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SIAM CITY CEMENT PUBLIC COMPANY LIMITED

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This Annual is printed RECYCLABLE SIAM CITY CEMENT PUBLIC Report COMPANY LIMITEDon recycled paper

ANNUAL REPORT 2006

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Contents

Report of the Board of Directors to the Shareholders

4

Board of Directors, Audit Committee and Executive Committee

6

Management structure

7

Key figures

8

Achievements and Milestones

9

Vision / Mission / Core Values

10

Why ‘Cement Solution Provider’ and ‘As I Wish’

11

Report of the Executive Committee

12

Customers Centric Organization

16

Customer understanding means not just products

18

AFR - there’s simply no alternative

20

Employee safety is our prime concern

22

Golden Rules reflect company commitment to welfare and safety

24

Safety culture extends beyond our site to community

26

Industrial Outlook, Risk Factors & Risk Management

28

Summary of major developments and recognitions in 2006

30

Good Corporate Governance & Internal Controls

32

Report of the Board of Directors’ Responsibilities for Financial Statements

36

Report of the Audit Committee

37

Consolidated Financial Statements

38

Report of Certified Public Accountant

39

Balance Sheets

40

Income Statements

43

Statements of Changes in shareholders’ equity

44

Statements of Cash Flows

46

Notes to Consolidated Financial Statements

47

Management discussion and analysis

68

Related - Party transactions

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Dividend allocation over past three years

72

Supplemental information

73

Customer Service Center and Distribution Center

81

Summary of specified items per form 56-2

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Report of the Board of Directors to the Shareholders

Chairman’s Message First and foremost, on behalf of the Board of Directors, the management and the company’s staff, I wish to take this opportunity to express our gratitude to our former Chairman, Khun Krit Ratanarak whose contribution throughout the 14 years of this Chairmanship, helped to solidify our company’s performance. With his vision and adherence to good corporate governance, Siam City Cement was able to weather the major economic turbulence that Thailand experienced 10 years ago. With his decisive leadership and personal sacrifice Siam City Cement has undergone a shareholders and management restructuring which enable us to achieve consistently good results. His support, for our successful build up and molding of the professional management team with emphasis on professional ethics, were with the intent to serve the interests of all shareholders. All this was done while at the same time providing excellent benefits to all members of the company’s work force.

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For the year 2006, Siam City Cement and its subsidiaries achieved total net sales of 23,647 million baht, up by 6.0 percent from 2005. Net profit amounted to 3,855 million baht with earnings per share of 16.43 baht down by 4.2 percent from 2005. Based on this performance and strong financial status of the company, the Board of Directors is pleased to propose to the shareholders at the Annual General Meeting the payment of a full-year dividend of 14.0 baht per share, representing 85 percent dividend payout from net profits, compared to 82 percent dividend payout in 2005. An interim dividend of 6.50 baht per share was paid on September 10, 2006 and a final dividend of 7.5 baht per share will be paid not later than April 14, 2007. In 2006 we paid particular attention to three key aspects of our business, namely our customers, improved operating efficiencies, and occupational health and safety. I am pleased to report that the efforts made by our management teams and employees in these key areas had yield successful results.

In trading terms, 2006 was a very challenging year in both domestic and international markets. A number of economic factors in overseas markets, especially the US market, applied downward pressure on our export. Furthermore, high energy prices could not be entirely offset by the implementation of our Alternative Fuels and Raw Materials policy. In 2007, we look forward to maintaining confidence and stability in our business whilst seeking to improve our competitive position. We are well placed to meet the country’s need when new national infrastructure projects are given the green light and we will continue to conduct our operation in the best interests of all our shareholders and other stakeholders as the nation’s ‘Cement Solution Provider’. The Board of Directors wishes to express sincere appreciation to all our shareholders, customers, suppliers, and employees for their continuing support and trust in the company and its management team.

Veraphan Teepsuwan Chairman

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Board of Directors, Audit Committee and Executive Committee

Board of Directors

Mr. Krit Ratanarak

Chairman (Up to November 9, 2006)

Mr. Veraphan Teepsuwan

Vice Chairman Elected Chairman (Effective November 9, 2006)

Mr. Paul Heinz Hugentobler Vice Chairman Mr. Urs Wolfgang Bieri

Director

Mr. Harald Link

Director

Mr. Ekasak Puripol

Director

Mr. Sura Sanittanont

Director

Mr. Prakob Visitkitjakarn

Director

Mr. Chet Raktakanishta

Director

Mr. Chachchon Ratanarak

Director

Ms.Chantana Sukumanont Director

Audit Committee

Executive Committee

Mr. Vanchai Tosomboon

Director

Mr. Leo Mittelholzer

Managing Director

Mr. Prakob Visitkitjakarn

Chairman

Mr. Harald Link

Member

Mr. Chet Raktakanishta

Member

Mr. Leo Mittelholzer

Chairman of the Executive Committee

Ms.Chantana Sukumanont Deputy Chairman of the Executive Committee Executive Vice President (Marketing and Sales) Mr. Vanchai Tosomboon

Executive Committee Member Executive Vice President (Saraburi Operations)

Mr. Andreas Leutenegger

Executive Committee Member Senior Vice President (Finance and Controlling)

Mr. Rungrote Soonthorn

Executive Committee Member Senior Vice President (Human Resources and Management Development)

Mr. Nopporn Thepsithar

Executive Committee Member Senior Vice President (Logistics and Exports)

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Management structure

Audit Committee

Board of Directors

Chairman - Executive Committee

Leo Mittelholzer

Corporate Governance

Saraburi Operations

Marketing and Sales

Vanchai Tosomboon Executive Vice President

Chantana Sukumanont Executive Vice President

*

Logistics and Exports

Finance and Controlling

Nopporn Thepsithar Senior Vice President

Andreas Leutenegger Senior Vice President

Human Resources and Management Development Rungrote Soonthorn Senior Vice President

Executive Committee

*

Deputy Chairman - Executive Committee

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Key figures

Million tons

Million Baht

2006

2005

2004

2003

Clinker production capacity

12.3

12.3

12.3

12.3

Cement production capacity

14.5

14.5

14.5

14.5

Domestic cement sales volume

7.6

7.8

7.1

6.4

Export clinker and cement sales volume

5.3

5.0

3.3

2.9

23,647

22,380

20,772

17,469

Operating EBITDA

6,059

6,307

7,032

5,950

EBITDA

6,344

6,613

7,256

6,018

Operating profit

5,320

5,567

6,044

4,843

Net profit after minority interests

3,855

4,073

4,141

3,288

Cash flow from operating activities

4,328

4,232

5,552

4,882

Investments in property, plant and equipment - net

1,177

1,021

877

548

20,609

21,029

20,109

21,255

73

(1,793)

(1,468) (1,422)

15,654

16,803

15,938

17,799

Operating EBITDA

26%

28%

34%

34%

EBITDA

27%

30%

35%

34%

Operating profit

22%

25%

29%

28%

Net profit after minority interests

16%

18%

20%

19%

Cash flow from operating activities

18%

19%

27%

28%

17.15

17.25

13.15

14.00

13.00

9.00

85%

82%

75%

68%

0%

(11%)

(9%)

(8%)

24%

20%

21%

16%

2,927

2,866

2,763

4,945

2,243

2,163

2,070

2,047

Net sales

Total assets Net financial debt Total shareholders' equity

Margin (%)

Financial Ratios

Earnings per share (Baht) Gross dividend per share (Baht) Dividend payout ratio on net profit (%) Gearing (%) Total liabilities to total assets (%)

Owned Personnel Group Cement

16.43 14.00

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1 Proposed by the Board of Directors.

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Achievements and Milestones

Supporting Thailand’s development for more than 30 years An innovative supplier of cement products and solutions

1969

The Company was established in 1969 as Siam City Cement Company Limited

1972

Siam City Cement begins producing cement

1977

Listed on the Stock Exchange of Thailand

1981

Imported bunker oil kiln fuel replaced with domestic lignite

1989

Introduction of 1st waste heat recovery system in Southeast Asia

1993

Changed its status to a public company and its name to Siam City Cement Public Company Limited

1996

Annual production capacity exceeds 12 million tons

1997

Awarded ISO 9002 Certification

1998

Awarded ISO 14001 Certification Holcim became shareholder in Siam City Cement

1999

Introduction of Alternative Fuels and Raw Materials (AFR) programme Debt restructuring and refinancing completed

2000

Launch of webSALES initiative Awarded the 2000 Best Practices on Corporate Governance Awarded the Audit Committee of the Year 2000

2001

Awarded TIS 18001 Certification Government approval for commercial use of AFR

2002

Launch of INSEE (Eagle) family of cement products Inauguration of AFR blending plant Siam City Cement long-term debt reduced to zero

2003

Launch of INSEE TONG, Thailand’s 1st premium masonry cement Voted Best Company in Thailand and Best Asian Company in the Construction Sector in Euromoney Asian company survey

2005

Repositioning corporate and products under the ‘As I Wish’ branding campaign Introducing ‘INSEE Mortar Max’ : a ready-to-use dry mortar

2006

OH&S 12 Golden Rules launch to reinforce OH&S performance INSEE concrete franchise Start-up aggregate business for Siam City Concrete Certificates from Department of Industrial Works, Ministry of Industry on pleasant and environmental friendly plant in honour of HM the King’s 60th year accession to the Throne

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Vision, Mission and Core Values

Corporate Vision To be the preferred application-tailored cement solutions provider, through effective internal and external collaboration along the value chain, achieving above industry profitability

Corporate Fundamental Goals 1. Position Siam City Cement as a cement solutions provider by offering the 'right' high-quality range of application-tailored cement solutions 2. Create effective collaboration with suppliers and channels by creating and growing business opportunities together 3. Be socially responsible and environmentally conscious within Saraburi and Thai society 4. Create an open and trusting working environment that provides challenging career development opportunities as well as competitive compensation and benefits Corporate Mission At Siam City Cement, We deliver Core Values 1. Commitment to customer service We are committed to understanding our customers' business needs and quickly satisfying them 2. A Company with opportunities for personal development We offer opportunities for personal development based on a clear understanding of job requirements and achievement of both individual and team performance 3. Consistent and sound financial performance We seek a sustainable and sound financial performance which will benefit all our stakeholders 4. A Company with an open and collaborative environment We treat each other with mutual respect and trust, sharing information and knowledge through all levels 5. Socially responsible, a good citizen We are strongly committed to responsible environmental practices. In everything we do we recognise the need to conserve energy and natural resources. We seek an active involvement in local communities through focused support of selected projects Vision and Mission for Sustainable Development Vision At Siam City Cement we have a continuing commitment to sustainability. We believe in taking seriously our role as a good corporate citizen, and believe that success and prosperity are best achieved through responsible social and environmental practice Mission To achieve our vision for sustainability, by working as a team through every link in the value chain

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Why ‘Cement Solution Provider’ and ‘As I Wish’

‘Cement Solution Provider’ and ‘As I Wish’ corporate culture that drives Siam City Cement to higher levels of success Siam City Cement has changed its culture to better answer present day business needs. This, we believe, is key to our drive to attain higher levels of success. Brainstorming at each employee level within the company has resulted in a new vision, fresh objectives and a new mission - setting us apart from other organisations. Our Corporate Vision, to be the preferred ‘cement solution provider’, is what all employees hold on to as our goal. This means every member of our company, in every department, is an expert in what they do to provide stakeholders with solutions. Our main objective is to respond to the wishes of all our stakeholders especially customers. By making this commitment to deliver high standards of service and products we will make strides towards achieving our Mission. We employ the strategy ‘As I Wish’ as an operational goal. This is a goal that looks from the outside in. What it really means is whatever our people do they look at the satisfaction, impressions and wish fulfilment of customers as their highest goal. This can only be achieved when our people are expert in each facet of cement, caring about our dealers/customers and end-users, doing their work with enthusiasm and being alert and trustworthy. With all these qualities found in our people our customers, partners and stakeholders appreciate this response to their needs and feel emotionally satisfied. Indeed, our people are the key to future success. This is how we built our culture, by building in the value chain the value creation under the strategy ‘As I Wish’ We believe our valued human resource is the key to drive Siam City Cement to a higher level of success.

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Report of the Executive Committee

Siam City Cement Public Company Limited faced a number of trading challenges in 2006. The domestic market has been stagnating compared with an increase of approximately some four percent in 2005. The housing sector, a traditional source of growth for the industry, witnessed a general flattening of consumer confidence caused by increased oil prices, high interest rates, decreasing disposable incomes, widespread flooding in rural communities and continued political uncertainty. In the public sector, the industry as a whole was affected by continued delays and uncertainties with proposed major infrastructure projects. The company remains well placed, however, to serve the nation’s interests when such projects are confirmed thanks to our attention to three key aspects of the business. Customers are the lifeblood of any business and we focused our attention on the continuous development and improvement of our customer relationship management programmes. The introduction of stateof-the-art management systems lifted our professional and technical expertise and enhanced our supply chain operations. The company systematically concentrates on building materials that complement each other and improve value adding products and solutions to the housing, commercial, residential building and infrastructure sectors. In this respect our product offering was further enhanced with new developments in our mortar range, the development and marketing of sand and aggregate and a further strengthening of the Ready - Mixed Concrete operations - particularly in Bangkok and on the Eastern Seaboard. Conwood added six new products to its product line. The transition from a product-focused business to a customer-orientated company through the ‘As I Wish’ campaign is well under way.

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Executive Committee (From left) Mr. Vanchai Tosomboon Executive Vice President (Saraburi Operations) Mr. Rungrote Soonthorn Senior Vice President (Human Resources and Management Development) Ms. Chantana Sukumanont Deputy Chairman of the Executive Committee, Executive Vice President (Marketing and Sales) Mr. Leo Mittelholzer Chairman of the Executive Committee Mr. Nopporn Thepsithar Senior Vice President (Logistics and Exports) Mr. Andreas Leutenegger Senior Vice President (Finance and Controlling)

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Report of the Executive Committee

Operational efficiency forms the second pillar in support of the company’s ‘cement solution provider’ strategy. The Saraburi plant operated at full capacity and programmes to improve productivity, efficiency and quality showed tangible results.

Occupational Health and Safety (OH&S) remains paramount in our company. We introduced a wide range of initiatives in 2006 and it is pleasing to note that OH&S is starting to become an embedded value at all our operations.

The increased use of alternative fuels and raw materials (AFR) made an important contribution to our drive to produce quality premium products at the lowest cost.

Safe working environments are not only an important aspect of our Corporate Social Responsibility policy but also make sound business sense - reflecting competence, productivity and excellence across the business. The introduction of the 12 Golden Rules, representing our operational philosophy in 12 clear, concise and straightforward statements, forms the framework for further progress and development in this key area.

The investment in a state-of-the-art AFR Platform started in 2006. We make this commitment to become more energy-efficient and environmentally friendly in the knowledge that we are making an important contribution to the many communities in which we operate and serve.

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All three initiatives have been made possible by the enthusiasm and dedication of our hard working and motivated employees. The continuous development of our people through training and educational programmes is reflected in our results. People development will remain an essential part of the company’s management strategy to meet the many significant challenges that face the business in the years ahead. The challenges faced by our organization in 2006 have demonstrated the strength and depth of the company, the dedication and commitment of the workforce and the quality of the entire product range. These are assets that will ensure that the company remains in good health - fit and able to remain Thailand’s ‘cement solution provider’ of choice. 2007 Outlook The company has a cautious outlook for 2007. However, we are confident that, with a clear focus on customer and operational efficiency, the company will be able to further improve its position.

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Customers Centric Organization The cement industry in Thailand has been experiencing a fundamental change in the relationship between manufacturers and customers. With supply exceeding demand for more than a decade and the customers becoming more knowledgeable and sophisticated, the days where manufacturers rule the market have ended and instead we have moved into the customers-centric era. The market power has shifted from producers to customers and business partners.

In response, Siam City Cement has undergone a transformation to become a Customer Centric Organization. Our corporate culture was rebuilt around customer needs where all parts of the organization are united with a single objective to create value to customers and business partners through continuing ‘As I Wish’ campaign.

Not just a sales representative but also an expert in cement Every working day Khun Ranee Surakitchai, Customer and Sales Consultant (Kanchanaburi), Siam City Cement, takes care of valued dealers. She takes pride not only in providing service but also in sharing knowledge, giving consultation, and delivering solutions to a variety of problems.

