gstel 05

Annual Report 2005

G Steel Public Company Limited

Think SteelThink TechnologyThink G Steel

> CONTENTS 015

Message from Chairman of the Executive Committee

001

Financial Highlights014

Message from Chairman of the Board of Directors

020

Report on Operating Results and Key Events in 2005

016

Audit Committee's Report

018

Steel Industry and Overview

026

Board of Directors022

Safety, Environmental Concern, and Social Activities

024

Organization Chart

058

Executive Notes and Analysis

056

Related Transactions055

10 Largest Shareholders

035

Changes in Shareholding by the Board of Directors and Management Team

028

Information on theBoard of Directors and Management Team

036

General Information

037

Nature of Business041

Management andCorporate Governance

039

Risk Factors

062

Financial Statements061

Board ofDirectors' Responsibilities with Regards to Financial Reports

28,356

6,808

21,548

22,202

22,297

3,257

2,531

2,741

11,422

21,718

2,911

18,807

21,270

21,979

3,059

2,599

8,902

8,682

14,965

9,364

5,601

12,622

13,517

833

1,187

48,005

(233)

Total Assets

Total Liabilities

Total Shareholders' Equity

Sales

Total Revenues

Gross Profit (Loss)

Operating Profit (Loss)

Net Profit (Loss)

Retained Earnings (Loss)

Financial Ratios

* Including gain from debt restructuring

(Times)

(Times)

(%)

(%)

(%)

(%)

(%)

(Baht)

(Baht)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

2.65

0.15

14.38

12.22

40.50

72.94

48.54

1.36

2.29

3.91

0.32

14.67

11.40

12.29

13.58

10.95

0.33

2.63

1.91

1.67

6.60

9.40

355.15

n/m

263.10

15.45

10.18

Liquidity Ratio

Debt to Equity Ratio

Gross Profit (Loss) Ratio

Operating Profit (Loss) Ratio

Net Profit (Loss) Ratio

Average Return on Equity

Average Return on Assets

Net Earnings (Loss) per Share

Book Value per Share

Data from Financial Statement 2005 2004 2003

2005 2004 2003

> Financial Highlights

1

* * *

03 04 05 03 04 05

2

14,965

21,718

21,548

28,356

Total Assets (Baht Million ) Total Shareholders’ Equity (Baht Million )

5,601

18,807

03 04 05 03 04 05 Year

3

3,257

3,059

833

22,202

12,622

21,270

Sales (Baht Million ) Gross Profit (Baht Million )

> With a firm and strong foundation,

G Steel enjoyed satisfactory profit

despite steel price fluctuations

��

Hot Rolled Coil Price in 2005

Q1 Q2 Q4Q3Baht/Ton

15,000

20,000

25,000

Amidst the volatile steel situation worldwide leading to the

price reduction of over 30%, several steel producers

operated at loss and were forced to reduce their

production capacity. However, with its capability in cost,

production efficiency and inventory management, G Steel

was among very few plants in Southeast Asia to maintain

a profit as high as Baht 2,531 million, very close to that of

the preceding year. This reflects the fact that the

company is an organization with a firm and strong

foundation, adept to promptly respond to steel price

fluctuations in the world market.

> With the strong financial status, G Steel

was well accepted and considered reliable

among local and overseas investors

B+, B1Rating

With the efficient management, strong financial status,

low debt ratio in addition to its high profitability, G Steel

was rated, according to international standards, B+ and B1

by S&P and Moody's respectively, very good ratings for

steel producers in Southeast Asian region. Its reliability

was boosted, and the company was more widely accepted

by investors worldwide. Consequently, its fund raising for

the first time overseas turned out to be very successful.

The issuance and offering of USD 100 million bonds,

approximately Baht 4,000 million, received an

overwhelming subscription of almost two times. The fund

would be used to expand production capacity and improve

product quality as per its plan in order to become even

stronger and to increase its competitiveness in the long

run.

2003

1

2004 2005

Industry’s Average

times

Debt to Equity Ratio

> Geared towards a firm with sustaining

business success with an adherence to

management principles in quality and ethics

No.1 The Board of Directors and the management team share

common vision that long-term firm and sustaining

business success relies on professional management

taking into account quality in all processes and at all

levels, good corporate governance and management

ethics. These became one of the most important policies

to which the company has adhered to and developed all

along. As such, G Steel recorded consistent growth in sales

volumes and profit. In 2005, it was presented with The

Prime Minister Industrial Award for an outstanding

achievement in the Quality Management. In addition, it

was also presented with Outstanding Entrepreneur Award

by the Director General of the Department of Primary

Industries and Mines which the company was the first and

only steel producer in Thailand to receive the awards. It is

naturally a proof of its success. The company continued

focusing on developing and improving the quality

management as such.

79%Directors without Management Authorities and Independent Directors

21%Directors with Management Authorities

Structure of the Board of Directors

> Dedicated to continuing technological

research and development to increase

production efficiency and enhance its

competitiveness

>5m/minTechnology is a key factor to business competitiveness.

G Steel is determined to continually promote technological

research and development. It decided to join hands with

JP Steel Plantech Co., Ltd., an affiliation of Japan's largest

steel making machine Sumitomo Heavy Industries Ltd.,

to develop a high speed slab caster concurrently with

a project to improve the slab quality. With an investment

capital of over USD 10 million or approximately Baht 400

million, the project was expected to increase the current

production capacity by 10-15%. This would substitute

a huge quantity of steel import. Results of the research

and development will be jointly patented worldwide.

Scrap

Pig Iron

Fluxes / Ferro Alloys

Crop Shear

R1 R2 F1 F2 F3 F4 F5 F6

> Attentive to environment issues

for the future and a better standard

of living of the Thai society

Before

600 kg.

540 kg.

After

COG Steel has all along realized an importance and a need to

have pleasant environment for the public and society as

well as to have development sustaining and balance for

industries, communities and environment. With its

committed objectives, the company was invited to

participate in the Greenhouse Gas Emission Reduction

from Industry in Asia and Pacific (GERIAP), organized by

United Nations Environment Programme (UNEP) during

2003 - 2005. It had developed and increased an efficient

usage of energy in the steel production process, thus

reducing greenhouse gas emission as planned. Besides,

the programme rendered energy conservation and

effective use of resources. It is a pride of G Steel people to

represent Thailand to have addressed the world

communities' concern by means of clean production

technology.

Greenhouse Gas Emission

14

>>>>> Message from Chairman of the Board of Directors

In 2005, Thailand’s economy expanded at a decreasing rate in accordance with export, expenditures, and private

investment growth rates. This was resulted from numerous negative factors especially increment in oil and goods prices

and interest rates, Tsunami aftermaths, and turbulence in the South. Thus, such downstream industries using hot rolled

coils as their base materials as automobile and parts, as well as construction industries grew at a slightly decreasing rate.

Nevertheless, this did not have much impact on domestic hot rolled coil industry which saw a continuous demand growth

in a marked contrast to rapidly reducing price trend especially during the second half of the year. The lowering prices were

due to anxiety of China’s production capacity expansion which might have led to supply surplus, apart from the world’s

high level of hot rolled coil inventory. The situation was completely contrary to that of Year 2004 even though prices in the

world market at the end of the year remained the same or gradually improved in some regions.

As for the performance in Year 2005, due to discreet management policy, dedication and concerted cooperation

between the management and all staff, the company successfully braved through the crisis of price downfalls without any

significant effects and maintained its operating results at approximately equivalent level to that of Year 2004. The sales

volumes marked as high as Baht 22,202 million, while the operating profit recorded at Baht 2,531 million, the highest in the

country’s steel industry. It registered the return on equity of 12%, a highly satisfactory level, and was one of very few hot

rolled coil plants in Southeast Asia to maintain its operating performance at closely equivalent level to the preceding year.

Moreover, G Steel succeeded in raising capital by issuing USD 100 million of unsecured bonds to overseas investors. The

proceeds were for production capacity expansion and addition of production lines for high quality products to cope with

increasing domestic demand for hot rolled coil as per the public investment, mega-projects in particular. This would also

enhance G Steel’s competitiveness in the long run. Taking into account that the debt to equity ratio at a low level of 0.3

times after the bond issuance, the company’s capital structure was one of the strongest.

Apart from focusing on management to create the highest added value according to the announced mission, the

company emphasized on abiding by 15 - clause corporate governance which was served as minimum compliance. It had

implemented efficient internal control systems to protect benefits and assets of shareholders and to ensure the maximum

utilization of its resources under efficient internal audit systems.

On behalf of the Board of Directors, I would like to extend our gratitude to shareholders for their trust, confidence,

and continuing support to the company. The board’s commitment is to jointly oversee the business management to be

transparent with good governance for confidence and fairness to shareholders, investors, business partners, and all

parties concerned. We will dedicate ourselves to our duty with highest efficiency for the company’s sustaining success

and shareholders’ worthwhile return on investment.

Mr. Vijit Supinit

Chairman of the Board of Directors

14

15

>>>>> Message from Chairman of the Executive Committee

In Year 2005, G Steel Public Company Limited successfully became Thailand’s leading hot rolled coil producer and was the

only hot rolled coil plant registering operating profit from hot rolled coil production and distribution business despite steel

price fluctuations worldwide since mid 2005. With the executives’ vision on planning and inventory management as well

as their strict cost controlling, the company enjoyed a net operating profit of over Baht 2,500 million from more than

1 million tons of production outputs and distribution. In addition, it did not only maintain domestic and overseas customer

bases but also expanded its customer bases in export markets as planned with an export value of over Baht 2,500 million.

In a financial management area, the company successfully mobilized capital at a reasonable cost for an investment of

its production expansion project by issuing and offering USD 100 million bonds in overseas market last October. With

Standard & Poor’s and Moody’s Investors Service rating its business as B+ and B1 respectively, the company was ranked

among the most reliables in the industry in Southeast Asia. It has continually developed and researched on steel quality

and production. Latest, it joined hands with Japan’s JSP (JP Steel Plantech Co., Ltd.), one of the world’s three largest steel

making machine companies, to develop a High Speed Slab Caster technology to reduce production time and improve slab

quality.

In Year 2006, the company has accelerated production expansions, additions of Skinpass Mill and Pickling and Oiling Line

to keep abreast with the country’s economic growth and customers’ demand for all types of hot rolled coils.

On behalf of the company’s executives, I would like to thank all shareholders and business partners as well as agents,

suppliers, and service providers. We will maintain our performance standard with all our expertise to enable the company

to make and distribute high quality hot rolled coils in response to consumers’ demand and keep on creating to our

shareholders more added value.

Dr. Somsak Leeswadtrakul

Chairman of the Executive Committee

15

16

>>>>> Audit Committee’s Report

The 2004 annual ordinary shareholders meeting on 9 June 2004 resolved the nomination of the Audit Committee with a

3 - year term starting from 9 June 2004 to 8 June 2007. The committee comprises 3 independent directors with the

Internal Audit Manager as a secretary. In 2005, a member of the Audit Committee resigned, and his replacement was

appointed as follows:

1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee

2. Mr. Preecha Prakobkit Member of the Audit Committee

3. Mr. Chaipatr Srivisarvacha Member of the Audit Committee

(resigned on 10 November 2005

to work in another capacity in the company)

4. Assoc. Prof. Prapanpong Vejjajiva Member of the Audit Committee

(effective as from 10 November 2005)

5. Ms. Sopit Jaeng-arun Secretary to the Audit Committee

Scopes of roles and responsibilities of the Audit Committee were stipulated as below:

1. To examine for the company’s accurate and adequate disclosure of financial report

2. To examine for the company’s efficient and appropriate internal control and audit systems

3. To examine for the company’s compliance with legal requirements on Securities and Stock Exchange, SET regulations

or laws relevant to the company’s business

4. To scrutinize, select and nominate the company’s external auditors and propose their remuneration

5. To scrutinize the disclosure of the company’s information concerning inter - related transactions or conflicts of

interest items

6. To prepare a report on the Audit Committee’s activities for disclosure in the company’s annual report

7. To execute any assignments by the Board of Directors with an approval from the Audit Committee

8. To report results of their execution, recommendations and any findings to the Board of Directors at least twice a year

For the accounting period ending on 31 December 2005, the Audit Committee convened 6 times to comtemplate and

examine the company’s operations in the following areas:

16

17

1. Having examined the company’s quarterly and 2005 annual financial statements, in cooperation with the independent

auditors, reporting on the financial status and 2005 operating results as well as inter-related transactions as

appeared in the financial statements together with the management’s remarks before having them submitted to

the Board of Directors. It was found out that the company’s financial statements were prepared in accordance with

generally accepted accounting practice with adequate disclosure of information.

2. Having examined justifications of inter-related items and transactions with the company’s business alliances. It was

observed that transactions between the company and related parties with possible conflict of interest as well as

transactions between the company and the business alliances were executed as normal business transactions under

general business terms and conditions as necessary to the business for the company’s maximum benefits.

3. Having scrutinized the Internal Audit Department’s annual audit plans and reviewed their audit performance results,

suggestions and quarterly implementation progress as per the plans. We opined that the company’s internal audit

systems were adequate, appropriate and efficient.

4. Having assessed with the company management team in compliance with the policy on good corporate governance

and sufficient internal controlling systems. The good corporate governance was found to further enhance in many

areas with sufficient and efficient internal controlling systems.

5. Having examined the company’s compliance with Securities and Exchange laws and other legal requirements related to

the company’s business.

6. Having selected and proposed to the Board of Directors for their perusal and requested for the shareholders

meeting’s approval to nominate Ms. Rungnapa Lertsuwankul and/or Ms. Sumalee Reewarabandit and/or Ms. Vissuta

Jariyatanakorn of Ernst & Young Office Ltd. as the company’s auditors for 2006 accounting period with the

remuneration of Baht 1,950,000 auditing service fee.

(Professor Paichitr Roajanavanich)

Chairman of the Audit Committee

17

18

>>>>> Steel Industry and Overview

HOT ROLLED COIL SITUATION IN 2005

During 2005, hot rolled coil (HRC) price situation in the world market drastically fluctuated. Ongoing price increases

over almost past 3 years were due to the substantial growth in import of steel products in China as a result of the real

consumption and speculations. The rising prices recorded the highest level at USD 600 - 650 per ton. The situation

continued until mid-2005 when the Chinese Government signaled a need to slow down domestic investment. Thus,

Chinese import and domestic demand for steel products slowed down accordingly. In combination to the high excessive

inventory and rapid production capacity expansion in China, there had been supply surplus in some types of steel

products, particularly low quality ones which were dumped into the world market. As a result, the HRC prices rapidly

reduced to an average of USD 380 - 450 per ton, over 30% decrease, at the end of last year.

Nevertheless, such situation led to a significant alignment of worldwide steel producers who initiated coordination

among themselves to limit outputs to control supply in the market. Besides, domestic, regional and international merger

and acquisition trend had emerged respectively. China itself turned to a policy not promoting steel product export and

increased tariff on steel raw materials, reducing competitiveness of their domestic producers. Moreover, the Chinese

Government’s merger and acquisition policy came into effects. The steel market situation worldwide hence became more

stable. The current steel prices are normalized, while those in some regions passed the bottom-most situation.

Thailand’s HRC industry has been inevitably affected by the world steel price volatility. Considering the actual

consumption level, however, the HRC industry continued to grow from the previous year in accordance with the economic

growth, especially in automobile and parts industry as well as construction. According to the Iron and Steel Institute of

Thailand, in 2005, demand for hot rolled flat products amounted to 6.1 million tons, an 8.7% rise over the previous year,

whereas a combined outputs of all domestic producers were merely 4.4 million tons. Of this, 0.9 million tons were

exported, and a net figure 3.5 million tons were sold domestically, much lower than that of the demand. Thus, as high as

2.6 million tons had to be imported, most of which were high quality hot rolled coil from Japan, as high as 70% of total

import. Meanwhile, import from China doubled that of the preceding year and accounted for approximately 12% of the

total import.

19

HOT ROLLED COIL INDUSTRY TREND IN 2006

On the supply side, though the HRC production capacity worldwide, especially in China, sharply rises, most of producers

focus more on profit-making and value-added productions rather than on large volume of production as it had been

previously. Hence, cooperation among producers as well as merger and acquisition becomes more apparent since

producers worldwide identically regard the trend as necessary to the steel industry’s sustenance as a whole. Additionally,

this would enable steel prices to be more stable than they had been.

On the demand side for HRC in the world, it is anticipated to continuously increase but at slower growing rates as per

those of the world economy. Drives from such fast developing countries as China, India, Middle East and the Southeast

Asian regions, including Thailand, have fundamentally demand for steel for their economic, industrial and infrastructure

development. Most of the demand will be from China which continually imports high quality steel products to cope with

its development, automobile industry expansion, construction of infrastructure, stadiums and other buildings for the

Olympic Games in 2008.

Presently, steel prices in the world market tend to be more stable than it had been during the past 3 years and to gradually

rise as steel inventory worldwide has continuously reduced almost to the lowest level. However, afresh purchasing of

stockists and users this time will be much more discreet and unlikely to be speculative as it was in the past.

As for Thailand’s HRC industry trend in 2006, demand is forecasted to increase, especially high quality grades, in

accordance with the industrial sector’s continuing growth. Automobile and parts as well as electrical appliance industries

are anticipated also to continuously grow this year. Besides, significant positive factors are demands from real estate

business and investment projects in infrastructure development as per the Government’s policy, especially the Baht 1.8

trillion mega project, which is expected to partially start in 2006. The HRC domestic demand is expected to expand at the

rates of 8 - 10%, approximately equivalent to that of 2005. However, there will be demand surplus in the market, thus

import will be resorted despite the domestic production capacity expansion as actual production outputs are inadequate.

20

>>>>> Report on Operating Results and Key Events in 2005

OPERATING RESULTS AMIDST FLUCTUATION IN STEEL INDUSTRY

Year 2005 saw dramatic changes and fluctuations in the steel industry. Despite a continual growth of 9% in the HRC

domestic consumption, the cycle of rising prices for nearly past 3 years came to an end in mid - 2005. Since then,

prices rapidly declined, by the end of the year prices dropped by over 30%. Bargaining power in the market switched

to buyers’ side. Import of low quality steel products from China had flooded in. The business management during the

second half of the year was of great difficulties.

With cost controlling, continuing production efficiency improvement and the maintenance of appropriate inventory

level, G Steel weathered the steel falling price crisis, although its operating results during the second half of the year

was inevitably affected. Its sales value and profit during the period were lower than those of the first half by 33% and

60% respectively. However, overall operating results throughout the year remained very satisfactory. It was one of

very few mills in the Southeast Asia to maintain the performance results at an equivalent level to the previous year.

Its total production volumes last year registered 1.12 million tons, a 1% increase from the preceding year due to the

production plan adjustment in accordance with the market slow down. The sales value was Baht 22,202 million, a 4%

rise compared to that of the preceding year. The average selling prices in 2005 were slightly higher than those of the

preceding year. Most of the incomes were from domestic sales as export prices were lower than the domestic ones.

