3. Operation of Each Business Unit

Chemicals Business

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. By-products from the olefins plant such as
  Mix-C4, Benzene and Toluene are mainly consumed within the Company’s
  and/or subsidiaries’ downstream plants. The Company’s current Olefins
  capacity is 1,200,000 tons per year and is the largest single site
  production in Thailand.

1.2 Polyolefins

  Polyolefins are the Company’s main products and are currently being
  produced at Thailand’s largest single-site plant at a 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 to form, and good resistance to chemicals. 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, and electric power cord
    insulators, 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, and
    traffic cones, 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 in industrial and agricultural films to
    produce plastic rice bags, 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, and surface coatings, 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, and car components, etc.

  1.3 Poly Vinyl Chloride (PVC)

  Products from Thai Plastics and Chemicals Public Company Limited can
  be divided into two main categories:

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

2)  PVC Compound – is normally in powder or a pellet form which has
    already been dry-blend 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, etc. Due to its many outstanding features such as
    resistance to changing weather, fire retardant, light weight and non
    rusty, it can be use as an insulator, sheath for electrical wire,
    telephone cable, pipes, 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, 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 with a fairly volatile price cycle.

1) Competitive Strategy

-   Price and Cost

  Both domestic and export prices of Polyolefins are closely correlated
  to the World market prices. The Company manages to create a price
  premium by offering high quality products and differentiated
  value-added services to its customers. In terms of cost management,
  the Company 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, by being a fully
  integrated player, the Company utilizes Total Productivity Management
  and Total Quality Management concepts and by following these two
  principles the Company has been awarded with the Deming Application
  Prize. The Company has also invested in advanced IT and e-Business
  systems, such as e-Supply Chain, e-Commerce website, Advanced Process
  Control and CRM Portal to achieve best-in-class efficiency and
  customer satisfaction.

-   Product Quality Management

  One of the Company’s main policies is to produce high quality products
  without any effects on the environment and communities. In addition,
  the Company also gives great importance to occupational health and
  safety management systems. Every plant is certified by the
  international quality system, namely ISO 9001, ISO 14001 and TIS
  18001. The Company invests in research and development to constantly
  improve its product quality to meet changing customer expectations.

-   Service

  The Company 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 customers’ needs leading
  to sustainable customer relationship. Moreover, the Company provides
  technical assistance in Polyolefins conversion with fast and accurate
  delivery. It also 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, an excellent management with accurate and rapid decisions is
  very important. Therefore, the Company has implemented Supply Chain
  Management system which consists of forecasts of order, 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 Company to better satisfy customers’ needs and better
  respond to industry’s changes. Moreover, the Company is using new
  technologies to continuously improve its Supply Chain Management
  system including Radio Frequency Identification system to increase
  efficiency in feedstock management, Vender management inventory system
  to reduce the amount of inventory in stock and set up Hub and Spoke
  warehouses both domestically and internationally to reduce delivery
  time and utilizes energy efficient transport mediums such as trains
  and ships.

2) Customer Features and Target Groups

  Target groups are Polyolefins converters which are classified
  according to formation types such as film, injection molding,
  monofilament & yarn, blow molding, and others like lamination,
  extrusion, and piping.

  The Company’s customers are mostly small and fragmented and the
  Company does not sell products to a single customer over 30 percent of
  total sales. Hence, the company is risk adverse as it is not dependent
  on one customer.

3) Channel of Distribution

  In 2006, domestic and export sales of Polyolefins are 60 percent and
  40 percent respectively.

-   Domestic

  There are two types of customers of which 80 percent are domestic
  customers and 20 percent are re-exporters. For the former, 45 percent
  is through direct sales by the Company while the rest (55 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 company.

-   Exports

  The Company mainly exports to the Asia-Pacific region. Products are
  distributed directly to end-users or local distributors so that
  customers’ needs are satisfied efficiently. At present, the Company
  has 6 representative offices internationally which are located in
  Myanmar, Vietnam, Philippines, China (Shanghai and Guangzhou) and
  Japan. The proportion for the export market is 38 percent in Southeast
  Asia, 20 percent in East Asia, 6 percent in South Asia and 36 percent
  in other regions.

  As the Company internationally exports around 437,000 tons per year
  without concentrating in any one 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
  Company is able to manage export products quantities for profit
  maximization as prices may differ depending on market conditions of
  each country.

  2.2 Competition and Capacity

-   Domestic

  Thailand has Polyolefins capacity of approximately 3.1 million tons
  per year while the country’s demand in 2006 was approximately 2.0
  million tons. Therefore, 35 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 Company has the highest Polyolefins capacity in the
  country (about 35 percent). Details as shown below:

Unit: thousand tons/year

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

  The Siam Cement Public        560      100      100      320      1,080
  Company. (SCC)                                                    

  Integrated Refinery and       140      -        150      475      765
  Petrochemical Company (IRPC)                                      

  HMC Polymers (HMC)            -        -        -        455      455

  Siam Polyethylene (SPE) *     -        300      -        -        300

  PTT Chemical (PTTCH)          250      -        -        -        250

  Bangkok Polyethylene (BPE)    250      -        -        -        250

  Total Capacity                1,200    400      250      1,250    3,100
  ----------------------------- -------- -------- -------- -------- --------

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

  Source: SCC, Petroleum Institute of Thailand.