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As a step towards the goal to become a ‘Cement Solution Provider’, our efforts to improve value to customers has been intensified throughout 2006. Among the major achievements, quality levels of our major products have been raised, our sales consultants’ technical knowledge has been enhanced and our technical services capabilities have been strengthened to ensure customers receive the best of quality, services and advice, from Siam City Cement. At Siam City Cement, customer satisfaction is our mission. We have created a culture based upon a total understanding of our customer needs and put a strong emphasis on ‘customers come first’ - ensuring that our products and services delivery match customer expectations.

We aim to fulfill our customers needs New product creation has been developed consistently at Siam City Cement. INSEE Mortar Max is one of our innovative and valued-added products. Deriving from our total understanding of customer needs modern, quick, easy to use - to meet customer expectations and generate more customer satisfaction. Success is witnessed by a sixfold increase in sales in 2006.

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Customer understanding means not just products but all company’s resource and expertise at customers’ disposal With cement users today enjoying a much greater understanding about products and product applications, Siam City Cement is more than ever committed to delivering better quality products and superior service to our customers and business partners.

Expertise for all solutions The company’s Mobile Lab, operated by qualified engineers and technicians, is available to help provide technical solutions and support to the customers; another example of how we provide our customers with sound and accessible technical support. Here Khun Sumet Tienjang, a member of our Mobile Technical team, gives advice to dealer staff on advanced cement application techniques.

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To achieve our goal to become ‘the preferred application-tailored cement solution provider,’ we hold on to the three principles: aligning the direction of our business to the customers and business partners interest and demands, placing emphasis on maintaining and enhancing relationships with customers and partners, and taking our customers experience, response, and ultimately loyalty as benchmarks for continued success. As well, Siam City Cement constantly monitors and studies the impact of changing market conditions and customers needs to our business. This enable us to adapt/adjust our strategy to suit changing environment - to ensure our organization’s success is sustainable in the long run.

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AFR - there’s simply no alternative Siam City Cement has done a great deal to consolidate its position as Thailand’s premier developer of Alternative Fuels and Raw Materials (AFR). In what was only the second year of operations for EcoSiam, Siam City Cement business unit responsible for developing and implementing AFR usage, considerable progress has been made in reducing energy consumption and carbon dioxide emissions at our plants. Working in partnership with the cement plant at Saraburi, the consumption of AFR in 2006 doubled compared to 2005. Six new feeding systems were established to serve the various types of alternative fuels, including used tyres, sorted municipal solid waste and sludge.

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The year ended with a ground-breaking ceremony at Saraburi to mark the start of the company’s AFR Platform - a significant new construction project scheduled for completion by 2008. This new plant will sort and prepare different types of waste materials received on site prior to co-processing in the cement kilns. It is expected that the new AFR laboratory and solid fuel pre-treatment works will commence operations in late 2007 with the new sludge facility coming on-stream in the first half of 2008. The company’s contribution in this field was extended in 2006 with the signing of a services agreement with Amata Industrial Estates as the manager of Amata Solid Waste Transfer Station. Tons of sorted solid waste from Amata is now being transported to be disposed and used as AFR at Siam City Cement’s plant.

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Another significant achievement in AFR is that we have successfully utilised Refuse Plastic Fuel (RPF), the final material from the composting process of the municipal solid waste, as an alternative fuel. Disposing RPF in our cement kilns is a great contribution to society and the environment as it reduces municipal waste volume for landfill.

In making a significant further investment in the use of AFR in cement production, Siam City Cement remains the market leader in co-processing and represents a vital ingredient in the company’s policy on Sustainable Development.

Working together to analyse and accept waste In AFR business, part of the important process is to analyse and accept waste to be alternative fuels and raw materials. As a Shift Foreman, Khun Kittarwit Jitmaitree’s job is receiving waste from customers and coordinating with AFR laboratory to test. Here Khun Kanya Thaemee, AFR Quality Control Division Manager, will analyse the physical and chemical properties of the waste in re-acceptance testing. It is to be ensuring that waste materials from the customer comply with current safety and environmental standards and are fully compatible with cement production process.

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Employee safety is our prime concern The welfare and safety of employees is of paramount concern to the Executive Committee and the entire management team at Siam City Cement. Indeed, the company’s commitment to Occupational Health and Safety has never been greater in the year 2006. OH&S is one of the six pillars which make up the company’s Corporate Social Responsibility policy. In seeking to provide safe and healthy workplaces for employees, subcontractors, third party contractors and visitors the company’s zero accident target is a

key element in the OH&S standards and guidelines applied across the business. The company stresses that Occupational Health & Safety is the responsibility of each and every line manager in the business, rather than that of the OH&S team. Hazard Reporting is a key element of OH&S performance which focuses on unsafe conditions with the potential of causing injury to personnel or damage to property.

Safety Talk We support a culture in which good OH&S practices are encouraged and praised. We firmly believe that such encouragement is a solid investment in our safe production culture and, by stressing the importance of increased awareness of health and safety issues in the workplace, employees, sub-contractors, third party contractors and visitors have every right to feel safer in our work environment. Every morning at 8 AM before our personnel and contractors start working, they receive a safety briefing. The objective is to alert them on key safety issues 5 - 10 minutes before their shift begins and to check on their general fitness for work.

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The number of hazards identified and reported rose from just one in 2005 to almost 500 in 2006. The number of reportable incidents rose from 457 in 2005 to almost 800 in 2006.

Don’t walk past The ‘Don’t Walk Past’ campaign, for example, has done much to highlight the importance of OH&S throughout the company. It is a campaign which applies to every employee - without exception. We preach the philosophy that to walk past an unsafe act or unsafe condition is to endorse it - and may lead later to a serious injury or even fatality. For example when Khun Sompol Charnvaivit, Assistant Plant Manager, Plant 3, saw a welder worked without a mask, he stopped him. At Siam City Cement there are strict rules of working with such tools. This is one of the 12 Golden Rules.

The job of a Safety Section Head is not just to follow the rules. He initiates as well. A number of initiatives were introduced during 2006 in support of the company’s overall policy. As Safety Section Head for Quarry, Khun Prasit Loonvela not only implements OH&S requirements but he also initiates ideas to improve safety at the quarry - such as enlarging signage as visibility needed to be improved.

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Golden Rules reflect company’s commitment to welfare and safety The Golden Rules has marked the start of a new era in health and safety compliance for the company. It was clear that, in certain areas of our business, urgent action was needed to reinforce key safety messages and tighten discipline on safe working practices.

The Golden Rules cover such areas as working at heights, moving machinery, electrical safety, confined space entry, lifting and supporting loads and vehicle/ road traffic safety. No employee or contractor is exempt from the Golden Rules and penalties reflect the level of risk associated with them.

Excuse me. This may be a minor issue to you but, for me, it’s very important. Every vehicle entering the quarry must either be escorted by a quarry vehicle or be fitted with a high pole and flag at the end, high enough for driver of a dump truck to see. The guard is showing his commitment to site safety by enforcing this important rule. When he sees that the escort vehicle has not raised the pole with red flags high enough to ensure that the big truck will see it, he raises the pole himself. The four metre pole stands tall against the sky and red flag at the top is clearly visible.

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It is clear that this new compliance framework has created a solid foundation but the company recognises that there is much work still to be done. Importantly, the company’s safety culture extends far beyond the office and plant environments. With up to 4,000 vehicle movements daily, the adoption of safe driving practices and safe vehicle conditions are a vital part of the campaign to achieve zero accidents. Our defensive driver training courses, for example, improve ‘on the road’ skills for our sales team.

Checking all around the vehicle for safety Before operations begin, staff must inspect the equipment they are about to use. Although the equipment may be in perfect working order, these important checks are still carried out.

Sales and customer service training for safe driving The Golden Rules concept has been introduced to reflect the company’s total commitment to safety on site, on the roads and in the workplace. The enthusiastic response of the workforce in signing up to these new standards is a clear indication that the company’s vision of zero fatalities, zero accidents and zero harm as part of a safe production culture is appreciated by all sections of our community. Alongside our sales and customer service, we train for safe driving.

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Safety culture extends beyond our site to community The company’s commitment to safety is probably best reflected in the annual two-day safety exhibition at Saraburi. In 2006 the exhibition attracted record numbers and provided an ideal showcase for the newly-introduced Golden Rules and included information stands by employees and contractors. It was an event not just for employees but also for contractors and their families and particularly for their children who can have an important impact on parent safety behaviour as we want all to return home each day to their families. Sub-contractors and employees sharing information at the exhibition In addition to the 1,000 employees who work at the plant the 2006 safety exhibition attracted more than 2,000 sub-contractors who live in Saraburi and the surrounding provinces. Many participated directly in the safety exhibition with imaginative and creative displays.

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You can’t miss our Golden Rules in this exhibition What is so significant about this exhibition is that it is an event organised and implemented by employees, supported by the company’s Occupational Health & Safety team.

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Industrial Outlook, Risk Factors & Risk Management

Cement Industry 2006: Overview The increase in demand for cement consumption over the past five years was driven by a number of governmental projects, including the Mass Transit, Suvarnabhumi Airport and other infrastructure projects in both city and regional areas. These projects stimulated the housing construction in the surrounding areas. However, in 2006, Both private and public investment declined and slowdown which decrease cement demand. The overall demand for 2006 was approximately 27.5 million tons, two percent lower than 2005. The major reasons for declining investment were: 1. Delays in government mega projects 2. High inflation and interest rates 3. Increase in oil prices which resulted in higher costs 4. Decline in local and foreign investors as a result of political uncertainty 5. Heavy flooding in many parts of Thailand which led to a stoppage in construction Additional to a decline in cement demand, the competition in the industry was also lifted to another level. In 2006, there was a new cement producer, with production capacity of around one million tons per annum. Consequently, the total annual industry production capacity increased from the previous year to approximately 56.3 million tons. With fierce competition, decline in demand and the entering of a new player, the industry has focused upon various issues as follows: 1. Product: Continued product development and quality enhancement to satisfy each customer segment and needs. 2. Price: Pricing remained very competitive despite the increase of production costs. 3. Place: Continued modernisation of distribution with special emphasis on the ‘Modern Trade’ concept was the trend. 4. Promotion: Wide spread advertisements through TV, radio and press is a common fashion of the industry. However there was no new significant trend.

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Export With a country total production capacity (No.1 in ASEAN), and slowdown in the domestic demand, Thai producers had to push ahead in the export market to better utilise installed capacity. The major export destinations were USA, ASEAN countries, Bangladesh and the UAE.

Cement Market 2007 Domestic demand for 2007 is expected to see little change from 2006. Although there will be increase in demand from renovation of infrastructure and housing damaged by flooding, the new housing and property sector may shrink due to reduction in confidence. Thailand Mega Projects, such as the Mass Transit system in Bangkok, are not expected to start before late 2007. The export market remains very important for Thai producers. However, it is expected that major markets such as the USA may show a drop in demand due to a slow down in the housing market. Export competition will remain strong. China will remain the main competitor. Thai producers have emphasised the importance of cost controls, product quality and productivity in order to remain competitive.

Risk Factor and Risk Management As for risk factors for 2006, please refer to ‘Report of the Executive Committee’ - page 12 The Company would like to report on business risk management systems as follows: In general, there are three risk management perspectives

1. Risk Management: Financial Risk Management, Operational Risk Management 2. Business Risk Management: Considering and covering risks relevant to the business e.g. market conditions, finance and human resources 3. Enterprise Risk Management: Focusing on alignment of strategy, processes, people, technology and knowledge on an enterprise - wide basis Therefore, in 2000, the Company established a business risk management function with an aim to assess and to manage potential business risks that might affect the Company and its subsidiaries, in line with international standards. The unit also coordinates with the Company’s management and operational team to establish a preventive measurement and contingency plan and to report this risk management activity to executives on a regular basis. Risk assessment and management studies across the Company and its subsidiaries are conducted every year, taking into consideration possible factors over the next five years. A control and follow-up report is issued on a periodic basis. Risks are categorised into two types risk for the entire corporation and risk for each type of business line. Risk for the entire corporation concerns macro environment, law and regulation, finance, business support, planning, human resources and corporate image. Risks for each type of business line comprises ten aspects including industry, market conditions, law, finance, planning, costs, marketing management, impact on the environment, human resources and corporate social responsibility. The significance of business risk management is taken into account by the Company during business planning and it is incorporated as one of the factors in the planning process. The aim of the business planning is to develop a risk mitigation plan, a plan for increased business opportunities, and to align strategies and actions from every function in order to achieve the Company’s goals and promote its vision.

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Summary of major developments and recognitions in 2006

Major Developments in 2006 Managing Director’s Office 1. OH&S 12 Golden Rules launch to reinforce OH&S performance 2. Fatality prevention elements implementation 3. Six new AFR feeding systems 4. Development of state-of-the-art AFR laboratory in the region 5. Signing contract with Amata Facility Services to manage new solid waste transfer station at Amata Nakorn. Established presence at Amata Industrial Estate through integrated marketing activities 6. Implementation of AFR stakeholder dialogue, in collaboration with German technical cooperation, among key authorities, NGOs and academia 7. Relocation of Head Office to consolidate several office locations into one for more effective business operation 8. Sustainable Development Report launch 9. Building the Celebrated Arch on Ratchadamnoen avenue to honour HM the King’s 60th year accession to the Throne 10. Check Dam Project to build 880 check dams to honour HM the King’s 80th Birthday

Marketing and Sales 1. Launch of product innovation, INSEE Dang - new formula 2. INSEE concrete franchise 3. Start-up aggregate business for Siam City Concrete 4. Significant growth of sales of INSEE Mortar Max, reinforced by investment in mortar max production 5. Doctor Cement hotline (+66 2 797 7777 or 1-80077-5555), new support service makes extensive technical expertise available to all customers from large developers to local contractors and homeowners

Logistics and Exports 1. Implementation of fleet management and transportation planning to ensure holistic transportation resources 2. Establishment of GPS monitoring system to track delivery status of trucks 3. Implementing an initiative with trucks of INSEE Transporters to replace diesel with NGV

Human Resources and Management Development 1. Development of Leadership Development Center 2. Conduct feasibility study in conjunction with AIT on establishment of Siam City Cement Technical Training Center

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Recognitions in 2006 Finance and Controlling 1. Establishment of Contractor Management and Service Department 2. Completion of second share buyback scheme

1. 2. 3.

Saraburi Operations 1. Implementation of compliance platform, a web-base integrated tool for management of information and operational audit tool for risk management 2. Scope expansion of PRIM (Product Reliability Improvement and Maintenance) to cover quarry heavy main machines 3. Implementation of condition-based monitoring system for Saraburi operations 4. Scope expansion of MPR (Manufacturing Performance Review), a programme to improve production costs, volume, quality and environment at all three plants 5. Upgrading plant master plan 6. Modernisation of quality control system 7. Development of Virtual Project Control (VPC) to control and monitor CAPEX progress 8. Establishment of Engineering Design Division into Project Management Department to optimise efficiency of CAPEX project execution

4.

5. 6.

7.

OH&S Green Pyramid certificate from external party Certificate for Youth Support from Bangkok Metropolitan Administration Certificate for supporting One District One Dream School from Ministry of Education Recognition flags on pleasant plants for five Ready - Mixed Concrete plants of Siam City Concrete and certificates on pleasant and environmental friendly plants in honour of HM the King’s 60th year accession to the Throne to Siam City Cement and Conwood from Department of Industrial Works, Ministry of Industry Safety award from the Ministry of Labour to Ready - Mixed Concrete plants of Siam City Concrete Recognition announcement from Saraburi Governor on amicable negotiations with Labour Union Certificate from Office of Saraburi Social Security for a healthy organisation

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Good Corporate Governance & Internal Controls

Good Corporate Governance Report

(b) Equal treatment of Shareholders

The Company wishes to report on compliance status of SET’s good corporate governance guidelines as follows:

To ensure that all shareholders are afforded equal treatment and provided equal documentation, the Company assigned Thailand Securities Depository Co., Ltd. to act as its registrar, distribute dividends and documents to shareholders on its behalf. It also encourages shareholders unable to attend shareholders’ meetings to exercise votes in their absence through appointing their representatives. If shareholders are unable to attend they may appoint the Chairman of the Board of Directors or the Chairman of the Audit Committee as their proxy-holder. In the last three years, on average about 78 per-cent of total shareholders have participated in shareholders’ meetings, either in person, or by proxy-holders. Aiming to give all shareholders equal rights when it comes to such decisions, the Company has always given shareholders advance notice of agenda items due to be raised at the meetings.

