gstel 06

CONTENTS

Financial Highlights

Message from Chairman of the Board of Directors

Message from Chief Executive Officer

Message from Chairman of the Audit Committee

Steel Industry and Overview

Report on Operating Results and Key Events in 2006

Safety and Environmental Concern

Social Activities

Organization Chart

Board of Directors

Information on the Board of Directors and Management Team

Information of IOD ’s Accreditation and Certification Program

Structure of Management

Changes in Shareholding by the Board of Directors and

Management Team

General Information

Nature of Business

Risk Factors

Corporate Governance

Structure of Shareholding

Related Transactions

Notes and Analysis on Financial Status and Performance Results

Board of Directors’ Responsibilities with Regards to Financial

Reports

Report of Independent Auditor and Financial Statements

SET Information reference guide under Form 56-2

The Principles of Corporate Governance

001

010

012

013

014

018

023

024

026

028

030

038

039

050

051

052

055

062

072

073

078

081

082

1 1 9

120

Data from Financial Statement 2006 2005 2004

Total Assets

Total Liabilities

Total Shareholders’ Equity

Sales

Total Revenues

Gross Profit (Loss)

Operating Profit (Loss)

Net Profit (Loss)

Retained Earnings(Loss)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

(Baht Million)

41,617

15,037

26,580

18,003

19,119

2,019

1,655

1,678

12,030

28,264

6,716

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

12,712

Financial Ratios 2006 2005 2004

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

(Times)

(Times)

(%)

(%)

(%)

(%)

(%)

(Baht)

(Baht)

1.52

0.57

11.21

9.14

8.77

6.97

4.80

0.17

2.64

3.91

0.31

14.67

11.40

12.29

13.58

10.95

0.33

2.63

2.65

0.15

14.38

12.22

40.50

72.94

48.54

1.36

2.86

FINANCIAL HIGHLIGHTS

010 In year 2006, Thailand’s economy grew at a slightly increasing rate over

the previous year due to the fact that private investment and expenditures

were affected from numerous factors, namely political instability, civil

unrest, turbulence in the deep South, oil price fl uctuations as well as

continuing Baht appreciation. Though this affected such downstream

industries using hot rolled coils as their base materials as construction

and automobile parts industries, expanded at a slow rate, but it did not

have much impact on hot rolled coil industry since the domestic demand

increased. Overall, though prices of hot rolled coils in late 2006 rose from

the lowest point of late 2005, they had continually fl uctuated due to anxiety

over China’s production capacity increment and the world’s high stock

quantities. The Company has been prepared to cope with these challenges

all along with confi dence in its current potentiality, vision in the world’s

developments and changes, long – standing experience in forecast and

operation as well as preparation in line with current and future

situations.

As for the 2006 performance, due to the management policy with vision

and caution in operations, dedication and cooperation between the

management and all staff, the Company maintained its performance results

at high levels. Its sales volumes registered as high as Baht 19,119 million

with an operating profi t of Baht 1,678 million or 6.97% return on equities

per annum which was at a satisfactory level. It is one of a few factories in

the Southeast Asia Region maintaining their performance results at almost

the same level as those of the previous year.

MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS

Mr. Vijit Supinit

Chairman of the Board of Directors

In addition, with its long experience in this industry, determination to

develop its potentiality at the utmost, management knowledge and capabilities

to cope with challenges in the dynamic industrial world, the Company

enjoyed a success and was well received by investors in public listing in

the Stock Exchange of Thailand (SET). Its securities were traded on the

SET for the fi rst time on 25 January 2006 under the security name of

“GSTEEL” to gather resort funds from the public for its working capital

and business expansion in the future. The Board of Directors determines

to supervise the business management to be transparent with good

governance and adhere to principles of good business supervision to create

confi dence and fairness to shareholders, investors, business partners and

all parties concerned equally. The board will dedicate itself to perform its

duties effectively for the Company’s sustaining success and worthy return

for shareholders.

For year 2007, the Company has become an alliance with a major hot rolled

coil producer and an acceleration in mega projects by the ruling government

are likely to enable the hot rolled coil business trend in 2007 more

satisfactory.

On behalf of the Board of Directors, I would like to express my gratitude

to shareholders for their trust, confi dence and support to the Company all

along. All shareholders can share very well its pride as an upstream

industry partly being the country’s economic driving force since it has

supplied hot rolled coils as raw materials for the country’s mid and

downstream industries. As a result, raw material import from overseas

has signifi cantly decreased, this was signifi cant in terms of both quantity

and quality, also, a substantial amount of foreign exchange has been saved.

In addition, the Company’s products are competitive and well accepted by

domestic and international markets. Meanwhile, export of its quality

products are competitive in the world market and bring in more foreign

exchange, thus partly strengthening the country’s overall fi scal position.

012

During year 2006, G Steel Public Company Limited successfully became

the leader of Thailand’s hot rolled coil producers who, among a few

producers, registered profits from the hot rolled coil production and sales

in spite of worldwide steel price fluctuations since mid 2006. With the

management’s vision in planning and inventory control as well as strict

production cost controlling measures, the Company marked a net

operating profit of approximately Baht 1,678 million in 2006.

In regard to management and financial policy, the Company resorted to

funding sources at reasonable costs for its production expansion project

investment through an initial public offering of 1,500 million shares at the

value of Baht 2,400 million in January 2006. In the same month, it was

listed in the Stock Exchange of Thailand, and its securities were traded on

the SET to mobilize funds from the public for its working capital and

business expansion in the future.

In year 2007, G Steel speeded up its production expansion projects,

including the addition of Skinpass Mill and the Pickling and Oiling Line,

to respond to customers’ rapidly growing needs for all types of hot rolled

products to cope with the country’s sustaining economic growth.

With the experience and expertise in hot rolled coil production, the

Company has continually researched and developed steel quality and

production. Lately, the Company formed a strategic alliance with Nakorn

thai Strip Mill Public Company Limited (NSM) to jointly develop diversified

products to thoroughly cover customers’ demands.

On behalf of the Company’s management and employees, I would like to

thank all shareholders, business partners and customers, raw material

suppliers as well as service providers for their supports over the year.

G Steel will maintain our performance standard with all our knowledge and

expertise to enable the Company to produce and distribute high quality hot

rolled coils to meet consumers’ demand and create value added to our

shareholders.

Dr. Somsak Leeswadtrakul

Chief Executive Officer

013MESSAGE FROM CHIEF EXECUTIVE OFFICER

According to the resolution of the Company’s annual ordinary

shareholders’ meeting on the nomination of the Audit Committee with

a 3 – year service term starting from 9 June 2004 to 8 June 2007, the

Audit Committee, consisting of 3 independent members with the Internal

Audit Manager as a secretary, is as follows:

1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee

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

3. Mr. Preecha Prakobkit Member of the Audit Committee

4. Ms. Sophit Changaroon Internal Audit Manager /

Secretary to the Audit

Committee

The Audit Committee is responsible for examining the accuracy of the

internal audit and sufficient disclosure of financial statements prior to

submission for perusal and approval by the Board of Directors. The

committee also coordinates with the internal auditor and authorized

external auditors to assure appropriate internal controlling systems,

compliance with laws and relevant legal requirements as well as to

scrutinize selection and nomination of the Company’s external auditors

and propose their remuneration.

For the accounting period ending 31 December 2006, the Audit Committee

examined the accuracy, completeness and sufficiency of significant

contents in accordance with generally accepted accounting practice and

examined the internal audit systems, risk prioritization and operations in

various aspects in accordance with legal requirements. The examinations

were not conducted on every item but on those considered significant as

per the Internal Audit Department’s plan.

The Audit Committee found no significant deficiencies in the internal audit

systems that would significantly effect the Company’s financial

statements and reported the audit results to the Board of Directors’

meeting.

On behalf of the Audit Committee

(Professor Paichitr Roajanavanich)

Chairman of the Audit Committee

MESSAGE FROM CHAIRMAN OF THE AUDIT COMMITTEE

014 HOT ROLLED COIL INDUSTRY SITUATION IN 2006

In 2006, the hot rolled coil price situaton in the world market slightly fluctuated, when

compared to that in 2005. The first quarter of 2006 marked the lowest price of the cycle,

thereafter prices rose substantially worldwide. The prices in many regions gradually dropped

during midyear, while European prices remained high until the middle of the last quarter of

2006. Nevertheless, hot rolled coil prices (commercial grade) in the world market at the

2006 year–end ranged between USD 460 – 520 (FOB export prices) varying in different

regions. Despite the decreases from those in the third and fourth quarters of 2005, the prices

were at moderately higher levels than those in the first quarter. The situation in the United

States was an exception as steel prices were tuning to respective normal levels as a result of

demand and supply adjustment, thus, they were slightly lower than those in the first quarter.

A major reason was that the economy slowed down, particularly in the construction and real

estate sectors.

China still had an impact on the world’s steel market in terms of both demand and supply.

According to statistics of the International Iron and Steel Institute (IISI) in 2006, the country

produced the highest quantity of crude steel in the world, amounting to 418.8 million tons

or one – third of the world’s overall crude steel outputs. Its total output grew by 18.5% over

the previous year, whereas the global gross outputs increased by 8.8% from 1,139.6 million

tons in 2005 to 1,239.5 million tons in 2006. Therefore, changes in demand and supply in China

significantly effected the market and steel prices worldwide.

Thanks to the Chinese government’s policy not to support steel export since 2005 onwards,

in 2006 they reduced / abolished tax redemption for many steel export items in addition to

015

STEEL INDUSTRY AND OVERIVEW

016

other measures of the previous year. Thus, price competitiveness of Chinese producers

decreased, when compared to competitors overseas, as the former were forced to sell at higher

prices. China’s steel export volumes subsequently dropped.

In 2006, regional and international mergers in the steel industry occurred in many countries.

Analysts had opinions that such mergers were stemmed from the fact that steel producers

were quite scattered. According to IISI data in 2005, it was estimated that in 2006 combined

outputs of the world’s top 5 largest steel producers were less than 20% of the world’s total

outputs. This could not be comparable with other industries, like automobile, ship building,

such metal mining as nickle, tin, copper, zinc, aluminium, iron, coal and so on, the leading

producers’ combined outputs made up a much higher proportion. An explicit example was

China’s steel industry which was of a very scattering nature, its top 3 largest producers had

a combined outputs of less than 18% of the country’s total outputs. The proportion was

relatively low, if compared with those of such major steel – making countries as South Korea

(over 80%) and Japan (over 60%). Consequently, a merger trend was high in the future

in order to control supply in the market, reduce production costs and support steel price more

effectively.

As for Thailand’s hot rolled coil industry, the situation was a similar phenomenon worldwide:

there were recovery, expansion and sluggishness periods in 2006 in accordance with domestic

and international market mechanism as well as local economic situation. According to the

latest reports of the Iron and Steel Institute of Thailand, during January – November 2006,

the country’s demand for hot rolled coils totalled 5.25 million tons, or 14.4% drop from that of

the same period of the previous year, whereas local producers had a combined outputs of

approx. 4.13 million tons, and net steel import volume was 1.12 million tons. The decrease was

due to economic slowdown as a result of political instability, construction and real estate sector

stagnation for a long period of time and somewhat low government expenditures for country

development and relatively low domestic consumption, in spite of higher export volumes.

017

HOT ROLLED COIL INDUSTRY TREND IN 2007

On the supply side worldwide, a MEPS report anticipated that overall raw steel outputs

will further expand by 5.4% to 1,300 million tons with China taking the lead. Cooperation

among producers to control supply and business mergers tends to continue and become

more significant than earlier since it has been proven worldwide to definitely enable the steel

industry as a whole to be stable and profitable.

On the demand side worldwide, it is estimated to expand in many country groups/ regions ;

China, India, Middle East and Africa, etc. Besides, the world economy is expected to expand at

a satisfactory rate despite of a slight decrease from the previous year. It is believed that

relaxing oil prices will clearly contribute to a greater economic expansion in many developing

countries.

Although steel prices in the world market trend become more stable with average prices

higher than those of the previous year, they will vary slightly between regions. This is because

China has reduced its steel export, and the prices are obviously higher. In addition, major raw

material costs keep on rising. Nevertheless, buyers will be willing to pay at higher prices

due to the balance between demand and supply in the world market from 2007 onwards.

As for Thailand’s hot rolled coil industry trend in 2007, it is anticipated that demand for both

hot rolled coils for the construction sector and for high quality grade, will substantially

increase. This is in line with recovery in residential and commercial building construction

sector, production sector, automobile parts, electronics and electrical appliance industries

in particular, which are expected to grow continually from the increased export volumes.

Additionally, if the situation turns out as per the interim government’s plan and current

implementations, Thailand will have a growing demand for steel from last year for

infrastructure development projects. These are parts of mega projects the budget

reimbursements of which are accelerated to start the construction in 2007.

019

018

REPORT ON OPERATING RESULTS AND KEY EVENTS IN 2006

OPERATING RESULTS AMIDST FLUCTUATIONS IN STEEL INDUSTRY SITUATION

Year 2006 saw signifi cant changes and fl uctuations in the steel industry situation. Despite

Thailand’s continuing consumption growth for hot rolled coils, a cycle of price upwards for almost

3 years came to an end in late 2005, during which prices rapidly adjusted downwards until the

end of last year, the prices decreased by over 30%. Bargaining power in the market switched to

buyers, lower quality steel products were imported from China. The business management during

the second half of last year was very diffi cult.

Nevertheless, with production cost controlling and continuing effi ciency improvement as well as

proper inventory control at appropriate levels, the Company managed to brave through the crisis

of steel falling prices. Eventhough the second half of 2006 performance results were unavoidably

effected by the low steel prices, the Company’s overall annual performance results were highly

satisfactory. It was one of a few steel producers in Southeast Asian region that managed to

maintain performance results at the levels close to those of the previous year. Its total annual

sales volumes registered at approximately 1 million tons due to a reduction in its production plan

in accordance with market situation. Meanwhile, the total sales value amounted to Baht 19,119

million with average selling prices in 2006 slightly lower than those in the preceding year. The

majority of incomes were from domestic sales since export prices were lower than the domestic

ones. The gross profi t rate for the entire year was at 11.21%, close to that of the previous year,

and the operating profit amounted to Baht 1,678 million, or Baht 0.17 per share.

ISSUANCE OF STOCK OPTIONS FOR DIRECTORS AND EMPLOYEES

On 12 January 2006, the Company issued warrant for an amount of 100 million units of its

common shares to directors and employees. The warrant with no regulated offering prices

would be due in 5 years from the issuance date. One unit of warrant could be exercised to buy

1 common share at the price of Baht 1 per 1 common share. The members of the Board of Directors

and employees could exercise one third of their allocated rights 1 year, 2 years and 3 years

respectively after the company’s common shares were traded on the SET with the fi rst stipulated

exercise date on 30 March 2007 and the last date on 11 January 2011.

LISTING IN THE STOCK EXCHANGE OF THAILAND

The Company was listed in the Stock Exchange of Thailand and its shares were traded on the

SET for the fi rst time on 25 January 2006 under the security name of “GSTEEL” to raise funds

from general public for its working capital and business expansion in the future. With its

potentiality in many aspects, i.e., the management’s vision and competence, capabilities to continually

lower production costs when compared to the market as a whole, further development of high quality

products to meet customers’ demands as well as continuing public relations to make its presence

felt and accepted by the public, the Company was rated as a strong listed fi rm in 2006 and was among

leaders in Thailand’s hot rolled coil business.

ISSUANCE AND OFFERING OF ADDITIONAL USD 70 MILLION BOND TO OVERSEAS INVESTORS

In February 2006, the Company issued and offered additional 70,000 units of bond with a faced value

of USD 1,000 per unit, totalling USD 70 million, to overseas investors. The debentures were offered

at USD 1,019.78 per unit with the same terms and conditions as the ones previously issued in October

2005.

ENTERING INTO A STRATEGIC ALLIANCE WITH NAKORNTHAI STRIP MILL PUBLIC COMPANY

LIMITED (NSM)

On 26 June 2006, the Board of Directors’ meeting resolved the making of an agreement with Oriental

Investment Company Limited (which became its subsidiary later on) to buy rights over secured

convertible debts as per its business rehabilitation plan for Nakornthai Strip Mill Public Company

Limited. from On City Holding Limited and NSM’s creditors for not more than USD 130.12 million with the

total amount not more than USD 180 million. Its subsidiaries would invest approximately USD 120

million, whereas the Company would invest about USD 60 million. The management considered that

entering into a strategic alliance with NSM would enhance both companies’ potentiality in many

areas such as production, competition, cost controlling, market accessibility, business risk reduction

as well as turning a competitor into an alliance. Additionally, the board meeting resolved cancellation

of proportions to allot 1,750 million common shares to be offered to the public and cancellation of

greenshoe option or over allotment of 450 million shares. The meeting also resolved an allotment

of remaining additonal shares of not over 2,200 million units to On City Holding Limited and NSM

creditors as parts of settled prices.

On 2 August 2006, the Company’s Extraordinary Shareholders’ Meeting approved the cancellation of

1,750 million common share allotment proportions to be offered to the public and the cancellation of

greenshoe option allotment of 450 million shares and also approved limited allotment of remaining

additional shares of not over 2,200 million units to NSM creditors at not less than Baht 1.40 per 1 common

share. NSM creditors would settle for shares with their convertible rights for NSM common shares as

per NSM’s business rehabilitation plan (including additions) for not over USD 60 million or NSM’s 2,511,266,071

common shares. In this regard, the meeting assigned the board and/or a taskforce delegated by the

board to map out details on increased common share allotment in terms of both price and quantity.

020

On 12 September 2006, the Company issued 1,400 million additional common shares which were

not yet alloted at Baht 1.51 per share, to NSM creditors in exchange with NSM’s 2,511,266,071 common

shares resulting from an exercise of the rights over secured convertible debts as per the debt

restructuring agreement. The transfer of this lot of shares to the Company had already been

completed.

On 28 June 2006, Oriental Investment Company Limited (which later on became its subsidiary

and had the name changed into Oriental Access Company Limited) entered into a Memorandum

of Understanding with On City Holding Limited on behalf of NSM creditors to buy rights over

secured convertible debts of Nakornthai Strip Mill Public Company Limited for approximate USD

104.3 million with the regulated FOREX rate at Baht 43.5065 per USD 1 for the common share

conversion as per the business rehabilitation plan at the price of Baht 0.42 per NSM’s new common

share.

Currently, the Company and Oriental Investment Company Limited had 5,803,673,289 common

shares in NSM or 23.51% of NSM paid – up registered capital.

ADVANTANGES OF THE ALLIANCE BETWEEN G STEEL AND NSM

1. Reducing raw material costs. Both fi rms can pooled their purchases for higher quantities,

therefore, they could buy raw materials at the lower prices.

2. Sharing production know - how and best practice. Becoming an alliance enables G Steel

and NSM to share production technology, they could cooperate for optimum of production,

thus achieve the maximum benefi ts of their respective organization.

ISO 14001 AND TIS/OSHAS 18001 CERTIFICATION

The Company had determined and persevered all along to become a fi rm with standards in all

aspects of management systems namely, quality, environment, hygiene and safety. In 2006, it

was highly successful to have been certifi ed by TUV NORD for compliance with international

standards and requirements. It was of the Company’s great pride as it received certifi cations of

ISO 14001 for environment , TIS 18001 and OSHAS 18001 for occupation health and safety

management system.

021

022

023

The Company has committed to have hot rolled coil produced without any environmental impacts

on communities and the society, also taking into consideration safety and occupation health of its

employees and contractors.

Having complied with requirements of ISO 14001, TIS 18001 and OSHAS 18001 throughout 2006,

G Steel aimed at assuring that all operation units administrated, environment, safety and hygiene

matters are as per international standards which focused on effective and efficient administration.

The aim of environmental administration is to worthily utilize resources, whereas the aim of safety

administration is to reduce accidents and minimize wastage rate in year 2007 and succeeding years.

The Company regularly held meetings with contractors for better understanding and joint

improvements in safety, hygiene and environment implementation. Moreover, it assigned a

taskforce to handle emergency in the factory and to coordinate with relevant agencies outside to

organize joint emergency exercises.

