11. Financial Condition and Operating Results

  The corporate accounting period begins on November 1 and ends on
  October 31 of every year.

11.1) Report of Independent Auditor

1)  Auditor

  Year 2010 Miss Sansanee Poonsawat, Certified Public Accountant,
  Registration No. 6977,

  Sam Nak-Ngan A.M.C. Co., Ltd.

  Year 2011 Miss Wimolporn Boonyusthian, Certified Public Accountant,
  Registration No. 4067,

  Deloitte Touche Tohmatsu Jaiyos Audit Co., Ltd.

  Year 2012 Miss Wimolporn Boonyusthian, Certified Public Accountant,
  Registration No. 4067,

  Deloitte Touche Tohmatsu Jaiyos Audit Co., Ltd.

2)  Summary of the audit reports over the past three years

  Year 2010 The Auditor reviewed corporate financial statements and
  issued unqualified opinions.

  Year 2011 The Auditor reviewed corporate financial statements and
  issued unqualified opinions.

  Year 2012 The Auditor reviewed corporate financial statements and
  issued unqualified opinions.

  The Auditor clarified the scope of her responsibilities that she had
  not audited financial statements of three foreign subsidiaries and six
  local subsidiaries which are included in this consolidated financial
  statements. In 2012, the financial statements of the subsidiaries
  indicated the total assets of THB 7,321.04 million, accounting for
  24.72 % of the total assets. The total sales was THB 3,737.93 million,
  accounting for 16.83 % of the year’s total sales. The net loss totaled
  THB 322.03 million, accounting for 13.02 % of the year’s total sales.
  The financial statements of the subsidiaries were audited by other
  certified public accountants. The Auditor presented parts of the
  reports related to monetary amounts of transactions of the
  subsidiaries included in the consolidated financial statements; those
  amounts presented were based on the other certified public
  accountants' reports.

11.2) Percentage of Shareholding in the Subsidiaries and Consolidated
Financial Statements Preparation Criteria

(Refer to the attached Financial Statements for details.)

The 2010 financial statements, the 2011 financial statements, and the
2012 financial statements comprise of 14 subsidiaries (excluding
subsidiaries of Thai Sugar Terminal Public Company Limited).

Table 11.1: Percentage of Direct and Indirect Corporate Shareholding

  ---------------------------------------- -------------- ---------- ---------
                                           %age of                   
                                           Shareholding              

                                           2010           2011       2012

  Tamaka Sugar Industry Co., Ltd.          90.21          90.21      90.21

  New Krung Thai Sugar Factory Co., Ltd.   95.78          95.78      95.78

  New Kwang Soon Lee Sugar Factory Co.,    98.61          98.61      98.61
  Ltd.                                                               

  KSL Real Estate Co., Ltd.                80.31          80.31      80.31

  KSL Export Trading Co., Ltd.             79.11          79.55      79.55

  KSL Chemicals Co., Ltd.                  100.00         100.00     100.00

  Khon Kaen Sugar Power Plant Co., Ltd.    100.00         100.00     100.00

  Khon Kaen Alcohol Co., Ltd.              100.00         100.00     100.00

  KSL Agro and Trading Co., Ltd.           100.00         100.00     100.00

  Savannakhet Sugar Co., Ltd.              98.49          98.49      98.49

  Koh Kong Plantation Co., Ltd.**          70.00          70.00      70.00

  Koh Kong Sugar Industry Co., Ltd.        70.00          70.00      70.00

  Wynn In Trading Co., Ltd.                100.00         100.00     100.00

  Thai Sugar Terminal Public Company       23.82          23.82      23.82
  Limited***                                                         
  ---------------------------------------- -------------- ---------- ---------

NOTE:

* Koh Kong Plantation Co., Ltd. holds shares through Wynn In Trading
Co., Ltd.

** Although the company only has 23.82 % shareholding in Thai Sugar
Terminal Public Company Limited, it has controlling power in that
particular company. Thai Sugar Terminal Public Company Limited is,
therefore, considered a corporate subsidiary. Thai Sugar Terminal Public
Company Limited, a KSL subsidiary listed in the SET as TSTE, has 5
subsidiaries:

TSG Assets Company Limited operates real estate rentals. TSTE holds
79.78% shares.

TS Oil Industry Company Limited (formerly name as TSG Property Company
Limited) trades, leases, develops real estate, and operates a palm oil
refinery plant. TSTE holds 94.31% shares.

TS Flour Mill Public Company Limited rents out real estate and
manufactures wheat flour. TSTE holds 69.34% shares and also listed in
the SET as TMILL.

TS Warehouse Company Limited stores and transfers goods. TSTE holds
64.13% shares.