(a) Rights of shareholders The Company promotes and facilitates shareholders' access to information, attendance at meetings and casting of votes. Shareholders may, through written correspondence or via the Company website (www.siamcitycement.com), learn about subjects to be raised at the annual shareholders' meetings. Each meeting provides adequate time and opportunity for shareholders to ask questions and express their opinions freely.

Meeting Ordinary Meeting attendance In Person Appointment of Representatives Total

2006 (%)

2005 (%)

2004 (%)

0.07

0.05

0.09

78.80 78.87

79.20 79.25

76.31 76.40

In order to prevent and monitor potential insider trading, the Board had requested that board members and executives submit details of their shareholdings at every meeting of the Board of Directors.

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(c) Roles of Stakeholders Since 2004, the Company has pursued a policy on corporate social responsibility in which it intends to create ongoing relationships which are acceptable to all and to establish mutual trust and a high quality of life for the staff and their families - including communities in which we operate. The aforementioned policy has taken the legal rights of all interested parties into consideration. For example, the need to respect high business standards and international human rights. Regarding employment, it follows labour laws strictly and will not employ children or young people under the compulsory education age. It promotes diversity of personnel and offers equal opportunities to employees. The Company considers needs of the community, encourages staff to do volunteer community work. Environmental responsibility is another Company policy. The Company emphasises the need for regular monitoring and continual improvement of environmental performance. The Company also places importance on Eco-efficiency and QSHE (Quality, Safety, Health and Environment) management system into its business process. The Company realises that stakeholders’ participation plays a significant role in improving corporate performance. In 2006, the Company prepared a report on sustainable development to report its performance on environment and corporate social responsibility as well as setting future objectives in these two fields. The report has been sent to shareholders and has already been distributed to the public. (Details of this report can be downloaded from the Company’s website).

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(d) Disclosing information and transparency The Company has set a policy on transparent communication. Both financial and non-financial information has been disclosed by the Company accurately, speedily and transparently in accordance with SET rules. For example, in 2006 there were 35 separate fillings made with the SET. The Company also provides additional access of this information on its website. This includes annual report, annual registration statement and other reports, made available both in Thai and English. The Company has established a unit responsible for investor relations under corporate communications function to provide information to shareholders, investment institutions public and the media. In 2006, more than 150 personal contacts were made with securities analysts and investors, in addition to regular corporate briefings which covered business performance for prospective investors, securities analysts and other interest groups. Telephone : +66 2 797 7060 Facsimile : +66 2 663 1847 E-mail : staporn.phettongkam@sccc.co.th

(e) Responsibility of the Board and Executive Committee The Board had implemented ‘Organisational Regulations’. These regulations are reviewed regularly. 1. Board Structure: Company’s Articles of Associations stipulate that the number of board members is limited to 13. There are currently 12 board members, each elected in accordance with its Articles of Association under which shareholders vote for each candidate. The Board is comprised of three executive directors, nine non-executive directors - the latter are neither executives nor employees of the Company. The Audit Committee comprises three independent directors who work under the framework of the Charter of the Audit Committee. Each Board member has knowledge and expertise beneficial to the Company and is free to render his/her opinion. The Chairman of the Board, who represents the Company to its shareholders, is not an executive director. The positions of managing director and Chairman of the Board are held by different people.

The Company has also conducted more than 100 corporate social responsibility activities which received widespread media coverage in over 300 publications. Report of Board of Directors for financial statements has been displayed along with Report of Certified Public Accountant in this annual report. Basis for preparation of financial statements is in compliance with Thai accounting law, with income taxes and employee benefits are aligned with international accounting standards (IAS) No. 12 and 19. Its presentation is also in compliance with regulations of the Department of Business Development, its governing authority. More details are stipulated in Note No. 2 of the Consolidated Financial Statements. Other information, such as names of Board members and executives, their experiences and remuneration are shown in related sections.

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2. Roles and responsibilities of the Board: The Company’s Organizational Regulations stipulate a framework for roles and responsibilities of the Board, Chairman and Deputy Chairman of the Board, and the Executive Committee. The roles and responsibilities of the Board and Executive Committee are clearly separated from each other. The former is to consider and give approval on significant issues concerning the Company’s operations while the latter is assigned to implement the approved vision, mission, strategy, corporate governance and internal controls. An internal audit function has been established and reports directly to the Audit Committee. This measure has assisted in paving the way for direct communication with the Board in case of any concerns with financial statements, internal control, violation of the law, or ethics.

Internal control

The Audit Committee, which is comprised of independent directors, has expressed the opinion that the Company’s internal control system is sufficient and appropriate to run operations. The Report of the Audit Committee is attached in this annual report.

Presently, the Company is considering preparing the Code of Conduct for the whole organization. 3. Performance of the Board: Putting the utmost effort into its many duties, the Board sets a meeting schedule on a yearly basis. The Managing Director submits a notice with supporting documentation and an agenda not less than one week in advance before each board meeting takes place. Information on the Company’s operations is presented so that the board can make inquiries or express opinions. Every board member is encouraged to express their opinion freely. 4. Remuneration for the Board and executives: The Board proposes its remuneration for shareholders approval on yearly basis. Compensation for executives who are employees of the Company is in line with the Company’s annual earnings performance and also in accordance with strategy and management systems which will stimulate executives to provide satisfactory yields to shareholders. Details on remuneration payment to Board of Directors and the Executive Committee are contained under Supplemental Information.

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, Report of the Board of Directors Responsibilities for Financial Statements

The consolidated financial statements of the Company and its subsidiaries and the separate financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Thailand, in compliance with Accountancy Act B.E. 2543. The Company has chosen with careful consideration its accounting policies, which are proper to business operations, and has always strictly adhered to these policies. All material information has been sufficiently disclosed in the notes to the financial statements.

The Board of Directors of the Company is held accountable for correctness and completeness of the aforementioned financial statements, including financial data as shown in the annual report. The Board has also adopted an effective internal control which makes reasonably assure that the financial data and report are accurate, complete and adequate to protect assets and prevent possible wrongdoing or other irregularities in the operations of the Company.

The Audit Committee, consisting of three independent directors performing its duties in compliance with the SET guidelines on Best Practice Guidelines for Audit Committee, assists the Board of Directors by overseeing internal and external audit matters on its behalf, and operates under a written charter adopted by the Committee and the Board of Directors. The report of the Audit Committee and the report of the certified external authorized auditors appear in this annual report.

Leo Mittelholzer Managing Director

Veraphan Teepsuwan Chairman

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Report of the Audit Committee

To the Shareholders of Siam City Cement Public Company Limited We are pleased to present our report for the financial year ended 31 December 2006. The Audit Committee is comprised solely of independent directors and operates under a written charter adopted by the Committee and the Board of Directors. In 2006, the Audit Committee held four ordinary meetings. The Committee discussed with the Company's external auditors their plans for audits during the year and discussed the results of their examinations and evaluations of the Company's internal controls, and the quality of financial reporting. The Management reported to the Committee that the Company's quarterly and annual consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Committee has reviewed and discussed the consolidated financial statements and the separate financial statements of Siam City Cement Public Company Limited, including the disclosure of connected transactions and transactions of conflicts of interest, with management and the external auditor. Based on the reviews and discussions, the Committee reported to the Board of Directors that the audited consolidated financial statements for the years ended 31 December 2006 and 2005 have been prepared in compliance with generally accepted accounting principles, and reflect the financial performance of the Company and its subsidiaries. The Committee reviewed the internal auditor’s plans to assess internal controls in selected areas of the Company's operations for 2006. The Committee also reviewed the results of these assessments with the internal auditors and management. Where improvements are required to internal controls, the Committee was satisfied that management is taking appropriate remedial action. Whilst reviewing the quarterly and annual financial statements for 2006, and the above mentioned assessments performed by the external and internal auditors, the Committee did not note non-compliance of the Company's activities with the Securities and Exchange Act and with rules and regulations of the Stock Exchange of Thailand. The Committee recommends to the Board of Directors and the Annual General Meeting, the retention of Mr. Narong Puntawong, Ms. Saifon Inkaew and Ms. Ratana Jala of Ernst & Young Office Limited as the Company’s external auditors for 2007 and the proposed remuneration. January 30, 2007 For and on behalf of the Audit Committee Siam City Cement Public Company Limited

Prakob Visitkitjakarn Chairman of the Audit Committee

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Consolidated Financial Statements

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Report of Certified Public Accountant

To The Board of Directors and Shareholders of Siam City Cement Public Company Limited I have audited the accompanying consolidated balance sheet of Siam City Cement Public Company Limited and its subsidiaries as at 31 December 2006, the related consolidated income statements, statements of changes in shareholders' equity and cash flows for the year then ended, and the separate financial statements of Siam City Cement Public Company Limited for the same year. These financial statements are the responsibility of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated financial statements of Siam City Cement Public Company Limited and its subsidiaries, and the separate financial statements of Siam City Cement Public Company Limited for the year ended 31 December 2005, as presented herein for comparative purpose, were audited by another auditor of our firm who, under his report dated 9 February 2006, expressed an unqualified opinion on those statements. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the aforementioned financial statements referred to above present fairly, in all material respects, the financial position of Siam City Cement Public Company Limited and its subsidiaries and of Siam City Cement Public Company Limited as at 31 December 2006, and the results of their operations and cash flows for the year then ended in accordance with generally accepted accounting principles.

Narong Puntawong Certified Public Accountant (Thailand) No. 3315 Ernst & Young Office Limited Bangkok : 8 February 2007

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Balance Sheets

As at 31 December 2006 and 2005

(Unit : Baht) The Company Only

Consolidated Note

2006

2005

2006

2005

ASSETS CURRENT ASSETS Cash and cash equivalents

6

710,304,130

2,227,599,882

545,610,844

2,084,844,775

Trade accounts receivable Subsidiaries and related companies

322,782,982

227,813,609

691,440,736

505,945,696

9

2,239,385,632

1,737,812,713

1,483,869,156

1,138,781,032

Inventories - net

10

1,672,880,938

1,744,996,958

1,563,958,077

1,659,395,598

Other debtors - subsidiary and related companies

7

7,699,211

-

160,806,779

117,278,614

Advance payments to suppliers - other companies

170,088,002

96,674,946

144,429,478

44,161,238

Other current assets

131,936,810

187,074,859

96,108,587

123,532,503

5,255,077,705

6,221,972,967

4,686,223,657

5,673,939,456

1,630,142,249

Other companies - net

7, 8

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS Investments accounted for under equity method

11

830,283,476

720,391,935

1,730,457,484

Other investments - related company

12

368,119,260

368,119,260

-

-

Long-term loans to subsidiaries - net

7, 13

-

-

1,283,125,433

991,165,288

Property, plant and equipment - net

14

12,088,237,575

11,318,770,020

10,145,600,593

9,576,847,656

Assets not used in operations - net

15

1,128,654,987

1,523,423,384

1,103,678,608

1,486,430,442

Intangible assets - net

16

380,830,725

394,811,316

378,210,919

388,266,730

17

371,648,014

342,607,710

371,648,014

342,607,710

186,043,575

138,528,827

146,316,630

118,606,872

TOTAL NON-CURRENT ASSETS

15,353,817,612

14,806,652,452

15,159,037,681

14,534,066,947

TOTAL ASSETS

20,608,895,317

21,028,625,419

19,845,261,338

20,208,006,403

Other non-current assets Deferred income tax Others

The accompanying notes are an integral part of the financial statements.

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Balance Sheets

As at 31 December 2006 and 2005

(Unit : Baht) Consolidated Note

2006

The Company Only 2005

2006

2005

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term loans from financial institutions

18

443,544,467

50,099,000

400,000,000

-

Trade accounts payable Associated and related companies

7, 19

Other companies

185,359,181

113,069,013

237,567,750

113,069,013

1,142,904,093

1,200,791,675

885,439,787

973,058,901

Current portion of long-term loans

20

50,000,000

46,000,000

-

-

Current portion of long-term liabilities for concession

21

30,870,372

-

30,870,372

-

Other current liabilities Accrued rebate

209,874,950

118,458,736

205,874,950

118,458,736

Accrued electricity

232,586,537

226,663,623

230,606,900

220,952,403

760,581,194

676,885,993

735,458,475

663,541,941

618,352,488

571,456,216

549,897,900

500,775,293

Advances from customers

30,628,345

31,556,642

26,061,700

25,909,430

Others

61,008,347

26,634,371

54,254,062

18,705,444

3,765,709,974

3,061,615,269

3,356,031,896

2,634,471,161

20

289,000,000

339,000,000

-

-

- net of current portion

21

280,210,086

311,080,458

280,210,086

311,080,458

Provident fund

23

492,540,640

443,607,371

437,582,371

396,649,387

Reserve for employee retirement benefit plan

24

Corporate income tax payable

22

Other accrued expenses

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES Long-term loans - net of current portion Other liabilities Long-term liabilities for concession

127,046,990

70,801,856

117,421,752

61,878,736

TOTAL NON-CURRENT LIABILITIES

1,188,797,716

1,164,489,685

835,214,209

769,608,581

TOTAL LIABILITIES

4,954,507,690

4,226,104,954

4,191,246,105

3,404,079,742

The accompanying notes are an integral part of the financial statements. SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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Balance Sheets

As at 31 December 2006 and 2005

(Unit : Baht) Consolidated Note

2006

The Company Only 2005

2006

2005

3,000,000,000

3,000,000,000

3,000,000,000

SHAREHOLDERS' EQUITY Share capital Registered 300,000,000 ordinary shares of Baht 10 each

3,000,000,000

Issued and fully paid up 250,000,000 ordinary shares of Baht 10 each Share premium Translation adjustment

2,500,000,000

2,500,000,000

2,500,000,000

2,500,000,000

10,106,266,730

10,106,266,730

10,106,266,730

10,106,266,730

25,580

(149,697)

25,580

(149,697)

Retained earnings Appropriated - statutory reserve - treasury stock reserve

25

300,000,000

300,000,000

300,000,000

300,000,000

26

4,696,067,693

2,985,423,947

4,696,067,693

2,985,423,947

Unappropriated Total equity attributable to the Company's shareholders Less : Treasury stock

26

2,747,722,923

3,897,809,628

2,747,722,923

3,897,809,628

20,350,082,926

19,789,350,608

20,350,082,926

19,789,350,608

(4,696,067,693)

(2,985,423,947)

(4,696,067,693)

(2,985,423,947)

15,654,015,233

16,803,926,661

15,654,015,233

16,803,926,661

EQUITY ATTRIBUTABLE TO THE COMPANY'S SHAREHOLDERS - NET MINORITY INTERESTS - EQUITY ATTRIBUTABLE TO

372,394

(1,406,196)

-

-

TOTAL SHAREHOLDERS' EQUITY

15,654,387,627

16,802,520,465

15,654,015,233

16,803,926,661

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

20,608,895,317

21,028,625,419

19,845,261,338

20,208,006,403

MINORITY SHAREHOLDERS OF SUBSIDIARIES

The accompanying notes are an integral part of the financial statements.

