11. Financial Position and Performance 

  11.1 Summary of Financial Statement in the Previous 3 Years

(A) Accounting Audit Summary

-   Financial Statement for year-end, as of December 31, 2012 and 2011 :
    The accounting auditor has

  expressed non-binding opinions towards the financial statement. The
  auditor is Miss Pimjai Manitkajohnkit, Miss Rungnapa Lertsuwanku and
  Mr. Chayapol Suppasedtanon from Ernst & Young Office Limited.

-   Financial Statement for year-end, as of December 31, 2010 : The
    accounting auditor has expressed non-binding opinions towards the
    financial statement. The auditor is Miss Sansanee Poonsawat from AMC
    Co., Ltd.

(B) Financial Statement

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Financial Ratios (Consolidated financial statements*)

  -------------------------------------------- --------- --------- --------
  Liquidity Ratio                              2012      2011      2010

  Current Ratio (times)                        0.69      0.82      1.04

  Quick Ratio (times)                          0.40      0.55      0.74

  Cash Flow Ratio (times)                      0.15      0.32      0.37

  Accounts Receivable Turnover (times)         8.96      8.02      8.16

  Average Debt Collection Period (Day)         40        45        44

  Inventory Turnover (times)                   10.20     10.32     9.05

  Average Selling Period (days)                35        35        40

  Payable Turnover (times)                     2.98      3.10      3.14

  Average Payment Period (days)                121       116       115

  Cash Cycle (days)                            (46)      (36)      (31)

                                                                   

  Profitability Ratio                                              

  Gross Profit Margin (%)                      31.84     31.44     31.48

  Operating Profit (%)                         4.62      5.84      6.40

  Other Profits (%)                            1.47      1.41      1.16

  Cash to Earnings Ratio (%)                   93.14     150.07    199.21

  Net Profit Margin (%)                        3.55      4.05      4.70

  Rate of Return to Equity (%)                 26.40     32.32     34.36

                                                                   

  Efficiency Ratio                                                 

  Return on Assets (%)                         10.26     13.61     15.14

  Return on Fixed Assets (%)                   28.62     42.96     55.20

  Asset Turnover (times)                       2.25      2.36      2.37

                                                                   

  Financial Policy Ratio                                           

  Debt to Equity Ratio (times)                 1.81      2.37      1.86

  Interest Capability Ratio (times)            63.63     127.49    136.22

  Debt Service Coverage Ratio (times)          0.42      0.72      1.32

  Dividend Payout Rate (%)                     72.00**   59.13     97.28
  -------------------------------------------- --------- --------- --------

Remarks ** Dividend payment rate is proposed by the board of directors,
where by such rate will be decided at the annual general shareholder’s
meeting on April 25, 2013

  11.2 Interpretation & Analysis of Financial Status and Results of
  Operations

Publishing Business Situation in 2012

In the aftermath of the great flood in the previous year, the Company
faced another challenging year in 2012 in which the labor wage became a
critical problem. Effective in April 2012, the government announced a
new policy to change the minimum wage in 7 pilot provinces to 300 Baht
per day and to increase it by 39.5% in the other provinces. Moreover,
the starting salary of government officers who are a bachelor’s degree
holder was adjusted to 15,000 Baht per month. Even though the government
tried to help by decreasing the corporate tax rate from 30% to 23%, the
Company could not compensate for the excessive expenses from the wage
hike. In addition, the Company’s bookstore business could not change the
price of books to correspond to the rise in expenses while there was an
aggressive competition among department stores and a change in consumer
behaviors from various impulses. Moreover, customers’ purchasing power
in general has dropped because of the increasing expenses from the
first-car project and the purchase of smartphones. Therefore, the
Company also suffered from the slight drop in same-store sales.

                In regards e-books, the market in Thailand is relatively
small even though e-books are gaining more popularity in the west from
the growth of e-book readers and tablets. This is partly because there
are not many Thai e-books available for purchase and convenient enough
for readers to read. Therefore, it can be expected that it will take
some time before the popularity of e-books will affect the print book
market. However, e-Magazine in Thailand are becoming more popular and
already have some effect on the sales of print magazines. Anyhow, the
Company has already prepared necessary facilities to support the online
sales of both e-books and print books in order to become the country’s
biggest online bookseller in both electronic and print formats.

As the economy is in recession while the competition is more aggressive,
the number of new branches that the Company plans to open in department
stores drops from the forecast. In 2012, the Company opens 47 new
branches. As of December 31, 2012, there is a total of 438 branches and
24 points of sale in operation. Therefore, the total revenue of 2012
increases from the previous year by 2.99% and the net profit to
shareholders’ equity according to the consolidated financial statement
in 2012 amounts to THB 203.45 million.

