3. Major Products and Service

3.1 Products and Services of SE–ED as follows:

1.  Books Currently, SE–ED is the large publisher in Thailand,
    publishing books for nationwide bookstores. The company pioneered
    its publishing in the country in several subject areas such as
    computer, electronics, engineering in various fields, management,
    self–help, psychology, youth development books, childcare, science,
    language (English, Chinese, Korea, Japan) skills, food, health,
    reference (e.g. English, Thai, Japanese, Korean dictionary) maps,
    and the production of non–book products (e.g. CD) which promote the
    development of learning potential in different level.

1.  Magazines The company has also published 10 magazines of science and
    technology namely,

-   Semiconductor Electronics : A monthly magazine emphasizing on
    electronics was launched in 1974.

-   UpDATE : A monthly magazine catering to those readers who want to
    keep abreast of latest developments in the world of science and
    technology, first published since 1978.

-   MICROCOMPUTER : A monthly magazine devoting entirely to PC
    technology was first circulated since 1983.

-   Hobby Electronics: A monthly magazine specially preparing the
    knowledge of electronics for the fledgling electronics enthusiasts
    and also interested readers was launched in early 1991.

-   MICROCOMPUTER USER: A monthly magazine which focuses on knowledge
    transfer in the field of microcomputer for general audience. It was
    launched in late 1993. Yet, the magazine project has been terminated
    since January 2007 to allow editorial team to regroup and reform for
    other venture for greater business opportunity.

-   Industrial Technology Review : Monthly magazine launched in mid–1994
    provided reading material on major developments in industry and
    technology for plant engineers and general readers.

-   Mechanical Technology : Monthly magazine related to mechanical
    engineers, operating techniques, machine problem–solving guidance –
    it was first published in the middle of 2001.

-   The Absolute Sound & Stage : Monthly magazine about video and audio
    for home, car, studio and stage launched in the end of May 2002.

-   Extreme Technology : Monthly magazine about new, technology and
    hi–tech products with comparative performance for buyer decision,
    first launched in late October 2003.

-   add Magazine : Free monthly magazine offering variety of interesting
    information and also new technology adaptable to the daily living
    (launched in February 2006) and is distributed free of charge mainly
    through SE–ED Book Center Bookstore branches.

The Company’s revenue from magazine comes from the sales of magazines,
advertisement and special edition.

3. Distribution The Company has distributed both books published by
SE-ED and other publishers including various organizations who produced
works which is in line with the company’s policy. All of them were
distributed to at least 1,000 bookstores, both large and small
bookstores. The Company sells directly to the educational institutes and
distributes to SE–ED Book Centers, Book Variety, and some universities
book centers owned by SE–ED.

Currently, the Company has over 1,100 titles to publish, and distribute
over another 3,500 titles from various publishers and organizations.
SE–ED is considered the largest book distributor in the country.

Towards the end of 2006, SE–ED has been appointed as Thailand’s sole
distributor of Oxford University Press (OUP) for book and related media
for English language teaching and learning from January 1^(st) 2007
onward. Under this agreed cooperation between SE–ED and OUP, the
business activities of production and distribution associated with
English language learning will be increased through company’s
distributing channel which promptly allows SE–ED to share some
responsibility of resolving the country’s problem with regards to
English language learning in Thailand in the much greater extent.

4. Bookstores business (SE–ED Book Center or SBC) SE–ED operates several
SE–ED Book Center and Book Variety both in Bangkok and other provinces
including the expansion in bookstore networks and sales area management
in several models (making profit 84.54% of 2006 total revenue). SE–ED
Book Center are medium–sized bookshops selling all kind of books, with
modern design and good layout plan, efficiently selling and emphasize in
being located in convenient location for people to come buying books.
The main locations are located in leading shopping malls (such as
Central, The Mall, Robinson, Future Park Rangsit, Future Park Bangkae,
provincial leading shopping centers, etc.), leading super centers (such
as Tesco Lotus, Big C, and Carrefore, etc.) and education institutes
(such as Ramkhamhaeng University, National Institute of Development
Administration, Dhurakij Bundit University, Siam University, Khon Kaen
University etc.) in different formats both in Bangkok and other
provinces.

  The company has also launched new bookstores in another name of “Book
  Variety” (which is the same name as the company own TV program
  produced and broadcasted on UBC cable TV channel 8 and later
  transferred to broadcast on TTV Channel 1) since July 2002. This is
  also regarded as one type of SE–ED Book Center bookstore.

