2. Nature of Business Operation

1.  Company History

  History of Khon Kaen Sugar Industry Public Company (KSL) ’s sugar
  business began in 1945 by 3 Thai - Chinese family Co - founders,
  establishing the first sugar mill in the group, Kwang Soon Lee
  Co.,Ltd. Then, from the beginning, the business in Kwang Soon Lee had
  grown and expanded continuously by building new sugar mill and
  acquiring the old sugar mills, such as, Thonburi Sugar Factory (Plant
  1, Plant 2, Plant 3), Angwien Sugar Factory, Tamaka Sugar Industry,
  New Krung Thai Sugar Factory and Prachub Sugar Industry, etc.

  In 1974, there was a significant change in shareholder structure and
  the company structure in the group. New company group structure, Ms.
  Nantha Chinthammit as a chairman and Mr. Chavalit Chinthammit as a
  managing director, had 3 sugar factories under their management, as
  follows: Tamaka Sugar Industry, New Krung Thai Sugar Factory (both two
  sugar factories, located in Kanchanaburi province), New Kwang Soon Lee
  Sugar Factory (located in Cholburi province) In addition, in 1976 new
  sugar factory, Khon Kaen Sugar Industry Co.,Ltd., was established in
  Khon Kaen province. Since then, the company group had concentrated
  their investment based on the business related to sugar business, such
  as, Thai Sugar Terminal public company limited, KSL Export Trading
  Co.,LTD, KSL Real Estate Co.,LTD., etc.

  In 2003, the group of companies, under the management of Mr.Chamroon
  Chinthammit and with the approval from shareholders in each company,
  had reorganized the company group structure from that each shareholder
  held the shares in each sugar factory into new structure as Khon Kaen
  Sugar Industry as a holding company, holding the shares of each sugar
  factories and almost all of the old shareholders switched to hold the
  share only in Khon Kaen Sugar Industry Co.,Ltd, instead. In 2004, Khon
  Kaen Sugar Industry Co.,Ltd was registered as a public company and the
  capital was increase for offering some shares (IPO) to general
  investors. On February 2005, the Company was listed and first traded
  in The Stock Exchange of Thailand. The purpose of IPO share are partly
  from the decision to make investments in downstream project of sugar
  business, Ethanol Plant, Fertilizer Plant and Power Plant. Other
  proceeds will be used for internal working capital within the company.

2.  Business overview of the Company

Khon Kaen Sugar Industry Public Company and its subsidiaries, under KSL,
are Thailand 5^(th) largest sugar producer group (based on the
production volume on 2005). The company has 4 sugar factories in the
group, located in three different regions, as follows:

1.  Northeastern Region: Khon Kaen Sugar Industry Public Company in Khon
    Kaen province

2.  Western Region: New Krung Thai Sugar Factory Co.,Ltd and Tamaka
    Sugar Industry Co.,Ltd in Kanchanaburi province

3.  Eastern Region: New Kwang Soon Lee Sugar Factory Co.,Ltd in Cholburi
    province

The core products which the Company produces are sugar which can be
categorized to be 4 types: (a) raw sugar (b) high pol sugar (c) white
sugar and (d) refined sugar. The company also have other products
related to sugar production process, such as molasses, bagasses and
filter cake. According to these kinds of products, the company have a
plan to invest in value added projects, as followings: (shown on chart
2.1)

(1) Ethanol Plant. Ethanol is used for mixing with gasoline, called
    gasohol, which can be used as fuel for vehicles. This ethanol plant
    use molasses and/or sugarcane juice as raw materials.

(2) Fertilizer Plant, using filter cake, waste products from sugar
    production process, and waste water from ethanol production process,
    as raw materials.

(3) Power Plant, using bagasses, waste products from sugar production
    process as a source of energy for producing electricity and steam.

Chart 2.1 : The Relation between KSL Existing Sugar Production and KSL
Value Added Project

[]

As of October 31, 2005, Khon Kaen Sugar Industry Public Company have the
investment in subsidiaries and affliliates, as followings:

+-------------------------+----------+-------+------------------------+
| Name of Company         | Re       | Propo | Nature of Main         |
|                         | gistered | rtion | Business               |
|                         | Capital  |       |                        |
|                         |          | Of    |                        |
|                         | (THB     |       |                        |
|                         | Million) | Inves |                        |
|                         |          | tment |                        |
+-------------------------+----------+-------+------------------------+
| Sugar Business          |          |       |                        |
+-------------------------+----------+-------+------------------------+
| Tamaka Sugar Industry   | 525.0    | 8     | Produce and distribute |
| Co.,Ltd.                |          | 8.82% | sugar                  |
+-------------------------+----------+-------+------------------------+
| New Krung Thai Sugar    | 540.0    | 9     | Produce and distribute |
| Factory Co.,Ltd.        |          | 1.06% | sugar                  |
+-------------------------+----------+-------+------------------------+
| New Kwang Soon Lee      | 880.0    | 9     | Produce and distribute |
| Sugar Factory           |          | 6.85% | sugar                  |
|                         |          |       |                        |
| Co.,Ltd                 |          |       |                        |
+-------------------------+----------+-------+------------------------+
| Supporting Business     |          |       |                        |
+-------------------------+----------+-------+------------------------+
| Thai Sugar Terminal     | 100.0    | 2     | Terminal and           |
| Public Company Limited  |          | 3.82% | Warehouses             |
+-------------------------+----------+-------+------------------------+
| KSL Export Trading      | 10.0     | 7     | Sugar and Related      |
| Co.,Ltd.                |          | 8.32% | products Exporting     |
|                         |          |       | Activities             |
+-------------------------+----------+-------+------------------------+
| Energy and Chemical     |          |       |                        |
| Business                |          |       |                        |
+-------------------------+----------+-------+------------------------+
| Khon Kaen Alcohol       | 160.0    | 9     | Ethanol and Fertilizer |
| Co.,Ltd                 |          | 9.99% | Production             |
+-------------------------+----------+-------+------------------------+
| Khon Kaen Sugar Power   | 400.0    | 9     | Power Plant            |
| Plant Co.,Ltd           |          | 9.99% |                        |
+-------------------------+----------+-------+------------------------+
| KS Laxmi Co.,Ltd*       | 10.0     | 5     | Chemical Trading       |
|                         |          | 1.00% |                        |
+-------------------------+----------+-------+------------------------+
| Other Business          |          |       |                        |
+-------------------------+----------+-------+------------------------+
| KSL Real Estate Co.,Ltd | 140.0    | 8     | Real Estate            |
|                         |          | 0.31% | Development and        |
|                         |          |       | Training Center        |
+-------------------------+----------+-------+------------------------+
| Champion Fermentation   | 200.0    | 3     | Joint Venture with the |
| Co.,Ltd**               |          | 2.00% | business partner to    |
|                         |          |       | invest 60% in          |
|                         |          |       | Chantaburi Starch      |
|                         |          |       | Co.,Ltd. - Starch      |
|                         |          |       | Factory by using       |
|                         |          |       | cassava as raw         |
|                         |          |       | material               |
+-------------------------+----------+-------+------------------------+

Note

* KS LAXMI has THB 10 million register capital with THB 2.5 million
paid-up capital

On November 25, 2005, Board of directors had approved Khon Kaen Sugar
Industry Public Company to purchase 490,000 shares of KS LAXMI from
LAXMI Co.,Ltd. (India) and India partners at the price of THB 0.7 per
share. After transaction had been done, Khon Kaen Sugar Industry Public
Company held 99.99% share of KSLAXI. In addition, Board of directors had
approved changing the name of KS LAXMI Co.,Ltd. to be KSL Chemical
Co.,Ltd.

**Champion Fermentation has THB 200.0 million register capital with THB
150.0 million paid-up capital.

Organization of KSL Group on October 31, 2005, shown on the following
chart:

[]

The details of Khon Kaen Sugar Industry Public Company, subsidiaries and
affiliates will be follows:

Sugar Business

Khon Kaen Sugar Industry Public Company Limited

The nature of business is to produce and distribute sugar and other
by-products. The factory is located in Amphur Nampong, Khon Kaen (North
Eastern of Thailand) with the maximum crushing capacity of 26,848 ton
cane per day and the capability to produce raw sugar, high pol sugar,
white sugar and refined sugar. The company’ headquarter is located in
KSL building, Sriayudhya Road, Rajathevi, Bangkok.

Tamaka Sugar Industry Co.,Ltd

The nature of business is to produce and distribute sugar and other
by-products. The factory is located in Amphur Tamaka, Kanchanaburi
(Western of Thailand) with the maximum crushing capacity of 20,000 ton
cane per day and the capability to produce raw sugar, white sugar and
refined sugar.

New Krung Thai Sugar Factory Co.,Ltd

The nature of business is to produce and distribute sugar and other
by-products. The factory is located in Amphur Tamaka, Kanchanaburi
(Western of Thailand) with the maximum crushing capacity of 11,377 ton
cane per day and the capability to produce raw sugar, white sugar and
refined sugar.

