gstel 04

F I N A N C I A L H I G H L I G H T S

2004 2003 2002

Data from Financial Statements

Total Assets (Baht Million) 21,718 14,965 21,528

Total Liabilities (Baht Million) 2,911 9,364 64,979

Total Shareholders’ Equity (Baht Million) 18,807 5,601 (43,451)

Sales (Baht Million) 21,270 12,622 5,914

Total Revenues (Baht Million) 21,979 13,517 6,255

Gross Profit (Loss) (Baht Million) 3,059 833 (217)

Operating Profit (Loss) (Baht Million) 2,599 1,187 (1,080)

Net Profit (Loss) (Baht Million) 8,902 48,005 (1,080)

Financial Ratios

Gross Profit (Loss) Ratio (%) 14.38 6.60 3.67

Operating Profit (Loss) Ratio (%) 12.22 9.40 (18.26)

Net Profit (Loss) Ratio (%) 40.50 355.15 (17.27)

Average Return on Equity (%) 72.94 n/m n/m

Average Return on Assets (%) 48.54 263.10 (4.96)

Net Earnings (Loss) per Share (Baht) 1.36 15.45 (0.22)

Book Value per Share (Baht) 2.29 10.18 (8.69)

1

M E S S A G E F R O M C H A I R M A N

The year 2004 marked significant changes and was a year in

which the company recorded remarkable success, having

quickly turned over its business to a normal situation. It enjoyed

significant improvement in operating results with the total sales

volume of as high as Baht 21,270 million, an operating profit of

Baht 2,599 million, doubling the increase over the previous

year, producing net profit of Baht 8,902 million. This was a

result of the overall steel industry situation, having stable

growth in consumption and price levels in addition to dedication

and cooperation between the management team and staff

within the company to improve production efficiency and product

quality to be widely accepted by customers. Consequently,

G Steel increased its export to North America, Europe and

Middle East. Furthermore, it successfully undertook a financial

restructure and is now on a strong and stable financial position

and considered the sole steel producer in the country having no

financial liabilities and registering the lowest debt to equity ratio.

Last year, the company modified its policies and management

structure in many areas to establish good corporate governance

under efficient internal controlling and auditing systems. It was

aimed at building confidence among shareholders, investors

and all parties concerned. It also emphasized on environmental

concerns, operational safety as well as social contributions

to enable local communities and our society to grow with

quality.

Apart from the aforementioned development and changes in the

year 2004, it took an opportunity to launch a new corporate

image reflecting its vision and mission to be the leader of

Thailand’s integrated steel industry. In this regard, the

company’s name was changed to “G Steel Public Company

Limited” in early 2004 with “3 Gs” policies:

GLOBAL: World class production technological development to

make steel products with an international standard quality to

meet a variety of customers’ requirements both in domestic

and overseas markets.

GROWTH: Management with a focus on sustainable and quality

growth by administrating all resources efficiently and appropriate

investment to attain value added to the organization, consistent

with worthy return on investment to shareholders.

GREEN: The company’s steel industry development keeps

balance between environmental concerns, contribution towards

local communities and society to have a better quality of life.

I would like to express my gratitude to all shareholders for the

confidence and continuing support extended to the company.

The Board of Directors and I are wholeheartedly determined

to manage the business for steady progress and growth to

achieve the stipulated mission to provide consistent and

worthy returns to the shareholders.

Dr. Vira Susangkarakan

Chairman of the Board of Directors

14

M E S S A G E F R O M OF T H E E X E C U T I V E C O M M I T T E E CH A I R M A N

Having been through the economic crisis, G Steel Public

Company Limited not only repaid total debts to financial

creditors but also improved the efficiency of its integrated plant,

as a result of the produced 1.1 million tons of hot rolled steel

meeting customers’ quality requirements and with short delivery

times, hence satisfying both domestic and overseas customers.

According to 2004 operating results, the company saw a

continuous increase in sales volumes and substantial rise in

operating profit. Nevertheless, its export merely accounted for

approximate by 20% of the total product sales volume. It was

relatively low compared to orders from overseas customers

during the previous year. Due to a growing domestic demand as

a result of economic expansion after the country’s economic

crisis, the company worked out de-bottlenecking plan to

increase its annual production capacity from 1.8 million tons to

3.4 million tons. The plan also included the addition of pickling

and oiling line, and HRC pickling and conditioning line in response

to demands of both domestic and overseas customers those

requiring high quality hot rolled coils.

In 2005, although G Steel has been in a period of production

capacity expansion, it will definitely record higher income.

This can be achieved through the maximization of production

efficiency at 1.5 million tons and its quality management

policy of “We are determined to produce and distribute hot

rolled steel to satisfy customers’ needs and to continually

develop the quality management systems together with the use

of environmental - friendly advanced technology”. This will lead

the company to become one of the world’s largest integrated

hot rolled coil mill leaders.

In the name of the Executive Committee, I would like to express

my gratitude to all shareholders and partners including

customers, raw material suppliers and service providers over

the previous year. I will professionally maintain our operating

standards to enable the company to continually produce and

distribute high quality hot rolled coils.

Dr. Somsak Leeswadtrakul

Chairman of the Executive Committee

15

I N F O R M A T I O N O N T H E B O A R D O F D I R E C T O R S A N D M A N A G E M E N T T E A M

Name / Position

Age

(Years) Relationship Education % of Shares Experience

01. Mr. Vira Susangkarakan

• Chairman

74 - none - • A Directors Accreditation Program

(DAP) at the Thai Institute of Directors

Association

- none - G Steel Public Company Limited

1995-Present : Chairman of the Board of Directors

• Honorary doctorate in business

administration from Berks University,

United Kingdom

• Class 18 National Defense Course

Other businesses

1993-Present : Chairman of Executive Committee

T.S.B. Trading Co., Ltd.


at the National Defense Academy

• M. Eng. (Civil Engineering) from

University of Illinois, USA

• B. Eng. (Civil Engineering) from

Chulalongkorn University

Thai Agro Energy Co., Ltd.


Patkol Public Co., Ltd.

1998-Present : Chairman of the Audit Committee

Phoenix Pulp and Paper Public Co., Ltd.

02. General Singha Saovapap

• Vice Chairman

74 - none - • A Chairman 2000 Program at the

Thai Institute of Directors Association

0.02% G Steel Public Company Limited

2003-Present : Vice Chairman of the Board of Directors

• Honorary doctorate in Sociology and

Anthropology from Ramkhamhaeng

University

Other businesses


• A Principle of Hospital Administration

Program

• M.D., Chulalongkorn University

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.

18

Name / Position

Age


03. Ms. Patama Chiachuabsilp

• Vice Chairman

40 Wife of

Mr. Somsak

• A Chairman 2000 Program at the



2003-Present : Vice Chairman of the Board of Directors

• Executive Director

• Assistant Chief Executive Officer

Leeswadtrakul • Honorary doctorate in General

Administration from Ramkhamhaeng

University

• B. Econ., Ramkhamhaeng University

• Assumption Commercial College

: Executive Director

: Assistant Chief Executive Officer

Other businesses

1997-Present : Chairman of the Executive Committee

Paitoon Hotel and Resort Co., Ltd.


Siam Jetty and Container Co., Ltd.


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

04. Mr. Somsak Leeswadtrakul

• Director

52 Husband of

Ms. Patama

• A Chairman 2000 Program at the



1995-Present : Director

• Chairman of the

Executive Committee

• Chief Executive Officer

Chiachuabsilp • Honorary doctorate in Industrial

Management from University of the

Americas, Louisiana, USA

: Chairman of the Executive Committee

: Chief Executive Officer

• Honorary doctorate in Administration,

Kasetsart University

• Honorary doctorate in General

Administration from Ramkhamhaeng

University

• B. Econ., Ramkhamhaeng University

Other businesses


Siam Integrated Cold Rolled Steel Public

Co., Ltd.

1994-Present : Executive Director



Felix River Kwai Resort (Kanchanaburi)

Co., Ltd.


First Steel Industry Co., Ltd.


Inter Metal Tube Alliance (Thailand) Co., Ltd.


Siam Ferro Industry Co., Ltd.


Thailand Iron Works Public Co., Ltd.


Thai Special Steel Industry Public Co., Ltd.


Thai Steel Pipe Industry Co., Ltd.


Nas Toa (Thailand) Co., Ltd.

19

Name / Position

Age


05. Mr. Chainarong

Monthienvichienchai

• Director


(DAP) at the Thai Institute of

Directors Association



• M.A. (Management), Asian Institute

of Management

• B.A. (Business Administration),


Other businesses




Saint John for Education Co., Ltd.

1991-Present : Vice Chairman of the Board of Trustees

St. John’s University

1977-Present : Director General

St. John’s College

06. Mr. Yanyong Kurovat

• Director and Executive Director




2004-Present : Director and Executive Director


• Class 5 National Defense Course Other businesses

for Joint Private and Public Sectors


• Graduate Diploma in Government,

2000-Present : Managing Director

Technology Operation Group Co., Ltd.


Chulalongkorn University Academic Network Co., Ltd.

• B.A. (Pol. Sci.), Chulalongkorn 2000-Present : Advisor

University Boonrawd Brewery Co., Ltd.

2000-Present : Advisor

Saha Transportation Thonburi Co., Ltd.

07. Mr. Prapanpong Vejjajiva

• Director

69 - none - • A Chairman 2000 Program at the






• Certificate in Business Administration,

Other businesses


Stanford University

• Graduate Diploma in Welfare

Administration

• M.A. in Social Science, Stockholm

C & C International Venture Co., Ltd.


Primavest Asset Management Co., Ltd.


University

• B.A. (Pol. Sci.) (Honors) in

Government, Chulalongkorn University

Home Place Group Public Co., Ltd.


Dhammaniti Public Co., Ltd.

1990-Present : Vice President (Development and Planning)

SASIN Graduate Institute of Business

Administration, Chulalongkorn University

20

Name / Position

Age


08. ML. Sasivimol Kasemsri







• Master of Intellectual Property (MIP),

Franklin Pierre Law, U.S.A.

Other businesses


• LL.M. (International Laws),


• LL.B., Chulalongkorn University

The Unified Council Co., Ltd.

2000-2003 : Attorney

Law and Solicitors Co., Ltd.

1993-2000 : Attorney

Baker and Mckenzie Co., Ltd.

09. General Choochat

Kambhu Na Ayudhya





• Director Directors Association

• Class 7 National Defense Course Other businesses

for Joint Private and Public Sectors 2003-Present : Chairman of the Board of Directors


• Certificate of Royal Thai Army

War College

• M.D. University of Munster, Germany

• Doctor of Medicine University of

Gottingen, Germany

• Residency Training in General

Surgery and Diploma of General

Surgery

Unity Percussion Co., Ltd.


Lucky Music Co., Ltd.

2003-2004 : Advisor, National Defense Studies

Institute, Supreme Command

2001-2003 : The Surgeon General

Royal Thai Army Medical Department

2000-2001 : Chairman

Department of Anatomy

Phramongkutklao College of Medicine

1998-2000 : Deputy Surgeon General

Royal Thai Army Medical Department

10. Pol. Lt. General Prakard

Sataman


62 - none - • Class 1 Advanced Management

Program at the National Defense

Academy




Other businesses


• LL.B., Thammasat University

• Interpol Training Course, U.S.A.

2000-Present : Member of Disciplinary Committee of

Office of the Auditor - General

2004-Present : Advisor

The Pure Drinks Co., Ltd.

2005-Present : Advisor of the Committee

N.E.C. Management and Development

Co., Ltd.

21

Name / Position

Age


11. Mr. Stephane Benayon


37 - none - • B. Econ., York University - none - G Steel Public Company Limited


Other businesses


Superior Overseas (Thailand) Co., Ltd.


Distresses Assets Investment Ltd.

2003-2004 : Director

Prebon Yamane (Hong Kong) Ltd.

12. Mr. Jeong Joon Ahn 66 - none - • M. Econ, Dankuk University - none - G Steel Public Company Limited

• Director • B. Eng, Seoul National University 2004-Present : Director and Executive Director

• Executive Director : Senior Executive Vice President

• Senior Executive Vice President

Other businesses

1994-1997 : Vice President

Hanbo Steel Co., Ltd., South Korea

13. Mr. Paichitr Roajanavanich

• Director and Chairman of the





Audit Committee Directors Association

• MGA Econ. (Public Finance),

Pennsylvania University, U.S.A.

Other businesses


• Higher Diploma in Accountancy

(Equivalent to Master Degree)

Thammasat University

• LL.B., Thammasat University

MBK Development Public Co., Ltd.


Pathum Rice Mill and Granary Co., Ltd.


Muramoto Electron (Thailand) Public

Co., Ltd.


Sicco Securities Public Co., Ltd.


Sicco Advisory Co., Ltd.


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

22

Name / Position

Age


14. Mr. Chaipatr Srivisarvacha

• Director and member of the

Audit Committee





2004-Present : Director and Audit Committee

• MBA (Finance) Illinois Benedictine

College

• B.Sc. (Metallurgy), Lehigh University

Other businesses


Payzy (Thailand) Co., Ltd.

2002-Present : Independent Director

Kudu Co., Ltd.


The Brooker Group Public Co., Ltd.


Thanachart Bank Public Co., Ltd.

1999-Present : Chief Executive Officer

Capmaxx Co., Ltd.


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


Faces Co., Ltd.


SVAC Co., Ltd.

1999 : Director

Krung Thai Bank Public Co., Ltd.

15. Mr. Preecha Prakobkit

• Director and member of the

Audit Committee





2003-Present : Director and Audit Committee

• Executive Leadership Thunderbird,

The American Graduate School of

Other businesses


International Business Paitoon Hotel and Resort Co., Ltd.

• Senior Executive Program, SASIN

Graduate Institute of Business

Administration, Chulalongkorn

University

• Mini MBA, Thammasat University

• B.A. (Business Administration),

Roosevelt University, U.S.A.


Amway (Thailand) Co., Ltd.

16. Mr. Ryuzo Ogino

• Assistant Chief Executive Officer

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

2004-Present : Assistant Chief Executive Officer

Other businesses


Suncall Co., Ltd.

1965-2001 : Managing Director

Itochu Corp.

23

Name / Position

Age


17. Mr. Chalothorn Leelamali

• Executive Vice President

37 - none - • MBA., Business Administration,

NIDA


2003-Present : Executive Vice President

• B. Econ., Chulalongkorn University

Other businesses

1999-2002 : Project Financial Controller

Metro Resources Public Co., Ltd.

1998-1999 : Financial Assistant Manager

Thainox Steel Co., Ltd.

1996-1998 : Financial Analyst

Shinho Paper (Thailand) Co., Ltd.