Giving an importance of human resources, G Steel organized compulsory training courses on

environment, safety and hygiene to assure that its staff and contractors received adequate and

appropriate trainings. Training topics for respective employees varied in accordance with their

job positions and responsibilities.

Owing to perseverance and determination to abide by international standards and requirements

in environment, hygiene and safety, the Company achieved its goal, receiving ISO 14001

certification in environmental administration standard, TIS 18001 certification in hygiene and

safety administration together with OSHAS 18001 certification by TUV NORD. The accrediting

body for ISO 14001 was TUV Cert and NAC.

Also, the Company participated in the Greenhouse Gas Emission Reduction from Industry in Asia

and the 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.

SAFETY AND ENVIRONMENTAL CONCERN

024

025

In 2006, G Steel took part in various social activities such as educational, environmental, religious and other

activities as follows.

EDUCATION

Realizing the importance of education, the Company intended to take part in educational development which

would enable the country to be a learning society leading to sustaining developments. The Company rendered

supports to several projects, namely :

• Participation in “The Global University Network for Innovation – Asia and the Pacifi c (GUNI-AP) 2006” in

cooperation with Mahidol University during 9 – 11 November 2006

• Supporting the organization of “Thailand Future” on 7 December 2006, in cooperation with Thammasat

University Foundation under the Royal Patronage of H. M. the King

• Providing learning opportunities for students from various educational institutions to visit its factory premise

and production process all year round

• Donating educational apparatus to schools in its vicinities in Ban Khai District, Rayong Province

• Donating scholarships to Thai Buddhist, Christian, and Muslim youths

RELIGION

Realizing an importance of religion as a spiritual refuge and guidance for people to live in harmony, the Company has

taken part in fostering religions in the society by donating for the maintenance of many religious buildings such as building

of restrooms and other infrastructures of temples in the remote areas of the country and donating for the purchase of

necessary equipment to various religious establishments.

SOCIAL ACTIVITIES

G Steel has regularly provided supports to foundations and charity organizations to extend aid to the people with less

opportunity for better living conditions, apart from assistance to natural disaster - affl icted people. Year 2006 was an

auspicious occasion celebrating the 60th Anniversary of H.M. the King’s Accession to the Throne; the Company participated

in numerous activities as follow:

• Co-sponsorship of the Fireworks Project for the Celebration of the 60th Anniversary of H.M. the King’s Accession

to the Throne at Queen Sirikit National Convention Center

SOCIAL ACTIVITIES

• Co-sponsorship of the charity concert, “A Choral Celebration to Celebrate the 60th Anniversary of H.M. the King’s

Accession to the Throne” which all proceeds went to the Chaipattana Foundation

• Making donation to the Chaipattana Foundation via the Board of Investment (BOI) for H. M. the King’s 80th Birthday

Celebration in 2007

• Making donation to Vibhavadi Rangsit Foundation to publish a book entitled “His Royal Visit to the United States

in B.E. 2503, Pakistan in B.E. 2505 , and the Malaya Federation in B.E. 2505” written by HRH Princess Vibhavadi

Rangsit in honor of H.M. the King. Proceeds from the book will be presented to H.M. the King for charities at his

royal disposition

• Co-sponsorship of the “Royal Diamond Jubilee Musical Celebration Project” to celebrate the 60th Anniversary of

H.M. the King’s Accession to the Throne and to publicize H.M. the King’s musical brilliance to the world and to raise

fund to support the development of various musical programs in Thailand

• Making donation to the Police General Hospital Foundation under the Royal Patronage of H.M. the Queen

• Making donation to fl ood – affl icted people via His Excellency Prime Minister General Surayudh Julanonda at the

Government House

• Making donation to fl ood – affl icted people via the Television Channel 5

• Making donation to Thai Red Cross Society in Rayong Province and participating the annual Thai Red Cross Society

Fair at the Amphorn Garden in Bangkok in cooperation with the National Council of Women of Thailand Under the

Royal Patronage of H.M. the Queen

• Support and sponsorship to the Factory’s surrounding community in a variety of activities such as the National

Children’s Day festival, community sports events, and other donation to the Nonglalog Sub-district Administration

OTHER ACTIVITIES

In 2006, the Company had continually participated in many events to publicize its business to the public and those

interested in the steel industry. It cooperated with the public sector in organizing numerous events, namely,

• Sponsorship and participation in the “Bangkok Steel Exhibition & Conference 2006” in cooperation with the Iron

and Steel Institute of Thailand (ISIT) during 13 –15 July 2006 at Siam Paragon

• Sponsorship and participation in the 3rd “SBB Steel Markets Asia 2006”, the largest steel industry seminar in Southest

Asian region during 6 – 7 November 2006 at Grand Hyatt Erawan Hotel Bangkok

026

Remuneration Committee

Executive Committee

Nomination Committee

Audit Committee

ORGANIZATION CHART

Board of

Directors

President Mr. Ryuzo Ogino

Internal Audit Department

Office of the President

President Ms. Patama Leeswadtrakul

Assistant Chief Executive Officer Ms. Patama Leeswadtrakul

Chief Executive Officer Dr. Somsak Leeswadtrakul

Vice President - Finance Mr. Chaimongkol Boonchanaphan

Vice President - Commercial Ms. Methikarn Chutipongsiri

Vice President - Corporate Finance Mr. Nakun Sakunchotikarote

Senior Vice President - Operation

Mr. Nopakao Srisuvanon

Vice President - Operation Mr. David James Scott

Executive Vice President - Expansion & Engineering

Mr. Joachim Burgers

Vice President - HR & Administration Mr. Nakun Sakunchotikarote (Acting)

Vice President - Accounting Ms. Kannikar Soykeeree (Acting)

Senior Vice President Ms. Kannikar Soykeeree

028

BOARD OF DIRECTORS

01 Mr. Vijit Supinit Chairman of the

Board of Directors

02 General Singha Saovapap Director

03 Ms. Patama Leeswadtrakul Director

04 Dr. Somsak Leeswadtrakul Director

05 Professor Paichitr Roajanavanich Director

06 Assoc. Prof. Prapanpong Vejjajiva Director

07 Mr. Yanyong Kurovat Director

08 Pol. Lt. General Prakard Sataman Director

09 Mr. Ryuzo Ogino Director

10 General Choochat Kambhu Na Ayudhya Director

11 Mr. Chainarong Monthienvichienchai Director

12 Mr. Preecha Prakobkit Director

13 Mr. Chaipatr Srivisarvacha Director

14 ML. Sasiwimol Kasemsri Director

15 Mr. Stephane Benayon Director

01 02 03

04 05 06

07 08 09

10 11 12

13 14 15

030

031

INFORMATION ON THE BOARD OF DIRECTORS

1. Mr. Vijit Supinit

- Chairman of the Board of

Directors

65

-none- • Class 3 Leadership Program,

Capital Market Academy

• Class 31 National Defense

Course at the National Defense

Academy

• M. Econ., Yale University, USA

• B. Econ. (Honors),

Manchester University,

England

-none- G Steel Public Company Limited

2006-Present Chairman of the Board of Directors

Others


The Stock Exchange of Thailand


Asset Management Corporation

1993-1996 Chairman of the Board of Directors

The Export and Import Bank of

Thailand

1992-1996 Commissioner Securities and

Exchange Commission, Thailand (SEC)

1990-1996 Governor and Chairman

The Bank of Thailand

1990-1996 Executive Director

The Offi ce of the National Economic and

Social Development Board

1990-1991 Director

The Offi ce of the Board of Investment

1987- 1990 Executive Director

Siam City Bank Public Co., Ltd.

2. General Singha

Saovapap

- Vice Chairman of the

Board of Directors

- Chairman of the

Nomination Committee

76 -none- • Honorary Doctorate in

Sociology and Anthropology,

Ramkhamhaeng University

• A Principle of Hospital

Administration Program

• M.D., Chulalongkorn University

0.01% G Steel Public Company Limited

2006-Present Chairman of the Nomination Committee

2003-Present Vice Chairman of the Board of Directors

Others


Chaopraya Hospital Public Co., Ltd.


Kanchanaburi Health Center Co., Ltd.


Phattanakarn Vechakit Co., Ltd.


Vibhavadi Hospital Public Co., Ltd.


Jittiporn Co., Ltd.


River Kwai Evergreen Hills Resort Co.,

Ltd.

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

7. Mr. Yanyong Kurovat

- Director

- Executive Director

- Nomination Committee

Member

68 -none- • Class 5 National Defense

Course for Joint Private and

Public Sectors at the National

Defense Academy

• Graduate Diploma in

Government, Chulalongkorn

University

• B.A. (Pol.Sci.), Chulalongkorn

University


2006-Present Nomination Committee Member

2004-Present Director and Executive Director

Others

2003-Present Director

G.O. International (Thai) Co,. Ltd

2003-Present Advisor

MAN Trucks & Bus Concessionaires

(Thailand) Co., Ltd.

2000-Present Managing Director

Technology Operation Group Co,. Ltd.


Academic Network Co,. Ltd.

8. Pol. Lt. General Prakard

Sataman

- Director


- Remuneration Committee

Member

64 -none- • Class 1 Advanced Management

Program at the National

Defense Academy



Academy

• International Police Program,

USA

• LL.B., Thammasat University


2006-Present Remuneration Committee Member


Others

2006-Present Advisor to Interior Deputy Minister

2006-Present Advisor to the Board of Directors

State Railway of Thailand


Sirikit National Convention Center


Thai Pure Drinks Co., Ltd.

2000-2006 Member of Disciplinary Committee

Office of the Auditor - General

2000-2003 Commander of the Police Forensic

Science, Royal Thai Police

3. Ms. Patama

Leeswadtrakul

- Vice Chairman of the

Board of Directors


- Assistant Chief Executive

Offi cer

- President

42

Wife of

Dr.

Somsak

Lee-

swad-

trakul

• Honorary Doctorate in

General Administration,


• MBA.,


• B. Econ.,



2003-Present Vice Chairman of the Board of

Directors, Executive Director,

Assistant Chief Executive Offi cer

and President

Others


G.E.I. Holding Co., Ltd.

1997-Present Chairman of the Executive Committee

Paitoon Hotel and Resort Co., Ltd.

1990-2006 Chairman of the Board of Directors

Siam Jetty and Container Co., Ltd.

4. Dr. Somsak

Leeswadtrakul

- Director

- Chairman of the

Executive Committee

- Chief Executive Offi cer

54 Husband

of Ms.

Patama

Leeswad

trakul

• The Program for senior

executives in criminal justice

administration class 10.


Industrial Management,

University of the Americas,

Louisiana, USA

• Honorary Doctorate in General

Administration,



Administration,

Kasetsart University

• MBA., Ramkhamhaeng

University

• B. Econ.,



1995- Present Director, Chairman of the Executive

Committee and Chief Executive

Offi cer

Others


Thai Special Steel Industry Public

Co., Ltd.


Siam Integrated Cold Rolled Steel

Public Co., Ltd.


Felix River Kwai Resort

Kanchanaburi Co., Ltd.


Nas Toa (Thailand) Co,. Ltd.


Thai Steel Pipe Industry Co., Ltd.


Thailand Iron Works Public Co., Ltd

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

032

5. Professor Paichitr

Roajanavanich

- Director

- Chairman of the Audit

Committee

78 -none- • MGA. (Fiscal Policy),

Pennsylvania University, USA


Accountancy (Equivalent to

Master’s Degree), Thammasat

University


• CPA-Thailand


2004-Present Director and Chairman of the

Audit Committee

Others

2002-Present Chairman of the Audit Committee

Sicco Securities Public Co., Ltd.


MBK Development Public Co., Ltd.


Pathum Rice Mill and Granary

Public Co., Ltd.


Muramoto Electron (Thailand)

Public Co., Ltd.

6. Associate Professor

Prapanpong Vejjajiva

- Director

- Audit Committee Member

- Chairman of the

Remuneration Committee



Academy

• Certifi cate in Business

Administration, Stanford

University

• Graduate Diploma in Welfare

Administration, Stockholm

University, Sweden

• M.A. in Social Science,

Stockholm University, Sweden

• B.A. (Pol.Sci.)(2nd Class

Honors) in Government,

Chulalongkorn University


2006-Present Chairman of the Remuneration

Committee

2005-Present Audit Committee Member


Others


C&C International Venture Co., Ltd.


The Master Asset Management Co., Ltd.


Primavest Asset Management Co., Ltd.


Dhammaniti Public Co., Ltd.


Home Place Group Public Co., Ltd.

1990-2006 Vice President

(Development and Planning)

Sasin Graduate Institute of Business

Administration,


033

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience


- Director



Member



Public Sectors at the National

Defense Academy


Government, Chulalongkorn

University

• B.A. (Pol.Sci.), Chulalongkorn

University




Others


G.O. International (Thai) Co,. Ltd


MAN Trucks & Bus Concessionaires

(Thailand) Co., Ltd.


Technology Operation Group Co,. Ltd.


Academic Network Co,. Ltd.


Sataman

- Director


- Remuneration Committee

Member

64 -none- • Class 1 Advanced Management

Program at the National

Defense Academy



Academy

• International Police Program,

USA





Others

2006-Present Advisor to Interior Deputy Minister


State Railway of Thailand


Sirikit National Convention Center


Thai Pure Drinks Co., Ltd.

2000-2006 Member of Disciplinary Committee

Office of the Auditor - General

2000-2003 Commander of the Police Forensic

Science, Royal Thai Police

9. Mr. Ryuzo Ogino

- Director


- President

63 -none- • B.Econ., Keio University, Japan -none- G Steel Public Company Limited


2004-Present President

Others

2000-2004 Director

Suncall Corporation

1965-2000 Director

Itochu Corporation

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

10. General Choochat

Kambhu Na Ayudhya

- Director

- Remuneration

Committee Member



Public Sectors at

the National Defense Academy

• Certifi cate of the

Royal Thai Army War College

• Diploma of General Surgery,

Council of Doctors of Medicine

• Doctor of Medicine,

University of Gottingen,

Germany

• M.D.,

University of Munster,

Germany




Others


Singha Paratech Public Co., Ltd.

2005-Present Physician Leader

Medical Bureau to His Majesty

the King


Lucky Music Co., Ltd.

2003-Present Army Special Expert

Royal Thai Army


Unity Percussion Co., Ltd.

2003-2004 Advisor

National Defense Studies

Institute, Military Supreme Command

2001-2003 Director General

Royal Thai Army Medical Department

2000-2001 Director

King Mongkut Medical Administration

Center

1998-2000 Deputy Director General

Royal Thai Army Medical Department

11. Mr.Chainarong

Monthienvichienchai

- Director


Member

61 -none- • M.A. (Management),

Asian Institute of Management

• B.A. (Business Administration),





Others


Paitoon Hotel and Resort Co., Ltd.


Saint John for Education Co., Ltd.

1991-Present Vice Chairman of the Board of

Trustees Saint John’s University

1977-Present Director General

Saint John’s College

035

034

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

12. Mr.Preecha Prakobkit

- Director

- Audit Committee Member

58

-none-

• Executive Leadership

Thunderbird,

The American Graduate

School of International

• Senior Executive Program

Sasin Graduate Institute of

Business Administration,


• Mini MBA, Thammasat

University

• Business Administration,

Roosevelt University, USA

-none-

G Steel Public Company Limited

2003-Present Director and Audit Committee

Member

Others


Amway (Thailand) Co., Ltd.

13. Mr. Chaipatr

Srivisarvacha

- Director

48 -none- • MBA (Finance), IIIinois

Benedictine College

• Bachelor of Science

(Metallurgy) Lehigh University



2004-2005 Audit Committee Member

Others


MRM Mobile Co., Ltd.


Ecco Communications Co., Ltd.

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.

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

14. ML. Sasiwimol

Kasemsri

- Director


42

-none-

• Master of Intellectual Property

(MIP),

Franklin Pierre Law, USA

• LL.M. (International Laws),


• LL.B.,


-none-



Others


The Unified Council Co., Ltd

2000-2003 Attorney

LS Horizon Ltd.

1993-2000 Attorney

Baker and Mckenzie Co., Ltd.

15. Mr. Stephane Benayon

- Director


39

-none-

• B.Econ., York University

-none-



Others


Superior Overseas (Thailand)

Co., Ltd.


Distresses Assets Investment

1998-2001 Director

Prebon Yamane (Hong Kong) Ltd.

037

036

INFORMATION OF MANAGEMENT TEAM

Name/Position Age

(Years)

Rela-

tion-

ship

Education % of

Shares

Experience

1. Mr. Joachim Burgers

- Executive Vice President

Expansion & Engineering

56 -none- • Electrical Engineering and

Industrial Engineering as Dipl.

Eng., Mercator Technical

University, Germany


Present Executive Vice President



Expansion Project & Engineering

2. Ms. Kannikar Soykeeree

- Senior Vice President

- Vice President

Accounting (Acting)

33 -none- • MBA., University of the Thai,

Chamber of Commerce

• Bachelor of Atrs, Chandrakasem

Rajabhat University


Present Senior Vice President

1999-2006 Vice President - Commercial

3. Mr. Nopakao Srisuvanon

- Senior Vice President

Operation

47 -none- • Bachelor of Engineering,



Present Executive Vice President




4. Mr. David James Scott

- Vice President

Operation

43 -none- • Bachelor of Engineering,

Electrical and Electrical

Engineering,

Southbank University,

London, England


Present Vice President - Operation

2004-2006 Assistant Vice President

Expansion Project

2003-2004 Senior Department Manager

Support Service

038

039

Name

Thailand Institute of Directors : IOD

Director

Accreditation

Program (DAP)

Class/year

Director

Certification

Program (DCP)

Class/year

The Role of

Chairman

Program (RCP)

Class/year

Audit Committee

Program

(ACP)

Class/year

Finance for

Non-Finance

Director (FND)

Class/year

1. Mr. Vijit Supinit 54/2006 _ 13/2006 _ _

2. General Singha Saovapap _ _ 10/2004 _ _

3. Ms. Patama Leeswadtrakul 49/2005 _ 8/2003 _ _

4. Dr. Somsak Leeswadtrakul 49/2005 _ 8/2003 _ _

5. Prof. Paichitr Roajanavanich _ _ _ 15/2006 _

6. Assoc. Prof. Prapanpong

Vejjajiva

49/2005 _ 4/2001 11/2006 _

7. Mr. Yanyong Kurovat 22/2004 _ _ _ _


Sataman

45/2005 _ _ _ _

9. Mr. Ryuzo Ogino _ _ _ _ _

10. General Choochat Kambhu

Na Ayudhya

22/2004 _ _ _ _

11. Mr. Chainarong

Monthienvichienchai

22/2004 _ _ _ _

12. Mr. Preecha Prakobkit 23/2004 _ _ 11/2006 19/2005

13. Mr. Chaipatr Srivisarvacha _ 34/2003 11/2005 _ _

14. ML. Sasiwimol Kasemsri 23/2004 _ _ _ _

15. Mr. Stephane Benayon _ _ _ _ _

INFORMATION OF IOD’ S ACCREDITATION AND CERTIFICATION PROGRAM

STRUCTURE OF MANAGEMENT

MANAGEMENT STRUCTURE

The Company’s management structure comprises 5 committees: Board of Directors, Executive Committee, Audit

Committee, Nomination Committee and Remuneration Committee.

The respective roles and responsibilities are summed up as follows.

(1) BOARD OF DIRECTORS

As at 31 December 2006, the Company had 15 members in the Board of Directors and during 2006, there was a

change in one director and his position.

• New Director 1 person:- Mr. Vijit Supinit, Chairman of the Board of Directors

on 8 February 2006 (to replace Mr. Vira Susangkarakan who died in 2005)

The Board of Directors as at 31 December 2006 hence consisted of 15 members as listed below.

