1.  Risk Factors

The factors that may cause risk for investment of investors or affect
the issuer are as following:

Risk in Distribution Channels : One of the main distribution channels is
the chain retail outlets
SE-ED Book Center and Book Variety in leading department stores and
super centers nationwide. This channel made profit as 84.54% of total
income in 2006.

Then the Company diversifies risk by opening the bookstores through
several groups of shopping center groups, not binding to department or
opening bookstores in one specific shopping department store group. Most
of the leasing contracts for bookstores are in long term period for
stability in sales location investment. Therefore, if any department
stores or super centers encounter problems or cannot operate in any
condition or changing leasing policy, the Company’s income will not be
significantly affected.

Moreover, the Company has acquired all the assets and products insurance
to reduce the unexpected risk that might occur.

Risk from product loss : As the Company that operates in retail
bookstore business of over 200 branches nationwide, it has faced with
loss of products due to thief and other causes similar to what other
retail businesses have encountered.

The Company is aware of the important in protection and being vigilance
towards product loss. As such, it seeks to install closed circuit
television (CCTV) in all Bangkok and other provinces, and has appointed
the staffs to keep track and determines Company’s measures in an attempt
to mitigate the problem.

The risk from computer and information technology errors or
mal-functions : The Company installed varieties of computer and
information technology systems for all the work such as store front
selling system, distribution management system, purchasing system,
accounting and financial system, etc. All these computer and information
technology are regarded as crucial facts in supporting the effective
Company’s operation. Therefore, errors and mal-functions of computer
systems may have the effect over the Company’s management.

Therefore, to reduce the impact of such computer and technology system
error and malfunctions at the branch and headquarter levels, the Company
has set up protection system and back-up system at the generally
accepted standard. It also creates measures of preparedness for any
uneventful circumstances and of back-up plan. This also includes the
regular training and practice of preventive measures.

The risk from inoperable products distribution center : Most products
sold in SE-ED Book Center branches are distributed from the Company’s
distribution center. The distribution is, therefore, very important fact
in business operation. In the case product distribution center becomes
inoperable from natural causes, accident, or other causes, the computer
business operation will be affected.

The Company has sought to insure all the assets and product to reduce
unexpected risk related to disaster which might occur at the
distribution center. In case such uneventful situation happens, the
Company can mitigate the problem by requesting publishers or
distributors to deliver products to the distribution center in a
temporary period and then directly deliver the product to the
bookstores.

Risk in Specialist shortage : Experts and specialized field personnel
are the most important resources in academic books and magazines
production including other creative works in the Company business line
which most of them are the pioneer businesses.

The Company completely realizes the importance of the personnel
mentioned above, then the ESOP project has been set up to provide stock
options to employees to persuade them with motivation to create Company
growth in long-term. This project has been approved from SEC to issue
warrants in December 2001 and the last date to exercise the right will
be on January 2008.

Besides, the Company has also provided training and developing the
Company culture in order to improve the employees in gaining higher
potential and work more happily. Including the improvement of several
welfares such as annual checkup life insurance, health insurance,
accident insurance and increasing the insurance coverage concerning to
be enough for better stability and security of the employees and their
families.

Risk from reselling censored and pirate books : As some of the products
such as tape, CD, and published media may be stipulated and regulated by
laws. Some products must be requested for permission before sales and
some is directly related to the copyright. This causes the Company to be
relatively cautious towards the production and distribution both retail
and distribution of the Company for such products, so as to avoid the
illegal practice and violation of copyrights.

The academic books production may have risk from being used in case of
the Company infringed a copyright of others such as an author or
publisher has infringed a copyright and entrust the Company to publish
and/or distribute while the Company didn’t aware of the infringement.
The copyright holder may sue the Company as the publisher or the
distributor. Therefore, the Company editorial staffs have to select the
original manuscripts more carefully and cautiously in order to avoid the
problem that arises from the copyright infringement. Besides, the
Company has specified in the contract with authors or manuscript owners
that they have confirmed that their works did not infringe any copyright
and will subsidy all damages happened to the Company if the copyright
infringement occurred. This will reduce the probability of any damages
caused by this problem.

However, very few problems occur and the affected value are not
significant.

Risk of outdate products and superseded by other media : At present the
computer technology has been developed rapidly so the sales duration of
computer books which the Company is one of the leaders in this field is
shorter than before. And the electronics media has begun to replace
books in some category and some application so the Company has modified
the direction by increasing the ratio of books with long length of sales
and have large volume sales in production line. Including the set up of
Company website www.se-ed.com for interesting people can be informed
more quickly about the new books launching.

However the foreign statistics shows that even the electronics media
will be rapidly developed but still take more adequate time to start
taking significant effect towards books business. At that time the
Company can adapt to this trend in time as the Company has already
provided infrastructure for this case.

Risk from raw material and product deficiency : Paper is the important
raw material in books production and price has been changed varying to
market demand and production quantity all the time. But the books
published by the Company have target group with purchasing power and
well educated so that the Company can use the policy to set price in
accordance with the real cost in that period, then this does not cause a
considerable impact.

As the Company which has the major revenue from retail business, the
Company tries at best to maintain the role as respectable neutral
element who sells books for every publisher which is in demand by the
market, and the Company business policy is determined on the basis of
good ethical standard in business practices. The Company has its duty to
perform the rightness in terms of conduct. The cause of trouble or
injustice occurring from the Company business conducts aiming towards
any interest groups will not be tolerated. Owing to this, the Company
has evidently been long supported by most suppliers in book industry,
and it also makes the Company less dependent on the revenue from one
particular supplier.

Risk from printing industry : As the Company has not invested in
printers so there is no risk and does not adversely affect from price
war in printing industry. The Company chooses several printers to
support productions so that the Company can control expense properly to
the competitive printing price offer all the time and can fix the
production time duration definitely.