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Income Statements

For the Years Ended 31 December 2006 and 2005

(Unit : Baht) Consolidated Note

2006

The Company Only 2005

2006

2005

23,647,362,689

22,380,411,565

20,975,928,019

19,852,067,549

149,868,825

157,000,220

230,296,849

210,983,482

164,683,904

162,941,178

159,284,571

342,059,345

-

11,594,435

-

11,594,475

23,961,915,418

22,711,947,398

21,365,509,439

20,416,704,851

16,270,011,849

14,711,736,205

14,056,075,005

12,785,107,160

2,056,262,051

2,101,405,922

1,789,605,701

1,822,444,362

29,703,109

25,905,668

17,703,109

25,905,668

18,355,977,009

16,839,047,795

15,863,383,815

14,633,457,190

5,605,938,409

5,872,899,603

5,502,125,624

5,783,247,661

(82,272,805)

(70,115,587)

(44,756,820)

(37,682,405)

(1,666,423,349)

(1,731,694,453)

(1,601,872,963)

(1,673,025,132)

3,857,242,255

4,071,089,563

3,855,495,841

4,072,540,124

(1,746,414)

1,450,561

-

-

3,855,495,841

4,072,540,124

3,855,495,841

4,072,540,124

16.43

17.15

16.43

17.15

234,711,139

237,500,000

234,711,139

237,500,000

REVENUES Net sales

7

Other income Share of profit from investments accounted for under equity method - net Gain on sale of investment in share of subsidiary TOTAL REVENUES EXPENSES 7

Cost of sales Selling and administrative expenses

15

Other expenses TOTAL EXPENSES PROFIT BEFORE INTEREST EXPENSES AND CORPORATE INCOME TAX INTEREST EXPENSES CORPORATE INCOME TAX PROFIT BEFORE MINORITY INTERESTS MINORITY INTEREST IN NET (PROFIT) LOSS OF SUBSIDIARY NET PROFIT FOR THE YEAR

22

BASIC EARNINGS PER SHARE

Net profit

Weighted average number of ordinary share - net (share)

The accompanying notes are an integral part of the financial statements. SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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43


Statements of Changes in Shareholders' Equity For the Years Ended 31 December 2006 and 2005

(Unit : Baht) Consolidated Retained earnings

Minority interests equity attributable

Appropriated Note

Translation adjustment 26

Net profit for the year Decrease in minority interests Dividend paid

Share premium

Translation adjustment

2,500,000,000 10,106,266,730

Balance as at 1 January 2005

Increase in treasury stock reserve

Issued and fully paid up share capital

29

Balance as at 31 December 2005

Treasury stock

shareholders of

Total

subsidiaries

-

300,000,000

-

6,016,908,351

(2,985,423,947)

-

-

(149,697)

-

-

-

-

-

-

-

-

-

2,985,423,947 (2,985,423,947)

-

-

-

-

-

-

-

-

-

-

-

-

-

2,500,000,000 10,106,266,730

(149,697)

300,000,000

2,985,423,947

175,277

-

-

-

-

Translation adjustment

to minority

statutory treasury stock reserve reserve Unappropriated

-

27,666 15,937,778,800 (149,697)

-

4,072,540,124

-

-

4,072,540,124

-

-

-

-

(1,433,862)

(1,433,862)

-

- (3,206,214,900)

-

- (3,206,214,900)

3,897,809,628

(2,985,423,947)

(1,406,196) 16,802,520,465

-

-

-

(1,710,643,746)

1,710,643,746 (1,710,643,746)

-

-

-

-

175,277

Increase in treasury stock during the year Increase in treasury stock reserve

26

-

-

-

-

26

-

-

-

-

-

-

-

-

-

3,855,495,841

-

-

3,855,495,841

-

-

-

-

-

-

-

1,778,590

1,778,590

-

-

-

-

- (3,294,938,800)

-

- (3,294,938,800)

2,500,000,000 10,106,266,730

25,580

300,000,000

(4,696,067,693)

372,394 15,654,387,627

Net profit for the year Increase in minority interests Dividend paid

29

Balance as at 31 December 2006

4,696,067,693

2,747,722,923

The accompanying notes are an integral part of the financial statements.

44

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- (1,710,643,746)


Statements of Changes in Shareholders' Equity For the Years Ended 31 December 2006 and 2005

(Unit : Baht) The Company Only Retained earnings

Note

Appropriated

Issued and fully paid up share capital

Share premium

Translation adjustment

2,500,000,000 10,106,266,730

statutory treasury stock reserve reserve Unappropriated

-

300,000,000

-

Translation adjustment

-

-

(149,697)

-

-

Increase in treasury stock reserve

-

-

-

-

-

-

-

-

-

-

-

-

2,500,000,000 10,106,266,730

(149,697)

300,000,000

Balance as at 1 January 2005

26

Net profit for the year Dividend paid

29

Balance as at 31 December 2005

Treasury stock

Total

6,016,908,351 (2,985,423,947) 15,937,751,134 -

-

2,985,423,947 (2,985,423,947)

-

-

-

4,072,540,124

-

4,072,540,124

- (3,206,214,900) 2,985,423,947

(149,697)

- (3,206,214,900)

3,897,809,628 (2,985,423,947) 16,803,926,661

Translation adjustment

-

-

175,277

-

-

-

Increase in treasury stock during the year

26

-

-

-

-

-

- (1,710,643,746) (1,710,643,746)

Increase in treasury stock reserve

26

-

-

-

-

-

-

-

-

-

-

-

-

2,500,000,000 10,106,266,730

25,580

300,000,000

Net profit for the year Dividend paid

29

Balance as at 31 December 2006

1,710,643,746 (1,710,643,746) -

3,855,495,841

- (3,294,938,800) 4,696,067,693

-

-

-

-

3,855,495,841

- (3,294,938,800)

2,747,722,923 (4,696,067,693) 15,654,015,233

The accompanying notes are an integral part of the financial statements. SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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175,277

45


Statements of Cash Flows

For the Years Ended 31 December 2006 and 2005

(Unit : Baht) Consolidated Note

2006

The Company Only

2005

2006

2005

Cash flows from operating activities Net profit for the year

3,855,495,841

4,072,540,124

3,855,495,841

4,072,540,124

(164,683,904)

(162,941,178)

(159,284,571)

(342,059,345)

-

(11,594,435)

-

(11,594,475)

Increase (decrease) in minority interest

1,746,414

(1,450,561)

-

-

Provision for doubtful accounts and obsolete inventories

3,809,655

10,474,550

507,524

116,131

739,414,323

740,023,378

618,180,359

630,828,395

28,532,707

25,905,668

17,703,109

25,905,668

-

-

28,339,855

26,768,682

65,441,210

(2,204,198)

66,018,299

(1,956,982)

101,027,852

48,669,890

91,295,127

42,346,735

6,086,221

(3,494,235)

5,957,517

(3,370,788)

Adjustments to reconcile net profit to net cash provided by (paid from) operating activities :Share of profit from investments accounted for under equity method - net Gain on sales of investments in shares of subsidiary and other companies

Depreciation and amortization Increase in provision for loss on impairment of assets Provision for doubtful accounts of long-term loans to subsidiary Loss (gain) on sales of fixed assets Provision for provident fund and employee retirement benefit Loss (gain) on foreign exchange - net Increase (decrease) in deferred income tax Net change in other operating assets and liabilities

6

Net cash from operating activities

(29,040,304)

3,234,271

(29,040,304)

3,234,271

4,607,830,015

4,719,163,274

4,495,172,756

4,442,758,416

(280,159,496)

(487,416,994)

(257,525,926)

(431,310,769)

4,327,670,519

4,231,746,280

4,237,646,830

4,011,447,647

-

-

-

(149,697) 141,201,687

Cash flows from investing activities Cash paid for investment in subsidiary company Proceeds from sales of investment in subsidiary and other companies - net of cash

-

140,294,076

-

Proceeds from sales of fixed assets

299,210,844

292,600,216

298,633,536

292,336,572

(1,475,509,642) (1,313,210,129) (1,158,835,133)

(556,166,001)

Purchase of fixed assets Increase in short-term loan to subsidiary

-

-

-

(11,608,800)

Increase in long-term loan to subsidiary

-

-

(320,300,000)

(475,000,000)

Increase in intangible assets

(17,808,009)

(18,682,268)

(17,879,223)

(14,040,267)

Increase in other non-current assets

(47,514,748)

(15,012,938)

(27,709,758)

(4,242,221)

54,792,363

182,641,211

54,792,363

212,641,139

(731,369,832) (1,171,298,215)

(415,027,588)

Dividend received Net cash used in investing activities

(1,186,829,192)

Cash flows from financing activities Increase in short-term loans from financial institutions

393,445,467

9,099,000

400,000,000

-

Dividend paid

(3,294,938,800) (3,206,214,900) (3,294,938,800) (3,206,214,900)

Increase in treasury stock

(1,710,643,746)

Cash received from (paid for) long-term loans - net

(46,000,000)

Net cash used in financing activities

(4,658,137,079)

Net increase (decrease) in cash and cash equivalents

(1,517,295,752)

Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

6

- (1,710,643,746) 10,000,000

-

-

(3,187,115,900) (4,605,582,546) (3,206,214,900) 313,260,548 (1,539,233,931)

390,205,159

2,227,599,882

1,914,339,334

2,084,844,775

1,694,639,616

710,304,130

2,227,599,882

545,610,844

2,084,844,775

Supplemental cash flows information :Cash paid during the years for :Interest expenses Corporate income tax

81,484,303

69,482,710

44,756,820

25,682,405

1,597,300,459

2,027,989,542

1,558,950,276

1,955,993,019

The accompanying notes are an integral part of the financial statements.

46

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

1. GENERAL INFORMATION Siam City Cement Public Company Limited (“the Company”) was incorporated as a limited company under Thai laws and registered the change of the status of the Company to a public limited company under the Public Limited Company Act on 5 November 1993. The Company operates in Thailand and its principal activity is manufacturing of cement with the registered address at 199, 7th - 12th Floor, Column Tower, Ratchadapisek Road, Klongtoey, Bangkok and its factory address is at 99 Moo 9 and 219 Moo 5, Mitraparp Road Km. 129 - 131, Tabkwang, Kaengkhoi, Saraburi. 2. BASIS OF PREPARATION The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, except for the early adoption of Accounting Standard No. 56 “Accounting for Income Tax” which is in line with International Accounting Standard (IAS) No. 12 “Income Taxes” (revised 1996) and the adoption of International Accounting Standard (IAS) No.19 “Employee Benefits”. The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543. The financial statements have been prepared on a historical cost basis except for those that have been disclosed in the accounting policy. 3. BASIS OF CONSOLIDATION 3.1 The consolidated financial statements include the financial statements for the years ended 31 December 2006 and 2005 of Siam City Cement Public Company Limited (herein after called “the Company”) and its subsidiaries (herein after called “the subsidiaries”) as follows :-

Company’s name

Incorporated in

Registered capital

2006 Million Baht Siam City Concrete Co., Ltd.

Thailand

Eagle Cement Holdings Co., Ltd. Conwood Co., Ltd. Khmer Cement Industry Co., Ltd.

Thailand Thailand Cambodia

Percentage of Shareholding by the Company

2005 Million Baht

2006 Percent

2005 Percent

400

400

99.99

99.99

700 300 USD 0.005 million

700 300 USD 0.005 million

99.99 99.99 75.00

99.99 99.99 75.00

Nature of Business

Ready-mixed concrete and aggregates Holding Construction Material Cement trading

3.2 The financial statements of the subsidiary company incorporated overseas are translated into Thai Baht at the closing average exchange rate for assets and liabilities, and at the monthly average exchange rate applying during the year for revenues and expenses. The resultant differences have been shown under the caption of “Translation adjustment” in shareholders’ equity.

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

3.3 Intercompany balances and significant intercompany transactions between the Company and its subsidiaries are eliminated from the consolidated financial statements. 3.4 On 29 December 2005, the Company sold its investment in Karat Faucet Company Limited, a 99.99 percent-owned subsidiary, to a third party. The Company recorded a loss on sale of investment in share of subsidiary of Baht 0.4 million in the income statement for the year ended 31 December 2005. The consolidated balance sheet as at 31 December 2006 and 2005 did not include the balance sheets of Karat Faucet Company Limited. However, the consolidated income statement for the year ended 31 December 2005 had included the income statement of Karat Faucet Company Limited proportionately up to date when such investment was sold in which the summarised financial information were as follows :-

Total revenues Cost and expenses Net profit

(Unit : Baht) 253,719,407 235,104,335 18,615,072

During the year 2005, the Company received dividend income of Baht 30 million from this subsidiary. 4. ADOPTION OF NEW ACCOUNTING STANDARD On 11 October 2006, the Federation of Accounting Professions issued Notification No. 26/2006 regarding Accounting Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in subsidiaries� (Amendment No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial statements under the cost method rather than the equity method. Entities which are not ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and adopt the cost method as from 1 January 2007. The above-mentioned notification was announced in the Royal Gazette and became effective on 30 October 2006. In this regards, the Company elected to change its accounting policy for investments in subsidiary and associated companies in the separate financial statements to the cost method as from 1 January 2007. 5. SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies adopted by the Company and its subsidiaries are summarized below :5.1 Revenue recognition a) Sales of goods Sales of goods are recognized when the significant risks and rewards of ownership of goods have passed to the buyer. b) Interest income Interest income is recognized as interest accrued taking into account the effective rate method. 5.2 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and cash at financial institutions with an original maturity of three months or less and not subject to restrictions. 5.3 Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at their net realizable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in the collection of receivables. The allowance is based on collection experience and the current status of receivables outstanding at the balance sheet date. 5.4 Inventories Inventories are valued at lower of cost (on an average method and first-in first-out basis) and net realizable value which is lower. In arriving at net realizable value due allowance has been made for all obsolete and deteriorated inventories. 48

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5.5 Investments in shares Investments in associated company in the consolidated financial statements are stated under the equity method. Investments in subsidiary and associated companies in the Company’s financial statements are stated under the equity method. Other investments in related company of a subsidiary company are stated at cost. Allowance for impairment loss will be made when the net realizable value is lower than the cost of investments. 5.6 Property, plant and equipment and depreciation Land is stated at cost. Building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of asset (if any). Depreciation of plant and equipment is calculated by reference to their cost on a straight-line basis over the estimated useful lives as follows :-

Building and structures Plant, machinery and equipment Furniture, fixtures and office equipment Vehicles

5 - 30 years 5 - 30 years 3 - 5 years 5 years

No depreciation is provided on land and construction in progress. Depreciation is included in determining earnings. 5.7 Treasury stock Treasury stock is stated at cost and presented as a reduction from shareholders’ equity. Gains on disposal of treasury stock are determined by reference to its carrying amount and are taken to premium on treasury stock, losses on disposal of treasury stock are determined by reference to its carrying amount and are taken to premium on treasury stock and retained earnings, consecutively. 5.8 Intangible assets and amortization Intangible assets are stated at cost less accumulated amortisation. Amortisation is calculated by reference to cost on a straight - line basis over the expected future period of economic benefit of each type of intangible asset, as follows :Mining concession Computer software

20 - 25 years 3 years

5.9 Related party transactions Related parties comprise enterprises and individuals that control or are controlled by the Company, whether directly or indirectly, or which are under common control with the Company. In addition, related parties include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, and key management personnel, and directors and officers with authority in the planning and direction of the Company’s operations, together with close members of the families of such persons and companies which are controlled or influenced by them, whether directly or indirectly.

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

5.10 Operating lease Lease of assets where a significant portion of the risks and rewards of ownership are retained by the lessor and classified as operating leases. Payments made under operating leases are recognized as expenses to the income statements over the period of the lease. 5.11 Foreign currencies Transactions in foreign currencies incurred during the year are translated into Baht at the rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currency outstanding at the balance sheet date are translated into Baht at the rates ruling at the balance sheet date. Exchange gains and losses are included in determining earnings. 5.12 Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Company makes an estimate of the asset’s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use. 5.13 Employee benefits The Company and its employees have jointly established a provident fund. The fund is monthly contributed to by employees and by the Company. The Company’s contributions are recognised as expenses when incurred. The Company has provided a retirement benefit plan which includes a resignation plan and a long service award for employees. The Company’s contributions are recognised as expenses when incurred. The provident fund liability and the reserve for retirement benefit plan are measured at the present value of estimated future cash flows using a discount rate that is similar to the interest rate on government bonds. A professionally qualified independent actuary values the fund’s liability and certain obligations on regular basis. 5.14 Corporate Income Tax a) Current tax The Company calculates corporate income tax in accordance with the Royal Decree as empowered under the Revenue Code concerning state revenue rate reduction No. 387 B.E. 2544 dated 5 September 2001. Subsidiary companies in Thailand calculate corporate income tax in accordance with the basis regulated in the Revenue Code. Overseas subsidiary company calculates corporate income tax in accordance with tax rate regulated in tax law of that country.

