3. Operation of Each Business Unit

SCG Chemicals

1.  Product or Service Features

  1.1 Olefins

  Olefins are the primary petrochemical product comprising of Ethylene
  and Propylene which are the main raw materials for downstream
  Polyolefin plastics and related products such as Polyvinyl Chloride
  and Styrene Monomer. The business’s current Olefins capacity is
  1,200,000 tons per year and is the largest single site production in
  Thailand. By-products from the olefins plant such as Mix-C4, Benzene
  and Toluene are mainly consumed within the business’s and/or SCG
  subsidiaries’ downstream plants.

  1.2 Polyolefins

  Polyolefins are the business’s main products. The business is the
  largest producer in Thailand with total polyolefins capacity of
  1,080,000 tons per year, covering a wide range of applications as
  follows:

  1) High Density Polyethylene – HDPE Outstanding features are good flow
  ability, easy formation, and good chemical resistance. It is normally
  used as the main raw material for the production of plastic shopping
  bags, milk bottles, shampoo and cosmetics bottles, lubricant
  containers, bottle crates, fruit crates, trash bins, ropes, fishnets,
  ring-nets, water pipes, electric power cord insulators, and etc.

  2) Medium Density Polyethylene – MDPE Outstanding features are high
  dart impact strength, stable formation, and low temperature
  resistance. It is normally used as the main raw material for the
  production of coolers, water tanks, water treatment tanks, traffic
  cones, and etc.

  3) Linear Low Density Polyethylene – LLDPE Outstanding features are
  high stiffness and high tensal strength. It is normally used as the
  main raw material for the production of industrial and agricultural
  films, plastic rice bags, and etc.

  4) Low Density Polyethylene – LDPE Outstanding features are clarity
  and high stiffness. It is normally used as the main raw material for
  the production of cold food bags, food preservation films, lids,
  plastic boxes, surface coatings, and etc.

  5) Polypropylene – PP Outstanding features are high dart impact
  strength and high heat resistance. It is normally used as the main raw
  material for the production of hot food bags, general wrapping films,
  woven bags, household utensils, battery shells, electrical appliance
  parts, car components, and etc.

  1.3 Polyvinyl Chloride (PVC)

  PVC products from Thai Plastics and Chemicals Public Company Limited,
  the largest PVC producer in Thailand and ASEAN with total production
  capacity of 766,000 tons per year, can be divided into two main
  categories:

  1) PVC Resin - a type of thermoplastic in pure powder form which can
  withstand heat and pressure without changing its original structure
  and can be reused in different productions. However, it cannot be
  directly formed into finished goods, thus needs various additives to
  adjust its properties according to customers’ specifications.

  2) PVC Compound - normally in powder or pellet form which has already
  been dry-blended with various additives such as additives to increase
  impact strength, additives to help the forming process, additives to
  increase heat resistance capability without changing its form, and
  etc. Due to its many outstanding features such as weather resistance,
  fire retardant, light weight, and rust-free material, it can be used
  as insulator, sheath for electrical wire, telephone cable, pipes, and
  etc.

  1.4 Jetty & Tank Terminal

  The Company provides its affiliates with pipe transportation as well
  as jetty and tank terminal for storage of petrochemical gases and
  liquids such as Naphtha, Olefins, Benzene, Butadiene, MMA, and etc. At
  present, the Company owns two jetties with a capacity of 100,000 and
  20,000 dead weight tons.

2.  Market and Competition

  2.1 Policy and Market Features of Main Products and Services

  Polyolefins are a commodity product with a fairly volatile price
  cycle.

1)  Competitive Strategy

-   High Value-Added Products

  In the past 4-5 years, the business has planned and developed high
  value-added products in order to improve product quality and respond
  to customer needs. In response to this strategy, the business has
  invested in the enhancement of research and development capability and
  efficiency. At present, sales of high value-added products accounts
  for 39 percent of total sales of downstream products. High value-added
  products are namely:

-   Pipe: PE 100 water pipe, gas pipe

-   Rotomolding: “Elixir” water storage, outdoor furniture

-   Wire and Cable: sheath for electrical wire, fiber optic cable,
    telephone cable

-   PE Wax: processing aid, dispersant

-   Propylene compound and Propylene co-polymer: compounds for
    automotive parts

    -   Other specialties: construction materials

  The business aims to further increase sales portion of high
  value-added products to reduce impact of business volatility in the
  down cycle while enhancing overall competitiveness of the business.

-   Price and Cost

  Both domestic and export prices of Polyolefins are closely correlated
  with the global market prices. The business is able to create a price
  premium by offering high quality products and differentiated value
  added services to its customers. The business has adopted Total
  Quality Management (TQM) concept which emphasizes on customer and
  quality, and was awarded with the Deming Application Prize. In terms
  of cost management, the business gives priorities to maintaining
  competitive cost position by investing in proven-technologies,
  world-scale plants and constantly de-bottlenecking the plant
  capacities to achieve economy of scale with lowest investment cost per
  ton. In addition, as a fully integrated player, the business also
  utilizes Total Productivity Management (TPM) concept which emphasizes
  on equipment maintenance, production efficiency, and cost reduction.
  By following TPM concept, the business was awarded with the TPM
  Excellence Award (1^(st) category) for its achievement in production
  efficiency enhancement, energy conservation as well as accident and
  environmental impact reduction, leading to improvement in employee
  morale and capabilities. The business has also invested in advanced IT
  and e-Business systems, such as e-Supply Chain, e-Ordering, Advanced
  Process Control and CRM Portal to achieve best-in-class efficiency and
  customer satisfaction.

-   Product Quality Management

  One of the business’s main policies is to produce high quality
  products without any effects on the environment and communities. In
  addition, the business also gives great importance to occupational
  health and safety management systems, therefore, it integrated ISO
  system with TQM and TPM to come under one quality management resulted
  in being certified by the international quality system, namely ISO
  9001, ISO 14001, and TIS 18001. In addition, the business also applied
  for ISO17025 which is related to laboratory management since the
  business invests in research and development to constantly improve its
  product quality to meet changing customer expectations.

-   Service

  The business recognizes that “service is the heart of selling”.
  Therefore, it has developed Customer Relationship Management system by
  applying IT technology to gather customer requirement and analysis so
  that it can accurately and timely responds to customer needs leading
  to sustainable customer relationship. Moreover, the business provides
  technical assistance in Polyolefins conversion and emphasizes on
  delivery timeliness and accuracy. It continuously engages in plans to
  develop and increase service efficiency to a better level of service
  standard and hence, ability to satisfy the needs of different target
  customers.

-   Management

  In the Polyolefins business, product demands and prices change
  rapidly. Therefore, an excellent management with accurate and rapid
  decisions is very important. The business has implemented Supply Chain
  Management system which consists of order forecasts, sales, delivery,
  production, raw material procurement, and inventory management through
  computerized system linking between departmental functions to achieve
  speed and accuracy in business operation. This will enable the
  business to better satisfy customer needs and respond to changes in
  the industry. Moreover, the business is using new technologies to
  continuously improve its Supply Chain Management system including
  implementing Vender Management Inventory (VMI) system to reduce the
  amount of inventory in stock, setting up Hub and Spoke warehouses both
  domestically and internationally to reduce delivery time and create
  new transportation routes such as train and ship. Also, it is using
  Radio Frequency Identification (RFID) to increase efficiency of
  feedstock management, and using Warehouse Management Operation
  Excellence (WOEX) and Global Positioning System (GPS) to enhance
  real-time inventory and product delivery management.

  2) Customer Features and Target Groups

  Target groups are Polyolefins converters which are classified based on
  formation types such as film, injection molding, monofilament & yarn,
  blow molding, and others which are lamination, extrusion, and piping.
  For PVC business, target groups are plastic converters, using PVC as
  raw materials.

  The business’s customers are mostly small and fragmented so the
  business aims to diversify the customer base into diverse segment and
  region. Hence, the Company is risk adverse as it is not dependent on
  one customer.

  3) Channel of Distribution

  In 2009, domestic and export sales of Polyolefins are accounted for 57
  percent and 43 percent respectively.

-   Domestic

  There are two types of customers of which 82 percent are domestic
  customers and 18 percent are re-exporters. For the former, 49 percent
  is through direct sales by the business while the rest (51 percent) is
  sold through agents who manage financial risks and distribution of
  products to Polyolefins converters. For re-exporters customers, goods
  are sold mostly through direct sales by the business.