  As of the end of 2006, SE–ED has already opened 226 branches of SBC.
  From this mentioned figure, there are 216 branches in operation, with
  101 branches in Bangkok and nearby provinces, and 115 branches in
  other provinces. 209 of them belongs to SE–ED, another 4 branches are
  designated as SE–ED Book Center Network Bookstores (SE– ED Book Center
  fully supports the shops, as a book suppliers) and 3 branches are
  SE–ED Network Bookstores. (SE–ED does not fully support, since the
  shop owners can order books by themselves.) Moreover, SE–ED also takes
  charge of managing the books and magazines sales spaces of super
  centers, Tesco Lotus Express stores, and other shopping centers in
  several sales models totaling of more than 170 different sales
  locations.

  Currently, SE–ED Book Center and Book Variety are the highest sales
  value book chain in Thailand.

SE–ED Book Center and Bookstores Chain Branches at year–end

  ------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
  Descriptions        1991   1992   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006

  Branches increase   2      1      1      4      2      2      10     13     12     19     28     27     22     31     26     26
  in the year                                                                                                                  

  Branches opened     2      3      4      8      10     12     22     35     47     66     94     121    143    174    200    226

  Branches closed in  -      -      -      -      -      -      -      -      -      (1)    -      -      (3)    (1)    (5)    -
  the year                                                                                                                     

  Total existing      2      3      4      8      10     12     22     35     47     65     93     120    139    169    190    216
  branches                                                                                                                     

  Kiosk in operation  1      1      2      2      2      2      5      8      11     17     28     37     39     42     44     40

  Petty sales in      -      -      -      -      -      -      -      -      -      -      2      63     75     115    165    130
  operation                                                                                                                    

  Total operation     3      4      6      10     12     14     27     43     58     82     123    220    253    326    399    386
  selling point                                                                                                                
  ------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Remarks – There has been an effort in reclassification of bookstores
branches to be properly suited. Therefore, the number of branches may be
different from other published documents by company. Branches include
the small size of bookshop of 20-50 square meters. Kiosk means mainly
the newsstand sales type. Points of sales means the sales type that the
company takes charge in managing the products in book corners (including
newspapers and magazines) at both Lotus super centers and at Tesco Lotus
Express by which SE-ED is only responsible for managing products, but
the selling jobs are the responsibility of the area owner.

– At year’s end 2006 there are 216 existing branches in operation. There
are 101 branches in Bangkok and its vicinity and 115 branches in other
provinces. This figure has included the small scale of 17 branches.

– At year’s end 2006 there are 193 existing branches in operation, using
the brand of SE-ED book center, 12 branches in the branch of Book
Variety, 4 branches in universities book centers and 7 branches in other
brand name.

– At year’s end 2006 there are 4 SE-ED network bookstores (SE-ED is
responsible for all book supply to the network stores) and there are 3
SE-ED network (SE-ED offers special help to these mentioned network
bookstores by allowing them to use SE-ED Book Center name or SE-ED
network) 40 branches of kiosk and 130 points of sales.

5.  Other activities. The company also performs additional activities as
    follow:

-   Organized the Thailand Electronics & Industrial Technology Trade
    Show in order to promote Thailand’s electronics industry.

-   Organized SE-ED Kiddy Camp for youth from 8-14 year which were held
    in academic vacation period.

-   Organized SE-ED English Camp 2006.

-   Created the Book Variety Program, the television program about books
    circles, broadcasted on TTV1 Nation Channel every Saturday at 9.00
    am - 9.30 am.

-   Organized Computer, Engineering, and Management seminars for general
    audiences.

    2.  Marketing and Competition

Policy and Marketing

Throughout the past 30 years, the Company has been a leading initiator
in the technical book
publishing business, in particular, the “How-to...” category. This
reputation as Thailand’s main publisher of technological books and
journals enabled other Company’s operations to flourish and enjoy
greater success.

The Company has set the long term goals and marketing strategy which can
be briefly described as follows:

Vision: SE–ED shall be a leader in ensuring that Thais have easy and
convenient access to
knowledge.

Mission: Our Determination is to make Thais Smarter.