-   Foreign

  In 2006, Polyolefins demand in Asia equaled 39.6 million tons with
  China as the largest importer. Major exporters are producers in the
  Middle East, Korea, and Singapore.

  Olefins and Polyolefins Market in 2006 and Trend in 2007

  In 2006, the price of Polyolefins has increased from 2005 by 19
  percent to USD 1,233 per ton following world economy growth and delays
  in additional Polyolefins capacity from the Middle East. The main raw
  material ‘Naphtha’ price has also increased by 20 percent to USD 583
  per barrel due to high crude oil prices from political uncertainties
  in oil producing countries. This has resulted in an increase in the
  feed-to-product margin by 20 percent to USD 650 per ton.

  In 2007, The Company expects a decrease in Polyolefins price due to
  supply expansions from China and the Middle East, which will intensify
  the market competition. Naphtha price is expected to stay constant.
  While the feed-to-product margin is expected to slightly decline.

3. Product or Service Procurement

3.1 Product Procurement Feature

1) Production

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

+-----------------+----------------+----------+---------+------------+
| Company         | P              | Cap      | Year    | %          |
|                 | roduct/Service | acity (T | First O | Sh         |
|                 |                | on/Year) | perated | areholding |
+=================+================+==========+=========+============+
| Rayong Olefins  | Ethylene       | 800,000  | 1999    | 63         |
|                 |                |          |         |            |
|                 | Propylene      | 400,000  |         |            |
+-----------------+----------------+----------+---------+------------+
| Thai            | HDPE 1         | 140,000  | 1989    | 100        |
| Polyethylene    |                |          |         |            |
|                 | HDPE 2         | 180,000  | 1997    |            |
| Thai            |                |          |         |            |
| Polyethylene    | HDPE 3         | 240,000  | 2001    |            |
| (1993)          |                |          |         |            |
|                 | LLDPE          | 100,000  | 1990    |            |
| Thai            |                |          |         |            |
| Polypropylene   | LDPE           | 100,000  | 1995    |            |
|                 |                |          |         |            |
| Thai            | PP 1           | 140,000  | 1993    |            |
| Polypropylene   |                |          |         |            |
| (1994)          | PP 2           | 180,000  | 1997    |            |
+-----------------+----------------+----------+---------+------------+
| Thai Plastics   | PVC Resin      | 440,000  | 1971    | 45         |
| and Chemicals   |                |          |         |            |
| PLC.            |                |          |         |            |
+-----------------+----------------+----------+---------+------------+
| PT. TPC Indo    | PVC Resin      | 120,000  | 1996    | 78         |
| Plastic and     |                |          |         |            |
| Chemicals       |                |          |         |            |
+-----------------+----------------+----------+---------+------------+
| Map Ta Phut     | Jetty and Tank | -        | 1998    | 90         |
| Tank Terminal   | Terminal       |          |         |            |
+-----------------+----------------+----------+---------+------------+
| Rayong Pipeline | Pipe           | -        | 1998    | 91         |
|                 | Transportation |          |         |            |
+-----------------+----------------+----------+---------+------------+
| Rayong          | Engineering    | -        | 2001    | 100        |
| Engineering and | and Plant      |          |         |            |
| Plant Service   | Service        |          |         |            |
+-----------------+----------------+----------+---------+------------+

2) Raw Material Procurement

-   Olefins Production

  The key raw material in Olefins production is Naphtha in which 30
  percent comes from local oil refineries and the other 70 percent are
  imported from the Middle East and Indonesia. In addition, the plant
  has been designed so that it is able to use other substitute raw
  materials such as LPG, raffinate and condensate, in the case that
  prices of Naphtha are higher than other raw materials.

-   Polyolefins Production

  The Company has long-term Olefins purchase contracts with PTTCH at a
  total of 325,000 tons per year where price formula is referenced
  against the World market price. In addition, 56 percent of the total
  Olefins production or 679,000 tons per year of Olefins which has been
  produced by the Company will be supplied to Polyolefins plants within
  the Group. The other 44 percent are sold to external customers who are
  the Company’s olefins plant shareholders. Moreover, the Company is
  also able to buy more Olefins from PTTCH or import in the case of
  Olefins shortages.

3.2 Environmental Impact

  One of the Company’s Business Philosophy is “Concern for Social
  Responsibility” including looking after the environment. Therefore,
  the Company has chosen to use “Clean Technology”, an energy
  conservative and environmentally friendly technology, which
  effectively utilizes all the feedstock and utilities. Moreover, the
  Company has implemented the Environmental Management Best Practices
  emphasizing its commitment to continuously improve the environmental
  management system. As a result, all of the Company’s plants have
  received ISO 14001 certification.

4. Undelivered Projects or High-Valued Purchase Agreements

None

Paper Business

1.  Product or Service Features

The Siam Pulp and Paper Public Company Limited and its subsidiaries are leaders in pulp and paper products in Thailand. Since the Company is the only Thai integrated investor in related pulp, paper, and container industries starting from preparing pulp for affiliates to produce printing and writing paper, packaging paper, and containers, it can efficiently control the cost, reduce profit fluctuations, and add value to its products. There are two major groups of business as follows:

1.  Pulp and Printing & Writing Paper Business

  Main products are eucalyptus pulp, bagasse pulp, and printing &
  writing paper. Pulp is used as raw material for Kraft paper and
  printing & writing paper. Printing paper is used for magazines,
  notebooks, textbooks, photocopy paper, some types of containers and
  labels.