1. Mr. Vijit Supinit Chairman of the Board of Directors

2. General Singha Saovapap Director

3. Ms. Patama Leeswadtrakul Director

4. Dr. Somsak Leeswadtrakul Director

5. Professor Paichitr Roajanavanich Director

6. Assoc. Professor Prapanpong Vejjajiva Director

7. Mr. Yanyong Kurovat Director

8. Pol. Lt. General Prakard Sataman Director

9. Mr. Ryuzo Ogino Director

10. General Choochat Kambhu Na Ayudhya Director

11. Mr. Chainarong Monthienvichienchai Director

12. Mr. Preecha Prakobkit Director

13. Mr. Chaipatr Srivisarvacha Director

14. ML. Sasiwimol Kasemsri Director

15. Mr. Stephane Benayon Director

040

041

AUTHORIZED SIGNATORY DIRECTORS ON THE COMPANY’S BEHALF are Dr. Somsak Leeswadtrakul or

Ms. Patama Leeswadtrakul or Pol.Lt. General Prakard Sataman or Mr. Stephane Benayon co-signs with Mr. Vijit

Supinit or Mr. Ryuzo Ogino or Mr. Yanyong Kurovat or ML. Sasiwimol Kasemsri together with 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 benefi ts.

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 effi ciently and effectively.

3. To be accountable to shareholders at all times and to manage for the maximum benefi ts 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 modifi ed.

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

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

fi nancial statements revealing the Company’s fi nancial 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 confl icts of interest in any matters shall have no voting rights on the specifi c issue.

10. To hold the Annual Shareholders’ Meeting within 4 months after the Company’s accounting year-end date.

In any case where any director or parties with possible confl icts of interest (as per announcements of SEC

offi ce and/or the Stock Exchange of Thailand) may have any confl icts of interest, the director(s) shall have

no authority to approve the matter.

BOARD OF DIRECTORS CONSISTS OF 5 INDEPENDENT DIRECTORS AS FOLLOWS:

1. Professor Paichitr Roajanavanich

2. Assoc. Professor Prapanpong Vejjajiva

3. Mr. Preecha Prakobkit

4. General Choochat Kambhu Na Ayudhya

5. Mr. Chaipatr Srivisarvacha

STRUCTURE OF CRITERIA FOR THE SELECTION OF INDEPENDENT DIRECTORS

The Company’ s Board of Directors selectively extends an invitation to persons of recognized capability,

experience, vision and with a good understanding of the nature of the Company’s business. The Board deems

such appointments as a favorable contribution to the Company’s progress and development. Such persons must

also be willing to devote their time adequately to the business of the Company, and they must ensure they meet

all regulations and requirements of the goverment agencies concerning the appointment of an independent

director of a business entity.

(2) EXECUTIVE COMMITTEE

As at 31 December 2006, the Company had a 7 - member Executive Committee consisting of:

1. Dr. Somsak Leeswadtrakul Chief Executive Offi cer

2. Ms. Patama Leeswadtrakul Executive Director

3. Pol. Lt. General Prakard Sataman Executive Director

4. Mr. Yanyong Kurovat Executive Director

5. ML. Sasiwimol Kasemsri Executive Director

6. Mr. Ryuzo Ogino Executive Director

7. Mr. Stephane Benayon Executive Director

EXECUTIVE COMMITTEE’S ROLES AND RESPONSIBILITIES

1. To scrutinize the Company’s policies, business plan, investment plan and annual budgeting 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 Directors 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.

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

salary structure.

042

5. To scrutinize authorizations for managerial and operational

levels covering areas of fi nance, accounting, procurements,

investment, borrowings, collateral, sales or disposal or transfer

of any assets, entering into any agreement or contract and

any other execution as deemed fi t.

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 it to approve any

transactional items that any Executive Director or parties with

possible confl icts of interest as per announcements of SEC offi ce

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 the Shareholders’ Meeting

for perusal and approval of the tranasctions as per regulations

or announcements or pertinent laws.

(3) AUDIT COMMITTEE

As at 31 December 2006, the Audit Committee consists of 3

Independent Directors with 3 year service term. They are:


Chairman of the Audit Committee

2. Associate Professor Prapanpong Vejjajiva

Audit Committee Member


Audit Committee Member

ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

1. To examine the Company to have accurate fi nancial 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 particular auditor offi ce 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 confl icts 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 fi nancial

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.

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 fi nancial reports in relations

with their completeness and reliability.

• Notes on adequacy of the internal audit systems .

• Justifi cations 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 accountable 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

fi ndings at least twice a year.

In any cases where any Audit Committee member or parties with

possible confl icts of interest (as per announcements of SEC Offi ce

and/or the Stock Exchange of Thailand) may have any confl icts 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.

(4) NOMINATION COMMITTEE

As at 31 December 2006, the Nominaton Committee consists of 3

Directors with 3 year service term. They are:

1. General Singha Saovapap

Chairman of the Nomination Committee


Member of the Nomination Committee

3. Mr. Chainarong Monthienvichienchai

Member of the Nomination Committee

044

045

ROLES AND RESPONSIBILITIES OF THE NOMINATION COMMITTEE

1. To set all rules and policies for persons to be nominated as directors of the Board of Directors, members

of other committees and Chief Executive Offi cer.

2. To consider and nominate appropriate persons to be appointed as directors of the Board of Directors,

members of other committees and Chief Executive Offi cer for the Board of Directors’ and/or the Meeting

of the Shareholders’ approval.

3. To inform and report the Board of Directors as to results of the meeting of the Nomination Committee

and other matters that should be informed.

4. To perform any other things as may be assigned by the Board of Directors.

(5) REMUNERATION COMMITTEE

As at 31 December 2006, the Remuneration Committee consists of 3 Directors with 3 year service term.

They are :

1. Associate Professor Prapanpong Vejjajiva Chairman of the Remuneration Committee

2. Pol. Lt. General Prakard Sataman Member of the Remuneration Committee

3. General Choochat Kambhu Na Ayudhya Member of the Remuneration Committee

ROLES AND RESPONSIBILITIES OF THE REMUNERATION COMMITTEE

1. To set all rules and policies relating to remuneration payable to the Board of Directors, other committees

and Chief Executive Offi cer to be proposed to the Board of Directors and/or the Meeting of the

Shareholders, as the case may be, for their approval.

2. To fi x the necessary and appropriate amount of remuneration for the Board of Directors, other committees

and Chief Executive Offi cer in each year.

3. To inform and report the Board of Directors as to results of the meeting of the Remuneration Committee

and other matters that should be informed.

4. To perform any other thing as may be assigned by the Board of Directors.

MANAGEMENT TEAM

As at present the Company’s Management Team comprises:

1. Dr. Somsak Leeswadtrakul Chief Executive Offi cer

2. Ms. Patama Leeswadtrakul Assistant Chief Executive Offi cer

and President

3. Mr. Ryuzo Ogino President

4. Mr. Joachim Burgers Executive Vice President - Expansion & Engineering

5. Ms. Kannikar Soykeeree Senior Vice President

6. Mr. Nopakao Srisuvanon Senior Vice President - Operation

7. Mr. David James Scott Vice President - Operation

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, reshuffl e, suspend or terminate an employment of any executives or employees in all

positions and to stipulate scopes of roles 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.

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

fi nance, 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 fi elds as necessary to the operation for the Company’s benefi ts. The CEO is

empowered to appoint attorney(s) to fi le 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 fi nancial 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 Offi cer or persons with possible confl icts of interest may have any

confl icts 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 Offi cer are selected by the Nomination Committee. The

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

experiences and qualifi cations 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 benefi ts of the Company’s

effi cient operations.

046

047

REMUNERATIONS FOR THE DIRECTORS AND MANAGEMENT TEAM

The Annual General Shareholders Meeting of Year 2006 on 24 April 2006 approved a total remunerations for the

Directors for 2006 at the amount of not exceeding Baht 8 million, and the Board of Directors Meeting No. 5/2006 on

10 May 2006 worked out a remuneration structure for the Company’s Directors as follows.

Position Position

Remuneration

(Baht/Month)

Monthly

Remuneration

(Baht/Month)

Meeting Allowance

(Baht/Time)

- Chairman of the Board of Directors

- Directors/Executive Directors

- Chairman of the Audit Committee

- Audit Committee Members

- Nomination Committee Members

- Remuneration Committee Members

100,000

-

20,000

-

-

-

-

30,000

40,000

40,000

-

-

10,000

5,000

5,000

5,000

5,000

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.

TOTAL REMUNERATION FOR THE BOARD OF DIRECTORS AND THE MANAGEMENT IN 2006

Items Year 2006

Persons Amount (Baht Million)

Remuneration Details

Board of Directors

Management*

15

6

6.28

33.32

remuneration and meeting

allowance

salary, bonus and other

compensations

* Including expatriate executives

REMUNERATION FOR INDIVIDUAL BOARD MEMBERS IN 2006

Items Names and Positions Remuneration

(Baht)

Meeting Allowance

(Baht)

Total Monetary

Remuneration

(Baht)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Mr. Vijit Supinit


General Singha Saovapap

Vice Chairman of the Board of Directors

and Chairman of the Nomination

Committee

Ms. Patama Leeswadtrakul *

Vice Chairman of the Board of Directors,

Executive Director, Assistant Chief

Executive Officer and President

Dr. Somsak Leeswadtrakul *

Director, Chairman of the Executive

Committee and Chief Executive Officer

Professor Paichitr Roajanavanich

Director and Chairman of the Audit

Committee

Assoc. Prof. Prapanpong Vejjajiva

Director, Audit Committee Member and

Chairman of the Remuneration Committee

Mr. Yanyong Kurovat

Director, Executive Director and

Nomination Committee Member

Pol. Lt. General Prakard Sataman


Remuneration Committee Member

Mr. Ryuzo Ogino *


President

General Choochat Kambhu Na Ayudhya

Director and Remuneration Committee

Member

Mr. Chainarong Monthienvichienchai

Director and Nomination Committee

Member

Mr. Preecha Prakobkit

Director and Audit Committee Member

Mr. Chaipatr Srivisarvacha

Director

ML. Sasiwimol Kasemsri

Director and Executive Director

Mr. Stephane Benayon

Director and Executive Director

1,100,000

360,000

_

_

720,000

480,000

360,000

360,000

_

360,000

360,000

480,000

360,000

360,000

360,000

80,000

45,000

_

_

75,000

80,000

50,000

55,000

_

50,000

20,000

70,000

35,000

25,000

40,000

1,180,000

405,000

_

_

795,000

560,000

410,000

415,000

_

410,000

380,000

550,000

395,000

385,000

400,000

* 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.

048

049

OTHER REMUNERATIONS

The Shareholders’ Extraordinary Meeting No. 2/2004 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 intentionally their

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 beneficiary 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 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.

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.

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

The directors will be allocated not over 2,000,000 units each, whereas the 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. Mr. Vijit Supinit

2. General Singha Saovapap

3. Ms. Patama Leeswadtrakul

4. Dr. Somsak Leeswadtrakul


6. Assoc. Prof. Prapanpong Vejjajiva


8. Pol. Lt. General Prakard Sataman

9. Mr. Ryuzo Ogino

10. General Choochat Kambhu Na Ayudhya

11. Mr. Chainarong Monthienvichienchai


13. Mr. Chaipatr Srivisarvacha

14. ML. Sasiwimol Kasemsri

15. Mr. Stephane Benayon


Vice Chairman of the Board of

Directors

Vice Chairman of the Board of

Directors

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

_

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

2,000,000

Management

1. Dr. Somsak Leeswadtrakul

2. Ms. Patama Leeswadtrakul

3. Mr. Ryuzo Ogino

4. Mr. Joachim Burgers

5. Ms. Kannikar Soykeeree

6. Mr. Nopakao Srisuvanon

7. Mr. David James Scott

Chief Executive Officer

Assistant Chief Executive Officer

and President

President

Executive Vice President


Senior Vice President

Senior Vice President – Operation

Vice President - Operation

5,000,000

2,750,000

2,750,000

2,000,000

2,000,000

2,000,000

784,000

Employees

704 employees

Total

54,688,200

99,972,200

050

051

C H A N G E S I N SHAREHOLDING BY THE BOARD OF DIRECTORS

Shareholding (Shares) : Par 1 Baht

Names Position As of 31 Dec. 2005

As of 31 Dec. 2006

Changes

1. Mr. Vijit Supinit Chairman of the Board of

Directors

_ _ _

2. General Singha Saovapap Vice Chairman of the

Board of Directors

1,500,000 1,500,000 _

3. Ms. Patama Leeswadtrakul Vice Chairman of the

Board of Directors

1,061,060,793 1,077,802,793 16,742,000

4. Dr. Somsak Leeswadtrakul Director 7,154,071 7,154,071 _

5. Professor Paichitr

Roajanavanich

Director _ _ _

6. Assoc. Prof. Prapanpong

Vejjajiva

Director _ _ _

7. Mr. Yanyong Kurovat Director _ _ _


Sataman

Director _ _ _

9. Mr. Ryuzo Ogino Director _ _ _

10. General Choochat Kambhu

Na Ayudhya

Director _ _ _

11. Mr.Chainarong

Monthienvichienchai

Director 1,500,000 1,500,000 _

12. Mr. Preecha Prakobkit Director _ _ _

13. Mr. Chaipatr Srivisarvacha Director _ _ _

14. ML. Sasiwimol Kasemsri Director _ _ _

15. Mr. Stephane Benayon Director _ _ _

CHANGES IN SHAREHOLDING BY MANAGEMENT TEAM

1. Mr. Joachim Burgers Executive Vice President Expansion & Engineering

_ _ _

2. Ms. Kannikar Soykeeree Senior Vice President _ _ _

3. Mr. Nopakao Srisuvanon Senior Vice President Operation

_ _ _

4. Mr. David James Scott Vice President - Operation _ _ _

MANAGEMENT TEAMCHANGES IN SHAREHOLDING BY M

General Information

G STEEL PUBLIC COMPANY LIMITED

G STEEL PUBLIC COMPANY LIMITEDGSTEEL0107538000746

18th Fl. SSP Tower 3, 88 Silom Road, Suriyawong, Bangrak, Bangkok 10500, ThailandTel. 0-2634-2222, Fax. 0-2634-4114

55 Moo 5, SSP Industrial Park, Nonglalog, Bankhai, Rayong 21120, ThailandTel. 0-3886-9323, Fax. 0-3886-9333

www.gsteel.com30 October 1995

1 November 1999

Production and Distribution of Hot Rolled Coils900 - 1,550 mm.1.0- 13.0 mm.Melting - Electric Arc Furnace from GermanyCasting - Medium Slab Casting Machine from JapanRolling - Hot Strip Mill from Japan1,800,000 tons per annum734 persons

12,000,000,000 Baht 12,000,000,000 Baht 1 Baht per Share 11,100,000,000 Baht 11,100,000,000 Baht

Thailand Securities Depository Co., Ltd.4th, 7th Fl., Stock Exchange of Thailand Building62 Rajadapisek Road, Khlong Toey, Bangkok 10110

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

The Hong Kong and Shanghai Banking Corporation LimitedLevel 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong

Ms. Rungnapa Lertsuwankul Certifi ed Public Accountant Registration No. 3516

Ms. Vissuta Jariyathanakorn Certifi ed Public Accountant Registration No. 3853

Ms. Sumalee Reewarabandith Certifi ed Public Accountant Registration No. 3970

Ernst & Young Offi ce Ltd.193/136-137 33rd Fl., Lake Rajada Building, Rajadapisek Road, Khlong Toey, Bangkok 10110

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

Company

Company’ s Name SymbolRegistration No.Head Offi ce

Plant Offi ce

WebsiteEstablishment DateProduction Commencement DateBusiness TypeWidthGaugeProduction Technology

Production CapacityNo. of Employees

Registered Capital and Paid-up Capital

Registered CapitalOrdinary SharesPar ValuePaid-up CapitalPaid-up Ordinary Shares

Referrals and Their Locations

Common Stock Registrar

Bond Trustee

Auditor

052

053

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° C

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 fi rst 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. The Company’s hot rolled coil meets international

standards, i.e. ASTM, JIS, DIN, BS and Thailand Industrial Standards (TIS).

In the year 2006 the Company achieved its goal, receiving ISO 14001 certification in environmental administration

standard, TIS 18001 certification in hygiene and safety administration together with OSHAS/TIS 18001 and CE

Marking certification by TUV NORD.

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

Channels

2004 2005 2006

Amount % Amount % Amount %

Sales from Hot

Rolled Coils

Domestic

Overseas

16,435,025

4,835,227

76.7

22.6

19,654,894

2,546,951

88.2

11.4

16,809,293

1,193,753

88.0

6.2

Total Sales 21,270,252 99.3 22,201,845 99.6 18,003,046 94.2

Other Incomes 140,018 0.7 95,234 0.4 1,115,763 5.8

Total Incomes 21,410,270 100 22,297,079 100 19,118,809 100

Notes: The Company’s other incomes included sales of various scrap 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.

FUTURE PLAN

The Company has long – term plans to expand production capacity from 1.8 million tons per annum to 3.4 million

tons per annum to meet domestic demand surplus.

Besides, becoming an alliance with Nakornthai Strip Mill Public Company Limited (NSM) – also in the hot rolled coil

production business – had continually positive effects on the Company in terms of purchasing, marketing,

production and so on. In addition, both companies’ know - how had been exchanged and adapted to develop new

products. As a result, the Company will have more diversified products in the future to respond and cover

customers’ needs, especially automobile parts, electronics and electrical appliance, furniture and other industries

in the future.

Business risk factors that may significantly affected return on investment and guidelines to prevent such risks can

be summed up as follows:

1. PRODUCTION RISKS

1.1 RISKS FROM RAW MATERIAL PRICE FLUCTUATIONS

Prices of such major raw materials as scrap and pig iron are of cyclic nature, hence there are price

fl uctuations: upward and downward trends. The Company has no protection tools for the raw material

procurement risks that may expose it to diffi culties during the downward cycle. As the Company may

have high – priced raw material inventory, its production costs will be high accordingly. This may have

impacts on its performance results.

Nevertheless, prices of scrap and pig iron follow the world market mechanism, in which the prices vary

with demands for hot rolled coils. i.e. the former to follow the latter’s upward and downward trends.

Besides, the fact that the Company has raw material purchasing agreements on consignment basis that

is the payment for major raw materials will be made upon an actual usage at the price of the purchasing

date enabled it to manage major raw material prices. However, it has to be responsible for interest

expenses for the overdue balance from B/L date to the date of payment for scrap and pig iron. As such,

it can manage to settle selling prices of hot rolled coils to customers, taking into account costs of major

raw materials purchased as major costs to stipulate selling prices of its products. Consequently, it is less

exposed to fl uctuations of major raw material prices.

1.2 RISKS FROM DEPENDENCY ON MAJOR RAW MATERIALS FROM OLIGOPOLY SOURCES

To produce hot rolled coils, main raw materials required include scrap and smelt iron. The Company has

imported a higher quantity of scrap than locally purchased with the proportion of 80:20. As for crude

iron, it has to fully import. Generally, producers worldwide will have transactions with only a few vendors

in order to continually control quality, terms and conditions. The Company has purchased main raw

materials from major distributors overseas such as Stena Metal Inc., Steel Base Trade AG and Cargill

International Trading Pte. Ltd., and so forth who have been its trade partners for a long time.

However, its major trade partners are long – standing multinational fi rms with strong fi nancial status.

It has also built up relationship with many other raw material distributors, both local and international,

who are prepared to support and to have business transactions with the Company. In this regard, it has

a policy to split a small quantity of raw material purchases to other distributors in order to maintain

business relationship with them. Currently, a number of new local and international distributors have

regular transactions with the Company given thus a high bargaining power in prices, payment terms and

so on.

2. MARKETING AND DISTRIBUTION RISKS

They are risks from fl uctuations of products’ market prices owing to the business downtrend because some

downstream industries using its products as their base materials such as construction industry is also of cyclic

nature. As a result, demand and prices of the Company’s products have fl uctuated in accordance with the

RISK FACTORS

056

business cycle. This may affect its performance results in the

future during business downtrend. The fl uctuations of products’

market prices may have impacts on the Company’s incomes during

particular period of time as well as on its business, fi nancial status,

performance results and its future.

Moreover, as its products have been in demand for many

downstream industries, i.e., hot rolled coil industry for automobile

industry, galvanized sheets for many industries. The business

downtrend fluctuations of the aforementioned industries will

naturally affect its performance. However, recessions in some other

downstream industries like construction ones (which mainly use

long - sized products) will have less effects on demand and prices

of the Company’s products.

Nevertheless, it expects that with its production effi ciency and

competitiveness at the current level, the Company will be able to

gear its production for export should the market demand during

the downtrend heavily fall. Presently, it has developed overseas

market bases. The fl uctuations of products’ prices, however, do not

have much impact on its performance results as raw material prices

and product prices normally vary with each other. Hence, its profi t

slightly fl uctuated.

