Part 1

Executive Summary

Khon Kaen Sugar Industry Public Co., Ltd. was established in 1976 with
the registered capital of THB 1,600 million and the paid-up capital of
THB 1,550 million. The Company engages in sugar manufacturing and
develops business relating to sugar production. In 2005 the Company
undertook an initial public offering and was listed in the Stock
Exchange of Thailand as “KSL”. Since then, the Company has changed the
vision, from being a conventional sugar manufacturer to a renewable
energy producer. The company had realized the promising growing demand
for renewable energy. Such vision is derived from the fact that
corporate products are energy sources. Sugar provides energy for humans.
Ethanol fuels automobiles. Bio fertilizer nurtures plants. Electricity
from burning biomass like bagasses (cane fiber) is an energy driving
equipment and machinery. According to its vision, KSL has continuously
invested in renewable energy businesses as well as planned to expand
them. In 2005, corporate main earnings were from the operation of the
company’s four sugar mills located in different regions of Thailand. In
2006, the Company’s Ethanol plant at Khon Kaen province achieved a
production capacity of 150,000 litres per day, using molasses and cane
juice as raw material. Bio fertilizer plant utilizes wastewater from
ethanol production and filter cake from sugar mill as raw materials. In
fiscal year 2007, KSL commenced the operation of its 30-MW power plant
in Khon Kaen province, which utilizes bagasse, cane fiber from sugar
production. The electricity produced has been sold to Electricity
Generating Authority of Thailand. In addition, in 2007, under Kyoto
Protocol, the company’s power plant has been registered by CDM Executive
Board, having the right to sell CDM or so-called Carbon Credit. The
company is expected to get the revenue from Carbon Credit Sale in 2008.

Apart from completed projects mentioned, the Company expanded its
ventures as follows:

(1) Sugarcane plantation and sugar production in Laos: KSL holds 97% of
the shares in Savannakhet Sugar Corporation, engaging in sugarcane
plantation and sugar production. The concession is done between the
company and the Lao government for sugarcane plantation, and
constructions of buildings and sugar mill at the area of 10,000 hectares
(62,500 rai). The company has started sugarcane plantation in part of
the area. In 2007, the company will use the canes from 2007 as a seeding
for expanding more plantation areas to grow more sugarcane, enough for
crushing in sugar mill. The sugar mill is expected to be finished and
start crushing, producing and distributing sugar in 2009.

(2) Sugarcane plantation and sugar production in Cambodia: In 2006 KSL
invests 50% of the common shares of Koh Kong Plantation Co., Ltd. and
Koh Kong Sugar Industry Co., Ltd. The memorandum of understanding is
done between the companies and the Cambodian government for sugarcane
plantation, and constructions of buildings and sugar mill at the area of
20,000 hectares (125,000 rai) in Koh Kong. The company has started
sugarcane plantation in some parts of the area. In 2007 and 2008, the
company will use the canes as a seeding for expanding more area to have
enough sugar cane for crushing. The sugar mill construction is to
commence in 2008 with a budget of THB 1,850 million. Its crushing
capacity amounts to 6,000 tons cane per day. The sugar mill is expected
to be finished and start crushing, producing and distributing sugar in
2009.

Future investment opportunities being under study in details are as
follows:

(1) Two more licenses in ethanol plants in Kanchanaburi and Cholburi
provinces: The ethanol plants, which will be constructed near the
Company’s sugar mills, will utilize molasses as raw material. The
Company has been licensed and supported by BOI to complete the projects.
However, the ventures have been delayed due to lack of the government’s
clear direction regarding policy on ethanol businesses. The license (if
the ventures are undertaken) would allow the company to increase its
ethanol production from 150,000 liters per day to 400,000 liters per
day.

(2) Relocation and expansion of two sugar mills: According to the
cabinet meeting’s resolution on October 16, 2007: (1) New Kwang Soon Lee
Sugar Factory Co., Ltd. (subsidiary) may move its sugar mill in Cholburi
Province to Sra Kaeo Province. The mill is permitted to expand its daily
crushing capacity of 6,479 tons of sugarcane to 20,400 tons; and (2) New
Krung Thai Sugar Factory Co., Ltd. (subsidiary) may move its sugar mill
from TaMaka District to Bo Ploy District, Kanchanaburi Province. The
mill is permitted to expand its daily crushing capacity of 8,385 tons of
sugarcane to 20,400 tons. Currently these opportunities are under study
in details, the company will report the progress later.

Regarding KSL’s 2007 operating results (the accounting year beginning
November 2006 and ending October 2007), droughts in 2005 and 2006
resulted in less sugarcane for crushing in the Thailand, which amounted
to approximately 46-47 million tons cane per year. For two years, the
Company’s sales were relatively low. In the later half of 2006, however,
sufficient rain and higher world sugar prices resulted in high sugarcane
price ( according to revenue sharing system 70:30). In 2007, the total
amount of sugarcane crushed in Thailand was back to normal, 63.8 million
tons which represents a 37 percent increase. The Company’s sugar sales
in the past 12 months, then, increased by 47 percent, from 365,356 tons
in 2006 to 537,110 tons in 2007. Also, the Company realized additional
income from compensation for sugar production and distribution according
to the revenue sharing system governed by the Cane and Sugar Act, and
start to recognize the revenue from electricity sales (firm contract) to
Electricity Generating Authority of Thailand amounting at THB 289
million. By contrast, in 2007, the Company experienced decrease in
income from ethanol business. Domestic ethanol prices were lowered due
to oversupply of ethanol. The Company’s income from its ethanol business
decreased from THB 591 million in 2006 to THB 342 million in 2007.
However, in overall, the Company’s total income increased by 41 percent,
from THB 6,499 million in 2006 to THB 9,133 million in 2007. Its net
profit grew by 24 percent, from THB 673 million in 2006 to THB 836
million in 2007.

In 2008, a positive factor encouraging better operating results is
adequate rain water that should result in more sugarcane crop for
crushing in 2008 than the previous year. In addition, the Company has
been preparing to export its ethanol since 2007, as well as, the ethanol
production cost is expected to decrease due to price reductions in raw
material. The Company expects to see the improvement in the ethanol
business. Moreover, the corporate power plant is permitted to sell its
carbon credit. Negative factors, however, include lack of the
government’s concrete policy on ethanol businesses that has been
affecting oversupply and lower domestic ethanol prices, appreciation of
the THB currency affecting lower export prices of when convert to be
THB, and lack of the country’s political stability affecting confidence
in the domestic economy.