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MBK Public Company Limited and its subsidiaries Management discussion and analysis of the financial statements For the third quarter period ended 31 March 2010 1 Analysis of operating results

1.1 Overall

The operating results of MBK Public Company Limited and its subsidiaries (“the Group”) for the three-month and nine-month periods ended 31 March 2010 and 2009 are as follows:

(Unit: Million Baht) For the three-month periods ended 31 March For the nine-month periods ended 31

March 2010 2009 Increase/(decrease) 2010 2009 Increase/(decrease)

Total revenue 2,570.8 1,514.9 1,055.9 69.7% 5,752.7 4,675.6 1,077.1 23.0% Net income attributable to equity holders of the parent

918.0

308.2 609.8 197.8%

1,442.8

969.9 472.9 48.8%

Earnings per share (Baht) 6.06 2.04 4.02 197.1% 9.53 6.41 3.12 48.7%

The operating results for the three-month period (The third quarter)

The total revenues for the third quarter of 2009/2010 increased dramatically by Baht 1,055.9 million or 69.7% mainly due to the fact that the rice milling business increased its revenues by Baht 155.3 million because of the expansion in export market for rice, and there was realized gain on sales of investments in marketable securities – available for sales amounting to Baht 938.1 million. However, the revenues of property for lease and service declined by Baht 70.7 million which has been affected by a major renovation for the shopping mall “Paradise Park” (formerly “Seri Center”).

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The net income attributable to equity holders of the parent for the third quarter of 2009/2010 increased significantly by Baht 609.8 million or 197.8% mainly due to the gain on sales of current investments, net of related tax impact, as mentioned above. On the other hand, the operating results of Paradise Park returned a loss since the closed rental space for renovation of the shopping center, and the rice milling business generated lower profit margin because of the high unit cost of raw materials and price competition.

The operating results for the nine-month period The total revenues for the nine-month period ended 31 March 2010 increased sharply by Baht 1,077.1 million or 23.0%. The major factors were that the rice milling business generated higher revenues by Baht 296.3 million from the expansion of export market for rice and there was realized gain on sales of investments in marketable securities – available for sales amounting to Baht 996.3 million. On the contrary, the revenues from the real-estate development for sales business decreased by Baht 145.4 million as a result of the impact of the global financial crisis and local political unrest. Furthermore, the revenues of property for lease and service declined by Baht 52.5 million due to the close space for renovation of Paradise Park. The net income attributable to equity holders of the parent for the nine-month period ended 31 March 2010 increased significantly by Baht 472.9 million or 48.8% with the same comments noted for the three-month period then ended. In addition, the Group’s performance was also impacted by the reduction in revenues of the real-estate development for sales.

The significant movements in revenues and expenses for the three-month and nine-month periods ended 31 March 2010 in comparison with the same period of last year were as follows:

1.2 Revenues The main revenues of the Group are divided into 3 categories, which are revenue from sales, revenue from service and rental, and revenue from hotel operations. The details of significant movements were as follows:

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(a) Revenue from sales

Revenue from sales mainly comprised of the revenue from the subsidiaries in the businesses of rice milling, real-estate development for sales and international food center.

Revenue from sales for the third quarter of 2009/2010 went up by Baht 159.8 million or 32.1%. The main reason was the revenues in rice milling business increased by Baht 155.3 million because of the higher export sales. Revenue from sales for the nine-month period ended 31 March 2010 increased by Baht 141.6 million or 8.2% due to the increase of Baht 296.3 million in revenues of the rice milling business with the same reason mentioned above, whereas, the revenues from real-estate development for sales in Phuket decreased by Baht 145.4 million which affected by the impact from global economy crisis and local political activities because most customers, who were foreigners, slowed down their purchases in residential properties.

(b) Revenue from service and rental

Revenue from service and rental principally comprised of the revenues from property for lease and service, and from the golf course businesses. Revenue from service and rental for the third quarter of 2009/2010 declined by Baht 70.7 million or 9.8%. The major reasons were the gradually closed space for rent of Paradise Park for both internal and external renovation, after acquiring in September 2008 under joint-venture with Siam Piwat Co., Ltd., an associate, to reposition and to become a modern shopping mall in order to differentiate itself from the other shopping malls located in that area. The renovation project of Paradise Park is to be completed by June 2010. As a result, the revenues for current quarter decreased by Baht 90.8 million. Revenue from service and rental for the nine-month period ended 31 March 2010 fell by Baht 52.5 million or 2.6% mainly due to the decrease of Baht 96.5 million in revenues of Paradise Park with the same reason stated above whereas the increase in annual rental rate in MBK Shopping Center resulted in higher revenue by Baht 28.6 million.

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(c) Revenue from hotel operations

Revenue from hotel operations for the third quarter of 2009/2010 increased by Baht 38.9 million or 17.1%. During the second to third quarter of 2008/2009, which was the high season for tourism, there were local political unrest and the airport closure together with room renovation of Pathumwan Princess Hotel. Theses factors led to a lower level of occupancy rate and a decrease in the hotel income. Revenue from hotel operations for the nine-month period ended 31 March 2010 decreased slightly by Baht 6.4 million or 1.0% because the reasons noted above have continuous impact on the hotel performance for the current period.