3. FINANCIAL RISKS

The Company is exposed to risks on foreign exchange

fluctuations as a majority of the income are in Baht

denomination whereas such raw material as scrap and crude

iron are purchased from overseas. Additionally, it issued and

offered USD 170 million worth debentures to overseas investors

during 2005 – 2006 which will be due in 2010 with a 10.5 interest

rate. Its subsidiary has borrowed USD 120 million short-term

loans from financial institutions in 2006. Thus, the Company

bears a great deal of expenses in USD denomination. It does not

have any FOREX risk prevention contracts with commercial

banks. Therefore, FOREX fluctuations may jack up its costs,

subsequently its profitability, and may have effects on its

liquidity, financial status, performance results and its future.

However, the Company anticipated that the impacts on its

business are limited because the stipulation of its selling prices

has been referred to selling prices in the world market which

directly involved USD denomination. Such matunal hedge makes

FOREX fluctuation directly vary with the stipulation of its selling

prices.

4. ENVIRONMENTAL AND PERSONNEL RISKS

4.1 RISKS FROM POSSIBLE POLLUTION - CAUSING PRODUCTION

The Company’s business is to produce hot rolled coils involving

melting, casting and rolling. The process may cause such

pollution as airborne particles, heavy metal contaminating

water and temperature of water in the process as well as

over – limit noise pollution. The Company has installed pollution

controlling systems in line with current laws and regulations

on environment. However, it is still exposed to risks as it may

not detect some certain environment – affecting pollution. In such

cases, it will have to absorb a higher cost to improve the affected

environment. It may also have to install more pollution

monitoring and controlling systems in accordance with more

stringent laws or regulations. This will increase its expenses,

including those incurred by legal disputes should the Company

fail to reduce such pollution. The situation has impacts on its

business, fi nancial status, performance results and future.

In 2006, the Company had complied with environmental standards

and regulations and was certifi ed ISO 14001 by TUV NORD.

Besides, it commissioned an environment expert fi rm to carry out

regular audits in its factory for every 6 months and regularly present

the fi ndings to the Ministry of Industry. The Company is, therefore,

confi dent not to face the aforementioned situation.

4.2 RISKS FROM OPERATIONS WITH POSSIBLE HAZARD TO

EMPLOYEES

The Company’s business is a heavy industrial one; its employees

may be affected by hazard from melting, rolling and handling

of very heavy materials. Such cases will incur the Company

increased expenses from compensation for infl icted persons as

well as expenses from penalty. This will naturally affect its

business, fi nancial status, performance results and future.

Nevertheless, the Company has an emergency plan and safety

measures which meet standards and accepted by government

agencies and relevant private parties. It received OSHAS / TIS

18001 certifi cations for accident prevention or risk rate reduction

during work. According to past records, it was found out that

since its establishment, its accident rate was very low, and there

was no claims from employees for any damages.

058

5. RISKS RELATED TO GOVERNMENT POLICIES AND RELEVANT RULES AND REGULATIONS

5.1 RISKS FROM FREE TRADE AGREEMENTS (FTA) WHICH COVER HOT ROLLED COIL PRODUCTS

At present, Thailand is under the Free Trade Agreement negotiation process. The FTA forum relating to

the steel industry is Thai – Japanese free trade negotiation. During the latest round, Japan would like

Thailand to reduce its import duty for hot rolled coils to 0% with immediate effect, while Thailand preferred

to maintain the import duty at 5% for the next 10 years and gradually reduce it from year 11 to year 15 to 0%.

If the talk results turned out in favor of Japanese side, some Thai producers will be affected. There will

also be quota limit. In this regard, the Company will be affected by competition from Japanese hot rolled

coil makers. This, in turn, will affect its performance results in the future. In addition, should the

government carry on its FTA negotiation with other countries, having hot rolled coil products included

in negotiation topics, the Company will have impacts from higher competition.

However, the Company anticipated that if conclusion of Thai – Japanese FTA negotiation turned out as

per Japanese proposals, it may not receive much effect because most producers in Japan are currently

levied for anti – dumping taxes. If such tax is no more levied or lenient, the Company will remain competitive

since it has continually improved its product quality, pricing and production effi ciency to be competitive

in the world arena.

5.2 RISKS FROM PRICE CONTROLLING MEASURES BY GOVERNMENT AGENCIES

According to an announcement of the Commerce Ministry, steel sheets are controlled goods with regulated

maximum selling price ceiling for each producer. To increase prices above the regulated ceiling, each

producer is required to submit to the government agency for price increment approval, and within 7 days,

if the agency does not turn down the request for the rise, the producer may increase its product prices.

However, it may face risks from not having granted permission from the government agency for the increment,

or it may not be able to increase their prices in line with growing costs. The government price control may

produce negative effects on business, fi nancial status, performance results and business future.

In the past, the Company managed to adjust its selling prices to cope with higher costs; it absorbed merely

a small portion of increase. Moreover, it successfully exported at the world market prices. Such prices

refl ected real costs, and there is no need to solely depend on domestic sales if prices for the latter market

are not in line with real cost burdens.

059

5.3 RISKS FROM GOVERNMENT POLICIES AFFECTING ITS OPERATIONS AND PERFORMANCE RESULTS

The Company’s business is in heavy industry the performance results of which may be affected by

government policies. Currently, the Company received promotional privileges from the Board of

Investment (BOI) and received protection under the Anti – Dumping Act. Hence, its business is exposed

to risks from changes in such policies.

Nevertheless, it anticipated that BOI – relevant policy changes will not affect the Company as it has

already been granted promotional privileges for the ongoing business and its production expansion.

Changes in government policies will have no retroactive effects on already – approved projects. Meanwhile,

cancellation of anti – dumping measures by the government in the future may have some impacts on it

in terms of competition from overseas. However, it expected that with its advanced production technology

and capabilities to make products on par with competitors in the world market, the cancellation of such

measures was likely to slightly affect its performance results.

6. RISKS FROM A LEGAL DISPUTE

In the past, it was sued by minority shareholders, two of which jointly fi led a complaint against the Company.

The complaint claimed that an agreement between the Company and its affi liated creditor (Siam Power Generation

Co., Ltd.) made on 24 November 2001 was a legal accord made with dishonest exercise of rights. This caused

damages to creditors as well as plaintiffs who were the Company’s shareholders. They asked the court to void

the agreement and claimed for Baht 54,450,000 from the Company for the damages.

On 25 July 2005, the court dismissed the case after which the plaintiff shareholders appealed to the appeal

court. The court had an order not to accept the appeal. The plaintiff shareholders later on submitted their

appeal against the court order; the appeal court again dismissed the complaint.

Presently, the plaintiff shareholders appealed the verdict of the appeal court, and the Company submitted its

justifi cations. The case is under the perusal of the Supreme Court. Should the Supreme Court uphold the appeal

court verdict; the case shall be considered completely ceased. Should the verdict turn out against the previous

one; the case will proceed to trial procedures again. This exposes the Company to risks from the legal

dispute.

060

7. INVESTMENT RISKS FOR INVESTORS

It is a risk from stock options offered to members of the Board of Directors, management and employees at a

special price. The 2/2004 Shareholders’ Ordinary Meeting on 5 October 2004 had a resolution to allot 100 million

units of the Company’s stock options to its directors, management and employees at a right – exercising price

of Baht 1 per share. The right was regulated to be exercised 1 year, 2 years and 3 years after the stock was

traded on SET respectively at the quantity of one – thirds of the stock options allocated. Each year, the right

shall be exercised on the last working day of March, June, September and December. Investors hence had risks

for having comparatively higher costs than the holders of the stock options. Additionally, they were exposed

to a risk of declining stock prices if this group of stock option holders sold out their shares upon an exercise of

their rights. The investors would face dilution effect as well.

However, there were merely 100 million units of the stock options offered to directors, management and

employees. Should they all exercise their right, the stock options would be converted into 100 million common

shares or 0.90% of total shares (11,100 million shares), a very small proportion. The situation shall not affect

share prices and ownership.

8. GENERAL RISKS

RISKS FROM NOT BEING ABLE TO OPERATE BUSINESS DUE TO FACTORS BEYOND CONTROL

The Company has risks from many factors beyond control, namely, natural disasters, industrial accidents,

arson, terrorism, technical mistakes and problems as well as labor protest. As its entire production

processes are located in the same area, it is exposed to a high risk to business stoppage should any

serious situation or disasters occur. The fact that the Company bought machines and equipment from

a few vendors and its production process is highly complicated and endanger from very high temperature,

it faced production risks caused by machinery defects or numerous industrial accidents. The aforementioned

factors may produce negative effects on the Company’s business, fi nancial status, performance results

and its future.

However, its machinery and equipment were made by leading producers with technology accepted

worldwide. The quality of the machines and production process made it unlikely to face serious production

disruptions leading to signifi cant loss of incomes. Besides, the Company hired responsible employees

from overseas who had expertise in steel production. Continuous production trainings for staff were

organized. This reduced chances for losses from extended production stoppage as employee errors were

minimal.

As for a situation where production could not be implemented due to other factors such as sabotage,

natural disasters and strikes, the Company has security systems. It hires outside security fi rm as well as

in – house security department staff to strictly monitor entries and exits around the clock. Moreover,

the factory is adequately equipped with standard fi re extinguishing tools and systems to cope with all

possible fi re accidents. Fire extinguishing exercises and evacuation were drilled in accordance with

standards of relevant government agencies. The Company also holds insurance policy to protect its

assets for possible damages.

061

062

063

CORPORATE GOVERNANCE

Understanding its roles and responsibilities to the Company and the shareholders, the Board of Directors has 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,

and internal control systems as well as to emphasize an equal importance of shareholders and their benefi t protection.

The Board formulated a corporate governance policy with the following detailed guidelines and implementation results

for the preceding year.

(1) CORPORATE GOVERNANCE POLICY

Realizing benefi ts and importance of the good corporate governance for the enhancement of transparent

and effi cient management and administration which will create confi dence 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 its roles and responsibilities in supervision and management honestly, ethically, prudently

and discreetly to achieve the set goals for the maximum benefi ts of the Company and shareholders as well

as to prevent possible confl icts of interest.

• To manage the Company with transparency under the effi cient 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 project rights and benefi ts of all shareholders, no matter they

are majority or minority ones, institute or foreign investors, particularly the rights to access the Company’s

data and information which are published on the Company’s website, www.gsteel.com 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 benefi ts 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 benefi ts.

(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 and SET rules and regulations. The Board shall encourage an equal treatment for all

shareholders with transparency and simplifi ed handing procedures and facilitate shareholders to exercise

their rights 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 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 2006, the Company held the Annual General Meeting of Shareholders once and the Extraordinary General

Meeting of the Shareholders once. The Company has developed the arrangement formality of each Annual

General Shareholders’ Meeting (AGM) in order to set standard for an AGM and to comply with the AGM

Checklist which is evaluated by the SEC and an independent appraiser. The checklist has the follow details:

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

information and an invitation letter to the meeting as legally required giving them time. Also, the meeting

information is published in advance on www.gsteel.com for the shareholders to study before the

meeting.

• Facilitating shareholders and their proxy who attend the meeting by using barcode system in the registration

and voting counting processes and notifi cation of voting method and vote counting as well as other relevant

meeting regulations they should be aware of. The voting forms are distributed to the shareholders before

the meeting.

• Strictly conducting the meeting as per the set agenda and providing a question-answer session for clarifi cation

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

with details on number of persons and number 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.

064

065

(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 effi ciently 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 confl icts 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 confl icts of interest among

shareholders, directors, and the management team with discretion, honesty, justifi cations and independence

within an ethical framework. This includes complete disclosure of information for the Company’s benefi ts

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 confl icts of interest, not allowing parties with direct or indirect confl icts

of interest to take part in deliberating the transactional item. The Audit Committee was required to jointly

contemplate and make observations on necessity and justifi cations of the items for the Company’s maximum

benefi ts. 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 as per the

information disclosure form (Form 56-1) and Annual Report (Form 56-2).

(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 its duties with consistent and stringent compliance. The code covers business

execution with honesty, equal and fair treatment to stakeholders, confl icts of interest, confi dentiality, 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 the 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 information, i.e. fi nancial

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 least 3 directors shall be independent directors

and Audit Committee members. As at 31 December 2006, the Board consisted of 15 members as follows:

• Directors with management authorities 3 members (or 20%)

• Directors without management authorities 7 members (or 47%)

• Independent Directors 5 members (or 33%)

The directors without management authorities and independent directors totaled 12 or 80%, 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 the Board of Directors, Executive

Committee, Audit Committee and the Chief Executive Offi cer (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 Offi cer 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.

In 2006, the Annual General Meeting of Shareholders of the year 2006 on 24 April 2006 regulated the maximum

amount of not over Baht 8 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’ MEETING

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 matter 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 every meeting except there are sound reasons

for their absence.

In 2006, 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 contemplation approximately 7 days prior

066

067

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 enquires and the Board’s suggestions for future references of the Board and

parties concerned. Details on attendances of the Board at the meetings in 2006 are listed below.

Item Names and Positions Numbers of

Attendance/

Total Numbers of

Meeting

Remarks

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

Mr. Vijit Supinit

General Singha Saovapap

Ms. Patama Leeswadtrakul

Dr. Somsak Leeswadtrakul

Prof. Paichitr Roajanavanich

Assoc. Prof. Prapanpong Vejjajiva

Mr. Yanyong Kurovat

Pol. Lt. General Prakard Sataman

Mr. Ryuzo Ogino

General Choochat Kambhu Na Ayudhya

Mr. Chainarong Monthienvichienchai

Mr. Preecha Prakobkit

Mr. Chaipatr Srivisarvacha

ML.Sasiwimol Kasemsri

Mr. Stephane Benayon

8/8

9/10

10/10

10/10

9/10

9/10

10/10

10/10

9/10

9/10

4/10

10/10

7/10

5/10

8/10

First meeting: Meeting 3/2006

(12) COMMITTEE

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

operations and screening its respective assignments with distinct scopes of roles and responsibilities. Currently,

4 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 is as follows:

• Holding not over 5% of overall voting shares in the Company, subsidiaries, affi liations or any parties

with possible confl icts 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, affi liations or any parties with possible

confl icts of interest at least for one year.

• Having no business relationship, direct or indirect stakes in fi nancial and managerial areas in the Company,

subsidiaries, affi liations or any parties with possible confl icts of interest in manners to lose their

independence.

• Having no close kinship with the management, the major shareholders of the Company, subsidiaries,

affi liations or any parties with possible confl icts of interest nor being appointed a representative to

protect benefi ts of the major shareholders or directors.

• Being competent to perform its 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 relatives

of the aforementioned persons.

3) The Nomination Committee with 3 year service term,

comprising 3 members

4) The Remuneration Committee with 3 year service term,

comprising 3 members

(13) INTERNAL CONTROL AND AUDIT SYSTEMS

With an emphasis on effi cient 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 activities;

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 for inter-related transactions

between the Company and parties with possible confl icts of

interest, and adoption of generally accepted accounting practice

policy in which external auditors have independence to make

observations and access to signifi cant data.

Apart from having set up an Internal Audit Department to audit

in the areas of fi nance and operation, 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 effi ciently 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 2006, the Audit Committee convened

6 times to review justifi cations of inter-related transactions,

adequacy of internal control systems. They also met with the

external auditors to examine fi nancial statements and deliberate

reports on disclosure of fi nancial data in the fi nancial statements

and to scrutinize an annual auditing plan as well as to monitor

results of the internal audits.

068

069

(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 signifi cant 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 its responsibilities in preparing fi nancial statements under the examination of the Audit Committee

to ensure accurate and complete accounting data with adequate disclosure of signifi cant 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 signifi cant information. In this regard, an investor relations unit was set up to

communicate with institute investors, shareholders, investment analysts and government authorities. The

Company also publishes all the information on the website www.gsteel.com as a channel to disseminate data

and information such as those on the Company, its business and fi nance and any coverage affecting investment

decision and so forth such as announcement to SET, the Company’s activity news, and AGM information. 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 road shows, 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.

INTERNAL INFORMATION CONTROL

It is a policy of the Company that all of its directors and/or executive members are prohibited from using any

material internal information, which has not yet been disclosed to the public, for their own or any other person’s

interest including for their or any other person’s trading of the Company’s securities. Procedures for controlling

the Company’s management people in respect of their use of the Company’s internal information are as follows:

1. To inform executive members of the Company’s departments or sections as to their duties to give report in

respect of the Company’s securities held by them and their spouses and non-sui juris children, including the

report of any changes thereof pursuant to Section 59 and penalty provisions specifi ed in Section 275 of the

Securities and Exchange Act B.E.2535 (A.D. 1992).

2. To circulate letters to executive members of the Company informing them that any executive members,

who receive or are aware of any of the Company’s material internal information and fi nancial statements

where such information may affect the price of the properties, should avoid or cease trading the Company’s

securities for a period of 1 month and that they are prohibited from disclosing such material information

to other persons prior to the disclosure of such material internal information and fi nancial statements

to the public. In this connection, the Company has imposed penalties in the Company’s regulations for

the persons who use such internal information in breach of the regulations for their own interests starting

from orally warning up to dismissal.

LABOR DISPUTES

At present, there is no any labor dispute.

EMPLOYEE IMPROVEMENT POLICY

It is a Company’s policy that the Company’s employees must be regularly trained in order to improve their skill and

knowledge. Such training is rendered on learning by doing basis and advice and recommendation from the experts

in each particular area of works are also given to the employees. Furthermore, the Company provides support to its

employees by way of having them constantly attend training and seminar courses conducted by other organizations.

Payment of appropriate remuneration as an incentive to the Company’s employees is another policy of the Company

such that the Company may maintain its employees for a long period of time.

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.

070

INTERNAL CONTROL

According to the Company’s Board of Directors

Meeting No. 7/2004 held on 7 October 2004

in which the Company’s Audit Committee

participated, an evaluation in respect of the

Company’s internal control was made by the Board

of Directors by way of inquiring for information

from and distributing questionnaires to the

Company’s management members regarding the

adequacy of the Company’s internal control system

in 5 areas, i.e. organization and environment, risk

management, control over management’s practice,

information technology and communication systems

and following-up system. The Board of Directors

was of the view that the Company’s internal control

was at a certain satisfactory level and the internal

control in respect of the Company’s transaction

made or engaged in with the Company’s major

shareholders, directors, management members or

related persons was sufficient. Moreover, the Board

of Directors encouraged the Company’s

management members to develop and improve

internal control system of the Company on a

continuing basis in order to strengthen the

Company’s Good Corporate Governance.

The Company’s Board of Directors have evaluated

the sufficiency of the Company’s internal control for

2006 as follows:

1. Organization and Environment

The Company’s production target is, in its business

operation, always set by high level of management.

Checking or following - up on operational results is

rendered via meeting among executives or

management members of each of the Company’s

departments at least once a month. Such production

target and operational results will then be informally

reported and presented to the Company’s Board of

Directors meeting. Appropriate remuneration to

employees in the relevant departments is also

arranged for the appropriate consideration.

Moreover, the Company’s management has set up a

code of conduct in which the prohibition of the

Company’s executives or management members and employees from doing anything that may create a conflict of

interest in respect of the Company and the Company’s customers and the penalty for violation of such code of

conduct are included. The Company also has manuals for its procurement practices in line with those of ISO standard

in relation to financial matters. With respect to general management of the Company, operational plan is prepared in a

form of flow chart.

2. Risk Management

The Company has always been attentive to the internal and external risks which may have significant effects to the

Company’s business. The Company always analyzes various risk related incidents such as the world’s steel market

situation, the trend in domestic demand for steel, the economy and social issues. The Company also has

procedures for implementation by setting up the Audit Committee to make policy and monitor all risks

management of the Company.

3. Control over Management’s Practice

An internal control system is established to ensure that such stipulated internal control procedures has been followed.

