Fund & Asset Manager Rating Group

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1 Full Rating Report National Asset Manager / Thailand Asset Manager Rating Outlook Stable Profile Assets under management THB1.0trn (end-may 2015) Operating EBITDA (2014) THb1.0bn Date of creation 1992 Domicile Thailand Ownership 100% by SCB Total staff 188 (end Apr 2015) Number of investment 53 professionals Disclosure Tisco Asset Company Limited and Kasikorn Asset Company Limited each hold 10% of shares in Fitch Ratings (Thailand) Limited. No shareholders, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or rating reviews undertaken by, Fitch Ratings (Thailand) Limited. Key Rating Drivers Established Market Position: (SCBAM) has a solid history in fund management and a strong market position domestically. At end-may 2015, it was Thailand s second-largest asset manager by assets under management (AUM), managing a diversified product portfolio with significant footprints in mutual, private, and provident funds. Strong Shareholder, Experienced : The company benefits from parental support and commitment from its single shareholder, Siam Commercial Bank Public Company Limited (SCB, AA(tha)/Stable/F1+(tha)). SCBAM s senior management is experienced, and internal replacements have ensured management continuity following the recent resignation of some department heads. Solid Control Framework: SCBAM s risk-management and control framework is governed by SCB, which oversees policy and provides extensive resources. Operational and investment risks are managed through coordination between SCBAM s risk management committee and SCB s risk management division. Market risk management was recently strengthened by an upgrade of its risk-management system to a globally recognised platform. Formalised Investment Decisions: SCBAM s investment process is formalised, backed by sufficient resources and marked by in-depth research, a disciplined buy-and-sell process, formal portfolio reviews and documentation of decisions. Investment decisions are derived from fundamental analysis, quantitative approaches, and the judicious use of inputs from external research and consultancy. While fixed-income investment is its key strength, the asset manager has delivered an increasing number of complex products. Extensive IT Resources: SCBAM benefits from a high level of automation, following upgrades to its front-office system in 2014 and risk-management systems in Back- and middle-office systems are targeted for complete overhaul in early Key Challenges: These include maintaining AUM growth while migrating clients towards complex products; ensuring smooth integration between front-office and the newly upgraded risk management system; sustaining performance of its equity funds; and maintaining growth momentum in new areas such as REITs. Category Assessments Good standards High standards Highest standards Company Controls Investments Operations Technology Source: Fitch Analysts Jackerin Jeeradit jackerin.jeeradit@fitchratings.com Lertchai Kochareonrattanakul lertchai.kochareonrattanakul@fitchratings.com Profile Leading Company: Incorporated in March 1992, SCBAM is SCB s asset management arm, and had a total AUM of THB1.0trn at end-may SCBAM is the market leader in the private-fund business, and one of the leading asset managers in the mutual-fund and provident-fund businesses. 16

2 AUM Breakdowns AUM Growth (THBbn) 1,200 1, Source: SCBAM Mutual funds Provident funds Private funds AUM Breakdown by Type of Funds (As at Dec 2014) Provident 10.9% Private 10.6% AUM Breakdown by Type of Clients (As at Dec 2014) Source: SCBAM Institutions 22.8% AUM Breakdown by Asset Class (As at Dec 2014) Equity 9.9% Others 12.1% Retail 77.2% Property & Infrastructure 12.8% Mutual (excluding Property & Infrastructure) 65.7% Bonds (more than 1 year) 18.7% Cash, money market and bonds (less than 1 year) 59.3% Source: SCBAM Source:SCBAM Corporate Structure Siam Commercial Bank (SCB) 100% 100% 94.7% 99.4% SCB Asset SCB Securities SCB Life Assurance Siam Commercial Leasing Source: SCB s annual report 2014 Rated Entity Related Criteria Asset Manager Rating Criteria (May 2014) 2

