1.  Risk Factors

  Risk factors will be effect to the company’s operation are as follows:

1.  Risk on External Source of Fund

  In present, the major source of fund came from Bank of Ayudhya, the
  credit limited Baht 520 million were bank over draft and on call
  promissory notes. As at 31^(st) December 2005 the company utilized
  fully credit limited, and interest expenses about Baht 29.81 million
  in 2005.

  The interest rate- MOR of Bank of Ayudhya per annum at 31^(st)
  December 2005 is 7.00% which is nearly average MOR of top 5 big banks
  which is 6.80% per annum.

  Because the company was a good customer of Bank of Ayudhya over
  nineteen years, the Bank of Ayudhya always gives us financial support
  continuously. However, the company’s policy try to minimize that risk
  by raising funds from the other sources. In 2005, the company issued
  bill of exchange amount Baht 200 million sold to the Asset Management
  Fund, Outstanding balance of bill of exchange as at 31^(st) December
  2005 amount 100 million will be due in 2006.

2.  Risk on Interest Rate

  The major of the company’s revenues come from hire purchase
  motorcycles. Then, the higher interest loan rate will directly effect
  to the company’s profit. In 2005, the company interest margin was
  about 32.98%. If the interest loan rate rise up, the cost of fund will
  be increased. While the hire purchase interest rate was fixed for the
  period of hire purchase contract, which the company can’t push higher
  interest expenses to our customers.

3.  Risk on The Mismatch Between Source of Fund to The Period of Hire
    Purchase Motorcycles Contract

  Because the major source of fund came from the Bank of Ayudhya ,was an
  on call short term loan while the average period of hire purchase
  motorcycles contract was about 27 months. There was a risk whenever
  bank called back the principle of loan.

  However the company was a good customer of the Bank of Ayudhya over
  nineteen years, the Bank of Ayudhya always gives us financial support
  continuously. The company’s policy tries to matching fund to minimize
  the risk.

4.  Risk on Governmental Regulations

  In present, there is no rules or regulations from the Bank of Thailand
  to control hire purchase motorcycle. Excepted the Office of Consumer
  Protection Board regulations, Ministry of Commerce issued regulations
  to protect consumer for some agreement in hire purchase motorcycle
  contract such as to limited interest rate for default customers which
  can’t be charged more than MOR + 10% per annum of Krung Thai Bank etc.

  Whenever, The Government issue regulations to control hire purchase
  motorcycle business, It will be effect to our operation in the future.
  For example, to limit interest rate of hire purchase motorcycle
  contract or limit down payment etc.

5.  Risk on Non Performing Loan

  In present, The hire purchase motorcycles business isn’t limited by
  rules or special laws from the government. Therefore, the company in
  hire purchase motorcycles business can expand business with the
  capacity of themselves. However, the risk will be occurred at the
  approved credit process if there is not a good internal control system
  and inaccuracy.

  For our experience, as the company is a membership of The National
  Credit Bureau Company Limited, The company sends the historical
  payment of customers to credit bureau every month. By this way, the
  company can reduced non performing loan if customer acquires some loan
  from Financial Institute, there will be the record. If the good record
  of customer shows up, the payment will be easily approved on the other
  hand for bad record, it will be rejected until they clear overdue or
  closed account.

6.  Risk on Loss on Sales from Repossessed Motorcycles

  Repossessed motorcycles from non performing loan or doubtful accounts
  will be sold by auction within 15 days to used motorcycles’ dealers.
  The major used motorcycles’ dealers come from Bangkok, boundary and
  upcountry who are closed relationship and continued auction with us
  for more than 10 years. The pricing of repossessed motorcycles is
  variable in quality, aging and favor of used motorcycles. In case of
  auction price is not cover debt, the company can call the lost from
  debtor or guarantors. For other case, if the company couldn’t received
  money from customers or guarantors, we will record loss on sales
  repossessed motorcycles.

7.  Risk on The Major Shareholder’s Influence

  Mr. Khanchai Boonpan, who is the major shareholder holding of 12.79
  million shares- 28.42% of registered capital and completely issued and
  paid-up capital 45 million shares, can’t control or influence the
  company’s operations and he can’t control a number of votes for
  shareholders’ meeting, because the significant votes must be 3 of 4
  votes from shareholders’ meeting.

  To balance the administrations power, the company was managed 3 of 11
  directors from independent directors which equal to 27.3 percent of
  all directors.

8.  Risk on New Entrance and Competitive in Hire Purchase Motorcycles
    Industry

  To operate the hire purchase motorcycles business, it is not necessary
  to use many materials and tools. It’s easy to entrance in the business
  because hire purchase motorcycles business can be set up and expands
  with big capital. Somehow it’s difficult to success and existing.

  Dealers are important advisor to induce clients to buy our services.
  Therefore, there is risk if dealers don’t suggest our services to
  customers.

  With the fast operation, completed information system, experienced and
  specialize in business, we can approve credit within an hour which
  satisfy to dealers’ needs. The company can develop information system
  with ourselves to support business, then we can rapidly check and
  answer any question to dealers and customers for clearing outstanding
  balance.