ASSET ACCEPTANCE CAPITAL CORP

After the announcement of the execution of the Merger Agreement, three lawsuits were filed in the Macomb County Circuit Court of the State of Michigan against the Company and its directors, as well as Encore and Pinnacle Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Encore (“Merger Sub”). The lawsuits are: (1) Shell v. Asset Acceptance Capital Corp., et al., Index. No. 13-0959-CZ, filed on March 8, 2013 (the “Shell Action”); (2) Neumann v. Asset Acceptance Capital Corp. et. al., Index No. 13-1072-CZ, filed on March 19, 2013 (the “Neumann Action”); and (3) Jaluka v. Asset Acceptance Capital Corp. et. al., Index No. 13-1081-CZ, filed on March 20, 2013 (the “Jaluka Action”). In these lawsuits, purportedly brought on behalf of all of the Company’s public stockholders, the plaintiffs allege, among other things, that the Company’s directors have breached their fiduciary duties of care, loyalty and candor, and have failed to maximize the value of the Company for its stockholders by accepting an offer to sell the Company at a price that fails to reflect the true value of the Company and that was agreed to as a result of an unfair process, thus depriving holders of the Company’s common stock of the reasonable, fair and adequate value of their shares. Plaintiffs in the Shell Action and Jaluka Action further allege that the Company’s directors have breached their duties of loyalty, good faith, candor and independence owed to the shareholders of the Company because they have engaged in self-dealing and ignored or did not protect against conflicts of interest resulting from their own interrelationships or connection with the proposed acquisition. Finally, all plaintiffs allege that the Company, Encore, and Merger Sub aided and abetted the directors’ breaches of their fiduciary duty. Among other things, plaintiffs in the three lawsuits seek injunctive relief prohibiting consummation of the proposed acquisition, or rescission of the proposed acquisition (in the event the transaction has already been consummated), as well as costs and disbursements, including reasonable attorneys’ and experts’ fees, and other equitable or injunctive relief as the court may deem just and proper. Plaintiffs in the Neumann Action also seek rescissory damages as an alternative to rescission of the proposed transaction, and damages suffered as a result of the defendants’ wrongdoing.

If the merger is not completed, our Board of Directors will continue to evaluate and review our business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the Merger Agreement is not adopted by our stockholders or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to our company will be offered or that our business, prospects or results of operation will not be adversely impacted.

In addition, we may be required, under certain circumstances, to either pay Encore a termination fee of $4.25 million or $7.4 million and, under certain circumstances, reimburse up to $2.0 million of Encore’s merger related expenses. The payment of any termination fee and expense reimbursement could have an adverse effect on our company that is material to the results of its operations.

The amortization rate of 47.0% for the first quarter of 2013 was 790 basis points higher than the amortization rate of 39.1% for the same period of 2012. The increase in the amortization rate was a result of lower weighted-average yields and collections on fully amortized portfolios, and impairments in 2013 compared to impairment reversals in 2012. During the first quarter of 2013, we increased yields on twelve portfolios from the 2008 through 2012 vintages, which results in a higher percentage of cash collections being applied to purchased receivable revenue and less to amortization. This compares to the first quarter of 2012, when we increased yields on ten portfolios. Increases in assigned yields are generally a result of increases in expected future collections. We recognized impairments of $0.2 million during the first quarter of 2013, compared to impairment reversals of $4.5 million during the same period of 2012. The impairment in 2013 was recognized on one portfolio from the 2007 vintage. In 2012, the impairment reversals were the result of increased expectations for future collections on certain portfolios from the 2005 through 2009 vintages. Refer to “Supplemental Performance Data” on Page 34 for a summary of purchased receivable revenues and amortization rates by year of purchase (“vintage”) and an analysis of the components of collections and amortization.

The pursuit of the Merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect the financial results of the Company. In addition, the Merger Agreement requires that the Company operate its business in the usual, regular and ordinary course consistent in all material respects with past practice and restricts the Company from taking certain actions prior to the effective time of the Merger or termination of the Merger Agreement without the prior written consent of Encore. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Merger.