2. Risk Factors

Efficient risk management is a crucial dynamic for the successful
operation of the Company. The Company continuously assesses relevant
risk factors and enhanced risk management measures. In 2008, the Company
invested in accounting software of database and budget management to
improve the effectiveness of the company’s resource management

2.1 Risk from Discontinuous Revenue Stream

In the last fiscal year, the Company’s revenue came from property
development projects and project management, which had project basis
features and hence risk of discontinuous revenue stream. The management
realizes this risk and has a business plan to incessantly develop new
property projects balanced by hotel business expansion to ensure a
continuous stream of revenue from the business operations of the
Company.

2.2 Risk from Hotel Business Operations

Formerly, the Company’s core businesses were businesses related only
with property development. However, the Company presently places more
emphasis on the hotel business especially 3-6 star hotels in Bangkok as
well as up-country. Hence, there may be risks from operating this new
business since that was not the Company’s core business in the past.

The Company has formed a joint venture company, Absolute Hotel Services
Co., Ltd., with partners that have extensive experience in the hotel
business. The objective for setting up the joint venture is to develop a
hotel network under the brand U Hotels & Resorts to manage 3-4 star
hotels of the Company. For 5-6 star hotels, the Company forms alliances
with international hotel chains since these international hotel chains
are well established and have their own clientele. Moreover, the Company
was a shareholder of the Regent Hotel on Rajadamri Road and The Empress
Hotel in Chiang Mai as well as operating hotels such as the Empress
Bangkok, now known as the Eastin Makkasan Bangkok. Presently, the
Company also operates the Eastin Lakeside Hotel and therefore has the
capability to operate hotel businesses.

2.3 Risk from Construction Business Operations

The Company and Hip Hing Overseas Limited have jointly established Hip
Hing Construction (Thailand) Company Limited (Hip Hing) to operate a
construction business, which is a new business alike to the property
development business where the Company has extensive experience.

The construction business is related to the property development
business. Hence it facilitates the Company’s business management since
Hip Hing will construct a number of projects for the Company as
appropriate. Therefore, the Company will not have to acquire such
services from various sub-contractors. Hip Hing also has foreign
executives who have expertise in construction with extensive experience
in constructing large scale projects overseas and hence have superior
construction know-how and technology that will greatly support the
Company’s core business.

2.4 Risk from Rising Prices of Construction Materials

Cost of construction materials is an imperative component of
construction cost in developing property projects. Price of construction
materials tend to fluctuate in line with rising oil prices and growth of
the property sector. Construction cost of the Company’s projects has
risen in the recent past as a result of this fluctuation and
consequently impacted the Company’s profitability.

However, the Company efficiently manages construction cost by including
cost of construction material and labour of the project in its
contracts. By using this policy, construction contractors become
responsible for fluctuation in the cost of construction materials. As
for construction materials that are the Company’s responsibility, the
company has a qualified Project Development Department with experience
and good relationships with suppliers. The Company has strong bargaining
power and is able to control the cost of construction material at the
appropriate level. The Company always plans the construction in detail
and assesses the amount of construction materials required for each
material for its projects prior to placing orders.

2.5 Risk from the Baan Aur-Arthorn Project

The Company has signed a contract with National Housing Authority to
construct Baan Aur-Arthorn project on April 25, 2006. However, due to
political uncertainty which may affect public policy concerning the
continuity of this project, the Company will have to wait for
clarification on the matter.

This uncertainty directly affects the number of units that the Company
shall be approved to construct and hence future revenue.

At present, the number of units that the Company has been approved to
construct has been reduced from 9,584 units to 8,048 units from the
total of 20,000 units since the National Housing Authority has
terminated the project at Bang Bor (1,536 units). The Company has made
provision for impairment of the development cost of the Saraburi project
and the Chonburi project in the amount of 19.8 million baht and 11.2
million baht as stated in financial statements as at March 31, 2008 and
2009 respectively. However, the Company still receives revenue by
installments from the completed houses that have been handed over to the
National Housing Authority.

The Company is scheduled to handover 4,216 completed houses by September
2009 in accordance with the 180 day extension approved by the Cabinet.
The Company is confident that it will be able to handover the project
within the stated time period.

2.6 Risk from Interest Rate Volatility

After the completion of its business rehabilitation plan, the Company
still has a certain amount of debt outstanding. However, these debts are
non-interest bearing debts and thus the Company is not affected by the
risk from interest rate volatility. As regards new financing from
financial institutions for the Company’s projects after the termination
of the business rehabilitation, the Company has negotiated with several
financial institutions and entered into loan agreements with one
financial institution that offered the best terms and conditions.

As for future projects, the Company has a policy to find its funds from
the best sources depending on the economic and financial situation at
the time.

2.7 Risk from Overdue Debt Repayment

In accordance with the business rehabilitation plan, the Company has to
pay back installment debts to unsecured creditors totaling Baht 233.7
million due in late October 2007 and 2008. However, the Company did not
make payment to such unsecured creditors and is currently in negotiation
with those creditors.