24

CHANGES IN SHAREHOLDING BY THE BOARD OF DIRECTORS AND MANAGEMENT TEAM

Shareholding (shares) : Par Baht 1

Name Position At 31 Dec. 2003 At 31 Dec. 2004 Increase/(Decrease)

1. Mr. Vira Susangkarakan Chairman - - -

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

3. Ms. Patama Chiachuabsilp Vice Chairman 275,800 1,061,060,793 1,060,784,993

4. Mr. Somsak Leeswadtrakul Director 1,209,100 7,154,071 5,944,971

5. Mr. Stephane Benayon Director 2,700,000 - (2,700,000)

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

7. Mr. Yanyong Kurovat Director - - -

8. Mr. Prapanpong Vejjajiva Director - - -

9. ML. Sasivimol Kasemsri Director - - -

10. General Choochat Kambhu Na Ayudhya Director - - -

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

12. Mr. Jeong Joon Ahn Director - - -

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

14. Mr. Chaipatr Srivisarvacha Member of the Audit Committee - - -

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

16. Mr. Ryuzo Ogino Assistant CEO - - -

17. Mr. Chalothorn Leelamali Executive Vice President - - -

25

26

C h i e f E x e c u t i v e O f f i c e r

M r . S o m s a k L e e s w a d t r a k u l

T h e E x e c u t i v e C o m m i t t e e

T h e

A s s i s t a n t E x e c u t i v e O f f i c e r

M r . R y u z o i

V i c e P r e s i d e n t

M r . N o p a k a o S r i s u v a n o n

S e n i o r E x e c u t i v e V i c e P r e s i d e n t

( O p e r a t i o n s )

M r .

Vi ( i j

M r . J o a c h i m B u r g e r s

26

T H E C O M P A N Y ’ S

B o a r d o f D i r e c t o r s

C h i e f

O g n o

( O p e r a t i o n s )

J e o n g J o o n A h n

c e P r e s i d e n t E x p a n s o n P r o e c t )

S T R U C T U R E

27

A c t i n g V i c e P r e s i d e n t

( A c c o u n t i n g a n d F i n a n c e )

M r . C h a l o t h o r n L e e l a m a l i


( P u r c h a s i n g a n d M a r k e t i n g )

M s . K a n n i k a r S o y k e e r e e

E x e c u t i v e V i c e P r e s i d e n t

( A d m i n i s t r a t i o n )

M r . C h a l o t h o r n L e e l a m a l i

E x e c u t i v e O f f i c e r

M s . P a t a m a

I n t e r n a l A u d i t D e p a r t m e n t

T h e A u d i t C o m m i t t e e


( A d m i n i s t r a t i o n )

M r . N a k u n S a k u n c h o t i k a r o t e

27

A s s i s t a n t C h i e f

C h i a c h u a b s i l p

N A T U R E O F T H E B U S I N E S S

G Steel Public Company Limited is a producer and distributor of

hot rolled coil aiming at substituting imports and meeting

domestic customers’ demands. Its products serve as raw

materials for such downstream industries as cold-rolled coils,

galvanized steel, steel pipe, structural steel products for

construction, oil or LPG container, automobile parts as well as

electrical appliance industries.

Equipped with the world’s most advanced technology, its hot

rolled coil mill spent over Baht 40,000 million capital investment,

combining melting, casting and rolling processes in the

compact mini mill. It features:

• Melting technology in the Electric Arc Furnace;

• Casting technology in the Medium Slab Casting Machine and

• Rolling technology in the Hot Strip Mill

The process starts with melting steel scrap and pig iron in the

Electric Arc Furnace at 1600°C, the quality of the liquid steel

output is then improved with chemical additives to meet varied

demands of respective customers. It is cast into medium slabs

before being hot rolled into the customers’ required thickness.

It is the sole mill in Thailand and one of very few in the world

that is able to produce hot rolled coils at the lowest thickness

of 1.0 mm. The aforementioned continuous process merely

takes 3.5 hours.

The total annual production capacity was designed at 3.4 million

tons but, due to the economic crisis across the Asian region in

1997, the production line, then was not completely installed,

accomplishing the designed capacity of 1.8 million tons per year.

The production efficiency for mixed product outputs to meet

varied market requirements consequently ran at 1.5 million

tons per year. In 2004, the company’s hot rolled coil outputs

accounted for 1.1 million tons, 61% of the maximum designed

production capacity or 74% of the production efficiency.

At present, G Steel has the first phase de-bottlenecking

investment plan to increase the annual production capacity

from 1.8 million tons to 3.4 million tons. It will also introduce

production lines for high quality products, i.e., a pickling and

oiling line, picking and conditioning line to thoroughly respond

to customers’ demands. With promotional privileges from the

Board of Investment (BOI), the construction and production

line installation are scheduled to complete in 2007.

Furthermore, the firm received BOI promotional privileges for the

second phase development of an upstream smelting mini blast

furnace project to increase its potential and competitiveness

in the world market. The upstream project will feed hot metal

from a mini blast furnace to melt with scrap to improve liquid steel

quality. This will reduce the scrap consumption, bringing down

the major raw material costs and electricity cost. Meanwhile,

the higher quality output will be used to produce a range of

high quality steels. Significantly, the investment will be over 50%

lower than that of the conventional one as the mill already has

the Smelting Electric Arc Furnace and Medium Slab Casting

Machine. Although the second phase investment plan renders

huge benefits, the company will take portions of shares in order

to reduce investment burden.

30

INCOME STRUCTURE

Unit: (’000 Baht)

2002 2003 2004

Incomes Distribution Channels Sales Amount % Sales Amount % Sales Amount %

Sales Domestic 5,562,712 93.8 11,514,447 91.0 16,435,025 76.8

from Hot Overseas 351,146 5.9 1,107,716 8.8 4,835,227 22.6

Rolled Coils Total 5,913,858 99.7 12,622,163 99.7 21,270,252 99.3

Other Income 18,314 0.3 37,212 0.3 140,018 0.7

Total Income* 5,932,172 100.0 12,659,375 100.0 21,410,270 100.0

*Year 2004 excluded Reversal of Allowance for Compensation for Breach of Contract

Year 2002 – 2003 excluded gains from foreign exchange

DOMESTIC HOT ROLLED STEEL INDUSTRY SITUATION

Thailand’s domestic hot rolled steel industry in 2004 has

continually increased from the previous year with the key

factors being expansion in the automobile parts industries and

construction sector. Meanwhile, demand growth in the world

market, especially that of the People’s Republic of China,

substantially rose. This resulted in ongoing price increases

of upstream raw materials and year long increases in the

selling price of hot rolled steel in the world and domestic

markets.

According to reports by the Iron and Steel Institute of Thailand,

in the year 2004, the country’s demand for flat products

amounted to 7.3 million tons, a 7.8% rise over the previous

year. Of this, 5.6 million tons or a 5% increase in demand of

hot rolled steel from the year 2003. The total production

capacity of the country’s five hot rolled steel producers added

up to merely 3.9 million tons. The shortfall of 2.4 million tons

had to rely on import accounting for Baht 42,500 million value.

The hot rolled steel was mainly imported from Japan, it was

of high quality. The import volume tends to essentially increase

as Thailand’s steel consumption per capita is still low compared

to that of the region.

INDUSTRY TREND IN YEAR 2005

CRU Strategies forecasted that demand for flat products

worldwide in 2005 is approximately 384 million tons, a 5.2%

growth compared to 365 million tons in the preceding year.

The demand is mainly from the Asian region, especially the

People’s Republic of China where high quality steel products have

been steadily imported to cope with the country’s development

and automobile production base expansion. Meanwhile, steel

prices in the world market have some room to slightly increase.

As for Thailand’s hot rolled steel industrial trends in the year

2005, G Steel anticipated a rise in demand for hot rolled

steel products, the high quality one in particular, as results of

approximate 15-20% growths in automobile parts and

electrical appliance industries. In addition, there are demands

from the real estate industry and infrastructure development in

line with the government’s mega projects. The domestic demand

for hot rolled steel is forecasted to grow at 5-8%, approximately

the same growth rate as the previous year. Notably, pipe

makers, metal structural steel producers and metal slitting

plants - - G Steel’s alliances - - with the total production capacity

of not less than 1.5 million tons per year are ready to support

the company upon its capacity increment.

31

S A F E T Y, E N V I R O N M E N T A L C O N C E R N S A N D S O C I A L A C T I V I T I E S

Another mission of the company receiving an equal emphasis

with the business development and growth is operational safety,

occupational hygiene, environmental quality management and,

last but not least, social contributions. In the year 2004, G Steel

carried out activities in the above mentioned areas as follows:

SOCIAL CONTRIBUTIONS

Considering social contributions as important roles and

responsibilities, in the year 2004, the company constantly paid

full attention on relevant activities all year round. It carried out

activities and made donations to communities, educational

institutions and non-governmental organizations (NGOs).

Supports to various government offices include a subsidy of

personnel recruiting and hiring to assist Government Office of

Rayong Industrial Office; provisions of supplies and equipment

to local administrative offices and provisions of sports

accessories and equipment to communities. Donations for

education related activities were also provided to students in

several schools in Ban Khai district. Additionally, the company

donated Baht 3 million to the Foundation of Medical Station

Development for the construction of a medical station in

Sakon Nakhon province. Donations through various NGOs

and official offices were made to alleviate Tsunami affected

people in the six southern provinces. In addition, Baht 500,000

donation was to Handicapped Children Aid and Rehabilitation

Foundation at Pakkret Home for procurement of rehabilitation

equipment, medicines and food.

Support to the Foundation of Medical Station Development

Assistance to Tsunami affected people

Donation to the Handicapped Children Aid and Rehabilitation Foundation

32

SAFETY AND OCCUPATIONAL HYGIENE

A full range of fire protection equipment was installed in the

factory and office buildings. Coordination with governmental and

non governmental fire fighting units were made for readiness in

case of fire. Fire evacuation practice and training on uses of fire

extinguishers were included in the mill’s emergency plan.

Besides, first aid rooms and an emergency van are available

around the clock. The company provided machine controlling

employees with such safety equipment and kits as safety shoes

and helmets, heat protection uniforms, noise protection kits,

light filtering glasses, dust covers and so on. Furthermore, it

held an annual medical check-up for staff, providing them with

health and life insurance. The welfare is to cover medical

expenses in private hospitals for both work and non work

related illnesses.

ENVIRONMENTAL QUALITY MANAGEMENT

G Steel has commissioned an independent expert to monitor

and check its environmental quality; a relevant annual report is

continually prepared. According to the report for the year

2004, pollution levels of air and treated waste water drained

out meet official stipulated standards posing no environmental

effects. Moreover, it participated in the Greenhouse Gas

Emission Reduction from Industry in Asia and Pacific (GERIAP)

as per United Nations Environment Protection’s (UNEP) plan.

The project, coordinated by the Research Institute of Science

and Technology, is scheduled to complete in the year 2005.

Last year, it had a chance to receive UNEP executives and

experts from Sweden to visit the mill and received from them

academic recommendations and demonstrations on how to

improve the efficient use of energy in the production process.

Waste water treatment

33

K E Y E V E N T S I N 2 0 0 4

PROMINENT OPERATING SUCCESS

In the year 2004, the steel industry was continually growing both in terms of market demands and price levels. To keep abreast

with the rising demand for hot rolled steel together with the plan to expand its overseas market base, G Steel increased production

efficiency rate from 61% in 2003 to 74% in 2004. The total annual output amounted to 1.1 million tons, or 20% growth over the

previous year, with the additional output being mainly exported. This almost doubled export volume, accounting for 22% of the total

sales volume. The export markets expanded to countries in North America, Europe, Middle East and ASEAN. The higher export

volume proved that the company’s product quality and production standard are well accepted and competitive in the world market.

G Steel Public Co., Ltd. registered the total sales volume of Baht 21,270 million, a growth of 69% compared to that of the previous

year. This resulted from higher sales volumes and selling prices, an increase of 18% and 42% respectively. Most of the income was

from the domestic sales. Meanwhile, the company successfully managed the production cost control, contributing to an increase in

gross profit from 7% in 2003 to 14% in 2004 thus enjoyed an operating profit of as high as Baht 2,599 million, more than two times

higher than the previous year. Significantly, retained loss was cleared in as early as the first quarter. At the end of 2004, it recorded

cumulative profit of Baht 8,682 million.

BUSINESS ALLIANCES WITH OVERSEAS STEEL MANUFACTURERS

In 2004, the company and PT Krakatau Steel, an Indonesian hot rolled steel producer, signed a memorandum to cooperate in

international marketing, technology exchange and joint business development. The memorandum also covered assistance to each

other to supply products to the other party in case of shortage for the domestic markets, production related personnel exchange to

share knowledge and experience in order to improve and develop production process and to enhance production capabilities and

quality.

FINANCIAL RESTRUCTURING SUCCESS

In 2004, G Steel carried out major financial restructuring: its par value per share was changed from Baht 10 per share to Baht

1 per share, and the registered capital was increased from Baht 1,100 million to Baht 8,200 million. An additional 4,400 million

ordinary shares were issued and offered to existing shareholders at Baht 0.01 per share, while the other additional 2,700 million

shares were private offerings at Baht 1.60 per share. The paid up capital was used to early repay to four financial creditors of its

rehabilitation plan amounting to Baht 4,031 million. These creditors agreed to forgive the remaining debt of Baht 1,185 million. As

such, the company could save Baht 1,293 million of interest expenses as per the plan, discharged all collateral, i.e., lands, buildings,

machines and equipment, had no more financial burden. The company’s debt to equity ratio reduced to 0.15 times, thus significantly

strengthening financial position.

G STEEL’S PREPARATION FOR LISTING IN THE STOCK EXCHANGE OF THAILAND

On 5 October 2004, the 2/2004 extraordinary shareholders meeting approved the increase of the company’s registered capital

from Baht 8,200 million to Baht 12,000 million in preparation for an initial public offering (IPO) and processing of its listing in the

Stock Exchange of Thailand.

34

G E N E R A L I N F O R M A T I O N

Company’s Name G Steel Public Company Limited

(formerly Siam Strip Mill Public Company

Limited)

Head Office 88, 18th Fl. SSP Tower 3 Building

Silom, Suriyawong, Bangrak,

Bangkok 10500, Thailand

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

Plant Office 55 Moo 5 Tambon Nong Lalok,

Amphoe Ban Khai,

Rayong 21120, Thailand

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

Website: http://www.g-steel.com

Registered Capital 12,000,000,000 Baht

No. of Ordinary Shares 12,000,000,000 Shares

Par Value 1 Baht

Paid up Capital 8,200,000,000 Baht

No. of Paid up Ordinary Shares 8,200,000,000 Shares

Establishing Date 30 October 1995

Production Commencement Date 1 November 1999

Type of Business Production and Distribution of

Hot Rolled Coil

900 – 1,550 mm. Width

1.0 – 13.0 mm. Thickness

Production Electric Arc Furnace from Germany

Technology Medium Slab Casting Machine

from Japan

Hot Strip Mill from Japan

Designed Production Capacity 3,400,000 tons per year

Current Production Capacity 1,800,000 tons per year

REFERRALS

Securities Registrar G Steel Public Company Limited

88, 18th Fl. SSP Tower 3 Building

Silom, Suriyawong, Bangrak,

Bangkok 10500, Thailand

Tel. 0-2634-2222 Ext. 1401,

Fax. 0-2634-4114

Auditor Mr. Sophon Permsirivallop

Certified Public Accountant

Registration No. 3182

Mr. Narong Pantawong



Ms. Rungnapa Lertsuwankul



Ernst & Young Office Ltd.