TS Transport and Logistics Company Limited provides transport service
and security service. It also manufactures plastic sacks. TSTE holds
85.90% shares.

For details, refer to Listed Company Information on Thai Sugar Terminal
Public Company Limited (TSTE) and TS Flour Mill Public Company Limited
(TMILL).

11.3) Profit and Loss Statement

In 2012, the company generated the revenues from operations of THB
22,212 million, in total, increasing from that in the previous year by
35 % which the revenue from sales amounted to THB 21,876 million and the
revenue from services amounted to THB 336 million. The company’s total
cost was THB 16,479 million, increasing from that in the previous year
by 42 %. Other incomes amounted to THB 493 million. The company had
profit before selling and admin expenses totaled THB 6,226 million,
increasing from that in the previous year by 20 %.

Regarding selling and administrative expenses, the company had selling
expenses totaled THB 535 million, increasing by 57 % and administrative
expenses totaled THB 701 million, increasing by 16 %. The proceeds to
the cane and sugar fund was THB 1,064 million due to increasing in sugar
sales. Subsequently, the company had the profit before financial cost
and tax expenses totaled THB 3,763 million, increasing by 16 %.

In 2012, the company's financial cost of THB 556 million, increasing by
20 %. The corporate income tax burden of THB 726 million, decreasing by
3 %. After deduction of a THB 119 million profit in minority interests,
the company’s net profit increased by 25 % from the previous year from
THB 1,890 million to THB 2,354 million in 2012.

Table 11.2 : Consolidated Profit and Loss in the past 3 years

[]

With reference to the company’s revenue structure, the total revenues
from operations was THB 22,212 million. The company had revenues from
sales of sugar and molasses amounted to THB 15,640 million, accounting
for 71 % of the total revenue. Revenues from sales of ethanol and
gasoline totaled THB 1,818 million, representing 8 % of the total
revenue. Electricity sales, which the corporate power generation
facilities had distributed to the Electricity Generating Authority of
Thailand according to the firm contract, amounted to THB 860 million,
accounting for 4 % of the total revenue. Revenues from sales of wheat
flour, palm oil, and sacks totaled THB 2,761 million, accounting for 12
% of the total revenue. Other types of revenues were generated from
sales of fertilizer, service provision, and other sources.

[]Table 11.3 : Consolidated Revenue Structure in the past 3 years

[]Table 11.4 : Sales and Sale Volumes of Sugar, Molasses, Ethanol and
Electricity

Table 11.5 : NYBOT World Sugar Prices

[]

As of Dec 31, 2012

In 2012, the company had net profit of THB 2,354 million compare to
previous year’s net profit of THB 1,890 million, the company’s net
profit increased THB 464 million or accounting for 25 % compare to 2011.
The main reasons of the increase in 2012 were as follows:

1.  In 2012, the company’s sugar production increased from 616,237 tons
    to 743,706 tons which increase revenues from sugar and molasses
    while the average selling was stable compare to previous year. The
    world sugar price move in narrow range this year due to sugar
    surplus in many countries.

2.  Revenue from ethanol in 2012 increased by 166% due to increasing in
    sales volume from 29 million liters to 88 million liters while
    selling price soften compensate by strong sales volume.

3.  Electricity sales increased by 78% since sales volume increased by
    55% from 172,879 MW-hr in 2011 to 267,452 MW-hr in 2012. One of
    contribution comes from Boploy facilities have already fully
    operated and average selling price increased by 15% from 2,793
    THB/MW-hr to 3,215 THB/MW-hr.

4.  Revenue from wheat flour, palm oil and sack sales are from Thai
    Sugar Terminal Public Company Limited (TSTE) and its subsidiaries.
    During the past few years, TSTE and its subsidiaries have invested
    in wheat flour mill project by importing wheat to process and sell
    wheat flour domestically and also operated palm oil project by
    sourcing crude palm oil from southern of Thailand to refined and
    sell both food & fuel grade. Consequently revenue from this
    conglomerate increased. However the company holds shares in TSTE
    23.82% of total shares hence profit contribution from these
    operation are accounted for small amount compare to other type of
    business. (For more detail, refer to Listed Company Information on
    Thai Sugar Terminal Public Company Limited (TSTE))

Overall, main reason of increasing in revenue because of increasing in
cane crushed volume. Consequently more raw material for value-added
products while cost of production increased in lower rate.

The Selling and Administrative Expenses consist of 3 main parts:

1.  In 2012, Selling expenses increased by 57% due to increasing in the
    sales volume of sugar.

2.  Administrative expenses and Directors remuneration increased by 15%
    due to investment in Boploy facilities and Loei project, the company
    has recruited more staffs.