50

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b)

Deferred Tax Deferred income tax is calculated based on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts, by using the enacted tax rate at the balance sheet date. The Company recognises deferred tax liabilities for taxable temporary differences and recognises deferred tax assets for deductible temporary differences and tax losses carried forward. The Company recognises deferred tax assets to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilized. At each balance sheet date, the Company reviews and reduces the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

5.15 Financial instruments Financial instruments presented in the balance sheets consist of cash and cash at bank, accounts receivable, accounts payable and loans. The accounting policy is separately disclosed in the related notes. The Company and its subsidiaries have no policy to engage in the trading of any derivative financial instruments. 5.16 Earnings per share Earnings per share as presented in the income statements is the basic earnings per share which is determined by dividing the net profit for the year by the weighted average number of ordinary shares in issue during the year. No disclosure of diluted earnings per share for the year is required as the Company has no potential ordinary shares. 5.17 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions, affecting amounts reported in the financial statements and notes thereto. Subsequent actual results may differ from these estimates. 6. CASH AND CASH EQUIVALENTS As at 31 December 2006 and 2005, cash and cash equivalents consist of the following :(Unit : Baht) Consolidated 2006 Cash in hand and at banks Short-term investments in fixed deposits Cash and cash equivalents

710,303,099 1,031 710,304,130

The Company Only 2005

2006

827,598,878 1,400,001,004 2,227,599,882

545,609,813 1,031 545,610,844

2005 684,843,771 1,400,001,004 2,084,844,775

The net change in other operating assets and liabilities as reflected in the cash flow statements for the year ended 31 December 2006 and 2005 consists of the following :-

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

(Unit : Baht) Consolidated

Decrease (increase) in operating assets : Trade accounts receivable Inventories Other debtors-subsidiary and related companies Other current assets Increase (decrease) in operating liabilities : Trade accounts payable Corporate income tax payable Accrued expenses and other current liabilities Provident fund and reserve for employee retirement benefit plan Net change in other operating assets and liabilities

The Company Only

2006

2005

2006

2005

(604,887,220) 70,928,465 (7,699,211) (18,437,546)

(140,763,671) (395,454,313) 29,701,879 277,902,257

(540,455,271) 94,929,997 (39,254,664) (73,073,570)

(19,088,594) (347,586,274) 279,304,250

14,402,586 83,695,201 189,687,678

28,903,671 (302,279,172) 984,334

41,102,209 71,916,534 194,127,965

(33,136,138) (284,332,918) (37,760,070)

(7,849,449)

13,588,021

(6,819,126)

11,288,975

(280,159,496)

(487,416,994)

(257,525,926)

(431,310,769)

7. RELATED PARTY TRANSACTIONS During the years, the Company and its subsidiaries had significant business transactions with their related parties. These transactions which have been concluded on the terms and basis as determined by the Company and those companies, and in the ordinary course of business, are summarized below :(Unit : Thousand Baht) Consolidated 2006 Transactions with subsidiary companies (eliminated from the consolidated financial statements) Purchases of goods Sales of goods Other income (expense) Interest income

Transactions with associated company Purchases of goods Transactions with related companies Purchases of goods Sales of goods Other income (expense) Service fee expenses Selling and administrative expenses

The Company Only

2005

2006

Pricing policy

2005

-

-

1,418,597 2,373 83,238

1,328 1,112,092 23,517 42,180

Market price Market price Cost plus margin MLR with reference to the rate quoted by financial institutions

940,944

1,071,366

940,944

1,071,366

Market price

336,690 3,643,957 73,435 148,418 76,675

553,865 3,588,552 (41,579) 162,604 193,029

336,690 3,643,957 73,435 148,118 72,584

553,865 3,588,552 47,469 162,604 186,590

Market price Market price Cost plus margin Negotiated agreement Cost plus margin

The outstanding balance of the above transactions as at the end of year have been separately shown in the balance sheets. 52

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Directors’ remuneration In 2006 the Company and its subsidiaries paid to their directors the remuneration totaling Baht 15.0 million (The Company only: Baht 15.0 million). In 2005 the Company and its subsidiaries paid to their directors the remuneration totaling Baht 14.5 million (The Company only: Baht 14.5 million). 8. RECEIVABLES FROM SUBSIDIARIES AND RELATED COMPANIES As at 31 December 2006 and 2005, the outstanding balance of trade accounts receivable from subsidiaries and related companies is as follows :(Unit : Baht) Consolidated 2006 Siam City Concrete Co., Ltd. Other subsidiaries and related companies Total

322,782,982 322,782,982

The Company Only 2005

2006

227,813,609 227,813,609

254,156,491 437,284,245 691,440,736

2005 205,714,698 300,230,998 505,945,696

Most of the above receivables from subsidiaries and related companies are current. Management believes that these receivables from subsidiaries and related companies are collectible in full. Thus no allowance for doubtful accounts has been provided. 9. TRADE ACCOUNTS RECEIVABLE - OTHER COMPANIES The aging of the outstanding balance of trade accounts receivable as at 31 December 2006 and 2005 is as follows :(Unit : Baht) Consolidated

Current to 30 days Over 30 days to 60 days Over 60 days to 90 days Over 90 days Total Less : Allowance for doubtful accounts Net trade accounts receivable

The Company Only

2006

2005

2006

2005

2,115,065,970 64,637,019 2,378,267 264,867,479 2,446,948,735 (207,563,103) 2,239,385,632

1,716,783,835 13,262,859 6,901,264 206,093,982 1,943,041,940 (205,229,227) 1,737,812,713

1,441,667,488 28,088,069 2,120,632 184,745,128 1,656,621,317 (172,752,161) 1,483,869,156

1,137,546,074 359,939 769 173,626,411 1,311,533,193 (172,752,161) 1,138,781,032

The Company and its subsidiaries provided allowance for doubtful accounts of Baht 208 million and Baht 205 million in the consolidated financial statements, and Baht 173 million and Baht 173 million in the separated financial statements of the Company for the year ended 31 December 2006 and 2005, respectively. Management believes that such allowances are adequate to absorb possible losses on doubtful accounts.

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

10. INVENTORIES (Unit : Baht) Consolidated

Finished goods Work in process Raw materials Store supplies Goods in transit Total Less : Allowance for obsolete inventories Inventories - net

The Company Only 2006 2005

2006

2005

517,461,856 53,607,832 75,309,806 1,045,610,020 17,823,843 1,709,813,357 (36,932,419) 1,672,880,938

529,588,460 72,251,107 75,055,114 1,103,847,141 1,780,741,822 (35,744,864) 1,744,996,958

472,155,308 33,975,227 57,631,453 1,017,371,153 17,823,843 1,598,956,984 (34,998,907) 1,563,958,077

507,758,118 47,295,702 56,485,759 1,082,347,402 1,693,886,981 (34,491,383) 1,659,395,598

11. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD As at 31 December 2006 and 2005, the Company recorded the investments in subsidiary and associated companies under the equity method. These represent investments in the following companies. (Unit : Baht)

Consolidated

Dividend received

Percentage of Type of

Type of

business

relation

Shareholding

2006 2005 % %

Cost Value

2006

Equity Value

2005

2006

483,426,543

830,283,476

for the year ended 31 December

2005

2006

2005

Associated company Lanna Resources Public Company Limited

Coal mining

Direct

44.99

44.99

483,426,543

720,391,935

54,792,363

182,641,211

(Unit : Baht) The Company Only Dividend received

Percentage of Type of

Type of

business

relation

Shareholding

2006 2005 % %

Cost Value

2006

2005

Equity Value

2006

for the year ended 31 December

2005

2006

2005

Subsidiaries Siam City Concrete Co., Ltd.

Ready- mixed concrete and aggregates

Direct

99.99

99.99

399,998,800

399,998,800

496,699,025

596,954,340

-

-

Holding

Direct

99.99

99.99

699,999,300

699,999,300

-

-

-

-

Direct

99.99

99.99

300,000,000

300,000,000

402,411,641

312,795,974

-

-

Direct

75.00

75.00

149,697

149,697

1,063,342

-

-

-

1,400,147,797 1,400,147,797

900,174,008

909,750,314

-

-

Eagle Cement Holdings Co., Ltd. Conwood Co., Ltd.

Construction Material

Khmer Cement Industry

Cement Trading

Co., Ltd.

Associated company Lanna Resources Public Company Limited

Coal mining

Direct

44.99

Total 54

44.99

483,426,543

483,426,543

830,283,476

720,391,935

54,792,363 182,641,211

1,883,574,340 1,883,574,340

1,730,457,484

1,630,142,249

54,792,363 182,641,211

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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According to the joint venture agreement, Khmer Cement Industry Company Limited (herein after called “KCI�) was incorporated under the laws of Cambodia with a registered capital of USD 1.5 million consisting of 1.5 million shares with a par value of USD 1 per share. The Company holds a 75 percent interest and so will contribute USD 1.125 million. However, at the time of its incorporation and until 31 December 2006, the registered capital was equivalent to USD 5,300. The capital will be increased from time to time when the business of the company requires. KCI commenced its operation on 1 April 2005. 12. OTHER INVESTMENTS - RELATED COMPANY As at 31 December 2006 and 2005, investments in shares of a related company, which are accounted for by the cost method, is as follows :Consolidated Type of business

Holcim (Bangladesh) Co., Ltd.

Cement

Type of relation

Indirect

Paid up share capital

Percentage of shareholding

2006 2005 (Million Taka)

2006

120

10.40

120

2005

Dividend received

Cost Value 2005

2006

2006 2005 (Baht)

(Baht)

%

10.40 368,119,260

368,119,260

-

-

13. LONG-TERM LOANS TO SUBSIDIARIES During the year, movements of long-term loans to subsidiaries were as follows :-

(Unit : Baht) The Company Only Balance as at 31 December 2005

During the year Increase

Decrease

Balance as at 31 December 2006

-

369,119,260

Eagle Cement Holdings Co., Ltd. - The principal of the loan is repayable as a lump - sum on 28 June 2006. The loan bears interest at the Minimum Lending Rate (MLR), payable semi-annually commencing in June 2003.

369,119,260

Siam City Concrete Co., Ltd. - The principal of loan is repayable semi-annually installments of varying amounts. The loan bears interest at Minimum Lending Rate (MLR) minus 1% per annum payable quarterly commencing in March 2005.

682,000,000 496,000,000 132,700,000 1,045,300,000

Conwood Co., Ltd. - The principal of the loan is repayable in 15 semi - annual installments of varying amounts, commencing in December 2005. The loan bears interest at the Minimum Lending Rate (MLR), payable quarterly commencing in March 2003. Total Less : Allowance for doubtful debt Net

43,000,000

-

10,000,000

53,000,000

-

1,094,119,260 506,000,000 185,700,000 1,414,419,260 (102,953,972) (28,339,855) - (131,293,827) 991,165,288 477,660,145 185,700,000 1,283,125,433

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55


Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

14. PROPERTY, PLANT AND EQUIPMENT (Unit : Baht) Consolidated Furniture, Land and

Building and

Machinery

fixtures and

mineral

structures

and equipment

office

Construction

Vehicles

Total

in process

equipment

reserve Cost 31 December 2005

1,556,802,960

6,453,208,557

22,390,974,489

974,016,587

Purchases and transfer in

55,096,895

183,563,820

387,565,940

18,447,642

Disposals and transfer out

(44,432,658)

(72,880,209)

(895,572)

(9,006,672)

1,567,467,197

6,563,892,168

22,777,644,857

31 December 2006

1,307,360,627

875,442,508

33,557,805,728

- 1,350,848,099

1,995,522,396

(98,735,468)

(451,760,546)

(677,711,125)

983,457,557

1,208,625,159 1,774,530,061

34,875,616,999 22,212,139,079

Accumulated depreciation 31 December 2005

-

3,407,961,741

16,730,438,077

807,875,736

1,265,863,525

-

227,547

183,171,742

449,345,936

38,539,399

6,463,937

-

677,748,561

-

(33,553,465)

7,858,468

(4,542,238)

(97,997,208)

-

(128,234,443)

227,547

3,557,580,018

17,187,642,481

841,872,897

1,174,330,254

-

22,761,653,197

-

26,639,805

256,824

-

-

-

26,896,629

during the year

-

(1,158,752)

(11,650)

-

-

-

(1,170,402)

31 December 2006

-

25,481,053

245,174

-

-

-

25,726,227

Depreciation for the year Disposals and transfer in/out 31 December 2006 Allowance for impairment 31 December 2005 Decrease and transfer out

Net book value 31 December 2005

1,556,802,960

3,018,607,011

5,660,279,588

166,140,851

41,497,102

875,442,508

11,318,770,020

31 December 2006

1,567,239,650

2,980,831,097

5,589,757,202

141,584,660

34,294,905 1,774,530,061

12,088,237,575

Depreciation charge (included in the income statements) for the year

2005

642,251,626

2006

677,748,561

(Unit : Baht) The Company only Furniture, Building and

Machinery

fixtures and

structures

and equipment

office

Land

Construction

Vehicles

in process

Total

equipment

Cost 31 December 2005

1,077,968,071

5,991,773,800

21,218,043,561

877,436,460

718,253,776

31,173,435,389

Purchases and transfer in

33,786,243

69,064,203

136,788,682

7,822,118

- 1,158,835,133

1,406,296,379

Disposals and transfer out

(44,432,658)

(72,880,209)

(895,572)

(9,006,672)

(95,187,277) (189,806,384)

(412,208,772)

1,067,321,656

5,987,957,794

21,353,936,671

876,251,906

1,194,772,444 1,687,282,525

32,167,522,996

31 December 2005

-

3,302,892,334

16,298,071,515

742,144,162

1,253,479,722

-

21,596,587,733

Depreciation for the year

-

163,335,049

364,614,493

28,025,332

4,409,853

-

560,384,727

Disposals and transfer in/out

-

(34,695,214)

(859,088)

(4,542,239)

(94,953,516)

-

(135,050,057)

31 December 2006

-

3,431,532,169

16,661,826,920

765,627,255

1,162,936,059

-

22,021,922,403

31 December 2005

1,077,968,071

2,688,881,466

4,919,972,046

135,292,298

36,479,999

718,253,776

9,576,847,656

31 December 2006

1,067,321,656

2,556,425,625

4,692,109,751

110,624,651

31,836,385 1,687,282,525

10,145,600,593

31 December 2006

1,289,959,721

Accumulated depreciation

Net book value

Depreciation charge (included in the income statements) for the year

2005

549,951,511

2006

560,384,727

56

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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Depreciation for the years ended 31 December 2006 and 2005 amounted to Baht 643 million and Baht 605 million (The Company only : Baht 530 million and Baht 526 million), respectively was included in manufacturing costs and the remaining Baht 35 million and Baht 37 million (The Company only : Baht 30 million and Baht 24 million), respectively was included in selling and administrative expenses. A portion of subsidiary companies’ land, construction thereon and machinery with a total net book value as at 31 December 2006 of Baht 485 million is mortgaged as collateral for long-term loans from financial institutions as mentioned in Note 20. As at 31 December 2006 and 2005, certain plant and equipment items have been fully depreciated but are still in use. The original cost before deducting accumulated depreciation, of those assets amounted to Baht 7,855 million and Baht 7,860 million (The Company only : Baht 7,486 million and Baht 7,506 million), respectively. On 19 April 2004, there was an explosion and fire at the Company’s factory at Saraburi. The assessment on damaged fixed assets and facilities has been completed and the Company has received full compensation from the insurance company. However, a litigation claim for compensation of damage sustained by third party, caused by the accident, is pending. 15. ASSETS NOT USED IN OPERATIONS

(Unit : Baht) Consolidated

Land

Furniture, fixtures

Building and

Machinery

structures

and equipment

and office

Vehicles

Total

equipment

Cost 31 December 2005

952,769,263

1,308,705,015

66,041,035

46,183,539

507,802

(164,197,509)

(283,842,684)

(9,935,944)

(12,939,958)

-

(470,916,095)

788,571,754

1,024,862,331

56,105,091

33,243,581

507,802

1,903,290,559

31 December 2005

-

508,742,009

54,331,784

46,008,393

507,800

609,589,986

Depreciation for the year

-

28,693,647

1,008,518

174,997

-

29,877,162

Disposals and transfer in/out

-

(113,128,413)

(9,659,605)

(12,939,951)

-

(135,727,969)

31 December 2006

-

424,307,243

45,680,697

33,243,439

507,800

503,739,179

130,911,956

110,281,328

-

-

-

241,193,284

29,536,655

166,454

-

-

-

29,703,109

160,448,611

110,447,782

-

-

-

270,896,393

31 December 2005

821,857,307

689,681,678

11,709,251

175,146

2

1,523,423,384

31 December 2006

628,123,143

490,107,306

10,424,394

142

2

1,128,654,987

Disposals and transfer out 31 December 2006

2,374,206,654

Accumulated depreciation

Allowance for impairment 31 December 2005 Increase during the year 31 December 2006 Net book value

Depreciation charge (include in the income statements) for the year

2005

47,747,775

2006

29,877,162

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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57


Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

(Unit : Baht) The Company only

Land

Furniture, fixtures

Building and

Machinery

structures

and equipment

and office

Vehicles

Total

equipment

Cost 31 December 2005

915,951,067

1,305,635,067

42,603,550

46,144,312

507,800

(164,197,508)

(283,842,685)

(1,230,038)

(12,939,958)

-

(462,210,189)

751,753,559

1,021,792,382

41,373,512

33,204,354

507,800

1,848,631,607

31 December 2005

-

505,688,210

31,052,747

45,969,313

507,800

583,218,070

Depreciation for the year

-

28,685,719

999,906

174,973

-

29,860,598

Disposals and transfer in/out

-

(113,128,413)

(953,697)

(12,939,952)

-

(127,022,062)

31 December 2006

-

421,245,516

31,098,956

33,204,334

507,800

486,056,606

130,911,956

110,281,328

-

-

-

241,193,284

17,536,655

166,454

-

-

-

17,703,109

148,448,611

110,447,782

-

-

-

258,896,393

Disposals and transfer out 31 December 2006

2,310,841,796

Accumulated depreciation

Allowance for impairment 31 December 2005 Increase during the year 31 December 2006 Net book value 31 December 2005

785,039,111

689,665,529

11,550,803

174,999

-

1,486,430,442

31 December 2006

603,304,948

490,099,084

10,274,556

20

-

1,103,678,608

Depreciation charge (include in the income statements) for the year

2005

47,731,210

2006

29,860,598

Depreciation for the years ended 31 December 2006 and 2005 amounted to Baht 30 million and Baht 48 million (The Company only : Baht 30 million and Baht 48 million), respectively was included in selling and administrative expenses. During 2006 and 2005, the Company and its subsidiary had set up a provision for impairment of those non operating asset of Baht 30 million and Baht 26 million (The Company only : Baht 18 million and Baht 26 million), respectively. Such amount has been shown as a part of “Other expenses� in the income statements for the year. Management believes that such assets are salable in the future at prices not less than their carrying value. As at 31 December 2006 and 2005, certain non operating plant and equipment items have been fully depreciated but are still in use. The original cost before deducting accumulated depreciation, of those assets amounted to Baht 77 million and Baht 113 million (The Company only : Baht 61 million and Baht 88 million), respectively.