New Kwang Soon Lee Sugar Factory Co.,Ltd

The nature of business is to produce and distribute sugar and other
by-products. The factory is located in Amphur Panutnikom, Cholburi
(Eastern of Thailand) with the maximum crushing capacity of 8,600 ton
cane per day and the capability to produce raw sugar, high pol sugar,
white sugar and refined sugar.

Supporting Business

KSL Export Trading Co.,Ltd

Established in 1992, the company performs as a licensed exporting
company, according to cane and sugar act 1984, which provides services
of exporting activities to the sugar companies in KSL Group and also
other sugar factories.

Thai sugar Terminal Public Company Limited (TSTE)

Listed company in Stock Exchange of Thailand, with its business
involving port operation and warehousing, loading and discharging goods
and also providing logistics service. The terminal and warehouse are
located in Prapadang, Samutprakarn, near Chopraya River. The main
customers are currently the sugar companies in KSL Group, Other Sugar
factories owned by strategic partners and also other general customers.

Energy and Chemical Business

Khon Kaen Alcohol Co.,Ltd

Established in early 2004, the Company runs the business of producing
alcohol (Ethanol) from molasses, sugarcane and others with the licenses
of 150,000 litre per day granted by Ministry of Industry for the purpose
of producing alcohol for blending with gasoline, so-called “gasohol”,
using as fuel in vehicles. In addition, the company produces fertilizers
as a downstream project to the alcohol plant, which uses waste water
generated from alcohol plant and filter cake, waste products from sugar
processing. Both ethanol plant and fertilizer plant get the corporate
tax exempt from BOI for 8 years and will be expected to start the
operation in January 2006.

Khon Kaen Sugar Power Plant Co.,Ltd.

Established in late 2003, the company operates a business to produce 30
MW electricity and steam by using bagasses as renewable energy source.
The main objective is to sell electricity of 20 MW to the EGAT (Grid)
and other remaining to the factories in the group which are located
nearby the power plant. The company gets the corporate tax exempt from
BOI for 8 years and will be expected to start the operation in November
2006.

KSLAXMI Co.,Ltd (in the process of changing the company name to KSL Chemical Co.,Ltd)

In the past, the company was a joint venture between KSL and Laxmi
(India), Then, on November 25, 2005, Board of directors had approved
Khon Kaen Sugar Industry Public Company to purchase 490,000 shares of KS
LAXMI from LAXMI Co.,Ltd. (India) and India partners at the price of THB
0.7 per share. After transaction was done, Khon Kaen Sugar Industry
Public Company held 99.99% share of KSLAXI. The company has a plan to
operate the business related to alcohol based chemical.

Other Businesses

KSL Real Estate Co.,Ltd

The company is involved in the business of property rental and resort
ownership in Kanchanaburi, near the River Kwai, under the name of “River
Kwai Park and Resort” This company provides the accommodation and
facilities for holiday vacation and training center for employees of the
KSL group and other general customers.

Champion Fermentation Co.,Ltd

The company is a joint venture business between Khon Kaen Sugar Industry
Public Company and business partners with 32% of share hold by Khon Kaen
Sugar Industry. The joint venture company has the investment about 60%
of share in Chantaburi Starch Co.,Ltd which operate a starch producing
factory in Chantaburi province (Eastern of Thailand), using tapioca as
raw material.

Regarding the policy to regulate and monitor the operation of
subsidiaries and affiliates, Khon Kaen Sugar Industry has categorized
its subsidiaries and affiliates which have the similar nature of
business to be a group together under the same team of management. 4
sugar companies are under the same board of executive directors. For
supporting business, energy and chemical business and other business,
Khon Kaen Sugar Industry will assign its own representatives to join as
a position of company directors for policy making or as a position of
top management for operation directing, which will make consistency in
policies from parent company, subsidiaries and affiliates.

