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  2. Risk Factors

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2.1 Risk from the inability to acquire new asset management contracts to
replace expired contracts

A) Non-Performing Asset Management Contracts

Non-performing loan (NPL) management service is a major source of
revenue of the Company compared with its other sources. This revenue is
generated from fees earned on cash collected from repayments, disposal
of NPLs and sale of collateral assets. The Company earns such revenues
throughout the period of each NPL management contract. At the end of
2012, the Company and its subsidiaries had a total of five (5) NPL
management contracts, based domestically and internationally, with a
total outstanding principal balance of THB 12,418 million. All existing
asset management contracts will expire by June 2013. If in the future
the Company or its subsidiary is unable to find new asset management
contracts or participate in new NPL portfolio auctions, the financial
status and revenue received from operation of the Company may eventually
be impacted.

Mitigation

The Company recognises that it may not be able to find new NPL
portfolios in time to replace expired or disposed of portfolios and that
it needs to mitigate the risk of decreased revenues from asset
management services. The Company is focused on offering other services
by expanding its financial advisory services internationally, such as
the establishment of a subsidiary company, Aurum Capital Advisory Pte.
Limited based in Singapore. Moreover, if the Company sees other
opportunities to expand and foresees good return on the investment, the
Company is well-prepared to undertake such investment.

The Company has subsidiaries which participate in NPL auctions and own a
number of NPL portfolios, namely ACAP Asset Management Co., Ltd. (ACAP
AMC) and ACAP (Asia) Asset Management Co., Ltd. (ACAP ASIA AMC). Both
subsidiaries are asset management companies qualified under the Asset
Management Royal Decree of B.E. 2541 [1998], which enables them to
participate in NPL auctions from other financial institutions.

2.2 Risk from Dependency on Major Clients

As a majority of revenue comes from the NPL management business, major
clients of the Company are asset management companies or financial
institutions which hired the Company to be the administrator of their
NPL assets. Therefore, if an asset management company or financial
institution decides to terminate the contract or discontinue the service
from the Company, it is likely that the Company will encounter a
significant decline in revenue.

Mitigation

The major clients of the Company are those in NPL management business
such as clients or financial institutions that owned NPL portfolios. The
Company has mitigated the risk in NPL management service not only by
providing asset management services to the clients, but also found an
Asset Management Company, a subsidiary of the Company, which offers
opportunity for the Company to acquire its own NPL portfolios. Moreover,
the Company has competitive advantage in term of management contract by
reducing risk in cancellation of contract when compare to providing
services to the clients. Besides, the Company had thoroughly studied the
asset collaterals and other information of that portfolio before
participating in the bidding process to ensure the worthiness of such
investment. Each year, the Company regularly follows the news and
announcements from the financial institutions regarding the NPL
portfolios auction. The subsidiary companies namely, ACAP AMC and ACAP
(ASIA) AMC would enter approximately 1-2 auctions per year for NPL
portfolios being sold by financial institutions. Hence, after
considering the volume of NPL available in the financial system, the
Company and its subsidiaries expect to generate profit and continually
grow in this business.

For the financial advisory and investment banking business, its major
clients are those involving debt restructuring and seeking investment in
large size projects, however, the revenue contributed to the Company’s
total revenue is relatively small compared to the revenue earned from
NPL management business. The Company also pays attention to each service
contract, ensuring payment of fees upon successful completion. Moreover,
the Company is seeking to expand its revenue from other business lines
such as expanding investment banking services in Singapore, which is
considered one of the risk mitigation alternatives.

2.3 Personnel Risk

The Company and subsidiaries rely heavily on the competencies, expertise
and customer relationships of its directors and other senior staff, both
in terms of their relationship with other businesses and the management
work. The loss of such human resources, especially at the management
level may affect the future success of the Company’s business.

Mitigation

Executives of the Company at the director level are regarded as
established members. Also, every director is a shareholder. Most have
been working with the Company since establishment and the probability of
resignation is relatively low, especially for Dr. Vivat who is the major
shareholder and has no other businesses. In the aspect of seeking new
clients, all executives are involved by not depending on one particular
director. However, if the Company acknowledges the resignation of the
Company’s Director, the Company will consider and approve the
replacement in timely manner, of a highly qualified individual that
specialises in the Company’s business. At present, the Company’s Board
of Directors consists of six executive board members, which is
appropriate to the Company’s business.