58

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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16. INTANGIBLE ASSETS (Unit : Baht) Consolidated Mining

Computer

Other

concession

software

intangible assets

Total

Cost 31 December 2005

423,128,276

16,927,974

153,293,337

-

15,164,703

2,643,306

17,808,009

423,128,276

32,092,677

155,936,643

611,157,596

31 December 2005

70,027,503

9,445,295

119,065,473

198,538,271

Additions

16,967,091

5,642,659

9,178,850

31,788,600

31 December 2006

86,994,594

15,087,954

128,244,323

230,326,871

Additions 31 December 2006

593,349,587

Accumulated amortisation

Net book value 31 December 2005

353,100,773

7,482,679

34,227,864

394,811,316

31 December 2006

336,133,682

17,004,723

27,692,320

380,830,725

2005

16,246,854

4,858,971

17,803,027

38,908,852

2006

16,967,091

5,642,659

9,178,850

31,788,600

Amortised expenses for the year

(Unit : Baht) The Company only Mining

Computer

Other

concession

software

intangible assets

Total

Cost 31 December 2005

423,128,276

13,758,974

135,831,745

-

15,164,703

2,714,520

17,879,223

423,128,276

28,923,677

138,546,265

590,598,218

31 December 2005

70,027,503

9,172,649

105,252,113

184,452,265

Additions

16,967,091

4,586,325

6,381,618

27,935,034

31 December 2006

86,994,594

13,758,974

111,633,731

212,387,299

Additions 31 December 2006

572,718,995

Accumulated amortisation

Net book value 31 December 2005

353,100,773

4,586,325

30,579,632

388,266,730

31 December 2006

336,133,682

15,164,703

26,912,534

378,210,919

2005

16,246,854

4,586,325

12,312,495

33,145,674

2006

16,967,091

4,586,325

6,381,618

27,935,034

Amortised expenses for the year

Amortisation for the years ended 31 December 2006 and 2005 amounted to Baht 24 million and Baht 23 million (The Company only : Baht 23 million and Baht 23 million), respectively was included in manufacturing costs and the remaining Baht 8 million and Baht 16 million (The Company only : Baht 5 million and Baht 10 million), respectively was included in selling and administrative expenses.

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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59


Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

17. DEFERRED INCOME TAX (Unit : Baht) 2006 Balance brought forward as at 1 January Add : Current year temporary difference Less : Utilised during the year Balance carried forward as at 31 December

2005

342,607,710 35,542,882 (6,502,578) 371,648,014

345,841,981 80,557,054 (83,791,325) 342,607,710

18. SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS (Unit : Baht) Consolidated 2006 Short-term loans from banks

443,544,467

The Company Only 2005

50,099,000

2006

2005

400,000,000

-

As at 31 December 2006, the Company and its subsidiary had obtained short-term loans of Baht 444 million in the consolidated financial statements and Baht 400 million in the separate financial statements of the Company from a local bank carrying interest at the rate of 5.4 to 6.85 percent per annum. These loans are due for repayment within 2007. 19. PAYABLE TO ASSOCIATED AND RELATED COMPANIES As at 31 December 2006 and 2005, the balances of payable to subsidiary, associated and related companies are as follows :(Unit : Baht) Consolidated

Holcim Group Support Ltd. Lanna Resources Public Co., Ltd. Khmer Cement Industry Co., Ltd. Holcim Services (Asia) Ltd. Holcim Trading Pte Ltd. Other subsidiary and related companies

60

The Company Only

2006

2005

84,568,041 91,507,897 9,283,243 185,359,181

85,570,353 12,436,324 11,288,286 3,114,715 659,335 113,069,013

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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2/19/07, 3:30 PM

2006 84,568,041 91,507,897 51,785,400 9,283,243 423,169 237,567,750

2005 85,570,353 12,436,324 11,288,286 3,114,715 659,335 113,069,013


20. LONG-TERM LOANS (Unit : Baht) Consolidated

Subsidiary Company Loan from a local bank, repayable in 15 semi-annual installments of varying amounts, commencing in October 2005, and carrying interest at MLR. Less : Portion due within one year Net

The Company Only

2006

2005

339,000,000 (50,000,000) 289,000,000

385,000,000 (46,000,000) 339,000,000

2006

2005

-

-

Long-term loans from financial institutions of certain subsidiary is collateralised by a portion of the subsidiary’ land, construction thereon and machinery as mentioned in Note 14. The loan agreements have certain restrictive covenants pertaining to performance, dividend payments, maintenance of certain financial ratios in the financial statements and the percentage of shares held by the major shareholder.

21. LONG-TERM LIABILITIES FOR CONCESSION (Unit : Baht) Consolidated

Long-term liabilities for concession Less : Portion due within one year Net

The Company Only

2006

2005

311,080,458 (30,870,372) 280,210,086

311,080,458 311,080,458

2006 311,080,458 (30,870,372) 280,210,086

2005 311,080,458 311,080,458

The Company entered into various agreements to pay for in 2005 renewed mining concession which are payable in 8 equal, annual installments commencing in 2007 and carrying interest at the rate of 6.5 percent per annum, to Department of Primary Industries and Mines, the Ministry of Industry. 22. CORPORATE INCOME TAX (Unit : Baht) Consolidated 2006 Income tax payable at year end Income tax paid during the year Total income tax Net deferred tax benefits Corporate income tax charge against earnings

760,581,194 934,882,459 1,695,463,653 (29,040,304) 1,666,423,349

The Company Only 2005

676,885,993 1,051,574,189 1,728,460,182 3,234,271 1,731,694,453

2006 735,458,475 895,454,792 1,630,913,267 (29,040,304) 1,601,872,963

2005 663,541,941 1,006,248,920 1,669,790,861 3,234,271 1,673,025,132

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

23. PROVIDENT FUND The Company, its subsidiaries and their permanent employees have jointly established provident funds and registered a provident fund scheme under the Provident Fund Act B.E. 2530, whereby the Company and its subsidiaries contribute to the funds as follows :Fund 1 A contributory, unfunded provident fund for the employees of the Company and a subsidiary company. Employees who have completed at least 5 years of service are entitled to full benefits, while employees leaving before completing 5 years of service do not receive the contributions made by the Company and the subsidiary company. Under the regulations of the fund, members are required to pay, and the Company and such subsidiary company accrue, monthly contributions to the fund at 5% of the members’ basic salaries. Fund 2 On 1 January 1989, the Company established another contributory, unfunded provident fund for employees who have completed at least 5 years of service with the Company. The Company accrues amounts matching the employees’ contribution, but the percentage of contribution by each party varies according to the length of service with the Company. Fund 3 The Company, its subsidiaries and their permanent employees have jointly registered a provident fund scheme under Provident Fund Act B.E. 2530. Such fund is monthly contributed to by both the employees and the Company and its subsidiaries at rates of 3 - 5 percent of the employees’ basic salaries. The fund is managed by Bank of Ayudhya Public Company Limited. During the year, the Company and its subsidiaries contributed Baht 39 million (2005 : Baht 35 million) to the fund and the Company only contributed Baht 38 million (2005 : Baht 34 million). 24. RESERVE FOR EMPLOYEE RETIREMENT BENEFIT PLAN The Company and a subsidiary company have provided a retirement benefit plan for their employees who have completed one year or three years of continuous service with the Company and or such subsidiary company. Under the plan, employees are entitled to receive, upon retirement, early retirement benefits which were accrued according to the best estimation of the management and measured at the present value of estimated future cash flows using a discount rate that is similar to the interest rate on government bonds. A professionally qualified independent actuary values the fund’s liabilities and certain obligations on regular basis. As at 31 December 2006, the amount provided in the accounts of the Company and such subsidiary company amounted to Baht 117 million and Baht 10 million (2005 : Baht 62 million, Baht 9 million), respectively. 25. STATUTORY RESERVE Under the Public Limited Companies Act B.E. 2535, the Company is required to set aside as a statutory reserve at least 5 percent of its net profit after deducting accumulated deficit brought forward (if any) until the reserve reaches 10 percent of the registered share capital. The statutory reserve can not be used for dividend payment. The Company’s statutory reserve amounts to 10 percent of the registered share capital. 26. TREASURY STOCK Consolidated

Number of treasury shares (shares) Average price per share (Baht)

62

The Company Only

2006

2005

2006

2005

20,000,000 234.80

12,500,000 238.83

20,000,000 234.80

12,500,000 238.83

SIAM CITY CEMENT PUBLIC COMPANY LIMITED ANNUAL REPORT 2006

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By the resolution of the meeting of the Company’s Board of Directors held on 11 December 2003, the Company approved to repurchase its shares in order to manage its excess cash, under the share repurchase scheme, with the investment not to exceed Baht 3,200 million or in term of shares repurchased not to exceed 12.5 million shares, equivalent to 5% of the total issued and paid-up shares of the Company. The period for the repurchase of the shares was from 26 December 2003 to 25 June 2004 and the resale period is from 26 December 2004 to 25 June 2007 (6 months after the completion date of the share repurchase and not later than 3 years from this time). In the event that the Company does not or is unable to dispose of all repurchased shares within the set period, when the due date has passed the Company is to reduce its paid-up capital by writing-off the remaining unsold repurchased shares. On 14 February 2005, the Securities and Exchange Commission of Thailand (SEC) imposed an official requirement for all listed companies to follow the Judicial Council deliberated the issue of treasury share schemes under Section 66/1(2) of the Public Limited Companies Act B.E. 2535, that the cost of treasury shares as acquired by a public limited company should not exceed its unappropriate retained earnings. The Council also suggested that the relevant authorities should require public limited companies to set aside within appropriated retained earnings a separate reserve account in an amount equal to the cost of the treasury shares. The reserve shall remain outstanding until either the shares are sold or paid-up capital is reduced by cancellation of any remaining unsold shares. The Annual General Meeting of Shareholders held on 28 April 2005 approved the allocation of Baht 2,985.4 million from the unappropriated retained earnings as of 1 January 2005 to reserve for treasury shares according to SEC requirement. On 28 June 2006, the meeting of the Company’s Board of Directors passed a resolution to approve a second repurchase of shares by the Company in order to manage its excess cash, under the share repurchase scheme, with the investment not to exceed Baht 1,800 million or in term of shares repurchased not to exceed 7.5 million shares, equivalent to 3% of the total issued and paid-up shares of the Company. The period for the repurchase of the shares was from 14 July 2006 to 20 December 2006 and the resale period is from 21 June 2007 to 20 December 2009 (6 months after the completion date of the share repurchase and not later than 3 years from this time). In the event that the Company does not or is unable to dispose of all repurchased shares within the set period, when the due date has passed the Company is to reduce its paid-up capital by cancellation of any remaining unsold shares. The Company allocated additional Baht 1,710.6 million from the unappropriated retained earnings as of 31 December 2006 to reserve for treasury shares according to SEC requirement. The appropriation from retained earnings to treasury stock reserve will be proposed for the shareholders ratification in the forthcoming annual general meeting. 27. NUMBER OF EMPLOYEES AND RELATED COSTS Consolidated 2006 Number of employees at end of year (Persons) Employee costs for the year (Thousand Baht)

2,927 1,719,706

The Company Only 2005

2,866 1,544,367

2006

2005

2,243 1,446,076

2,163 1,257,475

28. BANK GUARANTEES As at 31 December 2006, there were outstanding bank guarantees of approximately Baht 60 million and Baht 48 million (2005 : Baht 57 million and Baht 44 million) issued by banks on behalf of the Company and its subsidiaries and the Company only, respectively, in respect of certain performance bonds as required in the normal course of their businesses.

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

29. DIVIDENDS The Annual General Meeting of Shareholders held on 28 April 2005 approved to pay a final dividend of Baht 7 per share out of 2004 earnings, or a total sum of Baht 1,663 million. Thus, including the interim dividend of Baht 6 per share, the total dividend payment out of 2004 earnings amounted to Baht 13 per share. On 1 September 2005, the Board of Directors approved the payment of an interim dividend from the Company’s earnings during the period of January to June 2005 of Baht 6.5 per share, or a total sum of Baht 1,544 million. The interim dividend was paid on 27 September 2005. The Annual General Meeting of Shareholders held on 30 March 2006 approved to pay a final dividend of Baht 7.5 per share out of 2005 earnings, or a total sum of Baht 1,781 million. Thus, including the interim dividend of Baht 6.5 per share, the total dividend payment out of 2005 earnings amounted to Baht 14 per share. On 10 August 2006, the Board of Directors approved the payment of an interim dividend from the Company’s earnings during the period of January to June 2006 of Baht 6.5 per share, or a total sum of Baht 1,514 million. The interim dividend was paid on 10 September 2006. 30. COMMITMENTS As at 31 December 2006, the Company and its subsidiaries have significant outstanding commitments as follows :1) The Company extended the general assistance agreement with a related company for another 2 years beginning from 1 January 2005 to 31 December 2006. The Company committed to pay a fee of U.S. dollars 4 million per annum. 2) The Company entered into an agreement with a local company in respect of the Company's computer system for a period of 3 years which is extendable under the terms specified in the agreement. The Company committed to pay the monthly fee of Baht 2.8 million. 3) The Company and its subsidiaries entered into various agreements with local companies to lease their office premises, other facilities and render service for periods ranging from 3 years to 30 years up to 2024. As at 31 December 2006, the Company and its subsidiaries have outstanding commitments payable in the future as follows :-

(Unit : Million Baht) Payable within 2007 2008 to 2009 2009 and thereafter Total

Consolidated

The Company Only

233 235 140 608

165 194 73 432

4) The Company and its subsidiaries have commitments in respect of raw materials and fuel purchases, logistic services, lease of equipment, sales contracts as required in the normal course of their businesses. 5) The Company entered into agreements with third parties to acquire land and raw material resources. Subject to certain conditions, the Company will purchase assets at the price as specified in the agreements.

