensure that the corporate operations are in accordance with the law and the articles of association of the Company.

- To keep up-to-date information of the clients so that the Company can provide them with appropriate advices and services.

- To provide clients with the material facts which are true on a timely basis so that they can make reasonable financial decision.


___________________________________________ Annual Report 2006 47

- To eliminate issues of conflict of interest by fair treatment, disclosing any possible conflict of interest and keeping the customers’ information with strictest confidentiality.

- To keep safe custody of customers’ assets.

- To support an activity that will provide creativity and prosperity.

- To ensure that the Company does not try to disrepute the competitor by creating wrongful or untruthful alleges.

- To ensure that the operations are in accordance with the law and the articles of association of the company and to cooperate with the authorities in investigating or reporting wrongful conducts.

Internal Control System and Internal Audit

For details, please see in the “Internal Control”

Directors’ Reporting

The Board of Directors provides report of its responsibilities for preparing the financial statements of year 2006. To ensure all related parties will have confidentiality in Company’s financial statements. The Board of Directors assigns the Audit Committee to oversee the Company’s financial statements correctly, completely and credibly. The Audit committee also has to oversee the efficiency of the Company’s internal control system as mentioned in its’ authority and responsibilities.

Relations with Investors

The Board of Directors emphasizes the business operation beneficially for investors by discloses information clearly, completely, transparently and promptly via electronic media of the Stock Exchange of Thailand and mass media. This disclosure beneficially for shareholders, investors, securities analysts, institutions and public for make a decision. In addition, this information will be disclosed through the Company’s website www.bfit.co.th.

Control of Internal Information Usage The Company has a policy and measure to prevent the conflict of interest that may arise from utilizing the internal information and to prevent the directors, managements and employees use internal information for their own or others benefits. The Company clearly prescribes the organization structure, duties and authorities of each section. The sections that have potential to occur conflict of interest were separated. The Company has the code of ethics, prohibition to disclose any clients’ information to external person or corrupt usage for personal benefits. Moreover, prohibition to disclose any Company’s financial information before official disclosure. The employees’ contravene will be penalized according to the rule at maximum level by dismissal.

In every Board of Directors’ Meeting have to acknowledge the reports of changes in securities held by directors, management, and independent auditor in compliance with the regulation of the Stock Exchange of Thailand. Internal Control The Board of Directors and Management of the Company emphasizes on the Internal Control System for business operation sufficiently by setting organization structure, duties and responsibilities of the management and other committees. There are separated functions for balance of power. The Company also issues policies, regulations, rules,


Annual Report 2006 ___________________________________________ 48

operation manual of each department and also the compliance manual in writing for Company’s employees to execute.

The Board of Director assigns the Audit Committee to be responsible in efficiently internal control system, oversee the operation according to the regulation. The Audit Department of the Company performs audit report to the Board of Directors by quarterly. In addition, the independent auditor was assessed the Company’s internal audit function and report to the Bank of Thailand. The Audit Committee acknowledged this special report for year ended on December 31, 2005 in the meeting no.3/2006 on August 24, 2006 and the Board of Directors acknowledged the minutes of the Audit Committee’s meeting in the meeting no.3/2006 on August 28, 2006. In conclusion, there were no significant defects that affect the Company’s internal control system.

The Board of Directors deems that the Company has adequate internal control system in business operation.


_____________________________________________Annual Report 2006 49

Related Party Transactions In 2006, related party transactions between the Company with connected persons or related parties were conducted in the normal course of business operation. There have been concluded on commercial terms and bases agreed upon in the ordinary course of businesses between the Company and those companies, except loans to employees of the Company which for part of fringe benefits of the employees. (The details were disclosed in the Notes to Financial Statements No.8)

Below is a summary of significant business transactions with related parties in 2006.

Related Party Relationship Transaction Million Baht

Pricing policy

1. BFIT Securities Plc. The subsidiary - Interest paid

on borrowings 6.6 2.75% - 4.00% p.a.

- Brokerage fees 0.8 0.25% of trading volume

2. S.E.C.Auto Sales and Services Plc.

Common director - Interest incomes on lending

2.9 Same rate as applied to ordinary customers

(Mrs.Kingthien Bang-Or) - Interest paid on borrowings


3. Krungdhep Sophon Plc. An executive of the Company being a

- Interest incomes on lending


director in this company (Mr.Ovart Phanprechakij)

- Interest paid on borrowings


4. Pridapramoth Co.,Ltd. Common director - Interest paid on borrowings


(Dr.Sakorn Suksriwong) 5. Com-Link Co.,Ltd. Common director - Interest paid

on borrowings 4.9 Same rate as applied to

ordinary customers (Dr.Sakorn Suksriwong) 6. Jirola (Thailand) Co.,Ltd. Common director - Interest paid


ordinary customers (Mrs.Kingthien Bang-Or) 7. Hi-tech Network Co.,Ltd. Common director - Interest paid


ordinary customers (Mrs.Kingthien Bang-Or) 8. Boon Anek Co.,Ltd. Common director - Interest paid


ordinary customers (Mrs.Kingthien Bang-Or) 9. Excel Link Co.,Ltd. Common director - Interest paid


ordinary customers (Dr.Sakorn Suksriwong) 10. Rak Thai Business Administrative Technology Co.,Ltd.

Common director (Dr.Sakorn Suksriwong)

- Interest paid on borrowings


The balances of the accounts between the Company and those related companies as of December 31, 2006 are as follows:-


1. BFIT Securities Plc. The subsidiary - Securities business receivables 1.9 - Borrowing and deposits 180.0 - Borrowing and deposits for customer account 354.7 - Accrued interest payables 3.1 2. S.E.C.Auto Sales and Services Plc.

Common director - Loans to related companies 49.9

(Mrs.Kingthien Bang-Or) - Borrowing and deposits 12.5


Annual Report 2006 __________________________________________ 50


3. Krungdhep Sophon Plc. An executive of the Company being a director in this company

- Loans to related companies 23.0

(Mr.Ovart Phanprechakij) 4. Tawana Hotel Co.,Ltd. Common director* - Investment in preferred share 0.6 5. Pridapramoth Co.,Ltd. Common director - Borrowing and deposits 130.2 (Dr.Sakorn Suksriwong) 6. Com-Link Co.,Ltd. Common director is - Borrowing and deposits - (Dr.Sakorn Suksriwong) 7. Jirola (Thailand) Co.,Ltd. Common director - Borrowing and deposits 33.4 (Mrs.Kingthien Bang-Or) 8. Hi-tech Network Co.,Ltd. Common director - Borrowing and deposits 15.3 (Mrs.Kingthien Bang-Or) 9. Boon Anek Co.,Ltd. Common director - Borrowing and deposits 347.2 (Mrs.Kingthien Bang-Or) 10. Excel Link Co.,Ltd. Common director - Borrowing and deposits 10.0 (Dr.Sakorn Suksriwong)

* Mr.Puck Bhengsri has resigned from the directorship of the Company and Tawana Hotel Co.,Ltd. in November 2006 and Dr.Sakorn Suksriwong, a director of the Company, has been appointed as the director of Tawana Hotel Co.,Ltd. as a substitute director in January 2007.

Policy and Possibility of the Related Party Transactions in the Future

The Company puts strong emphasis on effective management under good governance. The Company has issued the Operating Manual regarding Transactions with Connected Persons or Related Parties. The Company has policy that the price or the conditions of related party transaction would be the same as for other normal business transactions except loans to employees of the Company and those of its subsidiary which form part of the fringe benefits of the employees.

Measures or Procedures for Approval of Related Party Transactions

All transactions between related parties shall be done on the same basis and conditions as applied to external parties. The procedures for approval of related party transactions are summarized as follows:-

1. The related party transactions which are done at arm’s length, in line with terms of price and conditions offered to general clients must follow general procedure of approval in each transaction.

2. The related party transactions which are not included in item 1. must be approved by the majority members of the executives committee.

3. The Articles of Association of the Company state that the Company must proceed in accordance with the regulation or related laws for the related party transactions which must be approved by the Board of Directors and Shareholders.

The Company also has to summarize all related party transactions and disclose these related party transactions in Notes to Financial Statements. The Company shall carry out the related party transactions according to the laws, the notification of the Office of Securities and Exchange Commission, and the regulations of the Stock Exchange of Thailand to comply with good corporate governance principles.


_____________________________________________ Annual Report 2006 51

Explanation and Analysis of the Financial Status and Operating Performance for Year 2006

Summary of Operating Performance

The operating results of the Company for both the Company only and consolidated figures for accounting year 2006 ending December 31, 2006 showed a net profit of Baht 296.89 million, an increase of Baht 31.17 million or 11.73% comparing with Baht 265.72 million obtained in the year 2005.

Details of the net profit obtained in the year 2006 are as follows:-

1. Finance business posted a net profit of Baht 71.01 million, an increase of Baht 27.58 million, representing an increase of 63.50% as compared to net profit of Baht 43.43 million obtained in 2005. This was mainly due to the increment in non-interest income of Baht 32.43 million, the decrement in net interest and dividend income after bad debt and doubtful accounts of Baht 7.07 million, the decrement in non-interest expenses of Baht 7.43 million and the increment in corporate income tax of Baht 5.21 million in relevant to the increase in net income after expenses as per the following details :-

1.1 Non-interest income of finance business increased from Baht 10.11 million in 2005 to Baht 42.54 million in 2006 representing an increase of Baht 32.43 million. This was contributed mainly from gains on investments of Baht 24.24 million booked in 2006 while Baht 3.62 million was recorded in 2005. The increment in gain on disposal of property foreclosed of Baht 11.18 million. In addition, other income increased from Baht 0.44 million in 2005 to Baht 1.29 million in 2006.

1.2 Net interest and dividend income after bad debt and doubtful accounts dropped from Baht 162.85 million in 2005 to Baht 155.78 million in 2006, representing a decrease of Baht 7.07 million in spite of the increment in net interest and dividend income of Baht 81.10 million. The increment in bad debt recovery income of Baht 12.39 million. The decrement in bad debt and doubtful accounts of Baht 5.47 million while there was an increment in interest expense of Baht 106.03 million

1.3 Non – interest expenses decreased by Baht 7.43 million or 6.45 % from Baht 115.15 million in 2005 to Baht 107.72 million in 2006 mainly due to the decrement in other expenses of Baht 11.79 million, the decrement in loss on impairment of properties foreclosed of Baht 1.96 million while there was an increment in personnel expenses of Baht 3.98 million and an increment in special business tax of Baht 1.91 million.

1.4 The increase in corporate income tax of Baht 5.21 million was due to the increment in income in 2006 and the adding back of disallowable expenses for tax computation i.e. bad debt and doubtful account for Baht 5.47 million in 2005 while in 2006, it did not have this expense and there was reserve for impairment of properties foreclosed which has already added back for tax computation for Baht 5 million in 2006.

2. BFIT has recognized a net profit through BFIT Securities Pcl. (BSEC) by equity method for a total of Baht 225.87 million, an increase of only Baht 3.59 million comparing with a net profit of Baht 222.28 million in the year 2005. The subsidiary company posted a net profit of Baht 247.42 million in 2006, an increase of Baht 25.14 million comparing to the net profit of Baht 222.28 million obtained in 2005. This was caused by the decreasing share holding during the year 2006. On 31 October 2006 the percentage of holding was decreased from 100 percent to 66.67 percent and on 16 November 2006 the percentage was decreased to 50 percent respectively


Annual Report 2006 _____________________________________________ 52

Total Incomes Structure

Major incomes of the Company comprised interest and dividend incomes mainly from finance business, and non-interest incomes contributed mostly from securities business. In 2006, these two major incomes recorded a total of Baht 1,161.73 million, an increase of Baht 215.79 million or 22.81% from 2005’s Baht 945.94 million. The increase was contributed from the increase of interest and dividend incomes by Baht 108.87 million and the increment in non-interest incomes by Baht 106.93 million. The details of the incomes are as follow:-

(1) Interest and Dividend incomes

In 2006, total interest and dividend incomes were Baht 418.21 million, Baht 108.87 million or 35.19% increase from Baht 309.34 million obtained in 2005. Interest from loans and deposits amounted to Baht 254.45 million while interest and dividend income from investments contributed Baht 163.76 million.

Interest from loans and deposits constituted Baht 254.45 million, 37.56% or Baht 69.48 million increase from 2005’s Baht 184.97 million as a result of an increase in interest rate of finance business’s loans during the year 2006. Interest income from loans and deposits from finance business totaled to Baht 200.19 million and from securities business of Baht 54.26 million.

Interest and dividend income from investments in 2006 increased from Baht 124.38 million to Baht 163.75 million, an increment of Baht 39.37 million or 31.65%. It related to the increment in investment including securities purchased under resale agreements which increased from Baht 2,519.14 million to Baht 3,238.09 million, an increment of Baht 718.95 million or 28.54%.

(2) Non-Interest Incomes

Total non-interest incomes in 2006 amounted to Baht 743.52 million, Baht 106.93 million or 16.80 % increment from 2005’s Baht 636.59 million. Finance business accounted for Baht 42.54 million and securities business contributed additional Baht 700.98 million.

For finance business, these incomes comprised net gains from securities investment of Baht 24.24 million; fees and services incomes generated from loans and debenture holders representative of Baht 5.83 million; gains on sale of properties foreclosed of Baht 11.18 million; and from other incomes of Baht 1.29 million. Overall, non-interest incomes from finance business which increased from Baht 10.11 million obtained in 2005 to Baht 42.54 million in 2006 was due mostly to the increase in gains on sale of properties foreclosed of Baht 11.18 million and gains from securities investment of Baht 20.62 million. The said securities are ordinary shares obtained from debt restructuring.

For securities business, non-interest incomes in 2006 increased by Baht 74.50 million or 11.89% increment from 2005’s Baht 626.48 million to Baht 700.98 million. The rise was mainly contributed from the significant increase in brokerage fee income from Baht 606.18 million in 2005 to Baht 694.42 million in 2006, an increase of Baht 88.24 million or 14.56 %. The brokerage fee income relate directly to the total securities trading volume in the SET which presented the upward cycle during the year 2006.

Operating Expenses

Operating expenses comprised interest expense which is the main expense under finance business, and non-interest expense which is the major expense under securities business and secondary expense of finance business. Details of the operating expenses in 2006 are:-


_____________________________________________ Annual Report 2006 53

(1) Interest Expenses

According to the consolidated financial statements, interest expenses in 2006 amounted to Baht 246.34 million, an increase of Baht 95.49 million or 63.30% compare to 2005’s Baht 150.85 million.

For finance business which included deposits taken from the subsidiary company, interest expenses in 2006 increased from Baht 117.96 million in 2005 to Baht 224 million in 2006 while average outstanding of borrowings and deposits in 2006 decreased from Baht 5,191.19 million in 2005 to Baht 5,076.62 million in 2006. Average rate of interest increased from 2.30% in 2005 to 4.37% in 2006.

For securities business, interest expenses in 2006 decreased by Baht 10.55 million from 2005’s Baht 32.89 million to Baht 22.34 million. This was mainly contributed from the significant decrease in interest expense on subordinated loan and subordinated convertible debenture. During August 2006, the securities business repaid all subordinated loan and on 31 October 2006, subordinated convertible debenture holders exercised their rights to convert all subordinated convertible debentures into ordinary shares respectively.

(2) Non-Interest Expenses

Non-interest expenses in the consolidated financial statements for 2006 totaled to Baht 499.19 million, an increase of Baht 101.94 million or 25.66% compare to Baht 397.25 million in 2005 of which Baht 107.72 million was from finance business and Baht 391.47 million was from securities business.

Non-interest expenses under finance business decreased by Baht 7.43 million from Baht 115.15 million in 2005 to Baht 107.72 million in 2006. The decrement was due to the decrement of fees paid relating to a risk management services from Finansa Public Company Limited by Baht 10 million and loss on impairment of properties foreclosed decreased by Baht 1.96 million, the increase in personnel expenses by Baht 3.98 million as a result of remuneration paid to the directors for a period of 4 months started in September 2005 but for the full year in 2006 and also affected by the annual increase of salary.

Non-interest expenses under the securities business increased by Baht 109.37 million or 38.77% from Baht 282.10 million in 2005 to Baht 391.47 million in 2006. The increase was mainly from the rise in personnel expenses of Baht 109.04 million. To be in line with the policy of BFITSEC to expand its customer base, the number of staffs and marketing officers were increased and accordingly, the incentive bonus for marketing officers owing to higher brokerage fee generated during the year caused the growth in personnel expenses. The increment in premises and equipment expenses of Baht 22.53 million was a result of a moving of its office to a new site in 2006 and sharp increase in computers and software and the increment in other expenses of Baht 7.32 million. The decrement in donation of Baht 31.82 million was due mainly to the payment of a donation of Baht 30 million to a foundation in August 2005, in order to bring an end to the issue concerning employment mobility of marketing officers.

Net Profit

The operating results of the Company for both the Company only and consolidated figures for accounting year ended 31 December 2006 showed a net profit of Baht 296.89 million, an increase of Baht 31.17 million or 11.73% comparing with Baht 265.72 million obtained in year 2005. Finance business posted a net profit of Baht 71.01 million, an increase of Baht 27.58 million or 63.50% from Baht 43.43 million obtained in 2005, while securities business generated net profit of Baht 225.87 million (This amount was calculated by using a gradual decrement of share holding in subsidiary company during the year 2006. On 31 October 2006 the percentage of holding was decreased from 100 percent to 66.67 percent and on 16 November 2006 the percentage was decreased to 50 percent respectively) , an increase of Baht 3.59 million or 1.62% from a net profit of Baht 222.28 million registered in 2005. Major factors which affected the profitability were:-


Annual Report 2006 _____________________________________________ 54

(1) Finance business

Finance business posted a net profit of Baht 71.01 million, Baht 27.58 million increase, representing a rise of 63.50% as compared to net profit of Baht 43.43 million obtained in 2005. This was due to the increment in non-interest income of Baht 32.43 million as a result of sharp increase in gains on investment of 20.62 million and the increment in gains on sale of properties foreclosed of Baht 11.18 million.