1.3 Cost of sales and gross margin

The major cost of sales and gross margin of the Group are divided into 3 categories based on revenue types which are cost of sales, cost of service and rental, and direct hotel operating expenses. The details of significant movements were as follows:

(a) Cost of sales and gross margin

Cost of sales for the third quarter of 2009/2010 increased by Baht 156.6 million or 36.1%. In overall, cost of sales is varied according to the increase or decrease in sales, except the increase in cost of sales of the rice milling business which was higher than the increase of income due to the high raw material costs and market competition. As a result, the average gross margin for the current quarter fell from 13.0% to 10.3% when compared to the same quarter of last year. Cost of sales for the nine-month period ended 31 March 2010 increased by Baht 218.1 million or 14.7%. The average gross margin for the current period went down from 14.7% to 9.5% when compared to the same period of last year due to the same reason stated above.

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(b) Cost of service and rental, and gross margin

Cost of service and rental for the third quarter of 2009/2010 decreased slightly by Baht 13.4 million or 4.8%. The average gross margin for the current quarter went down from 61.5% to 59.4% when compared to the same quarter of last year. The key factor was that the closing of rental space for a major renovation of Paradise Park resulted in declining in revenues whereas the operating costs were mainly fixed. Cost of service and rental for the nine-month period ended 31 March 2010 increased by Baht 69.8 million or 9.3% against the reduction in its related revenues by Baht 52.5 million. The cost of service and rental for the same period of 2008/2009 included the operating costs of Paradise Park since 15 September 2008, the date on which the control in business and operation of the subsidiary was transferred to the Company. Therefore, the operating costs of Paradise Park for the period of 2008/2009 represented 6.5 months whereas, for the current period of 2009/2010 represented 9 months. The average gross margin for the current period went down from 62.8% to 58.2% when compared to the same period of last year due to the reason stated above.

(c) Direct hotel operating expenses and gross margin

Direct hotel operating expenses for the third quarter of 2009/2010 increased by Baht 21.0 million or 16.1%. The average gross margin for the current quarter increased slightly from 42.5% to 43.0% when compared to the same quarter of last year as a result of higher revenues. Direct hotel operating expenses for the nine-month period ended 31 March 2010 increased by Baht 13.4 million or 3.4% against the reduction in its related revenues by Baht 6.4 million mainly due to the operating costs were mainly fixed costs. As a result, the average gross margin for the current period reduced from 38.9% to 36.2% when compared to the same period of last year.

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1.4 Selling and administrative expenses

Selling and administrative expenses for the three-month and nine-month periods ended 31 March 2010 increased by Baht 16.4 million or 9.1%, and Baht 43.3 million or 8.2%, respectively. There was no significant change in other selling and administrative.

1.5 Share of income from investments in associates Share of income from investments in associates for the third quarter of 2009/2010 and for the nine-month period ended 31 March 2010 were down by Baht 7.4 million or 17.4% and Baht 31.0 million or 24.7%, respectively. The key factor was the operating results of an associate who operates hotel business decreased mainly due to a major room renovation and together with the negative impact on hotel industry in overall.

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2 Analysis of financial position

The significant movements in assets, liabilities and shareholders’ equity of the Group as at 31 March 2010 when compared with the balance as at 30 June 2009 were as follows:

(Unit: Million Baht)

31 Mar 2010 30 Jun 2009 Increase/(decrease) Total assets 30,177.2 24,653.7 5,523.5 22.4% Total liabilities 15,540.8 12,455.8 3,085.0 24.8% Equity attributable to Company's shareholders 13,533.7 11,026.9 2,506.8 22.7% Minority interests - equity attributable to

minority shareholders of subsidiaries 1,102.8 1,171.0 (68.2) (5.8%)

2.1 Assets

2.1.1 Current investments Current investments represented investments in debt securities and equity securities which are classified as available-for-sale marketable securities, increased dramatically by Baht 2,210.7 million or 56.3% because, during the nine-month period ended 31 March 2010, the Group purchased investment in subordinated debentures (net of sales) amounting to Baht 680.2 million and sold investments in equity securities of Baht 499.4 million. In addition, there was revaluation adjustment in fair value of the securities on hand as at 31 March 2010 in the amount of Baht 2,056.7 million.

2.1.2 Inventories Inventories increased sharply by Baht 381.5 million or 38.2%. The main factor was that the rice milling business increased its purchase volume to keep higher stock level by Baht 343.1 million because of the harvest season of rice period. In addition, the construction progress of land development for residence projects in Patumthani increased by Baht 48.3 million.