-   Exports

  The business mainly exports to the Asia-Pacific region. Products are
  distributed directly to end-users or local distributors so that
  customer needs are satisfied efficiently. At present, the business has
  8 representative companies internationally which are located in
  Myanmar, Vietnam, Philippines, Indonesia, China (Shanghai and
  Guangzhou), Japan, and United Arab Emirates. The proportion for the
  export market is 27 percent in Southeast Asia, 23 percent in East
  Asia, 10 percent in South Asia, and 40 percent in other regions.

  As the business internationally exports around 464,000 tons per year
  without concentrating in one particular country, it is able to avoid
  direct confrontation with multinational players and diversify
  political or economical risks. In addition, by having global based
  customers, the business is able to manage export products quantities
  for profit optimization as prices may differ depending on market
  conditions of each country.

  In 2009, Domestic and export sales of PVC through Thai Plastic and
  Chemicals Public Company Limited are 49 percent and 51 percent
  respectively.

-   Domestic

  In respect of local distribution, the Company emphasizes on direct
  selling to plastic manufacturers in various industries. The objectives
  are to know the real customer demand and to be able to promptly
  provide technical assistances to the customers.

  There are two types of customers of which 74 percent are domestic
  customers and 26 percent are re-exporters. For the former, 93 percent
  is through direct sales by the business while the rest (7 percent) is
  sold through agents. For re-exporters customers, goods are sold
  through direct sales by the business.

-   Exports

  The Company exported 79 percent, in volume, through agents and 21
  percent directly to customers. Main export areas are Turkey, Eastern
  Europe, Southeast Asian countries, South Asia, Middle East and Africa.
  To sell through agents, the Company has selected only capable
  companies in distribution of plastic products and chemicals with the
  addition of good relationships with customers. They are also capable
  of negotiations, co-ordination and providing assistances to customers
  in all areas.

  2.2 Competition and Capacity

  1) Domestic

  Thailand has Polyolefins capacity of approximately 3.8 million tons
  per year while the country’s demand in 2009 was approximately 2
  million tons. Therefore, 46 percent of products have to be exported.
  Import tariff for Polyolefins has been reduced according to AFTA and
  WTO, causing higher competition. However, when comparing with local
  producers, the business has the largest Polyolefins capacity in the
  country –about 35 percent of total domestic capacity. Details are
  shown as follows:

Unit: thousand tons / year

  --------------------- ---------- --------- --------- --------- ---------
  Company               HDPE       LLDPE     LDPE      PP        Total

  SCG Chemicals         540        120       100       320       1,080

  Integrated Refinery   140        -         -         475       615
  and Petrochemical                                              
  (IRPC)                                                         

  TPI Polene (TPIPL)    -          -         158       -         158

  HMC Polymers (HMC)    -          -         -         750       750

  Siam Polyethylene     -          300       -         -         300
  (SPE) *                                                        

  PTT Chemical (PTTCH)  250        400       -         -         650

  Bangkok Polyethylene  250        -         -         -         250
  (BPE)                                                          

  Total Capacity        1,180      820       258       1,545     3,803
  --------------------- ---------- --------- --------- --------- ---------

  Remark: * A joint venture between SCG Chemicals and The Dow Chemical
  Company of the U.S.A. (50 percent shareholding)

  Source: SCG Chemicals Co., Ltd. and Petroleum Institute of Thailand.

  Thailand has total PVC production capacity of 880,000 tons per year.
  Thai Plastic and Chemicals Public Company Limited is the largest
  producer, accounting for 57 percent of total domestic capacity.
  Details are shown as below:

Unit: thousand tons / year

  ---------------------------------- ------------ ----------- ------------
  Company                            PVC          VCM         EDC

  Thai Plastic and Chemicals (TPC)   500          500         520

  Vinythai (VNT)                     280          400         640

  Apex Plastic (APEX)                100          -           -

  Total Capacity                     880          900         1,160
  ---------------------------------- ------------ ----------- ------------

  Source: Thai Plastic and Chemicals Public Company Limited

2)  Foreign

  In 2009, Polyolefins demand in Asia equaled 59 million tons with China
  as the largest importer. Major exporters are producers in the Middle
  East, USA, Korea, and Singapore. For PVC, PVC demand in 2009 was 18
  million tons. Demand growth was mainly driven by China which is the
  largest importer in Asia.

Market situation and Trend

  Business performances of Olefins and Polyolefins in 2009 improved from
  the previous year. Prices of Naphtha and Polyolefins continuously
  increased from year-end 2008 due to demand growth from world economic
  recovery (especially in China and Southeast Asia countries) and rise
  of crude oil prices and delay start-ups of new Olefins and Polyolefins
  capacities from the Middle East.

  Average Naphtha price in 2009 was 553 USD per ton (lower than 2008’s
  average by 33 percent but surged 82 percent from the fourth quarter of
  2008). Average Polyolefins price in 2009 was 1,134 USD per ton
  (decreased from 2008’s average by 23 percent while improved from that
  of the fourth quarter of 2008 by 25 percent).

  In 2010, Naphtha-to-Polyolefins margin is likely to decline due to
  significant volumes of new Olefins and Polyolefins capacities from the
  Middle East and China are anticipated to flood the market by second
  quarter of 2010.

  Like Olefins and Polyolefins, PVC price gradually improved in second
  half of 2009 from global economic recovery. However, PVC demand in
  almost every region was sluggish. Global PVC demand decreased by 1
  percent but demand in some countries in Asia especially China, India,
  and Vietnam experienced significant growth rate of 14 percent, 21
  percent and 25 percent respectively mainly due to government’s
  economic stimulus packages. Nonetheless, PVC demand in Thailand
  dropped by 6 percent from that of 2008 due to uncertain political
  situations. On average, PVC price in 2009 was 773 USD per ton, down by
  26 percent from last year. The feed-to product margin in 2009 dropped
  by 157 USD per ton from last year.

  In 2009, PVC price is expected to improve in light of economic
  recovery. PVC global demand in 2010 is expected to increase by 4
  percent driven mainly by China, India, and Vietnam. For Thai market,
  PVC demand is also expected to improve as a result of government’s
  economic stimulus package “Thai-Khem-Kaeng” which will support
  expansion of the construction sector.

3. Product or Service Procurement

  3.1 Product Procurement Feature

  1) Production

The business has 1 Olefins plant and 7 Polyolefins plants located in Map Ta Phut Industrial Estate, Rayong Province. Nameplate capacities are displayed below:

+----------------------+-------------+----------+---------+-----------+
| Company              | Product /   | Capacity | Year    | %         |
|                      | Service     |          | First   | Sha       |
|                      |             | (Ton /   | O       | reholding |
|                      |             | Year)    | perated |           |
+----------------------+-------------+----------+---------+-----------+
| Rayong Olefins       | Ethylene    | 800,000  | 1999    | 63        |
|                      |             |          |         |           |
|                      | Propylene   | 400,000  |         |           |
+----------------------+-------------+----------+---------+-----------+
| Thai Polyethylene    | HDPE 1      | 160,000  | 1989    | 100       |
|                      |             |          |         |           |
|                      | HDPE 2      | 180,000  | 1997    |           |
|                      |             |          |         |           |
|                      | HDPE 3      | 200,000  | 2001    |           |
|                      |             |          |         |           |
|                      | LLDPE       | 120,000  | 1990    |           |
|                      |             |          |         |           |
|                      | LDPE        | 100,000  | 1995    |           |
+----------------------+-------------+----------+---------+-----------+
| Thai Polypropylene   | PP 1        | 140,000  | 1993    | 100       |
|                      |             |          |         |           |
|                      | PP 2        | 180,000  | 1997    |           |
+----------------------+-------------+----------+---------+-----------+
| Thai Pl              | PVC Resin   | 500,000  | 1971    | 46        |
| astics and Chemicals |             |          |         |           |
|                      | PVC         | 60,000   |         |           |
|                      | Compound    |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| TPC Paste Resin      | PVC Paste   | 38,000   | 1993    | 46        |
|                      | Resin       |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| PT. TPC Indo Plastic | PVC Resin   | 120,000  | 1996    | 78        |
| & Chemicals          |             |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| TPC Vina Plastic and | PVC Resin   | 100,000  | 1995    | 32        |
| Chemicals            |             |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| Viet-Thai Plastchem  | PVC         | 13,500   | 1994    | 33        |
|                      | Compound    |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| Map Ta Phut Tank     | Jetty and   | -        | 1998    | 81        |
| Terminal             | Tank        |          |         |           |
|                      | Terminal    |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| Rayong Pipeline      | Pipe        | -        | 1998    | 91        |
|                      | Tra         |          |         |           |
|                      | nsportation |          |         |           |
+----------------------+-------------+----------+---------+-----------+
| Rayong Engineering   | Engineering | -        | 2001    | 100       |
| and Plant Service    | and Plant   |          |         |           |
|                      | Service     |          |         |           |
+----------------------+-------------+----------+---------+-----------+

  2) Raw Material Procurement

-   Olefins Production

  The key raw material in Olefins production is Naphtha in which 70
  percent of total consumption comes from local oil refineries and the
  other 30 percent is imported from the Middle East and Indonesia. In
  addition, the plant has been designed to use alternative raw materials
  such as LPG, raffinate, and condensate in the production if Naphtha
  price is higher than other raw materials.