(2) Securities business

Securities business posted a net profit generated from BSEC for a total of Baht 225.87 million (66.67% on 31 October 2006 and 50% on 16 November 2006 of share holding in subsidiary company), an increase of Baht 3.59 million or 1.62% comparing with the net profit of Baht 222.28 million in the year 2005 (100% of share holding in subsidiary company).

The operating results of the subsidiary company for the accounting year ended 31 December 2006 showed a net profit of Baht 247.42 million, an increase of Baht 25.14 million, comparing with Baht 222.28 million obtained in year 2005. The increase of net profit was mainly due to the rise of income from brokerage fee, from Baht 606.18 million in 2005 to Baht 694.42 million in 2006, representing an increase of Baht 88.24 million or 14.56%. Besides, there was an increase of income from interest and dividends from bank deposit and investment in promissory notes of financial institutions for an amount of Baht 35.09 million, from Baht 18.30 million in 2005 to Baht 53.39 million in 2006 or an increase of 191.75% which was according to the increased volume and the market yield during the year 2006. In addition, the increase of fee and services income was derived from the outstanding performance of Investment Banking business for an amount of Baht 9.68 million or 1,291% from Baht 0.75 million in 2005 to Baht 10.43 million in 2006. However, there was a decrease in profit from securities trading from Baht 17.65 million gains in 2005 to Baht 5.18 million losses in 2006, a decrease of Baht 22.83 million or 129.35%. The aforementioned profit from securities trading in 2005 was mainly due to the disposal of investment in its wholly owned subsidiary company, BFITAM, making a profit of Baht 18.99 million. Interest income from loans granted to securities customers also decreased by Baht 4.33 million or 34.56% from Baht 12.53 million in 2005 to Baht 8.20 million in 2006. Furthermore, the other income was decreased as well from Baht 1.90 million in 2005 to Baht 1.30 million in 2006, a decrease of Baht 0.60 million or 31.58% . As to the subsidiary company’s operating expenses had increased from Baht 325.83 million in 2005 to Baht 420.42 million in 2006, an increase of Baht 94.59 million or 29.03%. Most of such increased expenses came from the increment of personnel expenses for Baht 108.90 million, premises and equipment expenses for Baht 22.54 million, fee and service expenses for Baht 4.42 million, directors’ remuneration for Baht 1.28 million, taxes and duties for Baht 1.00 million and other expenses for Baht 3.03 million.

The net profit from both businesses of Baht 296.89 million in 2006 represented an earnings per share of Baht 1.48 comparing to Baht 1.33 in 2005.

Financial Position

Assets

Total assets of the Company and its subsidiary as of December 31, 2006 amounted to Baht 8,374.18 million, Baht 639.08 million or 8.26% increase from Baht 7,735.10 million at yearend 2005.

Major assets of the Company comprised cash and deposits at financial institution, securities purchased under resale agreements, investment in securities, loans, receivables and accrued interest receivables and other assets. Details of the major assets were:


_____________________________________________ Annual Report 2006 55

December 31, 2006 December 31, 2005 Change Mil. Baht

% Mil. Baht % Mil. Baht

Cash and deposits at financial institutions 234.94 2.81 887.27 11.47 (652.33)

Loans to financial institution 1401.54 16.74 319.92 4.14 1,081.62

Securities purchased under agreement to resale 506.00 6.04 450.00 5.82 56.00

Net investment in securities 2,732.09

32.63 2,069.1

4 26.75 662.95

Trading transactions with securities companies 230.43 2.75 107.51 1.39 122.92

Net loans, receivable and accrued interest receivables 3,081.79

36.80 3,699.3

0 47.82 (617.51)

Property foreclosed – net 52.61 0.63 93.59 1.21 (40.98)

Property, plant and equipment – net 74.54 0.89 55.87 0.72 18.67

Other assets 60.24 0.71 52.50 0.68 7.74

At yearend 2006, the Company had securities purchased under agreement to resale which were transacted through the repurchase market operated by The Bank of Thailand totaled to Baht 506 million or 6.04% of total assets.

Net investment in securities of Baht 2,732.09 million at yearend 2006 increased by Baht 662.95 million from yearend 2005. The costs, revaluation surplus and provision for possible loss of the investments were as follows:-

(Unit : Baht million)

2006 2005 Change

1. Domestic marketable equity and debt securities

1.1 Domestic marketable equity securities 100.00 - 100.00

1.2 Private-sector debts securities - - -

Total 100.00 - 100.00

less allowance for change in valuation 0.03 - 0.03

Total domestic trading equity securities 100.03 - 100.03

2. Available-for-sale securities

2.1 Private-sector debts securities due within 1 year 596.50 150.45 446.05

2.2 Private-sector debts securities due more than 1 year 927.88 784.37 143.51

2.3 Government and state enterprise bonds 153.65 198.95 (45.30)

2.4 Domestic marketable equity securities 39.59 38.65 0.94

2.5 Other securities 124.07 15.08 108.99

Total investment costs 1,841.69 1,187.50 654.19

plus allowance for change in valuation (7.73) (26.13) 18.40

Total available-for -sale securities 1,833.96 1,161.37 672.59

3. Held-to-maturities securities

3.1 Government and state enterprise bonds 298.32 251.05 47.27

3.2 Private-sector debts securities 358.68 492.08 (133.40)

3.3 Promissory notes from TAMC 193.61 211.61 (18.00)

Total held-to-maturity securities 850.61 954.74 (104.13)

less Allowance for impairment loss and possible loss (96.48) (96.48) -


Annual Report 2006 _____________________________________________ 56

Total net held-to-maturity securities 754.13 858.26 (104.13)

4. Domestic non-marketable equity securities

Domestic non-marketable equity securities 73.04 81.27 (8.23)

less Allowance for impairment loss (29.07) (31.76) 2.69

Total domestic non-marketable equity securities 43.97 49.51 (5.54)

Total investment in securities 2,732.09 2,069.14 662.95

Net investment in securities of Baht 2,732.09 million at the end 2006 increased by Baht 662.95 million from the year-end 2005 consisting of a Baht 651.85 million increase in the net current investments and a Baht 11.10 million increase in the net long-term investments.

Loans, receivables and accrued interest receivables netted of allowance for doubtful accounts and allowance for revaluation of debt restructuring totaled to Baht 3,081.79 million, a decrease of Baht 617.51 million from Baht 3,699.30 million at the end of 2005 with the following details:-


2006 2005 Change

Finance business loans and receivables 2,991.73 3,121.65 (129.92)

Securities business receivables 311.00 802.03 (491.03)

Accrued interest 10.86 7.31 3.55

Total loans, receivable and accrued interest 3,313.59 3,930.99 (617.40)

Less : allowance for doubtful accounts (231.59) (231.29) (0.30)

revaluation allowance for debt restructuring (0.21) (0.40) 0.19

Net loans, receivable and accrued interest 3,081.79 3,699.30 (617.51)

The decrement in net loans, receivables and accrued interest receivables incurred from both finance and securities business. Loans and receivables of finance business decreased in the amount of Baht 129.92 million due mainly to the decrement of old short term loans which was to be matured in the first quarter of the year 2006. Debtors in the securities business decreased by the amount of Baht 491.03 million or from Baht 802.03 million at the end of 2005 to Baht 311 million at the end of 2006. The drop in securities business’s debtors was due mainly to the decrease in cash balance customers’ accounts of Baht 490.24 million, an decrease in other receivables under credit balance system of Baht 1.09 million and increase in installment loans of Baht 0.30 million which was set aside in full of allowance for doubtful accounts for this balance. Allowance for doubtful accounts and allowance for revaluation of debt restructuring increased from Baht 231.69 million at the end of 2005 to Baht 231.80 million at the end of 2006, a net increase of Baht 0.11 million which was the result of the decrement from finance business of Baht 0.19 million and the increment from securities business of Baht 0.30 million. The Company was still cautious in granting new lending while the Company’s customers base remained mostly on medium to large companies.

Liabilities

Consolidated financial statements showed that at the end of 2006, the Company and its subsidiary’s liabilities totaled to Baht 5,356.80 million comparing to Baht 6,129.37 million at the end of 2005, a decrease of Baht 772.57 million. Liabilities were decreased in the year 2006 mainly from subordinated loan of Baht 300 million which the subsidiary company


_____________________________________________ Annual Report 2006 57

repaid all subordinated loan during August 2006, the conversion of all the subordinated convertible debentures for Baht 291.21 million into ordinary shares of BSEC on 31 October 2006, the decrease of payables to the Clearing House by Baht 414.12 million, the securities business payables by Baht 139.33 million, the corporate income tax payable by Baht 17.98 million, as well as the increment in accrued interest payable of Baht 12.48 million, the increment in accrued bonus of Baht 21.34 million, the increment in withholding tax payable and other liabilities of Baht 4.14 million and Baht 16.23 million respectively, while borrowings and deposits increased by Baht 335.88 million. Borrowings and deposits which are the Company’s main liabilities amounted to Baht 4,870.72 million at yearend 2006 and accounted for 90.93% of total liabilities. Of which Baht 4,560.97 million represented borrowings and deposits from public, a increase by Baht 42.34 million comparing to Baht 4,518.63 million at yearend 2005. Borrowings and deposits from financial institutions increased by Baht 302.93 million as at yearend 2006. There was no outstanding balance in 2005 and from foreign countries Baht 6.82 million, an decrease of Baht 9.39 million from Baht 16.21 million at yearend 2005. The increment in borrowings and deposits was a result of high interest rate. The average rate was going up to 4.37% in the year 2006 from 2.30% in the year 2005. In addition, bills of exchange were issued to public totaling Baht 100.72 million in December 2006. As for subordinated convertible debentures in 2005, the outstanding debentures was the Baht 298.50 million with liability component of Baht 291.21 million which had been issued and sold by the subsidiary, BSEC to Finansa PCL., a related company at the time of issue, with par value of Baht 10,000 and coupon rate of 3.75% per annum. The conversion ratio was set at 1 debenture to 670 ordinary shares with the conversion price of Baht 14.77 per an ordinary share. During 2005, the securities company registered a change in the par value of ordinary shares from Baht 10 per share to Baht 1 per share. As a result, the conversion price of subordinated convertible debentures was changed to Baht 1.477 per ordinary share, and the debenture are convertible in a ratio of 1 debenture to 6,700 ordinary shares. On 31 October 2006, subordinated convertible debenture holders exercised their rights to convert all subordinated convertible debentures into ordinary shares. Regarding subordinated loan of Baht 300 million which BSEC borrowed from Finansa PCL, a related company at the time of borrowing and would be payable on 16 August 2006. The loan bears interest at the rate of 5.5% per annum, interest payable quarterly in arrears, the loan has given an option for Finansa PCL. to acquire 100% stake of BFITAM owned by the subsidiary at the exercise price of Baht 10.82 per share which Finansa PCL. already bought all of investment in BFITAM in January 2005. During August 2006, the subsidiary company repaid all subordinate loan.

Shareholders’ Equity

Consolidated and the Company only financial statements as of December 31, 2006 showed that shareholders’ equity of the Company only was at Baht 2,254.10 million, higher than that as of December 31, 2005 by Baht 648.37 million. The change was a net result of net profit of Baht 296.89 million, dividend payment of Baht 30.00 million, the increment of revaluation surplus on investments of Baht 17.99 million which was due to the increment in valuation of the available for sale investments, the increment of premium on ordinary shares of the subsidiary of Baht 375.98 million, and the decrement in subordinated convertible debentures-equity component of Baht 12.49 million. Details in consolidated shareholders’ equity account at yearend 2006 comprised issued and paid up share capital of Baht 1,000.00 million, premium on ordinary shares of the subsidiary of Baht 375.98 million, revaluation deficit on investments of Baht 8.00 million, statutory reserve of Baht 112.50 million and unappropriated retained earnings of Baht 773.62 million. Unappropriated retained earnings of Baht 773.62 million came from retained earnings at the end of 2005 of Baht 534.23 million and net profit for the year of Baht 296.89 million, less dividend payment of Baht 30.00 million and statutory reserve of Baht 27.50 million. The revaluation deficit on investments of Baht 8.00 million at the end of 2006 derived from the difference between available-for-sale securities’ market price at the end of 2006 versus cost of securities and profit from portfolio transfer with the following details:


Annual Report 2006 _____________________________________________ 58


Finance business

Securities business

Total

Surplus (deficit) from debt securities

Surplus (deficit) from equity securities & warrants

Surplus from other securities

Loss from transferring of securities accounts

(6.32)

(1.61)

-

(0.07)

-

-

-

-

(6.32)

(1.61)

-

(0.07)

Total surplus (deficit) from change in valuation on investments

(8.00) - (8.00)

Assets Quality, Liquidity, Reserves, and Capital Fund Requirements

Loans

A. Concentration of loans as classified by type of business

2006 2005 Consolidated statement

Loans classified by type of business Mil. Baht % Mil. Baht %

Manufacturing and Commerce

Real estate and construction

Utilities and services

Hire Purchase

Others

Total

Plus : accrued interest

Less : prepaid discount received

782.67

516.08

906.79

50.00

1,048.11

3,303.65

10.86

(0.92)

23.62

15.57

27.37

1.51

31.63

99.70

0.33

(0.03)

1,090.76

533.14

557.90

163.99

1,579.24

3,925.03

7.31

(1.35)

27.75

13.56

14.19

4.17

40.17

99.84

0.19

(0.03)

Total loans, receivables and accrued interest 3,313.59 100.00 3,930.99 100.00

Total loans, receivables and accrued interest receivables dropped by Baht 617.40 million from Baht 3,930.99 million at the end of 2005 to Baht 3,313.59 million at the end of 2006 due mainly to the decrement of loan portfolio of this year. Loans under manufacturing and commerce sector decreased by Baht 308.09 million from Baht 1,090.76 million at the end of 2005 to Baht 782.67 million at the end of 2006, real estate and construction sector dropped by Baht 17.06 million from Baht 533.14 million at the end of 2005 to Baht 516.08 million at the end of 2006, hire purchase sector dropped by Baht 113.99 million from Baht 163.99 million at the end of 2005 to Baht 50.00 million at the end of 2006, and others, which included securities business’s loans, decreased by Baht 531.13 million from Baht 1,579.24 million at the end of 2005 to Baht 1,048.11 million at the end of 2006, while utilities and services sector rose by Baht 348.89 million from Baht 557.90 million at the end of 2005 to Baht 906.79 million at the end of 2006. For the concentration of loans by business categories, others, which included securities’ business loan held the major part at 31.63%, an decrease from 40.17% as at yearend 2005, manufacturing and commerce stood at 23.62%, utilities and services at 27.37%, real estate and construction at 15.57%.


_____________________________________________ Annual Report 2006 59

B. Classification of loans and allowance for doubtful accounts

(1) Finance Business

In accordance with the Bank of Thailand’s rules and regulations, finance business has classified debtor accounts into 6 classes and had set up the minimum provision according to this classification by which provision required by BOT was calculated from the debtor account after deducting collateral value. As at December 31, 2006, classification of loans and provision for doubtful accounts in financial statements of the Company only were as follow:-

Allowance for doubtful accounts (Mil. Baht)

Classifications

(Mil.Baht)

Loans and accrued interest

receivables

(Mil.Baht)

Net loans after

deduction collateral

value

% Provision required by

BOT

Amount provided under BOT’s

guideline

Amount already set up

Normal

Special mentioned

Sub-standard

Doubt

Doubtful loss

Excessive reserve

2,856.649

23.204

46.680

19.756

60.695

-

2,845.868

23.204

26.046

19.756

60.848

-

1%

2%

20%

50%

100%

27.304

0.464

5.209

* 67.613

60.848

-

** 27.304

0.464

5.209

67.613

60.848

51.362

Total classified assets 3,006.984 2,975.722 161.438 212.800

* Allowance for doubtful accounts included the additional allowance ordered by BOT for a normal receivable identified as a potential NPL.

** Allowance for doubtful accounts for normal loan had included allowance for staff loans.

According to provision required by BOT, total amount to be provided under BOT’s guideline was Baht 161.44 million but the Company had set aside a total of Baht 212.80 million (Included provision at 100% under BOT’s new requirement on receivables in the period ended 31 December 2006 for which a court judgment has already been issued or under legal actions) which was higher than the minimum requirement by Baht 51.36 million or 31.81%. Net loans after deduction of collateral value included loans to Company’s employees and accrued interest, and excluded loans to financial institutions. The collateral values had not been deducted for normal loans and special mentioned loans.

(2) Securities Business

As at December 31, 2006, BFIT Securities Pcl., the subsidiary, classified its securities business receivables and accrued interest receivables and allowance for doubtful account in accordance with the Notification of the Office of the Securities and Exchange Commission (SEC) as presented below.


Classifications Receivables and accrued interest

receivables

Allowance for doubtful accounts as

required by SEC

Allowance for doubtful accounts recorded by the

subsidiary

Normal debts 292.21 - -

Doubtful debts 18.79 18.79 18.79

Total 311.00 18.79 18.79


Annual Report 2006 _____________________________________________ 60

Non-Performing Loans (NPLs)

Consolidated and the Company only financial statements showed that the Company had non-performing loans at the end of 2006 and 2005 of Baht 145.84 million and Baht 141.33 million, respectively, representing an increase of Baht 4.51 million, of which Baht 127.05 million or 87.12% represented loans and receivables of finance business and Baht 18.79 million or 12.88% represented loan of securities business at the end of 2006 (At the end of 2005 : Baht 130.08 million and Baht 11.25 million, respectively). As at 31 December 2006, non-performing loans and receivables of the Company constituted 4.34% of total loans and receivables and 3.55% for the yearend 2005

Quality of Investments in Securities

At the end of 2006 and 2005, the Company had net investment in securities of Baht 2,732.09 million and Baht 2,069.14 million respectively, representing an increase of Baht 662.95 million as per details shown in the heading of investments in securities of which such investments as at the end of 2006 had included loss on revaluation of investments of Baht 8 million. The figure was unrealized loss from the comparison between market values and carrying costs at the end of 2006.

The revaluation deficit from revaluation of investments recorded under the available-for-sale investment portfolio both long and short terms as per details described under Shareholders’ Equity.

The investment theme of 2006 was creating the balance of revenue from interests, dividends, and capital gain from the mixed portfolio consisted debt securities, equity securities and mutual funds.