The average gross margin for the year was 15%, close to that of the previous year, with an operating profit amounting

to Baht 2,531 million, or Baht 0.31 earning per share.

MANAGEMENT AWARDS

On 19 May 2005, G Steel received the 2005 Prime Minister Industry Award for an outstanding achievement in

Quality Management. The Industrial Ministry selected the winner from domestic industrial producers with

qualifications in internal quality management system, development of personnel to handle quality management,

continual and efficient development and improvement of production quality as well as management of product

quality to satisfy customers’ need.

On 4 October 2005, the company was presented with a plaque and certificate for 2005 Outstanding Entrepreneur

by the Director General of the Department of Primary Industries and Mines. Consisting of representatives from

educational institutions, private sectors and professional institutes in mines and primary industries, the panel

selected the winner from a group of companies in iron and steel industry with qualifications in production technology

management, safety, hygiene, environment protection and social contributions. The company is the first of its kind

and the only mill to receive the award.

PARTICIPATION IN HIGH SPEED SLAB CASTER RESEARCH AND DEVELOPMENT PROJECT

On 26 September 2005, the company entered into an agreement with JP Steel Plantech Co., Ltd., Japan’s largest

steel machine maker, to develop a high speed slab caster technology and to improve slab casting quality at the

investment cost of over USD 10 million or approximately Baht 400 million. In this regard, JP Steel Plantech Co., Ltd.

was responsible for the entire budget and would expedite a team of engineers from Japan to jointly undertake

research and development with the company’s engineering team. The project was planned to last for approximately

12 months. It was expected to boost the production capacity by 10 - 15% from the current capacity level. Additionally,

the research and development results would be patented in countries worldwide under the name of JSP - G STEEL.

21

JP Steel Plantech Co., Ltd. is a joint venture among Japan’s 4 major heavy machine makers, namely Sumitomo Heavy

Industries Ltd., JFE Engineering Corporation, Kawasaki Heavy Industries Ltd. and Hitachi Zosen Corporation. After

scrutiny and comparison with other steel mills worldwide, G Steel was selected to join in the research and

development project because its production technology is one of the world’s most advanced and its engineering team

is of long-standing experience with expertise in steel production technology. Besides, the company has an efficient

production management.

ISSUANCE AND OFFERING OF UNSECURED BONDS TO OVERSEAS INVESTORS

On 4 October 2005, the company issued and offered senior unsecured bonds to overseas investors, worth USD 100

million or approximately Baht 4,000 million, at the price of 98.116% of face value with an interest rate of 10.5%. Term

of bonds is 5 years with an option for the company to prematurely redeem after 3 years of the issuance. UBS AG was

appointed as a financial advisor and lead manager. Rated for their reliability as per international standards, the bonds

were rated by Standard & Poor’s (S & P) and Moody’s Investor Services (Moody’s) at B+ and B1 respectively. The

ratings were considered the best among steel makers in Southest Asia and were at the same level as most of steel

makers worldwide. Therefore, the bonds gained more confidence and recognition from worldwide investors. The first

fund mobilization overseas was successful with its over-booking almost doubled size of the issuance. The proceeds

from the bonds issuance would be for production expansion and product quality improvement projects to strengthen

and enhance its competitiveness in the long run. The bonds were listed in Singapore Stock Exchange as well.

APPROVAL OF INITIAL PUBLIC OFFERING AND WARRANTS FOR DIRECTORS AND EMPLOYEES

On 19 October 2005, the Securities and Exchange Commission approved the company’s initial public offering of

1,500 million common shares, 750 million shares of which would be offered to overseas investors. The other 750

million shares would be allocated to domestic investors, of this, 210 million shares would be offered to its employees

and patrons at Baht 1.60 per share. The company appointed Asia Plus Public Co., Ltd. as its financial advisors and lead

underwriting manager and Macquarie Securities (Asia) Pte. Ltd. as its international lead manager. The offering

dates were set during 17-20 January 2006. The proceeds would be for production expansion investment.

The company also plans to allocate non-negotiable warrants to its Directors and employees for 99,972,200 units

without charge. A unit of warrant is entitled to subscribe 1 common share of the company at the exercise price of

Baht 1. Term of warrant is 5 years, and the exercise period starts after the company stock has been listed and traded

in the SET for 1, 2 and 3 years at the annual proportion of one-third of total allocated amount. The company schedules

to allocate the warrants on 12 January 2006.

22

>>>>> Safety, Environmental Concerns, and Social Activities

Concurrently focusing on development and growth of the company’s business, the company has given an equal

importance to operational safety, occupational hygiene, environment quality management and social contributions.

During 2005, it implemented various activities in the areas, namely:

OPERATIONAL SAFETY AND OCCUPATIONAL HYGIENE

In 2005 despite no incidents nor damages caused by fire, the safety management team regularly had fire fighting

equipment and fire alarm systems both inside factory and office checked for assurance of safety in the company’s

personnel and assets. In cooperation with inside and outside organizations, fire evacuation, fire extinguishing drills for

staff and sessions to discuss and map out plans in case of emergency were carried out in accordance with the Emergency

Plan of the company’s Safety Division. Moreover, annual physical check-up and group health insurance were provided for

all staff as their personal welfare.

ENVIRONMENT QUALITY MANAGEMENT

The company appointed an independent expert in environment to inspect its environment quality and prepare relevant

report yearly. The report for Year 2005 found out that pollution degrees of air and already-treated waste water before

being drained out to public systems were within official standard limits with no effects on environment quality. Apart from

the factory’s environment quality control, the company participated in the Greenhouse Gas Emission Reduction from

Industry in Asia and Pacific (GERIAP) as per United Nations Environment Programme (UNEP). It turned out

successfully as the company substantially decreased fuel energy consumption, thus reducing greenhouse gas

emission. In this regard, the company was presented with a plaque and a certificate by UNEP for its remarkable

success as a hot rolled coil plant to control and reduce greenhouse gas emission to atmosphere. Besides, the

Department of Primary Industries and Mines, as the authority for a metallurgical business permit and control, also

presented the company with a plaque and a certificate as a hot rolled coil outstanding entrepreneur. Notably, the

company has been the only steel making factory in the country to receive awards from both organizations.

23

SOCIAL CONTRIBUTIONS

As a part of the company’s significant roles and responsibilities, the company consistently contributed to social activities

throughout 2005. It organized the activities and made donations in forms of funds and necessities to communities,

educational institutions, non-governmental organizations and government offices. This included donations for people

in the South, donations to Khun Poom Foundation, Handicapped Children Aid and Rehabilitation Foundation and

Somdej Chao Phraya Hospital Foundation, to name but a few. The company also subsidized personnel recruitment and

employment to assist Rayong Industrial Office in addition to provisions of office equipment and supplies to several

local administrative offices. Provisions of sports equipment to local communities, monetary contributions for

education-related activities to school children in Ban Khai District were made. The company also provided opportunities

for students from many institutions to visit its continuous production lines. Thus, numerous letters came from

educational institutions expressing their appreciation for the company’s support.

Certificate presented from UNEP for success in

reducing greenhouse gas emission (left and

center pictures)

Making donation for medical equipment to

the Police Hospital Foundation under the Royal

Patronage of Her Majesty the Queen (right

picture)

> Organization Chart of G Steel Public Company Limited

Board of Directors

Executive Committee

Chief Executive Officer

Dr. Somsak Leeswadtrakul

Office of the President

Assistant Chief Executive Officer

Mr. Ryuzo Ogino

24

Senior Executive Vice President

(Operations)

Mr. Jeong Joon Ahn

Vice President

(Operations)

Mr. Nopakao Srisuvanon

Vice President

(Expansion Project)

Mr. Joachim Burgers

Vice President

(Accounting and Finance)

Mr. Chalothorn Leelamali

25

Audit Committee

Internal Audit Department

Assistant Chief Executive Officer

Ms. Patama Chiachuabsilp

Senior Executive Vice President

(Administration)

Mr. Chalothorn Leelamali (Acting)

Vice President

(Corporate Finance)

Mr. Nakun Sakunchotikarote

Vice President

(General Administration)

Ms. Pannee Tanaprateepkul

Vice President

(Commercial)

Ms. Kannikar Soykeeree

> Board of Directors

26

Vijit Supinit> Chairman of the Board of Directors

Sasiwimon Kasemsri> Director

Singha Saovapap> Director

Somsak Leeswadtrakul> Director

Paichitr Roajanavanich> Director

Patama Chiachuabsilp> Director

Prakard Sataman> Director

27

Chainarong Monthienvichienchai> Director

Chaipatr Srivisarvacha> Director

Choochat Kambhu Na Ayudhya> Director

Stephane Benayon> Director

Yanyong Kurovat> Director

Prapanpong Vejjajiva> Director

Preecha Prakobkit> Director

Ryuzo Ogino> Director

28

>>>>> Information on the Board of Directors and Management Team

1 Mr. Vijit Supinit 64 - none - ■ Class 31 National Defense - none - G Steel Public Company Limited

Chairman of the Board Course at the National 2006 - Present Chairman of the Board of Directors

of Directors Defense Academy Others

(Effective as from ■ M. Econ., Yale University, USA 2003 - Present Chairman of the Board of Directors

8 February 2006) ■ B. Econ. (Honors), Manchester The Stock Exchange of Thailand

University, England 2003 - Present Chairman of the Board of Directors

Asset Management Corporation

1993 - 1996 Chairman of the Board of Directors

The Export and Import Bank of Thailand

1990 - 1996 Governor and Chairman

The Bank of Thailand

1990 - 1996 Executive Director

The Office of the National Economic

and Social Development Board

1990 - 1991 Director

The Office of the Board of Investment

1987 - 1990 Executive Director

Siam City Bank Public Co., Ltd.

2 Mr. Vira Susangkarakan 75 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Chairman of the Board Program (DAP) at the Thai 1995 - 2005 Chairman of the Board of Directors

of Directors Institute of Directors Association Others

(Deceased on ■ Honorary Doctorate in Business 2002 - 2005 Chairman of the Board of Directors

24 December 2005) Administration, Berks Thai Agro Energy Co., Ltd.

University, United Kingdom 1998 - 2005 Chairman of the Audit Committee

■ Class 18 National Defense Course Phoenix Pulp and Paper Public Co., Ltd.

at the National Defense Academy 1993 - 2005 Chairman of the Board of Directors

■ M. Eng. (Civil Engineering), Patkol Public Co., Ltd.

University of Illinois, USA 1993 - 2005 Chairman of the Executive Committee

■ B. Eng. (Civil Engineering), T.S.B. Trading Co., Ltd.

Chulalongkorn University

3 General Singha Saovapap 75 - none - ■ A Chairman 2000 Program at 0.02% G Steel Public Company Limited

Vice Chairman of the Thai Institute of Directors 2003 - Present Vice Chairman of the Board of Directors

the Board of Directors Association Others

■ Honorary Doctorate in 2003 - Present Chairman of the Board of Directors

Sociology and Anthropology, Chaopraya Hospital Public Co., Ltd.

Ramkhamhaeng University 1994 - Present Chairman of the Board of Directors

■ A Principle of Hospital Kanchanaburi Health Center Co., Ltd.

Administration Program 1993 - Present Chairman of the Board of Directors

■ M.D., Chulalongkorn University Phattanakarn Vechakit Co., Ltd.

1986 - Present Chairman of the Board of Directors

Vibhavadi Hospital Public Co., Ltd.


Jittiporn Co., Ltd.


River Kwai Evergreen Hills Resort Co., Ltd.

Age % ofName / Position (Years) Relationship Education Shares Experience

29

4 Ms. Patama Chiachuabsilp 41 Wife of ■ A Chairman 2000 Program at 12.94% G Steel Public Company Limited

Vice Chairman of the Board Mr. Somsak the Thai Institute of Directors 2003 - Present Vice Chairman, Executive Director,

of Directors Leeswadtrakul Association and Assistant Chief Executive

Executive Director ■ A Directors Accreditation Officer

Assistant Chief Executive Program (DAP) at the Thai Others

Officer Institute of Directors Association 2003 - Present Chairman of the Board of Directors

■ Honorary Doctorate in General G.E.I. Holding Co., Ltd.

Administration, Ramkhamhaeng 1997 - Present Chairman of the Executive

University Committee

■ B. Econ., Ramkhamhaeng Paitoon Hotel and Resort Co., Ltd.

University 1990 - Present Chairman of the Board of Directors

Siam Jetty and Container Co., Ltd.

5 Mr. Somsak Leeswadtrakul 53 Husband of ■ A Chairman 2000 Program at 0.09% G Steel Public Company Limited

Director Ms. Patama the Thai Institute of Directors 1995 - Present Director, Chairman of the Executive

Chairman of the Executive Chiachuabsilp Association Committee, and Chief Executive

Committee ■ A Directors Accreditation Officer

Chief Executive Officer Program (DAP) at the Thai Others

Institute of Directors Association 1995 - Present Chairman of the Board of Directors

■ Honorary Doctorate in Siam Integrated Cold Rolled

Industrial Management, Steel Public Co., Ltd.

University of the Americas, 1995 - Present Director

Louisiana, USA Thai Special Steel Industry

■ Honorary Doctorate in Public Co., Ltd.

Administration, Kasetsart 1994 - Present Executive Director

University Paitoon Hotel and Resort Co., Ltd.

■ Honorary Doctorate in General 1994 - Present Chairman of the Board of Directors

Administration, Ramkhamhaeng Felix River Kwai Resort

University (Kanchanaburi) Co., Ltd.

■ B. Econ., Ramkhamhaeng 1992 - Present Director

University First Steel Industry Co., Ltd.

1992 - Present Director

Inter Metal Tube Alliance (Thailand)

Co., Ltd.


Siam Ferro Industry Co., Ltd.


Nas Toa (Thailand) Co., Ltd.


Thai Steel Pipe Industry Co., Ltd.


Thailand Iron Works Public Co., Ltd.


30

6 Mr. Chainarong 60 - none - ■ A Directors Accreditation 0.02% G Steel Public Company Limited

Monthienvichienchai Program (DAP) at the 2000 - Present Director

Director Thai Institute of Directors Others

Association 2002 - Present Chairman of the Board of Directors

■ M.A. (Management), Asian Paitoon Hotel and Resort Co., Ltd.

Institute of Management 1994 - Present Director

■ B.A. (Business Administration), Saint John for Education Co., Ltd.

Chulalongkorn University 1991 - Present Vice Chairman of the Board of Trustees

Saint John’s University

1977 - Present Director General

Saint John’s College

7 Mr. Yanyong Kurovat 67 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Director Program (DAP) at the 2004 - Present Director and Executive Director

Executive Director Thai Institute of Directors Others

Association 2003 - Present Director

■ Class 5 National Defense G.O. International (Thai) Co., Ltd.

Course for Joint Private and 2003 - Present Advisor

Public Sectors at the National MAN Truck & Bus Concessionaires

Defense Academy (Thailand) Co., Ltd.

■ Graduate Diploma in 2003 - Present Chairman of the Election

Government, Chulalongkorn Commission of Pathumthani

University Province

■ B.A. (Pol. Sci.), Chulalongkorn 2000 - Present Managing Director

University Technology Operation Group Co., Ltd.


Academic Network Co., Ltd.

2000 - Present Advisor

Boonrawd Brewery Co., Ltd.

2000 - Present Advisor

Saha Transportation Thonburi Co., Ltd.


Bangkok Mass Transit Authority


31

8 General Choochat 61 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Kambhu Na Ayudhya Program (DAP) at the 2004 - Present Director



■ Class 7 National Defense and the Audit Committee

Course for Joint Private and Singha Paratech Public Co., Ltd.

Public Sectors at the National 2005 - Present Physician Leader

Defense Academy Medical Bureau to His Majesty

■ Certificate of the Royal Thai the King

Army War College 2004 - Present Chairman of the Board of Directors

■ Diploma of General Surgery, Lucky Music Co., Ltd.

Council of Doctors of Medicine 2003 - Present Army Special Expert

■ Doctor of Medicine, University Royal Thai Army

of Gottingen, Germany 2003 - Present Chairman of the Board of Directors

■ M.D., University of Munster, Unity Percussion Co., Ltd.

Germany 2003 - 2004 Advisor, National Defense Studies

Institute, Military Supreme Command

2001 - 2003 Director General

Royal Thai Army Medical Department


King Mongkut Medical

Administration Center

1998 - 2000 Deputy Director General

Royal Thai Army Medical Department

9 Mr. Chaipatr Srivisarvacha 47 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Director Program (DAP) at the 2004 - Present Director

Thai Institute of Directors 2004 - 2005 Audit Committee Member

Association Others

■ A Chairman 2000 Program at 2004 - Present Director

the Thai Institute of Directors Payzy (Thailand) Co., Ltd.


■ MBA (Finance), Illinois Ecco Communications Co., Ltd.

Benedictine College 2002 - Present Independent Director

■ Bachelor of Science Kudu Co., Ltd.

(Metallurgy) Lehigh University 2002 - Present Independent Director

Brooker Group Public Co., Ltd.

2001 - Present Independent Director

Thanachart Bank Public Co., Ltd.

1999 - Present Chief Executive Officer

Cap Maxx Co., Ltd.

1993 - Present Executive Director

Salon La Prairie (Far East) Co., Ltd.


Faces Co., Ltd.


SVAC Co., Ltd.


32

10 ML. Sasivimon Kasemsri 41 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Director Program (DAP) at the 2004 - Present Director and Executive Director

Executive Director Thai Institute of Directors Others

Association 2003 - Present Director

■ Master of Intellectual Property The Unified Council Co., Ltd.

(MIP), Franklin Pierre Law, USA 2000 - 2003 Attorney

■ LL.M. (International Laws), Law and Solicitors Co., Ltd.

Chulalongkorn University 1993 - 2000 Attorney

■ LL.B., Chulalongkorn University Baker and Mckenzie Co., Ltd.

11 Pol. Lt. General Prakard 63 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Sataman Program (DAP) at the 2004 - Present Director and Executive Director


Executive Director Association 2005 - Present Advisor to the Board of Directors

■ Class 1 Advanced Management Sirikit National Convention Center

Program at the National 2004 - Present Advisor

Defense Academy Thai Pure Drinks Co., Ltd.

■ Class 37 National Defense 2000 - Present Member of Disciplinary Committee

Course at the National Defense Office of the Auditor - General

Academy 2000 - 2003 Commander of the Police Forensic

■ International Police Program, Science, The National Police Office

USA

■ LL.B., Thammasat University

12 Mr. Stephane Benayon 38 - none - ■ B. Econ., York University - none - G Steel Public Company Limited

Director 2003 - Present Director and Executive Director

Executive Director Others


Superior Overseas (Thailand) Co., Ltd.

2001 - Present Managing Director

Distresses Assets Investment


Prebon Yamane (Hong Kong) Ltd.