-   Polyolefins Production

  The business has long-term Olefins purchase contracts with PTT
  Chemicals PLC (PTTCH) at a total of 325,000 tons per year where price
  formula is referenced against the World market price. In addition, 52
  percent of the total Olefins production or 619,000 tons per year is
  supplied to Polyolefins plants within the Group. The rest is sold to
  external customers who are the business’s olefins plant shareholders.
  Moreover, the business is also able to procure more Olefins from PTTCH
  or import in case of Olefins shortages.

-   PVC Production

  The key raw material for PVC production is Vinyl Chloride Monomer
  (VCM) in which is 100 percent self-contained. Other raw materials are
  domestically supplied and imported from overseas. The raw materials
  for VCM production are ethylene dichloride (EDC) and ethylene. TPC
  produces 65 percent of its EDC demand in Rayong province and purchases
  the rest quantity through agents such as Mitsui, Mitsubishi, and
  Arkema.

  For ethylene, the business holds share in Rayong Olefins Co., Ltd. and
  PTTCH, and has ethylene purchasing contracts with both companies.

  3.2 Environmental Impact

  One of the SCG’s Philosophies is “Concern for Social Responsibility”
  which includes the environment conservation. Therefore, the business
  has chosen “Clean Technology” which is up-to-date, efficient, energy
  saving and environmental friendly technology – in the production
  process. The business has implemented the Environmental Management
  Best Practices by using 3Rs (Reduce, Reuse/recycle, and Replenish) and
  eco-efficiency concepts together with Best Available Control
  Technology which are one of the business’ commitment to protect the
  environment and operate its business on sustainability concept.

  Moreover, the business has applied and certified with ISO 14001
  Environmental Management Standard as well as examined the
  Environmental Performance Assessment Program (EPAP) by external
  institutions which are internationally accredited.

4. Undelivered Projects or High-Valued Purchase Agreements

  None

SCG Paper

1.  Product or Service Features

SCG Paper is the country’s leading manufacturer of pulp, paper, and corrugated containers. The business is the only integrated producer in Thailand with production process starting from pulp preparation to manufacture of printing and writing paper, packaging paper, and corrugated containers. Being in such position allows it to appropriately allocate the production capacity, efficiently control the costs, make it relatively less vulnerable to external changes, and add value to its products. There are two major groups of business as follows:

  1.1 Pulp and Printing & Writing Paper Business

  The main products are eucalyptus pulp and printing & writing paper.
  Pulp is used as raw material for kraft paper and printing & writing
  paper. Printing & writing paper is used for magazines, notebooks,
  textbooks, photocopy paper, and certain types of containers and
  labels.

  1.2 Packaging Paper & Corrugated Containers Business

  The major products comprise of kraft paper for the manufacture of
  corrugated containers, extensible sacks, kraft bags, core paper,
  gypsum linerboard, coated duplex board, and various types of
  corrugated containers packaging.

2. Market and Competition

  2.1 Marketing

  1) Marketing Strategy

  In order to increase a competitive advantage during the recession and
  intense competition, SCG Paper aims to continuously reduce production
  costs and fixed expenses as well as to introduce and support the new
  innovation in order to achieve the high satisfaction and serve
  customers’ needs.

  To response to the dynamic of customers’ needs, SCG Paper always
  focuses on innovative products and services. As the business believes
  that roles of packaging are not only packing and protecting, but also
  a selling tool, the business, thus, continuously develops products to
  serve the purposes. “High Graphic Printing Technique”, which is one of
  the latest techniques, can leverage the printing image on the
  corrugated as well as the coated duplex board, which is renowned on
  its glossy appearance. Another innovative product is “Micro flute”
  which was developed to serve packaging with sophisticated design.

  Besides corrugated packaging, SCG Paper’s Graphic Design Center has
  developed various products from corrugated board such as Paper
  Furniture and Paper Exhibition Booth, known for its environmental
  friendly and recyclable.

  In terms of service development, the business has invested and
  implemented in the Supply Chain Management System. The IT system links
  all system together to create smooth and flawless transaction which
  consequently improve accuracy and timely response to customers

  For Printing and Writing paper, SCG Paper has developed and launched
  “Text Pro” paper for Textbook printing. The outstanding properties for
  Text Pro are bulky and eye care shade. With these properties, the
  textbook from Text Pro paper will be lighter than textbook from offset
  paper, and reduces light reflection for long reading. Furthermore,
  “Text Pro” paper production consumes less power than the offset paper
  by 138.31 KWH/Ton or reduces Carbon Dioxide emission by 312 tons
  CO2/Year (Base on 3,600 tons of “Text Pro” production).

  In addition to “Idea Green” paper (produced from Ecofiber 30% and
  consuming less farmed trees than normal paper) that can maintain high
  whiteness and premium quality, the company has also introduced a new
  office paper named “Idea Work” under Idea brand to serve the market.
  “Ideal Work” paper is manufactured by innovative technology “N2”,
  therefore, this paper can definitely offer better whiteness,
  smoothness and thickness to support high quality printing.

  2) Customer Features and Channel of Distribution

  Pulp and Printing & Writing Paper Business

  Pulp

  Channel: Directly sold to affiliates in the Paper Business and
  external customers.

  Printing & Writing Paper

  Channel: 70 percent of total sales was served to domestic market by
  different channels, including Modern Trade and Stationeries Stores,
  and the rest was sold to export markets; Malaysia, Vietnam, Hong Kong,
  Vietnam and etc.

  Packaging Paper & Containers Business

  Channel: Directly sold to affiliated firms under SCG Paper and
  external customers. Products are including paper rolls for converting
  plants and converted products such as sheet board, paper bags, ream
  paper, and small rolls as well as exporting to several countries such
  as Malaysia, Indonesia, Hong Kong, Singapore, Vietnam and China etc.

  2.2 Industry, Competition, and Trend

1)  Pulp and Printing & Writing Paper Business

  In 2009, the world demand for bleached chemical pulp increased 3
  percent y-o-y. Demand in the first half of 2009 dropped 4 percent
  y-o-y, especially demand in the first quarter of 2009 sharply dropped
  by 8 percent y-o-y resulted from world’s economic slowdown since the
  end of 2008. However, after the second quarter of 2009, the demand has
  been improved mainly from strong buying activities in China. Average
  price in Asia in the first half of 2009 decreased from last year by 35
  percent, but rose around 8 percent when compared to the second half of
  2008 thanks to demand recovery.

  In the second half of 2009, the world demand of bleached chemical pulp
  increased by 10 percent y-o-y due to stockpiling for new paper
  machines startup in 2010 in China. The average inventory level at
  year-ended 2009 dropped 36 percent from last year and 12 percent
  compared to the first half of 2009. According to U.S. dollar
  depreciation and supply constraint, an average price in Asia in second
  half of 2009 dramatically increased 44 percent when compared to the
  same period of 2008, and increased by 34 percent from the first half
  of 2009.

  In 2009, the domestic pulp manufacturers faced with the same situation
  as global pulp manufacturers as pulp demand slump in the first half of
  2009 and improved in the second half of 2009.

  Domestic demand of printing and writing paper in 2009 shrank by 3
  percent y-o-y. Demand in the first half of 2009 was lower by 13
  percent compared to the first half of 2008 and decreased by 8 percent
  compared to the second half of 2008 due to the economic crisis. To be
  able to maintain sales volume, Thai paper manufacturers had relied on
  export markets. In the second half of 2009, domestic demand of
  printing and writing paper grew by 8 percent compared to the second
  half of 2008 and rose by 16 percent when compared with the first half
  year of 2009 due to the economic recovery.

2)  Packaging Paper & Corrugated Container Business

  In 2009, demand for packaging paper decreased by 3.5 percent y-o-y as
  a result of the global recession beginning in late 2008. Domestic
  consumption and Thailand export sector had been decreased while the
  political uncertainty has negative impact on consumer confident index
  resulted in soft demand.

  As global demand dropped, all packaging manufacturers had to adjust
  their production plan to be responded to reduce demand by implementing
  market-related downtime.