As of year-end 2011, the Company underwent a reorganization of human
resources. The Company had decreased its employees to 114 and again
downsizing to 72 employees in year-end 2012. Most of the employees are
operations staff officers in asset management division. Even so, the
remaining employees are capable of performing their roles as the Company
distributes work to each department properly, without affecting the
efficiency and smooth functioning of the business operation. Moreover,
the Company is able to recruit new qualified staff to be in line with
the current asset under management.

The Company has paid great attention in human resource matters by
creating a secure employment environment for management and staff in
order to reduce staff turnover. The Company has provided on-the-job
training for both management and staff to ensure development of the
knowledge and skills. Moreover, the Company has signed employment
contracts with every management and staff and offers attractive and
competitive remuneration based on the performance and skills of each
staff.

2.4 Risk of Missing Collection Target, Delay or Default in Service Fee
Payment

As revenue from NPL management service is a major source of revenue for
the Company and subsidiaries, one of the risks involved is missing debt
collection targets. Additionally, the Company is exposed to risk of
delay or default in financial advisory service fee payments as some
clients have liquidity or financial problems, lack sources of funds, or
are likely to enter into a debt restructuring process.

Mitigation

The Company is aware of the uncertainty in achieving debt collection
targets, so it carefully studies details of NPL portfolios such as
collateral details and quality of the debtors in the due diligence
process to assess the potential recovery. Moreover, the Company would
offer a bid price significantly below the aggregate collateral value of
the particular NPL portfolio in order to mitigate the risk. In case that
the Company cannot collect the debt, it is usually able to enforce
selling of the collateral at the price not less than the bid price which
means that the risk of loss from NPL management should be minimal.

Measures taken to minimize the risk of delay or default in financial
advisory service fee payment include assessing clients’ repayment
ability from cash flow generation, sustainability of the business, and
so on before accepting the clients’ mandate. The Company’s monthly fee
would be charged on the basis of cash flow projection which should cover
initial costs of the Company. The Company charges a retainer fee
(monthly service fee) during the service contract duration, and a
success fee on completion of the service. If the Company cannot collect
its fees from a client, it would stop providing service but the revenue
received would still cover the Company’s expenses.

2.5 Risk from Dependency on Operating License

The Company and its subsidiaries require various types of licenses
either to participate in bidding for NPL portfolios from financial
institutions or to provide financial advisory and investment banking
services. Such operations must obtain the consent of and license from
the related government agencies, such as the Bank of Thailand for
bidding for NPL portfolios or from the Securities and Exchange
Commission (SEC) for providing the financial advisory and investment
banking service, in addition to the Business Reorganisation Office of
the Ministry of Justice for Plan Preparation and Plan Administration
services under the Bankruptcy and Business Reorganisation Act. The
Company and its subsidiaries have been operating with all necessary
licenses. However, the licenses to operate as financial advisor issued
by the SEC and the license to operate as Rehabilitation Planner and Plan
Administrator are subject to expiration and must be renewed
periodically. As a consequence, the Company and its subsidiaries may
have an exposure to the risk of not being able to renew the expired
licenses.

Mitigation

The Company and its subsidiaries have continuously reviewed the expiry
dates of all licenses to ensure that the Company and its subsidiaries
are eligible for business operation. At present, ACAP Corporate Services
Co., Ltd. (“ACS”) has been granted a license by the SEC to operate its
financial advisory service since December 3, 2008 for a 5-year period
which will expire on December 2, 2013. In case such license in nearing
expiration, the Company expects to be able to immediately renew the
license since it has maintained the proper qualifications and good track
record of services. Meanwhile, ACS has been granted a license from the
Business Reorganisation Office to become rehabilitation planner and plan
administration in which the licenses will be expired in 2014 and 2017,
respectively. Moreover, no renewal problem is foreseen as it has
maintained its appropriate qualification. Thus, the risk from losing
operating licenses is considered low.