193/136-137 33rd Fl. Lake Rajada Building

Rajadapisek Road, Khlong Toey,

Bangkok 10100

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

35

R I S K F A C T O R S

MARKETING AND COMPETITON RISKS

Hot Rolled Coil (HRC) is a commodity product with no differentiation

features, particularly in a modest quality market. These probably

pose high risks in price competition especially during the

market downturn. Nevertheless, there are no signs of the steel

industry slow down in the short or medium term. With the

management’s more than 30 - year experience in the industry

and its advanced production technology, the company can

promptly make products to meet international quality standards

and customers’ requirements. G Steel strongly believes that it

will be able to compete locally and internationally. During the

last two years, the company had developed its distribution

channels and firmly built up domestic market bases. In addition

to the local market, overseas markets are expanding to cope

with the future increased production outputs. To expand to a

high quality steel market segment that imports annually more

than 2 million tons of high quality hot rolled steel, the company

worked out a development plan to make the high quality product

within the next 2 years.

PRICE RISK

With a cycle of business upturns and downturns, the steel

industry inevitably faces market price fluctuation that naturally

directly affects the company’s income and profit, especially

during downturn cycles. In normal situation, the move in prices

of steel product and raw materials is in corresponding directions,

differences between those prices are not adversely affected.

In addition, G Steel has emphasized on raw material cost

management, maintaining conversion costs at appropriate

levels at all times and minimizing production wastage. At the

current production efficiency and competitiveness, it is believed

that the company will not be affected by the price fluctuations

during a downturn. Furthermore, the domestic steel industry has

been protected by an anti dumping import duty levied on hot

rolled coils from 14 exporting countries. This significantly

reduces selling price fluctuation in the country.

RAW MATERIAL SUPPLY RISK

Major raw materials of Hot Rolled Coil production are steel

scrap and pig iron in a 70 : 30 proportion. 80-90% of the scrap

is imported whereas the pig iron is wholly imported. This can

pose risks on raw material supply disruption and shortage.

However, current supplies of both raw materials are sufficient

for the company’s ongoing rising demands, additionally, the

company has established long standing and good relationship

with the suppliers who are major distributors with a worldwide

network of raw material sources. The raw material provisions

are hence of no concerns. As the company maintains 2-3 month

raw material inventory levels, it is confident it will not be

affected by any supply disruption in the market.

FOREIGN EXCHANGE RATE FLUCTUATION RISKS

While its expenses for the raw material imports are denominated

in US dollars on an unhedged basis, most of its incomes are in

Thai Baht. The company thus is exposed to foreign exchange

fluctuation risks. Despite the major incomes in Thai Baht, it

monthly sets selling prices for domestic markets in accordance

with the prevailing foreign exchange rates, and the timing

when the selling prices are set and payments for the raw

materials are remitted is not so far apart. The foreign exchange

risks for the company are therefore reduced. However, it is

contemplating appropriate tools from financial institutions to

properly cope with the risks.

36

M A N A G E M E N T A N D C O R P O R A T E G O V E R N A N C E

MANAGEMENT STRUCTURE

The company’s management structure comprises 3 committees:

the Board of Directors, Executive Committee and Audit

Committee, whose respective roles and responsibilities are

summed up as follows.

(1) THE BOARD OF DIRECTORS consisting of 15 members:

• Executive Directors 4 members

• Non - Executive Directors 5 members

• Independent Directors 6 members

As at 31 December 2004, the list of the Board of Directors is

1. Mr. Vira Susangkarakan Chairman

2. Mr. Somsak Leeswadtrakul Director

3. Ms. Patama Chiachuabsilp Director

4. Mr. Stephane Benayon Director

5. Mr. Yanyong Kurovat Director

6. ML. Sasivimol Kasemsri Director

7. Pol. Lt. General Prakard Sataman Director

8. Mr. Jeong Joon Ahn Director

9. Mr. Chainarong Monthienvichienchai Director

10. General Singha Saovapap Independent Director

11. Mr. Prapanpong Vejjajiva Independent Director

12. General Choochat

Kambhu Na Ayudhya Independent Director

13. Mr. Paichitr Roajanavanich Independent Director

14. Mr. Chaipatr Srivisarvacha Independent Director

15. Mr. Preecha Prakobkit Independent Director

AUTHORIZED SIGNATORY DIRECTORS ON G STEEL’S BEHALF

are Mr. Vira Susangkarakan, Mr. Somsak Leeswadtrakul,

Ms. Patama Chiachuabsilp, Mr. Stephane Benayon, Mr. Jeong

Joon Ahn, Mr. Yanyong Kurovat, ML. Sasivimol Kasemsri and

Pol. Lt. General Prakard Sataman. Two of the eight authorized

signatory Directors are to co sign with the company’s stamp.

THE BOARD’S ROLES AND RESPONSIBILITIES

1. To manage the business according to laws, company’s

objectives, rules and regulations as well as shareholders’

meeting resolutions with honesty and for the company’s benefits.

2. To stipulate the company’s policies and business direction

and to oversee and supervise the execution by the Management

to meet the set policies efficiently and effectively.

3. To be accountable for shareholders at all times and to

manage for the maximum benefits of the shareholders as well

as to disclose relevant accurate, complete and transparent

information to investors as per required standards.

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

signatory directors.

5. To appoint subcommittees to supervise, follow up and

control essential management issues, for instance, the

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 predetermined time frame. The Board may

have such a delegation repealed, changed or modified.

7. To stipulate the recruiting, selecting, hiring and appointing of

any person deemed appropriate as Chief Executive Officer and

stipulate appropriate remuneration. To empower the CEO to

transfer, suspend and terminate employment and have the

execution reported to the board.

8. To have the board’s annual report prepared and to be

responsible for the preparation and disclosure of financial

statements revealing the company’s financial status and

performance results of the preceding year to present to

shareholders meeting.

9. To convene at least once every 3 months. Rulings of the

board meeting will be based on a majority vote. Directors with

conflicts of interest in any matter shall waive their voting rights

on the specific issue.

10. To hold the annual ordinary shareholders meeting within

4 months after the company’s fiscal year end date.

37

(2) EXECUTIVE COMMITTEE

As at 31 December 2004, G Steel has an 8 - member executive

committee consisting of:

1. Mr. Somsak Leeswadtrakul Chairman of the

Executive Committee

2. Mr. Vira Susangkarakan Executive Director

3. Mr. Stephane Benayon Executive Director

4. Ms. Patama Chiachuabsilp Executive Director

5. Mr. Jeong Joon Ahn Executive Director

6. Mr. Yanyong Kurovat Executive Director

7. ML. Sasivimol Kasemsri Executive Director

8. Pol. Lt. General Prakard Sataman Executive Director

EXECUTIVE COMMITTEE’S ROLES AND RESPONSIBILITIES

1. To scrutinize the company’s policies, business plan,

investment plan and annual budgeting plan to submit to the

Board of Directors for approval.

2. To monitor, supervise and control operations to achieve the

set objectives in the approved plans or as per the board’s

assignment. To report results of the execution to the board’s

meeting for its information.

3. To approve any execution or reimbursements 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 approved annual budget.

4. To review the organization chart, authorization structure,

compensation policy as well as the company’s salary structure.

5. To scrutinize authorization regulations for managerial and

operational levels covering areas of finance, accounting,

procurements, investment, loans, mortgage, collateral, sales or

disposal or transfer of any assets, making of any agreement or

contract and any other execution as deemed fit.

6. To delegate any person or persons to execute on behalf of

the executive committee as deemed appropriate. They may

cancel or repeal, change or revise the authorization conferred.

7. To contemplate and approve openings of varied bank

accounts with any commercial bank 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.

(3) THE AUDIT COMMITTEE

As at 31 December 2004, the Audit Committee consists of

1. Mr. Paichitr Roajanavanich Chairman of the Audit Committee

2. Mr. Chaipatr Srivisarvacha Member of the Audit Committee

3. Mr. Preecha Prakobkit Member of the Audit Committee

ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE

1. To examine the company to have accurate financial reports

with enough disclosure, coordinating with the auditors and

management in charge to have quarterly and annual financial

reports prepared. The committee may recommend 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 auditors.

3. To examine the company’s operations in accordance with

laws on Securities and Stock Exchange, regulations of the

Stock Exchange of Thailand or any other laws related to the

company’s business.

4. To scrutinize and propose a nomination of the company’s

auditors and their service remuneration, taking into account their

reliability, resource adequacy, existing workload of the particular

auditor office as well as work experience of their team members

assigned to audit the company.

5. To deliberate an accurate and complete disclosure of

the company’s data in case of inter-related transactions or

transactions with possible conflicts of interest.

6. To carry out, in cooperation with the management team, any

task assigned by the Board of Directors with an approval from

the Audit Committee. For instance, to review financial and risk

management policies, management conduct as per business

codes and in cooperation with the company’s management

to review key reports such as Management’s Remarks and

Analysis to the public as per legal requirements.

38

7. To prepare a report on their activities 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

data in the company’s financial reports in relations with

their completeness and reliability.

• Notes on adequacy of internal control systems.

• Justifications for nomination of the company’s external

auditors for another term.

• Notes on compliance with laws on Securities and Exchange,

the SET regulations or any other laws relating to the


• Any other reports considered suitable for information of

shareholders and general investors under the scope, 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 and

shall report to them the performance results, recommendations

and findings at least twice a year.

MANAGEMENT TEAM

As at 31 December 2004, the company’s Management Team

includes:

1. Mr. Somsak Leeswadtrakul Chief Executive Officer

2. Mr. Ryuzo Ogino Assistant Chief Executive Officer

3. Ms. Patama Chiachuabsilp Assistant Chief Executive Officer

4. Mr. Jeong Joon Ahn Senior Executive Vice President

(Operations)

5. Mr. Chalothorn Leelamali Executive Vice President

(Administration)

and Acting Vice President

(Accounting and Finance)

THE RECRUITING OF DIRECTORS AND CHIEF EXECUTIVE OFFICER

Candidates of the company’s Directors and Chief Executive

Officer are not selected by the Nominating Committee.

According to the company’s regulations, the Board of Directors

has duties to recruit knowledgeable and competent candidates

with relevant experience and qualifications as per Clause

68 in the Public Company Limited Act B.E. 2535, related

announcements by the Securities and Exchange Commission

and the company’s rules and regulations. It is for the benefits of

the company’s efficient operations.

REMUNERATIONS

Year 2004

Amount

Items Persons (Baht Mil.) Details

The Board of Directors 20 3.75 compensation,

meeting allowance

Executive Directors 6 18.49 salary, bonus, other

and management* compensations

* Including expatriate executives

The current 15 - member Board of Directors was appointed

during the 2004 Annual Ordinary Shareholder Meeting on 9

June 2004, and the 5/2004 Board Meeting on 2 July 2004

approved their remuneration as listed below:

(1) A monthly compensation of Baht 30,000

(2) A meeting allowance of Baht 5,000 a time

The board members who concurrently have the company’s

managerial positions and receive monthly salary will not be

entitled to remuneration for the board members as specified in

items (1) and (2).

39

REMUNERATION FOR THE CURRENT BOARD MEMBERS from 9 June - 31 December 2004

Item Names and Positions Compensation Meeting Allowance Total Monetary

(Baht) (Baht) Remuneration (Baht)

1. Mr. Vira Susangkarakan*

Chairman and Executive Dirtector - - -

2. General Singha Saovapap

Vice Chairman and Executive Director 210,000 10,000 220,000

3. Ms. Patama Chiachuabsilp*

Vice Chairman and Executive Director - - -

4. Mr. Somsak Leeswadtrakul*

Director and Chief Executive Officer - - -

5. Mr. Stephane Benayon

Director and Executive Director 210,000 10,000 220,000

6. Mr. Chainarong Monthienvichienchai

Director 210,000 10,000 220,000

7. Mr. Yanyong Kurovat


8. Mr. Prapanpong Vejjajiva

Director 210,000 5,000 215,000

9. ML. Sasivimol Kasemsri


10. General Choochat Kambhu Na Ayudhya

Director 210,000 10,000 220,000

11. Pol. Lt. General Prakard Sataman


12. Mr. Jeong Joon Ahn*

Director and Executive Director - - -

13. Mr. Paichitr Roajanavanich

Director and Chairman of the Audit Committee 210,000 25,000 235,000

14. Mr. Chaipatr Srivisarvacha

Director and Member of the Audit Committee 210,000 20,000 230,000

15. Mr. Preecha Prakobkit

Director and Member of the Audit Committee 210,000 15,000 225,000

* Directors who concurrently hold managerial positions in the company and receive compensation in the form of monthly salary are not entitled to any

other monthly compensation nor meeting allowance.

OTHER REMUNERATIONS

The 2/2004 Extraordinary Meeting of Shareholders on 5

October 2004 resolved an issuance and allocation of warrants

to the Board members and their employees for the company’s

100,000,000 - unit ordinary shares (prior to a public offering for

new ordinary shares). It is aimed at rewarding the board members

and employees for their contributions and motivating them to

execute their duties attentively and be in the service of the

company for the long run. The board members received an

allocation of not over 2,000,000 units each whereas those

concurrently serve as the company’s employees will also be

allocated warrants as per their capacity.

40

CORPORATE GOVERNANCE

Realizing benefits and importance of good corporate governance

for the enhancement of transparent and efficient management

and administration which will create confidence among

shareholders, investors and all parties concerned, the company’s

Board of Directors set a good corporate governance policy

as the company’s operation standard and procedures. It covers

following principles:

• To treat shareholders, stakeholders, and all parties equally

and fairly.

• To carry out their roles and responsibilities in supervision

and management honestly, ethically, prudently and

cautiously to achieve the set goals for the maximum

benefits of the company and shareholders as well as

to prevent conflicts of interest from arising.

• To transparently manage the company under the efficient

internal control and audit systems and to adequately

disclose information to shareholders and all parties

concerned to ensure their equal access to information.

• To control and manage risks at levels appropriate to the


• To run the business honestly under legal framework and

business ethics.

