3.  Nature of the Business

3.1 Company History

The Company was incorporated as a company limited on May 16, 1969, with
the initial registered capital of Baht 100 million, and later listed on
The Stock Exchange of Thailand (“SET”) on April 15, 1977, and converted
to a public company limited on November 5, 1993. In 1999, the capital
was increased to Baht 3,000 million authorized capital, divided into 300
million ordinary shares with the par value of Baht 10 per share, and
Baht 2,500 million paid up. Under 2 shares repurchase schemes in 2003
(scheme 1) and 2006 (scheme 2), 20 million shares, equivalent to 8%, of
issued shares bought back are held as treasury stock for the purpose of
financial management due to the Company’s excess liquidity.

In order to comply with the Ministerial Regulations concerning treasury
stock under which the Company has to dispose all of its repurchased
shares and not being resold within the prescribed period by reduction of
its paid-up capital. Therefore, in 2007, the company reduced its
registered and paid-up capital by disposal of all repurchased shares
under scheme 1, for 12.5 million shares, or equal to capital of Baht 125
million. As its results, registered capital became Baht 2,875 million,
and capital became Baht 2,375 million. In 2010, the company reduced its
registered and paid-up capital by disposal of all repurchased shares
under scheme 2, for 7.5 million shares, or equal to capital of Baht 75
million. As its results, registered capital became Baht 2,800 million,
and capital became Baht 2,300 million in January 2010.

40 Years of Achievment

In 2009, Siam City Cement Public Company Limited, one of Thailand’s
leading cement manufacturers and distributors, celebrated its 40^(th)
anniversary with deep pride and a strong sense of achievement.

Throughout the years, the Company has been providing the market with
high-quality products under the “INSEE” brand, a name that has become
synonymous with quality to customers.

The name INSEE has today become a leading brand of cement that is well
trusted by customers, a fact that has helped the Company maintain its
position in the market through the various peaks and troughs that the
Thai economy has experienced over the 40 years since establishment in
1969.

Siam City Cement was listed on the Stock Exchange of Thailand (SET) in
1977 and has since shown to all its stakeholders the value of being a
good corporate citizen. Over the years, it has excelled in giving its
stakeholders the best in quality and this has been evident from the
continuous research and development effort over the years to improve and
innovate products to meet customers’ demand and expectation.

Throughout its 40 years of operations, the Company has played a part in
creating the foundations for Thai society by progressively developing
technologies with an aim of being a “Solution Provider”.

During 2009, when the overall cement and concrete market was in a
downturn, the widely recognized ‘INSEE’ brand helped the Company gain
market share in the concrete & aggregates segment. The rise in market
share came at a time when the overall market shrank, thus giving the
Company the optimism of seeing the business further growing in 2010.

Among other reasons, it is clear that the customization of products to
meet each customer’s demand and the trust that customers have in the
‘INSEE’ brand will help Siam City Cement achieve more successes in the
years to come.

Innovation – Foundation for a secured future

Siam City Cement’s stated vision is to "Provide Foundations for
Thailand’s Future." Achieving such a lofty aim requires the Company to
be farsighted and, above all, highly innovative.

Throughout the past 40 years, Siam City Cement has led the industry in
terms of innovation, creating new products and services, manufacturing
the best products to meet customer requirements, and striving to
continuously make customers and all stakeholders of the Company happy
and satisfied. New breakthroughs in cement products were made with the
launch of the INSEE range of cement products, including the first
premium masonry cement, INSEE Tong.

The Company's research & development division is tasked with the
development of new products and services. The division aims to create
improved quality and more effective products and develop solutions to
fulfill customer expectations.

The partnership with Swiss-based Holcim gives the Company a cutting edge
over its competitors as Siam City Cement can tap into the innovative
contributions of its experienced partner. This, coupled with the
Company’s dynamism, is a strong recipe for future development which goes
further to benefit the Thai society as a whole.

Towards more successes – with care, dynamism and innovation

Those, in a nutshell, are Siam City Cement’s proud achievements
throughout its 40 years of eventful history. At the same time, they also
show the caring, dynamic and innovative side that the Company is
confident will lead us towards more successes in the years to come.