13 Mr. Ryuzo Ogino 62 - none - ■ B. Econ, Keio University - none - G Steel Public Company Limited

Director 2005 - Present Director and Executive Director

Executive Director 2004 - Present Assistant Chief Executive Officer

(Effective as from Others

10 November 2005) 2000 - 2004 Director

Assistant Chief Executive Suncall Corporation

Officer 1965 - 2000 Director

Itochu Corporation


33

14 Professor Paichitr 77 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Roajanavanich Program (DAP) at the 2004 - Present Director and Chairman of the

Director Thai Institute of Directors Audit Committee

Chairman of the Audit Association Others

Committee ■ MGA. (Fiscal Policy), 2005 - Present Vice Chairman of the Board of

Pennsylvania University, USA Trustees Suranari Technology

■ Graduate Diploma in University

Accountancy (Equivalent to 2002 - Present Chairman of the Audit Committee

Master’s Degree), Thammasat Sicco Securities Public Co., Ltd.

University 2002 - Present Chairman of the Board of Directors

■ LL.B., Thammasat University Sicco Advisory Co., Ltd.

■ CPA - Thailand 2000 - Present Chairman of the Board of Directors

Far East Law Office (Thailand) Co., Ltd.

1999 - Present Chairman of the Audit Committee

MBK Development Public Co., Ltd.


Pathum Rice Mill and Granary Public

Co., Ltd.


Muramoto Electron (Thailand)

Public Co., Ltd.


S.P.R. Leasing Co., Ltd.


Karnjeon Co., Ltd.

15 Mr. Preecha Prakobkit 57 - none - ■ A Directors Accreditation - none - G Steel Public Company Limited

Director Program (DAP) at the Thai 2003 - Present Director and Audit Committee

Audit Committee Member Institute of Directors Association Member

■ A Finance for Non - Finance Others

Director Program at the Thai 1988 - Present Managing Director

Institute of Directors Association Amway (Thailand) Co., Ltd.

■ Executive Leadership 2002 - 2005 Director

Thunderbird, The American Paitoon Hotel and Resort Co., Ltd.

Graduate School of International

Business

■ Senior Executive Program

Sasin Graduate Institute of

Business Administration,


■ Mini MBA, Thammasat University

■ Business Administration

Roosevelt University, USA


34

16 Associate Professor 70 - none - ■ A Chairman 2000 Program - none - G Steel Public Company Limited

Prapanpong Vejjajiva at the Thai Institute of 2005 - Present Audit Committee Member

Director Directors Association 2004 - Present Director

Audit Committee Member ■ A Directors Accreditation Others

(Effective as from Program (DAP) at the Thai 2005 - Present Chairman of the Board of Directors

10 November 2005) Institute of Directors Association C&C International Venture Co., Ltd.

■ An Audit Committee Program at 2005 - Present Chairman of the Board of Directors

the Thai Institute of Directors The Master Asset Management Co. Ltd.


■ Class 28 National Defense Primavest Asset Management Co., Ltd.

Course at the National Defense 1995 - Present Director

Academy Dhammaniti Public Co., Ltd.

■ Certificate in Business 1994 - Present Chairman of the Board of Directors

Administration, Stanford Home Place Group Public Co., Ltd.

University 1990 - Present Vice President

■ Graduate Diploma in Welfare (Development and Planning)

Administration, Stockholm Sasin Graduate Institute of Business

University, Sweden Administration, Chulalongkorn

■ M.A. in Social Science, University

Stockholm University, Sweden

■ B.A. (Pol. Sci.) (2nd Class

Honors) in Government,


17 Mr. Jeong Joon Ahn 67 - none - ■ M. Econ, Dankuk University - none - G Steel Public Company Limited

Senior Executive Vice ■ B. Eng, Seoul National 2004 - Present Senior Executive Vice President

President (Operations) University (Operations)

(Resigned from 2004 - 2005 Director and Executive Director

Director position on Others

10 November 2005) 1994 - 1997 Vice President

Hanbo Steel Co., Ltd., Korea

1989 - 1993 CEO & President

Pohang Special Tinplate Co., Ltd.,

Korea

1985 - 1989 Managing Director

POSCO Co., Ltd., Korea

18 Mr. Chalothorn Leelamali 39 - none - ■ MBA., Business Administration, - none - G Steel Public Company Limited

Vice President NIDA 2003 - Present Vice President (Accounting and Finance)

(Accounting and Finance) ■ B. Econ., Chulalongkorn Others

University 1999 - 2002 Project Financial Controller

Metro Resources Public Co., Ltd.

1998 - 1999 Financial Assistant Manager

Thainox Steel Co., Ltd.

1996- 1998 Financial Analyst

Shinho Paper (Thailand) Co., Ltd.


35

1. Mr. Vira Susangkarakan Chairman - - -

2. General Singha Saovapap Vice Chairman 1,500,000 1,500,000 -

3. Ms. Patama Chiachuabsilp Vice Chairman 1,061,060,793 1,061,060,793 -

4. Mr. Somsak Leeswadtrakul Director 7,154,071 7,154,071 -

5. Mr. Stephane Benayon Director - - -

6. Mr. Chainarong Monthienvichienchai Director 1,500,000 1,500,000 -

7. Mr. Yanyong Kurovat Director - - -

8. Mr. Chaipatr Srivisarvacha Director - - -

9. ML. Sasiwimon Kasemsri Director - - -

10. General Choochat Kambhu Na Ayudhya Director - - -

11. Pol. Lt. General Prakard Sataman Director - - -

12. Mr. Ryuzo Ogino Director - - -

13. Prof. Paichitr Roajanavanich Chairman of the Audit Committee - - -

14. Mr. Preecha Prakobkit Member of the Audit Committee - - -

15. Assoc. Prof. Prapanpong Vejjajiva Member of the Audit Committee - - -

16. Mr. Jeong Joon Ahn Senior Executive Vice President - - -

(Operations)

17. Mr. Chalothorn Leelamali Vice President - - -

(Accounting and Finance)

CHANGES IN SHAREHOLDING BY THE BOARD OF DIRECTORS AND MANAGEMENT TEAM

Shareholding (Shares): Par 1 Baht

Name Position As of 31 Dec. 2004 As of 31 Dec. 2005 Changes

36

>>>>> General Information

36

Company’s Name, Location, and Business Type

Company’s Name G Steel Public Company Limited

Symbol GSTEEL

Registration No. 0107538000746 (formerly PLC 597)

Head Office 18th Fl. SSP Tower 3, 88 Silom Road, Suriyawong, Bangrak, Bangkok 10500, Thailand

Tel. 0-2634-2222, Fax. 0-2634-4114

Plant Office 55 Moo 5, SSP Industrial Park, Nonglalog, Bankhai, Rayong 21120, Thailand

Tel. 0-3886-9323 Fax. 0-3886-9333

Website www.g-steel.com

Establishment Date 30 October 1995

Production Commencement Date 1 November 1999

Business Type Production and Distribution of Hot Rolled Coils

Width 900 - 1,550 mm.

Gauge 1.0 - 13.0 mm.

Production Technology Melting - Electric Arc Furnace from Germany

Casting - Medium Slab Casting Machine from Japan

Rolling - Hot Strip Mill from Japan

Production Capacity 1,800,000 tons per annum

No. of Employees 718

Registered Capital and Paid-up Capital

Registered Capital 12,000,000,000 Baht

Ordinary Shares 12,000,000,000 Shares

Par Value 1 Baht per Share

Paid-up Capital 8,200,000,000 Baht

Paid-up Ordinary Shares 8,200,000,000 Shares

Referrals and Their Locations

Common Stock Registrar Thailand Securities Depository Co., Ltd.

4th , 7th Fl. Stock Exchange of Thailand Building

62 Rajadapisek Road, Khlong Toey, Bangkok 10110

Tel. 0-2229-2800 Fax. 0-2359-1259

Bond Registrar The Hongkong and Shanghai Banking Corporation Limited

Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong

Bond Trustee The Hongkong and Shanghai Banking Corporation Limited

Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong

Auditor Mr. Sophon Permsirivallop Certified Public Accountant Registration No. 3182

Mr. Narong Pantawong Certified Public Accountant Registration No. 3315

Ms. Rungnapa Lertsuwankul Certified Public Accountant Registration No. 3516

Ernst & Young Office Ltd.

193/136-137 33rd Fl. Lake Rajada Building, Rajadapisek Road, Khlong Toey, Bangkok 10110

Tel. 0-2264-0777 Fax. 0-2264-0789-90

37

>>>>> Nature of Business

G Steel Public Company Limited is a hot rolled coil producer and distributor with objectives to substitute import and to

serve domestic demand. Its products are used as raw materials for such downstream industries as cold rolled coils,

galvanized steel, steel pipes and structural steel products for construction, petroleum containers or LPG cylinders,

automobile and parts, electrical appliance, furniture, and so on.

The company’s hot rolled coil mill is equipped with the world’s latest state of the art technology and completed

infrastructure. With the total investment of over Baht 40,000 million, melting, casting, and rolling processes are

integrated into one mill: the Compact Mini Mill, which comprises melting technology in the electric arc furnace, casting

technology in the medium slab casting machine, and rolling technology in the hot strip mill.

The production process starts from having steel scrap and pig iron melted in an electric arc furnace at about 1,600 ÌC into

liquid steel, which is then improved quality with additives to meet customers’ respective requirements. The refined liquid

steel is cast into medium sized slab of 80 - 100 mm. and subsequently hot - rolled into a specific required gauge. Being the

first in Thailand and among very few of its kind in the world, the mill can make hot rolled coil at the minimum thickness of

just 1.0 mm. The entire process is continuous and merely takes 3.5 hours.

The company’s hot rolled coil mill was designed with the maximum production capacity of 3.4 million tons. Presently,

it runs at 1.8 million ton capacity per annum, and a designated production efficiency for product mixed ratio as per market

requirements is 1.5 million tons per annum. In 2005, its outputs amounted to 1.12 million tons, or 75% production

efficiency. The company’s hot rolled coil meets international standards, i.e. ASTM, JIS, DIN, BS and Thailand Industrial

Standards (TIS) with ISO 9001:2000 certified for its management system.

INCOME STRUCTURE

The company’s income structure during the past 3 years can be divided as per the nature of business as follows.

(Unit: ‘000 Baht)

Incomes Distribution 2003 2004 2005

Channels Amount % Amount % Amount %

Sales from Domestic 11,514,447 91.0 16,435,025 76.8 19,654,894 88.2

Hot Rolled Coils Overseas 1,107,716 8.8 4,835,227 22.6 2,546,951 11.4

Total Sales 12,622,163 99.7 21,270,252 99.3 22,201,845 99.6

Other Incomes 37,212 0.3 140,018 0.7 95,234 0.4

Total Incomes 12,659,375 100.0 21,410,270 100.0 22,297,079 100.0

Notes: The company’s other incomes included sales of various scraps from production process, interest income and foreign exchange gain

The company’s main income was from domestic sales due to the high demand from both construction and industrial

sectors. While the local production could not meet the local consumption, over 2 million tons had to be imported.

Nevertheless, the company has also continued exporting to establish overseas market bases for its business expansion in

the future. The fact reflected that quality of the company’s products was well accepted in overseas market as America,

Europe, Middle East, and Asia.

38

Structure of Transactions with Business Alliances

In 2005 the company had transactions with its business alliances by means of agents in both buying and selling. These

agents had long standing relation with the company and the transactions were normal business with general terms and

conditions as necessary to the business execution for the company’s maximum benefits. Average prices as well as terms

and conditions were suitable and comparable with those of other business partners the details are as follows:

Sales Transaction with Alliances

FUTURE PLAN

The company’s plan for a production capacity expansion from 1.8 million tons to 3.4 million tons is to meet domestic demand

surplus. The expansion focuses on de-bottlenecking, especially medium slab casting process. Additionally, the high quality

production lines under construction and installation are Skinpass Mill to improve the surface and flatness of the steel, and

Pickling and Oiling line to clean and eliminate oxide on surface by means of acid washing for surface shining, before corrosion

prevention oiling. Upon the completion, the product lines will be more varied, enabling the company to meet customers’

diversified needs, particularly in automobile and parts, electrical appliance and furniture industries. The aforementioned plan

has been approved by the Board of Investment, and the construction and machine installation are expected to complete at

the end of 2007.

Business Alliances Volume in 2005 Balance at 2005 Year-End

Nara International Co., Ltd. 3,020,936 570,798

Federal Steel Industry Co., Ltd. 4,003,050 163,949

Advance Metal Fabrications Co., Ltd. 2,273,756 422,591

Trinity International Co., Ltd. 66,129 -

Trinity Freight and Shipping Co., Ltd. 815,501 273,368

Millennium Metal Work Co., Ltd. 1,057,812 128,793

(Unit: ’000 Baht)

Business Alliances Volume in 2005 Balance at 2005 Year-End

Nara International Co., Ltd. 646,198 58,318

Federal Steel Industry Co., Ltd. - -

Advance Metal Fabrications Co., Ltd. 2,187,337 134,648

Trinity International Co., Ltd. 25,508 3,080

Trinity Freight and Shipping Co., Ltd. 597,142 104,757

Millennium Metal Work Co., Ltd. - -

Purchase Transactions with Alliances (Unit: ’000 Baht)

39

>>>>> Risk Factors

MARKETING AND COMPETITION RISK

Hot Rolled Coil (HRC) is a commodity with no distinguished differentiation features, especially in a modest quality market.

Prices are decisive factor to buyers. Therefore, during business downturn or a slow down in demand, risks in price

competition are prevalent, which will have direct impacts on the company’s performance.

However, the domestic demand for HRC continues to expand according to the country’s development and growth of

industries using it as raw materials, construction and automobile and parts industries in particular. Presently, there are no

signs of recession both in short and long run. Taking into account the current market structure, there is an excessive

demand, and 2.6 million tons were imported last year. Thus, no factors are believed to lead to a fierce price competition.

Besides, the company emphasizes on quality products with reasonable prices and adopts a strategy of quick response

to customers’ needs. As such, the company is confident to be competitive despite the business downturn. Furthermore,

It has developed distribution channels and also expanded overseas market bases for a more comprehensive export

business in the future. Additionally, the company plans to install a Pickling and Oiling line in order to penetrate into a less

competitive and high quality market where selling prices are more stable.

RAW MATERIAL SUPPLY RISK

HRC major raw materials are steel scrap and pig iron with a high proportion of import. 80 - 90% of steel scrap has to be

imported due to an inadequate domestic supply, while the latter is entirely imported due to no local production at all. This

poses risks on insufficient raw material supply, especially when the company has production expansion plan requiring

more consumption of raw materials.

However, quantities of the world’s steel scrap and pig iron are sufficient for the company’s current and future

production capacities. In addition, it has established long-standing and good relationship with the suppliers who are major

distributors with a worldwide network of raw material sources. Therefore, the raw material provisions are of no concerns

at all. Because of its policy to maintain 2 - 3 month level of raw material inventory, the company is confident not to be

affected by any delay in procurement and shipment processes.

PRICE FLUCTUATION RISK

The steel price situation in the world market changes up and down in a cycle, during a certain period, risks from price

fluctuations can be comparatively high. The situation is completely out of control and directly affects the company’s

income and profit, especially during the business downturn or when prices of HRC and raw materials do not change

harmoniously.

However, the move in prices of HRC and raw materials is generally corresponding. Spread between those prices is not

adversely affected. If there is any major price difference, it exists for only a short period of time. To minimize risks from

possible inventory depreciation especially during the downturn, the company has a policy to maintain the inventory of

raw materials and finished products at appropriate levels. Besides, the domestic HRC industry has been protected by

an anti-dumping import duty levied on hot rolled coils from 14 exporting countries. This helps reduce a selling price

fluctuation in the country at a certain level.

40

FOREIGN EXCHANGE RATE FLUCTUATION RISK

The company’s expenses for the steel scrap, pig iron and other raw material imports accounted for not less than USD 350

million annually, whereas its debt burden from an issuance of bonds overseas totalled USD 100 million to repay in the next

5 years plus 10.5% interest per annum. Contrarily, most of its incomes are denominated in Thai Baht. Thus, the company

is exposed to foreign exchange rate fluctuation risks.

Even though its income is mostly denominated in Thai Baht, the company monthly sets selling prices for domestic markets

that can adjust the prices in accordance with the prevailing foreign exchange rates. Besides, the timing when payments

for raw materials will be made and, when the selling prices are set, are not so far apart. The foreign exchange rate

fluctuation risks for the company are thus substantially reduced. With its USD 20 million credit line for forward exchange

rate contract at a financial institution, the company can additionally hedge the exchange risk as deemed fit to a prevalent

situation. This will also cover the exchange risk on bonds’ interest. Regarding the bonds to redeem in the next 5 years, the

company will keep on contemplating appropriate risk protection tools ensuring the minimum impacts of foreign exchange

fluctuation in the future.

RISK FROM THE ANTI-DUMPING MEASURES LIFTED

At present, Thailand’s HRC industry is protected by the 5 year anti-dumping measure which levies an import duty on hot

rolled coils from 14 exporting countries until the year 2008. Afterwards, the Government may not impose such protection

to the industry or it may lift or temporarily ease the measures should there be steel supply shortage situation in the

country. This will enable producers from overseas to be more competitive, thus intensifying domestic competition. It will

naturally have negative impacts on the company’s business, financial positions and operating results in the future.

Should the anti-dumping measures be lifted, after which no dumping takes place, the company is unlikely to be effected

as domestic HRC prices change according to those in the world market. At the moment, the domestic prices are

slightly higher than the world market prices, the gap is closely equivalent to a 5% import duty. Such measures serve as a

mechanism to protect domestic producers from unfair competition or price dumping behaviors. The company

constantly assesses and develops its competitiveness, improving its production efficiency, controlling production costs at

appropriate levels, making products up to international quality and delivering orders with a short lead time. As a local

producer, the company has an edge logistically thus enabling buyers to manage their inventory efficiently at

comparatively lower costs. Therefore, it is confident to be competitive with producers overseas despite no anti-dumping

measures. Nevertheless, the lifting of the measures is not imminent in the near future. However, the lifting is possible to

apply to specific overseas producers case by case should they file a petition for review, and there are no proofs of their

dumping behaviors.

41

>>>>> Management and Corporate Governance

MANAGEMENT STRUCTURE

The company’s management structure comprises 3 committees: Board of Directors, Executive Committee and Audit Commit-

tee, whose respective roles and responsibilities are summed up as follows.

(1) BOARD OF DIRECTORS

The current Board of Directors was appointed by the 2004 Annual Ordinary Shareholders’ Meeting on 9 June 2004, and

in 2005 changes in the Board members were:

■ Resigned Mr. Jeong Joon Ahn (effective on 10 November 2005)

■ Newly appointed Mr. Ryuzo Ogino (effective on 10 November 2005)

■ Deceased Mr. Vira Susangkarakan (on 24 December 2005)

The Board of Directors as at 31 December 2005 hence consisted of 14 members* as listed below.