Execution in compliance with good corporate governance in

each area features:

(1) TREATMENT TO SHAREHOLDERS AND STAKEHOLDERS

The company gives an importance to shareholders meetings as

a fundamental right of shareholders and support equal and

transparent treatment to all shareholders with simplified

procedures. Apart from stringent conformation to legal

requirements, the Board regulated that any management

member involving with specific agenda convene and the

company’s legal advisor attend shareholders meeting every

time to jointly provide relevant information and respond to

shareholders’ enquiry. In 2004, the company held the ordinary

shareholders meeting once and extraordinary shareholders

meeting twice. It kept on improving its organizing of the

meetings and worked out guidelines for the organizing of the

shareholders meeting as follows:

• Disclosing adequate information for shareholders’ decision

making, disseminating to them in advance information with

invitation letter to the meeting as legally required. This is

to give them time to study and contemplate the matters

prior to the meeting date.

• Facilitating shareholders and their proxy to attend the

meeting and notification of voting method and vote

counting as well as other relevant meeting regulations

they should be aware of.

• Conducting the meeting strictly conforming to the

regulations and providing a question and answer session

for clarification and fairness to shareholders and all

parties concerned. Explicitly disclosing voting results of

each agenda with details on numbers of votes and shares

exercised for approval, disapproval or abstention.

• Having shareholders meeting session tape recorded,

taking main contents of enquiry 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 as stipulated

by Public Company Limited Act B.E. 2535, regulations of

the Securities and Exchange Commission and the Stock

Exchange of Thailand.

Apart from the shareholders, the company strictly treats other

stakeholders, namely, employees, trade partners, customers,

competitors and communities in the vicinity according to legal

requirements and other relevant regulations. It worked out

Code of Conduct for management and employees with guidelines

for their impartial conduct and relationship with stakeholders.

(2) EXECUTION OF DUTIES OF THE BOARD OF DIRECTORS

The 15-member Board of Directors consists of 11 independent

and non-executive directors, or 73% of the board. They

nominated 2 subcommittees: the Executive Committee and the

Audit Committee with clear scope of their respective roles and

responsibilities, balance and check of their power with each

other. Besides, a majority of the board members attended

training programs by the Thai Institute of Directors Association.

The 6 independent directors have following qualifications:

• Having not more than 5% of the total voting shares in the

company, affiliated and associated firms or persons with

possible conflicts of interest (including related persons as

per Clause 258 of the Securities and Stock Exchange Act).

• Having no managerial participation, not being salary -based

employees/advisors nor having authorization in the

company, affiliated and associated firms or persons with

possible conflicts of interest for not less than 1 year prior

to the position.

41

• Having no business relationship, direct or indirect stake in

financial and managerial terms in the company, affiliated

and associated companies or persons with possible

conflicts of interest in the manner to lose their independence.

• Not being closely related to the management nor major

shareholders of the company, affiliated and associated

companies or persons with possible conflicts of interest,

and not being nominated as proxy to protect benefits of

the major shareholding director.

In 2004, the Board convened 7 times, 3 of which were meetings

of the current Board who stringently conducted the sessions

as per the company’s Article of Association and the Public

Company Act. Meeting agenda and related information are

disseminated to the board members not less than 7 days in

advance for their study and perusal. Chances are open for them

to comprehensively debate on major issues, and legal advisors

attended the sessions, taking meeting minutes as well as

questions and the board members’ recommendations to enable

the Board and related parties to follow up and check.

The Board of Directors in cooperation with the management

team set shared values, missions, goals and 3 year business

expansion plan as well as the annual budget. Besides, they

oversee and follow up the management to constantly report

performance results, any arising problems and development

of projects in addition to the examination of appropriateness

of inter-related transactions, adequacy of the internal control

systems, conduct ethics of the management and employees.

They deliberate to endorse the company’s interim and annual

financial statements, with sufficient disclosure of significant

data in the notes on the financial statements with an assistance

of the Audit Committee and the Internal Audit who follow

up and examine relevant details to present to the Board

meeting.

The annual shareholders meeting on 9 June 2004 approved

year 2004 remuneration for the Board with the maximum

amount of Baht 8,000,000 per year and assigned the latter to

allocate the remuneration in accordance with the company’s

regulations as deemed appropriate. The 5/2004 Board meeting

on 2 July 2004 in turn resolved on the matter, segregating

Executive Directors who receive the salary-based compensation

not to be entitled to the remuneration.

(3) INTERNAL CONTROL AND AUDIT SYSTEMS

Having given an importance to efficient internal control and

audit systems both at managerial and operational levels, the

company commissioned Pricewaterhousecoopers FAS Ltd. to

jointly assess and provide recommendations on the internal

control systems to serve as guidelines to the management for

the company’s development and improvement.

In 2004, it established the Internal Audit Office to audit in

financial, operational areas and compliance with rules, regulations

and concerning laws. Initially, an auditing execution focused on

financial and operational areas, while the company commissioned

an external expert legal advisor to assist the management to

ensure that the company’s operations and major activities were

executed efficiently according to the set guidelines. To make the

Internal Audit independent so as to effectively carry out their

audit and balance keeping, the Board has regulated that the

Internal Audit Office directly report their results to the Audit

Committee and the Board of Directors.

The company has 3 - member Audit Committee. In 2004, they

met 3 times to examine justifications of inter related items and

adequacy of the internal control. Apart from jointly convening

with external auditors to scrutinize the accounting policies

and reporting on disclosure of financial data in the financial

statements, they took into account an annual audit plan and

followed up reports on the internal audit results in numerous areas.

To make transparent inter related transactions with possible

conflicts of interest, the Board of Directors stipulated standard

approval procedures for transactions with stakeholders or

persons with possible conflicts of interest as follows:

• In case of normal business transactions, prices, terms and

conditions of the inter related transactions are set as per

general terms and conditions at fair and reasonable

market prices, taking into considerations the company’s

best benefits and are reported to the Audit Committee

for their perusal.

• In case of other transactions rather than the aforementioned,

for instance, borrowings, acquisitions and disposal of

principal assets or making of agreement or contracts

and so forth, the company stipulated the Audit Committee

to provide their comments on necessity and justification of

the transactions. In case that the Audit Committee has no

expertise to scrutinize the inter related transactions, the

42

company will nominate an independent expert or the

external auditors to provide notes on the transactions for

decisions to be made by the company or shareholders,

whichever cases.

• The company will arrange disclosures of information on

the inter related transactions in notes on audited financial

statements by the external auditors as per the generally

accepted accounting principles, Securities and Stock

Exchange Act and regulations of the Stock Exchange of

Thailand.

(4) RISK CONTROL AND MANAGEMENT

The company commissioned Pricewaterhousecoopers FAS Ltd.

to assess and analyze risk factors to its business and execution

in all areas. It mapped out plans to follow up, control and examine

risk management to serve as implementation guidelines for the

management and the Internal Audit Office to avoid possible

loss. Relevant executives were assigned by the Executive

Committee to systematically consolidate and, as of this report,

were working out an overall risk management plan.

(5) BUSINESS ETHICS

To have a stable and sustainable business success in the long

run, the Board had the company’s code of conduct prepared

for the management and all staff to refer to as guidelines in an

execution of their duties with consistent and stringent

compliance. The ethics cover business execution with honesty

treatment to stakeholders equally and fairly, conflicts of

interest, confidentiality, and an abuse of information, graft,

receipt of gifts and rewards. The Internal Audit Office was

assigned to monitor and examine compliance with the stipulated

codes.

INTERNAL CONTROL

During the Board meeting on 7 October 2004 in which the

Audit Committee also attended, the Board assessed adequacy

of the company’s internal control systems in 5 areas: namely,

organization and environment; risk management; monitoring

of management execution; information technology and

communications and follow-up systems. They opined that the

company had adequate internal control systems at certain

levels and also had sufficient internal control systems on the

inter related transactions with majority interest, Directors,

management and any other persons related to the

aforementioned parties. The Board encouraged and supported

the management to continually improve the internal control

systems to enhance good corporate governance.

Nevertheless, in 2004, Ernst & Young Office Ltd., the company’s

external auditor, issued recommendations on internal control,

for instance, counting of assets, withholding tax on welfare for

expatriate executives, control of reimbursement supporting

documents and claims on value added tax. The company

implemented all of the recommendations to improve operations

for more efficient internal control systems.

In addition to Ernst & Young Office’s annual recommendation

documents as aforementioned, the company also hired

Pricewaterhousecoopers FAS Ltd. in November 2004 to

assess adequacy of the internal control systems and to provide

suggestions for the systems improvement and operation

efficiency to meet international standards with even better

corporate governance in the short and long terms. Presently,

the company included their recommendations in the ongoing

implementation and internal control plans.

DIVIDEND POLICY

In normal situations when the company does not require any

additional investment or business expansion plan and has

enough liquidity, it has a policy to pay dividend at 50% of its net

earnings after tax and legally required reserve. Nevertheless,

the Board may resolve the company 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, and so on.

43

T H E 1 0 M A J O R S H A R E H O L D E R S

Names and proportions of the first 10 major shareholders as at 31 December 2004.

No. Names of Shareholders Number of Shares %

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

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

3. Ms. Patama Chiachuabsilp Group3 1,118,214,864 13.64%

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

5. Mrs. Boonsri Suthirachai 210,000,000 2.56%

6. Ms. Chinnicha Shinawatra 205,000,000 2.50%

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

8. Asset Management Corporation 151,250,000 1.84%

9. Mr. Chanathip Trivuth 71,476,143 0.87%

10. Ms. Suvimada Leeswadtrakul 50,451,778 0.62%

11. Others 1,832,363,850 22.35%

Total 8,200,000,000 100.00%

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

(1) Mr. Ekpet Chansue 66.00%

(2) Mrs. Chuanpit Pattana 20.00%

(3) Ms. Tanaporn Thongjude 10.00%

(4) Marco Wealth Investments Ltd. 4.00%

2 The shareholding structure of Ample Vision Group Ltd.

(1) Mr. Hamish Gordon Cruden 100.00%

3 The shareholding structure of Ms. Patama Chiachuabsilp Group

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

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

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

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

44

I N T E R R E L A T E D T R A N S A C T I O N S

Parties with Conflicts of Interest RelationshipTypes of Transactions

Transactions 2004

Balance at 2004 - Year end Details / Terms & Conditions

Sukhumvit Inter Development Co.,Ltd. (formerly SSP Property Co., Ltd or SID)

•

•

Holding less than 0.01% shares in the company

25.50% of its shares held

Office rental fee (1,618,960) - The rental fee for its former office on the 11th floor of SSP Tower 2 whose contract

by the company’s Director and shareholder, Mr. Somsak Leeswadtrakul

ended in June 2004. The rate was approximately the same as other tenants.

• In 2003, its Director also served as SID’s Director, Mr. Jaime Lozare

Raw water expense (18,471,963) - As per a contract to buy and sell raw water via SID, an industrial estate park developer, at a more competitive price than direct purchase from the producer.

Siam Power Generation Co., Ltd. • 3.33% of its shares held Allowance for loss 568,360,000 - SIPCO claimed for its loss (SIPCO) by the company’s

Director and shareholder, Mr. Somsak Leeswadtrakul

of BOI priviledges on machine import duty due to the company’s violation on power

• Related to the Director, Mr. Somchai Leeswadtrakul, SIPCO’s Director, is a brother of Mr. Somsak Leeswadtrakul

purchase contract, hence delaying the construction of its power plant. BOI later granted approval for SIPCO to extend import period. The allowance was cancelled and reversed as the company’s income in the 2nd

quarter of 2004.

Debts under a financial rehabilitation plan

- (347,486,901) The balance as per the plan with no interest and annual repayment of Baht 5.29 million. The rest was to repay in the last year (15th year)

Thai Sin Steel Holding Co., Ltd. • The company’s Director: Mr. Somsak Leeswadtrakul is rehabilitation plan administrator for 2 shareholders who also have shares in Thai Sin Steel

• Holding 0.09% of the company’s shares.

Service fee for debt settlement negotiations

(137,410,000) - Service fee for negotiation on premature repayment to 3 secured creditors in the financial rehabilitation. The debt was haircut by Baht 2,190 million

Nara International Co., Ltd. • Early 2004, a Director also serves as a Board member in Nara International

Raw material expense

(535,553,704) (53,387,157) Expenses for other raw material and consumable supplies for the production. Prices are based on costs plus standard margin. Only transactions requiring L/C or through agents were processed through Nara International for their credit facilities

Sales of goods 2,298,505,927 130,563,249 Sales of hot-rolled coils at prevailing market prices. Nara International is an agent with customer base and continual order quantities. It has no collection problems, thus facing less risks from collection loss.

45

JUSTIFICATIONS ON INTER RELATED TRANSACTIONS

The inter related transactions between the company and

parties with possible conflicts of interest are normal business

transactions with the company’s general terms and conditions

as necessary for the business execution, having taken into

account its maximum benefits.

APPROVAL PROCEDURES FOR INTER RELATED

TRANSACTIONS

For any inter related transactions in the future, the Board shall

execute according to the Securities and Stock Exchange Act,

rules, regulations, announcements of the Stock Exchange of

Thailand. It shall also disclose information on the inter related

transactions, acquisition or disposal of principal assets of

the company or subsidiaries as per SET regulations, SEC

announcements and accounting standards by the Accounting

Association. For the transparent inter related transactions, the

Board mapped out approval procedures as follows:

1) For normal business transactions, prices, terms and

conditions of inter related transactions are set as per general

business terms and conditions as well as prevailing market

prices, taking into considerations the company’s maximum

benefits. The transactions are to report to the Audit Committee

for examination.

2) For other transactions rather than those in item 1, such as

borrowings, acquisitions or disposals of major assets or making

of 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 will nominate an independent expert or the external

auditors to provide notes on the transactions for decisions to be

made by the Board or shareholders, whichever cases.

3) The company shall arrange disclosures of information on

the inter related transactions in notes on audited financial

statements by the external auditors as per the generally

accepted accounting principles and Securities and Stock

Exchange laws. For any inter related transactions in the future,

the company worked out a policy to apply general business

practice and market prices. It shall assign the Audit Committee

or independent experts to examine and provide justifications

on the prices and transactions as well.

46

R E P O R T O F T H E A U D I T C O M M I T T E E

The annual ordinary shareholders meeting on 9 June 2004

resolved the nomination of the Audit Committee with a 3 - year

term starting from 9 June 2004 to 8 June 2007. The 3

independent members of the committee having the Internal

Audit Manager as their secretary are:

1. Prof. Paichitr Roajanavanich Chairman of the Audit Committee

2. Mr. Preecha Prakobkit Member of the Audit Committee

3. Mr. Chaipatr Srivisarvacha Member of the Audit Committee

4. Ms. Sopit Jaeng-arun Secretary to the Committee

Scope, roles and responsibilities of the Committee were

stipulated as below:

1. To examine for the company’s accurate and adequate

disclosure of financial report.

2. To examine for the company’s efficient and appropriate

internal control and audit systems.