2.  Packaging Paper & Containers Business

  Major products comprise Kraft paper for corrugated paper boxes or
  extensible sack kraft bag cored paper, gypsum liner board, coated
  duplex board and corrugated paper boxes for various packaging and
  containers

2.  Market and Competition

  2.1) Marketing

  2.1.1 Marketing Strategy

Due to intense competition, the Company places important value on
product, service and technology development for highest customer
satisfaction. Packaging Paper Business developed new product as “Mira
Board”, paperboard laminated with metalized PET, giving it a highly
smooth and glossy finish and excellent water repellent properties. It
helps boast a distinctive modern appeal to products. This kind of paper
used for display box on showing shelf.

Containers Business continually developed basic quality on great
strength for protecting goods in transit. It also developed printing for
adding fine-look. And Containers Business launched new products to match
customer needs as Paper Pallet and Slip Sheet. These are specially
designed to provide great strength, increasingly used as an alternative
to wood pallets. In addition, it developed Triple Wall sheet board, made
from 7 piles of kraft paper bonded together, is used for the manufacture
of corrugated containers for heavy loads.

The Company developed its service via implementing information
technology to improve customer comfort and effectiveness. This is
Product Catalogue Ordering Service System, so that its customers are
able to track the progress of order.

Printing and Writing Paper Business did well for marketing campaign by
introducing Green Read Paper. It is an innovative eyesight friendly
paper launched to pocket-book printing business, whereas improved
colorful printing process for reader attractions. Three outstanding
properties are reduced light reflection to contact readers’ eyes, light
weight and new-looking.

In addition, the Company build its own trademark “Offset PRO” for new
offset paper. This kind of paper was developed by new technology to
boost better resolution in high quality printing.

  2.1.2 Customer Features

Pulp and Printing & Writing Paper Business

  Sold to affiliates in the Paper Business, external customers like
  agents, direct users such as printing houses, and paper processing
  plants and exported to Hong Kong, the U.S.A., Singapore, Malaysia,
  Vietnam etc.

Packaging Paper & Containers Business

  Sold to affiliates in the Paper Business, external customers and
  exported to

Malaysia, Hong Kong, Singapore, Vietnam and China, etc.

  2.1.3 Channel of Distribution

Pulp and Printing & Writing Paper Business

  Pulp

  Channel : Sold to affiliated in the Paper Business, as well as direct
  sell to external customers.

  Proportion: 100 percent direct sales

  Printing & Writing Paper

  Channel : Sold to domestic customers via dealers and direct users i.e.
  printing house and factory for 85 percent and export for 15 percent.

Packaging Paper & Containers Business

  Channel : Sold to affiliates and external customers by direct sales.
  Products sold are comprise of big rolls for paper processors and
  processed paper such as corrugated board, paper bags, ream paper,
  small rolls and corrugated paper boxes for various packaging and
  containers

  Proportion: 100 percent direct sales

  2.2) Industry, Competition, and Trend

Pulp and Printing & Writing Paper Business

  By the IMF evaluation,the world economy had increased from 4.9 percent
  in year of 2005 to 5.1 percent in 2006 resulting in up to 48.4 million
  ton higher worldwide demand of bleaching chemical pulp in 2006 (4.3
  percent up from previous year). The situation of world pulp market in
  previous year indicated that the average inventory level of major
  world pulp producer had dropped 200,000 tons monthly to the average
  level of 3.25 million ton in year of 2006, comparing with 3.45 million
  ton in previous year. This caused by the termination of some paper
  pulp factories in Europe and America representing the losing of 2
  Million ton production capacity annually in global market resulting in
  increasing price level of bleaching chemical pulp through the year of
  2006 as exemplified by the Asia Market price level higher USD 100-200
  per ton.

  For the domestic market of pulp market, the demand of short fibre is
  close to previous year with the main customers of Printing Paper and
  Napkin Manaufacturer Group. Nevertheless, while in all of higher
  demand of domestic market, still there are some manufacturers
  switching to use paper scrap for cost reduction purpose replacing the
  higher cost of the short fibre pulp.

  For the printing paper business, the demand in year of 2006 of such
  paper had decreased 3 percent from previous year causing by the
  uncertainty of economy resulting not only in the delay of consumption
  in the other printing business but also in severe competition among
  domestic manufacturers that have to utilize their surplus capacities
  for export market for the purpose to avoid the price war. Moreover,
  the export sector also severely indicated competitive due to the huge
  surplus of supply in regional market.

Packaging Paper & Container Business

  Due to the sluggish economy in domestic market, the competitiveness
  still prevailed with over supply. Moreover, the impact from higher
  fuel and energy price, the fluctuation of raw material price had
  resulted in the soaring manufacturing cost while the adjusted sale
  price cannot be made commensurately.

  The export sector also had indicated severe competitive like domestic
  one deriving from the expansion of production capacity of some Asia
  manufacturers, especially Chinese.