Major Development in 2009:

Customers

Marketing & Sales

1.  Siam City Cement introduced small concrete mixer trucks with playful
    themes to serve the retail market. These trucks were designed to be
    environmentally friendly and to attract attention. The retail
    operation started in October 2008 and has consistently grown ever
    since. In order to ensure the highest possible coverage, the
    expansion plan is being undertaken to cover up-country provinces.

2.  Continued to expand the INSEE Concrete Franchise to extend our
    strategic partnership network and market coverage.

3.  The INSEE Brand has achieved strong recognition as one of the top
    cement brands in Thailand through a focused visibility strategy.
    This effect was further enhanced with the 40^(th) Anniversary
    celebrations in the latter half of the year.

4.  Broadened the INSEE product line and enhanced the manufacturing
    standard of our valued customers, INSEE CPM (Concrete Product
    Manufacturer) franchise offering includes concrete block, slab, pipe
    and pile.

5.  Focusing on innovation that meets both customers’ needs and being
    environmental friendly, the company launched “INSEE Interlock Block”
    and the housing solution called “Baan U Sabai”. INSEE CPM
    franchisees serve as producers and distribution channels for both
    products.

6.  A cement substitute material was introduced as a basis to develop
    new products that are aimed at specialized applications. For
    example, “Slag” (a by-product from steel production) is used to
    produce a sulfate/chloride resistant cement that releases less CO²
    into the atmosphere.

7.  Customer Relationship Management enhancement through the sub-dealer
    channels has been implemented in order to ensure the accuracy of our
    information and maintain a competitive edge in the market. The
    information is fully utilized to formulate marketing and sales
    strategies.

8.  Introduced a wide range of new value-added cement and concrete
    products to address the specific requirements of each customer group
    and enhance SCCC’s competitiveness, for example INSEE Ngan Lor,
    INSEE TileFix Pro, INSEE FloorCrete, INSEE FreezeCrete and INSEE
    ThruCrete.

Logistics

1.  Provided differentiated services to Mono-Brand Platinum customers to
    improve logistics efficiency and increase customer satisfaction.

2.  Implemented First Class Fleet Management Project to improve delivery
    lead time and on time delivery.

Employees

People and Organization Performance

1.  Reorganized and transformed the HR function to be able to support
    SCCC’s continued growth more effectively.

2.  Established INSEE Academy as an integrated unit responsible for
    employee development in all dimensions from functional, managerial
    and leadership capabilities.

3.  Launched the INSEE Excellence Award aiming to motivate and reward
    employees who demonstrated creative thinking and innovation.
    Nominated were 291 initiatives/projects with 1,391 employees
    involved.

4.  Structured and Implemented leadership identification and development
    process as part of company effort to strengthen leadership pipeline.

Recognition

1.  Award for Outstanding Workplace 2009 (Excellent Labor Relations and
    Labor Welfare) from the Ministry of Labor for the third consecutive
    year.

2.  Award for Outstanding Workplace 2009 (Excellent Employee Training)
    from Ministry of Labor.

Occupational Health & Safety

1.  Adopted and implemented new Five Cardinal Rules to prevent the most
    critical incidents within the Group and achieve the OH&S goal of
    “Zero harm to people”.

2.  Implemented Fatality Prevention Elements (FPE) on Electrical Safety,
    Confined Space, Lifting & Supporting Loads for all relevant business
    units within the Group.

3.  Launched Contractor Safety Management (CSM) OH&S Directive to enable
    safe management of contractor-related activities in high risk
    operational units.

4.  Carried out Fatality Prevention Element Audits on Vehicle & Traffic
    Safety, Isolation & Lockout and Working at Height for all relevant
    business units within the INSEE Group Company.

5.  Promoted & communicated “Passion for Safety” within the Group and
    launched INSEE Safety Junior Camp for employees' children by using
    ‘Stop and Think about Me’ theme.

Recognition

1.  CONWOOD was awarded for Zero Accident Campaign and Occupational
    Health & Safety Management from Department of labor protection and
    welfare, Saraburi.

Society and Communities

1.  Carried out many educational, environmental or community-improvement
    projects such as the “80 years, 880 Check Dams INSEE Builds for His
    Majesty the King”, achieving more than 3,000 check dams completed to
    date.