3. To examine for the company’s compliance with legal

requirements on Securities and Stock Exchange, SET

regulations or laws relevant to the company’s business.

4. To scrutinize, select and nominate the company’s external

auditors and propose their remuneration.

5. To scrutinize the disclosure of the company’s information

in case of inter related transactions or conflicts of

interest items.

6. To prepare a report on the Audit Committee’s activities

for disclosure in the company’s annual report.

7. To execute any other assignments by the Board of Directors

with an approval from the Chairman of the Audit Committee

8. To report results of their execution, recommendations and

their findings to the Board at least twice a year.

For the accounting period ending on 31 December 2004, the

Audit Committee convened 3 times to comtemplate and

examine the company’s operations in following areas:

1. Having examined the company’s interim and 2004 annual

financial statements together with the management’s

remarks, in cooperation with the external auditors, before

having them submitted to the Office of the Securities and

Stock Exchange Commission.

2. Having acknowledged the company’s reports, remarks

and analysis on the interim and 2004 annual financial

statements prepared by the company’s management.

3. Having approved the Internal Audit Office’s audit plans

for year 2005.

4. Having assessed adequacy of the company’s internal

control systems in accordance with an assessment

form of the Office of the Securities and Stock Exchange

Commission.

5. Having acknowledged the company’s reports on their

compliance with Securities and Stock Exchange laws and

other legal requirements related to the company’s business.

6. Having selected and proposed to the Board of Directors

for their perusals and request for the shareholders

meeting’s approval to nominate Mr. Sophon Permsirivallop

and/or Mr. Narong Pantawong and/or Ms. Rungnapa

Lertsuwankul of Ernst & Young Office Ltd. as the

company’s auditors for 2005 accounting period. They

also proposed to the Board of Directors the remuneration

of Baht 1,400,000 auditing service fee.

7. Having assessed conformation to the policy on good

corporate governance, in cooperation with the company’s

management in accordance with an assessment form of

the Stock Exchange of Thailand.

(Prof. Paichitr Roajanavanich)

Chairman of the Audit Committee

47

R E P O R T O N B O A R D O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S W I T H

R E G A R D S T O F I N A N C I A L R E P O R T S

G Steel’s Board of Directors is directly responsible for the company’s financial reports as appeared in its 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 principles

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

statements for the benefits of shareholders and general investors.

The Board of Directors established and maintained the appropriate and efficient internal control and audit systems to ensure that

their 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 appointed the Audit Committee to examine the accounting policies and quality of the financial reports, to examine

the internal control systems as well as risk management system. The Committee’s remarks on the matters appeared in the Audit

Committee’s report, already included in the annual report. The company’s certified auditors, nominated by the Board of Directors, had

sufficient independence to audit the financial reports and also to attach their notes on the financial status, performance results and the

company’s cash flow in the financial reports.

(Dr. Vira Susangkarakan) (Dr. Somsak Leeswadtrakul)

Chairman of the Board of Directors Chief Executive Officer

48

N O T E S A N D A N A L Y S I S O N F I N A N C I A L S T A T U S A N D

P E R F O R M A N C E R E S U L T S

ANALYSIS ON PERFORMANCE RESULTS

OVERVIEW

The performance results for 2004 grew in all areas, albeit

production and sales volumes and operating profit. The company

registered 1.1 million tons of hot-rolled coil production volume,

an increase of 20% over the preceding year, with 74% utilization

of the maximum production efficiency. The additional outputs

were mainly exported to countries in North America, Europe,

Middle East and ASEAN, enabling it to register a distinguished

178% rise in their export volume. It accounted for 22% of the

total sales volume. The sales volume during 2004 increased

both in quantities and especially selling prices that kept on

rising all year round. The average selling price in 2004 was

42% higher than that of 2003. The company hence recorded

2003

Baht 21,270 million sales value, a 69% growth over the

previous year. Most of its incomes were from domestic markets.

Concurrently, the company successfully managed their

production costs, pushing up a gross profit rate from 7% in

2003 to 14% in 2004. Operating profits (excluding allowance

for compensation for breach of contract) were as high as Baht

2,599 million, more than two times higher growth over the

previous year, while the net profit totalled Baht 8,902 million.

The company cleared all retained loss since the beginning of

the first quarter, until the 2004 year end, and registered a

cumulative profit of Baht 8,682 million.

2004

Total 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Production Volume (Tons) 920,131 277,575 262,392 269,654 295,017 1,104,638

Sales Volume (Tons) 934,465 293,167 260,887 268,394 284,613 1,107,062

Sales Value (Baht Thousand) 12,622,163 4,759,873 5,008,988 5,269,031 6,232,360 21,270,252

During the first half of 2004, the company negotiated with its

4 financial creditors under the rehabilitation plan to prematurely

repay the total debts of Baht 4,031 million using incomes from

sales of additional shares to existing shareholders and private

offering. The creditors agreed on the haircut of Baht 1,185

million, thus the company could save interest expense of Baht

1,293 million under the rehabilitation plan. The gains of Baht

2,478 million from premature repayment was recognized

during the first half of 2004. Having all of their collateral burdens

such as property, plant and equipment discharged, the company

had no more financial debt burden, and their debt to equity

ratio reduced to 0.15 times, significantly strengthening the

financial status. It was the year of the company’s huge success

both in their business operation and financial restructure,

indeed.

SELLING AND OTHER INCOMES

In 2004, the company enjoyed the total incomes of Baht

21,979 million, a growth of Baht 8,462 million or 63% over the

preceding year. Of this, there was a domestic selling income of

Baht 16,435 million or 43% increase, an export income of Baht

4,835 million or a 336% increase, compared to the previous

year. Additionally, there was a reversal of allowance for

compensation for breach of contract of Baht 568 million (an

item not affecting its cash flow), profits from selling steel scrap

and pig iron of Baht 121 million and other incomes of Baht

18.9 million.

Regarding the reversal of allowance for compensation for breach

of contract, the company set aside the allowance of Baht 568

million in 2003 as it violated the contract to sell and buy

49

power with Siam Power Generation Co., Ltd., causing the latter

to lose their BOI privileges. The item was later reversed in

2004 after a burden of the loss ended as per conditions in the

contract.

COST OF GOODS SOLD, SELLING AND ADMINISTRATIVE EXPENSES

The cost of goods sold (COGS) consists of 70% raw material

cost, 28% conversion cost and 2% depreciation cost. In 2004,

the company had a total COGS of Baht 18,211 million, a rise of

Baht 6,722 million or 54% over the previous year. It was due to

a higher production volume and increasing raw material prices.

Nevertheless, selling prices were increased at a higher rate,

providing a higher spread between the selling prices and raw

material costs of scrap and pig iron. The ratio of COGS to sales

volume thus decreased from 93% in 2003 to 86% in 2004, the

company marked a higher gross profit of 7% in 2003 to 14%

in 2004.

The selling and administrative expenses were Baht 417 million

or 2% of the total selling income, a reduction of Baht 66 million

or 14% from the previous year. In 2003, the company amortized

loan management fees and premiums on loans as well as

expenses for the preparation and management of the business

rehabilitation plan whereas there were no such expenses in

2004. The selling and administrative expenses were mainly

transportation expenses, staff salary and other expenses.

INTEREST EXPENSE

At present, the company has no more interest expense for

financial institution creditors. Existing interest expense is

incurred from raw material inventory -steel scrap and pig iron-

under agreement conditions in material management for

production of Hot Rolled Coil. During 2004, interest expense

accounted for Baht 121 million, an increase of Baht 64 million

or 111% over 2003 due to an increase in raw material purchase

in accordance with growing production outputs plus rising

costs of raw materials.

THE REVERSAL OF ALLOWANCE FOR ASSET IMPAIRMENT

At 2004 year end, an independent asset appraiser was hired

to assess the company’s property, plant and equipment and

found out that its asset value at prevailing market prices was

Baht 3,441 million higher than the book value. The market value

of its land was Baht 395 million, an increase of Baht 175 million;

that of the plant was Baht 910 million, a decrease of Baht 538

million and that of the machine was Baht 14,430 million, an

increase of Baht 3,804 million. The reversal of Baht 3,441

million loss on asset impairment was posted after the realization

of the loss was earlier made at Baht 5,803 million.

EARNINGS FROM BUSINESS REHABILITATION

In 2004, the company registered Baht 2,294 million earnings

from the business rehabilitation resulting from a debt reduction

by financial and trade creditors as it prematurely repaid the debts.

OPERATING NET PROFITS

The company enjoyed Baht 3,167 million operating profit, a

growth of Baht 2,548 million or 412% increase due to higher

sales volume and utilization of production capacity as well as a

higher margin from 5% in 2003 to 14% in 2004. It was due to

an increase in a gap between selling prices and raw material

costs as well as lower selling and administrative expenses.

The operating profit, excluding reversals of allowances for

loss, was Baht 2,599 million or equivalent to Baht 0.32

per share. (Based on the number of shares at the year-end)

The company saw a Baht 8,902 million net profit, including

items on asset impairment, asset disposals and profits from

the rehabilitation, a sharp reduction compared to that of the

preceding year when it registered a profit as high as

Baht 54,422 million from the rehabilitation due to its debt

restructuring plan.

FINANCIAL STATUS

As at the end of 2004, the company’s total assets were Baht

21,718 million, a rise of Baht 6,753 million over the previous

year. They were current assets of Baht 4,389 million, an increase

of Baht 2,419 million; fixed assets of Baht 16,242 million,

an increase of Baht 3,443 million; other assets of Baht 1,087

million, an increase of Baht 890 million. The increased assets

were due to the re-appraisal and growth in production outputs,

sales volume and prices. This required more working capital to

purchase and maintain raw materials as well as an increase of

credit lines to customers accordingly.

As at the end of 2004, the company’s total liabilities were

Baht 2,911 million, a reduction of Baht 6,453 million over the

previous year. They were current liabilities of Baht 1,655

50

million, an increase of Baht 625 million; long term liabilities

were interest free account payables and service fees under the

business rehabilitation plan totalling Baht 1,256 million, a

reduction of Baht 7,708 million. The decrease in long-term

liabilities was mainly due to the premature debt repayment and

the haircut by the creditors in the business rehabilitation plan

and the reversal of allowance for compensation for breach of

contract. The current liabilities was in accordance with the

higher production volumes and raw material procurement.

As at the end of 2004, the shareholders’ equity of the company

amounted to Baht 18,807 million, an increase of Baht 13,206

million from the end of 2003. Issued and paid up capital was

Baht 8,200 million, premium on shares was Baht 1,925 million

and retained earnings were Baht 8,682 million. As such, its

shareholders’ equity was substantially higher than its liabilities,

with debt to equity ratio of 0.15 times and its book value of Baht

2.29 per share.

CASH FLOW

The company had an operating cash flow of Baht 473 million,

compared to the negative cash flow of as high as Baht 395

million in 2003. The turning of its cash flow from negative to

positive positions in 2004 was due to overall improved

performance results, with increased production and sales

volumes as well as the higher profit in 2004, compared to

those of 2003. The company’s liquidity was significantly

improved, notwithstanding its need for an increased working

capital to expand its production outputs and market bases. It

had higher capability to repay debt as it registered earnings

before interest, tax and depreciation as high as Baht 3,217

million whereas its debt burden reduced to merely Baht 1,256

million.

REMUNERATIONS FOR AUDITORS

The company paid the auditing fee for Ernst & Young Office Ltd.

for the 2004 accounting period at the amount of Baht 1.3

million.

51

52

F I N A N C I A L

52

S T A T E M E N T S

R E P O R T O F I N D E P E N D E N T A U D I T O R

To the Board of Directors and Shareholders of

G Steel Public Company Limited

(Formerly known as “Siam Strip Mill Public Company Limited”)

I have audited the balance sheets of G Steel Public Company Limited as at 31 December 2004 and 2003, and the related statements

of earnings, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility

of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an

opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statements presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial positions of G Steel Public

Company Limited as at 31 December 2004 and 2003, and the results of its operations and cash flows for the years then ended in

accordance with generally accepted accounting principles.

Sophon Permsirivallop

Certified Public Accountant (Thailand) No. 3182

Ernst & Young Office Limited

Bangkok: 4 March 2005

53

B A L A N C E S H E E T S As of 31 December 2004 and 2003

(Unit: Baht)

Note 2004 2003

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Trade accounts receivable

Trade accounts receivable - related company

Inventories - net

Other current assets

Other receivable

Refundable value added tax

Value added tax suspense

Prepayment to vendors

Others

6

13

8

353,402,016

1,059,809,659

130,563,249

2,320,984,965

40,931,318

381,449,394

91,766,042

1,297,288,857

51,515,703

270,418,384

134,000,477

43,479,147

24,760,832

-

25,055,715

67,574,359

45,484,153

19,929,443

Total other current assets 524,174,543 158,043,670

TOTAL CURRENT ASSETS 4,388,934,432 1,969,479,281

NON-CURRENT ASSETS

Restricted deposit at financial institution 7 1,000,000 -

Property, plant and equipment - net 9 16,129,106,125 12,735,306,941

Intangible assets 10

Computer software installation 45,582,224 40,991,898

Deferred supply costs 67,138,043 22,428,003

Other non-current assets

Deposits for purchases of raw materials 11 973,248,674 142,931,204

Deposits for use of energy 110,429,906 53,231,681

Deposits for others 2,866,255 599,113

Total other non-current assets 1,086,544,835 196,761,998

TOTAL NON-CURRENT ASSETS 17,329,371,227 12,995,488,840

TOTAL ASSETS 21,718,305,659 14,964,968,121

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

54

2003

B A L A N C E S H E E T S As of 31 December 2004 and 2003

(Unit: Baht)

Note 2004

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Trade accounts payable

Trade accounts payable - related company

Others payable

Advance received from customers

Advance from director

Current portion of liabilities which were included under

the former rehabilitation plan

Accrued expenses

TOTAL CURRENT LIABILITIES

13

13

13

12

13

1,144,744,569

53,387,157

330,122,271

32,888,812

-

-

93,775,978

1,654,918,787

376,068,986

70,861,524

389,302,514

45,000,000

170,952

53,029,333

95,595,474

1,030,028,783

NON-CURRENT LIABILITIES

Amount due to related company

Liabilities which were included under the former

rehabilitation plan - net of current portion

13

12

-

1,256,354,919

568,360,000

7,765,721,790

TOTAL NON-CURRENT LIABILITIES 1,256,354,919 8,334,081,790

TOTAL LIABILITIES 2,911,273,706 9,364,110,573

SHAREHOLDERS' EQUITY

Share capital

Registered share capital

12,000,000,000 ordinary shares of Baht 1 each

(2003: 55,000,000 ordinary shares of Baht 10 each)