In the midst of economic volatility that had two main driving factors, inflation that moves closely with global fuel prices pressing interest rate policy of the Bank of Thailand and political instability throughout the year, the company satisfactorily generated revenue from investment more than that of 2005 together with continual enhancement in investment portfolio.

In 2006, the company and subsidiary’s revenue from investment assets was Baht 183.65 million increasing from Baht 145.70 million in 2005 or increased by 26.05%. The revenue mentioned was from interests and dividends for the amount of Baht 163.75 million and from capital gain for the amount of Baht 19.90 million. Finance business’ revenue from investment assets was Baht 187.28 million increasing from Baht 127.11 million in 2005 or increased by 47.34%. Finance business’ revenue consisted of Baht 163.04 million from interests and dividends and Baht 24.24 million from capital gain while those of 2005 were Baht 123.49 million and Baht 3.62 million respectively.

The increase of revenue in 2006 originated from the increase of investment assets that, as of December 2006, stood at Baht 2,732.09 million gaining from Baht 2,069.14 million in 2005 or increased by 32.04%. The main increase was from investment expansion in available for sale portfolio that stood at Baht 1,833.96 million surging from Baht 1,161.37 million in 2005 or gained by 57.91%. Of such increment, debt securities increased by 63.07% while equity securities and mutual funds increased by 204.60%.

Overall investment asset quality had continuously been improving since 2005. Such improvement derived from active portfolio management throughout the year. The company heavily invested in debt securities when the Bank of Thailand’s policy interest rate had been increasing. Therefore, average yields of the company were booked at relatively high levels of the year. Since the third quarter of 2006, market yield of debt securities fell sharply. Consequently, investment values surged accordingly. The company also expanded investment in mutual funds because they offered relatively higher yield with lower volatility comparing with other ordinary equity securities. In turn, allowance for change in valuation dropped considerably to Baht 7.73 million from Baht 26.13 million in 2005.


_____________________________________________ Annual Report 2006 61

All investment transactions in debt securities were carefully reviewed. Securities issuer’s latest financial status and credit ratings were included into consideration. Investment in state and private debt securities were allocated at the appropriate level of risk and return. In turn, the company proudly had zero default in 2006. Investment in equity securities and mutual funds were also adequately reviewed. Their financial status, potential upside gain, expected dividend yield and liquidity were taken into consideration as the usual procedure.

The quality of Thailand Asset Management Corporation’s (TAMC) promissory note originated from transferred non-performing loans (NPL) for the amount of Baht 193.61 million was tied to the issuer’s performance which the company had continuously been tracking all information related. However, during the year 2006, the Company received a letter from TAMC informing it that TAMC will terminate the transfer of Baht 153 million non-performing loans secured by leasehold rights which are not qualified for transfer, with TAMC to adjust the value of its promissory note by the same amount. The Company’s management has written to TAMC confirming its rights over such collateral as at the transfer date and confirming that the original transfer value is correct. As the date of this report the dispute has still not been finalised. The company had already booked allowance for maximum possible loss by Baht 96.48 million or 30% of the price at which the non-performing assets were transferred to TAMC. The Company’s management believes that no significant loss will be incurred in addition to the provision already made by the Company.

Company’s Liquidity

As at the end of 2006, the Company had a total of Baht 1,100.08 million of liquid assets under the definition of BOT or 21.54% of total borrowings of Baht 5,107.52 million (including borrowings from the subsidiary company) which was much higher than the 6.00% requirement stipulated by the BOT. The above-mentioned liquid assets consisted of cash deposits at the BOT in the amount of Baht 37.01 million, deposits at banks without obligations of Baht 10.79 million, Thai Government Bonds without obligations of Baht 88.05 million, debentures or bonds or debt instruments that principal and interest were guaranteed by Ministry of Finance and without obligations of Baht 556.09 million and debentures or bonds of government agencies or state enterprises that were founded by special acts or of the Industrial Finance Corporation of Thailand without obligations of Baht 408.14 million. The above-mentioned liquid assets had included securities purchased under resale agreements of Baht 506 million and TAMC’s promissory notes of Baht 97.12 million.

Relationships between sources and uses of fund

The Company’s sources of fund come from deposits or borrowings from general public and its own capital while its uses of fund are mostly in the investment in securities, and loans. As at the end of 2006, the above-mentioned sources and uses of fund could be divided according to the aging of deposits, debt instruments and loans in the consolidated financial statements as the following:-

Period Deposit % Loans (1) Investments (2) in debt

securities

Bonds (3)

repurchased market

Gap.

Call

< 1 year

> 1 year

331.09

4,398.75

140.88

6.80

90.31

2.89

234.96

1,849.95

1,217.82

-

885.80

1,449.20

506.00

-

-

409.87

(1,663.00)

2,526.14

Total 4,870.72 100.00 3,302.73 2,335.00 506.00 1,273.01

Remarks 1) Including loans not over 1 year to customers of securities business of Baht 311 million. 2) Only principal excluding allowance for revaluation of Baht 6.13 million. 3) Since the duration of investment in bond repurchase market was not more than 14 days as of December 31, 2006, it was classified as at call.


Annual Report 2006 _____________________________________________ 62

Sources of fund in the forms of deposits or borrowings from general public at the end of 2006 totaled to Baht 4,870.72 million of which Baht 331.09 million or 6.80% represented at call, Baht 4,398.75 million or 90.31% due within 1 year and Baht 140.88 million or 2.89% due over 1 year. The ratio of deposits based on the remaining period of contracts at the end of 2006 was call : not over 1 year : over 1 year at 6.80 : 90.31 : 2.89. It can be seen that the majority of sources of funds was short term deposit. Uses of fund in the forms of loans, investments in debt instruments and in bonds repurchase market were still not match in maturity profile with the sources of fund as there were loans under call basis and short term investments not more than 14 days in the high ratio while those of not more than 1 year were low as compared to maturity profile of sources of fund which was common for finance business because most of clients prefer to renew their Promissory Notes. However, when considering the Company’s liquidity position by the definition of BOT, at the end of 2006, the Company had total of liquid assets of Baht 1,100.08 million or 21.54% of total borrowings (including borrowings from securities business) and most of the Company’s debts securities are trading in the secondary market. Therefore, the Company had no liquidity problem due to mismatch of sources and uses of fund since it maintained substantial liquid assets.

Reserves and Capital Fund Requirements

Capital Adequacy Ratio

At yearend 2006, the Company had capital-to-risk assets ratio of 28.97% which was much higher when comparing to the BOT’s requirement of 8.0%.

Net Capital Rule

At the end of 2006, BFIT Securities Pcl. maintained its net capital rule ratio at 497.07% which was higher than 10.50% stipulated by the Office of Securities and Exchange Commission.


___________________________________________ Annual Report 2006 63

Report of the Board of Directors’ Responsibilities for Financial Statements

The Board of Directors is responsible for the financial statements of the company which have been accurately and adequately prepared in accordance with generally accepted accounting standards.

The Board has appointed an Audit Committee consisted of three independent directors, who have experience, competence and qualifications in accordance with regulations of the Stock Exchange of Thailand, to provide adequate and transparent disclosure of financial statements and related party transactions. The Committee is also responsible to provide effective internal control system complying with related laws and regulations.

The Board is confident that financial statements for year 2006 ending December 31, 2006 of the company and subsidiary were accurately and adequately prepared in accordance with generally accepted accounting standards and related laws and regulations.

(Somchai Sakulsurarat)

Chairman of the Board of Directors

(Harn Chiocharn)

Managing Director

BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED

AND ITS SUBSIDIARY REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2006 AND 2005

Report of Independent Auditor To the Board of Directors and Shareholders of Bangkok First Investment & Trust Public Company Limited

I have audited the accompanying consolidated balance sheets of Bangkok First Investment & Trust Public Company Limited and its subsidiary as at 31 December 2006 and 2005, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Bangkok First Investment & Trust Public Company Limited for the same years. These financial statements are the responsibility of the management of the Company and its subsidiary as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bangkok First Investment & Trust Public Company Limited and its subsidiary and of Bangkok First Investment & Trust Public Company Limited as at 31 December 2006 and 2005, the results of their operations, and cash flows for the years then ended, in accordance with generally accepted accounting principles.

Without qualifying my opinion on the financial statements, I draw attention to the following matters: -

(a) As discussed in Note 6 to the financial statements regarding the impact of the Financial Sector Master Plan on the Company.

(b) As discussed in Note 7 to the financial statements, during the year 2006, the Company received a letter from TAMC informing it that TAMC will terminate the transfer of Baht 153 million the non-performing loans secured by leasehold rights which are not qualified for transfer, with TAMC to adjust the value of its promissory note by the same amount. The Company’s management has written to TAMC confirming its rights over such collateral as at the transfer date and confirming that the original transfer value is correct. As the date of this report the dispute has still not been finalised.

(c) As discussed in Note 13.4 to the financial statements regarding the allowance for doubtful account, in December 2006, the Bank of Thailand modified its guidelines on the determination of provisions for non-performing loans in the years 2006 and 2007, whereby provision is to be made at 100% against the difference between the book value of a debt and the present value of expected future cash flows from debt collection or from collateral disposal. The Company has set full provisions against those receivables meeting the criteria stipulated under the guidelines for the year 2006. The Company is not able to conclude what additional provisions amount will be required for the year 2007 at this stage.

Ratana Jala Certified Public Accountant (Thailand) No. 3734

Ernst & Young Office Limited Bangkok: 20 February 2007

BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANYBALANCE SHEETS

AS AT 31 DECEMBER 2006 AND 2005(Unit: Baht)

CONSOLIDATED THE COMPANY ONLYNote 2006 2005 2006 2005

ASSETSCash and deposits at financial institutions 9 234,940,124 887,268,478 47,817,930 87,943,022Loans to financial institutions - net 10 1,401,539,394 319,916,728 49,788,493 49,788,493Securities purchased under resale agreements 11 506,000,000 450,000,000 506,000,000 450,000,000Investments 12 Current investments - net 985,332,471 333,482,589 885,297,486 333,482,589 Long-term investments - net 1,746,757,116 1,735,658,743 1,735,251,466 1,723,651,903 Investment in subsidiary - net - - 1,316,327,694 726,113,725 Net investments 2,732,089,587 2,069,141,332 3,936,876,646 2,783,248,217Receivables from the Clearing House 230,429,787 107,505,925 - -Loans, receivables and accrued interest receivables 13 Finance business loans and receivables 2,991,732,655 3,121,651,679 2,991,732,655 3,121,651,679 Securities business receivables 310,994,972 802,025,969 - 11,246,960 Total loans and receivables 3,302,727,627 3,923,677,648 2,991,732,655 3,132,898,639 Accrued interest receivables 10,861,256 7,309,414 10,861,256 7,309,414 Total loans, receivables and accrued interest receivables 3,313,588,883 3,930,987,062 3,002,593,911 3,140,208,053 Less: Allowance for doubtful accounts 14.1 (231,589,931) (231,291,498) (212,800,000) (212,800,000) Allowance for revaluation of debt restructuring 14.2 (209,437) (395,461) (209,437) (395,461) Net loans, receivables and accrued interest receivables 3,081,789,515 3,699,300,103 2,789,584,474 2,927,012,592Properties foreclosed - net 15 52,607,573 93,593,602 52,607,573 93,593,602Property, plant and equipment - net 16 74,545,515 55,874,642 5,872,354 7,572,961Intangible assets - net 17 7,312,234 7,382,143 779,191 1,030,796Other assets 18 52,930,486 45,119,692 32,585,985 28,782,669TOTAL ASSETS 8,374,184,215 7,735,102,645 7,421,912,646 6,428,972,352

The accompanying notes are an integral part of the financial statements.

DIRECTORS

BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANYBALANCE SHEETS (Continued)

AS AT 31 DECEMBER 2006 AND 2005(Unit: Baht)


LIABILITIES AND SHAREHOLDERS' EQUITYBorrowings and deposits 20 From public 4,561,264,395 4,518,633,150 4,561,264,395 4,518,633,150 From financial institutions 302,927,370 - 539,437,186 248,483,231 From foreign countries 6,817,203 16,211,003 6,817,203 16,211,003 Deferred interest expenses (292,252) - (292,252) - Total borrowings and deposits 4,870,716,716 4,534,844,153 5,107,226,532 4,783,327,384Subordinated loan 21 - 300,000,000 - -Payables to the Clearing House - 414,117,492 - -Securities business payables 276,000,222 415,328,047 67,820 67,820Subordinated convertible debentures - liability component 22 - 291,214,262 - -Accrued interest payables 39,838,414 27,363,809 42,892,112 23,150,946Withholding tax payable 6,412,851 2,256,729 1,644,061 1,650,682Corporate income tax payable 38,707,862 56,687,592 6,599,245 5,867,502Accrued bonus 86,652,589 65,312,509 - -Other liabilities 38,472,808 22,244,259 9,380,633 9,174,225Total liabilities 5,356,801,462 6,129,368,852 5,167,810,403 4,823,238,559Shareholders' equity Share capital 23 Authorised share capital 300,000,000 ordinary shares of Baht 5 each 1,500,000,000 1,500,000,000 1,500,000,000 1,500,000,000 Issued and paid-up share capital 200,000,000 ordinary shares of Baht 5 each 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 Premium on ordinary shares of the subsidiary 12.3 375,980,360 - 375,980,360 - Revaluation deficit from revaluation of investments 24 (7,997,086) (25,988,105) (7,997,086) (25,988,105) Subordinated convertible debentures - equity component 22 - 12,489,837 - 12,489,837 Retained earnings Appropriated - statutory reserve 25 112,500,000 85,000,000 60,000,000 45,000,000 Unappropriated 773,618,969 534,232,061 826,118,969 574,232,061EQUITY ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS 2,254,102,243 1,605,733,793 2,254,102,243 1,605,733,793EQUITY ATTRIBUTABLE TO MINORITY SHAREHOLDERS OF SUBSIDIARY 763,280,510 - - -TOTAL SHAREHOLDERS' EQUITY 3,017,382,753 1,605,733,793 2,254,102,243 1,605,733,793TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8,374,184,215 7,735,102,645 7,421,912,646 6,428,972,352

0 0 0 0The accompanying notes are an integral part of the financial statements.

BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANYINCOME STATEMENTS

FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005(Unit: Baht)


Interest and dividend income Loans and deposits 254,452,426 184,968,176 200,190,338 158,634,772 Investments 163,754,339 124,376,325 163,035,927 123,489,441 Total interest and dividend income 418,206,765 309,344,501 363,226,265 282,124,213Interest expenses Interest and discounts 217,388,584 114,360,219 223,998,534 117,962,317 Fees and charges 28,951,270 36,494,320 - - Total interest expenses 246,339,854 150,854,539 223,998,534 117,962,317 Net interest and dividend income 171,866,911 158,489,962 139,227,731 164,161,896Bad debt and doubtful accounts - (15,631,039) - (5,469,734)Reversal of allowance for doubtful accounts - 2,925,210 - -Bad debt recovery 16,554,084 4,164,112 16,554,084 4,164,112 Net interest and dividend income after bad debt and doubtful accounts 188,420,995 149,948,245 155,781,815 162,856,274Non-interest income Brokerage fees 693,583,590 606,127,058 - - Gains on investments 28 19,900,283 21,321,735 24,242,609 3,622,010 Share of profit from investments accounted for under equity method - - 225,874,565 222,282,592 Fees and services income 16,263,288 6,796,391 5,830,147 6,048,432 Gains on sell of properties foreclosed 11,178,615 652 11,178,615 652 Other income 2,590,850 2,345,095 1,292,486 442,955 Total non-interest income 743,516,626 636,590,931 268,418,422 232,396,641 Total net income 931,937,621 786,539,176 424,200,237 395,252,915Non-interest expenses Personnel expenses 318,395,595 205,379,827 51,849,990 47,865,957 Premises and equipment expenses 79,567,705 58,046,550 11,097,763 12,112,415 Taxes and duties 13,740,107 10,826,813 11,675,619 9,768,250 Directors' remuneration 29 9,361,667 6,724,414 5,081,667 3,724,168 Loss on impairment of properties foreclosed - 1,958,700 - 1,958,700 Donation expense 30 180,516 31,909,000 100,000 10,000 Fees and service charges from securities business 26,615,802 22,199,722 - - Other expenses 51,328,300 60,209,916 27,918,451 39,712,336 Total non-interest expenses 499,189,692 397,254,942 107,723,490 115,151,826Profit before income tax 432,747,929 389,284,234 316,476,747 280,101,089Corporate income tax 5.3 (114,312,268) (123,566,718) (19,589,839) (14,383,573)Income after corporate income tax 318,435,661 265,717,516 296,886,908 265,717,516Net income attributable to minority interest (21,548,753) - - -Net profit for the years 296,886,908 265,717,516 296,886,908 265,717,516Basic earnings per share 5.4 Net profit 1.48 1.33 1.48 1.33


BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANYCASH FLOW STATEMENTS


CONSOLIDATED THE COMPANY ONLY2006 2005 2006 2005

Cash flows from (used in) operating activities Net profit 296,886,908 265,717,516 296,886,908 265,717,516 Adjustments to reconcile net profit to net cash provided by (used in) operating activities: Net income attributable to minority interest 21,548,753 - - - Depreciation and amortisation 25,196,330 19,820,596 1,996,530 4,013,644 Bad debt and doubtful accounts 298,433 15,631,040 - 5,469,735 Reversal of allowance for doubtful accounts - (2,933,654) - - Allowance for revaluation of debt restructuring (186,024) (321,090) (186,024) (321,090) Share of profit of investments accounted for under equity method - - (225,874,565) (222,282,592) Gain from sale of investment in subsidiary company - (18,988,310) - - Gain on investments in securities (1,698,712) (1,326,560) (2,656,528) (1,422,960) Reversal of interest income from reduction of promissory note - 740,000 - 740,000 Reversal of allowance for impairment of promissory note - (222,000) - (222,000) Amortisation of premium (discount) on debentures (1,710,537) 13,651,752 (1,780,329) 13,895,552 Amortisation of discount on subordinated convertible debentures 3,469,399 5,204,099 - - Loss on impairment of propoerties foreclosed - 1,958,700 - 1,958,700 Gain on sell of properties foreclosed (11,182,431) - (11,182,431) - Gain on disposal of equipment (2,716) (261,521) 3,816 (652) Reversal of impairment of equipment and intangible assets - (1,483,594) - - Written-off of equipment and intangible asset 3,081 1,757,673 94 - Decrease (increase) in accrued interest receivables (7,881,462) 5,358,453 (7,854,014) 5,370,684 Increase in accrued interest payables 12,474,605 817,652 19,741,166 1,216,669 Profit from operating activities before changes in operating assets and liabilities 337,215,627 305,120,752 69,094,623 74,133,206 (Increase) decrease in operating assets Loans to financial institutions (1,081,622,666) (270,128,235) - - Securities purchased under resale agreements (56,000,000) 190,000,000 (56,000,000) 190,000,000 Current investments (213,487,842) 334,136,487 (113,487,841) 334,136,487 Receivables from the Clearing House (122,923,862) 3,932,258 - - Loans and receivables 620,950,021 (858,255,940) 141,165,984 (536,857,864) Other assets (3,226,694) 2,401,761 498,856 (971,696) Increase (decrease) in operating liabilities Borrowings from public 42,338,993 (141,978,238) 42,338,993 (141,975,534) Borrowings from financial institutions 302,927,370 (250,000,000) 290,953,955 (126,944,321) Borrowings from foreign countries (9,393,800) 7,564,043 (9,393,800) 7,564,043 Payables to the Clearing House (414,117,492) 364,955,597 - - Securities business payables (139,327,825) 270,934,306 - - Other liabilities 23,745,161 62,833,530 931,530 (24,537,827) Net cash flows (used in) from operating activities (712,923,009) 21,516,321 366,102,300 (225,453,506)


BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY COMPANYCASH FLOW STATEMENTS (Continued)



Cash flows from (used in) investing activities Decrease (increase) in long-term investments (427,617,624) 251,386,336 (428,347,624) 239,786,417 Cash received from sale of investment in subsidiary company 12.3 - 105,929,879 - - Cash paid for purchase of equipment and intangible assets (44,064,051) (37,406,792) (53,594) (6,057,252) Cash received from disposal of equipment 11,912 706,649 5,366 654 Cash received from sell of properties foreclosed 52,168,460 11,614,800 52,168,460 11,614,800 Net cash flows from (used in) investing activities (419,501,303) 332,230,872 (376,227,392) 245,344,619Cash flows from (used in) financing activities Cash received from increased share capital 12.3 813,203,343 - - - Cash paid for subordinated convertible debentures' holders (3,107,385) - - - Repayment to subordinated loan (300,000,000) - - - Dividend paid 26 (30,000,000) (29,989,725) (30,000,000) (29,989,725) Net cash flows used in financing activities 480,095,958 (29,989,725) (30,000,000) (29,989,725)Net increase (decrease) in cash and cash equivalents (652,328,354) 323,757,468 (40,125,092) (10,098,612)Cash and cash equivalents at beginning of year 887,268,478 563,511,010 87,943,022 98,041,634Cash and cash equivalents at end of year 234,940,124 887,268,478 47,817,930 87,943,022

Supplemental cash flows information: Cash paid during the years for Interest expenses 204,913,979 150,036,887 204,257,368 116,745,648 Corporate income tax 132,291,998 107,213,722 18,858,096 34,450,413 Non-cash transactions: The decrease in subordinated convertible debentures due to exercising the right to convert them into the ordinary shares of the subsidiary 304,066,113 - - - The decrease in investment in a subsidiary due to the conversion of subordinated convertible debentures - equity compoment - - 12,489,837 - Transfer from allowance for revaluation of debt restructuring to be allowance for doubtful accounts - 701,355 - 701,355


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BANGKOK FIRST INVESTMENT & TRUST PUBLIC COMPANY LIMITED AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2006 AND 2005

1. GENERAL INFORMATION

Bangkok First Investment & Trust Public Company Limited (“The Company”) is a public company incorporated and domiciled in Thailand. The principal activity of the Company is the finance business while its subsidiary, BFIT Securities Public Company Limited, operates the securities business. Its registered address is 23rd Floor, Bangkok Insurance / Y.W.C.A. Building, 25 Sathon Tai Road, Thung Mahamek, Sathon, Bangkok. As at 31 December 2006, the Company has 67 employees (31 December 2005: 67 employees).

BFIT Securities Public Company Limited (“The subsidiary”) was established to operate securities business. As at 31 December 2006, the subsidiary had a total of 4 branches in Bangkok and other provinces (31 December 2005: 2 branches) and had 335 employees altogether (31 December 2005: 256 employees).

On 2 October 2006, the Securities and Exchange Commission approved the listing of the subsidiary’s shares on the Stock Exchange of Thailand, and during 1 – 10 November 2006 the subsidiary offered 200,005,000 ordinary shares to the shareholders of the Company, who have preemptive rights, and to the general public at a bid price of Baht 4.2 per share, as described in Note 12.3 to the financial statements. On 31 October 2006, the subordinated convertible debenture holders of the subsidiary exercised their rights to convert all of their debentures into 199,995,000 ordinary shares, as described in Note 22 to the financial statements.

As a result of the increase in the subsidiary’s capital caused by the exercise of the debentures and the public share offering as mentioned above. The Company’s shareholding fell from 100 percent to 50 percent of the total ordinary shares issued by the subsidiary as at 31 December 2006.

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2. BASIS OF PREPARATION

The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547. The presentation of the financial statements has been made in compliance with the requirement of the Notification of the Bank of Thailand relating to the format of the financial statements of finance, finance and securities and credit foncier companies dated 10 May 2001 and also have been presented in compliance with the Office of the Securities and Exchange Commission.

The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies.

3. BASIS OF CONSOLIDATION

The consolidated financial statements include the financial statements of the Company and the following subsidiary company:

(Unit: Percent)

The outstanding balances and significant transactions between the Company and its subsidiary company, and the Company’s investments in the subsidiary and shareholders’ equity of the subsidiary have been eliminated from the consolidated financial statements.

Assets as a percentage Percentage of to the consolidated Country of Shareholding as at total assets as at

Company’s name Nature of business incorporation 31 December 31 December

Revenues as a percentage to the consolidated total revenues for the year ended 31 December

2006 2005 2006 2005 2006 2005 BFIT Securities Plc. Securities business Thailand 49.9999825 99.999965 27.1 26.3 64.1 69.9

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4. CHANGE IN ACCOUNTING POLICY/ADOPTION OF NEW ACCOUNTING STANDARDS

In October 2006, the Federation of Accounting Professions issued Notification No. 26/2006 regarding Accounting Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries” (Amendment No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial statements under the cost method rather than the equity method. Entities which are not ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and adopt the cost method as from 1 January 2007.

In this regard, the Company has elected to adopt the change in 2007. Adoption of the change in 2007 will necessitate the restatement of the Company's 2006 separate financial statements to be presented for comparative purposes along with the financial statements for 2007. The restatement will have the effect of decreasing net income in the separate income statement for 2006 by approximately Baht 225.87 million (Baht 1.13 per share) and decreasing net worth in the balance sheet at 31 December 2006 by approximately Baht 916.33 million.

5. ACCOUNTING POLICIES

5.1 Revenues and expenses recognition

(a) Interest and discounts on loans

Interest income on loans is recognised over the term of the loan based on the amount of principal outstanding. No accrual is made for certain loans which are not qualified for recognition of interest under an accrual basis in accordance with notifications of the Bank of Thailand.

Interest income on restructured loans of the Company is recognised on the same accrual basis as used for loans described above. However, for loans that are subject to monitoring for compliance with restructuring conditions, the Company recognises interest income on a cash basis until the borrower is able to comply with the restructured conditions for a period of not less than three months or three installments, whichever is longer.

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Interest income on the subsidiary’s credit balance accounts and other receivables is recognised on an accrual basis, but where there is uncertainty as to the collectibility of loans and interest the Company ceases accrual.

In the following cases are considered as uncertainty of collectibility of loans and interest. Those conditions are based on the guidelines stipulated by the Office of Securities and Exchange Commission.

(1) Loans which are not fully covered with collateral.

(2) Installment loans with repayment scheduled less frequently than 3 months and for which principal or interest is overdue for 3 months or more.

(3) Installment loans with repayment scheduled no less frequently than 3 months, unless there is clear evidence and a high degree of certainty that full repayment will be received.

(4) Problem financial institutions debtors.

(5) Other receivables from which interest payment is overdue for 3 months or more.

Interest or discounts which are already included in the face value of notes receivable or loans are deferred and taken up as income evenly throughout the term of the notes or loans.

(b) Interest and dividends on investments in securities

Interest on investments is recognised as income on an accrual basis. Dividends from investments in securities are recognized as income when the entitlement to receive the dividends arises.

(c) Brokerage fees

Brokerage fees on securities trading are recognised as income on the transaction dates.

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(d) Gains (losses) on trading in securities

Gains (losses) on trading in securities are recognised as income or expense on the transaction dates.

(e) Fees and services incomes

Fees and services incomes are recognised as income on an accrual basis.

(f) Expenses

Expenses are recognized on an accrual basis.

5.2 Interest expenses

Interest expenses are charged to income on an accrual basis. Interest included in the face value of the notes payable is recorded as deferred interest and amortised to expenses evenly throughout the term of the notes.

5.3 Income tax

Income tax is provided for in the accounts based on the taxable profits determined in accordance with tax legislation.

5.4 Earnings per share

Earning per share that presents in the income statement are basic earning per share which is determined by dividing net income for the year by the weighted average number of ordinary shares held by outside shareholders in issue during the year. Basic earnings per share, for the years ended 31 December 2005, was restated as if the change of the Company’s par value of ordinary shares was made on the beginnings of the first period of the report.

5.5 Cash and cash equivalents

For the purposes of the statements of cash flows, cash and cash equivalents include all kinds of cash in hand and at banks, but exclude negotiable certificates of deposit (NCDs).

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5.6 Securities purchased under resale agreements

The Company enters into purchases of securities under agreements to resell securities at certain dates in the future at a fixed price. Amounts paid for securities purchased subject to a commitment to be resold at a future date are presented as securities purchased under resale agreements in the balance sheet. These receivables are shown as collateralised by the underlying security.

The difference between the sale and purchase considerations is recognised on an accrual basis over the period of the transaction and is included in interest income.

5.7 Investments

a) Investments in securities held for trading are presented at fair value. Gains or losses arising from changes in the value of securities are included in determining income.

b) Investments in available-for-sale securities are presented at fair value. Changes in the value of securities are shown as a separate item in shareholders’ equity until the securities are sold, and the changes are then included in determining income.

c) Investments in debt securities, both due within one year and expected to be held to maturity, are recorded at amortised cost. The premium/discount on debt securities is amortised by the effective rate method with the amortised amount presented as an adjustment to the interest income.

d) Investments in non-marketable equity securities, which the Company classifies as other investments, are valued at cost net of allowance for loss on diminution in value (if any).

e) Investment in subsidiary in the Company separated financial statements is accounted for under the equity method.

The fair value of securities listed on the Stock Exchange of Thailand is based on the latest bid price of the last working day of the year as quoted on the Stock Exchange of Thailand.

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The fair value of debt instruments which are listed on the Thai Bond Market Association is determined using the average bid yield quoted by the Thai Bond Market Association on the last working day of the year. If no average bid yield is available, then the yield on the latest transaction is used, providing this was not more than one month, and that there have been no significant changes in the economic situation between the date of the latest transaction and the valuation date. Calculation of the fair value is determined using the formula quoted by the Thai Bond Market Association.

The fair value of debt instruments which are not listed on the Thai Bond Market Association or listed but are not active securities, is determined using the government bond yield curve published by the Thai Bond Market Association on the last working day of the year as a benchmark and then adjusted by an appropriated risk premium.

The fair value of unit trusts is determined from their net asset value at the end of year.

The weighted average method is used for computation of the cost of investment.

In the event of reclassifying investments, the investments are valued at their fair value prevailing on the reclassification date. Differences between the carrying amount of the investments and their fair value on that date are recorded as gains (losses) in the income statements, or as revaluation surplus (deficit) on investments in the shareholders’ equity, depending on the type of investment which is reclassified.

5.8 Allowance for doubtful accounts and allowance for revaluation of debt restructuring

The Company

The Company sets aside an allowance for doubtful accounts and an allowance for revaluation of debt restructuring based on the guidelines laid down in the Bank of Thailand’s Notification (“BOT”), and adjusted it with the additional amount which is expected to be not collectible by analyzing and evaluating debtors’ status based on the collateral valuation and risk assessment.

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Year 2006

On 21 December 2006, BOT revised its guidelines on determining allowance for doubtful accounts and the value of collateral to be deducted against the loan balance when setting provisions for non-performing loans. Under the new guidelines, finance companies have to make provision at a rate of 100% of the debt balance remaining after deducting the present value of expected future cash flows from debt collection or from collateral disposal, based on the use of the stipulated 7% discount rate and the time needed to dispose of collateral, in accordance with the BOT’s guideline. The timeline for implementing these provisioning guidelines is presented below.

a) From the second half-year period of 2006 provisions are to be made for receivables for which a court judgment has already been issued, for which a court order is being executed, and against which legal actions have been brought.

b) From the half-year period ended 30 June 2007 provisions are to be made for receivables that are classified as doubtful of loss and doubtful.

c) From the year ended 31 December 2007 provisions are to be made for receivables that are classified as substandard.

The Company set provision at 1% and 2% of the loan balance (excluding accrued interest receivable) for normal (including restructured receivables) loans and special mention loans, respectively, as required by the BOT’s guidelines.

As at 31 December 2006, the Company set provision at 100% on receivables for which a court judgment has already been issued, for which a court order is being executed, and against which legal actions have been brought, in accordance with the new guidelines of the BOT. For doubtful of loss, doubtful and substandard loans the Company still apply provisioning rates of 100%, at least 50% and at least 20%, respectively, in accordance with the prior guidelines.

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Year 2005

The Company provided allowance for doubtful debt in accordance with the BOT’s guideline dated 23 August 2004, applying provisioning rates of 1% for normal debt, 2% for special mention debt, 20% for substandard debt, 50% for doubtful debt and 100% for doubtful of loss debt. The Company can deduct the valuation of collateral against the loan balance before determining provisions as allowed under BOT guidelines.

A subsidiary company

For the subsidiary, the classification of debtors and allowances for doubtful accounts is in accordance with the Notifications of the Office of the Securities and Exchange Commission and other relevant factors.

5.9 Troubled debt restructuring

Under the Company’s accounting policy for troubled debt restructuring, if payment of debt is received through the transfer of property or financial instruments, or if equity in the debtor is received as a result of a debt to equity conversion, the Company records the assets received at their fair value. Losses arising from differences between the book value of the debt and the fair value of the assets are recorded in the income statement, taking into account the existing allowance for doubtful accounts.

If debt restructuring includes the allowance of a relaxation of debt repayment conditions to the debtor, the Company will record the loss arising from the revaluation of the book value of the debtor, determined on the basis of the present value of the future cash flows to be received under the new conditions, applying the Minimum Loan Rate (MLR) of Bangkok Bank Public Company Limited for discounting. Any amount by which the newly determined book value is lower than the previous book value, including interest receivable, is recorded as a loss from restructuring in the income statement.

Losses from troubled debt restructuring arising from reductions of principal and interest are included in the income statement.

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5.10 Properties foreclosed

Properties foreclosed are stated at the lower of cost and net realisable value with reference to the latest appraisal value less estimated selling expenses (if any).

Property foreclosed received as a result of debt restructuring, is recorded at its fair value, minus estimated selling expenses, but this is not to exceed the balance of the principal and interest receivable legally claimable.

Gains (losses) on disposal of properties foreclosed are recorded as income or expenses in the income statement when the disposal is made. Impairment loss is recognised as expenses in the income statement.

5.11 Property, plant and equipment and depreciation

Land is stated at cost. Buildings and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any).

Depreciation of plant and equipment is calculated by reference to their costs on a straight-line basis over the following estimated useful lives:

Buildings 20 years Computers and equipment 3 - 5 years Furniture, fixtures and installations 5 years Motor vehicles 5 years

Depreciation is included in determining income.

No depreciation has been provided for land and work in progress.

5.12 Intangible assets

Intangible assets are stated at cost less accumulated amortization and allowance for impairment loss (if any). Amortisation is calculated by reference to cost on a straight-line basis over the expected future period, for which the asset is expected to generate ecomomic benefit, as follow.

Software 5 years

The amortisation is included in determining income.

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5.13 Sales of bills of exchange

Sales of bills of exchange that carry no acceptances or aval from financial institutions with recourse clause are recorded as liabilities under the caption of “Liabilities under commercial papers sold”. The amount of debt recorded upon the purchase of the bills will be credited when the bills are due and collected.

5.14 Recognition and elimination of customer deposits of the subsidiary

Money which customers have placed with the subsidiary for cash accounts and credit balance accounts for securities trading is recorded as assets and liabilities of the subsidiary for internal control purposes. As at the balance sheet date, the subsidiary excludes these amounts from both assets and liabilities and presents only assets which belong to the subsidiary itself.

5.15 Related party transactions

Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company.

They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Company’s operations.

5.16 Impairment of assets

The Company and the subsidiary assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Company and the subsidiary make an estimate of the asset’s recoverable amount. Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. An asset’s recoverable amount is the higher of fair value less costs to sell and value in use.

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5.17 Employee benefits

Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.

5.18 Provisions

Provisions are recognised when the Company or the subsidiary has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

5.19 Foreign currencies

Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction dates. Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are translated into Baht at the exchange rates ruling on the balance sheet date.

Gains and losses on exchange are included in determining income.

5.20 Financial instruments

The Company and the subsidiary have no policy to speculate in or engage in the trading of any financial derivative instruments.

Financial instruments presented in the balance sheets consist of cash and deposits at financial institutions, loans to financial institutions, securities purchased under resale agreements, investments, receivables from/payables to Clearing House, loans and receivables, borrowings and deposits, securities business receivable/payables and debentures. The accounting policy used for each accounting transaction has been separately shown under the related caption.