Profitability and Operating Efficiency

During the past 3 years, the Company's revenue continued to grow. The
most satisfied
growth came from the expansion using distribution channels of SE-ED Book
Centers - the Company-owned bookstores, as well as through the network
stores (University Bookstores, and points of sales).

  ---------------------- -------------- ---------- ---------- ------------ ---------- ----------
                         Consolidated                         Separate                
                         financial                            financial               
                         statements                           statements              

                         2012           2011       2010       2012         2011       2010

  Total Revenue (THB     5,727.96       5,561.77   5,171.79   5,600.61     5,441.25   5,054.98
  Million)**                                                                          

  Growth from the last   +2.99          +7.54      +10.66     +2.93        +7.64      +8.78
  year (%)                                                                            
  ---------------------- -------------- ---------- ---------- ------------ ---------- ----------

**The total revenue is from the financial statement that combines the
profit share from the associate, which is in accordance with the total
revenue information from the Stock Exchange of Thailand.

OPERATING RESULTS

Operating performance for year 2012 over the same period last year

Table : Operating performance for year 2012 over the same period last
year.

  -------------------------------- -------------- ---------- --------- --------
                                                             (Unit :   
                                                             Million   
                                                             Baht)     

                                   Consolidated                        
                                   financial                           
                                   statements                          

                                   For the year                        

                                   2012           2011       Change    (%)

  Revenues                                                             

  Revenues from sales              5,522.18       5,370.06   152.12    7.40

  Income from tuition fees         119.71         111.34     8.37      2.16

  Interest and dividend income     22.06          23.95      (1.89)    15.20

  Other income                     62.26          54.41      7.85      38.24

  Total revenues                   5,726.21       5,559.76   166.45    7.56

  Expenses                                                             

  Cost of sales                    3,750.89       3,676.14   74.75     7.33

  Cost of services                 94.52          82.00      12.52     8.38

  Selling expenses                 1,042.07       924.72     117.35    11.15

  Administrative expenses          579.66         558.89     20.77     9.97

  Total expenses                   5,467.14       5,241.75   225.39    8.28

  Gross profit                     1,796.48       1,723.26   73.22     7.17

  Gross Margin (%)                 31.84          31.44                (0.04)

  EBITDA                           389.30         443.61     (54.31)   (1.54)

  Profit from operation accordance                                     
  with                                                                 

  Cash Flow Statement              389.33         484.53     (95.20)   (1.99)

  Equity holders of the Company    203.45         225.22     (21.77)   (7.34)

  EPS (Baht)                       0.57           0.63       (0.06)    (6.67)
  -------------------------------- -------------- ---------- --------- --------

The Company and its subsidiaries’ total revenue according to the
consolidated financial statement for the year ended December 31, 2012
amounts to THB 5,726.21 million, or an increase of 2.99% from the
previous year. The total revenue according to the separate financial
statements amounts to THB 5,600.61 million or an increase of 2.93% from
the previous year. Within this amount THB 5,518.65 million, which in an
increase of 2.89%, is the sales revenue.

The increase mainly comes from the sales performance of the 50 new SBC
branches opened in 2011 and 47 new branches opened in 2012. As a result,
the revenue of SBC and its network stores continues to grow by 2.75%
approximately.

The cost of sales and service according to the consolidated financial
statements of the year 2012 amounts to THB 3,845.41 million, or an
increase of 2.32%. The cost of sales, according to the separate
financial statements amounts THB 3,749.49 million or an increase of
2.04%. The gross profit margin of the year 2012 accounts for 32.06% or
an increase of 0.57% as a result of the increasing sales rebate from
suppliers because of the large purchases. In addition, the sales ratio
of high-profit products, such as books published and distributed by
SE-ED, increased from the previous year.

The selling and administrative expense of the year 2012 according to the
consolidated financial statement amounts to THB 1,621.73 million, or an
increase of 9.31%. The selling and administrative expense according to
the separate financial statement amounts to THB 1,593.36 million, or an
increase of 9.45%. Causes of the increase are as follows:

-   The level of salary increase in 2012 is the highest in history as a
    result of the government’s policy to adjust the minimal wage to THB
    300 per day in 7 pilot provinces and by 39.5% in other provinces
    since April 2012. The minimum salary of a bachelor degree holder is
    also adjusted to THB 15,000 per month in order to be in consistent
    with the government’s salary adjustment for civil servants with a
    bachelor degree.