14

12,000,000,000 550,000,000

Issued and paid up share capital

8,200,000,000 ordinary shares of Baht 1 each

(2003: 55,000,000 ordinary shares of Baht 10 each) 8,200,000,000 550,000,000

Share subscription received in advance 14 - 547,024,680

Other surplus

Share premium 14 1,719,140,000 162,080,000

Premium on capital reduction 15 206,307,094 4,562,307,094

Retained earnings (deficit)

Appropriated - legal reserve 16 458,027,234 12,920,280

Unappropriated 8,223,557,625 (233,474,506)

TOTAL SHAREHOLDERS' EQUITY 18,807,031,953 5,600,857,548

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 21,718,305,659 14,964,968,121


55

S T A T E M E N T S O F E A R N I N G S For the years ended 31 December 2004 and 2003

(Unit: Baht)

Note 2004 2003

REVENUES

Sales 21,270,252,071 12,622,162,692

Reversal of allowance for breach of contract 13, 18 568,360,000 -

Other income 19 140,239,928 894,663,055

TOTAL REVENUES 21,978,851,999 13,516,825,747

EXPENSES

Cost of sales 18,211,316,404 11,788,752,412

Selling and administrative expenses

Allowance for breach of contract 13, 18

417,263,909

-

483,348,916

568,360,000

Loss on exchange

Directors' remuneration 20

58,107,583

4,200,000

-

390,000

TOTAL EXPENSES 18,690,887,896 12,840,851,328

EARNINGS BEFORE INTEREST EXPENSE 3,287,964,103 675,974,419

Interest expense (120,997,469) (57,348,559)

EARNINGS FROM OPERATING ACTIVITY 3,166,966,634 618,625,860

Reversal of allowance for assets impairment

Allowance for assets impairment

Loss from assets written off

9

9

9

3,441,440,639

-

-

-

(5,802,624,311)

(1,232,495,777)

EARNINGS (LOSS) FROM ORDINARY ACTIVITY 6,608,407,273 (6,416,494,228)

EXTRAORDINARY ITEMS

Gain from rehabilitation 12, 13 2,293,731,812 54,421,762,378

NET EARNINGS FOR THE YEAR 21 8,902,139,085 48,005,268,150

BASIC EARNINGS PER SHARE 22

Earnings (loss) from ordinary activity

Extraordinary item

1.01

0.35

(2.06)

17.51

NET EARNINGS 1.36 15.45

Weighted average number of ordinary shares with a par value of

Baht 1 each (shares) 6,574,863,388 3,107,397,260


56

S T A T E M E N T S O F C A S H F L O W S For the years ended 31 December 2004 and 2003

(Unit: Baht)

2004 2003

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings for the year

Adjustments to reconcile net earnings to net cash provided (paid)

from operating activities: -

Depreciation

Expenses of negotiation with overseas financial institution creditors

Allowance for compensation for breach of contract (Reversal)

Amortisation

Bad debts

Allowance for slow-moving inventories

Gain from disposal of assets

Loss from assets impairment (Reversal)

Loss from assets written off

Unrealised loss on exchange

8,902,139,085

439,093,516

(196,300,000)

(568,360,000)

32,125,445

-

-

(222,069)

(3,441,440,639)

-

28,643,825

48,005,268,150

351,522,734

-

568,360,000

25,766,532

6,063,413

5,167,782

(443,654)

5,802,624,311

1,235,674,742

2,631,354

Net earnings from operating before changes in operating assets

and operating liabilities

DECREASE (INCREASE) IN OPERATING ASSETS

Trade accounts receivable

Trade accounts receivable - related companies

Inventories

Other receivable

Refundable value added tax

Prepayment to vendors

Other current assets

Intangible assets

Other non-current assets

INCREASE (DECREASE) IN OPERATING LIABILITIES

Trade accounts payable

Trade accounts payable - related companies

Other payable

Amounts due to related companies


Other current liabilities

Net cash from operating activities before extraordinary items

Extraordinary items

NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

5,195,679,163

(5,172,545,968)

(38,797,204)

(1,023,696,108)

(51,515,303)

(245,362,668)

2,005,006

(71,257,508)

(81,425,811)

(869,086,347)

5,196,046,601

-

(59,180,243)

-

(12,111,188)

(1,819,896)

2,766,932,526

(2,293,731,812)

473,200,714

56,002,635,364

(2,452,121,744)

84,902,789

(339,250,509)

-

73,054,775

(22,857,134)

(12,819,191)

-

(84,807,459)

1,713,834,371

(91,251,936)

(343,019,950)

(396,859,141)

-

(104,755,085)

54,026,685,150

(54,421,762,378)

(395,077,228)


57

S T A T E M E N T S O F C A S H F L O W S For the years ended 31 December 2004 and 2003

(Unit: Baht)

2004 2003

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in restricted deposit at financial institution (1,000,000) -

Cash received from sale of equipment 270,093 543,458

Net increase in property, plant and equipment (391,500,085) (382,554,699)

NET CASH FLOWS USED IN INVESTING ACTIVITIES (392,229,992) (382,011,241)

CASH FLOWS FROM FINANCING ACTIVITIES

Shares subscription received in advance -

Cash received from increase in share capital 4,366,975,320

Payment of expenses related to increase in share capital (62,940,000)

Payment of liabilities which were included under

the former rehabilitation plan (4,072,364,392)

Increase (decrease) in advance from director (170,952)

547,024,680

500,000,000

-

(232,274,489)

158,389

NET CASH FLOWS FROM FINANCING ACTIVITIES 231,499,976 814,908,580

NET INCREASE IN CASH AND CASH EQUIVALENTS

Cash and cash equivalents at beginning of year

312,470,698

40,931,318

37,820,111

3,111,207

Cash and cash equivalents at end of year 353,402,016 40,931,318

SUPPLEMENTAL CASH FLOWS INFORMATION

Non-cash items

Transfer of interest payable to liabilities under rehabilitation plan

Transfer of trade accounts payable and other payable to

liabilities under rehabilitation plan

Transfer of current portion of long-term loan to

liabilities under rehabilitiation plan

Transfer of short - term loans from financial institutions to


Transfer of loan to directors to liabilities under rehabilitation plan

Transfer of short - term loan from related company to


Transfer of liability under composition to liabilities under rehabilitation plan

Transfer of other liabilities to liabilities under rehabilitation plan

Trade accounts receivable decreased by offsetting with

trade accounts payable

Cash paid during the year for:-

Interest paid


-

-

-

-

-

-

-

-

4,490,746,656

120,997,469

4,693,608,029

526,552,986

20,576,404,036

1,187,426,011

999,665

5,200,000

35,629,000,000

8,074,207,949

2,169,014,044

3,462,128

58

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N O T E S T O F I N A N C I A L S T A T E M E N T S For the years ended 31 December 2004 and 2003

1. GENERAL INFORMATION

a) G Steel Public Company Limited was incorporated as a limited company under Thai laws and then was registered as a Public

Company Limited. The Company operates its business in Thailand and its principal activity is the manufacture of hot rolled coils.

The Company registered its change in the Company’s name from “Siam Strip Mill Public Company Limited” to “G Steel Public

Company Limited” with the Ministry of Commerce on 26 March 2004. Its registered address was located on 116/36-39 SSP Tower

2 Building, Soonthornkosa Road, Klongtoey, Bangkok. Subsequently, the Company registered its change in the Company’s head office

location to 88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong, Bangrak, Bangkok with the Ministry of Commerce on 12 July 2004.

b) In the past, the Company sustained persistent operating losses and suffered from a lack of working capital. As a result its total

liabilities significantly exceeded its total assets (capital deficit) and it defaulted on the payment of substantial amounts of loans and

outstanding interest. Therefore, the Company, together with three major lenders (one of them a related company), filed a petition for

business rehabilitation with the Central Bankruptcy Court. On 26 March 2001, the court ordered the Company to rehabilitate its business

and ordered the petitioners to appoint a planner and a financial advisor to prepare a debt restructuring plan. However, three creditors

who filed the petition for business rehabilitation, together accounting for more than 50 percent of voting rights, later passed a

resolution rejecting the rehabilitation plan and the court ordered the rejection of the rehabilitation plan on 22 November 2001.

Subsequently, on 25 December 2001, another creditor which is a related company filed a new petition for rehabilitation with the

Central Bankruptcy Court, and on 27 June 2002 the court ordered the Company to rehabilitate its business. On 26 December 2002,

the planner submitted a rehabilitation plan to the official receiver and the court approved the rehabilitation plan on 17 June 2003.

The Company was able to successfully comply with the process stipulated in the plan and the plan administrator therefore petitioned

the court to order the termination of rehabilitation. The court ordered such termination on 26 September 2003.

2. BUSINESS REHABILITATION PLAN

On 27 February 2001, the Company and three of its overseas financial creditors jointly filed a petition for business rehabilitation

with the Central Bankruptcy Court. The court accepted the petition, and ordered the rehabilitation of the Company’s business on 26

March 2001. The petitioners subsequently appointed a financial advisor to prepare the debt restructuring plan of the Company.

On 5 November 2001 the planner submitted a rehabilitation plan to the creditors’ committee, but overseas financial creditors rejected

the plan. Subsequently on 22 November 2001 the court cancelled its order to rehabilitate the business of the Company, and the three

lenders sued the Company for bankruptcy on the same day. On 25 December 2001 the Company and a major creditor which is a

related company filed a new petition for business rehabilitation with the Central Bankruptcy Court. Such petition was opposed by

the same group of overseas lenders and the court ordered an investigation.

On 27 June 2002 the Central Bankruptcy Court ordered the Company into rehabilitation and appointed Paper Planner Co., Ltd. as

planner. The planner submitted the Company’s rehabilitation plan to the official receiver on 26 December 2002.

On 17 June 2003, the Central Bankruptcy Court issued an order approving the business rehabilitation plan, with Paper Planner Co., Ltd.

as plan administrator. Any right and authority of the planner were transferred to the plan administrator.

The Company’s business rehabilitation plan can be summarised as follows: -

1. Debt restructuring

1.1 Secured finance creditors consist of secured financial institution creditors with debts amounting to approximately Baht

26,288.14 million according to the claims for repayment lodged. Debt is to be repaid as follows:

60

a) The new principal liability under the plan amounting to Baht 2,716 million, is to be paid in proportion to the amount of secured

debt held by each creditor, in annual installments over a period of 13 years, after completion of a period of suspension of

principal repayment (24 months from the date the court approved the plan). These liabilities carry interest at a rate of 1 percent

in the first to third years, 2 percent in the forth to fifth years and 4 percent in the sixth to fifteenth years.

b) The principal in excess of the value of the security, amounting to approximately Baht 2,500 million, is to be paid in proportion

to the part of the debt final approval granted in excess of the value of the security. Payment is to be made on an installment

basis from the 8th to the 14th year after the date the court approved the plan, with the remainder to be repaid in full in the

15th year. A fixed rate of interest of 1 percent per annum applies throughout the fixed 15-year period.

c) Principal amounting to Baht 87.24 million is to be paid from part of the capitals injected by new investors, with no interest charge.

1.2 Unsecured creditors consist of the debts of directors, trade accounts payable, the Revenue Department, government and state

enterprises creditors and creditor arising as a result of composition agreement amounted to approximately Baht 37,910.32 million

according to the claims for repayment lodged. Creditors are to be repaid as follows:

a) The payment is allotted for trade accounts payable with the ration of 1 percent to 100 percent subtract 0.38 percent. The

payment is to be made in installments from operating cash flows within 15 years and from newly arranged loan facilities with

the first payment due within 12 months from the date the court approved the plan. Debt is to be repaid at a constant rate of

1.5 percent per year from the 1st to the 14th year, with the remainder to be settled in the 15th year.

b) The outstanding principal, 0.38 percent is to be paid from the capital injected by the new investor within 60 days of the date

the plan was approved by the court.

c) No interest is to be charged on these balances through the period of repayment.

d) No repayment is to be paid to debts of directors except under other conditions stipulated in the plan.

1.3 Contingent liabilities from assessment of duty and taxes by the Customs Department, and the Revenue Department amounting to

approximately Baht 2,431.49 million according to the claims for repayment lodged. Contingent liabilities as a result of guarantees

amounting to Baht 22,210.92 million. Contingent liabilities as a result of insurance contracts amounting to Baht 10,682.29 million.

No repayment is to be made to those debts unless in accordance with other conditions stipulated in the plan.

2. Capital restructuring

The process of capital restructuring is as follows: -

2.1 The reduction of the Company’s registered share capital from Baht 7,500 million to Baht 5,000 million, consisting of 500 million

shares of Baht 10 each, through the cancellation of 250 million registered shares which have not yet been allocated.

2.2 The reduction of the number of issued and paid up shares by a ratio of 100 to 1, leaving 5 million ordinary shares of Baht 10 each,

with the reduction in capital to be offset against the deficit.

2.3 Increase registered share capital from Baht 50 million to Baht 550 million through the issue of 50 million shares at Baht 10 each,

all of which are to be sold to a new investor.

The Company had repaid liabilities identified under the rehabilitation plan, reduced its registered share capital, reduced its paid-up

share capital to 5 million ordinary shares with a par value of Baht 10 each, or a total of Baht 50 million, increased its share capital to

50 million of ordinary shares with a par value of Baht 10 each, or a total of Baht 500 million. The Company registered its reduction

and increase of shares with the Ministry of Commerce. Moreover, on 2 September 2003, the Company filed a request for the Stock

Exchange of Thailand to accept its shares for listing as marketable securities on the Stock Exchange of Thailand.

The above steps had mainly been successfully implemented in compliance with the conditions stipulated in the rehabilitation plan.

The plan administrator therefore petitioned the court to terminate the Company’s rehabilitation plan and the court ordered such

termination on 26 September 2003. Consequently, the authority and responsibility for the Company was legally returned to the

management and shareholders as from the date of termination.

3. PRIOR YEAR ADJUSTMENT

During the period ended 30 June 2003, the Company adjusted interest payable on loans and other liabilities which it had recorded

until the end of 2001, while the lenders and other creditors ceased charging interest to the Company commencing from the date the

court ordered the rehabilitation of the Company’s business. The effect of interest payable of 2002, amounting to Baht 916 million, was

to cause the brought forward balance of retained earning of 2003 to be restated as if the Company had ceased accruing interest

from the date the court ordered the rehabilitation of its business to be restated.

61

4. CHANGE IN ACCOUNT ESTIMATION

Before 2003, the Company calculated depreciation of machinery using the productive units method, over the estimated useful lives

of 25 years. In 2003, the Company changed the estimated useful life of the machinery from 25 years to 30 years, based on the

estimation of an independent specialist; John Foord Valuers Co., Ltd.

5. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified

Accountants and Auditors of Thailand and with the Accounting Act B.E. 2543.

Significant accounting policies adopted by the Company are summarized below.

5.1 Revenues

Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the

invoiced value of goods supplied, excluding value added tax, after deducting discount and goods return.