1. General Singha Saovapap The first Vice Chairman of the Board of Directors

2. Ms. Patama Chiachuabsilp The second Vice Chairman of the Board of Directors

3. Mr. Somsak Leeswadtrakul Director

4. Mr. Chainarong Monthienvichienchai Director

5. Mr. Yanyong Kurovat Director

6. ML. Sasivimon Kasemsri Director

7. Mr. Stephane Benayon Director

8. Pol. Lt. General Prakard Sataman Director

9. Mr. Ryuzo Ogino Director

10. General Choochat Kambhu Na Ayudhya Independent Director

11. Mr. Chaipatr Srivisarvacha Independent Director

12. Prof. Paichitr Roajanavanich Chairman of the Audit Committee and Independent Director

13. Mr. Preecha Prakobkit Audit Committee Member and Independent Director

14. Assoc. Prof. Prapanpong Vejjajiva Audit Committee Member and Independent Director

* on 31 December 2005, the company did not appoint the new Chairman of the Board to replace Mr.Vira Susangkarakan who

deceased on 24 December 2005.

AUTHORIZED SIGNATORY DIRECTORS ON THE COMPANY’S BEHALF are Mr. Somsak Leeswadtrakul or Ms. Patama

Chiachuabsilp or Mr. Stephane Benayon or Pol. Lt. General Prakard Sataman co-signs with Mr. Ryuzo Ogino or Mr. Yanyong

Kurovat or ML. Sasivimon Kasemsri together with the company’s seal.

THE BOARD’S ROLES AND RESPONSIBILITIES

1. To manage the company’s business according to legal frameworks, its objectives, rules and regulations as well as

shareholders’ meeting resolutions with honesty and discretion on the company’s benefits

2. To stipulate the company’s policies and business direction and to oversee and supervise an execution of the

Management to meet the set policies efficiently and effectively

42

3. To be accountable to shareholders at all times and to manage for the maximum benefits of the shareholders as well

as to disclose to investors with acceptable standards, the relevant accurate, complete and transparent information.

4. To appoint and revise the company’s list of authorized signatory directors

5. To appoint subcommittees to supervise, monitor and control essential management issues, namely, Executive

Committee and Audit Committee and so forth

6. To delegate any person or persons to duly act on behalf of the Board within a duly time frame. The Board may have

such a delegation repealed, changed or modified.

7. To stipulate recruiting, selecting, hiring and appointing any person as deemed appropriate as Chief Executive

Officer and stipulate appropriate remuneration and to empower the CEO to transfer, suspend and terminate

employment.

8. To prepare annual Board of Directors’ report and be responsible for the preparation and disclosure of financial

statements revealing the company’s financial status and operating results of the preceding year to present to

shareholders’ meeting.

9. To convene at least once every 3 months. Rulings of the Board meeting will be based on a majority vote. Directors

with conflicts of interest in any matters shall have no voting rights on the specific issue.

10. To hold the annual shareholders’ ordinary meeting within 4 months after the company’s accounting year-end date.

In any case where any Director or parties with possible conflicts of interest (as per announcements of SEC Office and/or

the Stock Exchange of Thailand) may have any conflicts of interest, the Director(s) shall have no authority to approve the

matter.

(2) EXECUTIVE COMMITTEE

As at 31 December 2005, the company had 7-member Executive Committee* consisting of:

1. Mr. Somsak Leeswadtrakul Chief Executive Officer

2. Mr. Stephane Benayon Executive Director

3. Ms. Patama Chiachuabsilp Executive Director

4. Mr. Ryuzo Ogino Executive Director (as from 10 November 2005)

5. Mr. Yanyong Kurovat Executive Director

6. ML. Sasivimon Kasemsri Executive Director

7. Pol. Lt. General Prakard Sataman Executive Director

* Mr. Vira Susangkarakan, ex- Executive Director resigned on 4 April 2005

Mr. Jeong Joon Ahn, ex- Executive Director resigned on 10 November 2005

EXECUTIVE COMMITTEE’S ROLES AND RESPONSIBILITIES

1. To scrutinize the company’s policies, business plan, investment plan and annual budgeting to submit to the Board of

Directors for approval

2. To monitor, supervise and control operations to achieve the set objectives of the plans approved by the Board of

Directors or as per its assignment. To report results of the execution to the Board of Director for its information

3. To approve an execution or payment for any execution which exceed an authority or an authorization amount of the

management in accordance with the company’s authorization regulations or as per an annual budget approved by

the Board of Directors

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4. To review the organization chart, authorization structure, remuneration policy as well as the company’s salary

structure

5. To scrutinize authorization regulations for managerial and operational levels covering areas of finance, accounting,

procurements, investment, borrowings, mortgage, collateral, sales or disposal or transfer of any assets, entering

into any agreement or contract and any other execution as deemed fit

6. To delegate any person or persons to execute on behalf of the Executive Committee as deemed appropriate. They

may cancel or repeal, change or revise the authorization conferred

7. To contemplate and approve openings of varied bank accounts with any commercial banks as deemed appropriate

and assign persons to authorize withdrawals or payments from those bank accounts

8. To execute any other tasks assigned by the Board of Directors

The authorization to the Executive Committee described above shall not cover any authorization enabling them to

approve any transactional items that any Executive Director or parties with possible conflicts of interest as per

announcements of SEC Office may have conflicts of interest with the company or any subsidiaries (if any). The Executive

Committee shall submit the matter to the Board of Directors and/or the Shareholders’ Meeting for perusal and approval

of the transactions as per regulations or announcements or pertinent laws.

(3) AUDIT COMMITTEE

As at 31 December 2005, the Audit Committee consists of 3 Independent Directors with 3 year service term. They are:

1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee

2. Assoc. Prof. Prapanpong Vejjajiva Audit Committee Member (as from 10 November 2005*)

3. Mr. Preecha Prakobkit Audit Committee Member

* Mr. Chaipatr Srivisarvacha, ex-Audit Committee Member resigned from the position on 10 November 2005 (to serve in the

company’s another capacity)

ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

1. To examine the company to have accurate financial reports with sufficient disclosure, coordinating with the external

auditors and the executive in charge to have quarterly and annual financial reports prepared. The committee may

recommend the external auditors to examine or check any items as deemed necessary or essential during the audit.

2. To examine the company to have appropriate and effective internal control and audit systems in cooperation with

the external auditors and internal audit department

3. To examine the company’s operations in compliance with laws on securities and stock exchange, SEC and SET

regulations or any other laws related to the company’s business

4. To select and propose a nomination of the company’s external auditors and their remuneration, by taking into

account their reliability, resource adequacy, existing workload of the particular auditor office and work experience

of respective team members assigned to audit the company

5. To deliberate complete and accurate disclosure of the company’s information in case of inter-related transactions

or transactions with possible conflicts of interest

6. To carry out any other tasks assigned by the Board of Directors with consent of the Audit Committee, i.e. to review

financial and risk management policies, management conduct as per business codes and in cooperation with

the company’s management to review the key reports as Executive Notes and Analysis to the public as per legal

requirements

44

7. To prepare the Audit Committee’s report to be included in the annual report and have it signed by the committee’s

Chairman. The report shall comprise the following information:

■ Notes on the preparation procedure and disclosure of information in the company’s financial reports in relations

with their completeness and reliability

■ Notes on adequacy of the internal audit systems

■ Justifications for nomination of the company’s external auditors for another term

■ Notes on compliance with laws on Securities and Exchange, SEC and SET regulations and any other laws relating

to the company’s business

■ Any other reports considered suitable for information of shareholders and general investors under scopes of

roles and responsibilities assigned by the Board of Directors

8. The Audit Committee is accountabe to the Board of Directors as per roles and responsibilities entrusted by the

Board of Directors and shall report to it the performance, recommendations and findings at least twice a year.

In any cases where any Audit Committee member or parties with possible conflicts of interest (as per announcements

of SEC Office and/or the Stock Exchange of Thailand) may have any conflicts of interest with the company or any

subsidiaries (if any), the Audit Committee shall submit the matter to the Board of Directors and/or the shareholders’

meeting for perusal and approval of the transactions as per regulations or announcements or pertinent laws.

MANAGEMENT TEAM

As at 31 December 2005, the company’s Management Team comprises:

1. Mr. Somsak Leeswadtrakul Chief Executive Officer

2. Mr. Ryuzo Ogino Assistant Chief Executive Officer

3. Ms. Patama Chiachuabsilp Assistant Chief Executive Officer

4. Mr. Jeong Joon Ahn Senior Executive Vice President (Operations)

5. Mr. Chalothorn Leelamali Acting Senior Executive Vice President (Administration)

Vice President (Accounting and Finance)

ROLES AND RESPONSIBILITIES OF THE CHIEF EXECUTIVE OFFICER

1. To stipulate business plan, investment plan and annual budgeting to submit to the Executive Committee and/or the

Board of Directors for approval

2. To take responsibility of the overall management and to deliberate the company’s management policies enabling

operations to achieve the set objectives under the framework of the policies, business plans and budgets approved

by the Board of Directors

3. To approve an execution or payment for any execution according to the company’s authorization regulations or

annual budgets approved by the Board of Directors

4. To recruit, hire, reshuffle, transfer, suspend or terminate an employment of any executives or employees in all

positions and to stipulate scopes of rules and responsibilities as well as appropriate remuneration. An execution of

positions equivalent to a Senior Executive Vice President or higher shall be reported to the Executive Committee for

their information, while an execution of positions equivalent to the Internal Audit Department management shall be

made with the Audit Committee’s considerations.

45

5. To appoint respective authorized persons to sign the company’s documents in the areas of accounting, finance,

procurement, production, sales, general administration and any other important documents.

6. To set, change, revise, and cancel any rules, statements, announcements, regulations, punishment measures

and internal controlling systems to serve as operational guidelines for all employees and to enable an internal

organizational management executed as per the company’s stipulated policies.

7. To appoint advisors in any fields as necessary to the operation for the company’s benefits. The CEO is empowered

to appoint attorney(s) to file a lawsuit or defend any case relating to the company.

8. To delegate any person to execute any tasks on his behalf as deemed appropriate. He may cancel, repeal, change or

revise the authorization conferred.

9. To report the operating results and development or progress of projects as well as financial status to the Executive

Committee and the Board of Directors.

10. To execute any other tasks assigned by the Executive Committee or the Board of Directors.

In any cases where the Chief Executive Officer or persons with possible conflicts of interest may have any conflicts of

interest, the CEO shall have no right to approve the execution.

THE SELECTION OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER

Candidates for the company’s Directors and Chief Executive Officer are not selected by the Nominating Committee.

The Company assigns the duty to the Board of Directors to recruit knowledgeable and competent candidates with relevant

experiences and qualifications as per Clause 68 in the Public Limited Company Act B.E. 2535, pertinent announcements by

the Securities and Exchange Commission and the company’s rules and regulations for the benefits of the company’s efficient

operations.

REMUNERATIONS FOR THE DIRECTORS AND MANAGEMENT TEAM

The 2005 Shareholders’ Ordinary Meeting on 29 April 2005 approved a total remunerations for the Directors for 2005 at the

amount of not exceeding Baht 10 million, and the 3/2005 Board Meeting on 20 May 2005 worked out a remuneration

structure for the company’s Directors as follows.

Positions Position Remuneration Monthly Remuneration Meeting Allowance

(Baht/Month) (Baht/Month) (Baht/Time)

Chairman of the Board of Directors 100,000 30,000 5,000

Directors / Executive Directors - 30,000 5,000

Chairman of the Audit Committee 20,000 40,000 5,000

Audit Committee Members - 40,000 5,000

Any Director who concurrently holds the company’s managerial positions will receive remuneration in the forms of monthly

salary thus will not be entitled to the remuneration listed above. In cases where any Director takes up more than 1 position,

he/she will be entitled only to the remuneration of the position offering the highest return.

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TOTAL REMUNERATION FOR THE BOARD OF DIRECTORS AND THE MANAGEMENT in 2005

Items Year 2005

Persons Amount (Baht Mil.) Remuneration Details

Board of Directors 16 5.91 Remuneration, meeting allowance

Management * 5 32.10 Salary, bonus, other compensations

* Including expatriate executives

REMUNERATION FOR INDIVIDUAL BOARD MEMBERS in 2005

Items Names and Positions Remuneration Meeting Allowance Total Monetary

(Baht) (Baht) Remuneration (Baht)

1. Mr. Vira Susangkarakan 1,040,000 - 1,040,000

Chairman

2. General Singha Saovapap 360,000 45,000 405,000

Vice Chairman

3. Ms. Patama Chiachuabsilp * - - -

Vice Chairman and Executive Director

4. Mr. Somsak Leeswadtrakul * - - -

Director and Chairman of the Executive Committee

5. Mr. Stephane Benayon 360,000 15,000 375,000

Director and Executive Director

6. Mr. Chainarong Monthienvichienchai 360,000 30,000 390,000

Director

7. Mr. Yanyong Kurovat 360,000 45,000 405,000


8. Assoc. Prof. Prapanpong Vejjajiva *** 380,000 45,000 425,000

Director and Audit Committee Member

9. ML. Sasivimon Kasemsri 360,000 30,000 390,000


10. General Choochat Kambhu Na Ayudhya 360,000 30,000 390,000

Director

11. Pol. Lt. General Prakard Sataman 360,000 50,000 410,000


12. Mr. Jeong Joon Ahn ** - - -


13. Mr. Ryuzo Ogino ** - - -


14. Prof. Paichitr Roajanavanich 600,000 80,000 680,000

Director and Chairman of the Audit Committee

15. Mr. Chaipatr Srivisarvacha *** 430,000 70,000 500,000


16. Mr. Preecha Prakobkit 440,000 60,000 500,000


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* Directors who concurrently held managerial positions in the company and received remuneration in the form of monthly salary

were not entitled to any other monthly remuneration nor meeting allowance.

** Mr. Jeong Joon Ahn resigned from the positions of Director and Executive Director on 10 November 2005, and the Board

meeting replaced him with Mr. Ryuzo Ogino in both capacities. Being a Director concurrently holding a managerial position in

the company receiving remuneration in the form of monthly salary, he was not entitled to any other monthly remuneration nor

meeting allowance.

*** Mr. Chaipatr Srivisarvacha resigned from the position of Audit Committee Member on 10 November 2005, and the Board meeting

replaced him with Assoc. Prof. Prapanpong Vejjajiva.

OTHER REMUNERATIONS

The 2/2004 Shareholders’ Extraordinary Meeting on 5 October 2004 resolved an issuance and allocation of warrants for

100,000,000 units to the company’s Directors and employees (prior to the company’s initial public offering) as a recognition

to their contribution and a motivation for them to continue their intentionally performance with the company in the long run.

The details on the matters are as below:

Type of Instrument Named and Non-Negotiable Certificate of Warrants

It will be transferable solely in case of an inheritance or benificiary heir

Offering Size 100,000,000 units

Offering Price Baht 0 per unit (Zero Baht)

Issuing and Offering Date 12 January 2006

Expiry Date 11 January 2011

Exercise Ratio 1 unit of warrant per 1 ordinary share

Exercise Price Baht 1 per share

Exercise Period 1. One year after the date when the company’s shares are traded on the SET until the expiry

date of the warrants (24 January 2007 - 11 January 2011). Holders are entitled to exercise at

the one-third of total allocated warrants and shall exercise their right for the full portion at

one time.

2. Two years after the date when the company’s shares are traded on the SET until the expiry

date of the warrants (24 January 2008 - 11 January 2011). Holders are entitled to exercise

at another one-third of total allocated warrants and shall exercise their right for the full

portion at one time.

3. Three years after the date when the company’s shares are traded on the SET until the expiry

date of the warrants (24 January 2009 - 11 January 2011). Holders are entitled to exercise at

another one-third of total allocated warrants and shall exercise their right for the full portion

at one time.

Exercise Dates The last working day of March, June, September and December until the expiry date of the

warrants. The first date to exercise the right is 30 March 2007 and the last date is 11 January

2011.

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The Directors will be allocated not over 2,000,000 units each, whereas Directors concurrently serving as the company’s

employees will be entitled to an allocation to employees as well. The company carried out the allocation on 12 January 2006

as per guidelines approved by the Board of Directors as follows:

Names Positions Quantity (units)

Board of Directors

1. General Singha Saovapap Vice Chairman 2,000,000

2. Ms. Patama Chiachuabsilp Vice Chairman 2,000,000

3. Mr. Somsak Leeswadtrakul Director 2,000,000

4. Mr. Stephane Benayon Director 2,000,000

5. Mr. Chainarong Monthienvichienchai Director 2,000,000

6. Mr. Yanyong Kurovat Director 2,000,000

7. Mr. Chaipatr Srivisarvacha Director 2,000,000

8. ML. Sasivimon Kasemsri Director 2,000,000

9. General Choochat Kambhu Na Ayudhya Director 2,000,000

10. Pol. Lt. General Prakard Sataman Director 2,000,000

11. Mr. Ryuzo Ogino Director 2,000,000

12. Prof. Paichitr Roajanavanich Chairman of the Audit Committee and 2,000,000

Independent Director

13. Assoc. Prof. Prapanpong Vejjajiva Audit Committee Member and 2,000,000


14. Mr. Preecha Prakobkit Audit Committee Member and 2,000,000


Management

1. Mr. Somsak Leeswadtrakul Chief Executive Officer 5,000,000

2. Ms. Patama Chiachuabsilp Assistant Chief Executive Officer 2,750,000

3. Mr. Ryuzo Ogino Assistant Chief Executive Officer 2,750,000

4. Mr. Jeong Joon Ahn Senior Executive Vice President (Operations) 2,000,000

5. Mr. Chalothorn Leelamali Acting Senior Executive Vice President 2,000,000

(Administration)

Employees

704 employees 57,472,200

Total 99,972,200

49

CORPORATE GOVERNANCE

Understanding their roles and responsibilities to the company and the shareholders, the Board of Directors have studied the

15 item good governance principles and recommendations for directors of listed companies as per guidelines of the Stock

Exchange of Thailand. This is to further enhance the company’s transparent operations, business ethics, internal control

systems as well as to emphasize an equal importance of shareholders and their benefit protection. During the 6/2004 Board

Meeting on 10 September 2004, the Board formulated a corparate governance policy with the following detailed guidelines

and implementation results for the preceding year.