2.  Established Tabkwang Community and Environment Development Fund for
    social and culture development, education support and environment
    preservation. The fund is managed by the villagers themselves.

3.  Continued the INSEE Awards program, presented for outstanding
    construction projects. This is one of the company’s educational
    support schemes designed to encourage vocational students and
    teachers to raise the level of their skills and make greater
    contributions to community development.

4.  Continued its financial contribution to the Tabkwang Health Security
    Fund to support public health services.

Business Partners and Suppliers

Logistics

1.  Implemented “Transportation Safety Program” for the whole
    transportation network and “Environment Care At Port” for clinker
    export.

2.  Completed “Centralized Dispatching Management Process” by using
    Radio Frequency Identification (RFID) for all three plants to
    improve in-plant logistics visibility and increase efficiency in
    dispatching process.

3.  Increased use of waterway transportation of cement bags to the
    southern region using containerization to increase reliability &
    speed and also reduce fossil fuel consumption.

4.  Pre-loaded bag cement on pallets to reduce loading time and better
    utilize packing machines.

5.  Extended Integrated Supply & Demand Planning to solid fuel and Kraft
    paper supply and demand planning for better control of inventory and
    working capital and more productive operations.

Procurement

1.  The company is in process of implementing a Supplier Relationship
    Management with the objective to increase relationship with its key
    suppliers for long-term wins and total overall better values to its
    business.

2.  The company has implemented a Procurement Excellence Program to
    develop long-term plans and organizational renewal to implement best
    practices, skills and capabilities for future growth.

3.  The company implemented a Procurement Sustainability Development
    Review to ensure long-term development and effectiveness of its
    world-class procurement activities.

4.  The company has continued to expand the scope of Contractor
    Management and Services Sourcing Program to Logistic Supply Chain
    and transportation services with the target to achieve higher
    efficiency, reliability and also reductions in total cost of
    ownership.

5.  The company enhanced the automated payment system to ensure most
    efficient, accurate and complete payments.

Manufacturing Operations

Production

1.  Implemented Maintenance Transformation for improved Overall
    Equipment Efficiency targeting global best performance.

2.  Installing Waste Heat Recovery systems at K5 and K6 to use hot gas
    from kiln and clinker cooler to generate 25 MW of electricity.

3.  Optimized fuel cost through process improvement and improved mixing
    facilities to handle low grade fuels.

4.  Proceeded with Alternative Fuel & Raw Material platform expansion.

5.  Product Quality Management to comply with global Holcim Quality
    Standard.

  Recognition

1.  Awarded the Carbon Label for continual reduction in carbon emission
    in the manufacturing process of INSEE Dang, INSEE Petch, INSEE Dam &
    INSEE Fah.

2.  Wall Street Journal ranked Siam City Cement one of the top 10
    companies in Thailand for Quality.

Shareholders

Finance & Controlling

1.  Successfully issued 4,000-million-baht Senior Unsecured Debentures
    with a period of four years at an interest rate of 4.50 percent per
    annum.

2.  Made substantial progress towards International Financial Reporting
    Standard (IFRS) convergence to ensure highest quality reporting.

3.  Executed a cost reduction program to achieve immediate and
    significant cash cost benefits compared to financial year 2008.

Legal

1.  Implemented dividend payment policy to be used in 2010.

2.  Invited shareholders to nominate a person to be elected as a
    director at AGM.

3.  Conducted shareholders’ visit to the Saraburi Plant.

4.  Implemented legal assessment in order to improve legal awareness and
    compliance in accordance with legal requirements.

5.  Implemented automatic warning system for all users to ensure that
    reports for government authorities are prepared and submitted timely
    and completely.

6.  Cascaded Code of Conduct awareness.

Recognitions

1.  Wall Street Journal ranked Siam City Cement one of the top three
    companies in Thailand for Corporate Reputation.

2.  The Company was evaluated as “Very Good”, by the AGM assessment 2009
    project, organized by Thailand Investors Association.

3.2 Nature of business of the subsidiaries and related company

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3.3 Revenue Structure

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