  Nevertheless, the consumer confident index and export sectors have
  shown improvement in the forth quarter, leading to a demand recovery.
  Looking ahead, a growth in packaging demand is expected to see in
  2010.

  As for the corrugated containers, sales volume decreased by 3 percent
  due to the sluggish economy. Producers in several industries were
  negatively affected and consumers had cut their spending. However, the
  sign of economic recovery in the second half of 2009 had pushed up
  sales volume as customers in the export-based industries, such as
  electrical appliances, increased their purchasing orders.

3. Product or Service Procurement

3.1 Raw Material and Suppliers

1) Pulp and Printing & Writing Paper

  Pulp

Raw Material Type: Eucalyptus logs and chips

  Source: Eucalyptus log and chips are bought mainly from open market
  and contract farming.

  Printing & Writing Paper

  Raw Material Type: Bleached long fiber pulp, bleached short fiber
  pulp, and chemicals.

  Source:

-   Bleached long fiber pulp from import.

-   Bleached short fiber pulp from local vendors.

-   Chemicals, synthetic latex, kaolin powder, calcium carbonate, and
    others from local and import.

  Obstacles: Bleached long fiber pulp is entirely imported with 30-45
  days lead-time.

2) Packaging Paper & Containers Business 

  Packaging Paper

  Raw Material Type: Wastepaper, bleached and unbleached short fibre
  pulp, bleached and unbleached long fibre pulp, and chemicals

  Source:

-   70 percent wastepaper from local vendors and 30 percent from import.

-   Bleached short fibre pulp from local vendors.

-   Unbleached short fibre pulp from local and import. Bleached and
    unbleached long fibre pulp from import.

-   Main chemicals such as starch, sizing agent, color, and others from
    local and import.

  Obstacles: Unbleached long fibre pulp is entirely imported within
  30-45 days lead-time. Bleached and unbleached short fibre pulps are
  procured domestically while unbleached long fiber pulps depended on
  few suppliers. The domestic supply of wastepaper is also limited to
  high competition in the market.

  Corrugated Containers

  Raw Material Type: Kraft paper

  Source: From Siam Kraft Industry Co., Ltd., a subsidiary of SCG Paper.
  (supply over 50 percent of raw material throughout the past 3 years)

  Obstacles: No obstacle due to adequate supply and controllable
  quality. Selling price is set by referring to current market price to
  optimize fair and competitive cost

3.2 Environmental Impact

  SCG Paper’s vision is set to be a world-class paper company with a
  strong presence in ASEAN, which has driven persistently to innovate
  value while committed to sustainable development and betterment of the
  environmental.

  As the company believes in the equilibrium among the economic,
  environmental and social dimensions, the vision is set to be a
  well-recognized corporation in social responsibility in order to
  ensure the long term growth in accordance with sustainable business
  practices.

  SCG Paper provides continuously the Sustainability Report in order to
  show the intention in business environmental management, for example,
  indicating the Business Environmental Performance Indicators,
  providing Human Resources Training Program and setting active Action
  Plans.

  In 2009, SCG Paper paid attention to two important aspects of
  environmental and humankind concerns, which are “Biodiversity” and
  “Climate Change”.

-   Biodiversity: SCG Paper has been able to uphold its sustainable
    forest management policy in keeping with the globally certified
    standards of the Forest Stewardship Council (FSC). The company is
    pleased to be the first Thai paper company to be recognized for the
    FSC standards, including the pulp product that has been certified
    FSC Chain-of-Custody (CoC). The certification offers consumers new
    and better environment-friendly choices. In 2009, Siam Forestry Co.,
    Ltd, one of SCG Paper’s subsidiaries, was given an award from the
    Ministry of Natural Resources and Environment for its significant
    contributions towards biodiversity conservation, restoration and
    sustainable management.

-   Climate Change: SCG Paper has set up a working group to work on the
    projects aiming to reduce greenhouse gas emissions under the “Kyoto
    Protocol” and promote global climate change awareness. In 2009, the
    company, along with employees and their families, customers, local
    communities, schools and government agencies built more than 1,000
    check dams in the provinces of Ratchaburi, Kanchanaburi, and Khon
    Kaen. These check dams contributed to an increase in moisture
    retention of surrounding forest area within a remarkably short
    period of time as well as contribute to long–term local ecology.
    Also, the other contribution was to foster a sense of solidarity and
    responsibility among the participating groups for the health of the
    environment.

  Besides ISO 9001 and 14001, which are internationally agreed standards
  that provide guidelines for a Quality Management System, SCG paper
  also implements “Green procurement” program to ensure
  environmental-friendly in procuring the office supplies and raw
  materials.

  Participation with communities

  SCG Paper encourages employees to get involved voluntarily in
  activities that benefit nearby communities, which will bring mutual
  understanding between employees and communities and create the
  awareness in social responsibility. The participating employees will
  act on behalf of SCG Paper in order to explain to the company about
  the exact problems and needs of their communities. The practices,
  thus, are in line with the business’ belief in the sustainable
  development that needed to be implemented in environmental, economy
  and social dimensions, simultaneously. Moreover, SCG Paper has
  introduced the youth camp named “SCG Paper Green Academy” to enhance
  young people’s knowledge and let them convey the message to their
  families and communities and promote more balanced development
  henceforth.

  SCG Paper is well aware that corporate progress depends on the
  engagement of all stakeholders, from shareholders, clients, suppliers,
  employees, business partners and contractors, as well as communities,
  government agencies, academics, NGOs, and environmental groups. These
  various parties are affected positively or negatively by the company’s
  actions, both directly and indirectly. SCG Paper is thus committed to
  dialogue with the stakeholders and mutual engagement in the processes
  of sustainable development, social and environmental, and corporate
  governance. An independent organization will monitor these practices
  in order to ensure stakeholder satisfaction, which results in
  effective social and environmental strategic planning of the company.

4.  Undelivered Projects or High-Valued Purchase Agreements

  None

SCG Cement

1.  Types of Products and Services

  1.1 Products and Services

  Products and services in cement business are primarily classified
  according to its manufacturers as follows:

+--------------------------------+-------------------------------------+
| Company                        | Products and Services               |
+--------------------------------+-------------------------------------+
| The Siam Cement (Ta Luang)     | Grey Cement                         |
| Co., Ltd.                      |                                     |
|                                | - Portland Cement Type I (Elephant  |
|                                | Brand)                              |
|                                |                                     |
|                                | - Portland Cement Type II           |
|                                |                                     |
|                                | - Portland Cement Type III          |
|                                | (Elephant Brand)                    |
|                                |                                     |
|                                | - Portland Cement Type V (Elephant  |
|                                | Brand)                              |
|                                |                                     |
|                                | - Portland Cement Pozzolan          |
|                                | (Elephant Brand)                    |
|                                |                                     |
|                                | - Portland Cement Oil Well          |
|                                | (Elephant Brand)                    |
|                                |                                     |
|                                | - Mixed Cement (Tiger Brand and     |
|                                | Super Cement Brand)                 |
|                                |                                     |
|                                | - Precast Cement (Elephant Brand)   |
+--------------------------------+-------------------------------------+
| The Siam Cement (Kaeng Khoi)   |                                     |
| Co., Ltd.                      |                                     |
+--------------------------------+-------------------------------------+
| The Siam Cement (Thung Song)   |                                     |
| Co., Ltd.                      |                                     |
+--------------------------------+-------------------------------------+
| The Siam Cement (Lampang) Co., |                                     |
| Ltd.                           |                                     |
+--------------------------------+-------------------------------------+
| The Kampot Cement Co.,Ltd.     |                                     |
|                                |                                     |
| (Incorporated in Cambodia)     |                                     |
+--------------------------------+-------------------------------------+
| The Concrete Products and      | Concrete Products                   |
| Aggregate Co., Ltd.            |                                     |
|                                | - Ready-mixed Concrete (CPAC Brand) |
|                                |                                     |
|                                | - Precast Concrete Products (CPAC   |
|                                | Brand)                              |
|                                |                                     |
|                                | - Post-Tension Concrete (CPAC       |
|                                | Brand)                              |
+--------------------------------+-------------------------------------+
| The Siam White Cement Co.,     | - Portland White Cement (White      |
| Ltd.                           | Elephant Cement Brand)              |
|                                |                                     |
|                                | - Mixed White Cement (White Tiger   |
|                                | Cement Brand)                       |
+--------------------------------+-------------------------------------+
| Siam Mortar Co., Ltd.          | - Dry Mortar (Tigers Mortar Brand)  |
|                                |                                     |
|                                | - Tile Adhesive (Tigers Mortar      |
|                                | Brand)                              |
+--------------------------------+-------------------------------------+
| The Siam Refractory Industry   | - Fireclay Bricks (Elephant Brand)  |
| Co., Ltd.                      |                                     |
|                                | - Special Refractory (Elephant      |
|                                | Brand)                              |
+--------------------------------+-------------------------------------+
| SCI Plant Services Co., Ltd.   | - Engineering Design, Building,     |
|                                | Construction, Installation,         |
|                                | Improvement ,and Maintenance        |
+--------------------------------+-------------------------------------+
| SCI Eco Services Co., Ltd.     | - Disposal of Industrial Waste      |
+--------------------------------+-------------------------------------+

  Grey cement, ready-mixed concrete, precast concrete products,
  post-tension concrete and white cement are typically used for building
  houses, factories, office buildings, including large infrastructures
  of the country such as roads, bridges. Customers, thus, range from
  small-sized end users to large contractors. Traditionally, products
  and services are sold through: 1) dealer network nationwide under the
  SCG 2) direct sale to large construction contractors.