-   The operation cost, including the rental and the service fee,
    increases in line with the opening of new branches. The increase is
    also due to the rising transportation fee because the 2011 flood
    prevented the branches from returning products to the warehouse.

The Company net profit belonging to shareholders’ equity of the parent
company of the year 2012 according to the consolidated financial
statements amounts to THB 203.45 million, or a decrease of 9.66% from
the previous year. The decrease is due to the rise in the selling and
administrative expenses, the salary adjustment according to the
government’s announcement, and the competition in department stores. As
a result, the same-store sales this year had dropped in spite of
additional other incomes from insurance claims for goods and equipment
damaged by flood incident in 2011 and from the gains from reversal of
impairment from unused properties.

The net profit according to the separate financial statement amounts to
THB 205.15 million or a decrease of 7.94% from the previous year.

Financial status analysis for year 2012 compare to 2011

Asset Component

  --------------------------- -------------- -------- ---------- -------- ---------- ---------
                                                                          (Unit :    
                                                                          Million    
                                                                          Baht)      

  Description                 Consolidated                                           
                              financial                                              
                              statements                                             

                              Year 2012               Year 2011           Change     

  Assets                      Amount         % to     Amount     % to     Amount     (%)
                                             Total               Total               
                                             Assets              Assets              

  Current assets                                                                     

  Cash and cash equivalents   346.95         13.21    570.31     23.19    (223.36)   (39.16)

  Current investments         168.39         6.41     178.86     7.27     (10.47)    (5.85)

  Trade and other receivables 104.22         3.97     132.41     5.38     (28.19)    (21.29)

  Inventories                 401.34         15.28    396.08     16.11    5.26       1.33

  Other current assets        66.72          2.54     39.93      1.62     26.79      67.09

  Total current assets        1,087.62       41.42    1,317.59   53.58    (229.97)   (17.45)

  Non-current assets                                                                 

  Restricted bank deposits                                                           
  and other                                                                          

  Investments                 12.58          0.48     12.39      0.50     0.19       1.53

  Investments in associate -  26.79          1.02     27.05      1.10     (0.26)     (0.96)
  net                                                                                

  Property, plant and         1,251.68       47.67    844.50     34.34    407.18     48.22
  equipment - net                                                                    

  Leasehold right on land -   7.04           0.27     7.37       0.30     (0.33)     (4.48)
  net                                                                                

  Leasehold right on          98.84          3.76     110.30     4.49     (11.46)    (10.39)
  buildings - net                                                                    

  Intangible assets           7.89           0.30     5.34       0.22     2.55       47.75

  Prepaid book copyright and  22.51          0.86     27.18      1.11     (4.67)     (17.18)
  translation fee                                                                    

  Rental guarantee and        104.76         3.99     92.24      3.75     12.52      13.57
  deposit                                                                            

  Other non-current assets    6.26           0.24     15.03      0.61     (8.77)     (58.35)

  Total non-current assets    1,538.35       58.58    1,141.40   46.42    396.95     34.78

  Total assets                2,625.97       100.00   2,458.99   100.00   166.98     6.79
  --------------------------- -------------- -------- ---------- -------- ---------- ---------

Liabilities and shareholders’ equity Component

(Unit : Million Baht)

Consolidated financial statements

[TABLE]

Financial analyses

Total Asset As of December 31, 2012 the company and its subsidiaries had
a total asset of THB 2,625.97 million increase of THB 166.98 million or
6.79% from the end of last year. Causes of changing of total assets:

-   Property, plant and equipment as of December 31, 2012 totals THB
    1,251.68 million, an increase of THB 407.18 million or 48.22%
    because of the construction of the new warehouse on Bang Na-Trad
    Road k.m.21 and the purchases of book shelves, decorations, and
    computers for the new branches.

-   Other current assets total THB 66.72 million, an increase by THB
    26.79 million or 67.09%. It is mostly due to the advance fee for the
    warehouse rental in 2013 and the advance payment for the
    construction of the new warehouse on Bang Na-Trad Road k.m.21.

-   Rental guarantee and deposit for THB 104.76 million increased THB
    12.52 million from the opening of 47 new branches.

-   Inventories-net totals THB 401.34 million and increase from last
    year by THB 5.26 million or 1.33%. It is mostly because there were
    more orders of textbooks, stationery, and traveling bags.

-   Cash and cash equivalents totals THB 346.95 million, a decrease of
    THB 223.37 million or -39.16% because of the construction cost of
    the distribution center (new warehouse on Bang Na-Trad Road k.m.21)

-   Trade and other receivables total THB 104.22 million, a decrease of
    THB 28.19 million or -21.29% because the Company received insurance
    claims from the flood incident in 2011 and payments from account
    receivables.

