RISK FACTORS

Evolution Capital Public Company Limited places importance on the
management of both internal and external risks which may affect its
operations. Therefore, the Company has established the following
effective measures to mitigate such risks:

Property Services

Risk from economic and political factors

Property developments/investments are affected by economic and political
conditions and sentiment. The business plans of both domestic and
foreign developers/investors are driven and shaped by global as well as
domestic economic and political situations. These risks are outside the
Company’s control. However, most of the time, property
developers/investors will adjust their business strategies according to
changing economic and political conditions. When economic and political
conditions are not favourable, property businesses (both advisory and
proprietary investments) may slow down in line with prevailing
circumstances. However, the Company believes that there are always
unique opportunities in unfavourable conditions which are in line with
the Company’s strategies. The global financial turmoil which accelerated
during the second half of 2008 also created opportunities for the
Company in 2009. However, in the short term, revenue growth may be
slower than foreseen and it is important to manage both costs and risk.

Risk from property market factors

Property market conditions also directly affect property
development/investment activities. However, property market factors are
generally specific to varying types of projects and segments within the
entire market. The Company believes that Thailand’s property market is
diversified in terms of geographical areas and types/classes of
projects. The Company has also not tied its business to one type or
segment of the property market. Within the hospitality and residential
sectors, it can operate under different sub-segments for different types
of clients. In terms of its own development/investment, a careful study
is always performed before entering into specific types of
developments/investments or segments.

Competition and client sources

The services the Company offers to its clients are unique and specific
to their needs. Most real estate consulting firms offer services that
are in the pre-development and/or post-development period, such as
market studies and brokerage. Although the Company can take on such
assignments, it chooses to focus on services required during the
development period. Such services can be as comprehensive as a client
wants, ranging from conducting due diligence to project management. In
terms of client sources, the Company places an emphasis on foreign
investors whom the company believes have unique and specific needs.

Human resources

One of the critical factors in the Company’s operation is human
resources since the services the company provides to its clients require
specialised skills across various disciplines. The Company has
successfully attracted a pool of talented personnel – a mix of Thais and
expatriates who possess extensive experience and have held key positions
in their field. The Company believes that in the near future, after its
new businesses have grown, it will be able to attract more talented
personnel, both Thais and expatriates, to help execute its business
plans. In terms of human resources management, the Company plans to
become one of the preferred employers in Thailand and has been working
to set up a programme for compensation and incentives to create
long-term loyalty between the Company and its employees. The Company is
also designing an internship programme for undergraduate students to
work for the Company during their last semester. This will create
opportunities for students to gain real life experience before
graduation. The main benefit for the Company is the chance to identify
talented personnel to join the Company in the near future.

Media Services

Risk from specific characteristics of the industry

In engaging in the provision of wireless Value Added Services (VAS) to
mobile phone users, the Company faces a highly competitive situation.
However, this competition mostly relates to the incumbents in the
market, rather than new entrants. Since the Mobile Value Added services
market is relatively mature at this stage, the rush of companies trying
to get a piece of the pie has let up. Now we see the market leveling
out, with most players achieving a stable market share. The demand for
wireless VAS from mobile phone users itself has declined in the middle
to upper middle class demographic. This is caused by controversy in the
VAS industry in conjunction with the spread of smartphones and data
access – content can now be accessed online for free rather than at a
premium through Value Added Services. However, the lower-income market
continues to consume Value Added Services, in particular Horoscope
services. These services continue to be a main source of revenue for the
Digital Media subsidiary. The race for new types of content has not
panned out, mostly due to the stalling of the 3G concession process.
Without 3G licenses and infrastructure, new generations of
bandwidth-heavy content cannot be put to market, causing a lag in
innovation.

The Company has established effective measures to mitigate risks arising
from the nature of the business. It has streamlined its product
offering, removing non-performing products and services and focusing on
the most profitable ones. The focus has also shifted from one-off
services to subscription-based services which provide a recurring
revenue stream. Finally, rather than focusing on pop content, which
changes month by month and requires high overheads to maintain/keep up,
the company has focused on product offerings which are mainstays of Thai
culture – namely horoscope and lottery-based services. This ensures a
constant, recurring revenue stream which is not subject to the latest
fad or trend, leading to stable and predictable performance.

Risk from changes in technology

The Company is engaged in a business which is mainly related to
information technology and communications. It is therefore vulnerable to
risk from rapid and constant changes in technology. These changes in
technology encourage mobile phone manufacturers to continually expand
the capabilities of their mobile phones, to enable them to receive
richer, detailed, and more complex information. As such, some of the
services currently provided by the Company may potentially experience a
decline in popularity, or even become obsolete. For example, due to the
rise of smartphones and increasingly connected consumers, premium
content has become a less attractive option to customers with medium to
high spending power. However, since this trend has yet to permeate to
the lower-income strata (the main audience of the VAS services), this
trend has not, and probably will not for some while, affect the
performance of the VAS business. However, the company must constantly
research new technologies as the awarding of 3G concessions combined
with the possibility of cheaper/mass-market smartphone handsets could
pose a significant risk. Constant innovation is required and being
performed in order to maintain competitiveness.

Risk from changes in consumer behavior

The Company’s wireless VAS enables users to receive information, news,
and entertainment in various forms, directly onto their handsets.
However, despite its popularity, wireless VAS is not essential to
communication with others; therefore the demand for it is constantly
open to change, subject to tastes and fashion. Thus, the Company faces
risk from changes in the consumer behaviour of mobile phone users. This
risk includes both declines in the popularity of wireless VAS in
general, as well as for demand for wireless VAS which the Company does
not yet provide. It is therefore crucial that the Company continuously
monitors changes in consumer behaviour, and develops new content aligned
with these changes so as to maintain its customer base and continues to
generate revenue from wireless VAS.

Risk from Investment in associates and from Interests in joint ventures

The Company has invested in associates companies by using equity method
approximately 44% of its total assets, as of 31 December 2010, which are
mostly in differing Real Estates sectors. At the end of 2009 and 2010,
the Company had realised shared losses from associates and joint
ventures companies, using the equity method of accounting, of THB 8.1m
and THB 51.7m, or 2.5% and 59.6% of the Company’s net profit,
respectively.

Consequently, the operating results of associates and joint ventures
companies have a direct impact on the Company’s operating results. In
other words, if their performance is significantly strong, the Company
will realise significant shared gains from investment which will result
in an increase in the Company’s net profit. Conversely, if their
performance is low, it would then result in a decrease in the Company’s
net profit.