2.6 Risk from Changing Business Cycles

Economic cycles during economic recovery or expansion may impact the
Company and subsidiaries’ revenue from NPL management business due to a
decrease in NPL volumes. This may affect acquisition of new NPL
portfolios which is directly related to the Company’s major source of
revenue as well as other business operated by the subsidiaries, such as
debt restructuring which tends to decline in such circumstances. On the
other hand, an economic downturn may adversely impacts areas such as
fund raising advisory for business expansion which is likely to
decrease.

Mitigation

The Company’s management is aware of the impact of the economic cycle.
However, the Company and subsidiaries are able to service the clients in
every stage of the cycle due to diversification of the services provided
such as NPL management, debt restructuring service, fund raising service
and mergers & acquisitions. During an economic expansion period, the
Company’s revenue from debt restructuring may be impacted. However, this
may be offset by revenue from other financial advisory and investment
banking services of the subsidiaries, such as fund raising, mergers &
acquisitions, and other financial advisory services. Furthermore, allow
debtors in NPL management to have a higher repayment capability.

The economic downturn adversely impacts debt collection of clients in
NPL management. On the other hands, also enables the Company to expand
its NPL portfolios at a higher rate, as well as increase debt
restructuring revenue. In other words, the Company can adjust its
financial advisory services as per changing economic conditions. With
competent and experienced staff, the Company is ready to operate in
changing conditions due to the diversified nature of its financial
advisory services.

2.7 Risk of Decrease in Stock Price if Existing Shareholders, Directors
and Management Committee of Them Company Sell Their Stocks

At present, major shareholders with more than 10% shareholding of
paid-up capital are the Vithoontien Group, which includes Dr. Vivat
Vithoontien, the Chairman and CEO. As of December 31, 2012, the
Vithoontien Group has holding 49.19% of paid-up capital. Others in the
10 major shareholders, who are directors and financial institutions,
hold a total of approximately 31.28% of paid-up capital. Therefore, the
investor could encounter regarding a potentially declining stock price
if major shareholders and management dispose their share portions.

Mitigation

Shareholders who are the Company’s directors have worked with the
Company since establishment, with the common purpose of managing the
Company to create added value for the business they jointly own. Each
director would be motivated by the incentive related to the Company’s
growth rather than disposal of their shares to make short-term capital
gain.

The foreign financial Institution shareholders, each are all well known
institution in the industry, however, not the major shareholder of the
Company, do not have short-term investment strategies. Rather, they
invest for return through a long-term investment horizon by expanding in
other countries as a basis for future growth. Additionally, in order to
reduce this risk, the offering price of the Company’s shares for these
shareholders is higher than the current share value. Therefore, there is
minimal risk that these Foreign Financial Institutions would dispose
shares in the short-term.

Nevertheless, the Company does not depend on any essential technology or
personnel from these shareholders, except for occasionally seeking of
financial support to bid for NPL portfolios. Thus, if the foreign
financial institutions sell their shares in the future, there should be
no material impact to the Company’s business operation since the Company
has the expertise in finding sources of funds from various groups of
investors and other well-known financial institutions.

2.8 Risk from the Subsidiary Entering into Loan Facility Agreements with
a Financial Institution

Regarding the operation of an asset management company, a subsidiary
company, requires large amount of investment for each portfolio auction.
Therefore, the subsidiary has to loan from financial institutions that
are the Company’s alliances. However, in any future circumstance, the
Company may expose to risks i.e. not be able to loan or incapable of
making loan repayments. As of December 31, 2012, after the disposal of
NPL portfolio, the Company had repaid all of its loans. As a result, the
Company and its subsidiaries have no obligation in loan facility
agreements with any financial institutions.

Mitigation ,

To obtain the loan for NPL portfolios auction, most of the loans are
being supported by the financial institutions that are minority
shareholders of the Company. In considering the loan, it is a normal
operation of the financial institutions to provide funding and in
return, receive interest from such loan, as well as to support the
Company’s operation and business. Meanwhile, the Company is trying to
mitigate the risk by considering the appropriate facility agreement
which will benefit both parties. In repayment of the existing facility
agreements, it depends on the collection performance of each asset
portfolio acquired. Such acquired portfolios have been studied
thoroughly of their collaterals. The study has shown that the
collaterals existed in each portfolio have higher value than the amount
paid in auction and the amount supported by the financial institution.
Thus, the repayment of the two subsidiaries to the financial institution
can be surely achieved.