5.21 Use of accounting estimates

Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances, affecting amounts reported in these financial statements and related notes. Actual results could differ from these estimates.

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6. FINANCIAL SECTOR MASTER PLAN

On 8 March 2004, an Extraordinary General Meeting of the Company’s shareholders approved the purchase of ordinary shares in Finansa Credit Limited (FC) and the sale of newly - issued shares to Finansa Public Company Limited. These steps were taken as part of the plan to upgrade to a commercial bank.

On 21 July 2004, a meeting of the Board of Directors of the Company approved a proposal by FC concerning a merger between FC and the Company in order to apply for a Commercial Banking License, with FC as the core applicant. Such merger is to be effected by means of setting up a new public company.

On 28 July 2004, the Company and FC jointly submitted an application to the Bank of Thailand to set up a commercial bank. Under such application, FC was to serve as the lead institution and the Company as its merger partner.

On 20 April 2005, the Company received a letter from the Bank of Thailand informing that its application to set up a commercial bank in accordance with the Financial Sector Master Plan had been rejected by the Ministry of Finance. As a result of these developments, the terms of the merger proposal approved by the shareholders of both institutions are no longer valid. The Bank of Thailand has assured the Company that its status will continue as a finance business in accordance with the revised Act on the Undertaking of Finance Business, Securities Business & Credit Foncier Business, B.E. 2522, and that domestic customers of the Company holding deposits, certificates of deposits or promissory note issued by the Company will continue to be guaranteed principal and interest repayments in accordance with regulations of the Financial Institutions Development Fund.

Subsequently, the Bank of Thailand requested the Company to prepare a 3-year business plan covering its operations from 2005 to 2007. The Company submitted such business plan to the Bank of Thailand.

The management of the Company expects the rejection of the application to set up a commercial bank to have no impact on its finance business.

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7. THE EMERGENCY DECREE ESTABLISHING THAI ASSET MANAGEMENT CORPORATION

In June 2001, the Government issued an Emergency Decree establishing Thai Asset Management Corporation (TAMC). Under this Emergency Decree, financial institutions may choose whether to join the scheme and transfer those of their non-performing assets which meet the stipulated conditions to TAMC, within the specified timeframe. The assets are to be transferred at a price equal to the value of the collateral or a price stipulated by the Board of TAMC and any future profits and responsibility for losses from the non-performing assets are to be shared. The Company’s management agreed to join the scheme, and in October and November 2001 the Company transferred a total of 4 non-performing loans, with book values amounting to Baht 40.7 million and Baht 281.6 million, respectively, to the TAMC, in accordance with the prices stipulated by the Board of TAMC. The Company received promissory notes and did not suffer any loss as a result of the transfer of these loans.

In March 2005, the Company adjusted the principal balance of the promissory note downward by Baht 0.7 million because the valuation of the non-performing loans transferred to TAMC had been higher than appropriate.

The Company and TAMC will together share future profits and losses arising from TAMC’s management of the non-performing assets. If losses are incurred on the transferred non-performing assets under TAMC’s management, the Company’s maximum liabilities for such loss is limited to the equivalent of not more than 30% of the price at which the non-performing assets were transferred to TAMC, or approximately Baht 96.5 million. As at 31 December 2006, the Company had already set up allowance for possible loss amounting to Baht 96.5 million (31 December 2005: Baht 96.5 million).

During the year 2006, the Company received a letter from TAMC informing it that TAMC would terminate the transfer of Baht 153 million of non-performing loans secured by leasehold rights which are not qualified for transfer, with TAMC to adjust the value of its promissory note by the same amount. The Company’s management has written to TAMC confirming its rights over such collateral as at the transfer date and confirming that the original transfer value is correct.

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In addition, on 28 November 2006, the Company also received TAMC’s loss sharing report for the end of the first 5 - year period.

As at 31 December 2006, the Company’s management believes that no significant loss will be incurred in addition to the provision already made by the Company.

During the year ended 31 December 2006, TAMC made payment totaling Baht 18 million. The balance of promissory notes as at 31 December 2006 is Baht 193.6 million (31 December 2005: Baht 211.6 million).

8. RELATED PARTY TRANSACTIONS

During the years, the Company had significant business transactions with related parties, which have been concluded on commercial terms and bases agreed upon in the ordinary course of businesses between the Company and those companies. Below is a summary of those transactions.

(Unit: Million Baht) CONSOLIDATED THE COMPANY ONLY For the years ended For the years ended 31 December 31 December Transfer Pricing policy 2006 2005 2006 2005 Transactions with the subsidiary: BFIT Securities Plc.

Interest expenses - - 6.6 3.5 2006: Interest at rate of 2.75%-4.00% p.a 2005: Interest at rate of 0.50%-2.75% p.a

Brokerage fees - - 0.8 0.1 Rate of 0.25% of volume trade

Transactions with related companies Interest incomes 4.7 1.2 4.7 1.2 At normal interest rate

applicable to ordinary customers

Underwriting revenue 1.3 - - - At agreed contract price Interest expenses 22.5 1.7 22.5 1.7 At normal interest rate

applicable to ordinary customers

Interest expenses - subordinated loan - 13.7 - - Interest at rate of 5.5% p.a

Sale of investment in subsidiary - 108.2 - - Option price Service fees 3.6 10.0 - - Contract price in the

normal course of business

Consultant fees - 10.0 - 10.0 Contract price in the normal course of business

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During the year 2005, the subsidiary sold all of its investment in Krungdhep Thanathon Asset Management Company Limited to Finansa Public Company Limited as described in Note 12.3 to the financial statements.

The balances of the accounts between the Company and those related companies are as follows:

(Unit: Million Baht) CONSOLIDATED THE COMPANY ONLY

Relationship 31 December

2006 31 December

2005 31 December

2006 31 December

2005 Transactions with the subsidiary: BFIT Securities Plc.

Subsidiary company

Securities business receivables - - 1.9 2.8 Borrowing and deposits - - 180.0 132.0 Borrowing and deposits for customer account 298.2 - 354.7 116.5 Accrued interest payables - - 3.1 0.5 Loans to related companies S.E.C. Auto Sales and Services Plc. (formerly known as MPV Cars Co., Ltd.)

Common director 49.9 49.3 49.9 49.3

Krungdhep Sophon Plc. An executive of the Company is the director

in this company

23.0 27.0 23.0 27.0

Investment in preferred share of related company

Tawana Hotel Co., Ltd. Common director 0.6 0.6 0.6 0.6 Borrowings and deposits from related companies

Pridapramote Co., Ltd. Common director 130.2 50.0 130.2 50.0 S.E.C. Auto Sales and Services Plc. (formerly known as MPV Cars Co., Ltd.)

Common director 12.5 12.5 12.5 12.5

Com-Link Co., Ltd. Common director - 200.0 - 200.0 Jirola (Thailand) Co., Ltd. Common director 33.4 33.0 33.4 33.0 Hi-tech Network Co., Ltd. Common director 15.3 - 15.3 - Boon Anek Co., Ltd. Common director 347.2 - 347.2 - Finansa Public Co., Ltd. Common director in

year 2005 - 300.0 - -

Excel Link Co., Ltd. Common director 10.0 - 10.0 -

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During the year 2006, movements of borrowings and deposits from the subsidiary were as follow: (Unit: Million Baht)

THE COMPANY ONLY Balance as at

1 January 2006

Increase

during the year

Decrease

during the year

Balance as at 31 December

2006 Borrowings and deposits from the subsidiary company BFIT Securities Plc. 132.0 395.6 347.6 180.0 BFIT Securities Plc. for the customer’s account 116.5 327.8 89.6 354.7

During the year 2006, movements of loans to, borrowings and deposits from related parties were as follow: -

(Unit: Million Baht) CONSOLIDATED AND THE COMPANY ONLY Balance as at

1 January 2006

Increase

during the year

Decrease

during the year


2006 Loans to related companies S.E.C. Auto Sales and Services Plc. (formerly known as MPV Cars Co., Ltd.)

49.3 61.1 60.5 49.9

Krungdhep Sophon Plc. 27.0 42.0 46.0 23.0 Borrowings and deposits from related companies Pridapramote Co., Ltd. 50.0 192.2 112.0 130.2 S.E.C. Auto Sales and Services Plc. (formerly known as MPV Cars Co., Ltd.)

12.5 - - 12.5

Com-Link Co., Ltd. 200.0 160.0 360.0 - Jirola (Thailand) Co., Ltd. 33.0 0.4 - 33.4 Hi-tech Network Co., Ltd. - 120.3 105.0 15.3 Boon Anek Co., Ltd. - 449.2 102.0 347.2 Excel Link Co., Ltd. - 10.0 - 10.0 Krungthep Sophon Public Co., Ltd. - 36.0 36.0 - Rak Thai Business Administrative Technology Co., Ltd. - 60.0 60.0 -

- 18 -

The transactions between the Company and the subsidiary and their executive officers from departmental manager level upward and/or connected persons with those persons are as follows:

(Unit: Million Baht) CONSOLIDATED THE COMPANY ONLY 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Pricing policy

Officers from departmental managers level upward Borrowings and deposits 43.4 41.6 43.4 41.6 At normal rate applicable to ordinary

customer declared by the Company

Loans 0.4 0.7 0.4 0.7 Deposit rate of 12-month promissory note of the Company as at 1 January of the year with no interest charged for car loans

Interest expenses on borrowings and deposits

3.1 0.8 3.1 0.7 At normal rate applicable to ordinary customer declared by the Company

Related and/or connected persons with the officers from departmental managers level upward

Borrowings and deposits 69.1 66.1 68.9 65.9 At normal rate applicable to ordinary customer declared by the Company

Interest expenses on borrowings and deposits

5.5 3.3 5.5 3.2 At normal rate applicable to ordinary customer declared by the Company

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During the year 2006, movements of loans to, borrowings and deposits from executive officers from departmental managers level upward and/or their connected persons were as follow: -

(Unit: Million Baht) CONSOLIDATED Balance as at

1 January 2006

Increase

during the year

Decrease

during the year


2006 Officers from departmental managers level upward Borrowings and deposits 41.6 176.8 175.0 43.4 Loans 0.7 - 0.3 0.4 Related and/or connected persons with the officers from departmental managers level upward

Borrowings and deposits 66.1 452.1 449.1 69.1

(Unit: Million Baht) THE COMPANY ONLY Balance as at

1 January 2006

Increase

during the year

Decrease

during the year


2006 Officers from departmental managers level upward Borrowings and deposits 41.6 176.8 175.0 43.4 Loans 0.7 - 0.3 0.4 Related and/or connected persons with the officers from departmental managers level upward

Borrowings and deposits 65.9 452.1 449.1 68.9

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9. CASH AND DEPOSITS AT FINANCIAL INSTITUTIONS (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Cash 51,000 48,000 20,000 20,000 Deposits at financial institutions 234,889,124 887,220,478 47,797,930 87,923,022 Total cash and deposits at financial institutions 234,940,124 887,268,478 47,817,930 87,943,022

10. LOANS TO FINANCIAL INSTITUTIONS (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December

2006 31 December

2005 31 December

2006 31 December

2005 Call loans 1,129,999,970 230,000,000 - - Term loans 271,188,280 90,000,000 50,000,000 50,000,000 Total 1,401,188,250 320,000,000 50,000,000 50,000,000 Add: Accrued interest receivables 851,144 416,728 288,493 288,493 Less: Allowance for doubtful accounts (500,000) (500,000) (500,000) (500,000) Total loans to financial institutions - net 1,401,539,394 319,916,728 49,788,493 49,788,493

11. SECURITIES PURCHASED UNDER RESALE AGREEMENTS (Unit: Baht)

CONSOLIDATED AND THE COMPANY ONLY 31 December 2006 31 December 2005 Bank of Thailand’s bonds 506,000,000 450,000,000 Total 506,000,000 450,000,000

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12. INVESTMENTS

12.1 Classified by type of investment (Unit: Baht)

CONSOLIDATED 31 December 2006 31 December 2005 Cost/ Fair value/ Cost/ Fair value/ Book value Market value Book value Market value

Current investments Trading securities Unit trust 100,000,000 100,034,985 - - Add: Allowance for change in valuation 34,985 - - - Total trading securities - net 100,034,985 100,034,985 - - Available-for-sale securities Government securities 48,526,786 48,595,536 89,038,266 88,629,192 Private sector debt securities 596,502,884 595,940,507 150,450,740 149,296,252 Total 645,029,670 644,536,043 239,489,006 237,925,444 Less: Allowance for change in valuation (493,627) - (1,563,562) - Total available-for-sale securities - net 644,536,043 644,536,043 237,925,444 237,925,444 Held-to-maturity debt securities - due within 1 year Government and state enterprise securities 199,988,483 51,059,920 Private sector debt securities 40,772,960 44,497,225 Total held-to-maturity debt securities due within 1 year 240,761,443 95,557,145 Current investments - net 985,332,471 333,482,589 Long-term investments Available-for-sale securities Government and state enterprise securities 105,119,136 101,894,537 109,914,602 104,501,851 Private sector debt securities 927,875,670 925,468,471 784,372,835 768,649,319 Domestic marketable equity securities 39,594,941 44,785,370 38,654,996 35,299,644 Unit trust 124,075,180 117,276,385 15,079,800 14,996,075 Others 341 676 341 399 Total 1,196,665,268 1,189,425,439 948,022,574 923,447,288 Less: Allowance for change in valuation (7,239,829) - (24,575,286) - Total available-for-sale securities - net 1,189,425,439 1,189,425,439 923,447,288 923,447,288 Held-to-maturity debt securities Government and state enterprise securities 98,335,855 199,988,467 Private sector debt securities 317,905,956 447,582,828 Promissory notes from TAMC 193,607,000 211,607,000 Less: Allowance for possible loss (96,482,100) (96,482,100) Net 97,124,900 115,124,900 Total held-to-maturity debt securities 513,366,711 762,696,195 Other investments Domestic non-marketable equity securities 73,037,256 81,272,227 Less: Allowance for impairment loss (29,072,290) (31,756,967) Total other investments - net 43,964,966 49,515,260 Long-term investments - net 1,746,757,116 1,735,658,743

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(Unit: Baht) THE COMPANY ONLY 31 December 2006 31 December 2005 Cost/ Fair value/ Cost/ Fair value/ Book value Market value Book value Market value

Current investments Available-for-sale securities Government securities 48,526,786 48,595,536 89,038,266 88,629,192 Private sector debt securities 596,502,884 595,940,507 150,450,740 149,296,252 Total 645,029,670 644,536,043 239,489,006 237,925,444 Less: Allowance for changes in valuation (493,627) - (1,563,562) - Total available-for-sale securities - net 644,536,043 644,536,043 237,925,444 237,925,444 Held-to-maturity debt securities - due within 1 year

Government and state enterprise securities 199,988,483 51,059,920 Private sector debt securities 40,772,960 44,497,225 Total held-to-maturity debt securities due within 1 year 240,761,443 95,557,145 Current investments - net 885,297,486 333,482,589 Long-term investments Available-for-sale securities Government and state enterprise securities 105,119,136 101,894,537 109,914,602 104,501,851 Private sector debt securities 917,590,662 915,286,271 774,018,035 758,547,119 Domestic marketable equity securities 39,006,741 43,461,920 36,343,996 33,395,004 Unit trust 124,075,180 117,276,385 15,079,800 14,996,075 Others 341 676 341 399 Total 1,185,792,060 1,177,919,789 935,356,774 911,440,448 Less: Allowance for changes in valuation (7,872,271) - (23,916,326) - Total available-for-sale securities - net 1,177,919,789 1,177,919,789 911,440,448 911,440,448 Held-to-maturity debt securities Government and state enterprise securities 98,335,855 199,988,467 Private sector debt securities 317,905,956 447,582,828 Promissory notes from TAMC 193,607,000 211,607,000 Less: Allowance for possible loss (96,482,100) (96,482,100) Net 97,124,900 115,124,900 Total held-to-maturity debt securities - net 513,366,711 762,696,195 Other investments Domestic non-marketable equity securities 73,037,256 81,272,227 Less: Allowance for impairment loss (29,072,290) (31,756,967) Total other investments - net 43,964,966 49,515,260 Long-term investments - net 1,735,251,466 1,723,651,903

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12.2 Classified by the remaining period to maturity of the debt securities

As at 31 December 2006 and 2005, debt securities of the Company and the subsidiary can be classified by the remaining period to maturity as presented below.

(Unit: Million Baht) CONSOLIDATED 31 December 2006 31 December 2005 Maturity within Maturity within 1-5 Over 1-5 Over

1 year years 5 years Total 1 year years 5 years Total Available-for-sale securities

Government and state enterprise securities 48.5 74.7 30.4 153.6 89.0 49.4 60.5 198.9 Private sector debt securities 596.5 898.9 29.0 1,524.4 150.5 631.2 153.3 935.0

Total 645.0 973.6 59.4 1,678.0 239.5 680.6 213.8 1,133.9 Less: Allowance for change in

valuation (0.5) (5.7) 0.1 (6.1) (1.6) (16.3) (4.9) (22.8) Total 644.5 967.9 59.5 1,671.9 237.9 664.3 208.9 1,111.1 Held-to-maturity debt securities

Government and state enterprise securities 200.0 98.3 - 298.3 51.1 200.0 - 251.1 Private sector debt securities 40.8 316.3 1.6 358.7 44.5 445.4 2.2 492.1 Promissory notes from TAMC - net - 97.1 - 97.1 - - 115.1 115.1

Total 240.8 511.7 1.6 754.1 95.6 645.4 117.3 858.3 Total debt securities 885.3 1,479.6 61.1 2,426.0 333.5 1,309.7 326.2 1,969.4

(Unit Million Baht) THE COMPANY ONLY 31 December 2006 31 December 2005 Maturity within Maturity within 1-5 Over 1-5 Over

1 year years 5 years Total 1 year years 5 years Total Available-for-sale securities

Government and state enterprise securities 48.5 74.7 30.4 153.6 89.0 49.4 60.5 198.9 Private sector debt securities 596.5 888.6 29.0 1,514.1 150.5 631.2 142.9 924.6 Total 645.0 963.3 59.4 1,667.7 239.5 680.6 203.4 1,123.5

Less: Allowance for change in valuation (0.5) (5.6) 0.1 (6.0) (1.6) (16.3) (4.6) (22.5)

Total 644.5 957.7 59.5 1,661.7 237.9 664.3 198.8 1,101.0 Held-to-maturity debt securities

Government and state enterprise securities 200.0 98.3 - 298.3 51.1 200.0 - 251.1 Private sector debt securities 40.8 316.3 1.6 358.7 44.5 445.4 2.2 492.1 Promissory notes from TAMC - net - 97.1 - 97.1 - - 115.1 115.1

Total 240.8 511.7 1.6 754.1 95.6 645.4 117.3 858.3 Total debt securities 885.3 1,469.4 61.1 2,415.8 333.5 1,309.7 316.1 1,959.3

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12.3 Investment accounted for under equity method

The Company’s investments in its subsidiary as at 31 December 2006 and 2005 are summarised below.