  1.2 Factors affecting opportunities or constraints in business
  operations: Concession and its conditions

  (Companies in SCG Cement are not in the scope of BOI promoted
  industries; therefore, they do not earn the privileges.)

  Cement manufacturing process needs key raw materials such as
  limestone, shale, and gypsum. The business consequently assures its
  raw material sources by purchasing some sources and request for
  long-term concessions from the government.

Details of Currently Utilized Concessions of The Siam Cement Public
Company Limited and Companies under SCG Cement

+-----------+---------+---------+-------+-------+---+------+------+
| Conce     | L       | Type of | N     | Type  | A | R    | Ex   |
| ssionaire | ocation | Mineral | umber | of    | r | emai | piry |
|           | (Pr     |         | of    | Area  | e | ning | Year |
|           | ovince) |         | Conce |       | a |      |      |
|           |         |         | ssion |       | ( | Y    |      |
|           |         |         | (Co   |       | R | ears |      |
|           |         |         | pies) |       | a | of   |      |
|           |         |         |       |       | i | Co   |      |
|           |         |         |       |       | ) | nces |      |
|           |         |         |       |       |   | sion |      |
+===========+=========+=========+=======+=======+===+======+======+
| The Siam  | S       | Li      | 16    | Owned | 4 | 9    | 2018 |
| Cement    | araburi | mestone |       | by    | , |      |      |
| Public    |         | for     |       | Royal | 5 |      |      |
| Company   |         | cement  |       | F     | 8 |      |      |
| Limited   |         | i       |       | orest | 0 |      |      |
|           |         | ndustry |       | Depar |   |      |      |
|           |         |         |       | tment |   |      |      |
|           |         |         |       | (RFD) |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           |         | Pyrop   | 1     | RFD   | 9 | 19   | 2028 |
|           |         | hyllite |       |       | 4 |      |      |
|           |         |         | 2     | RFD   |   | 23   | 2032 |
|           |         |         |       |       | 1 |      |      |
|           |         |         |       |       | 8 |      |      |
|           |         |         |       |       | 2 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Pijit   | Gypsum  | 1     | RFD   | 2 | 3    | 2012 |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 8 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Nakorn  | Gypsum  | 3     | RFD   | 8 | 1    | 2010 |
|           | Sawan   |         |       |       | 5 |      |      |
|           |         |         | 1     | RFD   | 6 | 22   | 2031 |
|           |         |         |       |       |   |      |      |
|           |         |         |       |       | 2 |      |      |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 7 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Lopburi | Iron    | 1     | RFD   | 1 | 1    | 2010 |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 3 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Nakorn  | Li      | 19    | RFD   | 5 | 1    | 2010 |
|           | Sri     | mestone |       |       | , |      |      |
|           | Th      | for     |       |       | 0 |      |      |
|           | ammarat | cement  |       |       | 0 |      |      |
|           |         | i       |       |       | 7 |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           |         | Shale   | 1     | Owned | 1 | 6    | 2015 |
|           |         | for     |       | by    | 5 |      |      |
|           |         | cement  |       | the   | 0 |      |      |
|           |         | i       |       | Co    |   |      |      |
|           |         | ndustry |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Lampang | Kaolin, | 2     | RFD   | 3 | 2    | 2011 |
|           |         | L       |       |       | 6 |      |      |
|           |         | ignite, | 1     | RFD   | 1 | 5    | 2014 |
|           |         | Ball    |       |       |   |      |      |
|           |         | Clay    |       |       | 2 |      |      |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 7 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Sur     | Gypsum  | 1     | Owned | 7 | 3    | 2012 |
|           | atthani |         |       | by    | 8 |      |      |
|           |         |         |       | the   |   |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| SCG       | Lampoon | Lignite | 1     | Owned | 2 | 6    | 2015 |
| Cement    |         |         |       | by    | 2 |      |      |
| Co., Ltd. |         |         |       | the   | 8 |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Sur     | Gypsum  | 1     | Owned | 7 | 3    | 2009 |
|           | atthani |         |       | by    | 8 |      |      |
|           |         |         |       | the   |   |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Lampang | Lignite | 1     | RFD   | 2 | 23   | 2032 |
|           |         |         |       |       | 0 |      |      |
|           |         |         |       |       | 9 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | Lampang | Li      | 17    | RFD   | 4 | 9    | 2018 |
| Cement    |         | mestone |       |       | , |      |      |
| (Lampang) |         | for     |       |       | 9 |      |      |
| Co., Ltd. |         | cement  |       |       | 8 |      |      |
|           |         | i       |       |       | 7 |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           |         | Shale   | 3     | RFD   | 8 | 2    | 2011 |
|           |         | for     |       |       | 4 |      |      |
|           |         | cement  | 2     | RFD   | 4 | 9    | 2018 |
|           |         |         |       |       |   |      |      |
|           |         | i       |       |       | 5 |      |      |
|           |         | ndustry |       |       | 9 |      |      |
|           |         |         |       |       | 7 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | S       | Li      | 10    | RFD   | 2 | 18   | 2027 |
| Cement    | araburi | mestone |       |       | , |      |      |
| (Kaeng    |         | for     |       |       | 5 |      |      |
| Khoi)     |         | cement  |       |       | 7 |      |      |
|           |         | i       |       |       | 5 |      |      |
| Co., Ltd. |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           |         | Shale   | 3     | Owned | 8 | 18   | 2027 |
|           |         | for     |       | by    | 7 |      |      |
|           |         | cement  |       | the   | 4 |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         | i       |       | mpany |   |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | S       | Li      | 5     | RFD   | 9 | 21   | 2030 |
| Cement    | araburi | mestone |       |       | 5 |      |      |
|           |         | for     | 1     | RFD   | 4 | 17   | 2569 |
| (Ta       |         | cement  |       |       |   |      |      |
| Luang)    |         | i       |       |       | 2 |      |      |
| Co., Ltd. |         | ndustry |       |       | 7 |      |      |
|           |         |         |       |       | 9 |      |      |
|           |         | Ind     |       |       |   |      |      |
|           |         | ustrial |       |       |   |      |      |
|           |         | soil    |       |       |   |      |      |
|           |         | for     |       |       |   |      |      |
|           |         | cement  |       |       |   |      |      |
|           |         | i       |       |       |   |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+

The concessionaires shall operate within the conditions of the laws
regarding the concessions as follows:

  1) Conditions under Mineral Laws

1.  Pay special benefits for the government in exchange for the
    concession within the first ten years since receiving the
    concession.

2.  Strictly operate the mine according to the mining project layout and
    pay the royalty fee subject to the quantity used.

3.  Operate under safety and occupational health measures without
    causing harm to employees, contractors, third parties, the
    environment and any properties.

4.  Develop the mined areas into safety conditions.

5.  Monthly report the mining to The Department of Primary Industries
    and Mines.

  2) Conditions under Forestry Laws

1.  Pay compensation by the legal rates for forest plantation in mined
    areas.

2.  Operate the mine by controlling the effect to the forest and
    minimizing the wood cut down.

3.  When ten years is reached, prepare the post evaluation report and
    present to The National Environment Committee.

4.  Strictly obey the conditions in the permission to utilize the
    forestry area.

  3) Conditions under Environmental Laws

1.  Obey the conditions, and the preventive and corrective measures on
    environmental impact as described in The Environmental Impact
    Assessment Report (EIA).

2.  Revive the environment nearby the mines as well as set up an
    environment revival fund by allocating budget for such activities.
    Annually report the progress to The Office of Natural Resources and
    Environment Policy and Planning.

3.  Measure the quality of the air, water, noise and shakes around the
    mine, and then annually report the result to The Office of Natural
    Resources and Environment Policy and Planning to ensure that the
    quality conforms to the government standards.