3 Company High Standards Shareholding and Financial Standing SCBAM is wholly owned by SCB, Thailand s third largest bank by total assets (THB2.5trn at end-may 2015). The bank is profitable and well-capitalised, supported by moderate loan growth (5.6% yoy) and a total capital ratio of 17.0%. Stable and Strong Committed Shareholder SCB is fully committed to the asset management business, and provides financial and operational support to SCBAM. More than 90% of SCBAM s mutual-fund products are sold through SCB s branch networks. The asset manager s risk management, audit, compliance, IT, retail marketing, accounting, and human resources functions are centralised at SCB. SCB also provides a liquidity facility for SCBAM s largest fixed-income fund, SCBSFF. Fitch believes it is highly probable that SCB would provide support to SCBAM, if needed, given SCB s significant level of control and SCBAM s strategic importance to the bank. SCBAM s pre-tax profit was 49.5% higher yoy in 2014, driven by AUM growth of its private funds, close-ended mutual funds, and infrastructure funds, and by lower staff costs. The company recorded revenue growth of 19.3% and an operating profit margin of 24.7% in 2014 (2013: 19.7%). Profitability Driven by AUM Growth SCBAM's standalone financials appear healthy, given its unleveraged balance sheet, improved cash holdings of THB363m at end-2014 (2013: THB273m) and the rise in its equity/aum ratio to 4.5bp (end-2013: 3.6bp). Its EBITDA can withstand significant stresses on its AUM, based on the company s 2014 financials. About 92% of its management fees come from mutual funds, which are mostly diversified given the predominantly retail nature of mutual-fund investors. Its assets are also diversified by geography and asset type, contributing to SCBAM s revenue diversification. Experience Established Market Position As one of the founding members of Thailand's asset management industry, SCBAM is well established in the industry, led by an experienced senior management team, and staffed by highly-skilled investment professionals. It started its mutual fund business in 1992, and private and provident fund business in Its AUM expanded to THB1.0trn at end-may 2015, supported by an extensive product portfolio covering fixed-income, equity, index, foreign investment funds; commodity funds; property and infrastructure funds; asset allocation funds; trigger funds; sector funds; and country funds. SCBAM has become the market leader in the private-fund business since January 2014, with AUM of private funds at THB119bn at end-may In the provident-fund business, its market position has improved to third place, with AUM of THB116bn. 3

4 Company (continued) High Standards Governance and Independence Sound Governance with Strong Parent Oversight SCBAM has governing bodies at both the company and the parent bank. SCB participates in SCBAM s governance through the asset manager's board of directors, as well as through the bank's risk management, compliance, and audit divisions. SCBAM s risk management committee (RMC) reports directly to SCBAM's board of directors. SCBAM s board of directors numbers six including SCBAM s president. Of these, all but the president are senior executives at SCB. SCBAM is regulated by Thailand s Securities Exchange Commission (SEC) and subject to occasional inspection by the regulator. An inspection by the SEC took place and was completed in Findings have been properly addressed with remedial action. Governance practices and control procedures adequately cover potential conflicts of interest with affiliates. SCBAM operates at arm s length with other entities of SCB Group, with the exception of IT, audit, risk management, compliance, and retail marketing, which are controlled by SCB. Criteria and performance reviews exist for the selection of third parties. Arm s Length Relationship with Affiliates; Properly Regulated Investment Vehicles SCBAM's policy is to use brokerage and dealing services of SCB Group s companies as long as their fees and service quality are comparable with other servicers. Based on actual volume for full-year 2014, SCB (9.6%) represents one of the major dealers for fixed-income trading. For equity transactions, SCBAM relies largely on SCB Securities, which accounted for 37.7% of volume in full-year SCBAM s provident funds are governed by their own committees, while for mutual funds, majority votes by unitholders are required for major decisions. Staffing SCBAM segregates functions between its front, middle, and back offices. Risk and control functions are appropriately separated from those of investment management. Risk management officers report directly to the RMC and the risk management division at SCB. Compliance and audit functions are also centralised at SCB. Clear Segregation of Functions Investment is co-managed by two Chief Investment Officers (co-cios). One co- CIO heads the equity investment division, which comprises equity portfolio investment, tactical equity investment, equity research, and an equity-dealing desk. The other co-cio heads the investment management division, which consists of fixed-income and cash investment, asset allocation, credit research, portfolio analytics, investment support, and a fixed-income dealing team. Both divisions are governed by SCBAM s investment committee (IC). Given the fundamentally different nature of REITs, property funds, and infrastructure funds versus other businesses, the property and infrastructure group operates as a separate department, and is governed by a separate investment committee. 4