  The Container Industry still continuously had growth and development
  especially with supportive Government campaign, OTOP and SMEs
  resulting in the tendency of manufacturers to continuingly and
  increasingly perform R&D , technology design for being more
  competitive

  Product or Service Procurement

3.1 Raw Material and Suppliers

Pulp and Printing & Writing Paper Business

  Pulp

Raw Material Type: Eucalyptus portions, and Bagasse.

  Source: Eucalyptus portions bought from agriculturists supported by
  the Company and from general agriculturists. Bagasse bought from sugar
  factories.

  Printing & Writing Paper

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

  Source:

-   Bleached long fibre pulp from 8 foreign vendors.

-   Bleached short fibre pulp from 3 local suppliers.

-   Chemicals, synthetic latex, kaolin powder, calcium carbonate, and
    others from 50 Thai and foreign suppliers.

  Obstacles: Bleached long fibre pulp is entirely imported with 30-45
  days lead-time. Bleached short fibre pulp is locally supplied.

Packaging Paper Business 

  Raw Material Type: Waste paper, bleached and unbleached short fibre
  pulp, bleached and unbleached long fibre pulp, and chemicals.

  Source:

-   60 percent Waste paper from 270 local suppliers and 40 percent from
    60 foreign suppliers.

-   Bleached short fibre pulp from 3 domestic suppliers.

-   Unbleached short fibre pulp from 1 domestic supplier and 1 foreign
    supplier. Bleached and unbleached long fibre pulp from 13 overseas
    suppliers.

-   Main chemicals such as cassava starch, sizing agent, color, and
    others from 53 local and foreign suppliers.

  Obstacles: Unbleached long fibre pulp is all imported which takes
  30-45 days. Bleached and unbleached short fibre pulps are totally
  found in the Country. Unbleached long fibre pulp was limited supplied,
  so that it depended on particular players. Local waste paper is in
  limited supply with a rather competitive buying. Import is therefore
  made with a higher price.

Containers Business 

  Raw Material Type: Kraft paper.

  Source: From Siam Kraft Industry Co., Ltd., a Group company.

  Obstacles: No obstacle due to plentiful supply and controllable
  quality. Selling price is referred to market price to support fair
  cost and competitive capability.

  Seller upon which over 50 percent raw material purchases for three
  consecutive years relies: Siam Kraft Industry Co., Ltd.

3.2 Environmental Impact

The Company intends to build awareness in environmental importance for
every level of employees by improving one’s work, the unit’s work, and
cross-unit works. The main objective is to systematically and
consistently seek better environment with a policy to reduce pollution
from water, smoke, dust, noise, odor, and waste caused by production
process, transportation of raw materials and products, and other
processes. Such measures are shown below:

1.  Minimize pollution that destroys quality of water, air, soil,
    plants, and animals in the ecosystem. Pollution necessary to be
    emitted must be controlled to meet or exceed the government
    standards.

2.  Waste or water treatment must be done with safety and
    responsibility. Such waste and water would be recycled as much as
    possible.

3.  In case of accidents or emergency affecting the environment,
    occupational health, and employee and communal safety, emergency
    plans with modern technology and methods are regulated as well as
    regular training for staff’s readiness for the incidents.

4.  Formulate and review objectives and targets in environment
    management to achieve systematic and consistent improvement.

5.  Monitor, audit, and evaluate the environmental management to meet
    government regulations and comply with the system.

6.  Cooperate with governmental agencies and private organizations
    interesting in environment management to publicize the Company.

This environmental management policy was documented and submitted to
every level of employees for their understanding and preservation.

Environmental Management for plants at Ban Pong, Ratchaburi Province and
Wang Sala District, Amphur Ta Muang, Kanchanaburi Province is the total
pollution treatment system, which can be categorized into three aspects
as follows:

1. Treatment of Waste Water from Production Process

In the Waste Minimization System, installed traps capture fibres escaped
from the production process for reuse. Clear water is also re-used in
appropriate areas, and then treated in The Activated Sludge Treatment
with the first high treatment efficiency technology of Jet Aeration in
Thailand. This technology better reduces energy consumption and
maintenance than The Surface Aerator (Jet Aeration is from the U.S.A.
and is widely used in the U.S.A., Canada, and the EU). In addition,
about 10,000 cubic meters a day of treated wastewater is gravitated sand
filtered and germicide by ultraviolet before being recycled for plant
usage instead of water from artesian wells.

2. Treatment of Air from Energy Production

Steam boilers currently used are Circulating Fluidized Beds which are
designed to use scraps, e.g. sugarcane pith, bark, and dregs from
wastewater treatment system, combining with domestic lignite. Moreover,
Electrostatic Precipitators with 99.9 percent efficiency as well as
sulphur dioxide treatment systems with limestone entrapping and burning
temperature controls are used to limit nitrogen dioxide quantity.

3. Treatment of Production Scraps

There are two types of production scraps as described below:

-   Reusable Scraps For example, sugarcane pith, bark, and dregs from
    wastewater treatment can be used as fuels to partly replace lignite
    in steam boilers.

-   Non-reusable Scraps For example; fly ash which contractors collect
    as ready-mixed concrete ingredient, and bottom ash that is covered
    up in the factory area.

In summary, both Ban Pong plants and Wang Sala Plants of the Company
exceed the standards regulated by The Department of Industrial Works,
The Ministry of Industry, to control wastewater treatment, air emission,
and occupational health concerns.