-   Leasehold right on buildings for THB 98.84 million had decreased by
    THB 11.46 million or -10.39% from a land leasehold amortization.

-   Current investments for THB 168.39 million decreased of THB 10.47
    million or -5.85% due to the sale of Bangkok Commercial Property
    Fund in the whole amount to support the construction of the new
    warehouse on Bang Na-Trad Road k.m.21.

-   Other non-current assets for THB 6.26 million decreasing THB 8.77
    million mainly because in 2011 the Company paid for the EA, SA, CAL
    software system maintenance service in advance as well as the rental
    fee for stores in Tuk Com group (the section with more than

  1 year benefits).The payment will be made in installment according to
  the term in the rental agreement.

Total liabilities As of December 31, 2012 the Company and its
subsidiaries had a total liability of THB 1,691.36 million decreased of
THB 37.49 million or -2.17%. Causes of changing of total liabilities:

-   Trade and other payables total THB 1,459.10 million, an decrease by
    THB 41.11 million

  or - 2.74% because of the decrease of key account payables and
  turnover.

-   Income tax payable totals THB 16.61 million, a decrease by THB 17.57
    million or -51.40%. This was because the tax rate dropped from 30%
    to 23% while the income tax of 2011 and the first half of 2012 is
    paid according to the payment term of the Revenue Department.

-   Long-term loans were worth THB 74.71 million, an increase THB 10.11
    million, The loan belongs to Plearnpatt Co.,Ltd to spend on the
    construction of a new school building.

-   Income received in advance recognizable within one year totals THB
    33.80 million, an increase by THB 4.85 million or up 16.75% due to
    the receipt of the advance tuition fees according to the school’s
    policy to give a discount to parents who pay the tuition fee in
    advance.

Shareholders’ equity As of December 31, 2012 the Company and its
subsidiaries had a total shareholders’ equity of THB 934.60 million,
which the shareholders' equity of parent company worth THB 873.30
million increased of THB 205.07 million. Causes of changing of
Shareholders’ equity:

-   Net profit of shareholders' equity of parent company from operation
    result for the year of 2012 amount THB 203.45 million.

-   Capital gain from the appraisal increased by THB 136.61 million. The
    gain from the land appraisal amounts to THB 124.59 million and the
    gain from the property appraisal amounts to THB 12.02 million.

-   Unrealized loss-securities available for the allowance of
    revaluation of securities decreased, causing the shareholders’
    equity to increase by THB 8.63 million. This is because of the sale
    of Bangkok Commercial Property Fund, which totals THB 1.34 million,
    the rise of

  ONE-FAS by THB 5.56 million and the adjustment of the market price of
  Vayupak Fund 1 by THB 1.08 million from late last year.

-   Retained earnings decreased due to the dividend payment as THB
    175.28 million.

    -   Operation result of Q4/2011 THB 0.11112 per share as THB 35.99
        million.

    -   Operation result of Q1/2012 THB 0.10 per share as THB 35.63
        million.

    -   Increasing capital from paying dividend for 4/2011 quarter in
        the rate of 10 original shares: 1 new share, totaling THB 32.39
        million.

    -   Operation result of Q2/2012 THB 0.10 per share as THB 35.63
        million.

    -   Operation result of Q3/2012 THB 0.10 per share as THB 35.63
        million.

-   Retained earnings decreased THB 36.79 million from recognizing
    expense for employees benefit in long term future according with new
    Thai Accounting Standard.

Cash flow and sufficiency of capital structure

Table : Cash flow for year 2012 over the same period last year

  ------------------------------------ -------------- ---------- ---------- ---------
                                                                 (Unit :    
                                                                 Million    
                                                                 Baht)      

                                       Consolidated                         
                                       financial                            
                                       statements                           

                                       2012           2011       Change     (%)

  Cash flow received (used) from       242.94         480.26     (237.32)   (49.41)
  operation activities                                                      

  Cash flow received (used) from       (329.94)       (401.06)   71.12      (17.73)
  investing activities                                                      

  Cash flow received (used) from       (136.37)       (228.93)   92.56      (40.43)
  financing activities                                                      

  Cash flow increase (decrease)        (223.37)       (149.73)   (73.64)    49.18
  ------------------------------------ -------------- ---------- ---------- ---------

Cash Flow Received from Operation Activities for year 2012 was THB
242.94 million as listed below:

-   Income from operation increased in the amount of THB 389.33 million:

-   The Net profit before corporate income tax for year 2012 in the
    amount of THB 256.10 million.