Marketing Strategy: To achieve the stated vision and mission, the
Company stresses the readiness in several areas to develop and serve
with quality which respond to the needs of target customers by focusing
on executing the marketing strategies as follows:

1.  Concentrate on SE–ED Book Center and SE–ED network branch expansion
    in variety of store formats so that the stores can cover areas
    nationwide particularly in the sizable communities, by choosing the
    high potential areas in long term. This enables that all Thais to
    have equal chance in knowledge acquisition, which also paves the way
    for the growth of book market in the future.

2.  Focus on products or books development and production that directly
    serve market demand so as to maximizing product life cycles and
    being profitable in long term. In 2007, the Company is committed to
    publish more outside–reading English books, children books,
    supplementary books, and reference books.

3.  Focus on product procurement and service which includes technology
    procurement or new diverse innovations which respond directly to the
    target customers.

4.  Emphasize on maximizing total value creation by employing Company’s
    strength in retail channel –SE–ED Book Center and network stores–and
    also take advantage of its capability of being publicity channels.

5.  Stress upon the book distribution model development suitable for
    each book category. This permits the right access to the target
    customers and minimizes the book damage.

6.  Emphasize on development of tool and product publicity and promotion
    channels which gives more chance to sell at the early stage of
    product launch. In 2007, the Company begins to provide the product
    knowledge through SE–ED Channel – marketing tools used as a
    communication medium with general public through the store LCD TV
    destined to be installed in all branches nationwide.

7.  Focus on perception erection and Company’s brand acceptance by
    emphasizing the key principle that is “Think of book, think of SE–ED
    Book Center”.

8.  Emphasize on relationship building with business partners at
    different levels that permits good working impression between
    different parties and increase business opportunity.

Policy and Marketing

Pricing Policy: Pricing policy is set to meet the purchasing power of
each target group, appropriately reflecting the production costs, at the
reasonable profit in long run. However, this will not be applied to
magazines sales, which depend on advertising income as the main revenue
earner.

Distribution Channels: The Company distributes books and magazines to
SE–ED Book Center, Book Variety and other bookshops in Bangkok and other
provinces by managing the distribution channels according to customers,
products and services as follows:

1.  Books and Magazines Retail customers The customers are general
    readers and working people. The Company distributes books and
    magazines to 226 branches with 216 branches are still in operation
    including 7 branches for network bookstores (as of December
    31, 2006) which the centers of books and entertainment for family
    and working people, located in shopping centers and super center in
    Bangkok and other provinces and also in the higher educational
    institutes.

2.  Books and Magazines Wholesale customers This group of customers is
    accounted for over
    1,000 different. The Company is responsible for distributing all
    books and magazines to bookshops in Bangkok using its own
    transportation. For distribution to provinces, the Company uses
    private transportation Company as seemed appropriate.

  However, for distribution of magazines published by SE–ED, the Company
  uses several
  transportation companies in each region to distribute to the
  bookshops.

  For circulation and distribution to stores in Bangkok and around its
  vicinity, the Company solely utilizes the “Standing Order”
  distribution system, a combination of consignment and non–returnable
  sales system. For most of booksellers in other provinces, a
  non–returnable sales system has been applied with a limit of
  returnable quantities.

  3. Advertisers Major companies in the industrial circles including the
  computer and electronic circle are both regular and non–regular
  advertisers in the Company’s monthly magazines.

  Competition

Industry Overview and Competition The publishing industry grew at ever
larger rate which expected to be around 10-15% for from 2000 to 2006.
There are still market opportunities. As the result, it attracts many
interested individuals into the publishing business, retail business and
magazines business. The competition has, therefore, increased
dramatically. However, it is believed that this will stimulate the
market growth in long run.

However, the company has a very good growth rate in book publishing
business, wholesale and retail business, as the company still holds
strength in these areas. Whereas the overall magazines business still
grows in but the computer periodicals were hardest hit by competition
and an advertising price war, causing a significant decrease in its
advertising revenue. However, electronics and industrial periodicals
still show significant growth.

Opportunities and Threats Government policy currently promotes more
advanced education for its citizens to better prepare them for global
change. This, in turn, stimulates a greater thirst for new areas of
knowledge, triggering an increase in local demand for books. All these
conducive factors contribute much to the even brighter and more stable
future for the book business as a whole, particularly technical books
and magazines. The rapid expansion of mega stores and super centers all
over the country has helped to mushroom the company’s retail outlets. As
a major publisher and distributor of technical books, and the owner of
largest bookstores chain with high liquidity cash basis, the company is
in a strong position to respond to this encouraging market trend, and
grew ever larger than the market average growth.