5 Company (continued) High Standards Staffing (continued) SCBAM s senior management is experienced. The President Mr. Smith Banomyong is a capable banking veteran who joined SCBAM in May 2014; before that, he worked for Salomon Brothers, Citibank, and most recently within SCB Group as Executive Vice President of the bank s wealth management division from 2011 to Experienced Senior The two co-cios for investment management are also highly experienced. One co-cio, as the head of the investment management division, has over twenty years of financial services experience, mostly in the banking industry. The other co-cio, as the head of the equity investment division, was SCBAM s head of product strategy until June 2015, and also has over twenty years of experience in related fields including banking, insurance, and asset management. There has been some recent turnover at senior levels, including the co-cio for equity investment, the head of the fixed-income department, and the head of property and infrastructure group. However, they have been replaced internally by experienced senior staff, ensuring management continuity. The replacement of the co-cio for equity investment by its head of product strategy exemplifies such continuity. Board of Directors President Risk Committee SCB Investment Committee Risk Other Support Units a Compliance Equity Investment (18 staff) Investment (35 staff) Property & Infrastructure Fund (11 staff) Investment Product Strategy (17 staff) Private & Institutional Business (24 staff) Provident Fund Business (26 staff) Accounting & Operations (32 staff) Strategy and Planning (23 staff) a Includes IT, Finance, HR, Administration, Legal Source: SCBAM 5

6 Controls Highest Standards Overall Risk-Control Framework SCBAM s risk management and control functions are centralised at SCB. Risks and controls are managed by its risk management committee (RMC) and SCB s risk management division. SCBAM s RMC consists of eight members, and is chaired by SCB's head of market and operational risks. Well-Defined Control Structure with Parent s Active Involvement Three control levels exist: at SCBAM s fund-manager level, at SCB s risk management and compliance, and at SCB s audit division. Any breaches of investment rules are communicated daily via s to the relevant fund managers, the co-cios, the president, and SCB s risk management division. A monthly summary of breaches is reported concurrently to SCBAM s RMC and investment committee. SCB s compliance officers perform regular surveillance of SCBAM s overall operations. Internal audits are performed annually by SCB s audit division. Self-Risk Assessments and Controls for Operational Risks SCBAM's operational risk management framework is based on self-risk assessments, comprising risk self-assessment (RSA) and control self-assessment (CSA). Under this framework, SCB s operational risk division discusses with SCBAM's division heads to identify and prioritise key risk indicators (KRIs). KRIs are analysed and reviewed annually, with a detailed assessment of impact, likelihood, preventive actions, and a set of recommended action plans if key operational risks have not yet been adequately addressed. Action plans are developed with responsible units, and include target dates to remedy any deficiencies. Monthly reports of actual risk levels of KRIs and loss reports are distributed to SCBAM s RMC and SCB s operational risk division. If SCBAM s RMC deems any risks to have significant impact on SCB Group s overall operational risks, it will report the issues to SCB s RMC. SCB s RMC also receives KRIs and loss data on a monthly basis. There were no material investment breaches or outstanding litigation in Loss reports in 2014 indicated minor issues related to stop losses, which were addressed with remedial action. Strong Third-Party Oversight SCBAM has a written policy for outsourcing functions, which incorporates rules from the SEC and SCB Group s outsourcing policy. The asset manager s selection criteria for custodians and auditors are comprehensive, with key criteria weighted differently for private and provident funds. Selection criteria for custodians cover accuracy, service attractiveness, industry experience, and pricing. Service-level agreements (SLAs) are defined in custodianappointment contracts. For auditors, selection criteria include fees, the quality of staff and services, co-operation levels with SCBAM, frequency of news updates, and system developments for advanced transactions. Performance is reviewed annually for custodians and auditors, and quarterly for brokers and dealers. SCBAM s relationships with third-party servicers have been stable. 6