(1) CORPORATE GOVERNANCE POLICY

Realizing benefits and importance of the good corporate governance for the enhancement of transparent and efficient

management and administration which will create confidence among shareholders, investors and all parties concerned,

the Board of Directors set a corporate governance policy as the company’s operations standard and procedures. It

covers following principles:

■ To treat shareholders and stakeholders equally and fairly

■ To carry out their roles and responsibilities in supervision and management honestly, ethically, prudently and

discreetly to achieve the set goals for the maximum benefits of the company and shareholders as well as to prevent

possible conflicts of interest

■ To manage the company with transparency under the efficient internal control and audit systems and to disclose

adequate information to shareholders and all parties concerned to ensure equal information

■ To control and manage risks to be at levels appropriate to the company’s business

■ To run the business with honesty under pertinent legal framework and business ethics

(2) RIGHTS AND EQUALITY OF SHAREHOLDERS

The Board of Directors shall equally treat and protect rights and benefits of all shareholders, no matter they are major-

ity or minority ones, institute or foreign investors, particularly the rights to access the company’s data and information,

to attend shareholders’ meetings, to express their opinions and enquiries in the meetings and to jointly deliberate and

vote during the sessions. The Board shall facilitate the shareholders’ meetings in positive manners to encourage equal

and transparent treatment for all shareholders.

(3) RIGHTS OF VARIOUS GROUPS OF STAKEHOLDERS

All groups of stakeholders shall be treated equally by the Board of Directors, no matter they are shareholders,

employees, business partners, customers, competitors, communities in the factory’s vicinity or other stakeholders to

ensure that their basic rights and benefits shall be protected and taken care of in accordance with relevant laws and

legal requirements with no discrimination towards any particular person or groups just because of personal relationship

or benefits.

(4) SHAREHOLDERS’ MEETINGS

The Board of Directors gives an importance to shareholders’ meetings as they are basic rights of the shareholders. The

meetings shall be organized and run according to the company’s regulations, Public Limited Company Act B.E. 2535,

SEC and SET rules and regulations. The Board shall encourage an equal treatment for all shareholders with

transparency and simplified handling procedures and facilitate shareholders to exercise their right to attend meetings

and to obtain the company’s data and information prior to the sessions. Equal opportunities and time allocation shall be

provided for all shareholders to express their opinions and raise any questions during the meeting as per the proposed

50

agenda and issues. The minutes shall be recorded accurately for shareholders’ follow up and examination. The Board

shall also require the company’s management team members relating to the agenda and its legal advisors to attend the

shareholders’ meetings every time to provide information and address shareholders’ questions and enquiries.

In 2005, the company held the shareholders’ ordinary meeting once and the shareholders’ extraordinary meeting once.

It has endeavoured to correct shortcomings found in each session and set guidelines to organize the meetings as below.

■ Disclosing adequate information for shareholders’ decision making, disseminating to them in advance information

and an invitation letter to the meeting as legally required to give them time to study and contemplate the matters

prior to the meeting date.

■ Facilitating shareholders and their proxy to attend the meeting and notification of voting method and vote counting

as well as other relevant meeting regulations they should be aware of.

■ Strictly conducting the meeting as per the set agenda and providing a question-answer session for clarification and

fairness to shareholders and all parties concerned. Explicitly disclosing voting results of each agenda with details on

numbers of voting shares exercised for approval, disapproval or abstention.

■ Having shareholders meeting session tape-recorded, taking main contents of enquiries in the minutes for future

references and also to enable absentee shareholders to catch up with the relevant details

■ Overseeing and conducting the shareholders meeting in accordance with the company’s regulations, the Public

Limited Company Act B.E. 2535, SEC and SET announcements or regulations.

(5) VISION AND LEADERSHIP

With an aim to establish the company’s business stability and sustaining success in the long run, the Board of Directors

together with the Management team reviewed and adapted the vision and mission to suit changing environments. They

stipulated goals, business plans and budgeting, taking into account the highest economic value added and long term

stability for the company and shareholders. They supervised and monitored managerial execution to carry out

effectively and efficiently as per the set business plan.

Besides, to enhance good governance in the organizational management, the Board of Directors served as a leader to

set guidelines on good corporate governance, code of conduct, standards and procedures to approve inter-related

transactions with companies or parties with possible conflicts of interest, a clear division of authority between

shareholders and the Board, as well as between the Board and the management and committees for balance of power

and independent cross-checks.

(6) CONFLICTS OF INTEREST

The Board of Directors shall contemplate inter-related transactions with possible conflicts of interest among

shareholders, Directors, and the management team with discretion, honesty, justifications and independence within an

ethical framework. This includes complete disclosure of information for the company’s benefits as a whole in strict

conformity with guidelines and methods in SET announcements and regulations. Observations by the Audit Committee

on necessity and appropriateness of the transactions shall be included.

The Board of Directors regulated measures and procedures to approve inter-related transaction with related

companies or parties with possible conflicts of interest, not allowing parties with direct or indirect conflicts of interest

to take part in deliberating the transactional item. The Audit Committee was required to jointly contemplate and make

51

observations on necessity and justifications of the items for the company’s maximum benefits. It was also regulated

that the disclosure of the transactional items be included in the Notes to the Financial Statements in the annual report

as per the generally accepted accounting practice and an annual information disclosure form (Form 56-1).

(7) BUSINESS ETHICS

The Board of Directors shall monitor and supervise the company’s business operations, and execution of duties by the

Directors, management team and employees to conform with business ethics, apart from the company’s rules and

regulations and pertinent legal framework.

The Board of Directors had the company’s code of conduct for the management and employees to refer to as guidelines

in an execution of their duties with consistent and stringent compliance. The code covers business execution with

honesty, equal and fair treatment to stakeholders, conflicts of interest, confidentiality, and an abuse of information as

well as receipt of gifts and rewards. The Internal Audit Department was assigned to monitor and examine compliance

with the stipulated codes.

The Board of Directors has a policy for the Executive Directors and employees to avoid or abstain from trading the

company’s shares for one month prior to a revelation of the company’s informaion, i.e. financial data and so on, to the

public that may have effects on share prices.

(8) BALANCE OF POWER FOR DIRECTORS WITHOUT MANAGEMENT AUTHORITIES

The structure of the Board of Directors should comprise directors without management authorities and independent

directors of not less than 60% of the total members. Of this, at lease 3 directors shall be independent directors and

audit committee members. As at 31 December 2005, the Board consisted of 14 members as follows:

■ Directors with management authorities 3 members (or 21%)

■ Directors without management authorities 6 members (or 43%)

■ Independent Directors 5 members (or 36%)

The directors without management authorities and independent directors totalled 11 or 79%, more than a half which was

enough to balance with directors with management authorities, thus enabling the Board to deliberate independently.

(9) INTEGRATION OR SEGREGATION OF POSITIONS FOR MANAGERIAL BALANCE OF POWER

The Board of Directors clearly divided scopes of roles and responsibilities among Board of Directors, Executive

Committee, Audit Committee and the Chief Executive Officer (CEO) with a clear stipulation that the Chairman of the

Board shall not be the same person as the Chairman of the Executive Committee or the CEO and shall not have any

relationships with any executive or management team. This is to prevent any executive to have unlimited power and to

enable managerial balance of power and cross-checking.

(10) REMUNERATIONS FOR DIRECTORS AND THE MANAGEMENT

The Board of Directors shall be responsible for regulating criteria on remunerations for Directors in accordance with a

resolution of the shareholders’ meeting and have the Executive Committee regulate fair, appropriate and motivating

remunerations for the Chief Executive Officer based on his/her performance appraisal and the company’s operating

results. The Executive Committee shall also stipulate policies on the company’s salary structure and compensations as

well as reveal information on remunerations for the Directors and Management Team in the Annual Report.

52

The 2005 Shareholders’ Ordinary Meeting on 29 April 2005 regulated the maximum amount of not over Baht 10 million

annual remunerations to the Board of Directors and assigned the Board to scrutinize a detailed allocation as deemed

appropriate. In this regard, the 3/2005 Board Meeting on 20 May 2005 resolved that any Director with a managerial

position who received a monthly remuneration in the form of salary shall not be entitled to any remunerations for

Directors.

(11) BOARD OF DIRECTORS’ MEETINGS

The Board of Directors is required to convene at least 4 times a year, and each meeting shall be conducted as per the

company’s regulations, the Public Limited Company Act B.E. 2535 as well as SEC and SET regulations. The Chairman of

the Board as the chairman of the meeting shall promote prudent discretion and allocate appropriate time for the

Management to present any matters and adequate time for Directors to comprehensively discuss on key issues

thoroughly and carefully. Minutes of each meeting shall be taken to enable Directors and parties concerned to check.

All Directors are required to attend the every meeting except there are sound reasons for their absence.

In 2005, the Board of Directors convened 10 times, the meetings were strictly organized and conducted as per the

company’s regulations, as well as the Public Limited Company Act. B.E.2535. Agenda and relevant information were

disseminated to the Directors for their study and comtemplation approximately 7 days prior to the meetings. During

each session, the Board members were given opportunities to comprehensively discuss key issues thoroughly. The

secretary to the Board and legal advisors attended the session and took minutes which also included enquiries and the

Board’s suggestions for future references of the Board and parties concerned. Details on attendances of the Board at

the meetings in 2005 were listed below.

Item Names and Positions Numbers of Attendance/ Remarks

Total Numbers of Meeting

1. Mr. Vira Susangkarakan 6 / 10

2. General Singha Saovapap 10 / 10

3. Ms. Patama Chiachuabsilp 8 / 10

4. Mr. Somsak Leeswadtrakul 10 / 10

5. Mr. Stephane Benayon 3 / 10

6. Mr. Chainarong Monthienvichienchai 6 / 10

7. Mr. Yanyong Kurovat 9 / 10

8. Assoc. Prof. Prapanpong Vejjajiva 9 / 10

9. ML. Sasivimon Kasemsri 6 / 10

10. General Choochat Kambhu Na Ayudhya 7 / 10

11. Pol. Lt. General Prakard Sataman 10 / 10

12. Mr. Jeong Joon Ahn 1 / 9 Resigned on 10 November 2005

13. Mr. Ryuzo Ogino 1 / 1 Effective as from 10 November 2005

14. Prof. Paichitr Roajanavanich 10 / 10

15. Mr. Chaipatr Srivisarvacha 9 / 10

16. Mr. Preecha Prakobkit 7 / 10

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(12) COMMITTEE

The Board of Directors appointed committee(s) to assist it in studying, monitoring and controlling the operations and

screening their respective assignments with distinct scopes of roles and responsibilities. Currently, 2 committees have

been appointed.

1) The Executive Committee comprising 7 directors

2) The Audit Committee with 3 year service term, comprising 3 members, each of them is an independent director.

Criteria on the committee selections are as follows:

■ Holding not over 5% of overall voting shares in the company, subsidiaries, affiliations or any parties with

possible conflicts of interest (including related persons as per Clause 258 of the Securities and Exchange Act

B.E. 2535).

■ Having no participation in management nor employment, advisors receiving regular monthly salary nor having

controlling authorization in the company, subsidiaries, affiliations or any parties with possible conflicts of

interest at least for one year.

■ Having no business relationship, direct or indirect stakes in financial and managerial areas in the company,

subsidiaries, affiliations or any parties with possible conflicts of interest in manners to lose their independency.

■ Having no close kinship with the management, the major shareholders of the company, subsidiaries, affiliations

or any parties with possible conflicts of interest nor being appointed a representative to protect benefits of the

major shareholders or Directors.

■ Being competent to perform their duties, to voice out comments or to report results of any tasks assigned by the

Board of Directors with independence and not being under control of the management nor the company’s major

shareholders or related parties or close kins of the afore-mentioned persons.

(13) INTERNAL CONTROL AND AUDIT SYSTEMS

With an emphasis on efficient internal control and audit systems both in management and operational levels, the Board

of Directors and the Executive Committee are directly responsible for organizing and maintaining the internal control

system and assessing an adequacy of the system in 5 areas, namely, organizational control and environment

protection measure; risk management measure; management control activties; information and communication

measure; and monitoring. Of this it is included a stipulation of business direction and follow up, development of

information and communication system to support decision making, regulation of scopes of roles and authorization

amount for each managerial level, provision of distinct standard and procedure manuals for each function, execution of

duties in compliance with the code of conduct, controlling measures and procedures for inter-related transactions

between the company and parties with possible conflicts of interest, and adoption of generally accepted accounting

practice policy in which external auditors have independence to make observations and access to significant data.

Apart from having set up an internal audit department to audit in the areas of finance and operations, the company

commissioned external legal advisors with expertise in particular areas to supervise compliance with rules, regulations

and pertinent legal requirements to ensure that the company’s operations and key activities were efficiently executed

in the stipulated direction. To enable the internal auditors to independently perform for an organizational balance, the

Board of Directors has the Internal Audit Department to directly report to the Audit Committee and the Board of

Directors. In 2005, the Audit Committee convened 6 times to review justifications of inter-related transactions,

adequacy of internal control systems. They also met with the external auditors to examine financial statements and

deliberate reports on disclosure of financial data in the financial statements and to scrutinize an annual auditing plan as

well as to monitor results of the internal audits.

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(14) REPORT OF THE BOARD OF DIRECTORS

The Board of Directors shall prepare the Board’s annual report to present to the shareholders’ meeting. It shall cover

significant issues as per the Annual Report Form (Form 56-2) and shall be as per good governance guidelines for

directors of listed companies recommended by the Stock Exchange of Thailand. The report shall include their

responsibilities in preparing financial statements under the examination of the Audit Committee to ensure accurate and

complete accounting data with adequate disclosure of significant data in notes to the statements as per generally

accepted accounting practice.

(15) RELATIONSHIP WITH INVESTORS

The Board of Directors shall supervise to ensure the company’s accurate, complete, adequate, timely and transparent

disclosure of significant information. In this regard, an investors relations unit was set up to communicate with institute

investors, shareholders, investment analysts and government authorities.

The company has developed website (www.g-steel.com) as a channel to disseminate data and information such as those

on the company, its business and finance and any coverage affecting investment decision and so forth. This will enable

investors to monitor information on the company more conveniently. In addition, it organized numerous activities, i.e.

meeting with the press, analysts’ meeting, domestic and overseas roadshows, participation in exhibitions of the Stock

Exchange of Thailand, the Association of Securities Analysts and other organizations to disseminate information and

address to interested investors’ enquiries on the company’s performance. After its listing on the Exchange, the

company will also disseminate its data and information via SET Electronic Listed Companies Information Disclosure

(ELCID) as an additional channel. Interested parties can search relevant information via SET website (www.set.or.th).

This renders an equal opportunity to access data and information on the company.

DIVIDEND POLICY

In normal situations where the company does not require any additional investment or business expansion plan and has

enough liquidity, it has a policy to pay dividend at approximately 50% of its net earning after tax and legally required reserve.

Nevertheless, the Board of Directors may resolve the company to pay dividend differently from the set policy as deemed

necessary and appropriate, for instance, in case of economic or market condition changes or any other situations affecting its

liquidity.

55

>>>>> 10 Largest Shareholders

Names and proportions of the first 10 major shareholders as at 31 December 2005 are as follows:

Item Names of Shareholders Number of Shares %

1. Superior Overseas (Thailand) Co., Ltd. 1 2,522,588,903 30.76

2. Ample Vision Group Ltd. 2 1,622,083,795 19.78

3. Mr. Somsak Leeswadtrakul and Ms. Patama Chiachuabsilp Group 3 1,118,214,864 13.64

4. Ms. Ladda Jirapongtrakul 250,000,000 3.05

5. Ms. Chinnicha Wongsawat 204,850,000 2.49

6. The Thai Military Bank Public Co., Ltd. 166,570,667 2.03

7. Asset Management Corporation 151,250,000 1.84

8. Mr. Chanatip Trivuth 50,476,143 0.62

9. Ms. Suvimada Leeswadtrakul 50,451,778 0.62

10. Cosmo Land and House Co., Ltd. 50,000,000 0.61

11. Others 2,013,513,850 24.56

Total 8,200,000,000 100.00

1 The shareholding structure of Superior Overseas (Thailand) Co., Ltd.

(1) Mr. Ekpet Chunsue 66.00%

(2) Mrs. Chuanpit Pattana 20.00%

(3) Ms. Tanaporn Thongjude 10.00%

(4) Marco Wealth Investment Ltd. 4.00%

2 The shareholding structure of Ample Vision Group Ltd.

(1) Mr. Hamish Gordon Cruden 100.00%

3 Mr. Somsak Leeswadtrakul and Ms. Patama Chiachuabsilp Group consisting of:

(1) Ms. Patama Chiachuabsilp 1,061,060,793 shares

(2) Mr. Somsak Leeswadtrakul 7,154,071 shares

(3) Ms. Suthidarat Leeswadtrakul 25,000,000 shares

(4) Ms. Suratiporn Leeswadtrakul 25,000,000 shares

56

>>>>> Related Transactions

Related transactions between the company and the parties with conflicts of interest

Sukhumvit Inter ■ 1.26% of shares ■ Raw water (13,493,745) (1,126,789) ■ As per an agreement to sell and purchase

Development Co.,Ltd. held directly and expense raw water via SID, an industrial estate park

(“SID”) indirectly by the developer, at a more competitive price

company’s Director than direct purchase from the producer.

and shareholder,

Mr. Somsak

Leeswadtrakul

Siam Power ■ 28% of shares held ■ Debt (347,486,901) - ■ With prematured debt repayment,

Generation Co., Ltd. directly and repayment the company received Baht 182.2 million

(“SIPCO”) indirectly by the under the debt reduction.

company’s Directors business

and shareholders: rehabilitation

Mr. Somsak plan

Leeswadtrakul and

Ms. Patama

Chiachuabsilp

Paitoon Hotel and ■ 69.4% of shares held ■ Services (1,012,280) (86,787) ■ Service fees for usages of Arnoma Hotel’s

Resort Co., Ltd. directly and facilities for the company’s meetings and

(“PHR”) indirectly by the receptions of foreign guests.

company’s Directors The hotel is situated in a convenient location

and shareholders: and charges standard service fees.

Mr. Somsak

Leeswadtrakul and

Ms. Patama

Chiachuabsilp

■ It has common

Directors:

Mr. Somsak

Leeswadtrakul,

Ms. Patama

Chiachuabsilp and

Mr. Chainarong

Monthienvichienchai

Related Parties with Relationship Types of Transactions Balance at Details / Terms & Conditions

Conflicts of Interest Transactions 2005 2005 - Year end

57

JUSTIFICATIONS ON INTER-RELATED TRANSACTIONS

The Audit Committee observed that the transactions between the company and related parties with possible conflict of

interest as well as transactions with their business alliances are normal business transactions with the company’s general

terms and conditions as necessary for the business execution, having taken into account its maximum benefits. Besides,

average prices of the transactions, terms and conditions were deemed appropriate and comparable to those with other

parties in general.

APPROVAL PROCEDURES FOR INTER-RELATED TRANSACTIONS

1. For approvals of any transactions with related companies or parties with possible conflict of interest, the Board of

Directors and the Audit Committee regulated clear-cut policies as follows:

■ The Board of Directors shall execute according to the Securities and Stock Exchange laws, rules, regulations,

announcements by SEC and SET. It shall also disclose information on inter-related transactions, acquisition or disposal

of principal assets of the company or its subsidiaries as per SET regulations and generally accepted accounting

practice stipulated by the Accounting Association.

■ Clear-cut guidelines on and scopes of management roles and authorization of each managerial level have been set.