3.  Proceeds to the Cane and Sugar Fund have been made to stabilize the
    cane and sugar industry. They consist of 2 parts: The first part is
    the amount from the THB 5 /kilogram increased domestic selling price
    in mid 2008. The second part is the difference from the price
    adjustment. Controlled prices of sugar originally included VAT,
    while currently they do not. The difference in this sugar price is
    required by the Cabinet to be contributed to the Cane and Sugar
    Fund. The proceeds are based on domestic sugar sales volumes.

For financial cost and corporate income tax, interest expense increased
due to the new project which has drawn down loan. As a result, financial
cost increased by 20%. While corporate income tax decreased because of
some subsidiaries’ corporate income tax decreased from 30% to 23%.

From all the factors mentioned above, in 2012, the company recorded the
net profit, increased by 25% from THB 1,890 million in 2011 to THB 2,354
million in 2012.

Since the company and its subsidiaries businesses diverse in industry
categories with profitability and tendency being different for each
business. To facilitate analysis and comprehension of each business, the
company compared the profits that contribute to the consolidated profit
and loss statement in relation to business categories as shown in Table
11.6.

Table 11.6: Comparing Profits, related to Business Categories that
contribute to the Company’s Consolidated Profit and Loss Statement

[]

Profit from Thai sugar business, ethanol & fertilizer business and power
business increased due to mainly from increasing in sales volume since
cane crushed volume increased. Others business, profit come from Thai
Sugar Terminal Public Company Limited which the company holds shares
23.82% of total shares. However loss from oversea business comes from
production in Laos and Cambodia are less than expected.

11.4) Statement of Financial Position

Table 11.7 : A Summary of the Consolidated Statement of Financial
Position in the past 3 years

[]

Note: 2011 numbers are restated for comparison purpose

In 2012, the company and its subsidiaries had the total assets of THB
29,617 million because mainly increasing in investment in lands,
buildings, properties, plant and equipment in Loei project. The
increasing in total assets were invested by the use of credit loans from
financial institutions and issuance of bonds. Consequently, the total
liability increased by 20%, from THB 14,606 million in 2011 to THB
17,585 million in 2012. However, D/E ratio was decreased from 1.59 to
1.46 and interest-bearing debt/equity also decreased from 1.31 to 1.17
because of increasing in operating performance.

As of October 31, 2012, the company and its subsidiaries changed their
accounting policy for buildings and construction, machineries and
equipment, and motor vehicles and labor saving tools from revaluation
method to cost method because the Company’s management believe that the
new policy is more practical for current situation and operations of the
Company and its subsidiaries. Therefore, the consolidated and separate
financial statements for the year ended October 31, 2011, and the
consolidated and separate statements of financial position as at
November 1, 2010, presented herein for comparison, have been
retrospectively adjusted for the effect of the change to be in
accordance with the new accounting policy.

11.5) Cash Flow Statement
Table 11.8 : Cash Flow Statements of the Company in the past 3 years

[]

In 2012, the company and its subsidiaries received cash flows from their
operations before change in working capital totaled THB 4,781 million,
which was a 18% increased from that in 2011. The main reason was due to
increasing in operating results, especially in sugar, ethanol and power
business. As a result, in 2012 the company and its subsidiaries had cash
flows from operating activities THB 3,711 million or increased by 82%
compare to 2011.

For cash flows from investing activities, the company and its
subsidiaries had cash paid in (net) totaled THB 4,415 million, of which
THB 4,249 million was invested in lands, buildings, properties, plants
and equipment (net), mainly from Loei project.

Regarding financing activities in 2012, the company and its subsidiaries
received the net cash of THB 709 million from short term loan and
project finance credit line.

11.6) Financial Ratios

Table 11.9 : Financial Ratios

[]

Note: 2011 numbers are restated for comparison purpose

According to the 2012 financial ratios, liquidity ratios, specifically
decreasing in current ratio and acid test ratio were due to, in 2012,
interest rates for short-term loans were much lower than those for
long-term loans. The company managed its finance by using short-term
credits as working capital for its investment projects. Once the
long-term loan contract periods were due, the company switched to use
the long-term credits. The purpose was to relieve the interest burden on
loans. The current ratio and acid test ratio, subsequently, decreased.
The collection period decreased, indicating increased abilities to
collect and manage inventories.

Regarding solvency ratios, as a result of improving in operating result,
it can be seen that the D/E ratio, IBD/E ratio and LTD to equity
decreased.

In terms of profitability ratios, the ROA and ROE decreased due to the
decreasing in average sugar selling price 2012 soften and also
increasing in non-operating asset in new project.

11.7) Audit Fees

Khon Kaen Sugar Industry Public Co., Ltd. and subsidiaries were
responsible for audit fees in 2012 totaling THB 6,920,000 and other
service fee of THB 1,250,000.