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 operates sugar mills and develops sugar
product-related continuous businesses. In February 2005 the Company
undertook the initial public offering where right issues were offered to
the public, and it was listed in the Stock Exchange of Thailand under
KSL. Since then, the Company has invested and announced the project
plans to expand the business related to sugar continuously. In year
2005, the core business of KSL came from the performance of 4 sugar
mills locating in different regions of Thailand. In year 2006, the
Company’s Ethanol plant at Khon Kaen with capacity of 150,000 litre per
day, using molasses and cane juice as raw material, started production
and distribution. In that year, our ethanol plant produced and
distributed ethanol in the amount of 25.57 million litre to petro
companies for mixing with gasoline at 10% to make gasohol. Biofertilizer
plant uses filter cake, which is a waste from sugar production, and
waste water from ethanol production as raw materials. The plant started
the production in early 2006 with the production volume about 18,000
tons. In year 2007, the Power Plant with 30 MW capacity at Khon Kaen,
using bagasse (waste from sugar mills) as a fuel is expected to start
operation and distribute electric during late December 2006.

Apart from other projects mentioned, in 2006 the Company expanded its
ventures as follows:

(1) Two ethanol plants in Kanchanaburi and Chonburi provinces: Part of
the production material is from molasses from KSL’s sugar mills. The
production and sale are expected to commence in 2008 and 2009. The
Group’s ethanol production capacity will rise from 150,000 liters a day
to 400,000 liters a day.

(2) Sugarcane plantation and sugar production in Laos: In 2006 KSL
established Savannakhet Sugar Co., Ltd., a subsidiary that Khon Kaen
Sugar Industry holds 80% of the shares. Savannakhet Sugar deals with
sugarcane plantation and sugar mill operation in Laos’ Savannakhet Area.
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 2006 as a seeding for expanding more plantation areas to
grow more sugarcane, enough for crushing in sugar mill. The sugar mill
will be expected to start crushing, to produce and distribute sugar in
2008.

(3) 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 is to expand more area to have enough sugar cane for crushing.
The sugar mill will be expected to start crushing, to produce and
distribute sugar in 2009.

Regarding KSL’s operating results in 2006 (the accounting year beginning
November 2005 and ending October 2006), for sugar business, Thailand
drought resulted in less sugar cane for crushing for past two year, and
caused the Company had about 4 million tons of sugarcane crushed a year;
the sales, therefore, were relatively low. In addition, in the second
half of 2006, Thailand experienced flooding. The Group’s sugar buyers
had slowdown to take the shipment of sugar. The Company sugar sales,
then, decreased by 16 percent, from 436,455 tons in 2005 to 365,356 tons
in 2006. At accounting year-end 2006, the Company had 113,453 tons of
sugar that had not been delivered to the buyers in its inventories.
However, most of the sugar had been sold. The amount of sugar
inventories increased by 42 percent, compared to 79,774 tons in
accounting period 2005. However, the net profit of the Company and its
subsidiaries reached THB 678.947 million, representing a 37-percent
increase compared to the previous year’s net profit of THB 495.114
million. The net profit increase equaled THB 183.833 million due to the
following major reasons:

(1) Increased domestic and overseas sugar prices caused the Company’s
    average sugar price to increase by 29 percent, from THB 10,807 per
    ton sugar in 2005 to THB 13,906 per ton sugar in 2006.

(2) KSL realized the operating results from ethanol production in 2006.
    The sales of ethanol amounted to 25.57 million liters, equaling THB
    591 million.

In 2007, positive factors in the Company’s operating results will be
realizing of the income from the power plant and expecting the increase
in sugarcane crushed from the previous year’s 4 million sugarcane tons
to about 5 million sugarcane tons. The target amount of ethanol to be
produced is at 45 million liters while the ethanol plant produced 25
million liters last year. However, the Company expects some negative
factors in 2007. Uncertainty of the government’s policy concerning the
sale of ethanol affects ethanol market prices. Also, there is a decrease
in sugar prices compared to those in the previous year. Currently,
however, sugar prices are still higher than those in the past 10 years
(excluding last year). The increasing THB value affects prices of sugar
exported.

Apart from trying to relieve the effects of the negative factors, the
Company’s increasing production will reduce the unit cost and help
maintain the margin between product prices and production cost.