- In case where the Chief Executive Officer (CEO) or parties with possible conflict of interest may have conflicts of

interest with the company, affiliated companies or parties with conflicts of interest, the CEO cannot approve the

transaction.

- In case where any Executive Director or parties with possible conflict of interest may have conflicts of interest with

the company, affiliated companies or parties with conflicts of interest, the Executive Committee has to submit the

matter to the Board of Directors for their perusal and approval of the transaction.

- In case where any Director or parties with possible conflict of interest may have conflicts of interest with the

company, affiliated companies or parties with conflicts of interest, the Director cannot approve the transaction.

- Any shareholder with possible conflict of interest on specific matter, he/she cannot approve the transaction.

2. For normal business transactions with related companies or parties with possible conflict of interest and with business

alliances, i. e., purchases of raw materials or services and selling of goods

■ The Internal Audit Department shall monthly audit itemized transactions to examine prices in reference to prevailing

market prices and normal business terms and conditions, comparable to those applied with non-related business

parties for the company’s maximum benefits. The transactions are to quarterly report to the Audit Committee for

their further perusals.

■ The Audit Committee shall contemplate and opine on necessity and justification of the reported transactions for the

company’s maximum benefits, taking into account prices and business terms and conditions, compared to transactions

with non-related business parties for the same or similar products. Should the Audit Committee find out that any

execution is not carried out as per the stipulated policies, the Audit Committee shall report the matter to the Board of

Directors or the Chief Executive Officer for their information and remedies.

3. For other transactions such as borrowings, acquisitions or disposals of principal assets or entering into any agreement or

contracts, the company requires comments from the Audit Committee for necessity and justification of the transaction.

In cases where the Audit Committee has no expertise to contemplate the inter-related transactions, the company shall

nominate an independent expert or the external auditors to provide notes on the transactions for decisions to be made

by the Board of Directors or shareholders, whichever cases.

58

>>>>> Executive Notes and Analysis

OVERALL OPERATING RESULTS

In 2005, the situation of steel prices was intensely volatile especially during the second half of the year when domestic HRC

prices rapidly declined continually. Prices in the world market during the year end decreased by over 30%. This effected the

company’s operating results during the second half of the year. Its sales value and profit during the period were lower than

those of the first half by 33% and 60% respectively. Nevertheless, the overall operating results for the entire year were

considered very satisfactory, even though the growth was not as rapid as the previous 2 years. Total production outputs of 1.12

million tons, closely equivalent to that of the previous year, represented 75% production efficiency. The sales volumes

totalled Baht 22,202 million, a 4% rise over the preceding year, with an average selling price at USD 500 per ton in 2005. The

average price was slightly higher than that of the previous year despite the fact that an average price during the year end was

lower to merely USD 430 per ton. Most of the income was from domestic sales, or 80% of the total sales volumes, because

domestic demand for HRC continuously grew. The company gave an emphasis on expanding its domestic market bases and

increasing market shares, as a result, domestic sales values rose by 20%. Meanwhile, it reduced export volumes and, instead,

focused on export markets in Asian region that enjoyed the highest growth, particularly in such fast developing countries as

China, India, Vietnam and Indonesia.

The company’s profitability registered at satisfactory level due to its cost controlling and maintenance of appropriate

inventory level. Therefore, price volatility in the market did not have much severe impact on it. In 2005, the company had an

average gross margin at 15%, close to that of 2004, whereas its operating profit was Baht 2,531 million, or 11% of the sales

value, slightly lower than that of the previous year. The net profit, including business rehabilitation profit, equaled to Baht

2,741 million, with the return on equity (ROE) of as high as 14% (if the business rehabilitation profit was excluded, the ROE was

12%). This was much better than the industry average.

Regarding the progress of the production capacity expansion project and the addition of high quality product lines, an

implementation has been carried out: an installation of machines and major equipment in the Skinpass Mill is almost

completed and expected to start in the second quarter of 2006. Besdies, construction and installation of Pickling & Oiling

Line have been scheduded and most of machines and equipments including the internal transportation and handling

equipments are being imported from Japan. A part of the investment capital was from the internal cash flow, the other was

from the issuance of the 5-year senior unsecured bonds, worth USD 100 million to overseas investors during the last quarter

of 2005. It was offered at 98.116% of the face value with an interest rate of 10.5%. Moreover, the company plans to raise

additional funds through an initial public offering of its new shares and considers additional loan sources to subsidize its

production capacity expansion projects and additions of high quality product lines.

SALES AND OTHER INCOMES

In 2005, the company had total revenues of Baht 22,297 million, a figure close to that of 2004. Of this was Baht 19,655 million

worth domestic sales value, a 20% growth from the previous year; export value accounted for Baht 2,547 million, or a 47%

reduction. Due to the policy to expand and increase its domestic market shares while export prices were comparatively lower,

the domestic sales proportion was increased to 89%, and the export one was reduced to 11%. Other incomes from the sales

of scraps and by products totalled Baht 43 million, and an interest income was Baht 21 million. An unrealized gain from

foreign exchange was Baht 17 million, while the realized one amounted to Baht 14 million.

59

COST OF GOODS SOLD

The company’s cost of goods sold consists of 70% raw material costs, 27% conversion cost and 3% depreciation cost. In

2005, raw material and conversion costs slightly rose, whereas the posting of depreciation costs grew by as high as 30% due

to an adjustment higher of asset value based on the reappraisal prices at the 2004 year end. Such increases did not have

much impact on the total production costs. Its total production costs amounted to Baht 18,945 million, a merely 4% increase

which grew cohesively with that of the sales values. The gross profit marked at Baht 3,352 million or 15% of sales, quite close

to that of 2004.

SELLING AND ADMINISTRATIVE EXPENSES

The selling and administrative expenses consisted of transportation, salary and other expenses invariable to production

activities. In 2005, its selling and administrative expenses were Baht 461 million or 2% of sales, a 10% increase over the

preceding year. This was because in 2005 it had expenses on the issuance and offering of bonds, preparation expenses

for the initial public offering and expenses on such professional fees for financial and legal advisors, public relations and

advertising. The company also increased a reserve for allowance for slow-moving inventory depreciation. Consequently, the

administrative expenses grew relatively high.

INTEREST EXPENSE

The company had interest expenses of Baht 354 million, an increase of Baht 233 million or a 192%. The interest expenses of

Bath 269 million were incurred from purchases and inventory maintenance of steel scrap and pig iron, the proprietary rights

of which belong to suppliers until payment is made. Formerly, the company posted expenses only after interest was paid,

in cash basis. Later on, in 2005, it changed the method to an accrual basis. Hence, additional expenses were posted in

accordance with quantity of unsettled stocks. The other Baht 85 million interest expenses were incurred from the issuance of

USD 100 million bonds in October 2005.

GAIN FROM REHABILITATION

In 2005, the company had gain from rehabilitation of Baht 209 million due to partial debt write-offs by 2 creditors in

accordance with their conditions for the company to prematurely repay them.

OPERATING PROFIT & NET PROFIT

In 2005, the company recorded Baht 2,531 million operating profit, a mere 3% reduction from the preceding year or

accounted for 11% of sales. This was due to comparatively higher administrative and interest expenses. Therefore, its

operating profit slightly dropped from the previous year, despite the higher gross profit. Taking into account an extraordinary

gain from rehabilitation, its net profit totalled Baht 2,741 million or equivalent to Baht 0.33 per share, a sharp decrease when

compared to an extraordinary gain from rehabilitation of Baht 2,294 million in 2004.

FINANCIAL STATUS

Taking into account its capital structure at the end of 2005, the company was considered to be financially strong with

a comparative low risk. Its debt to equity ratio is merely 0.3 times, lower than that of the industry average of approximately

1.4 times. Besides, its non current liabilities to Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) was 1.4

times which was considered a high ability to service debts with low risk level. Regarding the current asset management, an

account receivable cycle was 30 day-sale on average and an inventory turnover ratio was satisfactorily 6 times.

60

ASSETS

As at 2005 year end, the company’s total assets amounted to Baht 28,356 million, an increase of Baht 6,637 million over the

previous year end. Of this, current assets, accounting for 27% of the total assets, were Baht 7,864 million, an increase of Baht

3,475 million; fixed assets, accounting for 62%, were Baht 17,370 million, an increase of Baht 1,196 million; other assets,

accounting for 11%, were Baht 3,121 million, an increase of Baht 1,966 million.

The current assets are mostly cash on hand, account receivables and inventory. Its cash on hand at the 2005 year end was

relatively high due to the proceeds from the issuance of the bonds during the end of the year, which was in a process for

further investment. The account receivables were approximately 30 days on average, close to the industry average, whereas

the inventory level was lower than the industry average with its high turnover ratio of 6 times.

The increase in the long term assets was due to the production expansion projects and the additions of high quality product

lines. The installation of the Skinpass Mill was almost completed. Upon receipt of funds from the issuance of the bonds, the

company would start construction and installation of the Pickling & Oiling Line. Relevant machines and equipment including

the internal transportation and handling equipments are being imported from Japan. In addition, it bought an additional

31.465 Rai plot of land to cope with growing quantity of raw materials in accordance with the increased production capacity.

LIABILITIES

As at the end of 2005, the company’s total liabilities were Baht 6,808 million, an increase of Baht 3,897 million over the

previous year. Of this, the current liabilities, accounting for 30% of the total liabilities, valued Baht 2,012 million, whereas the

long-term liabilities, accounting for 70%, valued Baht 4,796 million. The liabilities growth was due to an increase in long-term

liabilities from the issuance of Baht 4,044 million bonds bearing an interest rate of 10.5% of the face value with the maturity

date in October 2010. Meanwhile, debts under the business rehabilitation reduced by Baht 428 million as Baht 219 million

debts were duly settled and some were prematurely repaid. Besides, it received a Baht 209 million debt write-off. The debts

thus reduced to Baht 828 million, Baht 64 million of which will be prematurely repaid by 2006 as per an agreement.

The remaining was interest-free debts to be repaid during 2006 - 2017 Baht 12 million each year, while the balance of Baht

787 million will be repaid in 2018.

EQUITIES

At the 2005 year-end, the company’s equities marked Baht 21,548 million, a growth of Baht 2,741 million over that of 2004

year-end. The issued and paid-up capital was Baht 8,200 million, premium on shares were Baht 1,925 million, and retained

earnings were Baht 11,422 million. As a result, the company’s equities were much higher than the liabilities, and its book value

was Baht 2.63 per share.

CASH FLOW

The company had operating cash inflows of Baht 1,049 million, an increase of Baht 575 million when compared to that of

2004, while cash outflows from investing activities amounted to Baht 3,489 million. Most of them were investment for the

projects of production capacity expansion and additions of high quality product lines. The cash inflows from financing

activities totalled Baht 3,709 million through the issuance and offering of the bonds overseas.

REMUNERATIONS FOR AUDITORS

The company paid for the auditing fee to Ernst & Young Office Ltd. for the 2005 accounting period at the amount of Baht

1,400,000.

61

>>>>> Board of Directors’ Responsibilities with Regards to Financial Reports

G Steel’s Board of Directors is directly responsible for the company’s financial reports as appeared in the annual report. The

reports comprise the balance sheet, profit and loss statement, statement of changes in shareholders’ equity, statements of

cash flow and notes on financial statements, prepared by the company’s management according to the generally accepted

accounting practices with the selection of and consistent compliance with appropriate accounting policies. Discretion

and estimation had been exercised at their best in the preparation of the reports with sufficient disclosure of significant

information in the notes on the financial statements for the benefits of shareholders and general investors.

The Board of Directors established and maintained the appropriate and efficient internal control and audit systems to

ensure that the accounting data were complete, accurate and adequate to uphold the company’s assets and not to allow any

corruption or significant unusual practices to occur.

Moreover, the Board of Directors appointed the Audit Committee to examine the accounting policies and quality of the

financial reports, to examine the internal control systems as well as risk management system.

The Audit Committee’s remarks on the matters appeared in their report, already included in the annual report. The

company’s certified auditors, nominated by the Board of Directors, had sufficient independence to audit the financial reports

and also to attach their notes on the financial status, performance results and the company’s cash flow in the financial

reports.

General Singha Saovapap Dr. Somsak Leeswadtrakul

Vice Chairman of the Board of Directors Chairman of the Executive Committee

62

> > > > > Financial Statements

63

>>>>> Report of Independent Auditor

To the Board of Directors and Shareholders of


I have audited the balance sheets of G Steel Public Company Limited as at 31 December 2005 and 2004, and the related

statements of earnings, changes in shareholders’ equity and cash flows for the years then ended. 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 audits.

I conducted my audits 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 audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial positions of

G Steel Public Company Limited as at 31 December 2005 and 2004, and the results of its operations and cash flows for

the years then ended in accordance with generally accepted accounting principles.

Ernst & Young Office Limited Sophon Permsirivallop

Bangkok: 24 February 2006 Certified Public Accountant (Thailand) No. 3182

64

>>>>> Balance SheetsAs at 31 December 2005 and 2004

(Unit : Baht)

Note 20052005200520052005 20042004200420042004

ASSETS

CURRENT ASSETS

Cash and cash equivalents 1,621,834,060 353,402,016

Trade accounts receivable 3, 15 2,225,655,011 1,241,888,611

Inventories - net 4 3,602,905,841 2,166,001,312

Other current assets

Other receivable 5, 15 49,164,440 -

Refundable value added tax 31,903,364 270,418,384

Value added tax suspense 118,114,176 134,000,477

Prepayment to vendors 196,243,634 198,462,800

Others 18,588,857 24,760,832

Total other current assets 414,014,471 627,642,493

TOTAL CURRENT ASSETS 7,864,409,383 4,388,934,432

NON-CURRENT ASSETS

Restricted deposits at financial institutions 6 433,772,798 1,000,000

Property, plant and equipment - net 7 17,323,570,435 16,129,106,125

Intangible assets

Computer software installation 8.1 46,888,924 45,582,224

Deferred supply costs 8.2 82,090,184 67,138,043

Other non-current assets

Deferred bond management fees - net 9 92,088,519 -

Deposits for purchases of raw materials 10 1,048,755,030 973,248,674

Deposits for purchases of assets 1,288,835,502 -

Deposits for use of energy 11 170,429,906 110,429,906

Other deposits 4,841,229 2,866,255

Total other non-current assets 2,604,950,186 1,086,544,835

TOTAL NON-CURRENT ASSETS 20,491,272,527 17,329,371,227

TOTAL ASSETS 28,355,681,910 21,718,305,659

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

65

(Unit: Baht)

>>>>> Balance Sheets (Continued)As at 31 December 2005 and 2004

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Other payables 15 1,111,668,960 1,198,131,726

Trade accounts payable 15 273,292,560 330,122,271

Advance received from customers 14, 15 241,775,836 32,888,812

Current portion of liabilities which were included under 12 76,191,866 -

the former rehabilitation plan

Accrued expenses 15, 16 151,270,169 93,775,978

Accrued interest 157,398,562 -

TOTAL CURRENT LIABILITIES 2,011,597,953 1,654,918,787

NON-CURRENT LIABILITIES

Liabilities which were included under the

former rehabilitation plan 12 752,225,756 1,256,354,919

Bonds 17 4,044,193,206 -

TOTAL NON-CURRENT LIABILITIES 4,796,418,962 1,256,354,919

TOTAL LIABILITIES 6,808,016,915 2,911,273,706

SHAREHOLDERS’ EQUITY

Share capital

Registered share capital 18

12,000,000,000 ordinary shares of Baht 1 each 12,000,000,000 12,000,000,000

8,200,000,000 ordinary shares of Baht 1 each 8,200,000,000 8,200,000,000

Other surplus

Share premium 1,719,140,000 1,719,140,000

Premium on capital reduction 19 206,307,094 206,307,094

Retained earnings

Appropriated - legal reserve 20 595,058,886 458,027,234

Unappropriated 10,827,159,015 8,223,557,625

TOTAL SHAREHOLDERS’ EQUITY 21,547,664,995 18,807,031,953

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 28,355,681,910 21,718,305,659


Note 20052005200520052005 20042004200420042004

66

(Unit: Baht)

>>>>> Statements of EarningsFor the Years ended 31 December 2005 and 2004

REVENUES

Sales 15 22,201,844,756 21,270,252,071

Reversal of allowance for breach of contract

with a related company 16, 21 - 568,360,000

Other income 15, 22 95,233,801 140,239,928

TOTAL REVENUES 22,297,078,557 21,978,851,999

EXPENSES

Cost of sales 15 18,945,164,232 18,211,316,404

Selling and administrative expenses 15 461,060,749 417,263,909

Loss on exchange - 58,107,583

Directors’ remuneration 23 5,880,000 4,200,000

TOTAL EXPENSES 19,412,104,981 18,690,887,896

EARNINGS BEFORE INTEREST EXPENSE 2,884,973,576 3,287,964,103

Interest expense (353,736,948) (120,997,469)

EARNINGS FROM OPERATING ACTIVITY 2,531,236,628 3,166,966,634

Reversal of allowance for assets impairment 7 - 3,441,440,639

EARNINGS FROM ORDINARY ACTIVITY 2,531,236,628 6,608,407,273

EXTRAORDINARY ITEMS

Gain from rehabilitation 13 209,396,414 2,293,731,812

NET EARNINGS FOR THE YEAR 24 2,740,633,042 8,902,139,085

BASIC EARNINGS PER SHARE

Earnings from ordinary activity 0.31 1.01

Extraordinary item 0.02 0.35

Net earnings 0.33 1.36

Weighted average number of ordinary shares (shares) 8,200,000,000 6,574,863,388


Note 20052005200520052005 20042004200420042004

67

(Unit: Baht)

>>>>> Statements of Cash FlowsFor the Years ended 31 December 2005 and 2004

Cash flows from operating activities

Net earnings for the year 2,740,633,042 8,902,139,085

Adjustments to reconcile net earnings to net cash provided (paid)

from operating activities: -

Depreciation 572,976,550 439,093,516

Expenses of negotiation with creditors - (196,300,000)

Reversal of allowance for compensation for breach of contract - (568,360,000)

Amortisation 71,133,980 32,125,445

Allowance for slow-moving inventories 4,303,481 -

Gain from disposal of assets - (222,069)

Reversal of allowance for assets impairment - (3,441,440,639)

Unrealised loss (gain) on exchange (16,905,376) 28,643,825

Earnings from operating before changes in operating assets and operating liabilities 3,372,141,677 5,195,679,163

Decrease (increase) in operating assets

Trade accounts receivable (983,766,400) (5,211,343,172)

Inventories (1,441,208,010) (1,023,696,108)

Other receivable (49,164,440) (51,515,303)

Refundable value added tax 238,515,020 (245,362,668)

Prepayment to vendors (2,223,105) 2,005,006

Other current assets 22,058,276 (71,257,508)

Intangible assets (86,402,203) (81,425,811)

Other non-current assets (91,589,945) (869,086,347)

Increase (decrease) in operating liabilities

Trade accounts payable (85,950,786) 5,196,046,601

Other payable (56,867,663) (59,180,243)

Advance received from customers 207,852,814 (12,111,188)

Accrued interest payable 157,300,636 -

Accrued expenses 57,494,191 (1,819,896)

Net cash flows from operating activities before extraordinary items 1,258,190,062 2,766,932,526

Extraordinary items (209,396,414) (2,293,731,812)

Net cash flows from operating activities 1,048,793,648 473,200,714


20052005200520052005 20042004200420042004

68

Cash flows from investing activities

Increase in restricted deposits at financial institutions (432,772,798) (1,000,000)

Cash received from sale of equipment - 270,093

Increase in deposits for purchases of assets (1,288,835,502) -

Net increase in property, plant and equipment (1,767,440,860) (391,500,085)

Net cash flows used in investing activities (3,489,049,160) (392,229,992)

Cash flows from financing activities

Cash received from increase in share capital - 4,366,975,320

Payment of expenses related to increase in share capital - (62,940,000)

Cash received from the subscription of bond 4,024,163,722 -

Deferred bond management fees (96,935,283) -

Payment of liabilities which were included under the former rehabilitation plan (218,540,883) (4,072,364,392)

Decrease in advance from director - (170,952)

Net cash flows from financing activities 3,708,687,556 231,499,976

Net increase in cash and cash equivalents 1,268,432,044 312,470,698

Cash and cash equivalents at beginning of year 353,402,016 40,931,318

Cash and cash equivalents at end of year (Note 26) 1,621,834,060 353,402,016

Supplemental cash flows information

Non-cash items

Trade accounts receivable decreased by offsetting with trade accounts payable 1,990,058,070 4,490,746,656

Cash paid during the year for:-

Interest expense 196,338,386 120,997,469

Interest capitalised in assets 22,965,707 -


(Unit: Baht)

>>>>> Statements of Cash Flows (Continued)For the Years ended 31 December 2005 and 2004

20052005200520052005 20042004200420042004

69

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70

1. GENERAL INFORMATION

a) G Steel Public Company Limited was incorporated as a limited company under Thai laws and then was registered as a Public Company

Limited. The Company operates its business in Thailand and its principal activity is the manufacture of hot rolled coils. The Company

registered its change in the Company’s name from “Siam Strip Mill Public Company Limited” to “G Steel Public Company Limited”

with the Ministry of Commerce on 26 March 2004.