4.  Present the EIA report on potential utilization of the area to both
    The Mining Expert Committee and The National Environment Committee
    before extending the concession maturity.

2.  Market and Competition

  2.1 Policy and Market Features of Main Products and Services

  Currently, SCG Cement has five grey cement plants in Thailand, namely
  as follows:

  1) Ta Luang Cement Plant (Saraburi) 2) Khao Wong Cement Plant
  (Saraburi) 3) Kaeng Khoi Cement Plant (Saraburi) 4) Thung Song Cement
  Plant (Nakorn Sri Thammarat) 5) Lampang Cement Plant (Lampang), and
  one overseas cement plant, namely “Kampot Cement Company Limited”, in
  Cambodia. With the market share of approximately 42 percent, SCG
  Cement is the largest cement producer in the country.

  The business invariably places its value on creating products and
  services that timely respond to customers’ needs and meet customer
  satisfactions with state of the art of modern manufacturing technology
  and quality control system. Altogether with its 95 years manufacturing
  experiences, these ensure that its products and services contain
  higher quality than normal standards and competitors’ products.
  Furthermore, SCG Cement is the only Thai Cement Company that owns a
  research and development unit. As a result, SCG Cement is the first
  and the only cement producer in Thailand that coated the plastic layer
  in cement bags to keep the product fresh and prevent breakages. With a
  corporate commitment to continually respond to customers’ needs, the
  business has launched an innovative product under “Super Cement” brand
  since late 2008. In 2009, the business rolled out an innovative
  product under “Sea Resistance Elephant Cement” with a special formula
  design for concrete work located nearby coastal areas or submerged in
  sea water. These products are widely perceived as good quality with
  economic price. The business also provides technical service teams to
  recommend about production process, quality control, and cost
  reduction as well as provide advising and solve any related problems.
  Therefore, customers can promptly notify their problems via the
  business’s Customer Complaint Call Center.

  The business has supported assorted marketing and public welfare
  activities. For example, it annually performs educational activities
  including Elephant Concrete Fair, a project with its main purpose of
  enhancing knowledge and developing concrete technological skills. It
  also provides grey cement for educational purpose to universities and
  vocational schools. Moreover, the business supports sports activities,
  i.e. Tiger Cement Thai Boxing, and other public welfare such as
  building small check dams nationwide under the royal initiative
  project, donating blankets for the poor, supporting college student
  volunteer camp campaigns nationwide as well as building permanently
  residential structures with Department of Skill Development, etc.

  For the proportion of the business’s sale market in 2009, it comprises
  56 percent and 44 percent of domestic sale and export sale
  respectively. Key channels of domestic distribution are through: 1)
  the Group’s dealer network, 2) subsidiaries that produce related
  products such as ready-mixed concrete, roof tiles, and precast
  concrete slabs, etc., and 3) a direct sale to concrete product
  manufacturers and large contractors.

  About an overseas sale, the business has assigned SCT Co., Ltd., a
  trading agent company under the SCG group, as its representative to
  export clinker for foreign cement producers and bulk cement for
  general cement users. Nowadays, major export markets are in America,
  South Asia, Southeast Asia, and Africa, all of which have a
  continuously increasing demand both in forms of clinker and bulk
  cement. Apart from its low manufacturing cost leadership in the
  region, the business gains more advantage over its competitors in
  other regions in low shipping cost for the South Asia and the
  Southeast Asia.

  2.2 Competition and Capacity

  In 2009, the domestic cement demand became close to that of the
  previous year, primarily due to a continued slowdown of both domestic
  and global economies including negative factors, i.e. political
  violence, fluctuation on fuel and raw material prices. Consequently,
  consumers’ confidence has undermined and project investments from
  private sector have further slowed down. Furthermore, lower export
  volume of cement due to world economy slow down has inevitably caused
  an intense competition within the country. To cope with cyclical
  economic downturn and avoid price competition, the business has
  exerted more emphasis on key strategies to maintain its leadership in
  the marketplace through research and development of new products and
  services, customers’ relationship and cost reduction program. The
  business has also implemented distribution network expansion, and
  channel improvement nationwide, with an utmost aim to strengthen the
  business’s competitive edge in the long term and to enhance customer
  satisfaction through convenience in purchasing of products and
  services.

  List of Grey cement manufacturers in Thailand are as follows:

  ---- ----------------------------------------- -------------------------
                                                 Million tons per year

  1)   SCG Cement Co., Ltd.                      23.2

  2)   The Siam City Cement PLC                  14.5

  3)   TPI Polene PLC                            9.0

  4)   Asia Cement PLC                           4.8

  5)   Jalaprathan Cement PLC                    2.3

  6)   Thai Pride Cement Co., Ltd.               0.9

  7)   Cemex (Thailand) Co., Ltd.                0.7

  8)   Thai Satapana Co., Ltd.                   0.1

  9)   Samakki Cement Co., Ltd.                  0.1

       Total Country Capacity                    55.6
  ---- ----------------------------------------- -------------------------

3. Products and Services Procurement

  3.1 Product Procurement Feature

+---------+---+------+---+------------------+--------+-----------------------+
| Type    | N |      | P |                  | Local  | Remark                |
|         | u |      | r |                  | /      |                       |
|         | m |      | o |                  |        |                       |
|         | b |      | c |                  | F      |                       |
|         | e |      | u |                  | oreign |                       |
|         | r |      | r |                  |        |                       |
|         | o |      | e |                  |        |                       |
|         | f |      | m |                  |        |                       |
|         | S |      | e |                  |        |                       |
|         | e |      | n |                  |        |                       |
|         | l |      | t |                  |        |                       |
|         | l |      | m |                  |        |                       |
|         | e |      | e |                  |        |                       |
|         | r |      | t |                  |        |                       |
|         | s |      | h |                  |        |                       |
|         |   |      | o |                  |        |                       |
|         |   |      | d |                  |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Main    |   |      |   |                  |        |                       |
|  Raw Ma |   |      |   |                  |        |                       |
| terials |   |      |   |                  |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Li      |   | -    |   | -                | 100% / | Own supply sources    |
| mestone |   |      |   |                  | 0%     | and self-operate.     |
+---------+---+------+---+------------------+--------+-----------------------+
| Shale   |   | -    |   | Long-term        | 100% / | Own supply sources.   |
|         |   |      |   | contracts with   | 0%     | Long-term contracts   |
|         |   |      |   | external         |        | with contractors.     |
|         |   |      |   | contractors.     |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Sand    |   | A    |   | Occasional       | 100% / | Own supply sources    |
|         |   | bout |   | purchase from    | 0%     | kept as reserve.      |
|         |   | 3    |   | long-timed       |        | Currently buy from    |
|         |   |      |   | sellers.         |        | external sellers.     |
+---------+---+------+---+------------------+--------+-----------------------+
| Clay    |   | A    |   | Long-term        | 100% / | Own supply sources.   |
|         |   | bout |   | contracts with   | 0%     | Currently have        |
|         |   | 3    |   | external         |        |                       |
|         |   |      |   | contractors.     |        | long-term contracts   |
|         |   |      |   |                  |        | with contractors and  |
|         |   |      |   |                  |        | partly buy from       |
|         |   |      |   |                  |        | external suppliers.   |
+---------+---+------+---+------------------+--------+-----------------------+
| L       |   | A    |   | Occasional       | 100% / | Own supply sources    |
| aterite |   | bout |   | purchase from    | 0%     | kept as reserve.      |
|         |   | 4    |   | long-timed       |        | Currently buy from    |
|         |   |      |   | sellers.         |        | external sellers.     |
+---------+---+------+---+------------------+--------+-----------------------+
| Gypsum  |   | A    |   | Long-term        | 100% / | Currently buy from    |
|         |   | bout |   | contracts with   | 0%     | external sellers and  |
|         |   | 6    |   | suppliers and    |        | partly operate from   |
|         |   |      |   | partly operate   |        | own sources.          |
|         |   |      |   | from own         |        |                       |
|         |   |      |   | sources.         |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Kraft   |   | 2    |   | Buy from         | 90% /  | Currently buy from    |
| Paper   |   |      |   | affiliates.      | 10%    | SCT                   |
+---------+---+------+---+------------------+--------+-----------------------+
| Type    |   | Nu   |   | Procurement      | Local  | Remark                |
|         |   | mber |   | method           | /      |                       |
|         |   | of   |   |                  |        |                       |
|         |   | Sel  |   |                  | F      |                       |
|         |   | lers |   |                  | oreign |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Fuels   |   |      |   |                  |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Lignite |   | 4    |   | Long-term        | 100% / | Self-operate from its |
|         |   |      |   | contracts with   | 0%     | supply sources and    |
|         |   |      |   | suppliers        |        | buy from external     |
|         |   |      |   |                  |        | suppliers.            |
+---------+---+------+---+------------------+--------+-----------------------+
| Pe      |   | 1    |   | Long-term        | 0% /   | Buy from SCT          |
| troleum |   |      |   | contracts with   | 100%   |                       |
| Coke    |   |      |   | suppliers        |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Lignite |   | 5    |   | Long-term        | 0% /   | Buy from SCT and      |
|         |   |      |   | contracts with   | 100%   | external suppliers.   |
|         |   |      |   | suppliers and    |        |                       |
|         |   |      |   | occasional       |        |                       |
|         |   |      |   | buying.          |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Bunker  |   | 4    |   | Occasional       | 100% / |                       |
| Oil     |   |      |   | buying.          | 0%     |                       |
+---------+---+------+---+------------------+--------+-----------------------+
| Biomass |   | 18   |   | Long-term        | 100% / | Buy from external     |
| e.g.    |   |      |   | contracts with   | 0%     | suppliers.            |
| husk,   |   |      |   | suppliers and    |        |                       |
| palm    |   |      |   | occasional       |        |                       |
| shell,  |   |      |   | buying.          |        |                       |
| sa      |   |      |   |                  |        |                       |
| w-dust, |   |      |   |                  |        |                       |
| etc.    |   |      |   |                  |        |                       |
+---------+---+------+---+------------------+--------+-----------------------+