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6) A subsidiary company entered into a technology license agreement with an overseas company for a period of 10 years, commencing 6 March 2002 to 5 March 2012 after this period the agreement is automatically renewed for a 1 year period. The subsidiary committed to pay licensing fee on the basis and at the rate as stipulated under the agreement. 7) The Company only had outstanding capital expenditure and construction commitments of Baht 365 million (2005 : Baht 131 million). 31. FINANCIAL INSTRUMENTS Financial risk management and policies The Company and its subsidiaries are exposed to risks from changes in interest rates and currency exchange rates and risks from nonperformance of contractual obligations by counterparties. The Company and its subsidiaries have no policy to use derivatives to manage interest rate risk and foreign currency risk because the Company and its subsidiaries consider that their financial assets and liabilities carry interest rates which will be fluctuated in line with market rates, and will reach repricing or maturity dates in the near future or are short-term in nature. The Company and its subsidiaries purchase and sells their products in the same foreign currency and have a policy to balance the receipt and payment of such currency in order to minimize the exposure of foreign currency risk. In addition, the Company and its subsidiaries have a policy of entering into contracts with creditworthy counterparties. Therefore, it does not expect any material financial losses to be arisen from that the counterparties will fail to discharge their obligations as stipulated in the financial instruments contracts. The Company and its subsidiaries have no policy to hold or issue derivatives for speculative or trading purpose. Interest rate risk Interest rate risk is the risk that future fluctuations in market interest rates will affect the operating results and cash flows of the Company and its subsidiaries. The Company and its subsidiaries consider itself no interest rate risk because the Company and its subsidiaries have most of the financial assets and liabilities carrying floating interest rate which will fluctuate in line with the market interest rates and are short-term. The details of long-term loan to subsidiaries and short-term and long-term loans from financial institutions are set out in Note 13, 18 and 20. Foreign currency risk Foreign currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has a foreign currency risk in respect of the purchase/ sales transactions. The Company manages its exposure to foreign currency risk by balancing net position of receipt and payment of the foreign currency transactions in each period. However, the Company believes that foreign currency risk will have no material effect to their operational results and the Company therefore do not use derivative financial instruments to hedges this risk. As at 31 December 2006, outstanding balances of the Company’s financial assets and liabilities denominated in foreign currencies are as follows :-

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Notes to Consolidated Financial Statements For the Years Ended 31 December 2006 and 2005

(Unit : Million) Consolidated

Foreign currency

US dollars

The Company Only

Financial Assets

Financial Liabilities

Financial Assets

Financial Liabilities

Average exchange rate as at 31 December 2006 (Baht per foreign currency unit)

20.5

3.7

17.8

3.2

36.0932

Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations, resulting in a financial loss to the Company and its subsidiaries. The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable. The Company’s management controls such risk by establishing credit limits for customers and counter parties and analysing their financial position as an ongoing basis. As a result, the Company and its subsidiaries do not expect to incur material financial losses. The Company and its subsidiaries are not exposed to concentrations of credit risk because it has a variety of customer base and large number of customers. The maximum exposure to credit risk is limited to the carrying amount of trade accounts receivable as stated in the balance sheet. Fair value Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. Methodology of fair value measurement depends upon characteristics of the financial instruments. For the financial instruments which are regarded as traded in an active market, fair value has been determined by the latest quoted market price. If however the appropriate quoted market price cannot be determined, the fair value is determined using an appropriate valuation technique such as discounted cash flow. Since major financial assets and financial liabilities are short-term in nature, loans to and loans from of which the interest rate is approximate to the market rate, the fair value of financial assets and financial liabilities are presented as the amount stated in the balance sheet.

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32. FINANCIAL INFORMATION BY SEGMENT

(Unit : Million Baht) Consolidated for the year ended 31 December 2006 and 2005 Cement 2006 2005 Revenue from external customers Inter-segment revenues Total revenues Segment gross profit

20,107

19,152

Concrete 2006 2005 2,810

2,412

Others 2006 2005 730

816

Elimination 2006 2005 -

-

Total 2006

2005

23,647

22,380

1,045

787

-

-

-

-

(1,045)

(787)

-

-

21,152

19,939

2,810

2,412

730

816

(1,045)

(787)

23,647

22,380

6,965

7,089

115

284

297

296

-

-

7,377

7,669

315

332

(2,087)

(2,127)

Unallocated income Unallocated expenses Interest expenses Corporate income tax

(82)

(70)

(1,666)

(1,732)

Minority interest in net profit of

(2)

1

3,855

4,073

subsidiary Net profit

(Unit : Million Baht) Consolidated as at 31 December 2006 and 2005 Cement 2005

2006 Property, plant and equipment - net

10,148

9,582

Concrete 2005

2006 1,235

1,088

Others

Elimination 2005

2006

2005

2006

705

649

-

Unallocated assets Total assets

-

Total 2006

2005

12,088

11,319

8,521

9,710

20,609

21,029

33. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements were authorised for issuance by the Company's Board of Directors on 8 February 2007.

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Management discussion and analysis

The analysis of financial performance for the year 2006 and 2005 Total Revenues SCCC and its subsidiaries generated consolidated total revenues of THB 23,962 million in 2006, an increase of THB 1,250 million or 6% when compared to 2005.

2006

2005

Increase (Decrease)

Million Baht

%

Million Baht

%

Million Baht

%

Cement

21,152

88.3

19,939

87.8

1,213

6.1

Concrete

2,810

11.7

2,412

10.6

398

16.5

730

3.0

816

3.6

(86)

(10.5)

(1,045)

(4.4)

(787)

(3.5)

(258)

(32.8)

23,647

98.7

22,380

98.5

1,267

5.7

315

1.3

332

1.5

(17)

(5.1)

23,962

100.0

22,712

100.0

1,250

5.5

Net Sales

Other Elimination Other Income Total

Net Sales In 2006, consolidated net sales were recorded at THB 23,647 million or 98% of its total revenue, an increase of THB 1,267 million or 6% from the year before mainly due to higher sales in all business segments. From the total revenues, 88% of the company’s net sales were achieved in the cement business. In 2006, net sales both cement and clinker increased approximately 6% from the prior year mainly due to the increase in export sales volume. Net sales of other business decreased in the amount of THB 86 million or equivalent to 11% only due to the deconsolidation of Karat Faucet Co., Ltd. before the end of 2005. Other Income In 2006, consolidated other income was THB 315 million, a decrease of THB 17 million from the prior year. The consolidated income statement for year 2005 included gain on sales of investments in shares of Royal Porcelain Public Company Limited of THB 11.6 million.

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Cost and Expenses Consolidated cost and expenses were THB 18,438 million in 2006, an increase of 9% from 2005. Cost and expenses are summarized as follows: -

2006

Cost of sales

2005

Increase (Decrease)

%

Million Baht

%

Million Baht

%

16,270

88.2

14,712

87.0

1,558

10.6

2,056

11.2

2,101

12.4

(45)

(2.1)

82

0.4

70

0.4

12

17.1

Million Baht

Selling and administrative expenses Interest expenses Other expenses Total

30

0.2

26

0.2

4

15.4

18,438

100.0

16,909

100.0

1,529

9.0

Cost of sales increased as a result of an increase in sales, and higher fuel and electricity prices. Main reason for the decline of selling and administrative expenses by THB 45 million or 2% from the prior year was effective cost control. Net Profit Based on increased net sales and cost and expenses, the company recorded its consolidated net profit in 2006 at THB 3,855 million, a decrease of 6% compared to 2005 at THB 4,037 million. The analysis of cash flows for the year 2006 and 2005

2006 Million Baht

%

4,328

112.3

2005 Million Baht

Increase (Decrease)

%

Million Baht

%

Cash flows from operating activities

4,232

103.9

96

2.3

Proceeds from sales of fixed assets Purchase of fixed assets

299

7.8

293

7.2

6

2.0

(1,476)

(38.3)

(1,313)

(32.2)

(163)

12.4

(10)

(0.3)

289

7.1

(299)

(103.5)

Dividend paid

(3,295)

(85.5)

(3,206)

(78.7)

(89)

(2.8)

Increase in treasury stock

(1,711)

(44.4)

-

-

(1,711)

-

348

9.0

19

0.5

329

1,731.6

(1,517)

(39.4)

313

7.7

(1,830)

(584.7)

Other investing activities

Increase (decrease) in financial liabilities Net increase (decrease) in cash and cash equivalents

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Management discussion and analysis

Main factor for the decrease in cash and cash equivalents for year 2006 is the share buy back scheme in the amount of THB 1,711 million. In addition, the Company purchased fixed assets for new aggregate and mortar businesses as well as invested in assets to improve product quality, alternative fuel consumption and rationalization projects. The analysis of financial status as of December 31, 2006 and 2005

2006

Total Assets Current assets

2005

Increase (Decrease)

Million Baht

%

Million Baht

%

Million Baht

%

20,609

100.0

21,029

100.0

(420)

(2.0)

5,255

25.5

6,222

29.6

(967)

(15.5)

1,198

5.8

1,088

5.2

110

10.1

12,088

58.7

11,319

53.8

769

6.8

Investment accounted for under equity method Property, plant and equipment-net Assets not used in operations - net Total Liabilities Current Liabilities

2,068

10.0

2,400

11.4

(332)

(13.8)

4,955

24.0

4,226

20.1

729

17.3

3,766

18.3

3,062

14.6

704

23.0

569

2.8

650

3.1

(81)

(12.5)

620

3.0

514

2.4

106

20.6

15,654

76.0

16,803

79.9

(1,149)

(6.8)

Long-term liabilities - net of current portion Other non-current liabilities Total Shareholders’ Equity

Total Assets There was a decline in total assets, primarily in cash and cash equivalents due to the resolution to repurchase 7.5 million shares or 3% of its shares in order to manage its excess cash. Total Liabilities As at December 31, 2006, the company and its subsidiaries reported total liabilities of THB 4,955 million, an increase of THB 729 million from the prior year, due to aforementioned capital investment in maintenance, rationalization, improvement and expansion. Shareholders’ Equity At the end of December 31, 2006, total shareholders’ equity was THB 15,654 million, a decrease of THB 1,149 million from the prior year. On June 28, 2006, the meeting of the Company’s Board of Directors passed a resolution to approve a second repurchase of shares by the Company in order to manage its excess cash, under the share repurchase scheme, with the investment not to exceed Baht 1,800 million or in term of shares repurchased not to exceed 7.5 million shares, equivalent to 3% of the total issued and paid-up shares of the Company. The Company allocated additional Baht 1,711 million from the unappropriated retained earnings as of 31 December 2006 to reserve for treasury shares which will be proposed for the shareholders ratification in the forthcoming annual general meeting.

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Related - Party transactions

Definition of related-party transaction is defined in Note No. 5.9 (page 49), where information on related-party transaction is specified in Note No. 7 of the Note to Consolidated Financial Statements (page 52). Criteria for having related-party transaction Where it is necessary for the Company to have a transaction with a related party, the Company will consider necessity and business arm’s length as main criteria for decision-making. For example, product selling and purchasing is based on market price. Margin is included in the cost of service fee for service-render and interest rate of financial institution is charged to lenders. All of these are to ensure benefit to the Company. Sound approval mechanism and procedure The Company has complied with the rules of the Stock Exchange of Thailand regarding information disclosure and practices for listed companies in connected transactions. The Audit Committee also reviewed the connected transactions of the Company.

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Dividend Allocation over past three years

The Board of Directors aims at optimizing wealth of its shareholders, both through dividend payments and share value, without compromising on internal growth and commitment to sustainable development. Over the past three years dividend payments have been in the range of 13 - 14 baht per share. The Company’s reserve has reached 10 per-cent of its registered capital. The Board of Directors always ensures that there are enough profits to make interim payments and annual dividend allocations. During 2004 - 2006, Siam City Cement allocated dividends as follows: For fiscal year 2006, total dividend is 14 baht per share (subject to shareholders approval at the Annual Shareholders’ Meeting on March 14, 2007) - The Board of Directors approved payment of interim dividend on August 10, 2006 for 6.5 baht per share - The Shareholders are proposed to approve payment of dividend for the second half of 2006 on March 14, 2007 for 7.5 baht per share For fiscal year 2005, total dividend was 14 baht per share - The Board of Directors approved payment of interim dividend on September 1, 2005 for 6.5 baht per share - The Shareholders approved payment of dividend for the second half of 2005 on March 30, 2006 for 7.5 baht per share For fiscal year 2004, total dividend is 13 baht per share - The Board of Directors approved payment of interim dividend on September 2, 2004 for 6 baht per share - The Shareholders approved payment of dividend for the second half of 2004 on April 28, 2005 for 7 baht per share

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Supplemental information

1.

General Information

1.1 Siam City Cement Public Company Limited (Registration No. 0107536001346 or Bor Mor Jor 208) Type of business: Cement manufacturing and distribution Head office: Column Tower, 7th - 12th Fl., 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Factory: 99, Moo 9 (Plant 1 & 3), and 219, Moo 5 (Plant 2), Mitraparp Road Km. 129 - 131 Tabkwang Subdistrict Kaengkhoi District, Saraburi 18260, Thailand Telephone: + 66 2 797 7000 Fax: + 66 2 797 7001 to 2 Website: www.siamcitycement.com Issued and paid-up shares: 250 million ordinary shares with the par value of 10 baht per share. Among them, 20 million shares, equivalent to 8%, were bought back by the Company and presently hold in treasury. For more information, please refer to Note No. 26 of Notes to Consolidated Financial Statements on page 62 1.2 The companies where 10% or more of the issued and outstanding shares of their capital stock are held by the Company, as of 31 December, 2006. Name

Location of Head Office

1 Siam City Concrete Company Limited 2 Conwood Company Limited 3 Eagle Cement Holdings Company Limited 4 Lanna Resources Public Company Limited 5 Khmer Cement Industry Company Limited*

Bangkok Bangkok Bangkok Bangkok

Phnom Penh Cambodia

Type of Business / Products

Industrial Operation / Ready-Mixed Concrete Industrial Operation / Construction Material Share Holding Company Industrial Operation / Coal Mining and Decorative Stones Cement Trading

Registered Capital (million baht)

Number of issued Shares

% Direct Shareholding

400

4,000,000

99.99

300 700

3,000,000 7,000,000

99.99 99.99

350 appx. 0.2 (20 million riel)

35,000,000 500

44.99 75.00

Remark: Regarding Khmer Cement Industry Company Limited, according to the joint venture agreement, its registered capital is fixed at USD 1.5 million. However, at the time of its incorporation, the registered capital was at the equivalent of USD 5,300. The capital will be increased from time to time as the business of the company requires.

1.3 Other references: Share Registrar

Auditors

Thailand Securities Depository Co., Ltd. The Stock Exchange of Thailand Building 62 Rachadapisek Road, Klongtoey, Bangkok 10110 Mr. Ruth Chaowanagawi, Certified Public Accountant (Thailand) No. 3247 Mr. Narong Puntawong, Certified Public Accountant (Thailand) No. 3315 Ms. Saifon Inkaew, Certified Public Accountant (Thailand) No. 4434 Ernst & Young Office Limited

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Supplemental information

2.

The Company’s Businesses

2.1 The Company manufactures and sells cement primarily to the domestic market catering to market demand. The Company may export its product to overseas in the event of oversupply. 2.2 Downstream activities include ready-mixed concrete, aggregates, mortar, construction material, which have the continuously development over the last year. 3.

Shareholding and Management Structures

3.1 The top 10 major shareholders are the following: No.

Shareholders

1. 2. 3. 4. 5. 6. 7. 8. 9.

The Ratanarak’s and Sunrise Equity Company Limited Thai Roc-Cem Company Limited DBS Vickers Securities (Singapore) PTE Limited Parkmix Limited – JPMSAPL Client A/C Ayudhya Insurance Public Company Limited Littledown Nominees Limited 9 HSBC (Singapore) Nominees PTE Limited Goldman Sachs & Company Vayupak Mutual Fund I by MFC Asset Management Public Company Limited 10. Vayupak Mutual Fund I by Krungthai Asset Management Public Company Limited

Number of Shares Held

Percentage (%)

86,494,076 77,628,433 8,340,600 7,051,100 4,068,800 3,348,724 3,335,748 2,376,600

37.61 33.75 3.63 3.07 1.77 1.46 1.45 1.03

2,254,000

0.98

2,254,000

0.98

Remark: i) Pursuant to the SEC’s requirement, the shareholder list was rearranged by treating the shareholders who are de facto deemed to be in the same group as one shareholder and the ranking is conducted accordingly. The proportion of the equity interest of each top ten major shareholder is shown in percentage of the total issued and outstanding shares amounting 230 million shares. ii) The above rearrangement of top 10 major shareholders was made on the basis of the information appearing on the list of shareholders of the Company as of 8 September 2006. iii) The shareholders deemed belonging to The Ratanarak’s and Sunrise Equity Company Limited are as follows:

No.