7 Controls (continued) Highest Standards Compliance and Controls Monitoring against legal, contractual and internal restrictions is in place and overseen by SCB s compliance division and the RMC at SCBAM. Monitoring is supported by detailed reporting. Relevant policies and procedures are reviewed at least annually. Clear Policy with Regular Monitoring by SCB s Compliance Personal trading is covered in the compliance manual and governed by a written policy. Before making personal trades, SCBAM s staff need pre-approval from division heads with a minimum holding period of 30 days. Monthly trading activities of SCBAM s employees are sent directly by brokers to compliance for monitoring. The investment management division is prohibited from using mobile phones and personal s. They are required to record all phone conversations, and have a strict policy on personal trading. No breaches occurred in SCBAM has a written policy for fair allocations and churning, which is part of SCBAM s investment management policy and procedures. Compliance reviews volume trade allotments annually. To mitigate mis-selling risks, a call centre was established in September 2014 to monitor any mismatches between customers recent transactions and individual risk profiles. Direct followup with customers will be made if a customer engages in transactions that are inconsistent with documented risk profiles. Well-Identified Controls on Transaction Executions Approved lists of brokers and dealers are incorporated into SCBAM s trading system with allotment limits. Brokers are divided into execution, matching, index-enhancing, and TFEX (futures) brokers. The portfolio analytics team under the investment management division regularly reviews criteria for selecting brokers and dealers, which are based on fees, execution, confirmation and the quality of service, research and dealing. Pre- and post-trade checks are conducted through the Charles River Development, which has been in use since December 2013 when the CRD was implemented. Pre- and Post-Trade Checks In Place Formal Pricing Policy Further post-trade checks are conducted by SCB s compliance for limits and regulatory matters, and by SCBA s risk management for investment risks through reports generated from front- and back-office systems. Frequency of checks varies between restriction types. If breaches are found, compliance officers or risk management officers will clarify with relevant business units, and notify the CIO, the investment committee and the RMC. All breaches are addressed and eventually remedied. If related to SEC rules, breaches need to be reported to Thailand s SEC. Pricing policies follow market conventions, and comply with regulatory requirements. For listed securities, pricing sources include the Stock Exchange of Thailand (SET; equity), Thai Bond Market Association (Thai BMA; bonds), and Thailand Futures Exchange (TFEX; futures). For non-listed securities, SCBAM uses fair values determined by fund managers and approved by custodians, based on models that the fund accounting department can crosscheck with third-party sources such as Bloomberg or swap counterparties. Investment Risk Comprehensive Market Risk Breakdown and Risk Budgeting Market risk management is based on an annually reviewed written policy, and has recently been strengthened by the implementation of MSCI BarraOne a globally recognised platform that monitors T/E, duration, VaR, Beta, and may expand to cover currency exposures and maturity buckets. SCB s risk management division produces monthly market risk-analysis reports for mutual, private, and provident funds. Reports include the monitoring of key market risk metrics relative to warning and budgeting levels, VaR simulations, beta, weighted average maturity, duration, ex-poste and ex-ante T/E. 7