Its registered address was located on 88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong, Bangrak, Bangkok.

b) The financial statements of the Company were authorised for issue by the Authorised Directors on 24 February 2006.

c) On 25 January 2006, the Stock Exchange of Thailand approved the trading of the Company’s securities on the Stock Exchange of

Thailand.

2. SUMMARY SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Act B.E. 2547.

Significant accounting policies adopted by the Company are summarised below.

2.1 Revenues

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the

invoiced value of goods supplied, excluding value added tax, after deducting discount and goods return.

2.2 Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable is carried at its net realisable value. Allowance for doubtful accounts is provided for the estimated

collection losses that may be incurred in the collection of receivables. The allowance is based on collection experience and current

status of receivables outstanding at the balance sheet date.

2.3 Inventories

Finished goods are valued at lower of cost (first in - first out method) and net realisable value.

Raw materials and others consumable are valued at cost (moving average method) and charged to cost of production whenever

issued.

Allowance for diminution of inventories is provided by determining the slow-moving and damaged inventories.

2.4 Property, plant and equipment and depreciation

Property, plant and equipment are stated at revaluation made by an independent appraiser. As a policy, assets revaluation by an

independent appraiser will be made every 3 years. The Company recognised the carrying value, of which decreased as a result of

revaluation as an expense in the earnings statement.

Depreciation of plant and equipment is calculated by reference to their cost or reappraised value on a straight-line basis except for

depreciation of machinery which calculated on productive-output method over the estimated useful lives as follows: -

Buildings 20 years

Machinery and plant equipment 5, 30 years

Office equipment 5 years

Furniture and fixtures 5 years

Leasehold improvement 5 years

Motor vehicles 5 years

No depreciation is provided for land and factory under construction.

>>>>> Notes to Financial StatementsFor the Years ended 31 December 2005 and 2004

71

2.5 Allowance for assets impairment

The Company reviews the impairment of assets whenever events indicate that the carrying value of an asset exceeds its realisable

value. Realisable value is the higher of an asset’s net selling price and its value in use. The value in use is arrived at based on the

management estimates.

The Company recognises an impairment loss in the earnings statements whenever the carrying value of an asset exceeds its

realisable value. The Company will reverse the impairment loss when there are indications that the value of the asset is no longer

impaired or the amount of impairment has decreased.

2.6 Intangible assets and amortisation

Computer software is stated at cost less accumulated amortisation. The Company amortised computer software on a straight line

basis over the period of 5 years.

No amortisation on computer software installation.

Deferred supply costs are stated at cost less accumulated amortisation. The Company amortised deferred supply costs on a straight

line basis over the period of 2 years.

2.7 Deferred bond arrangement fees

The Company recorded bond arrangement expenses as deferred expenses, amortising them on a straight line basis over the term

of the bond.

2.8 Discount or premiums on bonds

Discount or premiums on bonds were amortised on a straight line basis over the term of the bonds as a result of the repayment of

principal is made at the end of the period of bond.

2.9 Capitalisation of interest cost

Interest cost on borrowings for purchases of machinery and construction of factory are capitalised as part of the cost of related

assets and will be ceased when these assets are completed.

2.10 Foreign currencies

Foreign currency transactions during the year have been translated into Baht on the rates ruling at the transaction dates. Mon-

etary assets and liabilities denominated in foreign currency outstanding on the balance sheet date have been translated into Baht

at the rates ruling by the Bank of Thailand at the balance sheet date.

Exchange gains and losses are included in determining earnings.

2.11 Cash and cash equivalents

Cash and cash equivalents in the preparation of statements of cash flows included cash in hand, deposits at financial institutions

with an original maturity of 3 months or less and without commitments.

2.12 Financial instruments

The Company has no policy to speculate in or engage in the trading of any financial derivative instruments.

Financial instruments carried in the balance sheet include cash and cash equivalents, trade accounts receivable, trade accounts

payable, liabilities which were included under the former rehabilitation plan and bonds. The particular recognition methods adopted

are disclosed in the individual policy statements associated with each item.

72

2.13 Provident fund

The Company and its employees have jointly established a provident fund scheme in accordance with the Provident Fund Act B.E.

2530. Such fund is monthly contributed by the Company and its employees at the rate of 2 percent of their basic salaries. The fund

is managed by Kasikorn Assets Management Company Limited, and will be paid to the employees upon termination in accordance

with the rules of fund.

2.14 Use of accounting estimate

Preparation of financial statements in conformity with generally accepted accounting principles requires management to make

estimates for certain accounting transactions, affecting reported amounts in the financial statements and notes related thereto.

Subsequent actual results may differ from these estimates.

2.15 Basic earnings per share

Basic earnings per share is determined by dividing the net earnings for the year by the weighted average number of ordinary shares

outstanding during the year.

3. TRADE ACCOUNTS RECEIVABLE

The balances of trade accounts receivable as at 31 December are classified by aging as follows: -

(Unit: Baht)

2005 2004

Not yet due 641,575,199 1,017,289,130

Overdue

Less than 3 months 1,582,256,771 221,533,002

3 - 6 months 1,823,041 2,844,622

Over 6 months - 221,857

2,225,655,011 1,241,888,611

4. INVENTORIES

(Unit: Baht)

2005 2004

Raw materials 1,833,835,240 902,435,004

Finished goods 705,659,699 421,174,233

Spare parts 564,547,300 331,343,325

Supplied cost 291,560,650 248,181,259

Others 216,774,215 268,035,273

Total inventories 3,612,377,104 2,171,169,094

Less: Allowance for slow-moving inventories (9,471,263) (5,167,782)

Inventories - net 3,602,905,841 2,166,001,312

73

5. OTHER RECEIVABLE

The balance of Baht 17 million represents credit notes issued by the Company’s suppliers for the price reduction after the payment.

The Company will use these credit notes to deduct in the next payment.

6. RESTRICTED DEPOSITS AT FINANCIAL INSTITUTIONS

As of 31 December 2005, Baht 1 million of saving deposit has been pledged with a bank to secure for a related company in respect of

purchase of goods. In addition, Baht 432.8 million of saving deposit was restricted for the guarantee of the repayment bond interest.

7. PROPERTY, PLANT AND EQUIPMENT

(Unit: Baht)

Building and Machinery and Office Furniture Motor Assets under

Land improvement equipment equipment and fixture vehicles construction Total

Cost:

31 December 2004 701,401,193 2,003,101,357 17,576,515,810 98,155,164 19,912,243 5,231,832 319,785,110 20,724,102,709

Acquisition 33,447,440 11,598,794 265,476,155 14,232,060 1,701,305 1,083,982 1,439,901,124 1,767,440,860

31 December 2005 734,848,633 2,014,700,151 17,841,991,965 112,387,224 21,613,548 6,315,814 1,759,686,234 22,491,543,569

Accumulated

depreciation:

31 December 2004 - 537,874,909 1,634,824,312 43,997,887 16,299,116 816,688 - 2,233,812,912

Depreciation for the year - 66,275,620 489,318,347 15,198,231 985,652 1,198,700 - 572,976,550

31 December 2005 - 604,150,529 2,124,142,659 59,196,118 17,284,768 2,015,388 - 2,806,789,462

Allowance for

impairment :

31 December 2004 305,901,193 538,176,254 1,511,491,498 4,366,325 1,248,402 - - 2,361,183,672

31 December 2005 305,901,193 538,176,254 1,511,491,498 4,366,325 1,248,402 - - 2,361,183,672

Net book value:

31 December 2004 395,500,000 927,050,194 14,430,200,000 49,790,952 2,364,725 4,415,144 319,785,110 16,129,106,125

31 December 2005 428,947,440 872,373,368 14,206,357,808 48,824,781 3,080,378 4,300,426 1,759,686,234 17,323,570,435

Depreciation for

the years:

2004 439,093,516

2005 572,976,550

On 30 December 2004, the Company had its land, plant and machinery reappraised by an independent appraiser; The Valuation &

Consultants Company Limited, using the market value approach. The appraiser reported that the market value of the land amounted to Baht

395 million (compared to a carrying value as of 31 December 2004 of Baht 220 million), the market value of plant amounted to Baht 910

million (compared to a carrying value of Baht 1,448 million) and the machinery had a market value of Baht 14,430 million (compared to a

carrying value of Baht 10,626 million). The Company reversed allowance for land and machinery amounting to Baht 3,979 million previously

recorded and recorded additional allowance for impairment of plant amounted to Baht 538 million in the statement of earnings, presenting

net amount as “Reversal of allowance for assets impairment” in the 2004 statement of earnings.

74

As of 31 December 2005, certain assets of the Company have been fully depreciated but are still in use. The original cost, before

deducting accumulated depreciation, of these assets amounted to Baht 127.1 million (2004: Baht 112.4 million).

Depreciation for 2005 amounting to Baht 566 million (2004: Baht 436 million) has been charged to cost of sales and the remaining Baht

7 million (2004: Baht 3 million) has been charged to selling and administrative expenses.

The title deeds of land and construction thereon with a net book value as of 31 December 2005 amounting to Baht 25 million are pledged

as collateral for the electricity usage.

8. INTANGIBLE ASSETS

8.1 Computer software installation

(Unit: Baht)

2005 2004

Balance - beginning of the year 45,582,224 40,991,898

Addition 1,306,700 4,590,326

Balance - end of the year 46,888,924 45,582,224

8.2 Deferred supply costs

(Unit: Baht)

2005 2004

Balance - beginning of the year 67,138,043 22,428,003

Addition 85,095,503 76,835,485

Amortisation (70,143,362) (32,125,445)

Balance - end of the year 82,090,184 67,138,043

9. DEFERRED BOND MANAGEMENT FEES

(Unit: Baht)

2005 2004

Balance - beginning of the year - -

Addition 96,935,283 -

Amortisation (4,846,764) -

Balance - end of the year 92,088,519 -

75

10. DEPOSITS FOR PURCHASES OF RAW MATERIALS

The outstanding balance mainly represents advance payments made to overseas suppliers to guarantee purchases of raw materials.

These deposits will be returned when the Company has not purchased any raw materials from those suppliers.

11. DEPOSITS FOR ENERGY USE

The outstanding balance represents deposits amounting to Baht 237.8 million for electricity which the Company has to pay to PEA in

accordance with an agreement and its amendment and deposits for gas use amounting to Baht 24 million. The Company paid the depos-

its on an installment basis.

12. LIABILITIES WHICH WERE INCLUDED UNDER THE FORMER REHABILITATION PLAN

(Unit: Baht)

2005 2004

Balance - beginning of the year 1,256,354,919 7,765,721,790

Repayment during the year (218,540,883) (3,996,152,723)

Debts forgiven by financial creditors after the rehabilitation plan - (2,477,869,500)

Trade and financial creditors forgiven debts after the rehabilitation plan (209,396,414) (35,344,648)

Balance - end of the year 828,417,622 1,256,354,919

Less: Current portion of liabilities included under the former rehabilitation plan (76,191,866) -

Total liabilities which were included under the former rehabilitation plan 752,225,756 1,256,354,919

13. GAIN FROM REHABILITATION

(Unit: Baht)

2005 2004

Gain from rehabilitation forgiven by trade payable as a result of the

repayment prior to maturity 27,599,139 12,162,312

Gain from rehabilitation plan forgiven by a related company as a result

of the repayment prior to maturity 182,195,223 -

Gain from forgiveness of debt by financial creditors - 2,477,869,500

Total gain from rehabilitation 209,794,362 2,490,031,812

Less: Expenses of negotiations concerning debt forgiveness

with overseas financial creditors - (196,300,000)

Adjustment of suspense value added tax of forgiven debts (397,948) -

209,396,414 2,293,731,812

76

The Company negotiated with trade accounts payable and other payable under the rehabilitation plan that the Company will pay

the debts prior to the maturity and all creditors would agree to reduce the partial of indebtedness. Most of creditors agreed with the

Company’s negotiation and therefore the Company recorded the portions of indebtedness forgiven under gain from rehabilitation in the

statement of earnings.

During the first quarter of 2004, the Company appointed a related company and another company as consultants to negotiate with

overseas financial institution creditors to execute agreement to repay indebtedness prior to maturity. On 15 March 2004, the Company

repaid indebtedness amounting to US dollars 85 million (approximately Baht 3,360 million) to overseas financial institution creditors

and the creditors released all the remaining debts of approximately Baht 2,190 million to the Company. The Company recorded the debt

forgiven by the creditors under gain from rehabilitation plan. Expenses incurred in negotiations with the overseas financial institution

creditors consist of expenses of US dollars 3.5 million, or Baht 137.41 million (exchange rate as at contract date was Baht 39.26 per USD 1)

payable to the above related company under a consultancy service contract dated 9 January 2004, and US dollars 1.5 million, or

Baht 58.89 million (exchange rate as at contract date was Baht 39.26 per USD 1) payable to the other company under a consultancy

memorandum dated 1 February 2004, which the Company has already paid these expenses. Expenses incurred in negotiations with these

consultants are presented as a deduction from the gain from rehabilitation in statement of earnings.

Subsequently on 14 June 2004, the Company executed an agreement with a domestic financial institution to pay the outstanding debts

under the rehabilitation plan prior to maturity. The outstanding balance as of the contracted date was Baht 958.3 million, the Company

had to repay Baht 671 million of indebtedness and that financial institution released Baht 287.3 million of debts to the Company, released

all assets which pledged against the loan to the Company. The Company repaid the debts in 2004 and recorded liabilities forgiven by the

financial institution as gain from rehabilitation plan in the earnings statement.

In 2005, the Company entered into an agreement with a trade payable to repay liabilities under the business rehabilitation plan as of

31 December 2004 amounting to Baht 133.3 million before maturity, in accordance with a memorandum of understanding on debt

repayment dated 6 December 2005. Under this MOU, the Company is to pay Baht 80.0 million of debt and the trade payable agrees to

cancel Baht 53.3 million of debt for the Company. The Company agreed to repay such debt on an installment basis, within July 2006 and

as of the balance sheet date, had repaid Baht 41.4 million and recorded a Baht 27.6 million gain from business rehabilitation, in proportion

to the payment made, presented as an extraordinary item in earnings statement. In addition, the Company paid Baht 165.3 million of

liabilities under the rehabilitation plan to a related company, and that related company, which agreed to cancel Baht 182.2 million of debt

for the Company because repayment was made prior to the maturity date, in accordance with the proposals to pay indebtedness prior to

maturity dated 28 October 2005 and 31 October 2005. The Company recorded the indebtedness of Baht 209.8 million forgiven by the

related company, upon extraordinary item in the 2005 earnings statement.

14. ADVANCE RECEIVED FROM CUSTOMERS

Under an agreement with overseas customers, for purchases of goods under the conditions of the Red Clause Letter of Credit, 80

percent of the value of the order is to be paid to the Company in advance, before the goods are delivered (2004: 50 percent).

77

15. TRANSACTIONS WITH BUSINESS ALLIANCES

The Company had significant business transactions with its business alliances in respect of sales, purchases and other services. The

transactions with these business alliances, which the Company formerly had shareholders or directors in common or had the directors

who have relationships with the Company’s directors, are summarised below: -

(Unit: Million Baht)

2005 2004 Pricing policy

Sales of goods 11,237 9,195 Normal selling price

Purchases of goods 2,832 2,586 Cost plus margin

Purchases of raw water 1 1 As stipulated in agreement

Commission paid 3 11 As stipulated in each agreement but not exceed

USD 3 per tonne (2004: USD 3 per tonne)

Transportation expenses and other services 623 723 Agree-upon basis and contractual price

Other income 12 760 Cost plus margin

Sales amounting to Baht 186 million made with 2 business alliances are “Bill and Hold Sales”, transactions of which the goods have not been

delivered but the customers signed as acceptance on their invoices.