Shareholders

1. Sunrise Equity Company Limited 2. Mrs. Sasithorn Ratanarak 3. Ms. Pilarnuj Ratanarak 4. Mr. Chachchon Ratanarak 5. Ms. Suthida Ratanarak 6. Ms. Chituma Ratanarak 7. Ms. Tatchamas Ratanarak 8. Mr. Chuan Ratanarak 9. Mr. Krit Ratanarak Total of number of shares held by The Ratanarak’s and Sunrise Equity Company Limited

Number of Shares Held

Percentage (%)

80,065,840 2,085,040 1,439,742 1,032,540 892,027 637,050 310,389 25,588 5,860

34.81 0.91 0.63 0.449 0.39 0.28 0.13 0.01 0.003

86,494,076

37.61

3.2 Members of the Board of Directors in the year 2006 and their recent experience are as follows:

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Working experience Name / Position

Age

Mr. Krit Ratanarak

61

Highest Education

MBA, Eastern

Chairman of the Board of

New Mexico

Directors2, (Up to

University, USA

% of Shareholding1 0.003

Period

Position

1993 - November Chairman of the 2006 1988 - 1993

November 9, 2006)

Company / Type of Business Siam City Cement

Board of Directors

Public Company Limited

Vice Chairman of

(same as above)

the Board of Directors

Total attendance at Board Meetings in 2006: 1 time

Mr. Veraphan Teepsuwan

November 2006 Chairman of the

Siam City Cement

Vice Chairman of the Board of

65

Master Degree (Finance), Northeastern University,

0.002

- Present

Public Company Limited

Directors2, (Elected Chairman on

USA

2001 - November Vice Chairman of

November 9, 2006)

2006

Board of Directors

(same as above)

the Board of Directors

1998 - 2000

Director

(same as above)

2001 - Present

Vice Chairman of the

Siam City Cement

Board of Directors

Public Company Limited

1999 - 2000

Managing Director

(same as above)

2002 - Present

Member of the

Holcim Ltd. / Cement

Total attendance at Board Meetings in 2006: 5 times

Mr. Paul Heinz Hugentobler

58

Lic.oec.HSG,

Vice Chairman of the Board of

University of

Directors2

St. Gallen, Switzerland

0.022

Executive Committee Total attendance at Board Meetings in 2006: 4 times

Mr. Urs Wolfgang Bieri

64

Director2

Lic.oec.HSG,

-

1998 - Present

Director

University of

Siam City Cement Public Company Limited

St. Gallen, Switzerland

2002 - December Deputy Chairman 2004

Holcim Ltd. / Cement

of the Executive Committee

Total attendance at Board Meetings in 2006: 3 times

Mr. Harald Link

Member of the

Siam City Cement

Member of the Audit Committee,

52

Lic.oec.HSG, University of

-

1998 - Present

Audit Committee,

Public Company Limited

Director2

St. Gallen, Switzerland

Director

Good Governance Experience

Director Certification Program (DCP), by Thai Institute of Directors Corporate Governance Program at St. Gallen, Switzerland

Total attendance at Board Meetings in 2006: 2 times

Mr. Sura Sanittanont

69

Director2

Ph.D. Economics,

-

1999 - Present

Director

University of

Siam City Cement Public Company Limited

Wisconsin, USA Total attendance at Board Meetings in 2006: 4 times

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Supplemental information

Working experience Name / Position

Age

Mr. Ekasak Puripol

62

Director2

Highest Education

Master of

% of Shareholding1

-

Period

February 2006 -

Management

Present

(Graduate Institute

2003 - Present

of Business Administration),

Position

Director

Company / Type of Business Siam City Cement Public Company Limited

Chairman of the

Bank of Ayudhya

Investment

Public Company Limited

Committee

Chulalongkorn

2002 - Present

Chairman

University

Ayudhya Asset Management Company Limited

B.A. (Commerce

2002 - 2006

Vice Chairman of

Bank of Ayudhya

and Accountancy)

the Risk Management

Public Company Limited

Chulalongkorn

Committee

University Total attendance at Board Meetings in 2006: 3 times

Mr. Chachchon Ratanarak

34

Director2

BSC Economics

0.449

November 2006 - Director

Siam City Cement

(Honors), Royal

Present

Holloway College,

June 2005 -

Member of the

PrimaVest Asset

Public Company Limited

University of London

Present

Executive Committee

Management Company Limited

Total attendance at Board Meetings in 2006: - times

Mr. Prakob Visitkitjakarn

67

Chairman of the Audit Committee,

MBA (Finance)

-

1999 - Present

Indiana University, USA

Director2

Chairman of the

Siam City Cement

Audit Committee,

Public Company Limited

Director

Good Governance Experience

The Role of Chairman Program (RCM), by Thai Institute of Directors Director Certification Program (DCP), by Thai Institute of Directors

Total attendance at Board Meetings in 2006: 5 times

Mr. Chet Raktakanishta

66

Member of the Audit Committee,

B.Sc. (Management)

-

1999 - Present

Brigham Young, USA

Director2

Member of the

Siam City Cement

Audit Committee,

Public Company Limited

Director

Good Governance Experience

Audit Committee Program (ACP), by Thai Institute of Directors Director Certification Program (DCP), by Thai Institute of Directors Compliance Leadership, by Bank of Ayudhya Public Company Limited (BAY)

Total attendance at Board Meetings in 2006: 5 times

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Working experience Name / Position

Age

Ms. Chantana Sukumanont

57

Director3

Highest Education

% of Shareholding1

Diploma in Business

-

Period June 2004

Position Director

Studies, The Center for

- Present

Economic and Political

1998 - June

Senior Vice President

2004

(Marketing and Sales)

Studies, UK

1995 - 1997

Company / Type of Business Siam City Cement Public Company Limited

Managing Director

(same as above)

Jalaprathan Cement

Advanced Management

Public Company Limited /

Program, Harvard Business

Cement

School, USA Good Governance Experience

Director Accreditation Program (DAP), by Thai Institute of Directors

Total attendance at Board Meetings in 2006: 5 times

Mr. Vanchai Tosomboon

58

Director3

Master in Business

0.009

- Present

Asian Institute

1999 - June

of Management Good Governance Experience

June 2004

Management (MBM)

2004

Director

Siam City Cement Public Company Limited

Executive Vice President

(same as above)

(Subsidiaries)

Director Certification Program (DCP), by Thai Institute of Directors Director Accreditation Program (DAP), by Thai Institute of Directors

Total attendance at Board Meetings in 2006: 5 times

Mr. Leo Mittelholzer

56

Managing Director3

Lic.oec.HSG,

-

June 2004

University of

- Present

St. Gallen, Switzerland

1999 - May 2004 1997 - 1999

Good Governance Experience

Managing Director

Siam City Cement Public Company Limited

Chief Executive Officer

Holcim (Schweiz) AG /

(CEO)

Cement

Business Division

Holcim (Schweiz) AG /

Manager

Cement

Good Corporate Governance Training, by Swiss, Italian, and German Stock Exchange

Total attendance at Board Meetings in 2006: 5 times

Remark: 1. The equity interest of the member of the Board of Directors are the information as of 8 September 2006, which are inclusive of the equity interest of their respective spouses and minor children (if any). 2. Non-executive director 3. Executive director, who is also an employee of the Company.

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Supplemental information

3.3 Executive Committee Members of the Executive Committee are nominated by the Board of Directors. Its duties are to organize, carry out and supervise the business operations so as to achieve the targets set by the Board of Directors. The following are information about the members of the Executive Committee in the year 2006:

Working experience Name / Position

Age

Mr. Leo Mittelholzer

56

Highest Education

% of Shareholding1

Lic.oec.HSG,

-

Period

Position

Company / Type of Business

June 2004

Chairman of the

Siam City Cement

Chairman of the

University of

- Present

Executive Committee

Public Company Limited

Executive Committee

St. Gallen, Switzerland

1999 - May

Chief Executive Officer

Holcim (Schweiz) AG /

2004 1997 - 1999

Good Governance Experience

(CEO)

Cement

Business Division

Holcim (Schweiz) AG /

Manager

Cement

Good Corporate Governance Training, by Swiss, Italian, and German Stock Exchange

Total attendance at ExCo Meetings in 2006: 20 times

Ms. Chantana Sukumanont

57

Diploma in Business

Deputy Chairman of the

Studies, The Center for

Executive Committee,

Economic and Political

Executive Vice President

Studies, UK

-

November

Deputy Chairman

2006 - Present of the Executive

Siam City Cement Public Company Limited

Committee

(Marketing and Sales) Advanced Management Program, Harvard Business School, USA

June 2004

Executive Vice President

- Present

(Marketing and Sales)

1998 - June

Senior Vice President

2004

(Marketing and Sales)

1995 - 1997

Managing Director

(same as above)

(same as above)

Jalaprathan Cement Public Company Limited / Cement

Good Governance Experience

Director Accreditation Program (DAP), by Thai Institute of Directors

Total attendance at ExCo Meetings in 2006: 20 times

Mr. Vanchai Tosomboon

June 2004

Executive Vice President

Siam City Cement

Executive Vice President

58

Management (MBM)

Master in Business

- Present

(Saraburi Operations)

Public Company Limited

(Saraburi Operations)

Asian Institute

1999 - June

Executive Vice President

(same as above)

of Management Good Governance Experience

0.009

2004

(Subsidiaries)

Director Certification Program (DCP), by Thai Institute of Directors Director Accreditation Program (DAP), by Thai Institute of Directors

Total attendance at ExCo Meetings in 2006: 20 times

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Working experience Name / Position

Age

Mr. Andreas Leutenegger

39

Highest Education

Lic.oec.HSG,

Senior Vice President

University of

(Finance and Controlling)

St. Gallen, Switzerland

Good Governance Experience

% of Shareholding1

-

Period

September

Company / Type

Position

Senior Vice President

of Business

Siam City Cement

2004 - Present (Finance and Controlling) Public Company Limited May 2000 -

Assistant Vice President

August 2004

Corporate Reporting

Swiss Certified

January 1999

Corporate Controller

Public Accountant

- April 2000

Holcim Ltd. / Cement

Holcim Ltd. / Cement

Responsible for corporate governance report for Holcim Ltd. Annual Report 2002 Seminar on Corporate Governance, by Stock Exchange of Switzerland Seminar on Corporate Governance, by Swiss Institute of Chartered Accountants

Total attendance at ExCo Meetings in 2006: 22 times

Mr. Rungrote Soonthorn

48

Master of

Senior Vice President

Comparative Law (M.C.L.)

(Human Resources and

University of Miami, USA

-

September

Senior Vice President

2003 - Present (Human Resources and

Siam City Cement Public Company Limited

Management Development)

Management Development)

1996 - August 2003

General Manager Human Resources

Auto Alliance (Thailand) Co., Ltd. / Automobile Industry

Total attendance at ExCo Meetings in 2006: 22 times

Mr. Nopporn Thepsithar

January 2004

Senior Vice President

Siam City Cement

Senior Vice President

53

Electrical Engineering,

Bachelor’s Degree in

-

- Present

(Logistics and Exports)

Public Company Limited

(Logistics and Exports)

Chulalongkorn University

2002 -

Logistics Manager

(same as above)

2000 - 2001

Executive Director

TCC Holding Co., Ltd. /

1999 - 2000

Operations

SCT Co.,Ltd. /

Division Manager

Import-export Company

December 2003

Holdings Company

Good Governance Experience

Audit Committee Program (ACP), by Thai Institute of Directors Director Certification Program (DCP), by Thai Institute of Directors Director Accreditation Program (DAP), by Thai Institute of Directors Good Governance, in Mini MBA Course for INSEE Logistics

Total attendance at ExCo Meetings in 2006: 22 times

Remark: 1. The equity interest of the member of the Executive Committee are the information as of 8 September 2006, which are inclusive of the equity interest of their respective spouses and minor children (if any).

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Supplemental information

4.

Remuneration of the Board of Directors and Management paid in 2006

4.1 Remuneration in Cash Remuneration in cash for 13 Board members was 15.02 million baht, included meeting attendance and bonus paid in 2006. Remuneration in cash for 6 members of the Company’s Executive Committee was 77.5 million baht, included salary and bonus. 4.2 Other Remunerations Contribution to Provident Fund for its executives was 1.21 million baht. Company cars are provided to the members of the Executive Committee. 5.

Auditor’s Fee

In 2006 Ernst & Young Office Limited, received from Siam City Cement, the auditing fee for 3.5 million baht and no other service fee.

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Customer Service Center and Distribution Center

Siam City Cement launched the Customer Service Center in September, 2001 with an objective to be the one-stop center that provides a superior service to customers. The integration of the Customer Sales Support Unit and Customer Care Unit is made to ensure the most efficiency of our services. The Customer Service Center handles the customers’ ordering progresses coming via fax and webSALES and responds to customers’ requests, inquiries and complaints. The Center offers 24 hours and 7 days a week service to guarantee customer’s satisfaction. Besides, all of the activities we serve to customers will be recorded in CRM (Customer Relationship Management) system to assist the service staffs to follow up and make sure that all customers’ requests are handled punctually. As we are now in the dynamic business encounter, we also analyze the data from CRM database to continuously improve our service standard. Location: Head Office Column Tower, 7th Fl.,199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Saraburi Plant Customer Service Building, 99, Moo 9, Mitraparp Road, Km. 129 - 131 Tabkwang Subdistrict, Kaengkhoi District, Saraburi 18260, Thailand Contact: Tel: 1-800-77-5555 (Free) or +66 2 797 7777, Fax: 1-800-33-5555 (Free) or +66 2 797 7788 Email: wecare@sccc.co.th Distribution Centers Siam City Cement distributes cement from Saraburi Plants to its customer nationwide in two methods: 1. Delivery from Saraburi Plants directly to dealers or their requested destinations 2. Delivery to four regional distribution centers

1. Lampang Warehouse Address: 208 Moo 2 Lampang - Chiangmai Road, Pong Yang Kok Subdistrict, Hang Chat District, Lampang 52190, Thailand Description: Warehouse and distribution center of bulk cement for northern customers 2. Udon Thani Warehouse Address: 1 Railway Station Road, Mark Kaeng Subdistrict, Muang District, Udon Thani 41000, Thailand Description: Warehouse and distribution center of bagged cement for upper northeastern customers 3. Ubon Ratchathani Warehouse Address: 23 Kong Tang Road, Varinchamrap Subdistrict, Varinchamrap District, Ubon Ratchathani 34190, Thailand Description: Warehouse and distribution center of bagged cement for lower northeastern customers 4. Surat Thani Terminal Address: 13/29 Moo 9 Surat Thani - Pak Nam Road, Bang Kung Subdistrict, Muang District, Surat Thani 84000, Thailand Description: Warehouse and distribution center of bulk and bagged cement, including Bag packing facility

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Summary of specified items per form 56-2

Compared in accordance with Form of Annual Report for a security - issuing company (Form 56-2) issued under SEC notification Ref. Kor Jor 40/2540 regarding principles, conditions and methods in presentation of financial data and operation results of a company which issues securities

Required Items in Guideline for 56-2 1. General Information 1.1 Company information and outstanding shares 1.2 Investment in other company for more than 10% of that company’s equity 1.3 Other reference

Supplemental information

2. Financial Summary Key data from financial statements during the most recent 3 years

Key Figures

3. Nature of business 3.1 Nature of business operation of company and subsidiaries, and distribution policy 3.2 Income structure 3.3 Major development in last year, and trend of industrial and competition situation

4. Risk factors 5. Shareholding and management structure 5.1 Shareholders 5.2 Management 5.2.1 Management structure

5.2.2 Nomination of directors and executives 5.2.3 Remuneration to directors and executives 5.2.4 Compliance of SET’s CG Principles 5.2.5 Rules on insider information 5.2.6 Internal control opinion of Audit Committee 5.3 Dividend Policy

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Supplemental information

73

8

74

Risk Factor and Risk Management

29

Supplemental information

74

Management structure, 7, Good Corporate Governance, 34, and Supplemental information 75-79 Good Corporate Governance 34 Good Corporate Governance, 35 and Supplemental information 80 Good Corporate Governance 32-35 Good Corporate Governance 32 Good Corporate Governance, 35 and Report of the Audit Committee 38 Dividend allocation over past three years 72 Related - Party transactions

7. Management discussion and analysis

Management discussion and analysis Report of Certified Public Accountant Supplemental information

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Page

Notes to Consolidated Financial Statement No. 32 67 Report of the Executive Committee, 12-15 Industrial Outlook, and 28-29 Summary of Major Developments and Recognitions in 2006 30-31

6. Related - Party transactions

8. Financial statements 8.1 Audited consolidated financial statements 8.2 Auditors’ fee

82

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This Annual Report is printed recycled SIAM on CITY CEMENTpaper PUBLICRECYCLABLE COMPANY LIMITED

ANNUAL REPORT 2006

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SIAM CITY CEMENT PUBLIC COMPANY LIMITED Column Tower, 7th - 12th Fl., 199 Ratchadapisek Rd., Klongtoey, Bangkok 10110, Thailand Tel: +66 2 797 7000 Fax: +66 2 797 7001-2 Call Center (Free) 1-800-77-5555 www.siamcitycement.com Registration No. 0107536001346

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:: Annual Report 2006 ::