8 Controls (continued) Highest Standards Investment Risk (continued) Liquidity risks are managed based on written policy, which is reviewed annually. SCBAM sets guidelines for maintaining liquidity levels (minimum cash and overnight assets, minimum assets maturing within seven days) for each fund type and in managing liquidity for daily redemption funds at different net outflow levels. Solid Control of Liquidity Risks with Guidelines for Maintaining Liquidity Liquidity risk management centres on SCBAM s large open-end fixed-income fund (SCBSFF) and money-market fund (SCBTMF). Redemption activities daily, weekly, and monthly are monitored and analysed regularly to gauge future redemption levels. For SCBSFF, liquidity analysis is further supported by monthly liquidity stress-tests. A liquidity facility from SCB exists for SCBSFF to provide liquidity support. For SCBTMF, liquidity is managed through a cap on portfolio maturity. Securities in equity funds are mostly liquid given the eligible equity universe, which restricts SCBAM s investment mostly to the 100 largest stocks by market cap in the Stock Exchange of Thailand (SET 100). SCBAM has only a small exposure to the less liquid corporate Thai bonds, mostly through its close-ended mutual funds (known locally as term funds ). The use of leverage is limited across SCBAM s funds; funding is obtained only through repos when necessary. Disciplined Counterparty Risk Counterparty risks are monitored using SCBAM s credit risk management policy. The creditreview team under investment management division regularly reviews limits and internal ratings of individual counterparties. Credit lines are set according to ratings, the size of total liabilities and equity, and each fund s asset size. Exposure is governed by an approved list and credit limits, both at the fund and the firm-wide levels. Issuer limits are monitored by SCB s risk management and compliance officers on a daily basis. In , credit risk analysis for corporate entities was made more rigorous by the introduction of a borrower risk rating model, which was already in use for analysing bank counterparties. A standard agreement in the form of ISDA is also used for swaps and other derivatives. 8

9 Investments High Standards Investment Resources Responsibilities of fund managers vary by asset class. Mixed or balance funds are comanaged by the asset allocation, fixed-income and equity departments. The property and infrastructure funds group operates separately from the investment management division, and is governed by a separate investment committee. Experienced Investment Teams with Strong Track Record The investment management division has sufficient staff, both in number and total experience. Continuity at senior level exists: the co-cio for equity investment has been internally replaced by the head of product strategy, whose role was in turn filled by an experienced, senior member within the product strategy department. Internal replacements by experienced team members have ensured this management continuity following the recent departures of the head of the fixed-income team and the head of property and infrastructure funds group. SCBAM s asset allocation team conducts economic, political, and market analysis, and formulates top-down views, which in turn are formulated from internal and external researches. A bi-weekly investment committee provides forums for sharing and disseminating in-house views across departments. To supplement its internal views, SCBAM has hired an offshore fund consultant to assist with formulating asset-allocation strategies for foreign investment funds. Good Access to Market Information, with Extensive Internal Credit Research The credit review team under the investment management division conducts credit analysis; assigns and monitors credit ratings of counterparties; and sets credit limits based on internal ratings. The team uses internal credit-scoring models and external credit ratings to assign internal credit ratings. Credit is reviewed or updated at least semi-annually. Internal credit ratings and limits are approved by SCBAM s RMC. The workload of the credit review team appears manageable, given the stability of the fixed-income universe and low staff turnover of 17%. A team of equity-research analysts write internal reports for securities in the eligible equity universe approved by SCBAM s investment committee. The team relies partly on external research from brokerage houses and on company visits. The quality of external research is one of the key criteria in broker selection. Investment Discipline Clearly Defined Investment Objectives and Guidelines Extensive Portfolio Performance Review and Analysis Clear mandates and performance benchmarks exist for all types of mutual, private, and provident funds. Eligible assets are detailed in each fund s investment policy, while exposure in each fund is limited by credit, tenor, and issuer. Investment targets, objectives and risk budgets are approved by the investment committee. Disclosure to unitholders well exceeds regulatory requirements, and is consistent with market conventions. Fund managers monitor portfolio performance regularly. One recent change has been made to the internal reviews of fund performance. Previously, the investment management division undertook all fund-performance evaluations. This has been partly transferred to risk management to achieve more independent evaluations. The investment management division still conducts some attribution analysis, which is geared towards enhancing returns for clients and developing alpha-creation strategies. Key performance-measurement metrics include benchmarking against eight peers; ranking by quartiles of SCBAM s funds relative to peers; and breakdowns into different fund types. While attribution reports are disclosed to unitholders for private and provident funds, such reports are used only internally for mutual funds. 9