However, the company’s future branch growth depends upon the retail
growth restriction policy and also the rule of law stipulated by
government which may affect the growth of shopping centers and Super
Centers.

Key Success Factors The factors that contribute to the company’s current
leading position and the company’s more important role in future book
business can be summarized as follows:

• Business policy is evidently conducive to national development Since
its inception the company has all along adhered to its business in
knowledge dissemination, with a view to developing the full potential of
Thai people in areas essential to national development. The company’s
continued growth is in line with national development, and fortunately
not severely affected by the economic slump. Besides, its corporate
image is clear, well received and trusted by every party concerned.

• SE–ED has the tools and business components to efficiently operate
future business Nowadays, the company’s business divisions cooperate
among themselves and render greater opportunity for even more success.

1. The company has its own distribution channel and system via the use
of the SE-ED Book Center, and Book Variety, which is the important
distribution channel because it spreads to many major communities all
over the country with largest number in branches and is always the first
to be offered to select new location for its new branches. These effects
support the wholesale growth opportunity and cause the lower cost of
bookstores business in return. Otherwise it effects to the higher
opportunity for success for publishing books.

2. The company also has its own media and public relations, which were
the company own magazines, a Book Variety TV Show, website
www.se-ed.com, free email service and free homepage via www.se–ed.net.

Quantity and size of Competitors As book business is one of the
continuous growth businesses and has also great potential to grow and
the barrier to entry is low, many people are interested to get into this
business each year both in publishing role and also in retailing role,
despite that fact that many of them went out of business already.
Because each of them tries to differentiate from each other, this result
in the flourishing of books and the base of books readers keeps
expanding. As a result, such activity does not severely affect the
company.

Moreover, as the company does business cover all categories ranged from
publishing, wholesaling, distributing and bookstores it is, of course,
beneficial in either way for the new comer in each role, as the result
the effect of competitors is slightly.

For the bookstores business, there are more competitors from several
large firms interested in doing this business but the market has divided
conform to the products mixed in the stores and to location, as such,
this causes not much effect to the company. While the company as the
market leader with strong financial position and receiving great
acceptance by general readers and being ready to expand new branches,
the company can keep a great step ahead from taking advantage of first
priority to choose new location and has the lower operating investment.
In future the books business is expected to grow out of a few large
firms who are well prepared to face the competition.

Market share Although the company is the market leader in 3 important
businesses: The leading retailer in bookstores chain and book
distributor (or wholesaler), and books publishers. Owing to the
continuous growth of book business, numerous entrepreneurs show interest
in joining and this causes the spread of business concentration. The
market shares for market leaders in this industry are not significantly
difference.

The company retail business is accounted for 20–30% at the maximum which
is quite similar to the book market in other countries whereby no large
bookseller can have market share more than this.

For the business of distributing book to booksellers, even though the
company has the maximum market share, it is still considered
insignificant due to the fact that market share in book business is less
concentrated.

For publishing business, the company always ranks between number 1 out
of 3 in the book market, depending upon which publishing, in each
particular year, produces the best selling tittles more or less than,
but in general the market share is not that significant because it is
less concentrated than usual.

Substitution products The rapid development in industry and business
leads to a need to learning new things and developing knowledge to gain
advantage over the competition. Regardless of how far the communication
and computer technology progress, books still play an important role in
imparting knowledge to people conveniently and inexpensively anywhere,
anytime, and for a life time.

Bargaining power of buyers and sellers As the books business has a level
of the standard trading condition structure with several traders in
which nobody can evidently monopolize the market and the needs to be
interdependent of each other, there are not much problem in bargaining.
However, due to the fact that new large retailers in other business
expand into the books business and may cause bargaining with publishers
and distributors according to the general retail business nature but is
still not much effect of the over all business as their market share is
still not significantly large enough at present.

3.3 Procurements of Products and Services

Books Distribution from other publishers, in general, consists of 2
parts:

1.  Books for distribution : At present the books that are distributed
    to all bookstores through out the country come from the company own
    publishing house and other more than 600 publishers who decide to
    grant the company as their distributors to distribute their book
    nationwide. The company will consider only the products which are in
    accordance with the company marketing direction and have sales
    opportunity.