In regard of connected transactions, each of the Company’s directors and executive members should be required to

give report or to disclose to the Company’s Board of Directors as to the conflict of interest that such person has or

may have and there should also be mechanisms or procedures to follow up and monitor such persons in order for such

persons to comply with those stipulated procedures and approval required. Such tasks could be rendered by the

Company’s internal control department. In the event of a transaction involving or may involve a connected person

where a long term commitment is to be engaged by the Company, procedures to follow up or monitor the Company’s

obligations agreed hereunder through out such period should be set up.

4. Information Technology and Communication Systems

The Company has been giving full attention to the information technology and communication systems.

The Board of Directors has been provided with sufficient and accurate information to be considered in each

meeting. The Board of Directors would receive the meeting agenda and details at least 7 days in advance. The

minutes of the meeting included details of the directors’ questions, opinions and comments and any differ in

opinion from any member of the Board of Directors should be recorded such that the shareholders or any related

persons will be able to review the directors’ performances. With respect to accounting policy, the Audit Committee

has been providing opinion regarding the accounting policy to the Company’s Board of Directors for consideration

and approval.

5. Following - up System

Operational results have been reported to the Company’s Board of Directors by management on a quarterly year

basis. In this connection, comparisons between the current and the previous period of operational results and

informal production target and operational result were also given to the Board of Directors. Furthermore, weekly

executives’ meetings in order to analyze the problems and solutions thereof have been made. Finally, the Company

has just recruited a manager of internal control department including certain officers to work therein for the

Company’s internal control works while these people are to give reports in respect of results of internal control to

the Audit Committee directly Recommendations: Reports in respect of comparisons between the Company’s actual

operational results and the targets and the following-up results should, in case of difference, be given to the

Company’s Board of Directors formally and regularly. In addition, there should be systemized mechanisms for

preparing and giving reports to the Audit Committee and the Board of Directors in respect of audited results,

audited result following-up, any material errors, fraudulences and doubtful fraudulences.

072

073

STRUCTURE OF SHAREHOLDING

Names and proportions of the first 10 major sharehodlers as at

31 December 2006 are as follows:

Item Names of Shareholders Number of Shares %

1 Superior Overseas (Thailand) Co., Ltd. 1 2,522,588,903 22.73

2 Ample Vision Group Ltd. 2 1,622,083,795 14.61

3 Dr. Somsak and Ms. Patama Leeswadtrakul Group 3 1,134,956,864 10.22

4 Rochelle Finance Limited 505,582,531 4.55

5 Morgan Stanley & Co International Limited 410,726,800 3.70

6 Mr. Nirum Ngamchumnanrit 295,200,000 2.66

7 Great Western Limited 271,241,066 2.44

8 Bethleham International Limited 223,733,651 2.02

9 Eastgate Limited 179,910,635 1.62

10 Newhaven Limited 177,733,373 1.60

11 Others 3,756,242,382 33.85

Total 11,100,000,000 100.00

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

(1) Ms. Patama Leeswadtrakul 29.42%

(2) Mr. Eakphet Chansue 19.80%

(3) Ms. Chunpit Phattana 15.38%

(4) Marcow Wealth Investment Co., Ltd. 10.00%

(5) Others 25.40%

2 The shareholding structure of Ample Vision Group Ltd.

(1) Mr. Hamish Gordon Cruden 100.00%

3 Dr. Somsak and Ms. Patama Leeswadtrakul Group consisting of:

(1) Ms. Patama Leeswadtrakul 9.70% ( 1,077,802,793 shares )

(2) Dr. Somsak Leeswadtrakul 0.06% ( 7,154,071 shares )

(3) Ms. Suthidarat Leeswadtrakul 0.22% ( 25,000,000 shares )

(4) Ms. Suratiporn Leeswadtrakul 0.22% ( 25,000,000 shares )

INTER-RELATED TRANSACTIONS WITH PARTIES WITH CONFLICT OF INTEREST

In 2006, the Company had inter – related transactions with parties with conflict of interest as follows:

Parties with Conflict

Of Interest

Relationships Types of

Transactions

Transactions

Value in 2006

Balance

at 2006

Year-end

Details / Terms &

Conditions

Sukhumvit Inter

Development Co.,Ltd.

(“SID”)

Nature of Business

- Real Estate Development

(Office building,

industrial estate and

others)

- 1.26% of shares held

directly and indirectly

by the Company’s

director and

shareholder, G Steel’s

ex – director serving as

a member of SID’s

Board of Directors

• Raw water

expense

14,709,884 1,286,340 • As per a contract to

buy and sell raw water via

SID, an industrial estate

park management, at a

more competitive price

than direct purchase

from the producer.

Paitoon Hotel and

Resort Co., Ltd. (“PHR”)

Nature of Business

- Hotel


directly and indirectly

by the Company’s

directors and

shareholders, and have

common members of

Board of Directors

• service fees

1,920,155 272,973 • For service fees for

usages of Arnoma

Hotel’s facilities for the

Company’s meetings

and receptions of

foreign guests. The

hotel is situated in a

convenient location

and charges standard

service fees.

Oriental Access Co., Ltd.

(“OA”)

Nature of Business

- Business Consulting


indirectly via Siam

Professional Holding

Co., Ltd.

• service fees

105,978,836 105,978,836 Service fees for

consultation rendered

to OA on business and

production process

management.

074

075

INTER – RELATED TRANSACTIONS WITH MAJOR BUSINESS ALLIANCES

Business Alliances Relationships Types of Transactions

Transactions Value in

2006

Balance at 2006 Year-end

Details / Terms & Conditions

Nara International Co., Ltd.

(“Nara”)

Nature of Business

- Steel Wholesaler and

Retailer

- Producer of other industrial

products

- The Company’s

directors and

shareholders formerly

served as directors in

Nara and held Nara’s

shares directly and

indirectly. However,

they quitted from both

capacities since

September 2004

• Expenses

for other

raw materials

and

consumable

supplies

• Expense for

the selling of

goods

• Expense for

the selling of

scrap

662,716,008

3,038,635,348

3,601,670

98,150,628

403,028,358

_

• Expenses for other raw material and

consumable supplies for the

production, a proportion of not

more than 3% of production costs.

Prices are based on costs plus

standard margin under normal

business terms and conditions.

• Expenses for the selling of hot rolled

coils at market prices under normal

business terms and conditions like

other customers with good financial

status and punctual payment

records as per the Company’s

terms and conditions.

• Expenses for the selling of scrap

from production process, Selling

prices are based on costs plus

standard margin under normal

business terms and conditions like

other customers .

Advance Metal Fabrication

Co., Ltd. (“Advance”)

Nature of Business

- Wholesaler and retailer of

steel and scrap

- The Company’s

directors and

shareholders formerly

served as directors in

Advance and held the

latter’s shares directly

and indirectly, however,

they relinguished since

September 2004

• Sales of

scrap

• Expense for

the selling of

goods

• Expense for

the selling of

scrap and

raw steel

2,989,004,338

1,304,805,704

11,959,482

200,235,008

341,816,850

_

• Expenses for scraps for production

process. Prices are based on costs

plus standard margin under normal

business terms and conditions and

not higher than those purchased

from other suppliers.

• Expenses for the selling of hot

rolled coils at market prices under

normal business terms and

conditions like other customers

with good financial status and

punctual payment records as per

the Company’s terms and

conditions.

• Expenses for the selling of scrap

the selling prices are based on

costs plus standard margin under


conditions like other customers.



2006



Federal Steel Industry Co.,

Ltd. (“Federal”)

Nature of Business

- Steel wholesaler and

retailer

- Its directors were

formerly the

Company’s directors

and shareholders, they

quitted since October

2004

• Expense for

the selling

of goods

2,028,079,940 361,276,533 • Expenses for the selling of hot







conditions.

Trinity Freight and

Shipping Co., Ltd.

(“Trinity Freight”)

Nature of Business

- Freight forwarding

service provider


retailer

- The Company’s

business alliance

• Freight

forwarding

service fees

• Expense for

the selling

of goods

758,737,692

41,419,538

54,941,569

24,044,869

• Expenses for transporting scrap

from ports to the factory,

transporting hot rolled coils from

the factory to customers’ premises

and ports for overseas markets.

Service charges were based on

weight and approximately the

same rate as other service

providers.

• Expenses for the selling of hot







conditions.

Trinity International Co., Ltd.

(“Trinity Inter”)

Nature of Business

- Wholesaler

- Customs clearance service

provider


retailer

- The Company’s

directors, shareholders

and executives were

formerly Trinity Inter’s

directors and

shareholders, but they

relinguished since early

2002 and 2003

respectively

• Service fees

21,614,185

2,550,247

• Service fees for customs clearance

for hot rolled coil import and

export. The fees were at market

prices in general.

076

077



2006



Millennium Metal Work Co., Ltd.

(“Millenium”)

Nature of Business


retailer

- An ex – major share

holder of Superior

Overseas (Thailand)

formerly served as

Millennium’s directors,

but quitted from the

position since 2003.

Expense for

the selling

of goods

500,034,738 137,056,621 Expenses for the selling of hot







conditions.

STANDARD AND PROCEDURES TO APPROVE INTER – RELATED TRANSACTIONS WITH RELATED

FIRMS OR PARTIES WITH CONFLICT OF INTEREST

The Company has a policy to protect benefits of all shareholders with strict standards and procedures

to control inter – related transactions with related firms or parties with conflict of interest as follows:

- In approving any transactions with related firms or parties with conflict of interest and business

alliances (to be referred altogether as “parties with conflict of interest”), the Board of Directors and

the Audit Committee shall contemplate and stipulate a clear cut policy as follows:

• The Board of Directors shall execute according to the Securities and Stock Exchange laws,

rules, regulations, announcement 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 Directors 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

its 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.

- For normal business transactions with related companies or parties with possible conflict of interest

and with business alliances, i.e., purchase 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 its 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.

- 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 case 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.

POLICY FOR INTER-RELATED TRANSACTIONS IN THE FUTURE

Having a policy on inter-related transactions in the future, the Company shall stipulate terms and

conditions as per standard practices at the market price, comparable to prices and conditions applied

to other business partners or vendors for the Company’s maximum benefits. It has no policy to extend

financial assistance to or guarantee any related firms or parties with conflict of interest in the future.

In making such inter-related transactions in the future with the parties with conflict of interest, it shall

assign the Audit Committee or the internal auditors or independent experts as deemed fit to

contemplate and make observation on appropriateness of prices and transaction justification. Such

transactions shall be executed according to the standard or procedures on inter – related transactions

as per an announcement of the SET and regulations of the Office of SEC.

078

079

NOTES AND ANALYSIS ON FINANCIAL STATUS AND PERFORMANCE RESULTS IN 2006

OVERALL PERFORMANCE RESULTS

Thailand’s steel industry situation in 2006 had fl uctuated all year – long due to unusual political situation and economic

slow down, however, fl uctuations were less than the situation in 2005. Average steel prices in year 2006 decreased

from the previous year since demand in the world market, China in particular, declined, and demand in Thailand dropped

by 14% from the previous year. Consequently, relevant entrepreneurs were forced to adapt to the situation, reducing

their production outputs in line with the market situation to support prices and to prevent supply and inventory

surpluses. In 2006, average steel prices continually reduced. Nevertheless, speculations and hoardings alleviated,

prices hence became more stable.

In 2006, G Steel’s total hot rolled coil outputs amounted to 0.97 million tons, a 13% decrease from that of the preceding

year with the production effi ciency of 65%. Its total sales volumes recorded at Baht 18,003 million, because of its prime

objective to maintain its domestic market shares. Focusing on domestic sales at a proportion of 93% of its overall

outputs, versus 7% for export sales, the Company aimed at maintaining balance between its production and selling

prices as well as maintaining relationship with overseas customers.

The Company’s profi tability in 2006 declined, compared to that of 2005 primarily due to a decrease in sales volumes

and increase in costs of goods sold, selling and administrative and interest expenses. However, the performance results

were at satisfactory level as the Company’s fi nancial ratios were higher than an overall average fi gure of the industry.

The selling gross margin marked at Baht 2,019 million or 11.2%, though it was lower than the previous year but much

higher than the industry’s overall average. This was due to effective management of sales and production costs. The

Company enjoyed a net profi t of Baht 1,678 million, including the profi t from the business rehabilitation,

or 8.8% net margin and 7.0% return on equities.

SELLING AND OTHER INCOMES

In 2006, G Steel and its subsidiaries marked a total income of Baht 19,119 million, its main income was

from the selling of goods of Baht 18,003 million or 94.2% of the total income, an 18.9% reduction from

the previous year due to market stagnation during the fi rst and third quarters as well as reducing steel

prices in line with an overall market demand decline throughout the year. Additionally, other incomes

of 5.8% were from services provided at Baht 115 million, an interest income of Baht 176 million, a profi t

of Baht 761 million from foreign exchange and other incomes of Baht 63 million.

SELLING, ADMINISTRATIVE AND INTEREST EXPENSES

In 2006, the Company and its subsidiaries had selling and administrative expenses of Baht 831 million.

Of this, Baht 558 million, or 3.1% of selling incomes, was for the Company’s expenses including

transportation, wages and salary, professional fees for legal and fi nancial advisors, expenses for

an issuance of additional debentures and other expenses invariable to production activities.

The Company and its subsidiaries bore interest expenses of Baht 606 million, mainly incurred from

an issuance of USD 170 million Bond, purchases and maintenance of raw materials, iron scrap and smelt

iron and other interest expenses.

080

081

OPERATING PROFIT AND NET PROFIT

The Company and its subsidiaries registered an operating profi t of Baht 1,655 million, or 9.1% operating profi t rate.

When combined with business rehabilitation profi t, the net profi t accounted for Baht 1,678 million or 8.8% rate, compared

to 38.8% of the previous year. The net earning per share was Baht 0.17, a 50% reduction from the previous year, while

the return on equities ratio was 7.0%, a 48.7% reduction from the previous year. Nevertheless, in 2006, the Company

had an accumulated profi t of Baht 12,712 million, an 11.3% rise from the previous year.

ASSETS AND LIQUIDITY

The Company and its subsidiaries had total assets of Baht 41,617 million, Baht 12,562 million of which were current,

whereas Baht 29,055 million were non – current. The liquidity ratio was 1.5 times, and the current liquidity ratio was

0.7 times, which was on average of the industry. In 2006, the Company invested in shares of Oriental Access Company

Limited and Nakonthai Strip Mill Public Company Limited at the book value of equity method of Baht 2,103 million,

or the stock values of Baht 2,145 million. At 2006 year-end, an investment in rights over secured convertible debts

amounted to Baht 3,989 million.

The fi xed assets including land, property and equipment at 2006 year-end had Baht 19,899 million of book value, an

increase of Baht 2,575 million or 14.9% over the previous year.

LIABILITIES

At 2006 year-end, the Company and its subsidiaries had a total liabilities of Baht 15,037 million, an increase of

Baht 8,321 million or 1.2 times increase over the preceding year. Of this, Baht 8,272 million were current liabilities, while

Baht 6,765 million were non-current ones.

In August 2006, the subsidiary companies borrowed from foreign fi nancial institutions USD 115.3 million, equivalent to

Baht 4,348 million, with one year repayment period.

The Company issued and offered bond with the faced value of USD 70 million to overseas investors in February

2006 and received a debenture value surplus of USD 1.4 million, adding up to USD 71.4 million. Taking into account,

conversion into Baht, foreign exchange conversion and deduction of expenses for the issuance of debentures, the net

book value was Baht 2,541 million. When combined with the net book value of the other debenture faced values of USD

100 million issued and offered to investors in October 2005, the total bond value at 2006 year – end amounted to

Baht 6,024 million. Of this, USD 170 million will be due in October 2010.

FINANCIAL STATUS

The Company has a firm financial structure since its risks are relatively low, compared to the industry average.

At 2006 year – end, its liabilities to capital was merely 0.57 times, its interest and debt coverage are satisfactory.

Its non-current liabilities to earnings before interest, tax and depreciation were 2.3 times, which was considered low,

while its interest coverage rate was 3.7 times, a low risk on interest delinquency.

INCURRING OF DEBT

Any new incurred debt will happen when the Leverage Ratio is lower than 4.50 to 1.00 if the debt incurring date is

before 1 January 2008, or the leverage ratio is lower than 4.00 to 1.00 if the debt incurring date is before 1 January

2008, or 4.00 to 1.00 if the debt incurring date is before or after 1 January 2008.

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 report

with sufficient disclosure of significant information in the notes on the

financial statement 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 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 report.

Dr. Somsak Leeswadtrakul Mr. Ryuzo Ogino

Chief Executive Officer President

082

To the Board of Directors and Shareholders of


I have audited the accompanying consolidated balance sheet of G Steel

Public Company Limited and its subsidiaries as at 31 December 2006,

the related consolidated statements of income, changes in shareholders’

equity and cash flows for the year then ended and the separate financial

statements of G Steel Public Company Limited for the same year. These

financial statements are the responsibility of the Company’s management

as to their correctness and the completeness of the presentation. My

responsibility is to express an opinion on these financial statements based

on my audit. The separate financial statements of G Steel Public Company

Limited for the year ended 31 December 2005, as presented herein for

comparative purposes, were audited by another auditor of our firm under

his report dated 24 February 2006 expressed an unqualified audit opinion

on those statements.

I conducted my audit in accordance with generally accepted auditing

standards. Those standards require that I plan and perform the audit to

obtain reasonable assurance about whether the financial statements are

free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles

used and significant estimates made by management, as well as

evaluating the overall financial statements presentation. I believe that

my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,

in all material respects, the financial positions of G Steel Public Company

Limited and its subsidiaries, the separate financial statements of G Steel

Public Company Limited as at 31 December 2006, and the results of their

operations and cash flows for the year then ended in accordance with

generally accepted accounting principles.

Without qualifying my opinion on the above financial statements, I draw

attention to Note 6 to the financial statements regarding the investments

of the Company and its subsidiary company in ordinary shares and rights

of secured convertible debts.