10 Investments (continued) High Standards Investment Discipline (Continued) SCBAM manages its portfolios by blending a top-down (or asset allocation) approach with a bottom-up (or securities selection) approach. The two approaches are well coordinated under the supervision of the investment committee and two co-cios. SCBAM s decisionmaking process for investments is consensus-driven across departments and through the investment committee. Formalised Investment Process The asset allocation team formulates top-down views, using strategic and tactical asset allocation. Asset allocation models are approved by the investment committee. Strategic asset allocation is reviewed at least twice a year. Tactical asset allocation is reviewed on a weekly basis by the team, which discusses economic and short-term market factors and determines allocation based on economic scoring and qualitative and quantitative models. Fixed-income fund managers focus on managing duration, weighted average maturity (WAM), yield curve, and credit strategy; this is done through weekly team discussions and bi-weekly investment committees. Credit selection is research-driven and governed by the RMC. Fund managers present portfolio strategies and models to the investment committee for approval. Equity fund managers combine fundamental analysis and quantitative approaches, and use both active and passive investment approaches, which are divided into sub-strategies under each investment approach. Within the equity investment division, research functions have been formally divided from investment functions, supported by a team of dedicated equityresearch analysts. Equity Investment Investment International Investment & Product Strategy Property & Infrastructure Funds Group Equity Portfolio (7 people) Fixed Income and Cash Investment (10 people) International Investment Product Property & Infrastructure Investment Mgt. Tactical Equity Investment (4 people) Asset Allocation (8 people) Investment Product Support & Service Property & Infra. Investment Support Equity Research (4 people) Dealing (3 people) Credit Risk (6 people) Portfolio Analytics & Quant. Model (1 person) (17 people) (11 people) Investment Support (8 people) Dealing (2 people) Source: SCBAM 10

11 Operations Highest Standards Operational Procedures Experienced Operations Staff, with Improving Turnover The number of operations staff increased to 32 in April 2015 (March 2014: 31), with a low turnover rate of 16%. Operations staff are experienced, particularly at senior levels. Technological resources are deemed adequate and commensurate with volumes and complexities of trades, clients, and portfolios. Further upgrades to middle and back-office systems in early 2016 will enhance SCBAM s technological resources. The workload in the operations group is viewed as manageable given system automation and the recent outsourcing of provident fund registration services to SCB in SCBAM benefits from a high level of automation under its existing systems. Greater efficiency can be expected following the implementation of new systems in early Highly Automated Portfolio Updates and NAV Calculations Under its current systems, SCBAM uses FIX protocol to execute equity trades, allowing STP orders to brokers. For fixed-income trades, orders are placed in the system by fund managers. Order execution is done by the central dealing unit via phones and s, and the executed orders are placed back in the system. The investment support team sends a buy/sell instruction form and brokers' confirmation form to custodians; they also send original copies of both documents to the fund operations team. Custodians also receive a brokers confirmation form from brokers. Allocations and portfolio holdings are system-automated. SCBAM has an established NAVvalidation process between its operations department and custodians/trustees. Data on subscriptions and redemptions from registrars are put into PORTIA system (which comes with an interface) to update portfolio holdings. In 2015, SCBAM is no longer a registrar for provident funds under its management; this has been outsourced to SCB via SCB Group s shared services. Corporate actions are updated by investment support into PORTIA system, while operations team handles par splits and stock dividends, and crosschecks corporate actions with custodians/trustees. Clear and Flexible Fund Set-Up Procedures Procedures exist for setting up funds. The investment product strategy division explores potential investments, and then sets new mutual funds. For provident and private funds, the asset allocation team discusses with provident- and private-fund clients to formulate an investment strategy for funds that fit clients' individual objectives and risk profiles. New funds need the investment committee s approval for set-ups, which are closely coordinated with risk management, compliance, investment support, and fund operations. The flexibility of fund set-up is exemplified by SCBAM s plans to set up more complex funds in 2015 in the form of sector funds such as global healthcare funds, and asset allocation funds. Communication and Client Servicing SCBAM's communication and reporting structures are systematic, and consistent with local regulations and market conventions. Systematic Communication and Reporting Communications are made through its website, mails/ s, call centres, bank branches, and meetings with institutional clients. NAVs of mutual funds are printed in local newspapers. SCB has consistently strived to improve the knowledge of its sales force to enhance communication and mitigate potential mis-selling risks. SCBAM s reports to investors are comprehensive but detailed analysis is mainly for internal use. Demand for detailed analysis beyond standard practice is low, especially from mutualfund investors. The company only provides detailed analysis on a case-by-case basis, mainly for provident and private fund clients. 11