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2.1.3 Property, plant and equipment-net Property, plant and equipment - net, increased by Baht 50.8 million or 0.4%. The significant movements for the nine-month period ended 31 March 2010 were as follows:

Increasing factors:

a) The increase of Baht 193.4 million was from the progress in the renovation of hotel rooms of Pathumwan Princess Hotel. At 31 March 2010, the substantial renovation work is completed and the minor work is expected to complete by October 2010.

b) The increase of Baht 372.9 million was from the progress of a major renovation of Paradise Park which is expected to complete by June 2010.

c) The increase of Baht 135.0 million was from the construction progress of a new golf course “The Riverdale Golf and Country Club” in Patumthani. The new golf course is expected to complete and commence its service by June 2010.

d) The increase of Baht 82.6 million was mainly from the costs of renovation of MBK Shopping Center, office expansion and the new ERP (Enterprise Resource Planning) project.

e) The increase of Baht 34.1 million was mainly from the construction progress of caddy apartment, design fee for hotel, landscape decoration and infrastructure developments for the two golf courses in Phuket, i.e. The Loch Palm Golf Course and The Red Mountain Golf Course.

Decreasing factors: f) The decrease of Baht 610.0 million was due to the depreciation charge for the period. g) The decrease of Baht 171.1 million was due to the transfer certain plots of land to property held for

development under the residence projects of the Group.

2.1.4 Prepaid rental fee Prepaid rental fee increased by Baht 279.2 million or 11.1%, representing the fee and duty stamp for registration of the lease agreements granting the right to utilise the shopping center at Pathumwan intersection.

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2.2 Liabilities 2.2.1 Advance rental deposit

Advance rental deposit (including current portion due within one year) increased significantly by Baht 2,382.1 million or 197.6% mainly represented the advance rental income received from the tenants under short-term contracts of MBK Shopping Center who had partially changed to long – term lease agreements and the tenants were requested to pay the advance rental for long-term contract per schedule determined in the lease agreements. Advance rental deposit is amortized as income based on a straight-line basis over the long-term lease periods.

2.2.2 Deferred tax liabilities Deferred tax liabilities went up significantly by Baht 496.9 million or 28.6% mainly due the increase of Baht 534.1 million from revaluation adjustment in fair value of the marketable securities on hand at 31 March 2010. Conversely, the decrease of Baht 48.3 million was from depreciation charge calculated based on the surplus cost of depreciated assets.

2.3 Equity attributable to Company’s shareholders Equity attributable to Company’s shareholders increased by Baht 2,506.7 million or 22.7%. The significant movements for the nine-month period ended 31 March 2010 were as follows:

a) The net income from operation attributable to equity holder of the parent of Baht 1,442.8 million.

b) The increase of Baht 1,523.4 million in the unrealised gain on available-for-sale marketable securities, net of the related deferred tax impact, which related to the higher stock market price.

c) The decrease of Baht 340.7 million derived from dividend payment for the operation of the second half of the year ended 30 June 2009.

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3 Analysis of the liquidity

3.1 Statement of cash flows Cash flows of the Group for the nine-month periods ended 31 March 2010 and 2009 are summarised in table below:

(Unit: Million Baht) For the nine-month periods ended 31 March

2010

2009 Cash flows

increase/(decrease) Net income from ordinary activities before changes in

operating assets and liabilities

726.3

1,033.4

(307.1)

(29.7%) Net movements in operating assets and liabilities (473.9) 54.4 (528.3) (971.1%) Cash flows from operating activities 252.4 1,087.8 (835.4) (76.8%) Cash flow used in investing activities (1,574.5) (1,540.6) (33.9) (2.2%) Cash flows from financing activities 2,083.9 553.7 1,530.2 276.4%

Net increase in cash and cash equivalents 761.8 100.9 660.9 655.0%

3.1.1 Cash flows from operating activities

The significant movements in cash flows from operating activities and operating assets and liabilities are as mentioned in the analysis of operating results and financial status above.

3.1.2 Cash flows from investing activities Net cash flows used in investing activities increased by Baht 33.9 million or 2.2% due to the following major reasons:-

Factors in cash increase:

a) Cash paid for the new subsidiary acquisition - net of cash and cash equivalents in the acquired subsidiary in September 2008 amounting to Baht 470.4 million.

b) Cash paid for the marketable securities – net of proceeds from sales of investments, decreased by Baht 157.0 million.

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Factors in cash decrease:

a) Cash outflow in the purchases of property, plant and equipment increased by Baht 402.0 million from the construction progress of several projects noted in 2.1.3 – Property, plant and equipment.

b) Cash paid for registration of leasehold rights of land and building amounting to Baht 279.2 million.

3.1.3 Cash flows from financing activities Net cash flows received from financing activities increased dramatically by Baht 1,530.2 million or 276.4% mainly due to the following major reasons:-

Factors in cash increase:

a) Cash received from advance rental deposit for the long-term lease increased by Baht 2,556.2 million due to the changes of short-term lease to long-term lease for the certain tenants in MBK Shopping Center.

b) The decrease in repayment of short-term loans (net of cash receipt from short-term loans) by Baht 1,125.5 million due to the debentures issuance during July 2008.

Factors in cash decrease: a) The reduction in cash receipts from issuing long-term bonds in July 2008, net of issuance of

debenture expense, by Baht 1,996.2 million.