1. Risk Factors

The possible risks which may profoundly affect the company are as
follows:

1.  Risk from copyright infringement Most of the company's technical
    books have been duly licensed from either foreign copyright holders
    or local ones. Despite the company's strict and cautious practice to
    minimize risk when obtaining copyright from local authors, it is
    still liable to facing lawsuit for copyright infringement. The
    classic case is that the professed author himself had earlier
    infringed the other's copyright before he offered "his work" to the
    company for publication. In this case, the company may be sued for
    illegal publishing or distributing the work. So far there has been
    few instances of this, with financially insignificant effect on the
    company.

    1.2 Risk from having those sales outlets in leading shopping centers
    and super centers A number of the company's sales outlets are
    located in leading shopping centers and super centers in Bangkok and
    neighboring provinces. The company stands to lose some earnings if
    any of these centers experience critical problem so much so that
    they cannot conduct their normal business. However, such risk can be
    lowered by taking out comprehensive insurances for all the company's
    bookshops. One comforting fact is that such scenario is not a normal
    happening. Another comforting fact is the company's arrangement to
    spread the risk across a group of leading retail operators i.e.
    Central group, The Mall Group, Robinson Group, Future Park, Lotus
    Super Center, Carrefour Group, Diana Department Store, Makro Office
    Group, Campuses etc. This arrangement should more or less shield the
    company from the unfavourable effect of any eventuality these
    operations may face. Estimate risk amount to be equal to cost of
    Inventory at branch.(Note of Financial Statements no.7 of year 2000
    = THB 61.16 million). And effect of asset is not important . But to
    absolve from leasehold on Building. (Note of Financial Statements
    no.11 of year 2000 = THB 144.32 million)

    1.3 Risk from product obsolescence and substitute threat It is a
    fact that shelf life of the company's leading products, namely
    computer books which claim over 70% market share, is getting shorter
    and shorter due to the fast changing computing technology. However,
    the company has already adjusted itself to this change by
    fine-tuning its book production to achieve an optimal production
    volume in line with the seasonal demand. In this connection, the
    company appoints the New Product Committee to closely monitor the
    book production of all departments to ensure that they always
    produce only the most up-to-date version of each title. At present
    the company has website “http:\\ www.se-ed.com” for people who are
    interested about new books. No matter how advanced information
    technology shall become, book will still be the only knowledge media
    in the most convenient form. It can be read anytime, anywhere. It is
    the cheapest among other media, and perhaps the most durable media.

4.  Risk from the limited source of paper, the key raw material Paper is
    one of the key raw materials used in book production. The company
    generally purchases it from local paper distributors. The price
    fluctuation as well as the market demand leads to the ever changing
    paper price. However, the shortage is not so bad that it becomes
    almost impossible to buy. Fortunately the company practices a
    cost-plus pricing strategy for all the products, and therefore is
    not seriously affected by the paper problem.

5.  Risk from the printing industry The printing industry is the key
    business base supporting the company's book and magazine production.
    Since the company does not invest in any printing factory or
    printing press and equipment, it is not liable to the risk related
    to this direct investment. Instead the company seeks the printing
    service from several printers to support its production capacity. In
    this way, the company is in a better position to effectively control
    the printing costs because the printers have to compete with one
    another in offering the best price. This outsourcing also helps the
    company be more accurate in setting the production time.

6.  Risk from shortage of publishing personnel in specific field The
    company needs to employ people with expertise in specific field of
    study, e.g. computer and IT, electronics, engineering, and industry,
    to fill in publishing positions essential in technical book and
    magazine production, which has become the company's strength in this
    industry. By comparison, the compensation from non-book industries
    seems to be more attractive than that of book
    production/distribution industry, leading to the inevitable shortage
    of personnel for the publishing industry. This fact forces the
    company to pay higher to rival for these personnel.