((Unit: Thousand Baht)

Paid-up capital

Shareholding percentage

Cost method Carrying amounts based on

equity method Type of 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December

Company’s name Business 2006 2005 2006 2005 2006 2005 2006 2005 % % Investment in subsidiary BFIT Securities Plc. Security business 800,000 400,000 49.9999825 99.999965 399,999.86 399,999.86 1,316,328 726,114

On 15 July 2005, the Company received a letter from the Bank of Thailand approving an extension to the period for which it may hold more than 10 percent of the issued shares of BFIT Securities Public Company Limited (BFITSEC), specifically at 99.99 percent of the total number of shares in issue and in total not more than 39,999,986 shares. The extension is for 3 years, ending on 2 October 2008. A condition of the approval is that senior management of the Company from department manager level upward, major shareholders holding more than 0.5 percent of the issued capital of Bangkok First Investment & Trust Public Company Limited, or persons or partnerships related to such parties are prohibited from taking up shareholdings in BFITSEC unless the shares purchases are made in order to achieve compliance with the law or have been approved by the Bank of Thailand. In addition, the Company and entities in which the Company has controlling interest are prohibited from establishing or investing in any other company such that they hold more than 10 percent of issued shares, except with Bank of Thailand approval. Finally, the Company is to oversee the operations of BFITSEC and submit reports on the operations of BFITSEC to the Bank of Thailand.

On 5 and 10 January 2005, BFITSEC, a subsidiary, sold all of its investment in Krungdhep Thanathon Asset Management Company Limited which is a subsidiary of BFITSEC in that period to Finansa Public Company Limited at a price of Baht 108.2 million, according to a share purchase option condition of a subordinated loan as described in Note 21 to the financial statements.

- 25 -

BFITSEC received cash from sale of investment in the mentioned company in 2005 was presented as follows:

Baht Sale of investment in Krungdhep Thanathon Asset Management Company Limited 108,199,924 Less : Cash and cash equivalents of divested company (2,270,045) Net cash received from sale of investment 105,929,879

On 21 October 2005, an Extraordinary General Meeting of the subsidiary’s shareholders passed the following resolutions:

a) Approval of a change in the par value of ordinary shares from Baht 10 per share to Baht 1 per share. As a result, the number of share comprising the registered and issued and paid-up share capital increased from 59,999,500 shares to 599,995,000 shares and 40,000,000 shares to 400,000,000 shares, respectively.

b) Approval of an increase in the registered share capital from Baht 599,995,000 to Baht 800,000,000 through the issue of 200,005,000 new ordinary shares with a par value of Baht 1 each, which are to be allocated through public offering.

The subsidiary registered the above changes with the Ministry of Commerce on 3 November 2005.

On 5 September 2006, an Extraordinary General Meeting of shareholders of the subsidiary passed a resolution to increase the subsidiary’s registered share capital by 200,005,000 shares, as follows:

1. Issue 40,000,000 additional shares to be offered to shareholders of Bangkok First Investment & Trust Public Company Limited.

2. Issue 160,005,000 shares for a public offering.

On 25 September 2006, the Office of the Securities and Exchange Commission approved new public share offering in accordance with the application lodged by the subsidiary.

- 26 -

On 2 October 2006, the Board of Governors of the Stock Exchange of Thailand approved a listing of ordinary shares of the subsidiary as securities on the Stock Exchange of Thailand, comprising 400,000,000 ordinary shares, 199,995,000 ordinary shares to support the exercise of the subordinated convertible debentures described in Note 22 to the financial statements, and the above 200,005,000 additionally issued ordinary shares. All with a par value of Baht 1 per share, for a total of Baht 800 million. The subsidiary sold these additional ordinary shares in November 2006 at a price of Baht 4.20 per share, or for a total of Baht 840 million, with share premium of Baht 640 million. Expenses amounting to Baht 27 million were incurred in relation to the share issue and such expenses were netted against the share premium balance. The subsidiary registered the increase in its share capital with the Ministry of Commerce on 16 November 2006.

Besides that, the subsidiary had share premium amounting to Baht 104 million as a result of the exercise of debentures (Note 22 to the financial statements). Therefore, the subsidiary’s share premium as at 31 December 2006 was totaling Baht 717 million.

12.4 As at 31 December 2006, the promissory notes the Company received from the TAMC as mentioned in Note 7 to the financial statements, amounted to Baht 97.1 million, net of allowance for possible loss, and were recorded as part of long-term investments in the balance sheet, classified as investments in held-to-maturity debt securities. Such promissory notes mature on 31 October and 30 November 2011. TAMC calculates interest on the notes based on five commercial banks’ quarterly average deposit rates as published by the Bank of Thailand at the end of each calendar quarter, and such interest is payable on an annual basis by issuing a one year non-negotiable promissory note avaled by the Financial Institutions Development Fund. TAMC reserves the right to extend the term of the promissory note as it deems appropriate.

12.5 As at 31 December 2005, the Company has investment in promissory notes, issued by a financial institution, amounting to Baht 100 million, presented as investment in held-to-maturity debt securities. Such investments are debt instruments with embedded derivative features relating to the amount of interest to be received by the Company. Interest is paid semi-annually and determined on a daily basis at 5.70% per annum, only on days when the reference rate does not exceed the predetermined barrier rate as stated in the agreement. The debt instrument has a term of 5 years, from 17 September 2004 to 17 September 2009, with an option for the issuer to make an early redemption at the face value. The holders of the securities have no early redemption rights unless consent is granted by the issuer, who

- 27 -

may charge early redemption fees. The Company has early redempted such securities in June 2006.

13. LOANS, RECEIVABLES AND ACCRUED INTEREST RECEIVABLES

13.1 Classified by loan type (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December

2006 31 December

2005 31 December

2006 31 December

2005 Finance business loans and receivables: Loans 2,814,107,604 2,911,719,254 2,814,107,604 2,911,719,254 Notes receivable - net 177,625,051 209,932,425 177,625,051 209,932,425 Total finance business loans and receivables 2,991,732,655 3,121,651,679 2,991,732,655 3,121,651,679 Add: Accrued interest receivables 10,861,256 7,309,414 10,861,256 7,309,414 Less: Allowance for doubtful accounts (212,800,000) (212,800,000) (212,800,000) (212,800,000) Allowance for revaluation of debt restructuring (209,437) (395,461) (209,437) (395,461) Net finance business loans and receivables and accrued interest receivables 2,789,584,474 2,915,765,632 2,789,584,474 2,915,765,632 Securities business receivables: Cash accounts 92,850,869 583,086,255 - - Credit balance accounts 199,354,172 200,448,216 - - Installment receivables 18,789,931 18,491,498 - 11,246,960 Total securities business receivables 310,994,972 802,025,969 - 11,246,960 Less: Allowance for doubtful accounts (18,789,931) (18,491,498) - - Net securities business receivables 292,205,041 783,534,471 - 11,246,960 Net loans, receivables and accrued interest receivables 3,081,789,515 3,699,300,103 2,789,584,474 2,927,012,592

13.2 Classified by remaining period of contract (Unit: Baht)

CONSOLIDATED AND THE COMPANY ONLY 31 December 2006 31 December 2005

At call 234,956,634 308,434,904 Not over 1 year 1,538,956,567 1,794,678,986 Over 1 year 1,217,819,454 1,018,537,789

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Total finance business loans and receivables 2,991,732,655 3,121,651,679

- 29 -

13.3 Classified by type of business and classification (Unit: Baht)

CONSOLIDATED 31 December 2006 Special Sub- Doubtful Pass mention standard Doubtful of loss Total

Manufacturing and commerce 698,972,100 17,000,000 36,599,021 - 30,098,716 782,669,837 Real estate and construction 469,488,493 - - 19,756,350 26,840,860 516,085,703 Public utilities and services 900,786,344 6,000,000 - - - 906,786,344 Hire purchase 50,000,000 - - - - 50,000,000 Securities business receivables 292,205,041 - - 18,789,931 - 310,994,972 Others 723,151,301 204,073 10,000,000 - 3,755,766 737,111,140 Total 3,134,603,279 23,204,073 46,599,021 38,546,281 60,695,342 3,303,647,996 Add: Accrued interest receivables 10,780,391 - 80,865 - - 10,861,256 Less: Unearned income (920,369) - - - - (920,369) Total loans, receivables and accrued interest receivables 3,144,463,301 23,204,073 46,679,886 38,546,281 60,695,342 3,313,588,883

(Unit: Baht) CONSOLIDATED 31 December 2005 Special Sub- Doubtful Pass mention standard Doubtful of loss Total

Manufacturing and commerce 1,022,285,008 - 38,376,846 - 30,098,716 1,090,760,570 Real estate and construction 477,547,498 - - 19,756,350 35,840,860 533,144,708 Public utilities and services 557,895,967 - - - - 557,895,967 Hire purchase 163,994,410 - - - - 163,994,410 Securities business receivables 783,534,471 - - 7,244,538 - 790,779,009 Others 771,134,492 70,671 - - 17,252,726 788,457,889 Total 3,776,391,846 70,671 38,376,846 27,000,888 83,192,302 3,925,032,553 Add: Accrued interest receivables 7,309,414 - - - - 7,309,414 Less: Unearned income (1,354,905) - - - - (1,354,905) Total loans, receivables and accrued interest receivables 3,782,346,355 70,671 38,376,846 27,000,888 83,192,302 3,930,987,062

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(Unit: Baht) THE COMPANY ONLY 31 December 2006 Special Sub- Doubtful Pass mention standard Doubtful of loss Total

Manufacturing and commerce 698,972,100 17,000,000 36,599,021 - 30,098,716 782,669,837 Real estate and construction 469,488,493 - - 19,756,350 26,840,860 516,085,703 Public utilities and services 900,786,344 6,000,000 - - - 906,786,344 Hire purchase 50,000,000 - - - - 50,000,000 Others 723,151,301 204,073 10,000,000 - 3,755,766 737,111,140 Total 2,842,398,238 23,204,073 46,599,021 19,756,350 60,695,342 2,992,653,024 Add: Accrued interest receivables 10,780,391 - 80,865 - - 10,861,256 Less: Unearned income (920,369) - - - - (920,369) Total loans, receivables and accrued interest receivables 2,852,258,260 23,204,073 46,679,886 19,756,350 60,695,342 3,002,593,911

(Unit: Baht) THE COMPANY ONLY 31 December 2005 Special Sub- Doubtful Pass mention standard Doubtful of loss Total

Manufacturing and commerce 1,022,285,008 - 38,376,846 - 30,098,716 1,090,760,570 Real estate and construction 477,547,498 - - 19,756,350 35,840,860 533,144,708 Public utilities and services 557,895,967 - - - - 557,895,967 Hire purchase 163,994,410 - - - - 163,994,410 Others 771,134,492 70,671 - - 17,252,726 788,457,889 Total 2,992,857,375 70,671 38,376,846 19,756,350 83,192,302 3,134,253,544 Add: Accrued interest receivables 7,309,414 - - - - 7,309,414 Less: Unearned income (1,354,905) - - - - (1,354,905) Total loans, receivables and accrued interest receivables 2,998,811,884 70,671 38,376,846 19,756,350 83,192,302 3,140,208,053

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13.4 Classified by loan classification in accordance with the Notification of Bank of Thailand

(Unit: Thousand Baht) THE COMPANY ONLY 31 December 2006 Loans and Amount to be Allowance for accrued interest Loans outstanding The rate of loan provided under doubtful accounts receivables after collateral loss allowance BOT’s guideline already set up Pass 2,856,649 2,845,868* 1% 27,304 27,304 Special mention 23,204 23,204 2% 464 464 Sub-standard 46,680 26,046 20% 5,209 5,209 Doubtful 19,756 19,756 50% 67,613 67,613 Doubtful of loss 60,695 60,848 100% 60,848 60,848 Additional reserve - - - 51,362 Total loans, receivables and accrued interest receivables 3,006,984 2,975,722 161,438 212,800

* The balance does not deduct the value of collateral which is deductible according to BOT regulation

(Unit: Thousand Baht) THE COMPANY ONLY 31 December 2005 Loans and Amount to be Allowance for accrued interest Loans outstanding The rate of loan provided under doubtful accounts receivables after collateral loss allowance BOT’s guideline already set up Pass 3,002,176 2,996,222* 1% 28,706 28,706 Special mention 71 71 2% 1 1 Sub-standard 38,377 25,982 20% 5,197 5,197 Doubtful 19,756 19,756 50% 72,673 72,673 Doubtful of loss 83,192 69,798 100% 69,798 69,798 Additional reserve - - - 36,425 Total loans, receivables and accrued interest receivables 3,143,572 3,111,829 176,375 212,800

* The balance does not deduct the value of collateral which is deductible according to BOT regulation

As at 31 December 2006, the Company set provision at 100% on receivables for which a court judgment has already been issued, for which a court order is being executed, and against which legal actions have been brought. For doubtful of loss, doubtful and substandard loans the Company still apply provisioning rates of 100%, at least 50% and at least 20%, respectively, in accordance with the prior guidelines. Determination of the effect to the financial statements for the year 2007 of the remaining additional provisions required under the new BOT guidelines cannot be finalized at this stage.

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Allowance for doubtful accounts of debts classified as doubtful includes an additional allowance which the Bank of Thailand ordered be set aside for a normal receivable identified as a potential non-performing loan.

The outstanding balances of loans after deduction of collateral value used in a calculation of allowance for doubtful accounts are in accordance with those per the Company’s asset classification report submitted to the Bank of Thailand. These balances include loans to employees but exclude accrued interest receivables for loan classified as normal.

As at 31 December 2006, the value of collateral which can be deducted from the outstanding balance of loans classified as normal in accordance with the Bank of Thailand’s regulation was Baht 1,288.7 million (As at 31 December 2005: Baht 1,083.5 million). The Company chose not to deduct the value of this collateral from the loan balances in calculating allowance for doubtful accounts.

13.5 Non-performing and non-accrued loans and receivables

13.5.1 Non-performing loans and receivables

As at 31 December 2006 and 2005, non-performing loans and receivables are as follows:

(Unit: Thousand Baht) CONSOLIDATED THE COMPANY ONLY 31 December

2006 31 December

2005 31 December

2006 31 December

2005 Finance business loans and

receivables

127,051

130,079

127,051

130,079 Securities business receivables 18,790 11,246 - 11,246 Total 145,841 141,325 127,051 141,325

Non-performing loans and receivables are presented in accordance with those per the report on overdue loans and receivables prepared by the Company for a submission to the Bank of Thailand.

As at 31 December 2006, non-performing loans and receivables in the Consolidated financial statements and the Company only financial statements represented 4.34% and 4.17% of total loans and receivables (31 December 2005: 3.6% and 4.5%).

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13.5.2 Non-accrued loans

As at 31 December 2006, the total loans which the Company discontinued recognizing interest income was Baht 90.5 million (31 December 2005: Baht 102.9 million).

13.6 As at 31 December 2006 and 2005, the Company has loans, receivables and accrued interest receivables due from companies which have problems in their financial position and results of operations against which an allowance for doubtful accounts has been made as follows:

(Unit: Million Baht) CONSOLIDATED AND THE COMPANY ONLY Allowance for Number of loans Amount doubtful accounts 31 December 31 December 31 December 31 December 31 December 31 December 2006 2005 2006 2005 2006 2005

Listed companies under rehabilitation 2 2 26.6 26.6 26.6 26.6

13.7 Troubled debt restructuring

During the year ended 31 December 2006, the Company entered into trouble debt restructuring agreements with 3 debtors with outstanding principal (included interest receivables on book) before restructuring totaling of Baht 24.2 million.

All of the restructured receivables in this period has made by change in repayment condition with a new installment period of 10 years. The company has loss from debt restructuring amounting to Baht 1.1 million, nevertheless, the Company did not record such loss in its income statement, considering the allowance for doubtful accounts of such receivables had been provided for in excess of the loss from the restructurings.

The discount rate used for the debt restructuring of the Company is the MLR of Bangkok Bank Public Company Limited.

For the year ended 31 December 2006, the Company recognised interest income amounting of Baht 28.7 million from the restructured receivables (For the year ended 31 December 2005: Baht 27.3 million) and received payment of principal and interest from those restructured receivables amounting of Baht 55.2 million (For the year ended 31 December 2005: Baht 56.6 million).

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The outstanding balance of finance business loans and receivables as at 31 December 2006 can be summarised as follows:

Number of debtors Million Baht Loan during restructuring process classified as doubtful of loss 2 17.8 Restructured loans currently classified as pass 5 418.6 Restructured loans currently classified as sub-standard 4 27.4 Restructured loans currently classified as doubtful 1 19.7 Restructured loans currently classified as doubtful of loss 2 14.2 Finance business loans and receivables classified as pass 9,760 2,494.0 Total finance business loans and receivables 9,774 2,991.7

The Company is unable to estimate the amount of future losses on outstanding loan currently being restructured.

14. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND ALLOWANCE FOR REVALUATION OF DEBT RESTRUCTURING

14.1 Allowance for doubtful accounts (Unit: Baht)

CONSOLIDATED For the year ended 31 December 2006 Special Sub-

Normal mentioned standard Doubtful Doubtful loss Total Balance - beginning of year 28,706,327 1,414 5,196,469 79,917,192 117,470,096 231,291,498 Others (1,402,348) 462,667 12,781 6,485,845 (5,260,512) 298,433 Balance - end of year 27,303,979 464,081 5,209,250 86,403,037 112,209,584 231,589,931

(Unit: Baht) CONSOLIDATED For the year ended 31 December 2005 Special Sub-

Normal mentioned standard Doubtful Doubtful loss Total Balance - beginning of year 23,417,535 2,953 - 85,312,162 109,244,665 217,977,315 Doubtful accounts - - - 10,161,305 5,469,735 15,631,040 Others 5,288,792 (1,539) 5,196,469 (15,556,275) 2,755,696 (2,316,857) Balance - end of year 28,706,327 1,414 5,196,469 79,917,192 117,470,096 231,291,498

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(Unit: Baht) THE COMPANY ONLY For the year ended 31 December 2006 Special Sub-

Normal mentioned standard Doubtful Doubtful loss Total Balance - beginning of year 28,706,327 1,414 5,196,469 72,672,654 106,223,136 212,800,000 Others (1,402,348) 462,667 12,781 (5,059,548) 5,986,448 - Balance - end of year 27,303,979 464,081 5,209,250 67,613,106 112,209,584 212,800,000

(Unit: Baht) THE COMPANY ONLY For the year ended 31 December 2005 Special Sub-

Normal mentioned standard Doubtful Doubtful loss Total Balance - beginning of year 23,417,535 2,953 - 85,321,162 97,887,261 206,628,911 Doubtful accounts - - - - 5,469,735 5,469,735 Others 5,288,792 (1,539) 5,196,469 (12,648,508) 2,866,140 701,354 Balance - end of year 28,706,327 1,414 5,196,469 72,672,654 106,223,136 212,800,000

14.2 Allowance for revaluation of debt restructuring (Unit: Thousand Baht)

CONSOLIDATED AND THE COMPANY ONLY

For the year ended For the year ended 31 December 2006 31 December 2005 Balance – beginning of the year 395 1,418 Increase during the year 127 98 Decrease during the year (313) (1,121) Balance - end of year 209 395

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15. PROPERTIES FORECLOSED

Properties foreclosed represent land, leasehold rights and land and buildings thereon transferred to the Company to redeem debt securities for which scheduled interest payments had been defaulted on and to repay loans. The values of the assets are presented at fair value less estimated selling expenses, provided that this balance does not exceed the outstanding principal and interest receivable legally claimable.

As at 31 December 2006 and 2005, details of properties foreclosed are as follows: (Unit: Baht)

CONSOLIDATED AND THE COMPANY ONLY 31 December 2006 31 December 2005 Balance - beginning Balance - Balance - beginning Balance - Type of property foreclosed of year Additions Disposals end of year of year Additions Disposals end of year Immovable assets 115,632,911 - (45,988,411) 69,644,500 131,632,911 - (16,000,000) 115,632,911 Less : Allowance on impairment (22,039,309) - 5,002,382 (17,036,927) (24,465,809) (1,958,700) 4,385,200 (22,039,309) Total properties foreclosed - net 93,593,602 - (40,986,029) 52,607,573 107,167,102 (1,958,700) (11,614,800) 93,593,602

16. PROPERTY, PLANT AND EQUIPMENT (Unit: Baht)

CONSOLIDATED Computer and Motor Work Land Building equipment Furniture Fixtures vehicles in progress Total

Cost 31 December 2005 1,548,000 2,231,040 54,478,929 11,218,222 29,242,513 19,377,635 2,390,947 120,487,286 Additions - - 16,402,727 2,991,608 10,040,621 1,055,000 11,722,734 42,212,690 Disposals - - (54,875) (73,498) - - - (128,373) Written-off - - (1,933,125) (229,275) (79,751) - - (2,242,151) Transfer in (out) - - 1,481,902 - 10,251,683 - (12,794,184) (1,060,599) 31 December 2006 1,548,000 2,231,040 70,375,558 13,907,057 49,455,066 20,432,635 1,319,497 159,268,853 Accumulated depreciation 31 December 2005 - 1,121,624 30,418,479 7,745,040 14,180,418 11,147,083 - 64,612,644 Depreciation - disposals - - (45,690) (73,490) - - - (119,180) Depreciation - written-off - - (1,930,068) (229,266) (79,737) - - (2,239,071) Depreciation charges for the year - 111,551 13,247,422 1,128,102 5,600,016 2,381,854 - 22,468,945 31 December 2006 - 1,233,175 41,690,143 8,570,386 19,700,697 13,528,937 - 84,723,338 Net book value 31 December 2005 1,548,000 1,109,416 24,060,450 3,473,182 15,062,095 8,230,552 2,390,947 55,874,642 31 December 2006 1,548,000 997,865 28,685,415 5,336,671 29,754,369 6,903,698 1,319,497 74,545,515 Depreciation for the year ended 31 December 2005 17,704,019 2006 22,468,945

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(Unit: Baht) THE COMPANY ONLY Computer and Motor Land Building equipment Furniture Fixtures vehicles Total

Cost 31 December 2005 1,548,000 2,231,040 8,269,696 6,227,246 11,533,271 10,367,046 40,176,299 Additions - - 22,555 7,383 23,656 - 53,594 Disposals - - (13,883) - - - (13,883) Written-off - - (1,349,230) (229,275) (79,751) - (1,658,256) 31 December 2006 1,548,000 2,231,040 6,929,138 6,005,354 11,477,176 10,367,046 38,557,754 Accumulated depreciation 31 December 2005 - 1,121,624 6,988,144 6,184,874 11,472,462 6,836,234 32,603,338 Depreciation - disposals - - (4,701) - - - (4,701) Depreciation – written-off - - (1,349,162) (229,265) (79,736) - (1,658,163) Depreciation charges for the year - 111,551 632,243 19,419 36,021 945,692 1,744,926 31 December 2006 - 1,233,175 6,266,524 5,975,028 11,428,747 7,781,926 32,685,400 Net book value 31 December 2005 1,548,000 1,109,416 1,281,552 42,372 60,809 3,530,812 7,572,961 31 December 2006 1,548,000 997,865 662,614 30,326 48,429 2,585,120 5,872,354 Depreciation for the year ended 31 December 2005 3,880,473 2006 1,744,926

As at 31 December 2006, the Company and its subsidiary have certain plant and equipment items which have been fully depreciated but are still in use. The original cost of those assets amounted to approximately Baht 42.1 million (2005: Baht 40.6 million) in the consolidated financial statements and approximately Baht 27.9 million (2005: Baht 27.2 million) in the financial statements of the Company only.

17. INTANGIBLE ASSETS (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Softwares 13,420,115 13,420,115 1,789,409 1,789,409 Add: Purchase 2,657,478 - - - Less: Accumulated amortization (8,765,359) (6,037,972) (1,010,218) (758,613) Net intangible assets 7,312,234 7,382,143 779,191 1,030,796 Amortisation expenses included in

the income statements for year 2,727,387 2,116,577 251,605 133,171

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18. OTHER ASSETS (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Interest receivables 23,407,531 19,077,911 23,279,055 18,976,883 Contribution to Clearing Fund 11,893,310 10,586,566 - - Deposits 10,359,583 8,711,462 1,959,876 1,964,266 Loans to employees 4,453,600 3,744,358 4,389,881 3,364,324 Others 2,816,462 2,999,395 2,957,173 4,477,196 Total other assets 52,930,486 45,119,692 32,585,985 28,782,669

19. CLASSIFICATIONS OF ASSETS

19.1 Classification of assets under the Bank of Thailand’s guidelines - The Company

As at 31 December 2006 and 2005, the Company classified its assets and made allowances against those assets in accordance with the Bank of Thailand’s guidelines as presented below:

(Unit: Million Baht) Allowance for doubtful accounts Amount to be provided under Balance The minimum BOT’s minimum requirements Amount already set up

31 December 31 December allowance rate 31 December 31 December 31 December 31 December 2006 2005 required by BOT 2006 2005 2006 2005 Loans and receivables (1)

Pass (included loans to financial institutions,

loans to employees and other assets) 2,895.9 3,046.2 1% 27.8 29.2 27.8 29.2 Special mention 23.2 0.1 2% 0.5 - 0.5 - Sub-standard 46.7 38.4 20% 5.2 5.2 5.2 5.2 Doubtful 19.8 19.8 50% 67.6 72.7 67.6 72.7 Doubtful of loss 60.8 83.5 100% 60.8 69.8 112.2 106.2 Total classified assets 3,046.4 3,188.0 161.9 176.9 213.3 213.3

Allowance for revaluation of debt restructuring - - 0.2 0.4 0.2 0.4 Total 3,046.4 3,188.0 162.1 177.3 213.5 213.7

(1) Debt balance/book value of normal and special mention loans using in calculating provision is excluding accrued interest receivables.

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As at 31 December 2006, the Company set provision at 100% on receivables for which a court judgment has already been issued, for which a court order is being executed, and against which legal actions have been brought. For doubtful of loss, doubtful and substandard loans the Company still apply provisioning rates of 100%, at least 50% and at least 20%, respectively, in accordance with the prior guidelines. Determination of the effect to the financial statements for the year 2007 of the remaining additional provisions required under the new BOT guidelines cannot be finalized at this stage.

19.2 Classification of assets in accordance with the Notification of the Office of the Securities and Exchange Commission (SEC) - The Subsidiary

As at 31 December 2006 and 2005, the subsidiary classified its securities business receivables, and accrued interest receivables in accordance with the notification of SEC regarding account preparation for non-performing receivables of securities company and allowances for doubtful accounts as presented below:

(Unit: Million Baht) Allowance for Allowance for doubtful Receivables and accrued doubtful accounts accounts recorded interest receivables as required by SEC by the subsidiary

31 December

31 December

31 December

31 December

31 December

31 December

2006 2005 2006 2005 2006 2005 Doubtful debts 18.8 7.2 (18.8) (7.2) (18.8) (7.2)

Total 18.8 7.2 (18.8) (7.2) (18.8) (7.2)

As at 31 December 2006, the balance of other receivables of the subsidiary increased approximately to Baht 11.6 million due to, during the period, the receivable which have been retained by the Bangkok First Investment & Trust Public Company Limited (BFIT), its parent company, because legal proceedings are in progress were transferred back to the subsidiary. The subsidiary made payment of Baht 11 million to BFIT. However, the subsidiary’s management does not expect to receive settlement from these receivables and so the full amount has been set to allowance for doubtful account.

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20. BORROWINGS AND DEPOSITS FROM FINANCIAL INSTITUTIONS

20.1 Classified by source of borrowings and deposits (Unit: Baht)

CONSOLIDATED 31 December 2006 31 December 2005 Promissory Notes

and Bill of Exchanges

Promissory Notes From public 4,561,264,395 4,518,633,150 From financial institutions 302,927,370 - From foreign countries 6,817,203 16,211,003 Deferred interest expenses (292,252) - Total borrowing and deposits 4,870,716,716 4,534,844,153

(Unit: Baht) THE COMPANY ONLY 31 December 2006 31 December 2005 Promissory Notes

and Bill of Exchanges

Promissory Notes From public 4,561,264,395 4,518,633,150 From financial institutions 539,437,186 248,483,231 From foreign countries 6,817,203 16,211,003 Deferred interest expenses (292,252) - Total borrowing and deposits 5,107,226,532 4,783,327,384

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20.2 Classified by the remaining period of contracts (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY 31 December 2006 31 December 2005 31 December 2006 31 December 2005

At call 331,089,633 349,335,596 567,599,449 597,818,827 Not over 1 year 4,398,743,966 4,117,845,850 4,398,743,966 4,117,845,850 Over 1 year 140,883,117 67,662,707 140,883,117 67,662,707 Total borrowing and deposits 4,870,716,716 4,534,844,153 5,107,226,532 4,783,327,384

20.3 Classified by the currency and the residency of depositors (Unit: Baht)

CONSOLIDATED 31 December 2006 31 December 2005 Local Foreign Total Local Foreign Total Baht currency 4,863,899,513 6,817,203 4,870,716,716 4,518,633,150 16,211,003 4,534,844,153 Total borrowings and deposits 4,863,899,513 6,817,203 4,870,716,716 4,518,633,150 16,211,003 4,534,844,153

(Unit: Baht) THE COMPANY ONLY 31 December 2006 31 December 2005 Local Foreign Total Local Foreign Total Baht currency 5,100,409,329 6,817,203 5,107,226,532 4,767,116,381 16,211,003 4,783,327,384 Total borrowings and deposits 5,100,409,329 6,817,203 5,107,226,532 4,767,116,381 16,211,003 4,783,327,384

As at 31 December 2006, borrowings and deposits from financial institutions of the consolidated financial statements is included borrowing and deposits from a subsidiary, accounted for a subsidiary’s customer accounts amounting to Baht 298.2 million

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21. SUBORDINATED LOAN

BFIT Securities Public Company Limited (BFITSEC) - The subsidiary (Unit: Baht)

CONSOLIDATED 31 December 2005 Interest rate Remaining period per annum Within 1 year 1 - 5 years Over 5 years Total

Subordinated loan 5.5% 300,000,000 - - 300,000,000

On 14 July 2004, the subsidiary’s Extraordinary General Meeting of shareholders approved the plan to raise funds from Finansa Public Company Limited (FNS), a related company of the subsidiary at that time, in the form of Baht 300 million subordinated loan and Baht 298.5 million subordinated convertible debentures, and granted its Board of Directors authorities to set necessary details and conditions relevant to such subordinated convertible debentures offering and to apply for permissions from related organizations.

On 16 August 2004, the subsidiary obtained a subordinated loan from FNS, maturing on 16 August 2006, and carrying interest at the rate of 5.5 percent per annum, payable quarterly in arrears. Under the terms of the loan agreement, FNS has the option to acquire all shares of Krungdhep Thanathon Asset Management Company Limited (BFITAM) owned by the subsidiary at the exercise price of Baht 10.82 per shares.

On 5 and 10 January 2005, the subsidiary sold all of its investment in BFITAM to FNS at a price of Baht 108.2 million, in accordance with the conditions of the option discussed above. The subsidiary received the full amount of the selling price on the same dates. Consequently, BFITAM has not been a subsidiary of BFITSEC since 10 January 2005. The subsidiary recognised a gain from the sale of BFITAM totaling Baht 18.9 million in the income statement in the year 2005.

During August 2006, the subsidiary repaid a subordinated loan as mentioned above in full.

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22. SUBORDINATED CONVERTIBLE DEBENTURES

BFIT Securities Public Company Limited (BFITSEC) - The subsidiary (Unit: Baht)

CONSOLIDATED 31 December 2005 Interest rate Remaining period per annum Within 1 year 1 - 5 years Over 5 years Total

Subordinated convertible debentures - liability component 3.75% - 291,214,262 - 291,214,262

With reference to the resolution of the subsidiary’s Extraordinary General Meeting of Shareholders held on 14 July 2004. On 5 October 2004, the subsidiary issued Baht 298.5 million of subordinated convertible debentures to Finansa Public Company Limited (FNS), a related company of the subsidiary at that time. The conversion right can be exercised since 29 April 2005, with the debentures maturing on 5 October 2007. These subordinated convertible debentures have a face value of Baht 10,000 each and a coupon rate of 3.75 percent per annum. The conversion ratio is 1 debenture per 670 ordinary shares with the conversion price of Baht 14.77 per ordinary share. With the conversion of all 29,850 subordinated convertible debentures, the subsidiary will obtain total proceeds of Baht 295.4 million in additional paid up capital, and will pay the remaining amount of Baht 3.1 million to the debenture holders. Subsequently, FNS sold all of the debentures to other investors in November 2004.

During 2005, the subsidiary registered a change in the par value of its ordinary shares from Baht 10 per share to Baht 1 per share. As a result, the conversion ratio of the subsidiary’s subordinated convertible debentures changed to 1 debenture per 6,700 ordinary shares with the conversion price of Baht 1.477 per ordinary share.

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According to the Thai Accounting Standard No. 48 “Financial Instruments: Disclosure and Presentation” which became effective for the financial statements covering the period beginning on or after 1 January 2000, the issuer of convertible debentures is required to classify the debentures’ liability and equity components and present them separately in the balance sheets. The subsidiary has therefore separated such components, determining the liability component by discounting the stream of future payments of principal and interest at the prevailing market rate. The carrying amount of the equity component, as presented in the balance sheet under the caption of “Subordinated convertible debentures - equity component”, is determined by deducting the liability component from the total face value of the subordinated convertible debentures and amortising the difference over the life of the subordinated convertible debentures. On 31 October 2006, the subsidiary’s subordinated convertible debenture holders excercised their right to convert all 29,850 subordinate convertible debentures to ordinary shares, in a ratio of 1 debenture per 6,700 ordinary shares at a price of Baht 1.477 per ordinary share. There are thus a total of 199,995,000 ordinary shares. The subsidiary’s paid-up capital after the conversion date thus amounted to Baht 599,995,000, comprising 599,995,000 shares and premium on such ordinary shares amounted to Baht 104 million. The subsidiary registered the above increase in its issued and paid up capital with the Ministry of Commerce on 31 October 2006.

In 2006 and 2005, the subsidiary company received brokerage fees from its former subordinated convertible debenture holders who exercised their rights to become shareholders of the subsidiary company, and from their close relatives having the same surname represent 6.52 percent and 5.28 percent of the total brokerage fees of the subsidiary company in each year.

23. SHARE CAPITAL AND WARRANTS Share Capital On 8 March 2004, an Extraordinary General Meeting of shareholders approved a reduction in the

Company’s registered share capital from Baht 1,500 million to Baht 1,000 million, by canceling the 50 million unissued ordinary shares with a par value of Baht 10 each, or a total of Baht 500 million. Moreover, the same Extraordinary General Meeting of the Company’s shareholders passed a resolution approving an increase in the registered share capital from Baht 1,000 million to Baht 1,999 million, and the sale of the new shares to Finansa Public Company Limited at a price of Baht 12.78 per share. These steps were taken as part of the plan to upgrade to a commercial bank.

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Subsequently, on 27 October 2005, an Extraordinary General Meeting of shareholders approved the cancellation of the resolution of the Extraordinary General Meeting of shareholders held on 8 March 2004 because the application to set up a commercial bank in accordance with the Financial Sector master Plan had been rejected by the Ministry of Finance.