5.2 Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable is carried at its net realizable value. Allowance for doubtful accounts is provided for the estimated collection

losses that may be incurred in the collection of receivables. The allowance is based on collection experience and current status of

receivables outstanding at the balance sheet date.

5.3 Inventories

Finished goods are valued at lower of cost (first in - first out method) and net realizable value.

Raw materials and others consumable are valued at cost (moving-average method) and charged to cost of production whenever issued.

5.4 Property, plant and equipment and depreciation

Land is stated at cost less allowance for impairment, plant and equipment are stated at cost less accumulated depreciation and

allowance for impairment.

Depreciation is calculated by reference to their cost on a straight-line basis except for depreciation of machinery which calculated on

productive-output method over the estimated useful lives as follows: -

Buildings - 20 years

Machinery and plant equipment - 5, 30 years

Office equipment - 5 years

Furniture and fixtures - 5 years

Leasehold improvement - 5 years

Motor vehicles - 5 years

No depreciation is provided for land and assets under construction.

5.5 Allowance for assets impairment

The Company reviews the impairment of assets whenever events indicate that the carrying value of an asset exceeds its realizable

value. Realizable value is the higher of an asset’s net selling price and its value in use. The value in use is arrived at based on the

management estimates.

The Company recognizes an impairment loss in the earnings statements whenever the carrying value of an asset exceeds its realizable

value. The Company will reverse the impairment loss when there are indications that the value of the asset is no longer impaired or the

amount of impairment has decreased.

5.6 Intangible assets and amortisation

Computer software is stated at cost less accumulated amortisation. The Company amortised computer software on a straight line

basis over the period of 5 years.

62

No amortisation on computer software installation.

Deferred supply costs are stated at cost less accumulated amortisation. The Company amortised deferred costs on a straight line

basis over the period of 2 years.

5.7 Foreign currencies

Foreign currency transactions during the year have been translated into Baht on the rates ruling at the transaction dates. Monetary

assets and liabilities denominated in foreign currency outstanding on the balance sheet date have been translated into Baht at the

rates ruling by the Bank of Thailand at the balance sheet date.

Exchange gains and losses are included in determining earnings.

5.8 Cash and cash equivalents

Cash and cash equivalents in the preparation of statements of cash flows included cash in hand, deposits at financial institutions with

an original maturity of 3 months or less and without commitments.

5.9 Financial instruments

The Company has no policy to speculate in or engage in the trading of any financial derivative instruments.

Financial instruments carried in the balance sheet include cash and cash equivalents, trade accounts receivable, trade accounts

payable and liabilities which were included under the former rehabilitation plan. The particular recognition methods adopted are

disclosed in the individual policy statements associated with each item.

5.10 Provident fund

The Company and its employees have jointly established a provident fund scheme in accordance with the Provident Fund Act B.E.

2530. Such fund is monthly contributed by the Company and its employees at the rate of 2 percent of their basic salaries. The fund

is managed by Kasikorn Assets Management Company Limited, and will be paid to the employees upon termination in accordance

with the rules of fund.

5.11 Use of accounting estimate

Preparation of financial statements in conformity with generally accepted accounting principles requires management to make

estimates for certain accounting transactions, affecting reported amounts in the financial statements and notes related thereto.

Subsequent actual results may differ from these estimates.

5.12 Basic earnings per share

Basic earnings per share is determined by dividing the net earnings for the year by the weighted average number of ordinary shares

outstanding during the year held by outside shareholders with the adjustment of ordinary shares in proportion to the change of the par

value as discussed in Note 22 and adjusted earnings per share of the prior year.

6. TRADE ACCOUNTS RECEIVABLE

The balances of trade accounts receivable as at 31 December are classified by aging as follows: -

(Unit: Baht)

2004 2003

Not yet due 886,725,881 -

Overdue

Less than 3 months 170,017,299 363,299,325

3 - 6 months 2,844,622 18,117,245

Over 9 months 221,857 32,824

1,059,809,659 381,449,394

63

The Company has not provided allowance for doubtful accounts against the balance as at 31 December 2004 and 2003 since the

Company’s management believes that the collectibility can be made by offsetting transactions with the purchases of raw materials and

consumables. Nevertheless, in 2003, the Company wrote off an account receivable amounted to Baht 3.2 million since it believed that

the balance was not recoverable.

Most of the collection from accounts receivable during the years incurred from the memorandum of understanding made between the

Company’s debtors, creditors and the Company. The debtors agreed to make the payments to the creditors instead of the Company.

7. RESTRICTED DEPOSIT AT FINANCIAL INSTITUTION

As of 31 December 2004, the balance of saving deposit has been pledged with a bank to secure for a related company in respect of

purchase of goods.

8. INVENTORIES

(Unit: Baht)

2004 2003

Raw materials

Finished goods

Goods in transit

Spare parts

Supplied cost

Others

902,435,004

421,174,233

154,983,653

331,343,325

248,181,259

268,035,273

322,032,539

329,140,416

185,015,991

176,740,754

177,266,982

112,259,957

Total inventories 2,326,152,747 1,302,456,639

Less: Allowance for slow-moving inventories (5,167,782) (5,167,782)

Inventories - net 2,320,984,965 1,297,288,857

9. PROPERTY, PLANT AND EQUIPMENT

(Unit: Baht)

Building and Machinery and Office Furniture Motor Assets under

Land improvement equipment equipment and fixture vehicles construction Total

Cost:

31 December 2003 701,401,193 1,974,068,814 17,305,086,086 73,868,081 18,500,570 1,440,335 258,363,757 20,332,728,836

Acquisition - 29,032,543 271,429,724 24,318,571 1,411,673 3,888,157 62,224,779 392,305,447

Disposal - - - (31,488) - (96,660) (803,426) (931,574)

31 December 2004 701,401,193 2,003,101,357 17,576,515,810 98,155,164 19,912,243 5,231,832 319,785,110 20,724,102,709

Accumulated depreciation:

31 December 2003 - 437,125,382 1,311,030,500 31,439,027 14,849,288 353,387 - 1,794,797,584

Depreciation for the year - 100,749,527 323,793,812 12,577,326 1,449,828 523,023 - 439,093,516

Depreciation on disposal - - - (18,466) - (59,722) - (78,188)

31 December 2004 - 537,874,909 1,634,824,312 43,997,887 16,299,116 816,688 - 2,233,812,912

Allowance for impairment :

31 December 2003 481,401,193 - 5,315,608,391 4,366,325 1,248,402 - - 5,802,624,311

Allowance for impairment

for the year (Reversal) (175,500,000) 538,176,254 (3,804,116,893) - - - - (3,441,440,639)

31 December 2004 305,901,193 538,176,254 1,511,491,498 4,366,325 1,248,402 - - 2,361,183,672

Net book value:

31 December 2003 220,000,000 1,536,943,432 10,678,447,195 38,062,729 2,402,880 1,086,948 258,363,757 12,735,306,941

31 December 2004 395,500,000 927,050,194 14,430,200,000 49,790,952 2,364,725 4,415,144 319,785,110 16,129,106,125

Depreciation for the years:

2003 351,522,734

2004 439,093,516

64

9.1 On 29 November 2002, the Company had its land appraised by an independent appraiser. The market value of the land per the

report of this independent appraiser was Baht 220 million while its cost was Baht 701 million. The discrepancy between cost and market

value of Baht 481 million was included as allowance for asset impairment in the earnings statement of the year 2003.

9.2 During the year 2003, the Company wrote down the brought forward balance of its spare machinery parts by its book value of Baht

1,233 million and had all of its machinery appraised by an independent appraiser, John Foord Valuers Co., Ltd. The appraisal report of

independent appraiser dated 29 November 2002 stated that the value of the machinery under the forced sale valuation method was

Baht 2,716 million (the forced sale valuation method was used for the specific purpose of preparing a business rehabilitation plan, and

does not reflect the value in use of these assets) and at market value was Baht 10,850 million, while the carrying value (after write

down of spare parts) was Baht 16,171 million. The Company recorded loss from assets impairment amounting to Baht 5,321 million

and loss from the write off of spare parts amounting to Baht 1,233 million in the statement of earnings of 2003.

9.3 On 30 December 2004, the Company had its land, plant and machinery reappraised by an independent appraiser; The Valuation

& Consultants Company Limited, using the market value approach. The appraiser reported that the market value of the land amounted

to Baht 395 million (compared to a carrying value as of 31 December 2004 of Baht 220 million), the market value of plant amounted

to Baht 910 million (compared to a carrying value of Baht 1,448 million) and the machinery had a market value of Baht 14,430 million

(compared to a carrying value of Baht 10,626 million). The Company reversed allowance for land and machinery amounting to Baht

3,979 million previously recorded and recorded additional allowance for impairment of plant amounted to Baht 538 million in the

statement of earnings, presenting net amount as “Reversal of allowance for assets impairment” in the statement of earnings for the

current year.

As of 31 December 2004, 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 112.4 million (2003: Baht 24.7 million).

Depreciation for 2004 amounting to Baht 436 million (2003: Baht 350 million) has been charged to cost of sales and the remaining

Baht 3 million (2003: Baht 1 million) has been charged to selling and administrative expenses.

The title deeds of land and construction thereon with a net book value as of 31 December 2004 amounting to Baht 25 million are

pledged as collateral for the electricity usage.

10. INTANGIBLE ASSETS

10.1 Computer software installation

(Unit: Baht)

2004 2003

Balance - beginning of the year 40,991,898 40,991,898

Addition 4,590,326 -

Balance - end of the year 45,582,224 40,991,898

10.2 Deferred supply costs

(Unit: Baht)

2004 2003

Balance - beginning of the year 22,428,003 920,926

Addition 76,835,485 23,084,425

Amortisation (32,125,445) (1,577,348)

Balance - end of the year 67,138,043 22,428,003

11. DEPOSITS FOR PURCHASES OF RAW MATERIALS

The outstanding balance represents advance payments to overseas suppliers to guarantee purchases of raw materials. If the Company

is unable to use raw materials in time, as stipulated in the contracts, or to utilize raw materials already delivered to the Company but

not released, the suppliers will charge interest at the rate of LIBOR plus 1 to 1.75 percent per annum.

65

12. LIABILITIES WHICH WERE INCLUDED UNDER THE FORMER REHABILITATION PLAN/GAIN FROM BUSINESS

REHABILITATION

Liabilities which were included under the former rehabilitation plan

(Unit: Baht)

2004 2003

Indebtedness included under rehabilitation plan 62,619,190,727 62,619,190,727

New balance of principal under rehabilitation plan as of 30 June 2003 8,074,207,949 8,074,207,949

Less: Repayment (4,304,638,882) (232,274,490)

Debt forgiven by financial institution creditors (2,477,869,500) -

Liabilities under rehabilitation plan forgiven by trade accounts payable

and service creditors (35,344,648) (23,182,336)

Total liabilities included under the former rehabilitation plan 1,256,354,919 7,818,751,123

Less: Current portion of liabilities included under the former rehabilitation plan - (53,029,333)

Total liabilities included under the former rehabilitation plan - net

of current portion 1,256,354,919 7,765,721,790

Gain from rehabilitation

(Unit: Baht)

2004 2003

Gain under rehabilitation plan - 54,544,982,779

Liabilities under rehabilitation plan forgiven by trade accounts payable

and service creditors after the rehabilitation process as a result

of the repayment prior to maturity 12,162,312 23,182,336

Gain from forgiveness of debt by financial institution creditors 2,477,869,500 -

Total gain from rehabilitation process 2,490,031,812 54,568,165,115

Less: Written off of deferred loan management fee - (139,999,359)

Adjustment of value added tax on waived debts - (6,403,378)

Expenses of negotiations concerning debt forgiveness with

secured overseas financial institution creditors (196,300,000) -

2,293,731,812 54,421,762,378

The Company negotiated with trade accounts payable and other payable under the rehabilitation plan that the Company would pay the

debts prior to the maturity and all creditors would agree to reduce the partial of indebtedness. Most of creditors agreed with the

Companyís negotiation and the Company paid the balance under the proposal. Therefore the Company recorded the portions of

indebtedness forgiven under gain from rehabilitation in the statements of earnings.

During the first quarter of 2004, the Company appointed a related company and another company as consultants to negotiate with

overseas financial institution creditors to execute agreement to repay indebtedness prior to maturity. On 15 March 2004, the Company

repaid indebtedness amounting to US dollars 85 million (approximately Baht 3,360 million) to overseas financial institution creditors

and the creditors released all the remaining debts of approximately Baht 2,190 million to the Company. The Company recorded the debt

forgiven by the creditors under gain from rehabilitation plan. Expenses incurred in negotiations with the overseas financial institution

creditors consist of expenses of US dollars 3.5 million, or Baht 137.41 million (exchange rate as at contract date was Baht 39.26 per

USD 1) payable to the above related company under a consultancy service contract dated 9 January 2004, and US dollars 1.5 million,

or Baht 58.89 million (exchange rate as at contract date was Baht 39.26 per USD 1) payable to the other company under a consultancy

memorandum dated 1 February 2004, which the Company has already paid these expenses. Expenses incurred in negotiations with

these consultants are presented as a deduction from the gain from rehabilitation in statement of earnings.

Subsequently on 14 June 2004, the Company executed an agreement with a domestic financial institution to pay the outstanding debts

under the rehabilitation plan prior to maturity. The outstanding balance as of the contract date was Baht 958.3 million, the Company

66

had to repay Baht 671 million of indebtedness and that financial institution released Baht 287.3 million of debts to the Company,

released all assets which pledged against the loan to the Company. The Company repaid the debts in 2004 and recorded liabilities

forgiven by the financial institution as gain from rehabilitation plan in earnings statement.