  3.2 Environment Protection

SCG Cement has pursued environment plans as follows:

  1) Environment Protection

1.  Green and Clean Plant: The business sets an environmental policy by
    requiring all cement plants and their surrounding areas to be “Green
    and Clean Plants. This helps reduce scattering dust as well as
    protect surrounded local communities and environments. Additionally,
    to promote environmental concerns among employees, the business has
    initiated and implemented environmental caring campaigns of which
    are named “Do It Clean” and “Do It Green” since 2004 and 2005
    respectively and continued to launch these campaigns ever since.

2.  Dust Control: The business has installed electrostatic
    precipitators, the most efficient machines, and bag filer machines
    to collect dust in every manufacturing process that causes dust.
    Besides, its preventive maintenance plans enable the plants to work
    efficiently all the time. It also provides raw material silos and
    closed transportation systems to reduce dust spread. Regarding
    mining, the modernized and environmentally-friendly Semi-Open Cut
    Mining has been introduced. This opens the face of the mine deep
    into the middle of the hills like stairways while the surface still
    maintains the mountain features. It can dwindle the unsightly
    scenery and also prevent noise and dust from scatterings. During the
    mining process, water is sprayed nearby the raw material receipt
    basin and when piles are scattered. To reduce dust dispersion while
    transporting, water is also sprayed on raw materials and roads. For
    the previous mining areas, the business embarked on an environmental
    plan so as to revive mining areas to its original nature by
    recovering surface and planting local trees.

3.  Water Usage: Water used to reduce gas temperature from cement
    burning process and machinery chilling process is reused via The
    Closed Circuit System, encouraging worthy water usage with no impact
    on the environment.

4.  Environmental Quality Monitoring and Auditing: Apart from installing
    efficient machines to control environmental quality in manufacturing
    process to meet or exceed government standards, the business also
    regularly measures the quality of air from factory stacks, in the
    community around the factories, and in the offices accordingly to
    the environmental impact analysis report. Moreover, the business has
    installed the automatic system known as “The Continuous Emission
    Monitoring Systems (CEMS)” by completing the installment at every
    kiln stack within 2009. In addition, there are mobile vans to
    monitor air quality and environmental laboratories to prevent
    environmental impact probably caused by business operations.

5.  Water Conservation: The business has further taken on HM the king’s
    initiative in conserving the sources of water by supporting nearby
    communities to build check dams in the deforestation areas nearby
    cement plants. All of them are built to reduce the speed of water
    flows in rainy season, increase moisture to soils, prevent wildfire,
    and can be used as water reservoirs during a severe drought.

  2) Natural Resources Conservation

1.  Raw Materials and Fuel Substitutes: In 2009, the business used
    approximately 15% of alternative fuels (AF) by heat value in its
    manufacturing process. Alternative fuels mainly comprise biomass and
    industrial waste. The business has reused biomass and industrial
    waste as raw materials and fuel substitutes in cement production
    without any impact on product quality and environment. Not only does
    this reduce natural resources consumption, but also helps the
    country eradicate industrial waste. Currently, every SCG Cement
    plants have been received Total Waste Quality Adjustment Permit
    (Number 101); the Company is the first to be awarded such permit. In
    2009, the plants under SCG could replace approximately 2 percent of
    fossil fuels used in cement burners with scraps and industrial
    waste. Up to now, about 700 factories have contacted the company
    under SCG Cement to treat their scraps and industrial waste.

2.  Substitution raw materials: In 2009, the business used substitution
    raw materials approximately 165,000 tons in its cement manufacturing
    process. In addition, CPAC used approximately 750,000 tons of
    Pulverized Fly Ash (PFA) in its ready mixed concrete business.

3.  Energy Usage: The business has regularly monitors energy usage of
    each plant in order to continuously improve machine efficiency. This
    has reduced energy consumption either in forms of electricity or
    fuel in production process. The amount of energy consumption is also
    determined as an indicator of cement production efficiency.

4.  Electricity Generator Fuelled by Waste Heat: The business has
    progressively been in the process of installing small electricity
    generators, fuelled by waste heat energy recovered from cement
    production process, at every cement plant. In 2009, 3 of the total 7
    projects of Waste Heat Power Generators (WHG) have been completed
    and could reduce approximately 6 percent of electricity usage, while
    the remaining projects are under construction. Total investment is
    estimated at Baht 5,850 million and shall contribute to Baht 1,500
    million per year cost saving upon the project completion. In
    addition, it is estimated that 309,000 tons per annum of carbon
    dioxide (CO2) shall be reduced through such projects.

  3) Sustainable Development

1.  Communal and Social Support: Apart from strictly conserving the
    environment, the business has regularly generated social activities
    to strengthen relationship with communities by exploring needs and
    satisfaction of local communities toward the Company. It also
    strongly intends to develop local communities with creativity and
    participation in assorted activities to improve the quality of life
    for the surrounding people and societies. Different dimensions
    prevail such as community activities including One Cell One Project
    (OCOP), educational activities including providing cement for
    educational purpose for department of vocational education and
    various universities nationwide. In addition, the business has
    contributed to social activities such as providing cement for
    rebuilding school, giving cement to college student volunteer camps,
    sports activities including boxing etc.

2.  Employee Support: The business believes that employees are the most
    valuable resource, so it places significance on their welfare and
    quality of life, including occupational health and work safety for
    every employee. The business provides working environment
    improvement, knowledge and understanding development, as well as
    safety awareness for their workforce with strong intentions to
    prevent accidents among all of them.

3.  Management System: In order to efficiently manage the environment
    and safety as a fundamental working system, every company has to
    comply with the ISO 14001-Environment Management Standard and the
    TIS 18001-Occupational Health and Safety Management Standard with
    consistent reviews and evaluations. The Siam Cement (Ta Luang) Co.,
    Ltd. was the first who receive every certification in management
    system, namely, ISO 9001, ISO 14001, and TIS 18001. Nowadays, every
    grey cement plant of the Group has already received all of the above
    certifications. Moreover, the business joined with Thailand
    Environment Institute (TEI) to set up a prototype project namely
    “Greening the Supply Chain” to help, develop and improve small to
    medium suppliers to environmental friendly operate the business and
    this should not increase operational costs. Another project was
    assessing the effect of Cement Life Cycle in order to statistically
    collect fundamental data of Thailand for future reference.

4.  Awards: The business places an importance on the quality management
    of organization, aiming for satisfaction and contentment of
    stakeholders that include customers, suppliers, shareholders,
    employees, and the society. The Siam Cement (Thung Song) Co., Ltd.
    was the first cement manufacturer in the world to receive the 2002
    Deming Application Prize from the Union of Japanese Scientists and
    Engineers (JUSE). This is the most famous and widely accepted prize
    for the Total Quality Management: TQM. The Siam Refractory Industry
    Co., Ltd. was also the first refractory manufacturer in the world to
    received Deming Application Prize in 2003. In addition, Siam White
    Cement Company was the latest to received Deming Application Prize
    in 2009. continuous social and environment contribution of the
    Company accomplishes its good acceptance from communities,
    government, and private agencies as can be seen from several awards,
    e.g. Prime Minister Awards for Environmental Conservation from The
    Ministry of Industry, Compliance to Environmental Impact Reduction
    Measures Award from The Ministry of Science, Technology, and
    Environment, Outstanding Awards for Safety in Workplace from The
    Ministry of Labour and Social Welfare, and Occupational
    Safety/Health Awards from National Safety Council of The United
    States of America. All of them have expressed the business’s
    ambitions to develop and make a stride of progress toward every
    management aspect so as to achieve the highest level of efficiency.