The same Extraordinary General Meeting of shareholders of the Company also approved a change in the par value of ordinary shares from Baht 10 per share to Baht 5 per share. As a result, the number of share comprising the registered capital and its issued and paid-up share capital increased from 150,000,000 shares to 300,000,000 shares and 100,000,000 shares to 200,000,000 shares, respectively.

Warrants to subscribe for ordinary shares

The Annual General Meeting of Shareholders held on 22 April 1998 passed resolution to issue an additional 35,000 warrants to directors and executive-level employees (together with the 15,000 warrants previously approved on 29 April 1994, making a total of 50,000 warrants). Each warrant has a term of 5 years, can be exercised to purchase 100 ordinary shares and is issued at the discretion of the Board of Directors.

On 8 March 2004 an Extraordinary General Meeting of shareholders approved the cancellation of resolutions of the Annual General Meeting of shareholders held on 29 April 1994 and 22 April 1998 regarding the issue of 50,000 warrants to directors and executive-level employees.

Subsequently, on 27 October 2005, an Extraordinary General Meeting of shareholders approved the cancellation of the resolution of the Extraordinary General Meeting of shareholders held on 8 March 2004 because the application to set up a commercial bank in accordance with the Financial Sector master Plan had been rejected by the Ministry of Finance.

The same Extraordinary General Meeting of shareholders also approved an adjustment of the exercise ratio of the warrants to be issued to directors and executive-level employees to a ratio of 1 warrant to 200 new ordinary shares and approved the reservation of additional 5,000,000 shares with a par value of Baht 5 each for the exercise of warrants, in line with the approved change in the par value of ordinary shares.

As at 31 December 2006, the Company had not yet to issue the above warrants to directors and executive-level employees of the Company.

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24. REVALUATION DEFICIT ON INVESTMENTS (Unit: Baht)

CONSOLIDATED THE COMPANY ONLY For the year ended For the year ended For the year ended For the year ended 31 December 2006 31 December 2005 31 December 2006 31 December 2005

Balance - beginning of year (25,988,105) (132,641) (25,988,105) (132,641) Increase (decrease) in the value of

securities during the year 17,962,870 (25,879,630) 17,113,989 (26,666,470) Amortised deferred losses from

transferring investment port 28,149 24,166 28,149 24,166 (7,997,086) (25,988,105) (8,845,967) (26,774,945) Decrease in revaluation deficit on

investments of the subsidiary - - 848,881 786,840 Balance - end of the year (7,997,086) (25,988,105) (7,997,086) (25,988,105)

25. STATUTORY RESERVE

Under section 116 of the Public Limited Companies Act B.E. 2535, the Company and its subsidiary are required to set aside as a statutory reserve at least 5% of its annual net income after deducting accumulated deficit brought forward (if any), until the reserve reaches 10% of the registered share capital. The statutory reserve is not available for distribution as dividend payment.

26. DIVIDENDS (Unit: Baht)

Total Dividend Dividends Approved by dividends per share

Final dividends for 2004 Annual General Meeting of the shareholders on 9 May 2005 30,000,000 0.30

Total dividends for 2005 30,000,000 0.30 Final dividends for 2005 Annual General Meeting of the shareholders on 26 April 2006 30,000,000 0.15

Total dividends for 2006 30,000,000 0.15

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27. CAPITAL FUND

As at 31 December 2006 and 2005, the capital funds maintained by the Company in accordance with Section 4 of the Act on Undertaking of Finance Business, Securities Business and Credit Foncier Business, B.E. 2522, were as follows:

(Unit: Baht) THE COMPANY ONLY 31 December 2006 31 December 2005

Tier 1 Issued and fully paid share capital 1,000,000,000 1,000,000,000 Statutory reserve 45,000,000 30,000,000 Retained earnings - unappropriated 731,492,759 443,331,100

Total 1,776,492,759 1,473,331,100 Tier 2 Reserve for assets classified as “Pass” 27,803,979 29,206,327 Revaluation deficit on investments (2,343,281) (3,032,659)

Total 25,460,698 26,173,668 Total capital fund 1,801,953,457 1,499,504,768 Tier 1 capital ratio % 28.56 27.92 Total capital ratio % 28.97 28.41 Minimum tier 1 capital ratio requirement % 4.00 4.00 Minimum total capital ratio requirement % 8.00 8.00

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28. GAINS ON INVESTMENTS (Unit: Baht)

For the years ended 31 December CONSOLIDATED THE COMPANY ONLY 2006 2005 2006 2005 Unrealised gain (loss) from trading securities 34,985 (96,400) - - Reversal of loss on impairment on other investments 2,684,677 1,398,794 2,684,677 1,398,794 Reversal of allowance for impairment of promissory note - 222,000 - 222,000 2,719,662 1,524,394 2,684,677 1,620,794 Net realised gain from securities trading 17,180,621 809,031 21,557,932 2,001,216 Gain from sale of investment in Krungdhep Thanathon Asset Management Co., Ltd. (Note 12.3 to the financial statements) - 18,988,310 - - Total 19,900,283 21,321,735 24,242,609 3,622,010

29. DIRECTOR REMUNERATION Directors’ remuneration represents the benefits paid to the Company and its subsidiary’s directors in accordance with Section 90 of the Public Limited Companies Act, exclusive of salaries and related benefits payable to directors and executives. In 2006, the Company and its subsidiary company paid salaries, remunerations and other benefits to their directors and management under the definitions of the Office of the Securities and Exchange Commission, in addition to those as mentioned in the preceding paragraph, totaling Baht 102.2 million (2005 : Baht 75.9 million) and Baht 24.2 million for the Company only (2005 : Baht 17.9 million). Management under such definitions include a chief executive officer, someone in the next four executive levels immediately under the chief executive officer, all positions comparable to the fourth executive position and chief finance officer or individuals having a similar function.

30. DONATION EXPENSE BFIT Securities Public Company Limited - The subsidiary On 8 August 2005, a meeting of the subsidiary’s Board of Directors approved the payment of a

donation of Baht 30 million to a foundation, in order to bring an end to the issue concerning employment mobility of marketing officers. A meeting of the Board of Directors of the Association of Securities Companies held on 19 July 2005 had passed a resolution accepting the subsidiary to donate such amount within 18 August 2005. The subsidiary paid a full amount of donation on such date.

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31. PROVIDENT FUND

The Company, the subsidiary and their employees have jointly registered a provident fund scheme under the Provident Fund Act B.E. 2530. The fund is contributed by the Company, its subsidiary and their employees at the rate of 6% of the employees’ basic salary. The fund is managed by a local asset management company and will be paid to the employees upon termination in accordance with the rules of the fund.

During the year 2006, Baht 6,284,693 has been contributed to the fund by the Company and its subsidiary whereas the Company only was Baht 1,671,422 (For the year ended 31 December 2005: Baht 4,931,449 has been contributed to the fund by the Company and its subsidiary whereas the Company only was Baht 1,779,747).

32. COMMITMENTS AND CONTINGENT LIABILITIES

32.1 Operating lease commitments

The Company and the subsidiary have significant outstanding commitments for rental and services fees under long-term building, equipment and motor vehicles rental and service agreements.

Future minimum rentals payable under these leases as at 31 December 2006 are as follows:

(Unit: Million Baht) CONSOLIDATED THE COMPANY ONLY

Payment within: Year 2007 35.8 6.3 Year 2008 - 2009 44.0 5.0

32.2 Long-term service commitments

32.2.1 The Company is obliged to make contributions to the Financial Institutions Development Fund, at the rate of 0.2 percent of the total outstanding balance of the Company’s deposits, borrowings, and liabilities arising from borrowings, as of the last day of the previous six-month period. Contributions are to be made on every 30 June and 31 December.

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32.2.2 The subsidiary is required to pay a membership fee to the Stock Exchange of Thailand comprising a monthly payment of Baht 50,000 and at the rate of 0.005 percent of the trading volume.

32.2.3 The subsidiary has a commitment under an on-line trading service agreement whereby the subsidiary is charged a fee at a rate of 0.02 - 0.05 percent of its trading volume, with the minimum payment not less than Baht 20,000 per month.

32.2.4 The subsidiary is required to pay a service fee to Thailand Securities Depository Company Limited, as Back Office Service Bureau, comprising a fixed monthly charge of Baht 40,000 and the variable charge at a rate of Baht 7.5 to Baht 16 per customer account.

32.2.5 The subsidiary is required to pay fee for its business operations as licensed to the Office of the Securities and Exchange Commission whereby the subsidiary is charged a fee at a rate of 1 percent of total brokerage fees and fees and services income, with not less than Baht 500,000 per annum but not over than Baht 5,000,000 per annum.

32.2.6 The subsidiary is required to pay contributions to the Compensation Fund for Clearing and Settlement, which is overseen by the Thailand Securities Depository Company Limited, on a monthly basis, at a rate of 0.008 percent of its net settlements each month.

32.2.7 The subsidiary is required to pay contributions to the Securities Investor Protection Fund, which is overseen by the Stock Exchange of Thailand, on a monthly basis, at a rate of 0.0005 percent of the trading volume.

32.3 Litigation

During the current period, the subsidiary was sued by an employee for Baht 20.48 million in relation to the payment of compensation for performance of duties and of bonus. The case is currently being processed by the Central Labor Court.

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33. SEGMENT INFORMATION

The Company is principally engaged in finance business. The subsidiary operates in the securities business. The Company’s and the subsidiary’s operations are mainly carried on in Thailand. Below is the consolidated financial information for the years ended 31 December 2006 and 2005 of the Company and its subsidiary by segments.

(Unit: Million Baht) For the years ended 31 December Finance business Securities business Total Elimination entries Total 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Net interest and dividend income after bad debt and doubtful accounts 156 163 32 (13) 188 150 - - 188 150 Non-interest income 268 232 702 627 970 859 (226) (222) 744 637 424 395 734 614 1,158 1,009 (226) (222) 932 787 Non-interest expenses (108) (115) (391) (282) (499) (397) - - (499) (397) Profit before income tax 316 280 343 332 659 612 (226) (222) 433 390 Corporate income tax (19) (14) (95) (110) (114) (124) - - (114) (124) Profit before minority interest 545 488 (226) (222) 319 266 Net income attributable to minority interest (22) - - - (22) - Net income for the year 523 488 (226) (222) 297 266

(Unit: Million Baht) Finance business Securities business Total Elimination entries Total 31

December 31

December 31

December 31

December 31

December 31

December 31

December 31

December 31

December 31

December 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Net investments 3,937 2,783 111 12 4,048 2,795 (1,316) (726) 2,732 2,069 Net loans, receivables and accrued interest receivables 2,790 2,927 292 783 3,082 3,710 - (11) 3,082 3,699 6,727 5,710 403 795 7,130 6,505 (1,316) (737) 5,814 5,768 Other assets 2,801 2,219 (241) (252) 2,560 1,967 Total assets 9,931 8,724 (1,557) (989) 8,374 7,735

The Company and its subsidiary have applied the pricing policies described in Note 8 to the financial statements to set the transfer prices.

34. FINANCIAL INSTRUMENT

The Company and its subsidiary are exposed to risk from fluctuations in interest rate and the risk of counterparties defaulting on their obligations. The Company and its subsidiary have no policy to use derivative instruments manage such risk or to speculate or trade in any derivative instruments.

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34.1 Credit risk

Credit risk is the risk that a counterparty will default on its obligation under financial instruments resulting in a financial loss to the Company and the subsidiary. The Company and the subsidiary disclose significant concentrations of credit risk in Note 13 to the financial statements. The amount of maximum credit risk exposure is the carrying amount of the financial assets less allowance for losses as stated in the balance sheet.

As of 31 December 2006, the Company and the subsidiary do not have off-balance sheet items.

34.2 Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates and it will affect the operating results and cash flow of the Company and the subsidiary.

As at 31 December 2006, the balance of financial assets and financial liabilities classified by interest rate characteristic are as follows:

(Unit: Million Baht) Consolidated as at 31 December 2006 Outstanding balances of financial instrument - net Floating Fixed interest rate interest rate No interest Total

Financial assets Cash and deposits at financial institutions 56.9 - 178.0 234.9 Loans to financial institutions - net - 1,401.5 - 1,401.5 Securities purchased under resale agreements - 506.0 - 506.0 Net investments 423.7 1,623.3 685.1 2,732.1 Receivables from the Clearing House - - 230.4 230.4 Finance business loans and receivables 2,215.1 705.9 70.7 2,991.7 Securities business receivables – net 199.4 - 92.8 292.2 Financial liabilities Borrowings and deposits - 4,870.7 - 4,870.7 Securities business payables - - 276.0 276.0

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(Unit: Million Baht) The Company Only as at 31 December 2006 Outstanding balances of financial instrument - net Floating Fixed interest rate interest rate No interest Total

Financial assets Cash and deposits at financial institutions 1.8 - 46.0 47.8 Loans to financial institutions - net - 49.8 - 49.8 Securities purchased under resale agreements - 506.0 - 506.0 Net investments 413.5 1,623.3 1,900.1 3,936.9 Finance business loans and receivables 2,215.1 705.9 70.7 2,991.7 Financial liabilities Borrowings and deposits - 5,107.2 - 5,107.2 Securities business payables - - 0.1 0.1

As at 31 December 2006, the remaining periods to earlier of repricing dates or maturity dates, commencing as from the balance sheet date, of the fixed interest rates financial instruments are as follows:

(Unit: Million Baht) Consolidated Repricing or maturity date No At call 0-3 months 3-12 months 1-5 years Over 5 years maturity Total Interest rates

Financial assets Loans to financial institutions - net 1,130.5 221.2 49.8 - - - 1,401.5 3.75% - 4.80% Securities purchased under resale agreements - 506.0 - - - - 506.0 4.90625% Net investments - 60.2 405.2 1,128.6 29.3 - 1,623.3 2.05% - 11.5625% Finance business loans and receivables

88.0 487.4 2.0 19.8 108.7 - 705.9 3.12% - 10.00%

Financial liabilities Borrowings and deposits 337.5 2,740.7 1,651.7 140.8 - - 4,870.7 2.50% - 5.50%

(Unit: Million Baht) The Company only Repricing or maturity date No At call 0-3 months 3-12 months 1-5 years Over 5 years maturity Total Interest rates

Financial assets Loans to financial institution - net - - 49.8 - - - 49.8 3.90% Securities purchased under resale agreements - 506.0 - - - - 506.0 4.90625% Net investments - 60.2 405.2 1,128.6 29.3 - 1,623.3 2.05% - 11.5625% Finance business loans and receivables

88.0 487.4 2.0 19.8 108.7 - 705.9 3.12% - 10.00%

Financial liabilities

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Borrowings and deposits 574.0 2,740.7 1,651.7 140.8 - - 5,107.2 2.50% - 5.50%

34.3 Liquidity risk

Liquidity risk is the risk that the Company and the subsidiary will be unable to liquidate their financial assets and/or procure sufficient funds to discharge its obligations in a timely manner, resulting in a financial loss incurring.

The periods of time from the balance sheet date to the maturity dates of financial instruments outstanding as at 31 December 2006 are as follows:

(Unit: Million Baht) Consolidated Non No performing At call 0-3 months 3-12 months 1-5 years Over 5 years maturity loans Total

Financial assets Cash and deposits at financial institutions 234.9 - - - - - - 234.9 Loans to financial institutions - net 1,130.5 221.2 49.8 - - - - 1,401.5 Securities purchased under resale agreements - 506.0 - - - - - 506.0 Net investments 160.8 379.3 506.0 1,479.7 61.0 145.3 - 2,732.1 Receivables from the Clearing House - 230.4 - - - - - 230.4 Finance business loans and receivables 164.3 1,016.2 522.8 850.5 367.2 - 70.7 2,991.7 Securities business receivables – net 199.4 92.8 - - - - - 292.2 Financial liabilities Borrowings and deposits 337.5 2,740.7 1,651.7 140.8 - - - 4,870.7 Securities business payables - 276.0 - - - - - 276.0

(Unit: Million Baht) The Company only

Non No Performing At call 0-3 months 3-12 months 1-5 years Over 5 years maturity loans Total

Financial assets Cash and deposits at financial institutions 47.8 - - - - - - 47.8 Loans to financial institutions - net - - 49.8 - - - - 49.8 Securities purchased under resale agreements - 506.0 - - - - - 506.0 Net investments 160.8 379.3 506.0 1,469.5 61.0 1,360.3 - 3,936.9 Financial business loans and receivables 164.3 1,016.2 522.8 850.5 367.2 - 70.7 2,991.7 Financial liabilities Borrowings and deposits 574.0 2,740.7 1,651.7 140.8 - - - 5,107.2 Securities business payables - 0.1 - - - - - 0.1

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34.4 Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates.

As of 31 December 2006, the Company and the subsidiary company do not have any material financial instruments in foreign currencies.

34.5 Fair value

Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The Company and its subsidiary have estimated the fair value of financial instruments as presented below:

a) Financial assets

The method used for determining the fair value is dependent upon the characteristics of the financial instruments. The fair values of financial assets, including cash, deposits at banks, and loans and receivables are presented as the amount stated in the balance sheet, which is considered to approximate their respective carrying value since the financial instruments carry interest at rates close to market interest rates. Financial instruments that have standard terms and conditions which are traded on an active and liquid market, such as investments in securities, have their fair values determined by the quoted market price.

b) Financial liabilities

The fair values of financial liabilities, including borrowings and deposits, are considered to approximate their respective carrying values for the same reasons as described above.

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As at 31 December 2006, there are no material differences between the book value of financial instruments and their fair value, except that the fair value of investments in held-to-maturity debt securities as follows:

(Unit: Million Baht) Net Book Value Fair Value State Enterprise bonds 298.3 301.7 Debentures 257.1 253.1 Promissory Notes 101.5 93.9

The fair value of investments in held-to-maturity debt securities is determined using the formula stipulated by the BOT, which is based on the yield rate quoted by the Thai Bond Market Association.

35. RECLASSIFICATION

Certain amounts in the financial statements for the year ended 31 December 2005 have been reclassified to conform to the current year’s classifications, with no effect on previously reported net income or shareholders’ equity.

36. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were authorised for issue by the Company’s Board of directors on 20 February 2007.

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