13. RELATED PARTY TRANSACTIONS

The Company had significant business transactions with its related company (related by ways of common directors and/or common

shareholders and the same group of companies). These transactions are summarized below: -

(Unit: Baht)

2004 2003 Pricing policy

Transactions with related companies:

Sales of goods 2,298,505,927 2,213,772,897 Market Price

Purchases of raw materials 535,553,703 439,123,254 Cost plus margin

Purchases of raw water 18,471,963 12,722,043 Contractual price

Commission expense 24,223,905 11,256,082 Agree-upon basis

Rental and service expenses 1,618,960 2,840,446 Contractual price

Expense of negotiation concerning debt forgiveness 137,410,000 - Contractual price

Compensation from breach of contract - 568,360,000 Contractual price

Reversal of compensation from breach of contract 568,360,000 - Contractual price

Interest expense - 3,462,128 8% and 1% per annum

The outstanding balances of transactions have been separately shown in the balance sheets as follows: -

(Unit: Baht)

Relationship 2004

Trade accounts receivable - related company

Nara International Co., Ltd. Group company 130,563,249 91,766,042

Trade accounts payable - related company

Nara International Co., Ltd. Group company 53,387,157 70,861,524

Amount due to related company

Siam Power Generation Co., Ltd. Shareholder and director - 568,360,000

Advance from director Director - 170,952

Current portion of liabilities which were included

under the former rehabilitation plan

Itochu Corporation Co., Ltd. Shareholder - 13,093,743

Industrial Finance Corporation of Thailand Shareholder - 7,770,445

- 20,864,188

Liabilities which were included under the

former rehabilitation plan - net of current portion

Itochu Corporation Co., Ltd. Shareholder - 1,604,629,895

Industrial Finance Corporation of Thailand Shareholder - 950,506,775

Siam Power Generation Co., Ltd. Shareholder and director - 347,486,901

- 2,902,623,571


Nara International Co., Ltd. Group company 20,789,060 -

Accrued expenses

Sukhumvit Inter Development Co., Ltd. Group company 1,304,250 -

Other payable

Sukhumvit Inter Development Co., Ltd. Group company - 2,544,657

67

2003

14. SHARE CAPITAL

The Company reduced its registered share capital from 750 million shares with a par value of Baht 10, or a total of Baht 7,500 million,

to 500 million shares with a par value of Baht 10, or a total of Baht 5,000 million, through the cancellation of registered shares which

had not yet been allocated. In addition, the Company reduced the number of its issued and paid up share capital by a ratio of 100 to

1, or from Baht 5,000 million to Baht 50 million, and issued 50 million new shares with a par value of Baht 10, in order to comply with

the rehabilitation plan. Share capital after the implementation of the conditions stipulated in rehabilitation plan, amounted to Baht 550

million, consisting of 55 million shares with a par value of Baht 10 each. The Company registered the capital reduction and capital

increase with the Ministry of Commerce on 31 July 2003, 1 August 2003 and 11 August 2003, respectively.

On 28 November 2003, an extraordinary general meeting of the shareholders of the Company passed a resolution to approve the

increase in the Company’s capital by Baht 550 million through the allocation of 55 million ordinary shares with par value of Baht 10 each

to the existing shareholders in a ratio of 1 existing share : 1 new share at Baht 10 each. As at 31 December 2003, most of the

shareholders have already paid for the shares and the Company recorded the Baht 547 million received as share subscription received

in advance in the balance sheet. The Company registered the increase in share capital by Baht 550 million with the Ministry of Commerce

on 19 January 2004.

Subsequently on 16 March 2004, an extraordinary general meeting of the shareholders of the Company no.1/2004 passed a resolution

approving the change in the par value of the Company’s shares from Baht 10 to Baht 1 each. The number of ordinary shares therefore

increased to 1,100 million shares with a par value of Baht 1 each. In addition, the meeting approved a resolution to increase the

Company’s share capital by Baht 7,100 million, through the issuance of 7,100 million shares at par value of Baht 1 each, with allocation

to the shareholders as follows: -

1. Allocation of 4,400 million ordinary shares to the existing shareholders in a ratio of 1 existing share : 4 new shares at a price of Baht

0.01 per share. In case of any shares remaining unsubscribed after the allocation were to be offered to interested existing shareholders,

in proportion to their shareholdings.

2. Allocation of 2,700 million new ordinary shares to 34 specific and/or institutional investors at a price of Baht 1.60 per share.

The Company has recorded the expenses concerning the increased share capital of Baht 62.94 million as deduction in “Share premium”.

The Company registered the increases in its share capital from Baht 1,100 million to Baht 5,500 million and then to Baht 8,200

million, or 8,200 million shares with a par value of Baht 1 each, with the Commerce Ministry on 23 March 2004 and 24 March 2004,

respectively.

On 5 October 2004, an extraordinary general meeting of the shareholders of the Company passed the resolution to approve of Baht

3,800 million increase in the registered share capital, from Baht 8,200 million to Baht 12,000 million, through the issue of 3,800 million

ordinary shares with a par value of Baht 1 each. Of these shares not more than 100 million are to be reserved for the exercise of the

warrants issued to the directors and employees and not more than 3,700 million are to be reserved for an Initial Public Offering (IPO).

The Company registered its increase in registered share capital with the Ministry of Commerce in October 2004.

15. PREMIUM ON CAPITAL REDUCTION

In order to comply with the capital restructuring process stipulated in the rehabilitation plan, the Company reduced its paid-up share

capital from Baht 5,000 million (500 million ordinary shares with a par value of Baht 10) to Baht 50 million (5 million ordinary shares

with a par value of Baht 10) to eliminate its deficit. The capital reduction of Baht 4,950 million compared to a deficit of Baht 387.7

million as at 31 July 2003, and the excess of the capital reduction over the deficit was presented as “Other surplus” in the balance

sheet. The Company offset premium on capital reduction amounting to Baht 4,356 million (4,400 million of increased ordinary shares

with par value of Baht 1 each at Baht 0.01 each) against the share discount as a result of the capital reduction.

68

16. LEGAL RESERVE

Under the Public Company Limited Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its

net profit, after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of its registered share

capital. The statutory reserve cannot be used for dividend payment.

17. WARRANTS SCHEME

On 5 October 2004, an extraordinary general meeting of the shareholders of the Company passed the resolution to approve of the issue

of 100 million warrants to subscribe to the Company’s ordinary shares to the Company’s directors and employees (ESOP warrants),

without charge. The 5-year warrants to be offered within 6 months from the date the warrants are approved by the Securities Exchange

Commission (SEC). The exercise period of warrants are three years, with one-third of the allocated warrants exercisable in each year.

The directors and employees must exercise all warrants allocated to them at the same time, with the exercise dates respectively set

at 1 year, 2 years and 3 years after the date the Company’s shares begin trading on the Stock Exchange of Thailand until the expiry

date of warrants. The warrants of approximately 30 percent are allocated to directors and the remaining 70 percent to employees.

As of the balance sheet date, there was no subscription of the above warrants.

18. ALLOWANCE FOR COMPENSATION FOR BREACH OF CONTRACT (REVERSAL)

During the fourth quarter of 2003 Siam Power Generation Co., Ltd., a related company sent a letter requesting compensation of Baht

568.36 million from the Company for damage caused by its breach of a contract to purchase electricity. This had resulted in a delay

in the construction of the electricity generating plant of Siam Power Generation Co., Ltd. and meant the loss of privileges granting an

exemption from import duty on imports of related machinery and equipment. The compensation was not included in the business

rehabilitation plan since at that time the official receiver declared that the liability had not been incurred. However, the Board of

Investment later sent a letter to the Company notifying it that it would not approve the extension of the privileges of Siam Power

Generation Co., Ltd., and therefore the issue of compensation was discussed. Subsequently, the Board of Directors of the Company

passed a resolution for a director of the Company to negotiate with the associated company and approved the payment of

compensation totalling Baht 568.36 million as per the agreement to pay compensation for the damages dated 26 December 2003.

On 4 February 2004, the Company entered into an amendment to the agreement to pay compensation for the damages, whereby

compensation is to be paid in annual installments, at each year-end, at the rate of 1 percent of the whole compensation for a period

15 years. The remaining compensation is to be paid in the final period, and no later than 15 December 2019.

In 2004, Siam Power Generation Co., Ltd. informed the Company that the Board of Investment approved an extension of the

privileges granting from imports of machinery and equipment until November 2006 that caused an obligation of the Company for the

compensation for breach of contract was completed as stipulated in the agreement dated 26 December 2003. On 31 May 2004, the

Company entered into an agreement to cancel that agreement and its amendment of agreement dated 4 February 2004 and reversed

the compensation for breach of contract amounting to Baht 568.36 million included in earnings statement for the current year.

19. OTHER INCOME

(Unit: Baht)

2004 2003

Gain on exchange rate - 857,451,130

Gain from disposal of assets 222,069 443,654

Gain from sale of raw materials 121,332,822 3,875,735

Others 18,685,037 32,892,536

140,239,928 894,663,055

69

20. DIRECTORS’ REMUNERATION

Directors’ remuneration represents the benefits paid to the Company’s directors in accordance with Section 90 of the Public Limited

Companies Act, exclusive of salaries and related benefits payable to executive directors.

21. PROMOTIONAL PRIVILEGES

The Company was granted privileges under the Investment Promotion Act B.E. 2520 by the Board of Investment. Subject to certain

imposed conditions, the privileges include: -

a) Exemption of 75 percent from import duty on raw material used in the manufacturing.

b) Exemption from payment of corporate income tax on profits for a total period of 8 years commencing as from the date of first

earning operating income.

c) Exemption from income tax on dividends paid from the profit of the operation within the tax exemption period.

d) An allowance of 50 percent on corporate income tax on income from investment for a period of 5 years commencing as from

the expiration date of period of exemption from corporate income tax.

e) An allowance of double the amount of actual expenditure on transportation, electricity and water, deductible from taxable income

for a period of 10 years commencing as from the date of first earning operation income.

f) An allowance of 25 percent of any investment in installation or construction of facilities, deductible from taxable income in

addition to normal depreciation.

The operating results for the year 2004 and 2003 of the Company classified under promoted and non-promoted business are as

follows: -

(Unit: Baht)

For the years ended 31 December

Promoted business Non-promoted business Total

2004 2003 2004 2003 2004 2003

Revenues

Sales 21,270,252,071 12,622,162,692 - - 21,270,252,071 12,622,162,692

Interest income - - 471,975 726,088 471,975 726,088

Reversal of allowance for

breach of contract - - 568,360,000 - 568,360,000 -

Other income 31,311,407 881,686,624 108,456,546 12,250,343 139,767,953 893,936,967

Total revenues 21,301,563,478 13,503,849,316 677,288,521 12,976,431 21,978,851,999 13,516,825,747

Expenses

Cost of sales 18,211,316,404 11,788,752,412 - - 18,211,316,404 11,788,752,412

Selling and administrative

expenses 421,463,909 483,738,916 - - 421,463,909 483,738,916

Liabilities under composition - - - 568,360,000 - 568,360,000

Loss on exchange 58,107,583 - - - 58,107,583 -

Interest expense 120,997,469 57,348,559 - - 120,997,469 57,348,559

Total expense 18,811,885,365 12,329,839,887 - 568,360,000 18,811,885,365 12,898,199,887

Reversal of allowance for

assets impairment 3,441,440,639 -

Allowance for assets impairment - (5,802,624,311)

Loss from assets written off - (1,232,495,777)

Extraordinary items

Gain from rehabilitation plan 2,293,731,812 54,421,762,378

Net earnings 8,902,139,085 48,005,268,150

70

22. BASIC EARNINGS PER SHARE

On 16 March 2004, an extraordinary general meeting of the shareholders of the Company approved a change in the par value of the

ordinary shares from Baht 10 to Baht 1 per share. The Company registered the change with the Commerce Ministry, and adjusted the

number of ordinary shares used in the calculation of basic earnings per share of 2003 to accord with generally accepted accounting

principles.

23. PROVIDENT FUND

In the current year, the Company contributed a total of Baht 2 million to the fund (2003: Baht 2 million).

24. COMMITMENTS

24.1 As at 31 December 2004, the Company had the following outstanding commitments in respect of raw material management and

service fees: -

(Unit: USD Million)

Amount

2005 5.5

2006 - 2013 43.7

24.2 As at 31 December 2004, the Company had commitments to pay financial advisory fees totalling Baht 2 million

(2003: Baht 7 million).

24.3 As at 31 December 2004, the Company had commitments to pay a total of Baht 16.2 million for water supply management

(2003: Baht 6.6 million).

24.4 As of 31 December 2004, the Company had a commitment to pay a total of Baht 1.2 million for raw water under the agreement

(2003: Baht 2.4 million).

24.5 As of 31 December 2004, the Company had a commitment to pay a total of Baht 0.5 million for a program license (2003: None).

24.6 As of 31 December 2004, the Company had commitments to pay machine installation service fees to two companies amounting

to USD 0.7 million (2003: None).

24.7 As of 31 December 2004, under building lease and service agreement the Company was committed to pay the following office

rental and service fees: -

(Unit: Baht Million)

Amount

2005 4.8

2006 - 2013 44.0

24.8 As of 31 December 2004, the Company had the following payment commitments for the use of gas under an agreement: -

(Unit: Baht Million)

Amount

2005 21.6

2006 - 2009 97.3

24.9 As of 31 December 2004, the Company had commitments to pay a consultancy fee for the preparation of a plan to increase

production capacity, based on hours worked.

24.10 As of 31 December 2004, under a long-term agreement the Company is committed to pay dock service fees based on the

quantity loaded.

25. FINANCIAL INFORMATION BY SEGMENT

The operations of the Company is in a single industry segment in manufacturing of hot rolled coils and is carried on in the single

geographical area in Thailand. As a result, all of revenue, operating profits and assets as reflected in these financial statements

pertain to the aforementioned industry segment and geographic area. Export sales for the year 2004 was amounted to Baht 4,835

million (2003: Baht 1,108 million).

71

26. FINANCIAL INSTRUMENTS

26.1 Credit risk

The Company is exposed to credit risk primarily with respect to trade accounts receivable since the majority of sales are supplied

to a limited number of customers. However, due to the collections made by offsetting transactions with accounts payable, the Company

does not anticipate material losses from its debt collection.

26.2 Interest rate risk

The interest rate risk is the risk that future movements in market interest rates will affect the Company’s operations and its cash

flows. The Company’s exposure to interest rate risk relates primarily to its cash and deposits with banks, trade accounts receivable

and trade accounts payable. The Company does not use derivative financial instruments to hedge such risk.

26.3 Foreign currency risk

The Company’s exposure to foreign currency risk relates primarily to its deposits paid to creditors, and trade creditors which are

denominated in foreign currencies. The Company does not primarily utilize forward exchange contracts.

Below is the summary of the Company’s significant foreign currency-denominated assets and liabilities as at 31 December 2004

which were unhedged by any derivative financial instruments. The majority of these liabilities are repayable within one year.

Assets Liabilities

Exchange rate Exchange rate

Currencies Amount for translation Amount for translation

US dollars 30,186,275 39.0147 22,322,146 39.2025

Euro 717,170 52.9333 267,412 53.4818

26.4 Fair value

As the majority of financial assets and liabilities are short-term, their carrying value does not materially differ from their fair value.

27. PRESENTATION

The presentation of the financial statements had been made in compliance with the Notification of the Department of Business

Development dated 14 September 2001, issued under the Accounting Act B.E. 2543.

The Company reclassified the financial statements presented herein to conform with the current year classification with no effect to

net earnings previously reported.

28. APPROVAL OF FINANCIAL STATEMENTS

These financial statements have been approved by the directors of the Company.

Designed by : pink blue black & orange co., ltd. (color party) tel. 0-2300-5124-7 fax. 0-2300-5124-7 www.colorparty.com 72

gstel 04

Documents

operating profit of

net profit of baht

operating profit loss

net profit loss baht

sales baht

share baht

gross profit loss baht

total liabilities baht