Rungnapa Lertsuwankul

Ernst & Young Offi ce Limited Certifi ed Public Accountant

Bangkok: 26 February 2007 (Thailand) No. 3516

REPORT OF INDEPENDENT

AUDITOR

CONSOLIDATED THE COMPANY ONLY

Note 2006 2006 2005

(Unit: Baht)

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

ASSETS

Current assets

Cash and cash equivalents 1,616,101,861 1,598,585,692 1,621,834,060

Trade accounts receivable 7, 17 2,122,768,748 2,122,768,748 2,225,655,011

Trade accounts receivable - related party 18 20,114,078 _ _

Amount due from related parties 18 479,862,051 514,749,613 _

Current portion of loans to and 18 _ 12,748,056 _

interest receivable from related parties

Inventories - net 8 7,118,502,998 7,118,502,998 3,602,905,841

Other current assets 9, 17 1,204,523,593 1,201,669,257 414,014,471

Total current assets 12,561,873,329 12,569,024,364 7,864,409,383

Non-current assets

Restricted deposits at fi nancial institutions 10 757,755,673 757,755,673 433,772,798

Investments 11 2,102,918,156 1,428,999,300 _

Investment in rights over secured 12 3,989,311,444 _ _

convertible debts

Loans to related parties 18 _ 10,786,650 _

Property, plant and equipment - net 13 19,898,769,070 19,898,769,070 17,323,570,435

Intangible assets - computer software 14 45,788,483 45,788,483 46,888,924

Other non-current assets 15 2,260,481,655 2,260,481,655 2,594,951,851

Total non-current assets 29,055,024,481 24,402,580,831 20,399,184,008

TOTAL ASSETS 41,616,897,810 36,971,605,195 28,263,593,391

BALANCE SHEETS


AND ITS SUBSIDIARIES

AS AT 31 DECEMBER 2006 AND 2005


Note 2006 2006 2005

(Unit: Baht)

084


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Short-term loan from fi nancial institution 16 4,347,696,000 _ _

Trade accounts payable 17 2,277,484,657 2,277,484,657 1,111,668,960

Trade accounts payable - related party 18 205,133,059 205,133,059 _

Others payable 17 527,490,215 527,489,715 273,292,560

Payable on purchase of investment 326,077,200 _ _

Advance received from customers 267,818,967 267,818,967 241,775,836

Current portion of liabilities which were 19 11,826,077 11,826,077 76,191,866

included under the former

rehabilitation plan

Other short-term loan 20 3,000,000 _ _

Accrued expenses 17, 18 111,284,155 99,874,358 151,270,169

Accrued interest 21 194,269,225 176,793,869 157,398,562

Total current liabilities 8,272,079,555 3,566,420,702 2,011,597,953

Non-current liabilities

Liabilities which were included under the

former rehabilitation plan 19 740,358,732 740,358,732 752,225,756

Bonds 22 6,024,315,243 6,024,315,243 3,952,104,687

Total non-current liabilities 6,764,673,975 6,764,673,975 4,704,330,443

Total liabilities 15,036,753,530 10,331,094,677 6,715,928,396

BALANCE SHEETS (Continued)




085


Note 2006 2006 2005

(Unit: Baht)


Shareholders’ equity

Share capital

Registered share capital 23

12,000,000,000 ordinary shares of

Baht 1 each 12,000,000,000 12,000,000,000 12,000,000,000

Issued and paid up share capital

11,100,000,000 ordinary shares of Baht 1 each

(2005: 8,200,000,000 ordinary 11,100,000,000 11,100,000,000 8,200,000,000

shares of Baht 1 each)

Other surplus

Share premium 2,561,677,530 2,561,677,530 1,719,140,000

Premium on capital reduction 24 206,307,094 206,307,094 206,307,094

Retained earnings

Appropriated - statutory reserve 25 681,974,286 681,974,286 595,058,886

Unappropriated 12,030,307,683 12,090,551,608 10,827,159,015

Equity attributable to Company’s shareholders 26,580,266,593 26,640,510,518 21,547,664,995

Minority interest - equity attributable to minority

shareholders of subsidiary (122,313) _ _

Total shareholders’ equity 26,580,144,280 26,640,510,518 21,547,664,995

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 41,616,897,810 36,971,605,195 28,263,593,391

BALANCE SHEETS (Continued)





Note 2006 2006 2005

(Unit: Baht)

086


Revenues

Sales 17 18,003,046,540 18,003,046,540 22,201,844,756

Service income 18 115,059,265 106,789,579 _

Gain on exchange rate 761,237,010 464,528,960 31,083,813

Interest income 18 176,224,827 102,350,184 21,377,732

Other income 63,241,458 63,241,458 42,772,256

Total revenues 19,118,809,100 18,739,956,721 22,297,078,557

Expenses

Cost of sales 17, 18 15,984,535,025 15,984,535,025 18,945,164,232

Selling and administrative expenses 17 831,374,477 557,679,934 466,940,749

Share of loss from investment in 42,010,000 _ _

associated company

Total expenses 16,857,919,502 16,542,214,959 19,412,104,981

Income before interest expense 2,260,889,598 2,197,741,762 2,884,973,576

Interest expense (605,794,633) (482,220,559) (353,736,948)

Income before minority interest 1,655,094,965 1,715,521,203 2,531,236,628

Loss of minority interest 182,313 _ _

Income from ordinary activity 1,655,277,278 1,715,521,203 2,531,236,628

Extraordinary items

Gain from rehabilitation 27 22,786,790 22,786,790 209,396,414

Net income for the year 31 1,678,064,068 1,738,307,993 2,740,633,042



FOR THE YEARS ENDED

31 DECEMBER 2006 AND 2005

INCOME STATEMENTS

087


Note 2006 2006 2005

(Unit: Baht)




FOR THE YEARS ENDED


INCOME STATEMENTS

Earnings per share 28

Basic earnings per share

Income from ordinary activity 0.17 0.17 0.31

Extraordinary item _ _ 0.02

Net income 0.17 0.17 0.33

Weighted average number of ordinary shares 10,047,671 10,047,671 8,200,000

(thousand shares)

Diluted earnings per share

Income from ordinary activity 0.17 0.17 _

Extraordinary item _ _ _

Net income 0.17 0.17 _

Weighted average number of ordinary

shares (thousand shares) 10,066,365 10,066,365 _


2006 2006 2005

(Unit: Baht)

088


Cash fl ows from operating activities

Net income for the year 1,678,064,068 1,738,307,993 2,740,633,042

Adjustments to reconcile net income to net cash provided

(paid) from operating activities: -

Depreciation and amortisation 596,221,251 596,221,251 572,976,550

Amortisation of deferred bond arrangement fees 29,029,867 29,029,867 4,846,764

Amortisation expenses 95,055,641 95,055,641 70,143,363

Amortisation of premiums (discounts) of bonds 3,166,800 3,166,800 (3,856,147)

Allowance for diminution in value of inventories 128,168 128,168 4,303,481

Unrealised gain on exchange (671,971,569) (517,091,246) (16,905,376)

Share of loss from investment in associated company 42,010,000 _ _

Minority interest in subsidiaries (122,313) _ _

Income from operating before changes in operating assets 1,771,581,913 1,944,818,474 3,372,141,677

and operating liabilities

Decrease (increase) in operating assets

Trade accounts receivable 63,239,913 63,239,913 (983,766,400)

Amount due from related parties (499,976,129) (514,749,613) _

Inventories (3,515,725,325) (3,515,725,325) (1,441,208,010)

Other current assets (820,048,315) (817,193,979) 209,185,751

Intangible assets (890,361) (890,361) (86,402,203)

Other non-current assets (74,164,760) (74,164,760) (91,589,945)

Increase (decrease) in operating liabilities

Trade accounts payable 1,201,850,934 1,201,850,934 (85,950,786)

Amounts due to related companies 205,133,059 205,133,059 _

Other payable 601,096,355 254,197,155 (56,867,663)

Advance received from customers (1,264,318) (1,264,318) 207,852,814

Accrued interest payable 41,082,718 22,195,689 157,300,636

Accrued expenses (38,257,192) (49,666,989) 57,494,191

Net cash fl ows from (provided in) operating activities

before extraordinary items (1,066,341,508) (1,282,220,121) 1,258,190,062

Extraordinary items (22,786,790) (22,786,790) (209,396,414)

Net cash fl ows from (provided in) operating activities (1,089,128,298) (1,305,006,911) 1,048,793,648



FOR THE YEARS ENDED


CASH FLOWS STATEMENTS

089


2006 2006 2005

(Unit: Baht)


Cash fl ows from investing activities

Increase in restricted deposits at fi nancial institutions (323,982,875) (323,982,875) (432,772,798)

Cash paid for acquisition of subsidiary _ (999,300) _

Decrease (increase) in deposits for purchases of assets 182,844,262 182,844,262 (1,288,835,502)

Loan to related parties _ (24,565,856) _

Net increase in property, plant and equipment (3,169,429,084) (3,169,429,084) (1,767,440,860)

Acquisition of rights over secured convertible debts (4,706,239,600) _ _

Net cash fl ows used in investing activities (8,016,807,297) (3,336,132,853) (3,489,049,160)

Cash fl ows from fi nancing activities

Cash received from short-term loan from fi nancial institution 4,479,312,000 _ _

Cash received from increase in share capital 2,400,000,000 2,400,000,000 _

Other short-term loan 3,000,000 _ _

Payment of expenses related to increase in share capital (85,462,470) (85,462,470) _

Cash received from the subscription of bonds 2,800,888,996 2,800,888,996 4,024,163,722

Payment of bonds arrangement fee (56,089,107) (56,089,107) (96,935,283)

Payment of liabilities which were included under

the former rehabilitation plan (53,446,023) (53,446,023) (218,540,883)

Dividend paid (388,000,000) (388,000,000) _

Net cash fl ows from fi nancing activities 9,100,203,396 4,617,891,396 3,708,687,556

Net increase (decrease) in cash and cash equivalents (5,732,199) (23,248,368) 1,268,432,044

Cash and cash equivalents at beginning of year 1,621,834,060 1,621,834,060 353,402,016

Cash and cash equivalents at end of year 1,616,101,861 1,598,585,692 1,621,834,060

Supplemental cash fl ows information

Non-cash items

Trade accounts receivable decreased by offsetting with

trade accounts payable _ _ 1,990,058,070

Issue ordinary shares in exchange of investment

in associated company 1,428,000,000 1,428,000,000 _

Convert investment in rights over secured convertible

debts to ordinary shares of associated company 716,928,156 _ _

Cash paid during the year for: -

Interest expense 651,757,871 545,659,153 196,338,386

Interest capitalised in assets 407,906,460 407,906,460 22,965,707



FOR THE YEARS ENDED


CASH FLOWS STATEMENTS

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092

1. GENERAL INFORMATION

a) G Steel Public Company Limited is a public company incorporated and domiciled in Thailand. The Company

is principally engaged in the manufacture and distribution of hot rolled coils and its registered address is

88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong, Bangrak, Bangkok.

b) On 25 January 2006, the Stock Exchange of Thailand approved the trading of the Company’s securities on

the Stock Exchange of Thailand.

2. BASIS OF PREPARATION

The fi nancial statements have been prepared in accordance with accounting standards enunciated under the

Accounting Act B.E. 2547. The presentation of the fi nancial statements has been made in compliance with the

stipulations of the Notifi cation of the Department of Business Development dated 14 September 2001, issued

under the Accounting Act B.E. 2543.

The fi nancial statements have been prepared on a historical cost basis except where otherwise disclosed in the

accounting policies.

3. BASIS OF CONSOLIDATION

3.1 The consolidated fi nancial statements were presented for the fi rst time as a result of the acquisition of

subsidiaries during the period ended 30 September 2006.

3.2 The consolidated fi nancial statements include the fi nancial statements for the year ended 31 December

2006 of G Steel Public Company Limited and the following subsidiary companies:

Assets as a percentage to the consolidated total assets

as at 31 December

Revenue as percentage

to the consolidatedtotal revenue

for theyear ended

31 DecemberCompany’s name

Nature

of business

Percentage of

shareholding

Country of

incorporation

2006 2006 2006

Percent Percent Percent

Held by the Company

Siam Professional Holding 99.93 Thailand 10.2 0.1

Holdings Co., Ltd. company

093

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



FOR THE YEARS ENDED


Percentage of Country of

Company’s name Nature of business indirect shareholding incorporation

2006

Percent

Held by subsidiary company

Oriental Access Co., Ltd. Consulting service 99.92 Thailand

(100% held by Siam Professional Holdings Co., Ltd.)

3.3 Material balances and transactions between the Company and its subsidiary companies have been

eliminated from the consolidated financial statements.

4. ADOPTION OF NEW ACCOUNTING STANDARDS

In October 2006, the Federation of Accounting Professions issued Notifi cation No. 26/2006 regarding Accounting

Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries” (Amendment

No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in

the separate fi nancial statements under the cost method rather than the equity method. Entities which are not

ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and

adopt the cost method as from 1 January 2007.

In addition, in November 2006, the Federation of Accounting Professions issued Notifi cation No. 32/2006 stated

that investment in associated company has to be recognised in the separate fi nancial statements under the

cost method in accordance with the Notifi cation No. 26/2006.

In this regard, the Company has elected to adopt the above accounting policy in the third quarter of 2006 as a

result of an acquisition in the subsidiaries and associate for the fi rst time in that period.

5. SIGNIFICANT ACCOUNTING POLICIES

5.1 Revenue recognition

Sales of goods

Sales of goods are recognised when the signifi cant risks and rewards of ownership of the goods have

passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after

deducting discount and allowance.

Rendering of services

Service revenue is recognised when services have been rendered taking into account the stage of completion.

Interest income

Interest income is recognised as interest accrues based on the effective rate method.

5.2 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, cash at fi nancial institutions and all highly liquid

investments with an original maturity of three months or less and not subject to withdrawal restrictions.

094

5.3 Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is

provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally

based on collection experiences and analysis of debtor aging.

5.4 Inventories

Finished goods are valued at the lower of cost (moving average method) and net realisable value.

Raw materials and other consumable are valued at the moving average cost and constitute part of production

costs whenever consumed.

Offi ce supplies, which useful life over 1 year, are recorded as other assets and amortised over the estimated

useful life over 2 years.

The associated company records fi nished goods using specifi c method, raw materials using FIFO method.

The effect of the difference in accounting policy is immaterial to the calculation of share profi t (loss) from

investment in associated company and the book value of investment in the consolidated fi nancial statements.

5.5 Investments

Investments in subsidiary and associated companies in the separate fi nancial statements are accounted

for under the cost method.

Investments in associated company in the consolidated fi nancial statements are accounted for under

the equity method. Under this method, the investment is recorded at cost and for each subsequent year

adjusted to incorporate the Company and its associated company’s proportionate share of the operating

results of the associated company.

The difference of cost of investment lower than the net book value of the investment in associated company

recognised as income on a systematic basis over the remaining weighted average useful life of the identifi able

depreciable assets.

5.6 Property, plant and equipment/Depreciation

Land is stated as cost. Building and equipment are valued at cost less accumulated depreciation and

allowance for loss on impairment of assets.

Depreciation of plant and equipment is calculated by reference to their costs on the straight-line basis

except for depreciation of machinery which calculated on productive-output method over the following

estimated useful lives:

Buildings 20 years

Machinery and plant equipment 5 and 30 years

Offi ce equipment 5 years

Furniture and fi xtures 5 years

Leasehold improvement 5 years

Motor vehicles 5 years

Depreciation is included in determining income.

No depreciation is provided for land and factory under construction.

5.7 Intangible assets

Computer software is stated at cost less accumulated amortisation. Amortisation of computer software

is calculated by reference to its cost on the straight-line basis over the expected future period, for which

the assets are expected to generate economic future, of 10 years.

The amortisation is included in determining income.

095

5.8 Deferred bond arrangement fees / Discounts or premiums on bonds

Bond arrangement fees are recorded as deferred expenses and to be amortised on an effective interest

rate method over the period of bonds.

Discounts or premiums on the issuance of bonds were amortised on an effective interest rate method

over the period of bonds.

The amortisation of deferred bond arrangement fees and discount or premiums on bonds are included in

determining income.

5.9 Related party transactions

Related parties comprise enterprises and individuals that control, or are controlled by, the Company,

whether directly or indirectly, or which are under common control with the Company.

They also include associated companies and individuals which directly or indirectly own a voting interest in

the Company that gives them signifi cant infl uence over the Company, key management personnel, directors

and offi cers with authority in the planning and direction of the Company’s operations.

5.10 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.

5.11 Foreign currencies

Foreign currency transactions are translated into Baht at the exchange rates ruling on the transaction

dates. Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are

translated into Baht at the exchange rates ruling by the Bank of Thailand at the balance sheet date. Gains

and losses on exchange are included in determining income.

5.12 Impairment of assets

The Company assesses at each reporting date whether there is an indication that an asset may be

impaired. If any such indication exists, the Company makes an estimate of the asset’s recoverable amount.

Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired

and is written down to its recoverable amount. Impairment losses are recognised in the income statement.

An asset’s recoverable amount is the higher of fair value less costs to sell and value in use.

5.13 Employee benefi ts

Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised

as expenses when incurred.

The Company issued warrants to purchase the ordinary shares to directors and employees of the Company.

The transaction will be recorded in the fi nancial statements when the warrants are exercised.

5.14 Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event, it is

probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation

and a reliable estimate can be made of the amount of the obligation.

5.15 Income tax

Income tax is provided for in the accounts based on the taxable profi ts determined in accordance with tax

legislation.

5.16 Derivatives

Forward exchange contracts

Receivables and payables arising from forward exchange contracts are translated into Baht at the rates

096

of exchange ruling on the balance sheet. Unrealised gains and losses from the translation are included in

determining income. Premiums or discounts on forward exchange contracts are amortised on a straight-line

basis over the contract periods.

Interest rate swap contracts

The net amount of interest to be received from or paid to the counterparty under the interest rate swap

contracts is recognised as income or expenses on an accrual basis.

5.17 Use of accounting estimate

Preparation of fi nancial statements in conformity with generally accepted accounting principles requires

management to make estimates and assumptions in certain circumstance, affecting the amounts reported in

the fi nancial statements and related notes. Actual results could differ from these estimates.

6. INVESTMENT OF THE COMPANY AND ITS SUBSIDIARY COMPANY

THE COMPANY

On 26 June 2006, the meeting of the Board of Directors of the Company passed a resolution to approve Oriental

Investment Co., Ltd.’s (subsequently is the Company’s subsidiary) acquisition of rights of claim over secured

convertible debt to equity in accordance with the business rehabilitation plan of Nakornthai Strip Mill Public

Company Limited (“NSM”), amounting to not more than USD 130.12 million from On City Holdings Limited and

the existing creditors of NSM at a price of not more than USD 180 million. The subsidiary was to invest USD 120

million and the Company was to invest USD 60 million. The Company’s management considered this strategic

alliance with NSM to be an enhancement in the capacity of both the Company and NSM in various aspects

such as production, competition, cost controlling, market entering, business risk reduction and changing the

competitor to the business alliance. In addition, the meeting of the Board of Directors of the Company approved

the Company’s cancellation of 1,750 million of shares allocated to the initial public offering and the 450 million

shares of the over allotment/Greenshoe option. In addition, the Board of Directors also approved the allocation

of not more than 2,200 million shares to On City Holdings Limited and the existing creditors of NSM as the part

of the consideration for the transfer of the above-mentioned rights of claims.

On 2 August 2006, an Extraordinary General Meeting of the Company approved the Company’s cancellation of

1,750 million of shares allocated to the initial public offering and the 450 million shares of the over allotment/

Greenshoe Option. In addition, the meeting approved the allocation of not more than 2,200 million shares to the

existing creditors of NSM, by way of private placement at an offering price of not less than Baht 1.40 per share.

Creditors of NSM is to make payment for the shares by transfer of the rights of claim over debts to be converted

to the ordinary shares of NSM, according to the business rehabilitation plan of NSM (including the amendment

to be made) in the amount not exceeding USD 60 million, or equivalent to 2,511,266,071 shares. In this regard,

the Board of Directors and/or any persons assigned by the Board are granted the authority to determine any

details in respect of the allocation of the additional shares and offer price.

On 12 September 2006, the Company issued the 1,400 million unallocated additional shares at an allocation price

of Baht 1.51 per share (the market price of the Company’s shares as of the date of exchange was Baht 1.02 per

share) to six creditors under the Master Restructuring Agreement of NSM in exchange of 2,511,266,071 ordinary

shares in NSM, resulting from the conversion of rights in secured convertible debt. The Company allocated the

additional shares to the group of creditors under the restructuring plan as follows: -

1. Rochelle Finance Limited 505,582,531 shares

2. Eastgate Limited 179,910,635 shares

3. Great Western Limited 271,241,066 shares

4. Newhaven Limited 177,733,373 shares

5. Bethleham International Limited 223,733,651 shares

6. On City Holdings Limited 41,798,744 shares

097

The Company received the transfer of 2,511,266,071 shares in NSM on 19 September 2006 and the Company

registered the change in paid-up shares capital with the Ministry of Commerce on 12 September 2006.

THE SUBSIDIARY COMPANY

On 28 June 2006, Oriental Investment Co., Ltd. (subsequently is the Company’s subsidiary and changed its

name to Oriental Access Co., Ltd.) entered into a Memorandum Of Understanding with On City Holdings Limited,

on behalf of the representation of NSM, as to acquire rights of claim in secured debt amounting to USD 104.3

million to be converted to equity in Nakornthai Strip Mill Plc., (“NSM”) at Baht 0.42 per share, applying the fi xed

exchange rate of Baht 43.5065 per USD 1, at a price of USD 122 million.

The subsidiary company paid USD 113 million on 13 September 2006 in order to settle such purchase and outstanding

unpaid balance as of the ending year was USD 9 million. The subsidiary received the transfer of 1,456,519,267

shares of NSM, of which converted from USD 14.1 million of principal debt, at a conversion price of Baht

0.42 per share on 22 September 2006. The remaining debt amounting to USD 90.2 million, represents rights of

claim in secured debt which is to be converted to equity within 18 months.

As of 30 September 2006, the Company and its subsidiary had received a total of 3,967,785,338 shares of NSM

with an average cost of investment to the Company at Baht 0.51 per share and the subsidiary at Baht 0.44

per share. The Company determined the consideration using Adjusted Net Book Value at Baht 0.68 per share

discounting by 25 percent due to the business characteristic of NSM which required a highly investment and

could hardly be estimated. The steel business also signifi cant fl uctuates with the change in the world market.

In addition, NSM operated its full capacity in 2005, and this was used as the base year to prepare fi nancial

forecasting. Therefore, it is possible that actual operating result in the future may signifi cant differ from

the estimation.