-   Adjustments to reconcile profit before tax in the amount of THB
    133.23 million (Depreciation and amortization as THB 116.69 million,
    Expense from donation of goods as THB 17.15 million, Expense from
    lost of inventories as THB 15.78 million, Allowance for dilapidated
    slow moving and lost of inventories as THB 14.95 million,
    Amortization of leasehold right on land and buildings as THB 11.79
    million, Expense from stock destruction as THB 11.50 million,
    Allowance for doubtful accounts and estimated goods return
    (reversal) as THB (18.80) million, Reversal allowance for impairment
    loss as THB (17.72) million, Interest income as THB (13.39) million
    and Dividend income as THB (8.67) million).

    -   Cash flow increased from trade and other receivables decreased
        amount THB 27.59 million. Because the Company receives insurance
        claims from the flood incident in 2011 and payments from account
        receivables.

    -   Cash flow decreased from inventories increased amount THB 64.64
        million, because SBC increased its orders of textbooks from PS
        Publishing Co.,Ltd., stationeries from Berli Jucker Public
        Co.,Ltd., SE-ED bags from Akkhararat Ltd.,Part and travelling
        bags from Huskies International Corporation Co.,Ltd.

    -   Cash flow decreased from prepaid expenses increased amount THB
        21.77 million. Most of the expenses come from the advance
        payment of office rental fee and insurance premium from
        extending insurances for branches, head office and warehouse as
        well as the advance payment for the construction of the new
        warehouse on Bangna Na – Trad Road k.m. 21

    -   Cash flow increased from compensation receivable from the
        insurance claim decreased amount THB 19.82 million, due to
        receiving the compensation in March, 2012 from flood, occurred
        in the end of 2011.

    -   Cash flow decreased from rental guarantee and deposit increased
        by THB 12.52 million from the opening of new 47 stores.

    -   Cash flow increased from other non-current assets decreased by
        THB 8.77 million, mainly because in 2011 the Company paid for
        the EA, SA, CAL software system maintenance service in advance
        as well as the rental fee for stores in Tuk Com group (the
        section with more than

  1 year benefits).The payment will be made in installment according to
  the term in the rental agreement.

-   Cash flow decreased from trade accounts payable decreased amount THB
    39.06 million, because of the decrease of SBC’s turnover and key
    accounts payable such as Dplus Intertrade Co.,Ltd., Amarin Book
    Center Co.,Ltd., Cyberdict Technology Co.,Ltd., Stock Tomorrow Co.,
    Ltd. and Kled Thai Co.,Ltd.

-   Cash flow decreased from accrued expenses decreased amount THB 23.76
    million because of the change of property tax regulation for all
    branches in Tesco Lotus, from annual to monthly payment and the
    decreased accrued royalties of donated and destroyed books.

-   Cash flow increased from notes payables increased amount THB 21.44
    million, because of the one-year advance rental fee of the
    warehouse.

-   Cash flow increased from other current liabilities increased amount
    THB 12.13 million, because there are new accounts payable from the
    construction of the new warehouse on Bang Na - Trad Road k.m. 21 and
    from the increasing sales of the coupons.

Cash Flow Used from Investment Activities for year 2012 was THB (329.94)
million as listed below:

-   Cash flow decreased from asset purchases amounts to THB 368.87
    million. Because of the construction of the new warehouse on Bang
    Na - Trad Road k.m. 21, there are expenses from the deep foundation
    installation, land fill, the advance rack fee, removing fee, and
    moving fee, which in total amounts to THB 63.18 million. There are
    also purchases of book shelves, store decorations, and computers for
    new branches.

-   Cash flow increased from current investments decreased amount THB
    19.09 million, due to the sale of Bangkok Commercial Property Fund
    to spend on the warehouse construction.

-   Cash flow increased from interest income amount THB 13.67 million.

-   Cash flow increased from dividends income amount THB 10.67 million.

Cash Flow Used from Financial Activities for year 2012 was THB (136.37)
million due to dividend payment for Q4 of 2011 which would be paid in
May, 2012 and interim dividend payment for operation result of Q1, Q2
and Q3 of 2012.

  11.3 Remuneration of Auditor

Auditing Fee The Company and its associated companies have paid the
auditing fee for the period of fiscal year 2012 to Ernst & Young Office
Limited. in the amount of THB 1,220,000. The Auditor doesn’t have any
relation with the Company other than auditing service only.

Other Service Fee The Company and its associated companies don’t pay any
other service fee to the Ernst & Young Office Limited. for the fiscal
year 2012.