Executive Summary

The Siam Cement Group (SCG) is incorporated in Thailand and holds
investments in the following core business segments: Chemicals, Paper,
Cement, Building Materials, Distribution and other businesses under
Cementhai Holding and Cementhai Property. (Details are presented in
“Business Operation” section.)

Main risk factors have been disclosed in “Risk Factors” section.

The Thai economy in 2006 was affected by many volatile factors such as
high energy costs, the challenge from economic and political factors and
the appreciation of Thai Baht which impacted on the country’s export,
while there were more imports of raw materials and goods with lower
prices. Therefore, the competition was higher due to the decreased GDP.

However, SCG’s operating performance remained relatively unchanged
compared to the previous year. This could be attributed to good
operating performance of the Chemicals business, while the other
business units registered weaker performances. Moreover, there was a
loss in asset impairment of approximately Baht 3,400 million in CRT
business.

As for operating results for the Siam Cement Group and subsidiaries in
2006, total sales amounted to Baht 258,175 million, up 18 percent over
the previous year. Operating profit before non-recurring items decreased
2 percent to Baht 30,157 million and net profit declined 9 percent from
the previous year to Baht 29,451 million. (Details are presented in
“Financial Position and Operating Performance” section.)

In light of the solid operating performance, the Board has recommended
shareholders approval of a full year Baht 15 per share dividend payment
at the Ordinary General Meeting scheduled on 28 March 2007, representing
61.2 percent of the net profit of SCG’s consolidated accounts. An
interim dividend of Baht 7.50 per share was earlier paid in August 2006,
with a final dividend of Baht 7.50 per share to be paid on 26 April
2007.

From Thailand’s Leading Conglomerate to a Leading ASEAN Group

With the goal of becoming a leading ASEAN conglomerate, SCG continues to
invest in key projects within the region to further enhance its
competitiveness. Example includes the wholly owned Baht 5,200 million
green-field packaging paper investment in Vietnam that provides solid
foundation for further investment opportunities. Further, the Baht 3,200
million cement plant investment in Cambodia is expected to commence the
operations in late 2007. Domestically, SCG continues forward with its
chemicals investment expansion that includes the upstream joint venture
with Dow Chemical in a second olefin plant valued at Baht 45,600
million, in addition to the wholly owned downstream project worth Baht
17,100 million to produce HDPE and PP with focus on high-value and
non-commoditized products.

Innovation for Enhanced Competitiveness

SCG remains dedicated to further develop and increase the creativity of
its employees,
as well as technological investments to enhance research and development
capabilities.
The Group has mandated that all business units develop products and
services that can accommodate ever-changing social and customer
requirements, in addition to the development of innovative processes and
business models for enhanced competitiveness. Example includes the
establishment of SCG Intellectual Property Centre to both support and
drive innovations within the Group.

Conserving the Environment to Ensure Sustainable Development

Environmental conservation continues to be our high priority within SCG.
The Group focuses on creating employees’ awareness, so as to incorporate
a compliance-oriented mindset and collaborations towards sustainable
development. At the same time, initiatives have been taken to reduce
greenhouse gases, the major cause of global warming. Specific mandates
include applying all measures for energy efficiency, substitution of
energy, installation of energy-saving devices in plants, and development
of energy-efficient products for offices and households.

In addition, “SCG Conserving Water for Tomorrow”, a water conservation
project initiated by SCG, supports the community in constructing of
10,000 check dams in rural Thailand to help restore the health of
forests. The project also aims to involve communities in sustaining a
healthy environment.

Contributing to Society

SCG pledges to positively contribute to all communities where it
operates. As a good corporate citizen and with total employee
participation and involvement, the Group has actively engaged in
socially beneficial projects. Activities during the past year included
donation of relief supplies to people affected by recent severe flooding
in rural Thailand, and as a tribute to H.M. the King, a 900 rai (360
acre) plot of land was donated for use as water retention basins (monkey
cheeks) to prevent run-off flooding from the North, while further
utilized for agricultural purpose during the dry season. In education
for the youth, the Group supports the activities dedicated to creating
opportunities and developing potentials in areas such as sports,
innovation, science, technology, and art. Added to these examples are
further donations from SCG to charitable organizations, as well as
encouraging SCG employees to individually contribute to society.

On the occasion of the 60^(th) Anniversary Celebration of H.M. the
King’s Accession to the Throne in 2006, SCG organized numerous
activities and projects as tributes to the King. Major activities
included “Musical Tribute to the King” project which highlighted the
musical genius of H.M. the King, and “Water is Life” musical documentary
which honored the talents for water resource management of H.M. the
King.

Ethics and Corporate Governance - The Very Heart of Business Operations

SCG conducts business in accordance with the principles of good
corporate governance. Further, all employees of SCG are expected to
practice and adhere to the SCG Code of Ethics and principles of
corporate governance, which are constantly updated to ensure compliance
with international standards. The Group took a number of initiatives to
promote good corporate governance in Thailand, including the sponsorship
of the Business Ethics Awards which was organized by the Thai Chamber of
Commerce. In conjunction with Thai Institute of Directors (IOD) and
CNBC, SCG organized the forum “Corporate Governance Development in Asia
2006: The Corporate Discipline” which brought together experts from
different countries to discuss means of achieving an improved Asian
corporate governance practice, to further comply with international
levels that would consequently accelerate investors’ confidence and a
sustainable economic environment within the region.

Employees: Driving Force to Success

Throughout the year, SCG has received numerous awards and recognitions,
both locally and internationally. The success was the culmination of the
dedication and collaborative efforts
of all employees. During times of difficulty and volatility, it took the
dedication, loyalty, and capability of SCG’s smart and ethical employees
to lead the company out of the storm. In response to the strategic
business expansions local and into ASEAN, the Group will undoubtedly
increase both the number and capabilities of its employees. This runs
concurrently with the objective of improving the quality of life of all
employees, regardless of their nationalities or work locations.