3.  Undelivered Projects or High-Valued Purchase Agreements

None

Cement Business

1.  Types of Products and Services

1.1 Products and Services

  Products and services in cement business are primarily classified
  according to their 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     |
|                                | Tiger Plus 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 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 Brand)                     |
|                                |                                     |
|                                | - Mixed White Cement (White Tiger   |
|                                | Brand)                              |
+--------------------------------+-------------------------------------+
| Siam Mortar Co., Ltd.          | - Dry Mortar (Twin Tigers Brand)    |
|                                |                                     |
|                                | - Tile Adhesive (Twin Tigers 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
  Distribution Business of The Siam Cement Group 2) direct sale to large
  construction contractors.

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

  (Cement Business is not in the scope of BOI promoted industries;
  therefore relevant companies do not earn the privileges.)

  Cement manufacturing process needs key raw materials such as
  limestone, shale, and gypsum. The Company 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 The Siam Cement Industry Co., Ltd.

+-----------+---------+---------+-------+-------+---+------+------+
| 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 | Y    |      |
|           |         |         | ssion |       | ( | ears |      |
|           |         |         | (Co   |       | R | of   |      |
|           |         |         | pies) |       | a | Co   |      |
|           |         |         |       |       | i | nces |      |
|           |         |         |       |       | ) | sion |      |
+===========+=========+=========+=======+=======+===+======+======+
| The Siam  | S       | 1.      | 16    | Owned | 4 | 12   | 2018 |
| Cement    | araburi | Li      |       | by    | , |      |      |
| Public    |         | mestone | 1     | Royal | 5 | 22   | 2028 |
| Company   |         | for     |       | F     | 8 |      |      |
| Limited   |         | cement  |       | orest | 0 |      |      |
|           |         | i       |       | Depar |   |      |      |
|           |         | ndustry |       | tment | 9 |      |      |
|           |         |         |       | (RFD) | 4 |      |      |
|           |         | 2.      |       |       |   |      |      |
|           |         | Pyrop   |       | RFD   |   |      |      |
|           |         | hyllite |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Pijit   | Gypsum  | 1     | RFD   | 2 | 6    | 2012 |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 8 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Nakorn  | Gypsum  | 3     | RFD   | 8 | 4    | 2010 |
|           | Sawan   |         |       |       | 5 |      |      |
|           |         |         | 1     | RFD   | 6 | 25   | 2031 |
|           |         |         |       |       |   |      |      |
|           |         |         |       |       | 2 |      |      |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 7 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Lopburi | Iron    | 1     | RFD   | 1 | 4    | 2010 |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 3 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Nakorn  | 1.  Li  | 19    | RFD   | 5 | 4    | 2010 |
|           | Sri     | mestone |       |       | , |      |      |
|           | Th      |     for | 1     | Owned | 0 | 9    | 2015 |
|           | ammarat |         |       | by    | 0 |      |      |
|           |         |  cement |       | the   | 7 |      |      |
|           |         |     i   |       | Co    |   |      |      |
|           |         | ndustry |       | mpany | 1 |      |      |
|           |         |         |       |       | 5 |      |      |
|           |         | 2.      |       |       | 0 |      |      |
|           |         |   Shale |       |       |   |      |      |
|           |         |     for |       |       |   |      |      |
|           |         |         |       |       |   |      |      |
|           |         |  cement |       |       |   |      |      |
|           |         |     i   |       |       |   |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Lampang | Kaolin, | 1     | RFD   | 8 | 2    | 2008 |
|           |         | L       |       |       | 7 |      |      |
|           |         | ignite, | 2     | RFD   |   | 5    | 2011 |
|           |         | Ball    |       |       | 3 |      |      |
|           |         | Clay    | 1     | RFD   | 6 | 8    | 2014 |
|           |         |         |       |       | 1 |      |      |
|           |         |         |       |       |   |      |      |
|           |         |         |       |       | 2 |      |      |
|           |         |         |       |       | 9 |      |      |
|           |         |         |       |       | 7 |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Sur     | Gypsum  | 1     | Owned | 7 | 6    | 2012 |
|           | atthani |         |       | by    | 8 |      |      |
|           |         |         |       | the   |   |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| Siam      | Lampoon | Lignite | 1     | Owned | 2 | 9    | 2015 |
| Cement    |         |         |       | by    | 2 |      |      |
| Industry  |         |         |       | the   | 8 |      |      |
| Co., Ltd. |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
|           | Sur     | Gypsum  | 1     | Owned | 3 | 3    | 2009 |
|           | atthani |         |       | by    | 9 |      |      |
|           |         |         |       | the   |   |      |      |
|           |         |         |       | Co    |   |      |      |
|           |         |         |       | mpany |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | Lampang | 1.      | 17    | RFD   | 4 | 12   | 2018 |
| Cement    |         | Li      |       |       | , |      |      |
| (Lampang) |         | mestone | 3     | RFD   | 9 | 5    | 2011 |
| Co., Ltd. |         | for     |       |       | 8 |      |      |
|           |         | cement  | 2     | RFD   | 7 | 12   | 2018 |
|           |         | i       |       |       |   |      |      |
|           |         | ndustry |       |       | 8 |      |      |
|           |         |         |       |       | 4 |      |      |
|           |         | 2.      |       |       | 4 |      |      |
|           |         | Shale   |       |       |   |      |      |
|           |         | for     |       |       | 5 |      |      |
|           |         | cement  |       |       | 9 |      |      |
|           |         | i       |       |       | 7 |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | S       | 1.      | 10    | RFD   | 2 | 21   | 2027 |
| Cement    | araburi | Li      |       |       | , |      |      |
| (Kaeng    |         | mestone | 3     | Owned | 5 | 21   | 2027 |
| Khoi)     |         | for     |       | by    | 7 |      |      |
| Co., Ltd. |         | cement  |       | the   | 5 |      |      |
|           |         | i       |       | Co    |   |      |      |
|           |         | ndustry |       | mpany | 8 |      |      |
|           |         |         |       |       | 7 |      |      |
|           |         | 2.      |       |       | 4 |      |      |
|           |         | Shale   |       |       |   |      |      |
|           |         | for     |       |       |   |      |      |
|           |         | cement  |       |       |   |      |      |
|           |         | i       |       |       |   |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+
| The Siam  | S       | Li      | 5     | RFD   | 9 | 24   | 2030 |
| Cement    | araburi | mestone |       |       | 5 |      |      |
| (Ta       |         | for     |       |       | 4 |      |      |
| Luang)    |         | cement  |       |       |   |      |      |
| Co., Ltd. |         | i       |       |       |   |      |      |
|           |         | ndustry |       |       |   |      |      |
+-----------+---------+---------+-------+-------+---+------+------+

