4.  Research and Development

The Company has established a subsidiary, namely, The Siam Research and
Development Co., Ltd., on July1, 1997. It was transformed from Research
and Development Center (Bangkok) of The Siam Cement Public Company
Limited and obtained the BOI privileges on January 4, 1991, and was
registered as a research company at The Ministry of Finance on July 4,
1997.

Mission of The Siam Research and Development Co., Ltd.

1.  Create new commercial product.

2.  Improve production process for better product quality.

3.  Reduce production cost by finding raw material substitute.

4.  Explore new utilization of industrial waste.

5.  Provide technical service for business units.

Research and development projects were given emphasis to cement products
including Portland cement, dry mortar and other special cements. Those
projects consisted of developing new products, saving production cost,
improving production process, reducing contaminated pollution resulting
from production process, finding substitute raw material and improving
quality of existing products. Moreover, other research and development
projects included High Performance Concrete, Durability of Concrete,
Super High Early Strength Concrete and the increased usage of chemical
mixture.

Apart from various technology research and development, the Company owns
analysis and test laboratories in chemistry, physics, and product test
to handle with increasingly important test service. The laboratories
attained ISO/IEC 17025 certification from The Thai Industrial Standard
Institute for export analysis and test of every type of Portland cement,
raw materials for cement and concrete durability.

In addition, some businesses have themselves researched and developed
qualified products and services to meet customer needs. Examples are:

Chemicals Business Three main objectives are cost reduction, higher
value-added product development, and production process and supportive
process efficiency development. This ranges from short-term (6 months)
to long-term (3 years) plans as follows:

1.  Cost Reduction

  The Company has made a research and development on key raw materials
  to lower their costs, enabling it to better compete in local and
  foreign markets. Moreover, modification of some raw materials
  differentiates better products than rivals.

2.  Higher Value-Added Product Development

  The Company set up product development teams to respond to changing
  customer needs as well as consistently develop new products for both
  local and overseas markets. Besides, it improves its marketing
  strategy to step into industrial products to add more revenue. Plastic
  substance for automotive components, electrical appliances, and
  various types of containers, water pipes, and water storages are
  examples.

3.  Production Process and Supportive Process Efficiency Development.

  The Company adheres to the policy to consistently improve production
  process to be safe, reliable, and most efficient. Capacity was
  expanded via existing assets. Production process was upgraded to lower
  cost as well as adjusted to produce new valuable and higher-priced
  products. Information technology was also applied to speed up all
  business procedures precisely and most efficiently with lowest cost.

Paper Business Established The Research and Development Center, under
The Siam Pulp and Paper Pcl., registered to be a research and
development center according to the announcement about tax (4^(th)
issue) by the Ministry of Finance. The objectives of the center are to
research and develop the product of the Business, improve product
quality, meeting customer needs, and improve production process. This
leads to lower cost, hence being competitive in domestic and overseas
markets. In addition, raw material and production process development
are encouraged to build competitive advantages and reduce import
technology.

The Research and Development Center founded Technology Information and
Training Unit to strengthen the business in the long run. Its task is
utilizing efficient information software to allocate, share, and rapidly
create the Knowledge Management to counter the changing markets.
Besides, pulp and paper technology training courses are implemented to
boost staff potential and organization innovation in the future.

Cement Business Continuously research on many types of cement, stressing
on a variety of application and international standard quality, to
respond to each customer segment and support its technological
leadership. The Company has focused on product research and development
as well as planning a marketing strategy for the latest innovative
products, e.g. Elephant Precast Cement, Elephant
Chloride-and-Sulfate-Resisting Cement, Twin Tiger White Plaster Mortar,
Twin Tiger Fine White Plaster Mortar, Twin Tiger White Skim Coat, etc.
Moreover, The Company has been researched and improved CPAC ready-mixed
concrete to have a special qualities for specific needs, for example,
CPAC Waterproof Concrete in coating a swimming pool floor, CPAC Freezing
Room Concrete using in frozen food factory, etc.

Building Products Business Research and Development is a vital part in
developing new products, improving a better product quality to be over
market standard and reducing production costs in the long run. The
business established a Research and Development unit to control and
follow up as well as improve production process so as to deliver better
quality products to serve its customer needs. In maintaining competitive
advantages over its competitors, the business invested in research and
development by improving production technology as well as using
knowledge and production experience to increase operational efficiency.
In 2005, the business launched new innovative products to the markets.
The business developed “Pimai” series of ceramic tiles with vein in tile
body similar to natural rock.

The Business used the Process of Strategic Product Innovation from
Decision Process International of the USA to generate a stream of
innovations. To that effect, a workshop was organized for all involved
employees to improve the method of new products development in
accordance with Strategic Product Innovation. Major examples of
innovative product and service concept included:

-   Developed the world’s first porcelain sensor faucet made of ceramic
    porcelain.

-   Established Cementhai Roofing Center, the first one-stop roofing
    center in Thailand.

 Distribution Business Established Business Development Unit and Pilot Project utilize knowledge, marketing information, and customer needs to readdress customer service processed and explore new products both within and outside the Group. Examples include logistics, product assortment, product display, after sales service, etc. All help trade partners sell more and increase customer demand.

The Company reviewed the scope of disclose date for research and
development expense by including the expense related to the investment
in research and development. As a result of this changing, the research
and development costs of 2003 and 2004 have been adjusted accordingly
which are comparable to the cost of 2005.

In the last three year, The Siam Cement Group incurred research and
development costs as follows:

+---------------------------+-------------+-------------+-------------+
| Year                      | 2003        | 2004        | 2005        |
+---------------------------+-------------+-------------+-------------+
| Million Baht              | 340         | 361         | 486         |
+---------------------------+-------------+-------------+-------------+