12 Technology Highest Standards IT Resources SCBAM benefits from SCB s extensive IT resources and well-segregated IT functions, which are centralised at SCB. The bank allocates a team of dedicated IT officers to work closely with SCBAM, who are supported by additional back-up from SCB s IT department. Following recent re-structuring within SCB s IT division, the division now comprises teams for operations, development, strategy, and investment support. Extensive Resources and Well- Segregated IT functions IT development is regularly conducted at SCB. The development team handles all aspects of significant projects, and the scope spans middle-, back-, and front-office systems. A dedicated development team ensures monitoring and the allocation of sufficient resources. For , IT development projects are likely to be operations-driven to improve the efficiency of systems to accommodate new complex instruments. IT maintenance is centralised at SCB's IT division, while IT internal audit is conducted annually. Systems SCBAM s risk management systems were upgraded in June 2015 to MSCI BarraOne. This replaces previous systems and methods of monitoring VaR, T/E, duration, and beta, among a number of risk metrics. Since the implementation of Charles River Development (CRD) in December 2013, SCBAM has experienced no material issues. CRD allows modelling and sensitivity analysis on a real-time basis, and features FIX protocol for equity transactions (STP orders to brokers). CRD has pre- and post-trade checks embedded in its system. Integrated Systems with Multiple Interfaces PORTIA (developed by Thomson Reuters) and BOS represent SCBAM s central database and operational platform. Other databases include shared drives and SCB's network. The databases show high levels of integration. Internal and external reports such as NAV, financial statements, and customer reports, are generated from PORTIA and BOS. SCBAM uses PORTIA to keep track of all transactions and portfolio holdings, though some manual calculations are conducted separately in Excel. Seven out of eight planned modules have been added to PORTIA; however, the eighth module (General Ledgers module) has not been installed due to problems with vendors. Instead of continuing with the upgrade of general ledgers, SCBAM plans to implement new middle and back-office systems to replace both its PORTIA and BOS (back-office system) in early Recent tests for key systems CRD, PORTIA, BOS indicate satisfactory results. Capacity usage at its main data centre averages between 10% and 20%, peaking at 50%. 12

13 Technology (continued) Highest Standards IT Map MSCI BarraOne Charles River Development PORTIA Bloomberg BOS Internally Developed Excel files Internally Developed Excel files PMS and Risk Analytics Front Office Operations Middle and Back Office Vendor Solutions Proprietary System Source: SCBAM IT Security IT functions are centralised at SCB. SCBAM has senior officers to resolve problems. Solid Business Continuity Database in PORTIA, BOS, and shared drive are regularly backed up, with a 45-day retention period for daily back-ups, a 35-week retention period for weekly back-ups, and permanent storage for monthly back-ups. Back-up tapes are maintained at two sites, the primary data centre at Ratchayothin and the back-up site at Chaengwattana. Servers at the primary data centre are replicated at, and synchronised with, the back-up site. A detailed business continuity plan (BCP) exists to ensure continuity in the event of disruptions; no material changes were made to the BCP in There is a back-up recovery site in Rama IV in Bangkok s Central Business District. A disaster recovery test is conducted annually. 13

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