1.  Revenue Structure

+-------------------------------+----------+-------+----+-------+----+
| Company                       | % of     | 2005  | %  | 2004  | %  |
|                               | Share    |       |    |       |    |
|                               |          | Re    |    | Re    |    |
|                               |          | venue |    | venue |    |
+-------------------------------+----------+-------+----+-------+----+
| 1. Khon Kaen Sugar Industry   | บริษัทหลัก  | 3,2   | 5  | 3,9   | 5  |
| Public Company                |          | 88.16 | 3% | 56.23 | 1% |
+-------------------------------+----------+-------+----+-------+----+
| 2. Tamaka Sugar Industry      | 88.82%   | 1,3   | 2  | 1,6   | 2  |
| Co.,Ltd                       |          | 31.22 | 2% | 41.34 | 1% |
+-------------------------------+----------+-------+----+-------+----+
| 3. New Krung Thai Sugar       | 91.06%   | 7     | 1  | 1,0   | 1  |
| Factory Co.,Ltd               |          | 49.28 | 2% | 47.58 | 4% |
+-------------------------------+----------+-------+----+-------+----+
| 4. New Kwang Soon Lee Sugar   | 96.85%   | 6     | 1  | 8     | 1  |
| Factory Co.,Ltd               |          | 54.20 | 1% | 81.46 | 1% |
+-------------------------------+----------+-------+----+-------+----+
| 5. Thai Sugar Terminal Public | 23.82%   | 1     | 3% | 1     | 3% |
| Company                       |          | 72.61 |    | 96.55 |    |
+-------------------------------+----------+-------+----+-------+----+
| 6. KSL Export Trading Co.,Ltd | 78.32%   | 8.15  | 0% | 13.22 | 0% |
+-------------------------------+----------+-------+----+-------+----+
| 7. Khon Kaen Alcohol Co.,Ltd  | 99.99%   | 1.40  | 0% | 0.00  | 0% |
+-------------------------------+----------+-------+----+-------+----+
| 8. Khon Kaen Sugar Power      | 99.99%   | 4.24  | 0% | 0.00  | 0% |
| Plant Co.,Ltd                 |          |       |    |       |    |
+-------------------------------+----------+-------+----+-------+----+
| 9. KS LAXMI Co.,Ltd           | 51.00%** | 0.00  | 0% | 0.00  | 0% |
+-------------------------------+----------+-------+----+-------+----+
| 10. KSL Real Estate Co.,Ltd   | 80.31%   | 2.68  | 0% | 2.37  | 0% |
+-------------------------------+----------+-------+----+-------+----+
| 11. Champion Fermentation     | 3        | 0.36  | 0% | 0.09  | 0% |
| Co.,Ltd                       | 2.00%*** |       |    |       |    |
+-------------------------------+----------+-------+----+-------+----+
| Total                         |          | 6,2   | 10 | 7,7   | 10 |
|                               |          | 12.30 | 0% | 38.83 | 0% |
+-------------------------------+----------+-------+----+-------+----+
| Minus Interrelated items      |          | 6     |    | 1,7   |    |
|                               |          | 79.84 |    | 32.89 |    |
+-------------------------------+----------+-------+----+-------+----+
| Total Revenues                |          | 5,5   |    | 6,0   |    |
|                               |          | 32.46 |    | 05.94 |    |
+-------------------------------+----------+-------+----+-------+----+

2.  Business Goal

Long term goal of the Company will be one of the leaders in sugar,
by-product, and value added productions which can be shown in company’s
sugar policy: “production of quality sugar with high efficiency, prompt
delivery, winning customers’ trust, consumption safety” This policy has
encouraged company’s 4 sugar mills to be widely accepted as one of the
highest efficiency and highest quality sugar production groups in
Thailand. In addition, with the goal of being leaders in by-product and
value added production and with the vision on the potential growth in
ethanol industry in the future which have the benefit in added value of
the products and the benefit for overall Thailand society, the company
are the first group among sugar factories in Thailand to decide to make
an investment in ethanol plant, annexed to sugar factory. In addition,
the Company have the investment in other value-added businesses, such
as, fertilizer project, using the waste from production process, power
plant project, using bio mass as a source of energy. These projects will
be expected to start the operation and the revenue recognition in 2006 –
2007. These projects are pilot projects, implementing only in the area
nearby Khon Kaen Sugar Industry, the company can still be able to expand
the project investments to other areas of other sugar factories in the
group. The project details and amount of the investment will be depended
on the potential, the feasibility of each sugar factory in the group.

In short term, the Company have a goal to be one of the leaders with
lowest costs of manufacturing and highest productivity. Base on that,
the Company implemented the modern technology, applying for production
and management system. Furthermore, the company has also concerned the
amount of the cane crushed, the major risk of the company. The factory
and valued added projects can not be survived if the amount of cane
crushed are not enough. Therefore, the company has a goal to reduce the
farmers’ cane plantation cost and also improve their production and
efficiency with the target for the farmers to survive and get reasonable
return from the investment. This has been shown in a slogan “Farmer
Prosperous, Factory Successful”