2.  Books and other goods SE–ED Book Center deals directly : SE–ED Book
    Center receives goods from 2 channels. From the company distribution
    business unit which is the distributor to the whole country and the
    other channel and mostly deals directly with suppliers by the
    marketing department of SE– ED Book Center in charge of
    consideration and selection products for sales in the company
    bookstores.

Relation with suppliers and the effect of losing them : For the value of
product for reselling in SE–ED stores acquired from each of the book
suppliers in the book market is no more than 10 percent of total
revenue. The company has no relation with these suppliers and has no
binding obligation to buy from them in the future. In the case that the
suppliers can not supply the books, the company can acquire the products
from other suppliers. The total value the company expenses for books
purchasing from 10 main suppliers was total at 32.63% of the cost of
products sold in 2006, which can be considered that no specific revenue
from sales can have severe effect to the company.

Books published by SE–ED : Books and magazines published by the company.
This business line is responsible by the book publishing group and the
magazines group to prescribe the direction and selection of original
manuscripts to publish including the production process of printing into
complete copy before handover to the company distribution group for
distribution.

Production utilization ratio : As the company does not own any printers,
the production of books and magazines are in the responsibility of
in–house work group to take care of the production throughout the
complete cycle and spread the printing jobs to several printers matched
with the schedule. Therefore the real production can be increased or
decreased without any unnecessary waste.

Raw material and supplier : Paper is the main raw material which the
company purchased from local distributors in lump sum (no any import
paper by the company). The types of paper used in production of books
and magazines mostly are wood–free, newsprint, coated and cover coated.

Relation with raw material suppliers and the effect of missing them :
For the purchasing value of paper, the company has no particular
relation with these suppliers and no any binding obligation to buy from
them in the future. In the case that these two suppliers can not provide
the company with paper, the company can still procure them from other
suppliers. The total value the company expenses for raw materials and
finished goods to 10 main suppliers was 21.54% of the cost of products
sold in 2006 which can be considered that no specific supplier can cause
severe effect to the company.

Process and production technology : Production process for new book
starts from editorial team call for meeting to plan and consider the
selection of manuscripts. This manuscript may come from the
self–proposed original writer, or from the company–assigned writer or
translator in accordance with the company’s determined guidelines. Then
editorial team will consider the content, correctness, and readability
of the books which also include the activity involved re–evaluating and
opinionating the books in terms of marketability by company’s
respectable book advisors who possess knowledge and interest in
particular subject areas. After the team agreed on the book, the content
may be re–adjusted and format at the suitable level for the market, and
the use of copyright contract may be signed with writer, translator, or
foreign publisher.

In the mean time, artwork team will start to design the book cover and
when the finish manuscript is finished and ready for print, the computer
artwork will later takes its duty. After finishing the artwork, the step
of proof–reading activity will be taken and corrected until the content
and art design are completed. In the case of book, there will be
additional step that is the naming of the book and pricing, which also
involves the related marketing work that is suitable for the target
audiences.

The process of producing magazine is quite similar to the process of
book publishing that is the editorial team takes responsibility right
from the market direction till the end of the production process.

For for book and magazine manuscript works, the company uses macintosh
computer and PC along with all other related tools and equipments,
whereby all these computer technology shows sign of having higher
efficiency but becoming less expensive. In addition, the editorial
staffs in the team are very experience and expertist in writing. They
come from people in the editorial team and also general writers.

After the manuscript is done, the company will pay for the printer to
print, while paper is supplied directly by the company. The paper
company then delivers paper straight to the printing press at the
determined time so that each manuscript is printed into book and
magazine.

Capability, Necessity, and Expenses in reapplying machinery to compete :
As company do not own printing press, therefore, there is no need for
company to invest in the machinery and equipment in printing. It becomes
unnecessary for company to develop machinery and equipment. And due to
the competitive environment of printing press business, it enables the
company to possess bargaining power and, with this, the company is
always allowed to have choices of printing press companies to choose
from.

Environmental Impact : The core production team for the company is
actually the editorial team. Therefore, production process is only
concerned the production of manuscript and coordination within offices
of the company. Such activity will not result in the making pollution
that can affect the environment and the company’s business is not under
the direct control of any government agency.

4.  Undelivered Jobs

  – None –