The outstanding balances of transactions have been shown as follows: -

(Unit: Baht)

2005 2004

Trade accounts receivable

Nara International Co., Ltd. 570,797,604 130,563,249

Advance Metal Fabrications Co., Ltd. 422,591,095 80,573,413

Federal Steel Industry Co., Ltd. 163,948,558 232,758,296

Millennium Metal Work Co., Ltd. 128,793,459 140,091,810

Trinity Freight and Shipping Co., Ltd. 273,367,527 110,273,372

Trinity International Co., Ltd. - 21,147,098

1,559,498,243 715,407,238

Trade accounts payable

Nara International Co., Ltd. 58,317,772 53,387,157

Advance Metal Fabrications Co., Ltd. 134,548,355 140,965,441

192,866,127 194,352,598

78

(Unit: Baht)

2005 2004

Other receivables


Nara International Co., Ltd. 1,201,954 -

Advance Metal Fabrications Co., Ltd. 547,433 -

10,975,085 4,937,088

Other payables

Trinity Freight and Shipping Co., Ltd. - 43,872,878

Trinity International Co., Ltd. 898,495 8,179,390

898,495 52,052,268

Advance received from customers

Nara International Co., Ltd. - 20,789,066

Accrued expenses

Advance Metal Fabrications Co., Ltd. 100,000 100,000

Trinity International Co., Ltd. 2,181,233 872,785


Nara International Co., Ltd. - 143,724

107,038,386 58,626,043

16. RELATED PARTY TRANSACTIONS

The Company had significant business transactions with its related company (related by ways of common directors and/or common

shareholders and the same group of companies). These transactions are summarised below: -


2005 2004 Pricing policy

Transactions with related companies:

Purchases of raw water 13 18 Contractual price

Office rental and service fees - 2 Contractual price

Expense of negotiation concerning debt forgiveness - 137 Contractual price

Reversal of compensation from breach of contract - 568 Contractual price

Gain from rehabilitation 182 - Agree-upon basis

79

The outstanding balances of transactions have been separately shown in the balance sheets as follows: -

(Unit: Baht)

Relationship 2005 2004

Accrued expenses

Sukhumvit Inter Development Co., Ltd. Group company 1,126,789 1,304,250

17. BONDS

On 2 September 2005, an extraordinary general meeting of the Company’s shareholders passed a resolution to approve the issue of

bonds in an amount not exceeding USD 250 million or the equivalent in other currency and the list of such bonds on the Singapore Stock

of Exchange. On 4 October 2005, the Company offered its bonds to foreign investors, with the following terms and conditions:

- Form Unsecured bonds

- Maturity period 5 years

- Issue date 4 October 2005

- Maturity date 4 October 2010

- Offering value USD 100 million

- Offering amount 100,000 units

- Face value USD 1,000 per unit

- Offering price USD 981.16 per unit

- Interest 10.5 percent per annum, with semi-annual payment on 4 April and 4 October of each year

- Redemption at the option Full or partial redemption on or after 4 October 2008 at a price of 105.25 percent of

of the Company principal in 2008, 102.625 percent in 2009 and 100 percent in 2010 plus accrued interest

up to the period of redemption

- Redemption at the option Redemption at a price of 101 percent of principal plus accrued interest at any time until

of the bondholders maturity if there is a significant change in the Company’s shareholding structural

- Covenants 1) A reserve is to be set aside as security for interest payment

2) If the Company creates additional long-term debt, it must maintain certain financial

ratios

3) No dividend may be declared or paid if the Company is in defaulted on interest payment

4) Fund received from bond issuance are not to be used for other than the stipulated

purposes

(Unit: Baht)

2005 2004

Par value of bond 4,117,460,000 -

Discount on bond (73,266,794) -

Book value of bond 4,044,193,206 -

80

18. SHARE CAPITAL

On 16 March 2004, an extraordinary general meeting of the shareholders of the Company no.1/2004 passed a resolution approving

the change in the par value of the Company’s shares from Baht 10 to Baht 1 each. The number of ordinary shares therefore increased to

1,100 million shares with a par value of Baht 1 each. In addition, the meeting approved a resolution to increase the Company’s share

capital by Baht 7,100 million, through the issuance of 7,100 million shares at par value of Baht 1 each, with allocation to the shareholders

as follows: -

1. Allocation of 4,400 million ordinary shares to the existing shareholders in a ratio of 1 existing share : 4 new shares at a price of

Baht 0.01 per share. In case of any shares remaining unsubscribed after the allocation were to be offered to interested existing

shareholders, in proportion to their shareholdings.

2. Allocation of 2,700 million new ordinary shares to 34 specific and/or institutional investors at a price of Baht 1.6 per share.

The Company has recorded the expenses concerning the increased share capital of Baht 62.94 million as deduction in “Share premium”.

The Company registered the increases in its share capital from Baht 1,100 million to Baht 5,500 million and then to Baht 8,200 million,

or 8,200 million shares with a par value of Baht 1 each, with the Commerce Ministry on 23 March 2004 and 24 March 2004, respectively.

Subsequent on 5 October 2004, an extraordinary general meeting of the shareholders of the Company passed the resolution to approve

of Baht 3,800 million increase in the registered share capital, from Baht 8,200 million to Baht 12,000 million, through the issue of 3,800

million ordinary shares with a par value of Baht 1 each. Of these shares not more than 100 million are to be reserved for the exercise of

the warrants issued to the directors and employees and not more than 3,700 million are to be reserved for an Initial Public Offering (IPO).

The Company registered its increase in registered share capital with the Ministry of Commerce in October 2004.

19. PREMIUM ON CAPITAL REDUCTION

In order to comply with the capital restructuring process stipulated in the rehabilitation plan, the Company reduced its paid-up share

capital from Baht 5,000 million (500 million ordinary shares with a par value of Baht 10) to Baht 50 million (5 million ordinary shares

with a par value of Baht 10) to eliminate its deficit. The capital reduction of Baht 4,950 million compared to a deficit the Baht 387.7

million as at 31 July 2003, and the excess of the capital reduction over the deficit was presented as “Other surplus” in the balance sheet.

The Company offset premium on capital reduction amounting to Baht 4,356 million (4,400 million of increased ordinary shares with par

value of Baht 1 each at Baht 0.01 each) against the share discount as a result of the capital reduction.

20. LEGAL RESERVE

Under the Public Company Limited Act B.E. 2535, the Company is required to set aside to 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 its registered share capital.

The statutory reserve can not be used for dividend payment.

21. ALLOWANCE FOR COMPENSATION FOR BREACH OF CONTRACT WITH RELATED COMPANY (REVERSAL)

On 4 February 2004, the Company entered into an amendment to the agreement to pay compensation for the damages amounting

to Baht 568.36 million to a related company as a result of the lack of the privileges granting from imports of machinery and equipment

under the Board of Investment, whereby compensation is to be paid in annual installments, at each year-end, at the rate of 1 percent of

the whole compensation for a period 15 years. The remaining compensation is to be paid in the final period, and no later than 15

December 2019.

81

In 2004, Siam Power Generation Co., Ltd. informed the Company that the Board of Investment approved an extension of the

privileges granting from imports of machinery and equipment until November 2006 that caused an obligation of the Company for the

compensation breach of contract was completed as stipulated in the agreement dated 26 December 2003. On 31 May 2004, the

Company entered into an agreement to cancel that agreement and its amendment of agreement dated 4 February 2004 and reversed

the compensation for breach of contract amounting to Baht 568.36 million included in earnings statement for 2004.

22. OTHER INCOME

(Unit: Baht)

2005 2004

Gain on exchange rate 31,083,813 -

Gain from disposal of assets - 222,069

Gain from sale of raw materials 2,790,791 121,332,822

Interest income 21,377,732 471,975

Others 39,981,465 18,213,062

95,233,801 140,239,928

23. DIRECTORS’ REMUNERATION

Directors’ remuneration represents the benefits paid to the Company’s directors in accordance with Section 90 of the Public Limited

Companies Act B.E. 2535, exclusive of salaries and related benefits payable to executive directors.

24. PROMOTIONAL PRIVILEGES

The Company was granted privileges by the BOI for the manufacture of hot-rolled coils under the Investment Promotion Act B.E. 2520,

under BOI certificate No. 1047/2539 issued on 15 November 1995. Moreover, on 29 June 2005, the Company was granted privileges by

the Board of Investment for investment in a hot rolled coil and skinpass project under BOI certificate No. 1579(2)/2548. Subject to

certain imposed conditions, the privileges include: -

a) Exemption of 75 percent from import duty on raw materials used in the manufacturing.

b) Exemption from payment of corporate income tax on profits for a total period of 8 years commencing as from the date of

first earning operating income.

c) Exemption from income tax on dividends paid from the profit of the operation within the tax exemption period.

d) A 50 percent reduction in the corporate income tax rate on income earned from the promoted investor for a period of 5 years

commencing as from the expiration date of period of exemption from corporate income tax.

e) An allowance of double the amount of actual expenditure on transportation, electricity and water, deductible from taxable income

for a period of 10 years commencing as from the date of first earning operation income.

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f) An allowance of 25 percent of any investment in installation or construction of facilities, deductible from taxable income in

addition to normal depreciation.

g) Exemption from import tax on imported raw materials for 5 years commencing as from the first date of import.

h) Exemption from import tax on raw materials which are imported for re-export for a period of 5 years commencing from the first

date of import.

Currently, the Company has not utilised the privileges under BOI No. 1579(2)/2548.

The operating results for the year 2005 and 2004 of the Company classified under promoted and non-promoted business are as

follows: -

(Unit: Baht)

For the years ended 31 December

Promoted business Non-promoted business Total

2005 2004 2005 2004 2005 2004

REVENUES

Sales 22,201,844,756 21,270,252,071 - - 22,201,844,756 21,270,252,071

Interest income - - 21,377,732 471,975 21,377,732 471,975

Reversal of allowance for

breach of contract - - - 568,360,000 - 568,360,000

Other income 71,065,278 31,311,407 2,790,791 108,456,546 73,856,069 139,767,953

TOTAL REVENUES 22,272,910,034 21,301,563,478 24,168,523 677,288,521 22,297,078,557 21,978,851,999

EXPENSES

Cost of sales 18,945,164,232 18,211,316,404 - - 18,945,164,232 18,211,316,404

Selling and Admin expenses 466,940,749 479,571,492 - - 466,940,749 479,571,492

Interest expense 353,736,948 120,997,469 - - 353,736,948 120,997,469

TOTAL EXPENSES 19,765,841,929 18,811,885,365 - - 19,765,841,929 18,811,885,365

Reversal of allowance for

assets impairment - 3,441,440,639

EXTRAORDINARY ITEMS -

Gain from rehabilitation plan 209,396,414 2,293,731,812

NET EARNINGS 2,740,633,042 8,902,139,085

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25. NUMBER OF EMPLOYEES AND RELATED COSTS

2005 2004

Number of employees at end of year 718 693

Employee costs for the year (Thousand Baht) 338,685 298,133

During 2005, the Company contributed Baht 2 million (2004: Baht 2 million) to the provident fund.

26. STATEMENTS OF CASH FLOWS

(Unit: Baht)

2005 2004

Cash 125,466 227,562

Deposits at financial institutions 2,055,481,392 354,174,454

Cash and cash equivalent 2,055,606,858 354,402,016

Less: Term deposits and restricted deposits (433,772,798) (1,000,000)

Cash and cash equivalent in statements of cash flows 1,621,834,060 353,402,016

27. COMMITMENTS

As at 31 December 2005, the Company had the following outstanding commitments: -

27.1 Commitments in respect of raw material management and service fees monthly paid to raw materials manager based on raw

materials usage (2004: based on the raw materials usage and fixed rate at USD 49.2 million from 2005 to 2013).

27.2 Commitments to pay financial advisory fees totalling Baht 2 million and fixed rate at USD 0.1 million per year (2004: Baht 2

million).

27.3 Commitments to pay a total of Baht 6.3 million for water supply management (2004: Baht 16.2 million).

27.4 Commitment to pay for raw water under the agreement based on the quantity used (2004: fixed rate at Baht 1.2 million and

on quantity used).

27.5 Commitment to pay dock service fee based on the quantity loaded.

27.6 Commitments to pay consulting fee, machine installation based on working hours and the fixed rate of USD 0.5 million, machinery

and construction of factory under the expansion project amounting to USD 28.5 million and Baht 32.7 million (2004: based on

working hours and the fixed rate at USD 3.2 million).

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27.7 The building lease and service agreement the Company was committed to pay the following office rental and service fees: -


Amount

2006 4.8

2007 - 2009 39.2

27.8 The Company had the following payment commitments for the use of gas under an agreement: -


Amount

2006 21.6

2007 - 2009 75.7

27.9 Commitments of Baht 1.5 million for car rental (2004: Baht 0.3 million).

27.10 Commitments of Baht 5.9 million for other service and marketing advisory fees.

27.11 Commitments of Baht 89.8 million under 2 agreements for electricity usage deposit (2004: Baht 149.8 million).

27.12 The Company had agreements to purchase raw materials with overseas suppliers for 319,663 tonne of unreleased raw materials,

which the ownership belongs to the sellers. In addition, the Company had to pay interest at rate LIBOR + 1 to 1.75 percent on the

unrealised raw materials.

28. GUARANTEE AND CONTINGENT LIABILITIES

28.1 The title deeds of land with a net book value as at 31 December 2005 amounting to Baht 25 million are pledged as collateral for

the electricity usage.

28.2 As of 31 December 2005, the Company had Baht 31.3 million of letter guarantees issued by banks in the name of Company in

respect of the normal course of the business of the Company.

28.3 As of 31 December 2005, forward exchange contracts outstanding are USD 2,212,412.39 of which forward rate for amount bought

are 41.05 - 41.22 Bath per 1 USD.

28.4 The Company was sued by 2 minority shareholders with a combined shareholding of 5.5 million shares, claiming compensation for

damage amounting to Baht 54.5 million suffered as a result of the Company entering into the business rehabilitation process and

restructuring its capital. On 25 July 2005, the Court First Instance ordered the suit dismissed, but the plaintiff requested to leave

to appeal. As at the balance sheet date, the Appeals Court has rejected the appeal of the plaintiff and the lawyer of the Company

believes that with the court’s rejection of the plaintiff’s appeal the case is legally complete.

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29. FINANCIAL INFORMATION BY SEGMENT

The operations of the Company is in a single industry segment in manufacturing of hot rolled coils and is carried on in the single

geographical area in Thailand. As a result, all of revenue, operating profits and assets as reflected in these financial statements pertain

to the aforementioned industry segment and geographic area. Export sales for the year 2005 was amounted to Baht 2,547 million

(2004: Baht 4,835 million).

30. FINANCIAL INSTRUMENTS

30.1 Credit risk

The Company is exposed to credit risk primarily with respect to trade accounts receivable since the majority of sales are supplied

to a limited number of customers. However, due to the Company had a strict policy to provide credit term and the repayment, the

Company does not anticipate material losses from its debt collection.

30.2 Interest rate risk

The interest rate risk is the risk that future movements in market interest rates will affect the Company’s operations and its cash

flows. The Company exposure to interest rate risk relates primarily to its cash and deposits with banks, trade accounts receiv-

able, trade accounts payable, liabilities under the rehabilitation process and bonds. The Company does not use derivative finan-

cial instruments to hedge such risk.


As at 31 December 2005

Fixed

Floating interest rate interest rate Non-interest Total

Financial assets

Cash and cash equivalents 470.4 - 1,151.4 1,621.8

Trade accounts receivable - - 2,225.6 2,225.6

Restricted deposits at financial institutions 433.8 - - 433.8

Financial liabilities

Trade accounts payable - - 1,111.7 1,111.7

Other payables - - 273.3 273.3

Advance received from customer - - 241.8 241.8

Liabilities from rehabilitation plan - - 828.4 828.4

Bonds - 4,044.2 - 4,044.2

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30.3 Foreign currency risk

The Company’s exposure to foreign currency risk relates primarily to its deposits paid to creditors, and trade creditors which are

denominated in foreign currencies. The Company did not primarily utilises forward exchange contracts.

Below is the summary of the Company’s significant foreign currency-denominated assets and liabilities as at 31 December 2005

which were unhedged by any derivative financial instruments.

Assets Liabilities

Exchange rate Exchange rate

Currencies Amount for translation Amount for translation

US Dollars 98,505,552.00 40.9826 124,794,494.00 41.1746

Euro 1,881,069.08 48.4372 422,613.59 48.9498

Yuan Renmimbi 1,540.00 5.0374 - -

Japanese Yen 54,330,845.00 0.3468 21,467,856.00 0.3511

Singapore Dollars - - 17,825.00 24.8344

Malaysian Ringgit 145.00 10.625 - -

GB Pound 14,441.60 70.5164 - -

30.4 Fair value

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable

willing parties in an arm’s length transaction. Fair values are obtained from quoted market prices, discounted cash flow models

or net asset value as appropriate.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments.

Cash on hand and at banks, accounts receivable and accounts payable - the carrying values approximate their fair values due to

the relatively short-term maturity of these financial instruments.

Liabilities under the rehabilitation plan bear no interest, bonds has fixed interest rate which the rate is equivalent to the current

market rate.

As at 31 December 2005, there are no material differences between the net book value of financial instruments and their fair

value.

87

31. SUBSEQUENT EVENTS

On 12 January 2006, the Company issued 100 million warrants to subscribe the Company’s ordinary shares to directors and

employees of the Company (ESOP), without charge. The warrants are exercisable for a period of 5 years from the issue date, in a ratio

of 1 warrant to 1 ordinary share. The exercise price is Baht 1 per share. The directors and employers could begin to exercise each of

the one-thirds of the allocated warrants after the company’s shares have been traded on the stock Exchange of Thailand for 1 year,

2 years, and 3 years, respectively.

In January 2006, the Company received additional subscription of 1,500 million ordinary shares from the public offering of ordinary

shares and registered the increase in paid-up capital to Baht 9,700 million with the Ministry of Commerce on 20 January 2006. Total

share-proceeds were Baht 2,400 million.

On 9 February 2006, the Company executed an agreement to issue bonds amounting to USD 70 million, bearing interest at a rate of 10.5

percent p.a. and mature in 2010. The issuance of the bonds was made in accordance with the resolution of the Extraordinary General

Meeting of shareholders held on 2 September 2005 as part of the facility of USD 250 million. The term and conditions of the bonds are

the same as those of the previously issued bonds.

32. PRESENTATION

The presentation of the financial statements had been made in compliance with the Notification of the Department of Business

Development dated 14 September 2001, issued under the Accounting Act B.E. 2543.

The Company reclassified the financial statements presented herein to conform with the current year classification with no effect to

net earnings previously reported.

88

Designed by : Pink Blue Black & Orange Co., Ltd.

Tel. +66 (0) 2300-5124-7 Fax. +66 (0) 2300-5123

http://www.colorparty.com

To be the leader of integrated steel producers in Thailand, by supplying internationally high

quality products to meet customers' requirements, establishing trustworthiness, and maximizing

our customers' satisfaction

To continually support and develop our human resources in order to be an integral and important

asset of the company at present and in the future and to improve our employees' quality of life

To develop the industry with the least impact to the environment. Also to contribute to local

communities to strengthen their quality of social development

MISSION >

>

>


Head Office:SSP Tower 3, 18th Floor, 88 Silom Rd., Suriyawong, Bangrak, Bangkok 10500, Thailand

Tel: (66) 0-2634-2222Fax: (66) 0-2634-4114

Factory:55 Moo 5, SSP Industrial Park, Nonglalog, Bankhai, Rayong 21120, Thailand

Tel: (66) 0-3886-9323Fax: (66) 0-3886-9333

E-mail: [email protected]://www.g-steel.com

gstel 05

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