Part 1

Executive Summary

Khon Kaen Sugar Industry Public Co., Ltd. was established in 1976 with
the registered capital of Baht 1,600 million and the paid-up capital of
Baht 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. The aim
was to invest further in the corporate sugar product-related continuous
business projects: the ethanol plant project requiring the capital of
approximately Baht 350 million; the biofertilizer factory project
requiring the capital of approximately Baht 80 million; and the biomass
power plant project requiring the capital of approximately Baht 1,000
million. Each project creates value-added products from sugar
manufacturing and its by-products (sugar, molasses, filter mud, and
bagasse). The ethanol plant, for instance, uses molasses and sugarcane
juice as raw materials in producing ethanol (99.5% alcohol). 10 percent
of ethanol is mixed with gasoline to make gasohol, a substitute for ULG
95 and 91. Biofertilizer manufacturing uses filter mud, which is a waste
from sugar production, and waste water from ethanol production. The
wastes are mixed and biodecomposed to make biofertilizer sold to
farmers. The biomass power plant utilizes bagasse remained from the
sugar mills as raw material to generate electricity. It is expected that
20 MW of electricity will be sold to the Electricity Generating
Authority of Thailand. The ethanol plant was expected to operate in
December 2005. Operation of the biofertilizer factor was expected in
January 2006. The power plant operation was scheduled to take place in
November 2006.

The 2005 operating results indicated a 17 percent decrease in net
profit, from Baht 593 million in 2004 to Baht 495 million in 2005. The
dry weather resulted in a 19 percent decreased total amount of cane
crushed, from 5.052 million tons in 2004 to 4.067 million tons in 2005.
However, compared to a 28.8 percent decrease of the total amount of cane
produce nationwide, from 64.48 million tons in 2004 to 47.82 million
tons in 2005, the Company’s market share increased from 7.8 percent to
8.5 percent in 2005. In 2005 sugar prices in the world market rose
compared to those in 2004. Average Raw sugar price (NYBOT SUGAR #11)
which in 2004 was at 7.07 cents/pound increased to 9.31 cents/pound in
2005. Average White sugar price (LIFFE SUGAR #5) which in 2004 was at
218 US$/ton increased to 268 US$/ton in 2005. Similarly, molasses price
increased, from the corporate average price of 798 Baht/ton in 2004 to
1,933 Baht/ton in 2005. The increase in prices lessened the effect of
the Company’s operating results experiencing the decreased net profit
caused by decreased cane produce.

In 2006 factors positively affecting the corporate operating results
included gradual revenue recognition of the three future projects;
increasing sugar prices in the world market; the EU’s reduced sugar
export; and increasing ethanol demand which results in an increase in
the use of canes in ethanol production of Brazil, a major sugar
exporter, and high oil prices. However, in 2005 the dry weather, which
at the end of the year its effect seemed to be not as serious, could
partially affect the 2006 production. There may be a decrease in
sugarcane produce which could negatively affect the Company’s
operations.