The market price of ordinary shares of Nakornthai Strip Mill Plc. as of the transaction date was Baht 0.38

per share.

In addition, the Company hired an independent fi nancial advisor (Sage Capital Limited) to study the reasonableness

and benefi t of this investment. That fi nancial advisor has already reported the result of the study to the Board

of Directors.

7. TRADE ACCOUNTS RECEIVABLE

The outstanding balances of trade accounts receivable as at 31 December 2006 and 2005, are aged based on

due date, is as follows:

(Unit: Baht)

CONSOLIDATED AND

THE COMPANY ONLY

2006 2005

Age of receivable

Not yet due 939,201,404 641,575,199

Past due

Less than 3 months 1,159,548,071 1,582,256,771

3 - 6 months 24,019,273 1,823,041

2,122,768,748 2,225,655,011

098

8. INVENTORIES

(Unit: Baht)

CONSOLIDATED AND

THE COMPANY ONLY

2006 2005

Raw materials 5,572,394,768 1,833,835,240

Finished goods 805,710,582 705,659,699

Spare parts 395,023,703 564,547,300

Consumable 263,775,407 291,560,650

Others 91,196,969 216,774,215

Total inventories 7,128,101,429 3,612,377,104

Less: Allowance for slow-moving inventories (9,598,431) (9,471,263)

Inventories - net 7,118,502,998 3,602,905,841

9. OTHER CURRENT ASSETS

(Unit: Baht)


2006 2006 2005

Other receivables 219,469,298 219,469,298 49,164,440

Deposit for purchase of investment 326,077,200 326,077,200 _

Refundable value added tax 172,454,686 172,454,686 31,903,364

Suspense value added tax 53,775,222 53,775,222 118,114,176

Advance for purchases of goods and service 397,462,134 397,462,134 196,243,634

Interest receivable 20,975,056 20,975,056 _

Others 14,309,997 11,455,661 18,588,857

1,204,523,593 1,201,669,257 414,014,471

The outstanding balance of other receivables in the consolidated and the separate fi nancial statements of the

Company as of 31 December 2006 represents Baht 177 million of credit notes issued by the Company’s suppliers

in order to reduce the price after payment had been made (2005: Baht 17 million) and Baht 326 million of deposit

for investment which On City Holdings Limited will refund to the Company.

10. RESTRICTED DEPOSITS AT FINANCIAL INSTITUTIONS

The outstanding balance was deposits at fi nancial institutions which the Company pledged with a bank as

a guarantee of interest payment on bonds and bank guarantees issued by bank as described in Note 35.4.

099

11. INVESTMENTS

THE COMPANY ONLY

These represent investments in ordinary shares in the following subsidiaries and associated companies.

(Unit: Million Baht)

THE COMPANY ONLY

As at 31 December 2006

Paid-up Shareholding

Name of incorporation capital percentage Cost

Subsidiary companies %

Siam Professional Holdings Co., Ltd. 1.0 99.93 1.0

Oriental Access Co., Ltd. (Held by Siam

Professional Holdings Co., Ltd.) 6.0 99.92 _

Associated company

Nakornthai Strip Mill Plc. 23,279.5 12.08 1,428.0

Total investments 1,429.0

Siam Professional Holdings Co., Ltd. was incorporated as a company under the Civil and Commercial Code

on 22 August 2006, with a registered share capital of Baht 1 million, consisting of 10,000 ordinary shares with

a par value of Baht 100 each. The Company purchased these shares on 22 August 2006.

On 26 June 2006, a Board of Directors meeting of the Company passed a resolution approving the

Company’s acquisition of a 94 percent interest in Oriental Access Co., Ltd. (formerly known as “Oriental

Investment Co., Ltd.”), comprising 94 ordinary shares with a par value of Baht 10,000 each. The Company acquired

the shares on 30 June 2006.

On 24 June 2006, an Extraordinary General Meeting of the shareholders of Oriental Access Co., Ltd. passed

a resolution approving a Baht 5 million increase in that company’s registered share capital through the issue

of an additional 500 ordinary shares with a par value of Baht 10,000 each. The Company purchased all of

the additional shares at par value.

On 24 August 2006, the Company executed an agreement to sell 594 ordinary shares of Oriental Access

Co., Ltd., at Baht 10,000 per share, to Siam Professional Holdings Co., Ltd., the subsidiary company which

99.93 percent of interest held by the Company. The Company thus indirectly holds 99.92 percent of Oriental

Access Co., Ltd accordingly.

As described in Note 6, on 12 September 2006, the Company issued 1,400 million unallocated shares at an allocation

price of Baht 1.51 per share to six creditors under the business rehabilitation plan in exchange of 2,511,266,071

ordinary shares of Nakornthai Strip Mill Plc. (“NSM”). The market price of the Company at the date of exchange

is Baht 1.02 per share. Consequently, the Company recorded cost of investment in NSM at the fair value of

1,400 million additional issued shares of the Company.

100

CONSOLIDATED

These represent investments in ordinary shares in the following associated company.


CONSOLIDATED

As at 31 December 2006

Shareholding Carrying amounts

Name of incorporation percentage Cost based on equity

method

%

Investments in Nakornthai Strip Mill Plc. held by

G Steel Public Company Limited 12.08 1,428.0 1,402.1

Oriental Access Co., Ltd. 7.92 716.9 700.8

2,144.9 2,102.9

On 22 September 2006, Oriental Access Co., Ltd., the subsidiary company which 99.92 percent of interest

indirectly held by the Company received 1,456,519,267 shares of NSM resulting from the conversion of rights of

claim over secured convertible debt to equity of USD 14.1 million from the total rights of claim USD 104.3 million.

The valuation of investment as of the conversion date was Baht 634.3 million.

Subsequently on 12 December 2006, the subsidiary company converted the rights of claim over convertible debt

of USD 1.8 million or equivalent to Baht 82.6 million to 189,684,342 million of ordinary shares in accordance with

the condition stipulated in rehabilitation plan of NSM. As a result, investments in NSM held by the subsidiary

increased from Baht 634.3 million to Baht 716.9 million and the shareholding percentage in NSM of the Company

and its subsidiary therefore increase from 19.09% to 20.0%.

During the year, the Company and its subsidiary recognised Baht 52.7 million of share loss of NSM and Baht 10.7

million of negative goodwill as income, including as part of share loss from investment in associated company

in the income statement.

As a stipulated condition in the short-term loan agreement of the subsidiary company with the fi nancial

institutions, the subsidiary company had to pledge existing shares held in NSM and shares to be converted

in the future as the security for loan. However, the subsidiary company had not yet pledged its existing shares

in NSM since the NSM shares are subject to 6 months lock-up period after the Stock Exchange of Thailand

approves the additional ordinary shares as listed securities under the business rehabilitation plan of NSM and

therefore their trading, transfer and pledge are prohibited.

As of 31 December 2006, the market price of ordinary shares of NSM was Baht 0.34 per share or equivalent to

the valuation of investment Baht 1,413.5 million.

12. RIGHTS OF CLAIM OVER SECURED CONVERTIBLE DEBT

As described in Note 6, on 28 June 2006 Oriental Access Co., Ltd., (subsequently is a subsidiary of the Company)

executed a Memorandum Of Understanding with On City Holdings Limited; a company incorporated in the

British Virgin Islands, to purchase rights of claim over secured convertible debt amounting to USD 104.3 million

from On City Holdings Limited and existing creditors under the debt restructuring plan, at USD 122 million.

The subsidiary company paid USD 113 million on 13 September 2006 to settle such purchase and exercise rights

101

of claim in secured convertible debt amounting to USD 14.1 million to equity (as described in Note 11). The remaining

of rights of claim over secured convertible debt amounting to USD 90.2 million, as equivalent to Baht 4,071.9

million is the rights can be converted to equity within 18 months (within 6 January 2008). If the subsidiary

company exercises that conversion right of USD 90.2 million, the subsidiary company will receive 9,349,915,246

shares of Nakornthai Strip Mill Plc.

(Unit: Million)

CONSOLIDATED

USD Baht Shares

Rights over secured convertible debt -

beginning of year _ _ _

Add: Acquisition during the year 104.3 4,706.2 9,349.9

Less: Convert to ordinary shares during the year (15.9) (716.9) (1,646.2)

Rights over secured convertible debt - end of year 88.4 3,989.3 7,703.7

Under the rehabilitation plan of Nakornthai Strip Mill Plc., the subsidiary company will receive interest charged

at MLR on USD 63 million of principal until the principal is converted to equity. Interest on the above secured

convertible debt is to be received in full within the period of 10 years, commencing from the date the rehabilitation

plan is effective, and was to be received on a quarterly basis starting from October 2006. As of the balance

sheet date, the subsidiary has not received interest on this secured convertible debt.

As of 31 December 2006, the subsidiary company assigned rights and interest on rights of claim over secured

convertible debt of the subsidiary as security against short-term loan from fi nancial institution.

13. PROPERTY, PLANT AND EQUIPMENT

(Unit: Baht)

CONSOLIDATED AND THE COMPANY ONLY

Offi ce

equipment,

Building and Machinery and furniture Assets under

Land improvement equipment and fi xture Vehicle construction Total

Cost:

31 December 2005 734,848,633 2,014,700,151 17,841,991,965 134,000,772 6,315,814 1,759,686,234 22,491,543,569

Acquisition _ 9,033,976 397,922,451 4,174,503 3,540,000 2,754,758,153 3,169,429,083

31 December 2006 734,848,633 2,023,734,127 18,239,914,416 138,175,275 9,855,814 4,514,444,387 25,660,972,652

Accumulated depreciation:

31 December 2005 _ 604,150,529 2,124,142,659 76,480,886 2,015,388 _ 2,806,789,462

Depreciation for the year _ 66,823,445 509,574,839 16,492,138 1,340,026 _ 594,230,448

31 December 2006 _ 670,973,974 2,633,717,498 92,973,024 3,355,414 _ 3,401,019,910

Allowance for impairment:

31 December 2005 305,901,193 538,176,254 1,511,491,498 5,614,727 _ _ 2,361,183,672

31 December 2006 305,901,193 538,176,254 1,511,491,498 5,614,727 _ _ 2,361,183,672

Net book value:

31 December 2005 428,947,440 872,373,368 14,206,357,808 51,905,159 4,300,426 1,759,686,234 17,323,570,435

31 December 2006 428,947,440 814,583,899 14,094,705,420 39,587,524 6,500,400 4,514,444,387 19,898,769,070

Depreciation for the year:

2005 (Baht 566 million included in cost of production, the remaining included in determining income) 572,976,550

2006 (Baht 586 million included in cost of production, the remaining included in determining income) 594,230,448

102

As of 31 December 2006, 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 140.7 million (2005:

Baht 127.1 million).

14. INTANGIBLE ASSETS - COMPUTER SOFTWARE

(Unit: Baht)

CONSOLIDATED

AND THE COMPANY ONLY

2006 2005

Beginning balance 46,888,924 45,582,224

Acquisition/Transfer in 890,361 1,306,700

Amortisation for the year (1,990,802) _

Net 45,788,483 46,888,924

15. OTHER NON-CURRENT ASSETS

(Unit: Baht)

CONSOLIDATED


2006 2005

Deferred supply cost 199,052,652 82,090,184

Deposits for purchases of raw materials 923,446,553 1,048,755,030

Deposits for purchases of assets 1,105,991,240 1,288,835,502

Deposits for used of energy _ 170,429,906

Other deposits 31,991,210 4,841,229

2,260,481,655 2,594,951,851

16. SHORT-TERM LOAN FROM FINANCIAL INSTITUTIONS

On 30 August 2006, Oriental Access Co., Ltd. (“the subsidiary company”) executed a syndicated credit facility

agreement of USD 120 million with overseas fi nancial institutions and received USD 115.3 million of such amount

on 13 September 2006 for the payment of rights of claim over secured convertible debt of USD 113 million as

described in Note 12.

The loan carry interest at the percentage of SIBOR + margin per annum, with such interest is to be repaid on

every three-month, commencing from December 2006 and the principal repayment is to be made within one

year.

103

On 30 August 2006, the subsidiary company executed a number of agreements with the lenders in order to

provide collateral for the above credit facility agreement. These agreements are summarised below.

1. An agreement pledging shares of Nakornthai Strip Mill Plc. converted from existing claims, including any

additional shares received in the future resulting as a result of a share split, change in par value, transfer

of shares or if for any other reasons the number of shares increases.

2. Assignmen t of the operation services agreement made with Nakornthai Strip Mill Plc., assigning present

and future rights, and interest received from Nakornthai Strip Mill Plc. under the above agreement.

3. Assignment of rights and interest on rights of claim over secured convertible debt of the subsidiary

company. Under this assignment agreement, the subsidiary company agreed to notify the assignee and

security trustee of any changes in the rights or any conversion of convertible debts, in writing.

4. Assignment of rights in deposit accounts and interest on such deposits, including any other existing or

future rights or benefi ts generated.

In addition, on 30 August 2006 the Company executed a guaranteed agreement to guarantee an existing and

future loans of the subsidiary company.

17. TRANSACTIONS WITH BUSINESS ALLIANCES

During the years, the Company had signifi cant business transactions with its business alliances, which the

Company formerly had shareholders or directors in common or had the directors who have relationships with

the Company’s directors, The business transactions have been concluded on commercial terms and bases agreed

upon in the ordinary course of business between the Company and those companies. Below is a summary of

those transactions.


CONSOLIDATED AND

THE COMPANY ONLY

2006 2005 Pricing policy

Sales of goods 6,913 11,237 Normal selling price

Purchases of raw materials 3,652 2,832 Cost plus margin

Purchases of raw water _ 1 As stipulated in agreement

Commission paid _ 3 As stipulated in each agreement

but not exceed USD 3 per tonne

Transportation expenses

and other services 780 623 Agree-upon basis and contractual

price

Other income 16 12 Cost plus margin

Sales for 2006 amounting to Baht 214 million (2005: Baht 186 million) are “Bill and Hold Sales” transactions of

which the goods have not been delivered but the customers signed as acceptance on their invoices. The above

sales of Baht 27 million was made with a business alliance (2005: Baht 186 million was made with two business

alliances).

The outstanding balances of transactions as of 31 December 2006 and 2005 have been shown as follows:

104

(Unit: Baht)

CONSOLIDATED


2006 2005

Trade accounts receivable

Nara International Co., Ltd. 403,028,358 570,797,604

Advance Metal Fabrication Co., Ltd. 341,816,850 422,591,095

Federal Steel Industry Co., Ltd. 361,276,533 163,948,558

Millennium Metal Work Co., Ltd. 137,056,621 128,793,459

Trinity Freight and Shipping Co., Ltd. 24,044,869 273,367,527

1,267,223,231 1,559,498,243

Other current assets - other receivables


Nara International Co., Ltd. _ 1,201,954

Advance Metal Fabrication Co., Ltd. _ 547,433

1,861,333 10,975,085

Trade accounts payable

Nara International Co., Ltd. 98,150,628 58,317,772

Advance Metal Fabrication Co., Ltd. 200,235,008 134,548,355

298,385,636 192,866,127

Other payables

Trinity Freight and Shipping Co., Ltd. 54,941,569 _

Trinity International Co., Ltd. 2,550,247 898,495

57,491,816 898,495

Accrued expenses

Advance Metal Fabrication Co., Ltd. _ 100,000

Trinity International Co., Ltd. 5,283,936 2,181,233


49,067,608 107,038,386

105

18. RELATED PARTY TRANSACTIONS

During the years, the Company had signifi cant business transactions with their related parties. These transactions,

which have been concluded on the commercial terms and bases agreed upon in the ordinary course of

businesses between the Company and those companies. Below is a summary of those transactions.



2006 2006 2005 Pricing policy

Transactions with subsidiary

companies

Operating service income _ 107 _ Fixed rate and percentage on net

sales at stipulated in agreement

Interest income _ 1 _ 7% p.a.

Transactions with associated

company

Sales of raw materials 904 904 _ Normal selling price

Operating service income 115 _ _ Fixed rate and percentage on net

sales at stipulated in agreement

Purchases of raw materials 187 187 _ Normal selling price

Interest on investments in

rights over secured

convertible debts

74 _ _ MLR p.a.

Transactions with related

companies

Purchases of raw water 15 15 13 Contractual price

Gain from rehabilitation _ _ 182 Agree-upon basis

The outstanding balances of the above transactions as at 31 December 2006 and 2005 are consist of

the following:

(Unit: Baht)


2006 2006 2005

Trade accounts receivable - related party

Associated company

Nakornthai Strip Mill Plc. 20,114,078 _ _

Amount due from related parties

Subsidiary company

Oriental Access Co., Ltd. _ 109,311,042 _

Associated company

Nakornthai Strip Mill Plc. 479,862,051 405,438,571 _

Total amount due from related parties 479,862,051 514,749,613 _

106

The Company recorded receivable from sales of raw materials to an associated company as amount due

from related parties rather than trade accounts receivable - related party because raw materials sold to that

associated company was purchased from outside for sales.

(Unit: Baht)


2006 2006 2005

Loans to and interest receivable from related parties

Subsidiary companies

Oriental Access Co., Ltd. _ 18,422,514 _

Siam Professional Holdings Co., Ltd. _ 5,112,192 _

Total loans to and interest receivable from

related parties _ 23,534,706 _

Less: Current portion _ (12,748,056) _

_ 10,786,650 _

Loans to 2 subsidiaries of USD 0.5 million and Baht 5 million carried interest at 7 percent p.a. and have

maturity date on annually basis, commencing from December 2006 to 2010, and on demand respectively.

(Unit: Baht)


2006 2006 2005

Trade accounts payable - related party

Associated company

Nakornthai Strip Mill Plc. 205,133,059 205,133,059 _

Accrued expenses

Related company (Related by way of the same

group company)

Sukhumvit Inter Development Co., Ltd. 1,286,340 1,286,340 1,126,789

During 2006, movements of loans to and interest receivable from related parties were as follow:

(Unit: Baht)

Balance as at During the year Balance as at

1 January 2006 Increase Decrease 31 December 2006

Loans to and interest receivable

from related parties

Subsidiaries

Siam Professional Holdings _ 5,112,192 _ 5,112,192

Co., Ltd.

Oriental Access Co., Ltd. _ 18,422,514 _ 18,422,514

_ 23,534,706

107

Directors and management’s remuneration

In 2006 the Company and its subsidiaries paid salaries, meeting allowances and gratuities to their directors and

management totaling Baht 39.6 million.

In 2006, the Company allocated approximately 100 million warrants to purchase of the Company’s ordinary

shares to the directors and employees, without charge. The details of warrants were stated in Note 26 to

fi nancial statements.

Guarantee obligations with related parties

The Company has outstanding guarantee obligations with its related parties, as described in Note 34.4 to

the fi nancial statements.

19. LIABILITIES WHICH WERE INCLUDED UNDER THE FORMER REHABILITATION PLAN

(Unit: Baht)

CONSOLIDATED


2006 2005

Balance - beginning of the year 828,417,622 1,256,354,919

Repayment during the year (53,446,023) (218,540,883)

Trade and fi nancial creditors forgiven debts after the

rehabilitation plan (22,786,790) (209,396,414)

Balance - end of the year 752,184,809 828,417,622

Less: Current portion of liabilities included under the former

rehabilitation plan (11,826,077) (76,191,866)

Total liabilities which were included under the former

rehabilitation plan 740,358,732 752,225,756

20. OTHER SHORT-TERM LOAN

The outstanding represents short-term loan which the subsidiary obtained from a former shareholder of the

subsidiary. This loan has no interest charged and the repayment period is on demand.

21. ACCRUED INTEREST

(Unit: Baht)


2006 2006 2005

Bonds 154,494,169 154,494,169 104,233,782

Consigned inventories 22,299,700 22,299,700 53,164,780

Financial institution 17,475,356 _ _

194,269,225 176,793,869 157,398,562

109

108

22. 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 offer 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

of the Company Full or partial redemption on or after 4 October 2008 at a price of 105.25

percent of 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

of the bondholders Redemption at a price of 101 percent of principal plus accrued interest at

any time until maturity if there is a signifi cant 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 fi nancial 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

In addition, on 16 February 2006, the Company issued and offerred 70,000 units of bonds to the foreign inves-

tors. The bonds have face value at USD 1,000 each, or totalling USD 70 million. The offering price was USD

1,019.78 per unit and the term and conditions were the same as the above issued bonds.