    4. Undelivered Projects or High-Valued Purchase Agreements

  None

SCG Building Materials

1.  Product or Service Features There are products and services as the
    follows:

1.  Roofing products such as fibre-cement roof tile, concrete roof tile
    and ceramic roof tile

2.  Ceramic wall and floor tile

3.  Ceiling and wall products

4.  Concrete products such as paving blocks and concrete floor tile

5.  Others e.g. insulation product

2.  Market and Competition

  2.1 Competition Strategy

  The business concentrates on product development to serve customer
  needs with quality control and compliance to international standards
  and environment protection measures instead of competing with price.
  This strategy reflects in the receiving of Deming Application Prize
  from the Union of Japanese Scientists and Engineers (JUSE) of Thai
  Ceramic Co., Ltd. Besides, the business develops distribution channels
  for roofing products, ceramic tiles and housing system by establishing
  Roofing Center, COTTO Tiles Studio and Home Solution, respectively.
  These centers have the concept of one-stop shop and service to respond
  to customer lifestyle.

  2.2 Target Group

-   Roofing product target groups can be classified by product, price,
    and application as follows:

+----------------------+----------------------+-----------------------+
| Product              | Target               | Price                 |
|                      | Group/Application    |                       |
+----------------------+----------------------+-----------------------+
| Fibre-Cement Roof    | Up-country           | Medium                |
| Tile                 | owner-built houses   |                       |
+----------------------+----------------------+-----------------------+
| Concrete Roof Tile   | Housing Project,     | Medium to high        |
|                      |                      |                       |
|                      | Owner-built houses   |                       |
+----------------------+----------------------+-----------------------+
| Ceramic Roof Tile    | Owner-built houses   | High                  |
+----------------------+----------------------+-----------------------+

-   Ceramic products can be classified as follows:

  ----------------------- ----------------------- -----------------------
  Product                 Target                  Price
                          Group/Application       

  COTTO                   Medium to high income   Medium to high
                          segment                 

  SGI Tiles , SOSUCO and  Medium to low income    Medium
  CAMPANA                 segment                 
  ----------------------- ----------------------- -----------------------

-   Concrete products can be grouped according to application and
    beauty, e.g. paving blocks, which can be used on road, sidewalk,
    lawn, multi-purpose yard, and parking lot, etc.

  2.3 Channel Distribution

  Most products are sold through the Group’s exclusive dealers
  throughout the country.

-   Roof and concrete products are 95 percent domestic sales and 5
    percent export sales, mainly exports to Indochina and Myanmar.

-   Ceramic tiles are 75 percent domestic sales and 25 percent foreign
    sales. Most exports are to the U.S.A., Australia, Europe, and ASEAN
    countries.

  2.4 Management

  The business continues organization development for achieving
  sustainable growth along the current line of business operation. For
  example, future leader development project which prepares every level
  of management to be ready for future business plan.

  2.5 Competition

  Due to an intensely growing demand for domestic building products in
  the past 4-5 years, the business adheres to its policy to increase
  sales by developing better product and service. It also regularly
  launches new products for more customer choices.

-   Major competitors in Roofing products:

1.  Mahaphant Group

2.  Diamond Roofing Tile PLC

3.  Oran Group

-   Major competitors in Ceramic Tile Products:

1.  Dynasty Ceramic PLC

2.  The Union Mosaic Industry PLC

3.  The Royal Ceramic Industry PLC

-   Major competitors in Ceiling and Wall Products:

1.  Mahaphant Group

2.  Diamond Roofing Tile PLC

3.  Conwood Co., Ltd.

-   Major competitors in Concrete Products:

1.  Chonburi Concrete Products Co., Ltd.

2.  Southern Concrete Block Co., Ltd.

  The business has the highest market share and capacity share in
  roofing tiles, ceramic tile, and concrete product markets.

3.  Raw Material Procument

There are two main raw materials:

-   Fibre-cement roof tile, concrete roof tile, and concrete products
    use cement as their key raw materials. There is no shortage because
    SCG Cement has the largest cement capacity.

-   Ceramic tile and ceramic roof tile use clay as their raw materials.
    The business buys clay from several domestic suppliers. In addition,
    the business and the Group own some sources that can last for over
    ten years.

Regarding other raw materials, the business secures long-term contracts
with local and foreign suppliers without profoundly depending on any
specific supplier to ensure the sufficiency.

For environmental impact, the business has a strict policy to treat
safety and the environment that might be affected by production process
and raw material or service procurement. Pollution control devices were
installed. At present, most companies accredited ISO certifications.

4.  Undelivered Projects or High-Valued Purchase Agreements

  None

SCG Distribution

1. Product or Service Feature

The SCG Distribution is responsible for both domestic and international
trading and providing logistic services for a number of SCG’s affiliates
and outside customers. SCG Distribution Co., Ltd. is the Holding company
with the following key subsidiaries.

1.  SCG Network Management Co., Ltd. is responsible for domestic
    distribution of building materials and home improvement products
    through network of authorized dealers and Home Mart stores
    nationwide.

2.  SCG Logistics Management Co., Ltd. provides logistics services in
    both domestic and ASEAN countries in order to build strong logistic
    network in neighbor countries including coastal logistics.

3.  SCT Co., Ltd. is responsible for international trading including
    imports and exports as well as offshore trade.

4.  SCG Experience Co., Ltd. provides consultation by experts, creative
    services, cutting edge technology, and quality products.

2. Markets and Competition

  Market Policy and Features

The SCG Distribution mainly focuses on creating values for customers and
business partners. This can be done by continuous development of
effective standard distribution system for various building materials
and home improvement to efficiently achieve customer responses, and by
synergizing all companies to offer a full range of services for
customers.

SCG Network Management Co., Ltd.

  Competition Strategy

  Management and Service

  The business provides strong domestic distribution network for
  building materials and home improvement products through 450 dealers
  across Thailand with an aim to timely respond to all type of
  customer’s needs.

  To increase service potential for suppliers and customers, the
  business developed IT network which links the company, the
  manufacturers, and all dealers to efficiently coordinate through the
  Business-to-Business e-Commerce.

  In addition, the Company adopted Customer Relationship Management
  (CRM) concept to manage customer relationship through 3 channels,
  which are wholesaling, retailing and project channels. Moreover,
  SAP-CRM software has been installed as a tool to enhance the
  collecting and analyzing of data.

SCG Logistics Management Co., Ltd.

  Competition Strategy

  Management and Service

  The Company provides modern, accurate, and prompt transportation
  services and warehouse management through a transportation contractor
  network. Modern information technology links all operations to timely
  and correctly distribute products to every segment of retailers,
  wholesalers, factories, and projects throughout the country and across
  borders. The Company emphasizes on transportation efficiency to reduce
  costs and improve services for internal and external customers with
  concerns for environment and safety.

  SCT Co., Ltd.

  Competition Strategy

  Management and Service

  SCT Co., Ltd. is one of the top international trading companies in
  ASEAN. The Company focuses significantly on value-added services,
  especially for energy products and raw material to serve certain
  requirements of customers which are factories inside and outside the
  Group.

  Currently, the company has 31 branches in various countries, i.e.
  Cambodia, Vietnam, Myanmar, Malaysia, the Philippines, Singapore,
  India, Bangladesh, The United Arab Emirates, Jordan, Australia, Laos,
  China, Taiwan, Indonesia, Canada, Tanzania, the U.S.A., Russia,
  Poland, and South Africa. Products are categorized into 5 main
  categories, which are cement products, building material products,
  energy and industrial products, recycling products, import-export,
  including freight and logistics service for overseas.

  SCG Experiences Co., Ltd.

  Competition Strategy

  Management and Service

  The company’s goal is to inspire, encourage and support consumers and
  makers to reach good home building, good living, and sustainable
  lifestyle. By providing consultation by experts, creative services,
  cutting edge technology, and quality products, consumers will be able
  to make smart decisions to develop sustainable lifestyles. SCG
  Experience will listen to every need of consumers for creating maximum
  satisfaction and building long term relationship with consumers and
  society. With cutting edge technology, innovation, and creative
  services the company commit to deliver the best to our consumers.