  The Siam Cement Public Company Limited and companies under The Siam
  Cement Industry Co., Ltd. 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 areas already mined into safety areas.

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 10 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. 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 an evaluation report on potential utilization of the area to
    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, the Cement Business has five grey cement plants, 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). With
  the market share of approximately 42 percent, the Siam Cement Industry
  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 90 years manufacturing
  experiences, these ensure that its products and services contain
  higher quality than normal standards and competitors’ products.
  Furthermore, Siam Cement Industry is the only Thai Cement Company that
  owns a research and development unit. As a result, Siam Cement
  Industry is the first and the only cement producer in Thailand that
  originated the plastic layer in cement bags to keep the product fresh
  and prevent breakages. The Company also provides technical service
  teams to recommend product usage and solve any related problems. In
  addition, customers can promptly notify their problems via the
  Company’s Customer Complaint Call Center.

  The Company has supported assorted marketing and public welfare
  activities. For example, it annually generates 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 company supports sports activities,
  i.e. Tiger Cement Thai Boxing, and other public welfare such as
  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.

  Regarding the proportion of product distribution, the Company commands
  63 percent domestic sale and 37 percent export. Key channels of
  domestic distribution are through: the Group’s dealer network,
  subsidiaries that produce related products such as ready-mixed
  concrete, roof tiles, and precast concrete slabs, etc.; and a direct
  sale to concrete product manufacturers and large contractors.

  About an overseas sale, the Company has assigned SCT Co., Ltd., a
  trading agent company under 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 Company gains
  more advantage over other regions in low shipping cost for the South
  Asia and the Southeast Asia.

2.2 Competition and Capacity

  After the economic crisis in 1997, cement consumption demand in
  Thailand had greatly declined, especially during 1999-2001, the grey
  cement demand dropped to 18-19 million tons per year. Even though in
  2006, it increased to 27 million tons with an export of 14 million
  tons, the grey cement industry still has had excess capacity since
  total country capacity was 56 million tons. This has inevitably led to
  an intense domestic price competition. To avoid such competition, the
  Company has exerted more emphasis on research and development of new
  products and services, as well as on distribution network expansion
  and channel improvement nationwide, with an utmost aim to strengthen
  the company’s competitive edge in the long term, along with enhancing
  customer satisfaction in terms of providing more convenience in
  purchase of products and services.

  Grey cement manufacturers in Thailand are currently comprised of:

  million tons per year

  1) The Siam Cement Industry 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 PCL. 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     | Num | Procurement method | Local/  | Remark             |
|          | ber |                    | Foreign |                    |
|          | of  |                    |         |                    |
|          | S   |                    |         |                    |
|          | ell |                    |         |                    |
|          | ers |                    |         |                    |
+==========+=====+====================+=========+====================+
| Ma       |     |                    |         |                    |
| in Raw M |     |                    |         |                    |
| aterials |     |                    |         |                    |
+----------+-----+--------------------+---------+--------------------+
| L        | -   | -                  | 100% /  | Own supply sources |
| imestone |     |                    | 0%      | and self-operate.  |
+----------+-----+--------------------+---------+--------------------+
| Shale    | -   | Long-term          | 100% /  | Own supply         |
|          |     | contracts with     | 0%      | sources. Long-term |
|          |     | external           |         | contracts with     |
|          |     | contractors.       |         | contractors.       |
+----------+-----+--------------------+---------+--------------------+
| Sand     | Ab  | Occasional         | 100% /  | Own supply sources |
|          | out | purchase from      | 0%      | kept as reserve.   |
|          | 5   | long-timed         |         | Currently buy from |
|          |     | sellers.           |         | external sellers.  |
+----------+-----+--------------------+---------+--------------------+
| Clay     | Ab  | Long-term          | 100% /  | Own supply         |
|          | out | contracts with     | 0%      | sources. Currently |
|          | 3   | external           |         | have               |
|          |     | contractors.       |         |                    |
|          |     |                    |         | long-term          |
|          |     |                    |         | contracts with     |
|          |     |                    |         | contractors and    |
|          |     |                    |         | partly buy from    |
|          |     |                    |         | external           |
|          |     |                    |         | suppliers.         |
+----------+-----+--------------------+---------+--------------------+
| Laterite | Ab  | Occasional         | 100% /  | Own supply sources |
|          | out | purchase from      | 0%      | kept as reserve.   |
|          | 8   | long-timed         |         | Currently buy from |
|          |     | sellers.           |         | external sellers.  |
+----------+-----+--------------------+---------+--------------------+
| Gypsum   | Ab  | Long-term          | 100% /  | Currently buy from |
|          | out | contracts with     | 0%      | external sellers   |
|          | 6   | suppliers and      |         | and partly operate |
|          |     | partly operate     |         | from own sources.  |
|          |     | from own sources.  |         |                    |
+----------+-----+--------------------+---------+--------------------+
| Kraft    | 1   | Buy from           | 100% /  |                    |
| Paper    |     | affiliates.        | 0%      |                    |
+----------+-----+--------------------+---------+--------------------+
| Fuels    |     |                    |         |                    |
+----------+-----+--------------------+---------+--------------------+
| Lignite  | Ab  | Long-term          | 70% /   | Buy 30% from       |
|          | out | contracts with     | 30%     | affiliates and 70% |
|          | 4   | suppliers and      |         | from external      |
|          |     | occasional buying. |         | suppliers.         |
+----------+-----+--------------------+---------+--------------------+
| P        | 3   | Long-term          | 0% /    | Buy from 1         |
| etroleum |     | contracts with     | 100%    | affiliate and from |
| Coke     |     | suppliers and      |         | 2 external         |
|          |     | occasional buying. |         | suppliers.         |
+----------+-----+--------------------+---------+--------------------+
| Lignite  | 4   | Long-term          | 0% /    | Buy from 1         |
|          |     | contracts with     | 100%    | affiliate and from |
|          |     | suppliers and      |         | 3 external         |
|          |     | occasional buying. |         | suppliers.         |
+----------+-----+--------------------+---------+--------------------+
| Bunker   | 4   | Occasional buying. | 100% /  |                    |
| Oil      |     |                    | 0%      |                    |
+----------+-----+--------------------+---------+--------------------+
| Biomass  | 21  | Long-term          | 100% /  | Buy from 1         |
| e.g.     |     | contracts with     | 0%      | affiliate and from |
| husk,    |     | suppliers and      |         | 20 external        |
| palm     |     | occasional buying. |         | suppliers.         |
| shell,   |     |                    |         |                    |
| s        |     |                    |         |                    |
| aw-dust, |     |                    |         |                    |
| etc.     |     |                    |         |                    |
+----------+-----+--------------------+---------+--------------------+

3.2 Environmental Protection

The Siam Cement Industry Co., Ltd. has pursued environmental plans as
follows:

1.  1) Environmental Protection

    1.  Green and clean plant: The Company 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 Company has initiated and implemented environmental caring
        campaigns of which are named “Do It Clean” and “Do it Green”
        since 2004 and 2005 respectively and continue to launch these
        campaigns ever since.

    2.  Dust Control: The Company 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 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, preventing 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 Company embarked on an environmental plan so
        as to revive mining areas to its original nature by planting big
        trees and suitable ground covers.

    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 Company also regularly measures the quality of air from
        factory stacks, in the community around the factories, and in
        the offices by using The Continuous Emission Monitoring Systems
        (CEMS). Other equipments include mobile vans to monitor air
        quality and environmental laboratories to prevent environmental
        impact probably caused by business operations.

    5.  Water Conservation: The Company 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. The check dam helps
        reduce the speed of water flows in rainy season, increase
        moisture to soils, and prevent wildfire, and can be used as
        water reservoirs during a severe drought.

2) Natural Resources Conservation

  2.1) Raw Materials and Fuel Substitutes: The Company has reused scraps
  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. Thus, the company is the first
  to receive Total Waste Quality Adjustment Permit (Number 101) in the
  country that officially allows every cement plant of The Siam Cement
  Industry to operate such activity at a cement plant. In 2006, the
  Company utilized over 186,000 tons of scraps and waste in cement
  burners, compared to 180,000 tons in 2005. In addition, The Concrete
  Products and Aggregate Co., Ltd. has replaced some of its raw material
  with 900,000 tons of pulverized fuel ash, compared to 766,000 tons in
  2005. Nowadays, about 700 factories have contacted the Company to
  treat their scraps and industrial waste.

  2.2) Clean Fuel Usage: The Company has used biomass such as husk, saw
  dust, bark and palm shell to replace fossil fuel types. In 2006, the
  Company used biomass 808,000 tons, compared to 733,000 tons in 2005.
  It invested approximately Baht 35 million for related machine
  installation. For example, machine for feeding husk to Pre-Calciner of
  the burner, wood grinding machine for the burner.

  2.3) Energy Usage: The Company has regularly monitors energy usage of
  each plant in order to improve machine efficiency. This has reduced
  energy consumption either in forms of electricity or fuel in
  production process.