(Unit: ‘000 Baht)


2006 2005

USD 100 million USD 70 million USD 100 million

bonds bonds Total bonds

Fair value of bonds 4,093,574 2,746,562 6,840,136 4,093,574

Effect of exchange rate (470,494) (210,406) (680,900) 23,886

Premiums (discounts) on face value (61,623) 45,850 (15,773) (73,267)

Amortisation of deferred bonds

arrangement fees (78,394) (40,754) (119,148) (92,089)

Book value of bonds 3,483,063 2,541,252 6,024,315 3,952,104

23. SHARE CAPITAL

In January 2006, the Company issued 1,500 million new shares with a par value of Baht 1 each and sold them

through an initial public offering at a price of Baht 1.60 per share, or for a total of Baht 2,400 million. The

Company recorded the expenses of Baht 85.5 million associated with the increase in share capital as a deduction

against premium on ordinary shares. The Company registered the increases in its share capital from Baht 8,200

million to Baht 9,700 million, comprising 9,700 million of ordinary shares of Baht 1 each, with the Commerce

Ministry on 20 January 2006. The Stock Exchange of Thailand has granted a listing of the Company’s ordinary

shares and permitted trading on 25 January 2006.

As described in Note 6, the Company issued 1,400 million ordinary shares at Baht 1.51 to swap the ordinary shares

in Nakornthai Strip Mill Plc. totalling 2,511 million shares. The market price of the Company at the transaction

date was Baht 1.02 per share. The Company recorded shares issued for the exchange with the ordinary shares

of Nakornthai Strip Mill Plc. at the market price of the transaction date, the paid-up share capital of the

Company therefore increased from Baht 9,700 million to Baht 11,100 million, comprised of 11,100 million or ordinary

shares with a par value of Baht 1 each. The share premium increased by Baht 28 million. The Company registered

its issued and paid up share capital of Baht 11,100 million with the Commerce Ministry on 12 September 2006.

The Stock Exchange of Thailand approved the additional ordinary shares of the Company as listed securities on

3 October 2006.

24. PREMIUM ON CAPITAL REDUCTION

In order to comply with the capital restructuring process stipulated in the rehabilitation plan, in 2004 the Com-

pany 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 defi cit. The

capital reduction of Baht 4,950 million compared to a defi cit the Baht 387.7 million as at 31 July 2003, and the

excess of the capital reduction over the defi cit 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 ordi-

nary shares with par value of Baht 1 each at Baht 0.01 each) against the share discount as a result of the capital

reduction.

111

110

25. STATUTORY RESERVE

Pursuant to Section 116 of 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 income, after deducting accumulated defi cit 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.

26. WARRANTS

On 12 January 2006, the Company issued approximately 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 employees could be able to exercise each of the one-third of all 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. The fi rst date of exercise is on 30 March 2007 and the last date is on 11 January 2011.

27. GAIN FROM REHABILITATION (Unit: Baht)

CONSOLIDATED


2006 2005

Gain from rehabilitation forgiven by trade payable as a results of the

repayment prior to maturity 25,889,107 27,599,139

Gain from rehabilitation plan forgiven by a related company as a result

of the repayment prior to maturity _ 182,195,223

Total gain from rehabilitation 25,889,107 209,794,362

Less: Adjustment of suspense value added tax of forgiven debts (3,102,317) (397,948)

22,786,790 209,396,414

The Company negotiated with its 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 income statements.

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

31 December 2005, 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 income 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 of 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 income statement.

28. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income for the year by the weighted average number

of ordinary shares in issue during the year.

Diluted earnings per share is calculated by dividing the net income for the year by the weighted average number

of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would

need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes

that the conversion took place either at the beginning of the year or on the date the potential ordinary shares

were issued.

Reconciliation between basic earnings per share and diluted earning per share is presented below.

CONSOLIDATED

For the year ended 31 December 2006

Weighted average

number of ordinary Earnings

Net income shares per share

(Thousand Baht) (Thousand shares) (Baht)


Net income 1,678,064 10,047,671 0.17

Effect of dilutive potential ordinary shares

ESOP _ 18,694


Net income of ordinary shareholders assuming the

conversion of warrants to ordinary shares 1,678,064 10,066,365 0.17

THE COMPANY ONLY

For the year ended 31 December 2006

Weighted average

number of ordinary Earnings

Net income shares per share

(Thousand Baht) (Thousand shares) (Baht)


Net income 1,738,308 10,047,671 0.17

Effect of dilutive potential ordinary shares

ESOP _ 18,694


Net income of ordinary shareholders assuming the

conversion of warrants to ordinary shares 1,738,308 10,066,365 0.17

No presentation of diluted earnings per share in the 2005 fi nancial statements because the Company issued

warrants to purchase the ordinary shares to the directors and employees of the Company in 2006.

113

112

29. DIVIDEND PAID

Dividend

Approved by Total dividend per share

(Million Baht) (Baht)

Dividend from net earnings of 2005 Annual General Meeting of

shareholders on 24 April 2006 388.0 0.04

Total for 2006 388.0 0.04

30. NUMBER OF EMPLOYEES AND RELATED COSTS

CONSOLIDATED


2006 2005

Number of employees at end of year 729 718

Employee costs for the year (Thousand Baht) 339,465 338,685

31. PROMOTIONAL PRIVILEGES

The Company has received promotional privileges from the Board of Investment for the manufacture of hot

rolled coils, pursuant to the promotion certifi cate No. 1047/2539. Subject to certain imposed condition, the

privileges include an exemption from corporate income tax for a period of 8 years from the date the promoted

operations commenced generating revenues and a 50% reduction of corporate income tax on income derived

from the promoted operations for a period of 5 years after the tax-exemption period end.

The Company’s revenues from sales for the years are below shown divided according to promoted and non-

promoted businesses.

(Unit: Baht)

Promoted business Non-promoted business Total

2006 2005 2006 2005 2006 2005

Revenues from sales

Domestic sales 16,809,293,349 19,654,893,575 _ _ 16,809,293,349 19,654,893,575

Export sales 1,193,753,191 2,546,951,181 _ _ 1,193,753,191 2,546,951,181

Total 18,003,046,540 22,201,844,756 _ _ 18,003,046,540 22,201,844,756

The Company is not liable to corporate income tax for the years due to tax loss brought forward.

32. FINANCIAL INFORMATION BY SEGMENT

The Company and its subsidiaries’ business operations involve 3 principal segments: manufacture and sold of

Hot Rolled Coils, consulting services and holding company. These operations are mainly carried on in Thailand.

Below is the consolidated fi nancial information for the year ended 31 December 2006 of the Company and its

subsidiaries by segment.


Manufacture and

sold of Hot Consulting

Rolled Coils services Holding company Total

Revenue from external – Domestic

sales

16,809.3 115.1 _ 16,924.4

- Export sales 1,193.7 _ _ 1,193.7

18,003.0 115.1 _ 18,118.1

Segment income 1,718.4 115.1 _ 1,833.5

Unallocated income and expenses

Interest income 176.3

Other income 824.4

Administrative expenses (229.3)

Share of loss from investment in

associated company (42.0)

Interest and fi nancial expenses (907.6)

Income before extraordinary item 1,655.3

Extraordinary item - gain from

repayment in prior period

stipulated rehabilitation 22.8

Net income 1,678.1

Property, plant and equipment 19,898.8 _ _ 19,898.8

Unallocated assets 21,718.1 _ _ 21,718.1

Total assets 41,616.9

In 2005, 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 profi ts and assets

as refl ected in these fi nancial statements pertain to the aforementioned industry segment and geographic

area. Export sales for the year 2005 was amounted to Baht 2,547 million.

33. PROVIDENT FUND

The Company and its employees have jointly established a provident fund as approved by the Ministry of Fi-

nance in accordance with the Provident Fund Act B.E. 2530. The fund is monthly contributed to by employees,

at the rate of 2 percent of their basic salaries, and by the Company at the same rate, and will be paid to em-

ployees upon termination in accordance with the rules of the fund. The fund is managed by Kasikorn Assets

Management Co., Ltd. During the year 2006, the Company contributed Baht 3 million (2005: Baht 2 million) to

the provident fund.

115

114

34. COMMITMENTS AND CONTINGENT LIABILITIES

34.1 Long-term services commitments

The Company has entered into agreements of providing raw materials, raw water, water supply management

and dock service fee. The Company is to pay service fees related to raw materials management, raw water,

water supply management and dock fees based on the quantity used.

The Company has entered into the purchase of gas with 2 companies and is to pay service fees under

this agreement at the variable rate based on the quantity of gas used and the fi xed rate as follows:-


Amount

2007 25.2

2008 - 2009 50.5

The Company had agreements to purchase raw materials with overseas suppliers for 40,169 tonne of

unreleased raw materials, which the ownership is belong to the sellers. In addition, the Company had to

pay interest at rate LIBOR + 1 to 1.75 percent on the unrealised raw materials.

34.2 Operating leases commitments

The Company has entered into several lease agreements in respect of the lease of offi ce building space.

Future minimum rentals payable under these leases as at 31 December 2006 are as follows:


Amount

2007 5.5

2008 - 2013 33.7

34.3 Other agreements commitments

The Company has commitments to pay fi nancial advisory fees, other advisory and service fees totalling

Baht 15.7 million. In addition, the Company has commitment to pay consulting fee, machine installation

based on working hours and the fi xed rate totalling USD 0.5 million, machinery and construction of

factory under the expansion project totalling USD 26.8 million and Baht 192.1 million.

34.4 Guarantees

The Company has guaranteed bank credit facilities of its subsidiary company amounting to USD 120 million.

As of 31 December 2006, the Company had Baht 441 million (2005: Baht 31 million) of letter guarantees

issued by banks on behalf of the Company in respect of certain performance bonds as required in the

normal course of business.

34.5 Litigation

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 2006, the Court

of First Instance ordered the suit dismissed. The shareholders, as the plaintiff, subsequently requested

leave to appeal but the Court First Instance refused to hear the appeal, fi nalizing the hearing of the case

by the court. However, the shareholders appealed the order of the court refusing leave to appeal. The

Appeals Court ordered the suit dismissed.

As at the balance sheet date, the shareholders have petitioned against the order of the Appeals Court

with the Supreme Court and the Company has submitted its case against the appeal. The litigation is

therefore being heard by the Supreme Court and if the Supreme Court uphold the order of the Appeals

Court, the outcome of the case is considered fi nal. However, if the Supreme Court cancels the existing

order, the case will need to be reheard.

35. FINANCIAL INSTRUMENTS

Financial risk management policies

The Company and its subsidiaries are exposed to risks from changes in interest rates and currency

exchange rates and risks from nonperformance of contractual obligations by counterparties. The

Company and its subsidiaries uses derivatives, as and when it considers appropriate, to manage such

risks. In addition, the Company and its subsidiaries have policies to enter into contracts with creditworthy

counterparties. Therefore, the Company and its subsidiaries do not expect any material fi nancial losses

to arise as a result of counterparties failing to discharge their obligations as stipulated in the fi nancial

instruments.

The accounting policies for derivatives are disclosed in the notes to fi nancial statements regarding

signifi cant accounting policies. The Company and its subsidiaries have no policies to hold or issue

derivatives for speculative or trading purposes.

Interest rate risk

Interest rate risk is the risk that future fl uctuations in market interest rates will affect the operating

results and cash fl ows of the Company and its subsidiaries.

The Company and its subsidiaries’ exposure to interest rate risk relates primarily to its cash at banks,

loans, investments in rights of claims over convertible debts, borrowings from fi nancial institutions

debentures and liabilities under the former rehabilitation which are subject to interest. As of 31 December

2006, the Company has Interest Rate Swap Transaction Agreement with a bank for principal totaling USD

120 million. The contract is for a period of 3 years, commencing from 4 April 2006 and maturing in April

2009. The Company has to pay interest on semi-annual, at each of 4 April and 4 October, to the bank at

a fi xed rate of 8.8 percent and the bank is required to pay interest to the Company at a rate depended

upon the rate of return of the securities as stipulated in the agreement.

As at 31 December 2006, the signifi cant fi nancial assets and liabilities classifi ed by type of interest rate

and, for those fi nancial assets and liabilities carrying interest at fi xed rates, by the contractual repricing

or maturity date (whichever is earlier) are as follows:


CONSOLIDATED

Fixed interest rates Non-

Within Over Floating interest Effective

1 year 1-5 years 5 years interest rate bearing Total interest rate

(% p.a.)

Financial assets

- Cash and cash equivalents _ _ _ 1,615.7 0.4 1,616.1 0.5 - 1.0

- Trade accounts receivable _ _ _ _ 2,122.8 2,122.8 _

- Trade accounts receivable - related party _ _ _ _ 20.1 20.1 _

- Amount due from related parties _ _ _ _ 479.9 479.9 _

- Deposits at fi nancial institutions

with restriction 78.5 _ _ 679.3 _ 757.8 0.5 - 3.0

- Investments in rights of claims

over secured convertible debts _ _ _ 3,989.3 _ 3,989.3 MLR

78.5 _ _ 6,284.3 2,623.2 8,986.0

Financial liabilities

- Short-term loan from fi nancial

institution _ _ _ 4,347.7 _ 4,347.7 SIBOR

- Trade accounts payable _ _ _ _ 2,277.5 2,277.5 _

- Trade accounts payable - related party _ _ _ _ 205.1 205.1 _

- Other payables _ _ _ _ 853.6 853.6 _

- Other short-term loan _ _ _ _ 3.0 3.0 _

- Liabilities under the former

rehabilitation plan _ _ _ _ 752.1 752.1 _

- Bonds _ 6,024.3 _ _ _ 6,024.3 10.5_ 6,024.3 _ 4,347.7 4,091.3 14,463.3

117

116


THE COMPANY ONLY

Fixed interest rates Non-

Within Over Floating interest Effective

1 year 1-5 years 5 years interest rate bearing Total interest rate

(% p.a.)

Financial assets

- Cash and cash equivalents _ _ _ 1,598.2 0.4 1,598.6 0.5 - 1.0

- Trade accounts receivable _ _ _ _ _ 2,122.8 _

- Trade accounts receivable

- related parties _ _ _ _ 514.7 514.7 _

- Deposits at fi nancial institutions

with restriction 78.5 _ _ 679.3 _ 757.8 0.5 - 3.0

- Loan to related parties 12.7 10.8 _ _ _ 23.5 7.0

91.2 10.8 _ 2,277.5 2,637.9 5,017.4

Financial liabilities

- Trade accounts payable _ _ _ _ 2,277.5 2,277.5 _

- Trade accounts payable

- related party _ _ _ _ 205.1 205.1 _

- Other payables _ _ _ _ 527.5 527.5 _

- Liabilities under the former

rehabilitation plan _ _ _ _ 752.1 752.1 _

- Bonds _ 6,024.3 _ _ _ 6,024.3 10.5_ 6,024.3 _ _ 3,762.2 9,786.5

Foreign currency risk

Foreign currency risk is the risk that the value of a fi nancial instrument will fl uctuate because of changes in

foreign exchange rates.

The Company and its subsidiaries are exposed to signifi cant foreign currency risk in respect of purchase/

sales transactions and borrowing denominated in foreign currencies. However, the Company has entered into

forward contracts with maturities of less than one year to mitigate the foreign currency risk.

Foreign currency assets/ liabilities

As at 31 December 2006, the outstanding balances of the Company and its subsidiaries’ fi nancial assets and li-

abilities denominated in foreign currencies are as follow:

CONSOLIDATED

Financial Financial Average exchange rate

Foreign currency assets liabilities As at 31 December 2006

(Million) (Million) (Baht per 1 foreign currency unit)

USD 122 338 36.0932

EUR 2 _ 47.4592

JPY 25 14 0.3035

THE COMPANY ONLY

Financial Financial Average exchange rate

Foreign currency assets liabilities As at 31 December 2006


USD 125 208 36.0932

EUR 2 _ 47.4592

JPY 25 14 0.3035

As at 31 December 2006, the Company and its subsidiaries had the following outstanding forward contracts:


Contractual exchange rate

Foreign currency Bought amount Sold amount Bought Sold


USD 12 _ 35.1950 - 38.4700 _

Credit Risk

Credit risk refers to the risk that counterparty will default on its contractual obligations, resulting in a fi nancial

loss to the Company.

The Company is exposed to credit risk primarily with respect to trade accounts receivable and other receivable.

The Company’s management manages such risk by establishing credit limits for customers and counterparties

and analysing their fi nancial position on an ongoing basis. As a result, the Company does not expect to incur

material fi nancial losses.

However, the Company is exposed to concentrations of credit risk with respect to trade receivables because it

has a few major customers who are in the same industry. The maximum exposure to credit risk is limited to the

carrying amounts of receivables as stated in the balance sheet.

118

Fair value

Fair value represents the amount for which an asset could be exchanged or a liability settled between know-

ledgeable, willing parties in an arm’s length transaction.

Since major fi nancial assets and fi nancial liabilities are short-term in nature, and loans to and loans from carry

interest at rates which approximate market rates, the fair values of fi nancial assets and fi nancial liabilities are

estimated to be close to the amounts presented in the balance sheet.

The Company estimated fair value of bonds using discounted cash fl ow based on the current interest rate. The

fair value of bonds are insignifi cantly different from the aggregate carrying value.

36. RECLASSIFICATION

Certain amounts in the fi nancial statements for the year ended 31 December 2005 have been reclassifi ed to

conform to the current year’s classifi cations, with no effect on previously reported net income or shareholders’

equity.

37. SUBSEQUENT EVENT

On 12 February 2007, Oriental Access Co., Ltd. the subsidiary of the Company received the transfer of

additional 1,646,203,609 shares converted from rights over secured convertible debt in accordance with the

business rehabilitation plan or equivalent to approximately 6.67 percent of registered and paid-up share

capital of NSM. The number of these shares and the existing shares made the Company and its subsidiary

held 5,803,673,289 shares, or approximately 23.51% of registered and paid-up shares capital of NSM.

38. APPROVAL OF FINANCIAL STATEMENTS

These fi nancial statements were authorised for issue by the Company’s Board of Directors on 26 February

2007.

119

SET INFORMATION REFERENCE GUIDE UNDER FORM 56-2

No. Topic Page

1 GENERAL INFORMATION

The Company and all details

Other reference persons

51

2 SUMMARY OF FINANCIAL INFORMATION

Financial Highlights

1

3 TYPE OF BUSINESS

Nature of Business, Income Structure and Structure of Transactions

with Business Alliances

52

4 RISK FACTORS

55

5 SHAREHOLDER’S STRUCTURE AND MANAGEMENT

• Shareholder List of 10 Major shareholders

• Management, Management’ s Structure and Nomination of Directors

and Management Team

• Remuneration for the Management, Remuneration by Cash and

remuneration by other

• Good Corporate Governance

• The Policy of Internal Information Using Protection

• Internal Control

72

39

45

62

68

69

6 COMMON INTERESTED PERSONS AND CONNECTED TRANSACTIONS

• Related transactions between the company and the parties with

conflicts of interest

• Related transactions between the company and with business alliances.

• Approval procedures for inter-related transactions

73

74

76

7 MANAGEMENT DISCUSSION AND ANALYSIS 78

8 FINANCIAL STATEMENTS 82

120

THE PRINCIPLES OF CORPORATE GOVERNANCE

No. Topic Page

1 Policy on Corporate Governance 62

2 Shareholders : Rights and Equitable Treatment 62

3 Various Group of Stakeholders 62

4 Shareholders’ Meetings 63

5 Leadership and Vision 64

6 Conflict of Interest 64

7 Business Ethics 64

8 Balance of Power for Non-Executive Directors 65

9 Aggregation or Segregation of Positions 65

10 Remuneration for Directors and the Management 65

11 Board of Directors’ Meetings 65

12 Committee 66

13 Controlling System and Internal Audit 67

14 Directors’ Reporting 68

15 Relations with Investors 68

Designed by : Pink Blue Black & Orange Co., Ltd. Tel. +66 (0) 2300 5124 www.colorparty.com

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