  2.4)Electricity Generator Fueled by Waste Heat: The company has
  progressively been in the process of installing small electricity
  generators, fueled by waste heat energy recovered from cement
  production process, at every cement plant. Apart from energy cost
  saving benefits, the project will help conserve natural resources
  through the reduction of fossil based energy; thus controlling carbon
  monoxide (CO) emissions.

3) Sustainable Development

  3.1) Communal and Social Support: Apart from strictly conserving the
  environment, the Company 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
  sports activities including boxing, educational activities including
  providing cement for educational purpose for department of vocational
  education and various universities nationwide. In addition, the
  Company has contributed to social activities such as providing cement
  for rebuilding school, giving cement to college student volunteer
  camps, etc.

  3.2) Employee Support: The Company 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 Company 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.

  3.3) 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 to 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 company 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.

  3.4) Awards: The Company 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 obtain this
  prize in 2003. In addition, 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 company’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

  The company has been undertaking the construction of integrated cement
  plant, with production capacity of 0.85 million ton/ year, at Kampot
  province in Cambodia. Total project investment is approximately USD 80
  million, and the project is expected to be completed within 2007.

Building Materials Business

1.  Product or Service Features

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

2.  Ceramic wall and floor tile

3.  Concrete products such as paving blocks, and concrete floor tile.

4.  Others e.g. insulation product

2.  Market and Competition

2.1 Competition Strategy

Avoid price war but emphasize on product development to serve customer
needs with quality control and compliance to international standards and
environment protection measures. This strategy reflects in the receiving
of Deming Application Prize from the Union of Japanese Scientists and
Engineers (JUSE) of Thai Ceramic Co., Ltd.

2.2 Target Groups

-   Roofing product target groups can be classified according to
    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                     Medium to low income    Medium
                          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 of 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 70 percent domestic sales and 30 percent foreign
    sales. Most exports are for the U.S.A., ASEAN countries, Australia,
    and Europe.

2.4 Management

The Company started continuous organization development for its
flexibility along the current line of business operation. For example,
future leader development project which prepare every level of
management to be ready for future expansion.

2.5 Competition

An intensely growing demand for domestic building products in the past
4-5 years, the Company adheres to the policy to increase sales via
better product and service development. It also regularly launches new
products for more customer choices.

-   Major Competitors in Roof Products:

1.  Mahaphant Group

2.  Diamond Roofing Tile Co., Ltd.

3.  Oran Group

-   Major Competitors in Ceramic Tile Products:

1.  Thai-German Ceramic Industry PLC.

2.  Dynasty Ceramic PLC.

3.  The Union Mosaic Industry PLC

4.  The Royal Ceramic Industry PLC.

-   Major Competitors in Concrete Products:

1.  Chonburi Concrete Products Co., ltd.

2.  Southern Concrete Block Co., Ltd.

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

3. Raw Material Procurement

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
    the Group has the largest cement capacity.

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

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

About environmental impact, the Company 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

Distribution Business

1. Product or Service Feature

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

1.  Cementhai Sales and Marketing Co., Ltd., is responsible for domestic
    distribution of building material and home improvement products
    through network of authorized dealers and Cementhai Home Mart stores
    nationwide.

2.  Cementhai Logistics Co., Ltd., provides logistics services in both
    domestic and ASEAN countries including coastal logistics.

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

2. Markets and Competition

Market Policy and Features

The Distribution Business is mainly focused on creating values for
customers and business partners. This can be done by continuous
development of IT systems to achieve efficient customer responses, and
by synergizing all companies to offer a full range of services for
customers.

Cementhai Sales and Marketing Co., Ltd.

  Competition Strategy

  Management and Service

  The Company provides domestic distribution network through dealers and
  company-owned outlets.

  To increase service potential for suppliers and customers, the company
  developed computerized 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 in 3 channels, which are
  wholesaling, retailing and project channels. Moreover, it installed
  SAP CRM software as a tool to enhance the collecting and analyzing of
  data.

  Channel of Distribution

  Building material and home improvement products are locally
  distributed through over 500 dealers, 330 of which are Cementhai Home
  Mart stores. 270 of them are in new Cementhai Home Mart format.

Cementhai Logistics Co., Ltd.

  Logistics market has a high potential growth, and several companies
  tend to outsource more on logistics. This is an opportunity for the
  Company to expand its network.

  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
  the 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.

  SCT Co. Ltd. is one of the top international trading companies within
  ASEAN.

  Competition Strategy

  The Company focuses significantly on value-added services, especially
  for energy products and raw material to match certain requirements of
  customers which are factories inside and outside the Group.

  Channel of Distribution

  The Company has 21 branches in various countries, i.e. Cambodia,
  Vietnam, Myanmar, Malaysia, the Philippines, Singapore, Hong Kong,
  India, Bangladesh, The United Arab Emirates, Jordan, Australia, Laos,
  China, Taiwan, and the U.S.A.. Products are categorized into 5 main
  categories, which are cement products, industrial-agricultural
  products, recycling products, energy products and services.

Tendency of Distribution Business

The Company tends to create value to customers and partners by creating
accurate and the most rapid distribution system in the region. The
company has implemented modern Information Technologies which are
Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and
Customer Relation Management (CRM).